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. During this past year, we specifically sought additional feedback on the Company's compensation and benefit programs for our named executive officers ("NEOs"). We encouraged stockholders to speak with a member of the Board or a representative of the Compensation and Management Development Committee and accommodated such requests when made.

We contacted
29
of our top stockholders
representing approximately
67%
of our outstanding common stock
We held approximately
16
meetings with stockholders
representing approximately
48%
of our outstanding common stock

We engaged with stockholders in the following ways:

Off Season Engagement
  • Engaged stockholders to understand their respective viewpoints
  • Engaged stockholders to understand any perception gaps between the Company's performance and stockholder interpretation of performance
  • Educated stockholders around the Company's financial position, corporate strategy, and business developments
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 considered the additional feedback from our stockholders following our "say on pay" vote last year. In addition, the Compensation and Management Development Committee reviewed and considered other compensation and governance best practices for changes to our executive compensation program that were implemented for fiscal 2022 or may be implemented during fiscal 2023. The following table summarizes the feedback received from stockholders during engagement and our response:

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

 
  • Our CEO received and will continue to receive 75% of his LTI Program award in the form of performance stock units ("PSUs"); the remaining 25% will be in the form of restricted stock units ("RSUs") (fiscal 2022 and fiscal 2023)
  • Other NEOs will receive 60% of their LTI Program awards in the form of PSUs (an increase from 50% in fiscal 2022); the remaining 40% will be in the form of RSUs (a decrease from 50% in fiscal 2022)
Interest in relative total shareholder return ("rTSR") as a measure in the long-term incentive program ("LTI Program")
  • For fiscal 2023, we will add PSUs with a rTSR measure for all NEOs
  • CEO PSU awards (75% of his LTI Program award) will be allocated such that 50% will be tied to return on invested capital ("ROIC") in excess of the weighted average cost of capital ("WACC"), and 25% will be tied to rTSR
  • Other NEO PSU awards (60% of their LTI Program award) will be allocated such that 40% will be tied to ROIC in excess of WACC, and 20% will be tied to rTSR
Interest in more descriptive disclosure of individual performance goals
  • For fiscal 2022, we have 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 Conduct and Business Ethics to highlight our commitment to prohibiting discrimination on the basis of sexual orientation, gender identity, and gender expression (2017) and to highlight our commitment to prohibiting child labor (2018)
  • Launched our EarthLIGHT website 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)

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 in past 3 years)
  • annual, robust Board and committee self-evaluation process, including periodic individual director assessments
  • 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 for incentive compensation paid to current and former executive officers and their direct reports

Executive Compensation Highlights

The Compensation and Management Development Committee continued its review of the Company's executive compensation program. We evaluated and implemented a number of changes designed to align our compensation program with long-term stockholder value creation and attracted a director with exceptional human capital expertise. We built upon the fiscal 2021 changes to strengthen our compensation processes for fiscal 2022 and for future years. Some of the changes We made during fiscal 2022 include:

  • Aligning the CEO's participation in the LTI Program with other NEOs by issuing similar award types; a combination of PSUs and RSUs;
  • Weighting the CEO's LTI Program more heavily towards performance than the other NEOs with 75% weighting on PSUs and 25% weighting on RSUs; and
  • Appointing a new Compensation and Management Development Committee member with deep human capital management experience.

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 2022, We received feedback and continued to deliver on our commitment to stockholders to make design changes to our compensation program as outlined in the following table.

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 2021 in response to feedback received from our stockholders.

We again engaged with our stockholders after last year's Annual Meeting. After receiving and reviewing their feedback, our Compensation and Management Development Committee is contemplating additional design changes for fiscal 2023 as highlighted in the following table. See Fiscal 2023 Compensation Changes for additional information.

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 ensure designs of STI and LTI Programs discourage 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
  • 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