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COMPENSATION DISCUSSION AND ANALYSIS |
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The Committee reassesses the
peer group composition annually and may periodically make changes, usually by adding companies that may better meet our selection criteria and/or by removing companies that may have experienced change, such as an acquisition, or no longer fit our
selection criteria. In 2021, the Committee, through its consultant, conducted a review of the peer companies which resulted in the conclusion that, for 2021, the peer group should be adjusted to reflect the group set forth above. Three companies
were removed and two companies were added. FLIR Systems, Inc. was removed due to the sale of the company, and STERIS plc and PerkinElmer, Inc. were each removed due to a significant increase in market capitalization following acquisitions by each
company. Lincoln Electric Holdings, Inc. and Donaldson Company, Inc., each of which are commonly used as peer companies among other peer group members and ISS, were added to the group.
The consultant conducts an annual analysis of the most recent proxy disclosures for the
peer group companies in order to understand the compensation ranges for base salary, and the annual and long-term incentives provided to the peer group named executive officers. In addition, regression analysis is applied to data from compensation
surveys conducted by Willis Towers Watson representing nearly 1,000 general industry companies. The Committee believes that the combination of these comprehensive data sources allows it to understand the market compensation ranges for both the Named
Officers and other key executives based on the duties and responsibilities of each position and to determine the level of compensation needed to target the middle (50th percentile) of the market.
The market compensation data is further used to develop a market compensation
structure which includes salary grades with midpoints. Each U.S. based executive is assigned to a salary grade where the midpoint of the grade approximates the median (50th percentile) of the
market salary level for that position. Each salary grade has a salary range around the midpoint and has corresponding annual and long-term incentive award opportunities that are percentages of the midpoint, and which also align to market-based
values. In assigning an executive to a salary grade, the Committee also considers internal factors that may, in a limited number of instances, impact the grade assignment of an executive.
In addition to the market data, the Committee considers the following factors when making
compensation decisions:
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Individual and Company performance |
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Experience in the position |
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Current compensation relative to market median |
An assessment of these factors could result in actual compensation being positioned modestly above or below the desired median of the market positioning. The
Committee does not consider amounts earned from prior performance-based compensation, such as prior bonus awards or realized or unrealized stock award gains, in its decisions to increase or decrease compensation for the following year. The Committee
believes that this would not be in the best interest of retaining and motivating its executives.
In order to assess the impact of its executive compensation decisions, the Committee reviews a summary report or tally sheet of total
compensation prepared for the CEO. The tally sheet includes the total dollar value of annual compensation, including salary, annual and long-term incentive awards, and the value of other benefits and perquisites. The tally sheet also provides the
Committee with information pertaining to equity ownership, and benefits the Company is required to provide to the CEO under various termination scenarios. The Committees review of the tally sheet information is an integral part of its
decision-making process each year.
DETERMINATION OF EXECUTIVE COMPENSATION AMOUNTS
Fixed Cash Base Salary. The Company provides executives with a base salary
in order to attract and retain executive talent. Base salary is designed to be competitive with other organizations and is sensitive to the skill level, responsibility and experience of the executive. Base salary for each executive is determined
through our external benchmarking process and an internal comparison to other executives at the Company to ensure internal equity. Base salary levels are targeted to the market median, although the Committee considers base salary levels that fall
within plus or minus 10% of the market median to be competitive.
Base salary
adjustments are considered and are affected by each executives individual performance assessment based on a rigorous performance review process. This individual process details an executives annual accomplishments compared to performance
expectations established at the outset of each year and assesses the individuals behaviors used to achieve the performance level. The CEO develops and recommends to the Committee annual base salary adjustments for each executive primarily by
evaluating the value and impact that each executive has had on the Companys performance during the year.
The Committee performs a similar comprehensive evaluation of the CEOs performance against predetermined annual operational and strategic goals previously
approved by the independent directors of the Board and determines a recommended annual base salary increase based on the outcome of this evaluation. This salary recommendation is then also approved by the independent directors of the Board. At its
February 2022 meeting, the Committee approved salary increases ranging from 5% to 9% for the Named Officers and certain other key executives. Following these adjustments, salary levels were positioned as follows relative to the market median
targeted level: Mr. Vartanian, 2% above median; Mr. Krause, at the market median; Mr. Blanco 6% above median; Mr. Leenen, 8% below median; and Ms. Sciullo, 2% below median.
Performance-Based Annual Cash Incentive. The Company provided executives with an
annual cash incentive during 2021 based on the MSA Executive Incentive Plan (EIP), which directly rewards the accomplishment of key corporate and/or geographical or business unit performance goals. Additionally,