BOARD OF DIRECTORS COMPENSATION
Director compensation is set by the Board of Directors upon the recommendation of the Corporate Governance Committee. The Corporate Governance Committee conducts an annual review of non-employee director compensation, including consideration of a survey of director compensation for the same peer group of companies used by the Compensation Committee for the assessment of executive compensation. For fiscal year 2020, non-employee directors received compensation for services as directors pursuant to the Directors’ Compensation Policy and Election Plan (the “Director Compensation Policy”) adopted by the Board of Directors on October 7, 2019. Pursuant to the Director Compensation Policy, non-employee directors received a base annual fee of $54,000 for services provided from January 1, 2020 through the date of the Company’s 2020 Annual Meeting of Stockholders. The lead independent director received an additional annual fee of $22,000. Non-employee directors received additional cash compensation for service on various Board Committees. The Chair of the Audit Committee received $16,000 and each other member of the Audit Committee received $8,000. The Chair of the Compensation Committee received $10,000 and each other member of the Compensation Committee received $4,000. Each Chair of the Corporate Governance Committee and the Finance Committee received $8,000 and each other member of those committees received $4,000. All such annual fees were paid in March 2020, with the exception of fees paid to Ms. Monteagudo. As a newly elected director, as of June 15, 2020, Ms. Monteagudo received a base annual fee of $40,500 and the sum of $4,000 in fees for service on the Audit Committee and the sum of $2,000 in fees for service on the Corporate Governance Committee through the date of the Company’s 2020 Annual Meeting of Stockholders.
At the Company’s 2016 Annual Meeting of Stockholders, the Company’s stockholders approved the WD-40 Company 2016 Stock Incentive Plan (the “Stock Incentive Plan”) to authorize the issuance of stock-based compensation awards to employees as well as to directors and consultants. For services provided for the period from the date of the Company’s 2019 Annual Meeting of Stockholders to the next annual meeting, the Director Compensation Policy provided for the grant of restricted stock unit (“RSU”) awards having a grant date value of $70,000 to each non-employee director. Each RSU represents the right to receive one share of the Company’s common stock. On December 10, 2019, each non-employee director other than Ms. Monteagudo received a non-elective RSU award covering 359 shares of the Company’s common stock. On June 15, 2020, Ms. Monteagudo received an RSU award covering 370 shares of the Company’s common stock. Additional information regarding the RSU awards is provided in a footnote to the Director Compensation table below.
Each non-employee director was also permitted to elect to receive an RSU award in lieu of all or a portion of his or her base annual fee for service as a director as specified above. The number of shares of the Company’s common stock subject to each such RSU award granted to the non-employee directors equaled the elective portion of his or her base annual fee payable in RSUs divided by the fair market value of the Company’s common stock as of the date of grant.
RSU awards granted to non-employee directors pursuant to the Director Compensation Policy are subject to Award Agreements under the Stock Incentive Plan. All RSU awards granted to non-employee directors are fully vested and are settled in shares of the Company’s common stock upon termination of the director’s service as a director of the Company.
The Company also maintains a Director Contributions Fund from which each incumbent non-employee director has the right, at a specified time each fiscal year, to designate $6,000 in charitable contributions to be made by the Company to properly qualified (under Internal Revenue Code Section 501(c)(3)) charitable organizations.
DIRECTOR COMPENSATION TABLE - FISCAL YEAR 2020
The following Director Compensation table provides information concerning director compensation earned by each non-employee director for services rendered in fiscal year 2020. Since the annual base fee and fees for service on Committees are payable for services provided to the Company from January 1st of the fiscal year until the next annual meeting of stockholders, such compensation is reported for purposes of the Director Compensation table on a weighted basis. For fiscal year 2020, one third of the reported compensation earned or paid in cash is based on the Director Compensation Policy in effect for calendar year 2019 and two thirds of the reported compensation earned or paid in cash is based on the Director Compensation Policy in effect for calendar year 2020. Amounts earned and reported in the Director Compensation table for Fees Earned or Paid in Cash for the fiscal year for each director are dependent upon the various committees on which each director served as a member or as chair during the fiscal year.
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Name
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Fees Earned or Paid in Cash
($)1
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Stock Awards
($)2
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All Other
Compensation
($)3
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Total
($)
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Daniel T. Carter
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$ 74,000
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$ 69,919
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$ 6,000
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$ 149,919
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Melissa Claassen
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$ 66,000
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$ 69,919
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$ 6,000
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$ 141,919
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Eric P. Etchart
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$ 66,000
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$ 69,919
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$ 6,000
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$ 141,919
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Trevor I. Mihalik
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$ 45,333
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$ 69,919
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$ 6,000
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$ 121,252
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Graciela I. Monteagudo
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$ 24,500
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$ 69,949
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$ 6,000
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$ 100,449
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David B. Pendarvis
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$ 62,000
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$ 69,919
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$ 6,000
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$ 137,919
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Daniel E. Pittard
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$ 66,000
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$ 69,919
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$ 6,000
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$ 141,919
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Gregory A. Sandfort
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$ 68,000
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$ 69,919
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$ 6,000
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$ 143,919
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Anne G. Saunders
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$ 66,000
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$ 69,919
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$ 6,000
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$ 141,919
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Neal E. Schmale
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$ 92,000
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$ 69,919
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$ 6,000
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$ 167,919
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1
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For services rendered during fiscal year 2020, directors received RSU awards pursuant to elections made in 2018 (not applicable to Messrs. Mihalik, Pittard and Schmale and Mses. Monteagudo and Saunders) and 2019 (not applicable to Messrs. Carter, Pittard, Schmale and Mses. Monteagudo and Saunders) under the Director Compensation Policy with respect to their services as directors in calendar years 2019 and 2020, respectively, in each case in lieu of all or part of their base annual fees for such calendar year (as described in the narrative preceding the Director Compensation table). The value of such elective RSU awards received by Ms. Claassen and Messrs. Etchart, Pendarvis and Sandfort for services rendered during fiscal year 2020 was $53,927. The value of elective RSU awards received by Messrs. Carter and Mihalik for services rendered during fiscal year 2020 were $17,961 and $35,966, respectively. Messrs. Pittard and Schmale and Ms. Saunders elected to receive all of their base annual fees in cash. The number of shares underlying each director’s RSU award is rounded down to the nearest whole share.
