Stockholder Engagement

Ongoing engagement and dialogue with our stockholders is important to the Company. We have adopted a robust and active year-round engagement philosophy that includes outreach for various purposes, including soliciting feedback in advance of filing this Proxy Statement. Our outreach efforts, led by our Board with input from the Compensation and Management Development Committee, sought feedback on governance priorities, compensation programs, and environmental and social issues. In our most recent pre-proxy season engagement cycle:

We contacted
33
of our top stockholders
representing approximately
73%
of our outstanding common stock
We held approximately
13
meetings with stockholders
representing approximately
25%
of our outstanding common stock

We engaged with stockholders in the following ways:

Off Season Engagement
  • Engaged stockholders to understand their respective viewpoints
  • Educated stockholders around the Company's corporate strategy, business developments, and financial position
  • Engaged stockholders to understand any perception gaps between the Company's performance and stockholder interpretation of performance
Engagement Prior to Annual Meeting
  • Sought feedback on potential matters for stockholder consideration at the Annual Meeting
  • Discussed any areas of concern that stockholders voiced
Engagement Around and After Annual Meeting
  • Provide clarification on matters being voted on after Annual Meeting material is published
  • Seek feedback on areas of concern to inform the Board's future decisions

Our Response to Stockholder Feedback

The Compensation and Management Development Committee carefully considers feedback from our stockholders regarding our executive compensation practices, as well as other compensation and governance best practices. The Compensation and Management Development Committee implemented a series of changes to our executive compensation program in fiscal 2022 and fiscal 2023 and stockholders have responded favorably, as illustrated in our say on pay ("Say on Pay") vote result at the annual meeting of stockholders held in January 2023, with 95% of votes cast in favor, and through the support indicated during our stockholder outreach program. The following table summarizes the feedback received from stockholders relating to executive compensation in recent years and our responses:

Feedback/What We Heard Response/What We Did
Interest in increased focus on performance-based compensation

 
  • For fiscal 2022 and 2023, our CEO received 75% of his LTI Program award in the form of performance stock units ("PSUs"); the remaining 25% were in the form of restricted stock units ("RSUs")
  • For fiscal 2023, other named executive officers ("NEOs") received 60% of their LTI Program awards in the form of PSUs (an increase from 50% in fiscal 2022); the remaining 40% were in the form of RSUs (a decrease from 50% in fiscal 2022)
Support of our interest in adding a relative total shareholder return ("rTSR") measure to the long-term incentive program ("LTI Program")

For fiscal 2023:

  • We added PSUs with an rTSR measure for all NEOs
  • CEO PSU awards (75% of his LTI Program award) were allocated such that 50% were based on return on invested capital ("ROIC") in excess of the weighted average cost of capital ("WACC"), and 25% were based on rTSR
  • Other NEO PSU awards (60% of their LTI Program award) were allocated such that 40% were based on ROIC in excess of WACC, and 20% were based on rTSR
Interest in more descriptive disclosure of individual performance goals
  • In our proxy statement for our 2023 annual meeting and in this Proxy Statement, we included enhanced disclosure of individual performance goals in the short-term incentive program ("STI Program") for all NEOs (see Key Achievements of our NEOs).

Corporate Governance Enhancements

In addition to our ongoing Board review and refreshment process, our Board regularly evaluates and enhances our corporate governance practices. Following is a summary of the corporate governance enhancements we have made over the past several years.

  • Declassified our Board and adopted a majority voting standard for non-contested elections (2017)
  • Amended our Corporate Governance Guidelines to set age 75 as the retirement age for our directors, except in unique or extenuating circumstances (2017)
  • Amended our Code of Ethics and Business Conduct to highlight our commitment to: prohibiting discrimination on the basis of sexual orientation, gender identity, and gender expression (2017); prohibiting child labor (2018); remaining vigilant to prevent money laundering (2023); designing, sourcing, and producing safe quality products for our customers (2023); and complying with all requirements for doing business with the government or on publicly funded projects (2023)
  • Launched our EarthLIGHT program to report the Company's ESG efforts and provide annual updates on our progress (2018)
  • Adopted a Board Diversity policy (2019)
  • Amended our Governance Committee Charter to provide for the Governance Committee's oversight of ESG (2019)
  • Amended the Company's By-Laws and Certificate of Incorporation to eliminate supermajority voting provisions (2021)
  • Amended the Company's Certificate of Incorporation to allow By-Law amendment granting stockholders' right to call a special meeting (2021)
  • Continued refreshment of our Board membership, the leadership of each of our standing committees, and the membership of our standing committees, including focused succession planning for each (2020, 2021, 2022 and 2023)
  • Adopted an Amended and Restated Incentive-Based Compensation Recoupment Policy to comply with recently adopted New York Stock Exchange ("NYSE") listing standards and Securities and Exchange Commission ("SEC") regulations governing compensation recovery policies (2023)

