shareholder value growth. Service based restricted stock units enhance the Company’s ability to retain executives and provides value based on the Company’s stock price performance. In determining the mix of performance share units and service based restricted share units included in annual award grants, greater emphasis is placed on performance share units to further motivate executives to pursue goals associated with the Company’s financial performance. Each vested PSU and RSU represents the right to receive one Common Share of the Company.
In determining the target amount of PSUs, the number of RSUs and the relative mix of the two awards to be granted under the Incentive Plan to our Executive Officers, the Compensation Committee takes into account several factors, including our Chief Executive Officer’s recommendation for the other Executive Officers, our short-term and long-term financial and strategic objectives, the Executive Officer’s relative job scope, individual performance history and prior and anticipated future contributions to the Company. After considering these factors, the Compensation Committee determines the amount of Incentive Plan shares to be granted at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value.
Under certain circumstances, including a restatement of financial results by the Company, the grantee may be required to return to the Company share awards and/or pretax income derived from any disposition of shares previously received if the performance shares would not have been earned based upon the restated financial results.
The three-year performance period for PSU’s granted to the Officers in 2020 concluded on December 31, 2022. The performance goals for the 2020-2022 performance period were based on targets for compound annual growth for adjusted operating income and adjusted shareholders’ equity, weighted 50% each. On February 22, 2023, the Compensation Committee reviewed the Company’s financial results for the three year period ended December 31, 2022 as compared to the performance goals, and determined that adjusted operating income growth fell between threshold and target and adjusted shareholders’ equity growth fell below threshold. Accordingly, performance-based shares were awarded to the Officers at 26% of the target under the 2020 grants with amounts as follows: Jeffrey S. Gorman — 1,563 Common Shares; Scott A. King — 1,172 Common Shares; James C. Kerr — 1,172 Common Shares; and Brigette A. Burnell — 781 Common Shares.
The two-year performance period for PSU’s granted to the Officers in 2021 concluded on December 31, 2022. The performance goals for the 2021-2022 performance period were based on targets for compound annual growth for adjusted operating income and adjusted shareholders’ equity, weighted 50% each. On February 22, 2023, the Compensation Committee reviewed the Company’s financial performance for the two year period ended December 31, 2022 as compared to the performance goals, and determined that both adjusted operating income growth as well as adjusted shareholders’ equity growth were above maximum. Accordingly, performance-based shares were awarded to the Officers at 150% of the target under the 2021 grants with amounts as follows: Jeffrey S. Gorman — 11,206 Common Shares; Scott A. King — 10,086 Common Shares; James C. Kerr — 8,965 Common Shares; and Brigette A. Burnell — 6,723 Common Shares.
Other Compensation — The Officers receive a variety of miscellaneous benefits, the value of which is represented for the named Executive Officers under the caption “All Other Compensation” in the Summary Compensation Table. These benefits include taxable life insurance, and Company contributions to the Christmas Savings Plan, the 401(k) Plan, and certain partial matching contribution opportunities under the Employee Stock Purchase Plan. The Company also sponsors a defined benefit pension plan in which two of the Company’s Executive Officers participate as explained under the caption “Pension Benefits.”
Stock Ownership — The Company has long encouraged the Officers to voluntarily invest in the Company’s Common Shares. As a consequence, the Company makes the purchase of its Common Shares convenient, in some cases with partial cash matching contributions from the Company, and in all cases without brokers’ fees or commissions, under an Employee Stock Purchase Plan, a 401(k) Plan and a Dividend Reinvestment Plan. Although the purchase opportunities available through these plans do not constitute elements of Officer compensation, all of the current Officers are shareholders and participate in one or more of the foregoing plans.
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2023 Proxy Statement |
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THE GORMAN-RUPP COMPANY |
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