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2
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Amounts included in the Stock Awards column represent the grant date fair value for non-elective RSU awards granted to all non-employee directors pursuant to the Director Compensation Policy. On December 10, 2019, each director other than Ms. Monteagudo received a non-elective RSU award covering 359 shares of the Company’s common stock. Each RSU award granted on December 10, 2019 has a grant date fair value equal to the closing price of the Company’s common stock on that date in the amount of $194.76 per share multiplied by the number of shares underlying the RSU award. On June 15, 2020 Ms. Monteagudo received a non-elective RSU award covering 370 shares of the Company’s common stock having a grant date fair value equal to the closing price of the Company’s common stock on that date in the amount of $189.05 per share multiplied by the number of shares underlying the RSU award. The number of shares underlying each director’s RSU award is rounded down to the nearest whole share. Outstanding RSUs held by each director as of October 12, 2020 are reported above in footnotes to the table under the heading, Security Ownership of Directors and Executive Officers. The RSUs vest immediately upon grant but are settled in stock only upon termination of service as a director. The RSUs provide for the payment of dividend equivalent compensation in amounts equal to dividends declared and paid on the Company’s common stock.
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3
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Amounts represent charitable contributions to be made by the Company in fiscal year 2021 as designated by non-employee directors pursuant to the Company’s Director Contribution Fund.
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EQUITY HOLDING REQUIREMENT FOR DIRECTORS
All RSU awards to non-employee directors, including both non-elective grants and RSU awards granted pursuant to the annual elections of the directors to receive RSUs in lieu of all or part of their base annual fee, provide for immediate vesting but will not be settled in shares of the Company’s common stock until termination of each director’s service as a director. The number of shares to be issued to each non-employee director upon termination of service is disclosed in the footnotes to the table under the heading, Security Ownership of Directors and Executive Officers.
STOCKHOLDER COMMUNICATIONS WITH BOARD OF DIRECTORS
Stockholders may send communications to the Board of Directors by submitting a letter addressed to: WD-40 Company, Corporate Secretary, 9715 Businesspark Avenue, San Diego, CA 92131.
The Board of Directors has instructed the Corporate Secretary to forward such communications to the Board Chair. The Board of Directors has also instructed the Corporate Secretary to review such correspondence and, at the Corporate Secretary’s discretion, to not forward correspondence which is deemed of a commercial or frivolous nature or inappropriate for consideration by the Board of Directors. The Corporate Secretary may also forward the stockholder communication within the Company to another department to facilitate an appropriate response.
COMMITTEES (membership as of October 12, 2020)
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Director
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Audit
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Compensation
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Corporate
Governance
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Finance
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Daniel T. Carter
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Chair
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✓
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Melissa Claassen
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✓
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✓
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Eric P. Etchart
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Chair
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✓
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Graciela I. Monteagudo
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✓
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✓
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Trevor I. Mihalik
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✓
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✓
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Chair
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David B. Pendarvis
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✓
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✓
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Daniel E. Pittard
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✓
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✓
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Gregory A. Sandfort
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Chair
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✓
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Anne G. Saunders
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✓
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✓
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Neal E. Schmale
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✓
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✓
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✓
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Number of Meetings Held in Fiscal Year 2020
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5
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3
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5
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5
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CORPORATE GOVERNANCE COMMITTEE
Nomination Policies and Procedures
The Corporate Governance Committee is comprised of Eric P. Etchart (Chair), Graciela I. Monteagudo, Trevor I. Mihalik and Daniel E. Pittard. The Corporate Governance Committee also functions as the Company’s nominating committee and is comprised exclusively of independent directors as defined in the Nasdaq Rules. The Corporate Governance Committee met five times during the last fiscal year.
The Corporate Governance Committee acts in conjunction with the Board of Directors to ensure that a regular evaluation is conducted of succession plans, performance, independence, and of the qualifications and integrity of the Board of Directors. The Corporate Governance Committee also reviews the applicable skills and characteristics required of nominees for election as directors. The objective is to balance the composition of the Board of Directors to achieve a combination of individuals of different backgrounds and experiences as describe more fully below. The Board of Directors has not established any specific diversity criteria for the selection of nominees other than the general composition criteria noted below. The Corporate Governance Committee also oversees an annual process of self-evaluation conducted by each committee of the Board and for the Board as a whole, which includes a board evaluation, individual self-evaluations and peer evaluations.
In determining whether to recommend a director for re-election, the Corporate Governance Committee considers the director’s past attendance at meetings, results of evaluations and the director’s participation in and anticipated future contributions to the Board of Directors. A director who will have reached the age of 72 prior to the date of the next annual meeting of stockholders will be expected to retire from the Board. However, the Board may re-nominate any director for up to three additional years if relevant circumstances warrant continued service.
The Corporate Governance Committee reviews new Board of Director nominees through a series of internal discussions, reviewing available information, and interviewing selected candidates. Generally, candidates for nomination to the Board of Directors have been identified and compiled in a database through director networking resources and professional organizations or suggested by individual directors or employees. The Company does not currently employ a search firm or third party in connection with seeking or evaluating candidates.
The Corporate Governance Committee considers director recruitment and succession planning for the Board at each quarterly meeting. This review entails consideration of various factors that the Committee believes to be relevant to assurance that the Board maintains a level of diversity and experience that is appropriate for its oversight and governance responsibilities. In addition to age and the tenure of each director on the WD-40 Company Board, the committee considers the extent of each
director’s experience in management and as directors on other public company boards, if applicable, including service on committees and as committee or board chairs. In addition to a baseline expectation that directors and director candidates will share WD-40 Company values and have demonstrated an ability to promote and sustain a strong corporate culture, the Board endeavors to assure that the mix of skills among existing directors is appropriate for the evolving business of the Company. The following list of specific skills are presently included among the areas of expertise and experience that the Committee believes will best serve the Company. The list is updated from time to time and each director’s skills in these areas are graded on a scale to assess the level of competence in each area that is available to the Board as a whole.
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·
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Organizational Development Expertise
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·
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Compensation Design Expertise
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·
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Consumer or Retail Market Expertise
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·
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Business-to-Business Sales and Marketing Expertise
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·
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Digital/Internet/E-Commerce Expertise
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·
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Experience in Americas Markets and Cultures (Canada and Latin America)
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·
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Experience in EMEA Markets and Cultures (Europe, India, Middle East and Africa)
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·
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Experience in Asia-Pacific Markets and Cultures (Australia, China and other countries in the Asia region)
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·
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IT or Cybersecurity Expertise
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·
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Logistics and Supply Chain Management Expertise
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·
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Manufacturing Expertise
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·
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Mergers and Acquisitions Expertise
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The Corporate Governance Committee will consider director candidates recommended by security holders under the same criteria as other candidates described above. Nominations may be submitted by letter addressed to: WD-40 Company Corporate Governance Committee, Corporate Secretary, 9715 Businesspark Avenue, San Diego, California 92131. Nominations by security holders must be submitted in accordance with the requirements of the Company’s Bylaws, including submission of such nominations within the time required for submission of shareholder proposals as set forth below under the heading, Shareholder Proposals.