Governance Best Practices

The Board takes seriously its responsibility to represent the interests of stockholders and is committed to good corporate governance. To that end, the Board has adopted a number of policies and processes, including:

Board Independence & Oversight

  • Strong independent Lead Director
  • Robust director refreshment and succession planning process (5 new independent directors added from fiscal 2020 - fiscal 2023)
  • Annual, robust Board and committee self-evaluation process
  • Oversight of risk management by the Board
  • Oversight of ESG by the Governance Committee

Stockholder Rights

  • Majority voting for directors in uncontested elections
  • Annual election of all directors
  • Proxy access by-law
  • No stockholder rights plan or "poison pill"

Equity Risk Mitigation

  • Executive and director stock ownership guidelines and retention requirements until ownership level achieved
  • Prohibitions on hedging and pledging of our common stock
  • Clawback policy (compliant with and exceeding NYSE listing standards) for incentive compensation paid to current and former covered officers

Executive Compensation Highlights

The Compensation and Management Development Committee continued its review of the Company's executive compensation program. We evaluated and implemented changes designed to align our compensation program with long-term stockholder value creation and strengthened our pay aligned to performance approach to compensation for our NEOs. We built upon the changes made in prior years to strengthen our compensation processes for fiscal 2023 and for future years, and incorporated feedback from our stockholders. Some of the changes we made during fiscal 2023 include:

  • adding an rTSR metric to our performance shares (PSUs) for our NEOs;
  • weighting the LTI Program awards of the NEOs (excluding the CEO) more heavily towards performance with 60% weighting on PSUs and 40% weighting on RSUs (CEO weighting remains higher at 75% PSUs and 25% RSUs); and
  • appointing a new Chair of the Compensation and Management Development Committee and refreshing the Committee membership with a Board member previously serving on the Audit Committee.

Executive Compensation Strategy

Our compensation strategy is consistent with and supportive of our long-term goals and is founded on the following principles:

  • alignment of pay and performance;
  • alignment with the Company's business and operating strategy;
  • alignment with stockholder value creation;
  • consistency with peer group and market practice;
  • motivation and retention of key talent; and
  • flexibility to withstand uncertainty and difficulty in a challenging economic climate.

Compensation Program Design Changes

During our stockholder engagement in fiscal 2023, we shared our interest in adding an rTSR metric and increasing our weighting toward performance-based compensation for the NEOs. We received favorable input from our stockholders for these changes and made the design changes to our compensation program outlined in the table below:

We believe the changes outlined above responded to input expressed by our stockholders, enhanced the pay-for-performance alignment of our program with stockholders' interests, and achieved our desire to retain and appropriately incentivize our NEOs.

The following table highlights several design changes we implemented in fiscal 2022 in response to feedback received from our stockholders.

After reviewing market trends, evaluating our Say on Pay vote results, and receiving supportive feedback from stockholders regarding the compensation design changes we made in fiscal 2022 and fiscal 2023, our Compensation and Management Development Committee determined to maintain the fiscal 2023 compensation design for fiscal 2024.

Compensation Best Practices

What We Do

  • We align pay and performance by providing a greater portion of compensation in incentive compensation
  • We conduct an annual compensation risk assessment to review whether the design of our compensation program discourages excessive risk taking
  • We conduct an annual review of peers, as well as benchmark pay practices and pay levels to ensure compatibility
  • We retain an independent compensation consultant to advise on director and executive compensation matters
  • We conduct regular outreach with stockholders to discuss and review our executive compensation program
  • We have stock ownership guidelines for all executive officers and directors
  • We have a clawback policy that complies with and exceeds NYSE listing standards
  • We limit perquisites
  • We have an annual Say on Pay vote

What We Don't Do

  • We do not have employment agreements with executive officers
  • We do not have "single-trigger" provisions for payout of benefits under change in control agreements
  • We do not have tax gross-ups in severance or change in control agreements
  • We do not allow new SERP participants or enhanced SERP benefits
  • We do not allow executive loans
  • We do not permit hedging or pledging of stock by directors and executive officers
  • We do not pay dividends on equity awards until performance units are earned or time-based awards vest
  • We do not allow repricing or backdating of stock options