AUDIT COMMITTEE
Related Party Transactions Review and Oversight
The Audit Committee is comprised of Daniel T. Carter (Chair), Trevor I. Mihalik, Graciela I. Monteagudo, Daniel E. Pittard, Anne G. Saunders and Neal E. Schmale. Five meetings of the Audit Committee were held during the last fiscal year to review quarterly financial reports, to consider the annual audit and other audit services, to review the audit with the independent registered public accounting firm after its completion and to fulfill other responsibilities provided for in the Audit Committee’s Charter. The Board of Directors has determined that Mr. Carter is an “audit committee financial expert” as defined by regulations adopted by the Securities and Exchange Commission. Mr. Carter and each of the other members of the Audit Committee are independent directors as defined in the Nasdaq Rules. Each member of the Audit Committee also satisfies the requirements for service on the Audit Committee as set forth in Rule 5605(c)(2) of the Nasdaq Rules.
The Audit Committee has responsibility for review and oversight of related party transactions for potential conflicts of interest. Related party transactions include any independent business dealings between the Company and related parties who consist of, or are related to, the Company’s executive officers, directors, director nominees and holders of more than 5% of the Company’s shares. Such transactions include business dealings with parties in which any related party has a material direct or indirect interest. The Audit Committee has adopted a written policy to provide for its review and oversight of related party transactions. Executive officers and directors are required to notify the Secretary of the Company of any proposed or existing related party transactions in which they have an interest. The Secretary and the Audit Committee also rely upon the Company’s disclosure controls and procedures adopted pursuant to Exchange Act rules for the purpose of assuring that matters requiring disclosure, including transactions that may involve a related party or may otherwise involve the potential for conflicts of interests, are brought to the attention of management and the Audit Committee on a timely basis. Certain related party transactions do not require Audit Committee review and approval. Such transactions are considered pre-approved. Pre-approved transactions include:
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·
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compensation arrangements approved by the Compensation Committee or the Board of Directors and expense reimbursements consistent with the Company’s expense reimbursement policy;
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·
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transactions in which the related party’s interest is derived solely from the fact that he or she serves as a director of another corporation that is a party to the transaction;
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transactions in which the related party’s interest is derived solely from his or her ownership (combined with the ownership interests of all other related parties) of not more than a 5% beneficial interest (but excluding any interest as a general partner of a partnership) in an entity that is a party to the transaction; and
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·
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transactions available to all employees of the Company generally.
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If a related party transaction is proposed or if an existing transaction is identified, the Audit Committee has authority to disapprove, approve or ratify the transaction and to impose such restrictions or other limitations on the transaction as the Committee may consider necessary to best assure that the interests of the Company are protected and that the related party involved is not in a position to receive an improper benefit. In making such determination, the Audit Committee considers such factors as it deems appropriate, including without limitation (i) the benefits to the Company of the transaction; (ii) the commercial reasonableness of the terms of the transaction; (iii) the dollar value of the transaction and its materiality to the Company and to the related party; (iv) the nature and extent of the related party’s interest in the transaction; (v) if applicable, the impact of the transaction on a non-employee director’s independence; and (vi) the actual or apparent conflict of interest of the related party participating in the transaction.
During the fiscal year ended August 31, 2020, there were no transactions required to be reported pursuant to the requirements of Item 404(a) of Regulation S-K under the Exchange Act that did not require review and approval by the Audit Committee.
FINANCE COMMITTEE
The Finance Committee is comprised of Trevor I. Mihalik (Chair), Daniel T. Carter, Melissa Claassen, Eric P. Etchart, David B. Pendarvis, Gregory A. Sandfort and Neal E. Schmale. Five meetings of the Finance Committee were held during the last fiscal year. The Finance Committee is appointed by the Board for the primary purpose of assisting the Board in overseeing financial matters of importance to the Company, including matters relating to acquisitions, investment policy, capital structure, and dividend policy. The Finance Committee also reviews the Company’s annual and long-term financial strategies and objectives.
COMPENSATION COMMITTEE
ITEM NO. 2
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act, the Company’s stockholders are being asked to cast an advisory vote to approve the compensation of the Company’s Named Executive Officers (“NEOs”) identified in the Compensation Discussion and Analysis section of this Proxy Statement. This vote is commonly referred to as a “Say-on-Pay” vote.
At the Company’s 2017 Annual Meeting of Stockholders, the Company’s stockholders were asked, by a non-binding advisory vote, to express their preference as to the frequency of future Say-on-Pay votes and the Board of Directors recommended annual Say-on-Pay voting. The Company’s stockholders expressed a preference to have Say-on-Pay votes every year.
The following resolution will be presented for approval by the Company’s stockholders at the 2020 Annual Meeting of Stockholders:
“RESOLVED, that the stockholders of WD-40 Company (the “Company”) hereby approve the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis section of the Company’s proxy statement for the 2020 Annual Meeting of Stockholders and in the accompanying compensation tables and narrative disclosures.”
The advisory vote to approve executive compensation is a non-binding vote on the compensation of the Company’s NEOs. This Proxy Statement contains a description of the compensation provided to the NEOs as required by Item 402 of Regulation S-K promulgated under the Exchange Act.
Stockholders are encouraged to carefully consider the Compensation Discussion and Analysis, accompanying compensation tables and related narrative discussion in this Proxy Statement in considering this advisory vote. The Board of Directors believes that the compensation provided to the Company’s NEOs offers a competitive pay package with a proper balance of current and long-term incentives aligned with the interests of the Company’s stockholders.
This is an advisory vote and will not affect compensation previously paid or awarded to the NEOs. While a vote disapproving the NEOs’ executive compensation will not be binding on the Board of Directors or the Compensation Committee, the Compensation Committee will consider the results of the advisory vote in making future executive compensation decisions.
The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal at the Annual Meeting of Stockholders is required to approve this advisory vote on executive compensation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” ADOPTION OF THE PROPOSED RESOLUTION FOR APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
COMPENSATION DISCUSSION AND ANALYSIS
WD-40 Company’s Compensation Discussion and Analysis addresses the executive compensation philosophy and the processes and decisions of the Compensation Committee of the Company’s Board of Directors (the “Committee”) with respect to the compensation of the Company’s Named Executive Officers (the “NEOs”). For fiscal year 2020, the Company’s NEOs were:
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Garry O. Ridge, our Chief Executive Officer and Chairman of the Board (“CEO”);
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Jay W. Rembolt, our Vice President, Finance, Treasurer and Chief Financial Officer (“CFO”);
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Steven A. Brass, our President and Chief Operating Officer;
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Richard T. Clampitt, our Vice President, General Counsel and Corporate Secretary; and
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Patricia Q. Olsem, our Division President, Americas.
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EXECUTIVE SUMMARY OF EXECUTIVE COMPENSATION DECISIONS AND RESULTS
The compensation structure for the NEOs is comprised of three elements: base salary, retention-related equity compensation and performance-related cash and equity compensation. Through the application of these elements, a significant portion of NEO realized compensation is directly tied to Company performance measured by increased earnings and total stockholder return (“TSR”). Performance-based compensation tied to earnings is based on earnings before interest, income taxes, depreciation (in operating departments) and amortization (“EBITDA”), not earnings per share.
Retention-related equity compensation includes restricted stock unit (“RSU”) awards that vest over a period of three years after grant, subject to earlier vesting upon the effective date of retirement under certain conditions. Retention-related equity compensation features are also reflected in our performance-based market share unit (“MSU”) awards that may be earned over a market return-based vesting period of three years, subject to pro-rata vesting at the end of the applicable measurement period in the event of earlier retirement under certain conditions.
Performance-related compensation includes (i) an annual cash payment opportunity that is tied to current fiscal year financial results (“Incentive Compensation”); (ii) MSU awards that are tied to a measure of TSR; and (iii) deferred performance unit (“DPU”) awards that are tied to current fiscal year financial results that exceed levels required for maximum payment of that portion of the cash Incentive Compensation opportunity that is tied to global EBITDA.
For purposes of measuring performance based on the Company’s EBITDA, the Company uses EBITDA before deduction of the stock-based compensation expense for vested DPU awards, if any, and excluding other non-operating income and expense amounts (“Adjusted EBITDA”).
FISCAL YEAR 2020 SUPPLEMENTAL CASH COMPENSATION AWARD
For fiscal year 2020, due to the extreme variability of the impact of the COVID-19 pandemic on the Company’s local market and regional results, and to recognize the outstanding cross-regional and cross-functional efforts that allowed the Company to manage its business successfully through the year, compensation for all employees, including the NEOs, was supplemented by a separate cash compensation award. Additional cash compensation was paid to each employee to the extent that the regular Incentive Compensation amount determined as described below under the heading, Performance Incentive Program, did not provide a baseline level of compensation equal to 25% of the employee’s Incentive Compensation opportunity. The Company maintains transparent and well-defined compensation arrangements for all employees, including the NEOs. This unprecedented supplemental cash compensation award has been granted to recognize employee efforts in an extraordinary year in which the regular compensation arrangements resulted in differences in rewards that did not properly reflect the contributions all made to achieve the results of the company as a whole.
The foregoing compensation structure elements are fully described later in this Compensation Discussion and Analysis.
In establishing the framework for overall NEO compensation and in assessing such compensation for each NEO in light of individual and overall Company performance, the Committee considers actual and target levels of compensation with reference to both short-term and long-term performance periods as well as labor market data and peer group executive compensation. The Committee seeks to align individual NEO performance incentives with both short-term and long-term Company objectives. The Committee assesses the effectiveness of the established framework for NEO compensation through a review of each of the principal elements of NEO compensation. The Committee considers measures of Company performance, specifically including regional and global measures based on the Company’s Adjusted EBITDA, and also relative Company performance as compared to an established peer group of companies and a comparable market index. Additionally, the Committee also considers the relative achievement of longer term strategic objectives as to which each NEO is accountable. Information regarding NEO strategic objectives is provided in the Executive Officer Compensation Decisions section below under the heading, Base Salary: Process. The Committee believes that a review of NEO compensation and relative company performance over multi-year periods demonstrates the effectiveness of the Company’s established framework for NEO compensation.
THREE YEAR PERFORMANCE-BASED COMPENSATION REVIEW
For fiscal year 2020, the Company’s overall financial performance resulted in highly variable achievement of performance measure goals for regional Adjusted EBITDA under the Company’s Incentive Compensation program (the “Performance Incentive Program”) as described below. Depending on local market impacts resulting from efforts to slow the spread of COVID‑19, most local market results for the Company were either quite strong or very poor. Due to this variability, a modest portion of the first level performance measure goal for the Americas region was achieved, a small portion of the first level performance goal for the EMEA region was achieved, and no portion of the first level performance goal for the Asia-Pacific region was achieved. As a result, a small portion of the first level goal for global Adjusted EBITDA was achieved and none of the second level goal for global Adjusted EBITDA was achieved. For fiscal year 2020, each of the NEOs identified for fiscal year 2020 other than Ms. Olsem earned Incentive Compensation equal to approximately 10% of their Incentive Compensation opportunity and Ms. Olsem earned Incentive Compensation equal to approximately 35% of her Incentive Compensation opportunity. Due to the extreme variability of the impacts of the COVID-19 pandemic on the Company’s financial results across local markets and the regions, the Company awarded additional cash compensation to all employees, including the NEOs, who did not receive at least 25% of their Incentive Compensation opportunity. As a result, each of the NEOs other than Ms. Olsem (who received more than 25% of her Incentive Compensation opportunity) received a supplemental cash compensation award for fiscal year 2020 in an amount equal to approximately 15% of their Incentive Compensation opportunity. Amounts received by each of the NEOs for fiscal year 2020 as earned Incentive Compensation and for the supplemental cash compensation awards are set forth below under the headings, Performance Incentive Program and Supplemental Cash Compensation Award for Fiscal Year 2020, respectively.
For fiscal year 2019, the Company’s overall financial performance resulted in partial achievement of performance measure goals for regional and global Adjusted EBITDA under the Company’s Performance Incentive Program. The maximum first level performance measure goals for the EMEA and Asia-Pacific regions were achieved, but only a modest portion of the first level performance goal for the Americas region was achieved. Due to the strong performance of the EMEA and Asia-Pacific segments and modest achievement of goals for the Americas segment, the maximum first level goal for global Adjusted EBITDA was achieved and approximately 35.6% of the second level for global Adjusted EBITDA was achieved. As a result, for fiscal year 2019, each of the NEOs other than Mr. Brass earned Incentive Compensation equal to 68% of their Incentive Compensation opportunity and Mr. Brass earned Incentive Compensation equal to 26% of his Incentive Compensation opportunity for fiscal year 2019.
For fiscal year 2018, the Company’s overall financial performance resulted in partial achievement of performance measure goals for regional and global Adjusted EBITDA under the Company’s Performance Incentive Program. The maximum first level performance measure goals for the Americas and Asia-Pacific regions were achieved, but no portion of the first level performance goal for the EMEA region was achieved. Due to the strong performance of the Americas and Asia-Pacific segments, the maximum first level goal for global Adjusted EBITDA was achieved and approximately 26.6% of the second level goal for global Adjusted EBITDA was achieved. As a result, for fiscal year 2018 each of the NEOs identified for fiscal year 2018 disclosures earned Incentive Compensation equal to 63% of their Incentive Compensation opportunity for fiscal year 2018.
For the three fiscal years ended August 31, 2020, the TSR for the Company’s shares exceeded, by an absolute percentage point difference, the return for the Russell 2000 Index (the “Index”) by 79.2%. As a result, MSUs awarded to the NEOs in October 2017 provided vested shares of the Company’s common stock to the NEOs at 200% of the target number of award shares.
For the three fiscal years ended August 31, 2019, the TSR for the Company’s shares exceeded, by an absolute percentage point difference, the return for the Index by 22.4%. As a result, MSUs awarded to the NEOs in October 2016 provided vested shares of the Company’s common stock to the NEOs, other than Mr. Brass, at 200% of the target number of award shares. Mr. Brass earned 150% of the target number of award shares for the MSUs awarded to him in October 2016.
For the three fiscal years ended August 31, 2018, the TSR for the Company’s shares exceeded, by an absolute percentage point difference, the return for the Index by 48.45%. As a result, MSUs awarded in October 2015 to the NEOs identified for fiscal year 2018 disclosures provided vested shares of the Company’s common stock to those NEOs, other than Mr. Brass, at the maximum amount of 200% of the target number of award shares. Mr. Brass earned 150% of the target number of award shares for the MSUs awarded to him in October 2015.
FISCAL YEAR 2020 COMPENSATION DECISIONS
Compensation decisions for fiscal year 2020 were made in October 2019 based on individual and Company performance during fiscal year 2019 and a market survey conducted by the Committee’s compensation consultant. The position relative to the market median of total compensation for each of the NEOs for fiscal year 2020 is based on peer group and survey data which is discussed below under the heading, Overall Reasonableness of Compensation.
The following is a summary of the decisions made by the Committee for NEO compensation for fiscal year 2020:
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For fiscal year 2020, base salaries for the NEOs other than Mr. Brass and Ms. Olsem were increased by 2.0%. The base salary for Mr. Brass was increased by 11.0% in October 2019, and the base salary for Ms. Olsem was increased by 12.5% in October 2019. Base salaries for the NEOs were assessed in relation to labor market information. For fiscal year 2020, consideration was given to the appropriate relative mix of salary, annual Incentive Compensation and equity awards.
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Annual Incentive Compensation is awarded to the NEOs under the Company’s Performance Incentive Compensation Plan as described below under the heading Performance Incentive Program. For purposes of the Performance Incentive Program, goals for regional and global Adjusted EBITDA were established at the beginning of the fiscal year. The Company’s performance as measured against these goals is described in detail below.
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In October 2019, the NEOs received annual RSU awards providing for the issuance of a total of 7,910 shares of the Company’s common stock to be earned by continued employment by the Company over a vesting period of three years, subject to earlier vesting upon the effective date of retirement under certain conditions. These awards serve a retention purpose together with an incentive to maximize long term stockholder value through share price appreciation.
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In October 2019, the NEOs received MSU awards subject to performance vesting covering a target number of shares of the Company’s common stock equal to 7,910 shares. If the Company’s TSR over the three-year vesting period matches the median return for the Index, the target number of shares of the Company’s common stock would be issued to the NEOs. The actual number of shares to be issued to the NEOs will be from 0% to 200% of the target number of shares depending upon the Company’s TSR as compared to the return for the Index. In October 2019, the NEOs received DPU awards that provided an opportunity to receive up to an aggregate maximum of 7,715 additional shares of the Company’s common stock upon termination of employment. The DPU awards provided for vesting as of the end of fiscal year 2020 if the Company were to achieve a level of global Adjusted EBITDA for the fiscal year in excess of the maximum goal for global Adjusted EBITDA established for the Performance Incentive Program. Since the Company’s global Adjusted EBITDA for fiscal year 2020 did not exceed the maximum goal for global EBITDA established for the Performance Incentive Program, the DPU awards for fiscal year 2020 did not vest and they have lapsed without value to the NEOs.
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RSU, MSU and DPU award amounts for fiscal year 2020 varied among the NEOs based on labor market compensation practices specific to the region of employment, relative achievement of individual performance measures and goals established for each NEO, as well as Company performance for fiscal year 2019 in areas over which each NEO had direct influence.
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The Company’s stockholders have provided advisory votes to approve executive compensation required by Section 14A of the Exchange Act (the “Say-on-Pay” votes) at the Company’s annual meeting of stockholders for fiscal years 2017, 2018 and 2019. In each instance, at least 95% of the votes cast in the Say-on-Pay votes approved the compensation of the NEOs as disclosed in the Compensation Discussion and Analysis section of the Company’s Proxy Statements for those fiscal years and in the accompanying compensation tables and narrative disclosures. The Committee has considered the results of these advisory Say-on-Pay votes in its decision-making for executive compensation of the NEOs and has concluded that no significant changes in executive compensation decisions and policies are warranted.
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GOVERNANCE OF EXECUTIVE OFFICER COMPENSATION PROGRAM
The purpose of the Committee is to establish and administer the compensation arrangements for our CEO and the other executive officers of the Company, including the other NEOs, on behalf of the Board of Directors. The Committee is responsible for developing the Company’s overall executive compensation strategy, with support from management and the Committee’s independent compensation consulting firm. For fiscal year 2020 compensation decisions, the Committee’s compensation consulting firm was Board Advisory, LLC. In March 2020 the Committee selected a new compensation consulting firm, ClearBridge Compensation Group, LLC. The Committee also has responsibilities in connection with administration of the Company’s equity compensation plans.
The Committee operates pursuant to a Charter which outlines its responsibilities, including the Committee’s responsibilities with respect to performance reviews and approval of annual compensation arrangements for the Company’s executive officers. A copy of the Compensation Committee Charter can be found on WD-40 Company’s website at http://investor.wd40company.com
within the “Corporate Governance” section.
PROCESS FOR EVALUATING EXECUTIVE OFFICER PERFORMANCE AND COMPENSATION
In accordance with its Charter, the Committee works with the Company’s Human Resources function in carrying out its responsibilities. The Vice President of Global Organization Development is management’s liaison with the Committee. The Committee’s independent compensation consulting firm provides advice and information relating to executive compensation. For fiscal year 2020, the compensation consulting firm assisted the Committee in the evaluation of executive base salary, Incentive Compensation opportunities, equity incentive design and award levels, and the specific pay recommendation for our CEO. The Committee’s compensation consulting firm reports directly to the Committee and provides no additional services for management.
EXECUTIVE COMPENSATION PHILOSOPHY AND FRAMEWORK
COMPENSATION OBJECTIVES
The Company’s executive compensation program is designed to achieve five primary objectives:
1.Attract, motivate, reward and retain high performing executives;
2.Align the interests and compensation of executives with the value created for stockholders;
3.Create a sense of motivation among executives to achieve both short- and long-term Company objectives;
4.Create a direct, meaningful link between business and team performance and individual accomplishment and rewards; and
5.Ensure our compensation programs are appropriately competitive in the relevant labor markets.
TARGET PAY POSITION/MIX OF PAY
The Company’s compensation program consists primarily of base salary, annual cash incentives, and long-term oriented equity awards. Each of these components is discussed in greater detail in the Executive Officer Compensation Decisions section below. The Committee has established a target for executive officer total compensation (defined as base salary, plus target Incentive Compensation, plus the value of RSU and MSU equity awards) at the median market level of compensation for each position (details on the use of peer group and survey data to establish the median market level are provided below). Actual pay may vary, based on Company and/or individual performance, length of time within the position, and anticipated contribution. The Committee does not adhere to specific guidelines regarding the percentage of total compensation that should be represented by each compensation component but monitors market competitiveness. A review of total compensation for each NEO relative to the target market percentile is provided in the Executive Officer Compensation Decisions section below under the heading, Overall Reasonableness of Compensation.
The mix of pay for executive officers is intended to provide significant incentives to drive overall company performance and increased stockholder value. The mix of pay consists of Salary and All Other Compensation amounts as reported in the Summary Compensation Table below, maximum possible values for Stock Awards (RSUs, MSUs and DPUs) as reported in the table in footnote 1 to the Summary Compensation Table, and maximum possible Non-Equity Incentive Plan Compensation (Incentive Compensation) amounts as reported in the Grants of Plan-Based Awards table below. The sum total of these maximum possible compensation amounts for each NEO is referred to as the NEO’s “Total Compensation Opportunity.” For purposes of the charts below, the Total Compensation Opportunity for the CEO, and for all other NEOs in the aggregate, has been divided among elements of compensation that are considered at risk (MSUs, tied to longer term relative stockholder return, and DPUs and Incentive Compensation, tied to current fiscal year financial performance), and those elements that are not performance-based and not considered at risk (Salary, All Other Compensation and RSUs). Approximately 72% of the CEO’s Total Compensation Opportunity for fiscal year 2020 was at risk while approximately 62%, in the aggregate, of the Total Compensation Opportunity for fiscal year 2020 for all of the other NEOs was at risk. As reported in more detail below, for fiscal year 2020, each of the NEOs other than Ms. Olsem earned 25% of their maximum Incentive Compensation amounts (inclusive of the supplemental cash compensation award described above under the heading, Three Year Performance-Based Compensation Review, and Ms. Olsem earned approximately 35% of her maximum Incentive Compensation amount, and each NEO earned maximum MSU award values (for the MSU award granted in October 2017), and no portion of their DPU awards.
COMPENSATION BENCHMARKING
For purposes of its fiscal year 2020 compensation decisions, the Committee examined the executive compensation practices of a peer group of seventeen companies to assess the competitiveness of the Company’s executive compensation. Peer group companies were selected from a list of U.S. headquartered companies having revenues and earnings reasonably comparable to the Company and doing business in the specialty chemical industry or within specific consumer products categories. In addition to the peer group data, the Committee considered general industry company survey data provided by Korn Ferry Hay Group, a global management consulting firm. These data sources are applied by the Committee to establish the market median level of compensation for each executive officer position. The companies used in the peer group analysis for fiscal year 2020 compensation decisions were as follows:
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American Vanguard Corporation
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Innospec Inc.
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Balchem Corporation
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Landec Corporation
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Cambrex Corporation
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Prestige Healthcare, Inc
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Chase Corporation
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Quaker Chemical Corporation
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Dorman Products
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Rayonier Advanced Materials, Inc.
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Flotek Industries Inc.
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Sensient Technologies Corporation
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Hawkins, Inc.
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Stoneridge Inc.
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Ingevity Corporation
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USANA Health Sciences, Inc.
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Innophos Holdings, Inc.
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EXECUTIVE OFFICER COMPENSATION DECISIONS FOR FISCAL YEAR 2020
BASE SALARY: PROCESS
Base salaries for all executive officers, including the NEOs, are approved by the Committee effective for the beginning of each fiscal year. In setting base salaries, the Committee considers the salary range prepared by its compensation advisor based on each NEO’s job responsibilities and the market 50th percentile target pay position. Salary adjustments, if any, are based on factors such as individual performance, position, current pay relative to the market, future anticipated contribution and the Company-wide merit increase budget. Assessment of individual performance follows a rigorous evaluation process, including self-evaluation and the establishment of annual goals for each executive officer and an assessment of the achievement thereof.
Individual performance elements considered in this process included individual and Company performance goals and achievements in such areas as growth, leadership, earnings and governance for Mr. Ridge; governance and risk, compliance, forecasting and financial reporting for Mr. Rembolt; growth, leadership, innovation, brand development, earnings and customer relations for Mr. Brass; brand protection, corporate governance, legal services and risk management, and compliance for Mr. Clampitt; and business unit performance, teamwork, execution and growth for Ms. Olsem.
BASE SALARY: FISCAL YEAR 2020
In October 2019, the Committee reviewed the market competitiveness of executive officer base salaries relative to peer group market data presented by the Committee’s compensation advisor. Based on its review of the peer group market data and the general industry company survey data, the Committee approved a 2.0% increase in the CEO’s base salary for fiscal year 2020 and increases in base salary ranging from 2.0% to 12.5% for the other NEOs.
PERFORMANCE INCENTIVE PROGRAM
The Company uses its Performance Incentive Program to tie executive officer compensation to the Company’s financial performance. All Company employees participate in the same Performance Incentive Program as described below. The Performance Incentive Program is offered to the executive officers pursuant to the WD-40 Company Performance Incentive Compensation Plan most recently approved by the stockholders at the Company’s 2017 Annual Meeting of Stockholders.
The Performance Incentive Program provides direct incentives to all Company employees, including executive officers, to affect regional financial performance and, for the Company as a whole, to promote sales at increasing levels of profitability. Specific performance measures tied to regional financial results are used in the Performance Incentive Program formulas as applied to each employee according to his or her particular area of responsibility.
For the NEOs, Incentive Compensation opportunity awards for fiscal year 2020 were based on pre-established goals for the following corporate performance measures: (i) the Company’s Adjusted EBITDA computed for each of the Company’s relevant financial reporting segments (“Regional EBITDA”); and (ii) Adjusted EBITDA computed on a consolidated basis (“Global EBITDA”). The calculations of attainment of these performance measures for the NEOs are substantially the same as the calculations for all other employees for whom such performance measures were applicable.
For purposes of computing the actual financial results to be measured against the goals established for the Regional EBITDA and Global EBITDA performance measures, the Company may exclude certain expenditures as approved by the Committee. For fiscal year 2020, the Committee approved the exclusion of certain expenses in the amount of approximately $1,493,000 associated with the Company’s investment in IT infrastructure.
The Company’s Incentive Compensation Program, as applied to all of its employees, is designed with the intent to fund the Incentive Compensation payout to all employees, including the NEOs, from increased earnings over the prior fiscal year. If the Company does not realize an increase in Global EBITDA over the prior year, it is possible that Ms. Olsem will earn some Incentive Compensation because the performance measure for a portion of the Incentive Compensation opportunity payable to her is based on Regional EBITDA.
Depending upon actual performance results, the Incentive Compensation opportunities for fiscal year 2020 range from 0% up to 200% of base salary for Mr. Ridge, from 0% up to 100% of base salary for Mr. Rembolt, from 0% up to 160% of base salary for Mr. Brass, from 0% up to 90% of base salary for Mr. Clampitt, and from 0% up to 100% of base salary for Ms. Olsem.
The maximum Incentive Compensation potential for employees under the Performance Incentive Program is referred to herein as the employee’s “Annual Opportunity.” For each of the NEOs, the Performance Incentive Program for fiscal year 2020 provided two performance measure levels (“Levels A and C”) for determination of earned Incentive Compensation; each level represented 50% of the Annual Opportunity. The Performance Incentive Program is consistently applied for all employees of the Company except that there are three performance measure levels (“Levels A, B and C”) for all employees other than the NEOs and certain other executive officers and management employees. The maximum Incentive Compensation payout for Ms. Olsem required achievement of specified segment goals for Regional EBITDA (Level A) and Company performance that equaled the maximum goal amount for Global EBITDA as described below (Level C). For Messrs. Ridge, Rembolt, Brass and Clampitt (each of whom has global rather than regional responsibilities), the maximum Incentive Compensation payouts required achievement of specified goals for Global EBITDA for each of Levels A and C.
Only two of the three performance measure goals are applied for the NEOs and certain other executive officers and management employees for purposes of calculating earned Incentive Compensation in order to provide an increased incentive to those employees to achieve the maximum level of Global EBITDA results for the benefit of stockholders. Level B performance measure goals for other employees are more directed to achievement of goals tied to areas over which they have more direct
influence. For such other employees, Level A represented 50% of the Annual Opportunity, Level B represented 30% of the Annual Opportunity and Level C represented 20% of the Annual Opportunity.
Target and maximum payout amounts for each of the NEOs for the fiscal year 2020 Performance Incentive Program are disclosed below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2020.
The following table sets forth the fiscal year 2020 Performance Incentive Program payout weightings and the minimum and maximum goals for the performance measures applicable to each of the NEOs. The minimum and maximum Level A goals for Regional and Global EBITDA were based on earnings before deduction of any Incentive Compensation amounts. The minimum and maximum Level C goals for Global EBITDA were based on earnings after deduction of an estimate of the maximum possible Incentive Compensation amounts for Levels A and B, but before deduction of Incentive Compensation amounts for Level C.
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Level
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Performance Measure
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Garry O. Ridge
Jay W. Rembolt
Steven A. Brass
Richard T. Clampitt
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Patricia Q. Olsem
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Minimum Goal
FY 2020
($ thousands)
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Maximum Goal
FY 2020
($ thousands)
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A
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Regional EBITDA (Americas)
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N/A
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50%
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$ 56,517
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$ 60,359
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A
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Global EBITDA
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50%
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N/A
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$ 88,917
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$ 102,713
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C
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Global EBITDA
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50%
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50%
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$ 93,363
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$ 100,954
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The following table sets forth the actual fiscal year 2020 performance results and percentage achievement for each of the performance measures under the Performance Incentive Program formulas applicable to the NEOs. Actual earnings results for measurement against the Regional and Global EBITDA goals were adjusted to exclude (a) Incentive Compensation amounts consistent with the manner in which the minimum and maximum performance measure goals are determined as described with reference to the table above and (b) certain Company expenditures as approved by the Committee, as described above.
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Level
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Performance Measure
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Actual
FY 2020
($ thousands)
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% Achievement
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A
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Regional EBITDA (Americas)
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$ 59,200
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69.8%
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A
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Global EBITDA
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$ 91,793
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20.8%
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C
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Global EBITDA
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$ 86,519
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0.0%
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Achievement of the maximum goals for Regional EBITDA and Global EBITDA is intended to be attainable through the concerted efforts of all management teams working in their own regions and areas of responsibility and for the Company as a whole.
Based on the Company’s fiscal year 2020 performance and the Committee’s certification of the relative attainment of each of the performance measures under the Performance Incentive Program, the payouts for our executive officers, including the NEOs, were calculated. On October 12, 2020, the Committee approved payment of the following Incentive Compensation amounts to the NEOs for fiscal year 2020 performance:
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Executive Officer
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Title
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FY 2020
Annual
Opportunity
(As % of
Base Salary)
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FY 2020
Incentive Compensation
Paid ($)
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FY 2020
Actual Incentive Compensation
(As % of
Opportunity)
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Garry O. Ridge
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Chief Executive Officer and Chairman of the Board
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200%
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$ 140,647
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10%
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Jay W. Rembolt
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Vice President, Finance, Treasurer
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100%
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$ 34,037
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10%
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and Chief Financial Officer
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Steven A. Brass
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President and Chief Operating Officer
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160%
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$ 74,161
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10%
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Richard T. Clampitt
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Vice President, General Counsel
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90%
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$ 26,874
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10%
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and Corporate Secretary
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Patricia Q. Olsem
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Division President, Americas
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100%
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$ 104,419
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35%
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As an example of the operation of the Performance Incentive Program, Ms. Olsem’s Incentive Compensation payout for fiscal year 2020 was computed as follows:
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Incentive Compensation Annual Opportunity = 100% X Eligible Earnings ($299,091) = $299,091.
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Level A (Regional EBITDA) = 50% of Annual Opportunity = $149,546.
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— Level A Incentive Compensation = Level A Achievement (69.824%) X Level A Annual Opportunity = $104,419.
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·
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Level C (Global EBITDA) = 50% of Annual Opportunity = $149,546.
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— Level C Incentive Compensation = Level C Achievement (0%) X Level C Annual Opportunity = $0.
Ms. Olsem’s aggregate Incentive Compensation payout was the sum of the payouts under Levels A and C of the Performance Incentive Program, or $104,419.
Supplemental cash compensation award for fiscal year 2020
As discussed above under the headings, Fiscal Year 2020 Supplemental Cash Compensation Award and Three Year Performance-Based Compensation Review, the Company paid a supplemental cash award to all employees, including the NEOs, so that all employees received at least 25% of their Incentive Compensation opportunity. Accordingly, the following supplemental cash compensation amounts were awarded to the NEOs for fiscal year 2020:
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Executive Officer
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Supplemental Cash Compensation Amount
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Garry O. Ridge
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$ 196,718
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Jay W. Rembolt
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$ 47,634
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Steven A. Brass
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$ 103,727
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Richard T. Clampitt
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$ 37,588
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Patricia Q. Olsem
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-
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Equity Compensation
Equity compensation is a critical component of the Company’s efforts to attract and retain executives and key employees, encourage employee ownership in the Company, link pay with performance and align the interests of executive officers with those of stockholders. To provide appropriately directed incentives to our executive officers, the Committee has provided awards of time-vesting restricted stock unit (“RSU”) awards as well as performance-vesting market share unit (“MSU”) awards and deferred performance unit (“DPU”) awards. Equity awards for fiscal year 2020 were granted to the NEOs pursuant to the Company’s 2016 Stock Incentive Plan (the “Stock Incentive Plan”) approved by the stockholders at the 2016 Annual Meeting of Stockholders.
The Company’s MSU awards are tied to a measure of total stockholder return (“TSR”) that is determined by reference to a change in the value of the Company’s common stock with reinvestment of dividends. In October 2019, the Committee granted primary equity allocations of RSU and MSU awards for fiscal year 2020. The authorized awards were divided equally between the two types of awards for each NEO. MSU awards provide for vesting after a three-year performance vesting period based on a comparison of the Company’s TSR against the Russell 2000 Index (the “Index”) as described in more detail below. In addition to the RSU and MSU awards, the NEOs also received DPU awards in October 2019. As compared to the retention and long-term performance-based attributes of the RSU and MSU awards, the DPU awards provide a near-term incentive reward for achieving Global EBITDA results for the fiscal year in excess of the amount of Global EBITDA required for maximum payout of Incentive Compensation under Level C of the Performance Incentive Program as described above. DPU awards provide for vesting at the end of the fiscal year for which they are granted. All RSU, MSU and DPU awards are subject to terms and conditions set forth in an applicable award agreement (the “Award Agreement”).
The principal attributes and benefits of the RSU, MSU and DPU awards for executive officers are as follows:
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RSU awards provide for vesting in relatively equal portions over a period of three years from the grant date, subject to earlier vesting upon the effective date of retirement under certain conditions.
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MSU awards provide for performance-based vesting tied to the Company’s TSR over a performance measurement period of three fiscal years beginning with the fiscal year in which the awards are granted and ending on August 31st of the third year.
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·
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DPU awards provide for performance-based vesting tied to the Company’s Global EBITDA achievement for the fiscal year in which the awards are granted in excess of the maximum goal for Global EBITDA under Level C of the Company’s Performance Incentive Program.
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·
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RSU and MSU awards provide for the issuance of shares of the Company’s common stock upon vesting.
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·
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Vested DPU awards provide for the issuance of shares of the Company’s common stock only upon termination of employment. Until issuance of the shares for vested DPU awards, the holders of the vested DPU awards are entitled to receive dividend equivalent payments with respect to their vested DPU awards, payable in cash as and when dividends are declared upon shares of the Company’s common stock.
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A mix of RSU, MSU and DPU awards is appropriate as compared to RSU awards alone or other equity awards, such as stock options, for the following reasons: i) MSU awards granted annually provide a more direct performance-based incentive aligned directly with longer term stockholder interests; ii) RSU awards have a greater perceived value to recipients than stock options; iii) DPU awards offer a reward for exceeding the highest goal for near-term financial results for the Company; iv) RSU, MSU and DPU awards have a less dilutive impact on a share count basis than stock options; and v) the issuance of shares of the Company’s common stock upon vesting of RSUs and MSUs, and the deferred issuance of shares following vesting of DPU awards encourages long-term stock ownership, promotes retention objectives and facilitates the achievement of the Company’s stock ownership guidelines (as described below in the Other Compensation Policies section, under the heading, Executive Officer Stock Ownership Guidelines).
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The Board recognizes the potentially dilutive impact of equity awards. The Company’s equity award practices are designed to balance the impact of dilution and the Company’s need to remain competitive by recruiting, retaining and providing incentives for high-performing employees.
Restricted Stock Unit Awards
RSU awards provide for the issuance of shares of the Company’s common stock to the award recipient upon vesting provided that the recipient remains employed with the Company through each vesting date except as noted below with respect to vesting upon retirement. Shares of the Company’s common stock equal to the portion of the RSU award that has vested are issued promptly upon the vesting date. RSU awards provide for vesting over a period of three years from the grant date. 34% of the RSU award will vest on the first vesting date and 33% of the RSU award will vest on each of the second and third vesting dates. The vesting date each year is the third business day following the Company’s public release of its annual earnings for the preceding fiscal year, but not later than November 15 of the vesting year.
RSU Award Agreements provide that, for RSU award recipients who retire from the Company after reaching age 65, or for RSU award recipients who retire from the Company after reaching age 55 and have been employed by the Company for at least 10 years, all RSUs will be vested upon the effective date of retirement and shares will be issued within 30 days after the effective date of retirement, except for executive officers whose RSU shares will be issued 6 months after the effective date of retirement.
Payment of required withholding taxes due with respect to the vesting of the RSU awards, if any, will be covered through withholding of shares by the Company. The Company will issue a net number of shares to the recipient for a vested RSU award after withholding shares having a value as of the vesting date, or as of the date of issuance in the case of the issuance of RSU shares following retirement, equal to the required tax withholding obligation.
Market Share Unit Awards
MSU awards provide for performance-based vesting over a performance measurement period of three fiscal years commencing with the fiscal year in which the MSU awards are granted (the “Measurement Period”). Except as noted below with respect to vesting upon retirement, the recipient must remain employed with the Company for vesting purposes until the date on which the Committee certifies achievement of the requisite performance provided for in the MSU Award Agreement. A number of shares of the Company’s common stock equal to an “Applicable Percentage” of the “Target Number” of shares covered by the MSU awards to the NEOs will be issued as of the “Settlement Date.” The Applicable Percentage is determined by reference to the performance vesting provisions of the MSU Award Agreements as described below. The Settlement Date for an MSU award is the third business day following the Company’s public release of its annual earnings for the third fiscal year of the Measurement Period.
MSU Award Agreements provide for monthly pro-rata vesting of MSUs as of the end of the Measurement Period in the event of the earlier termination of the award recipient’s employment due to death, disability, or retirement after reaching age 65, or retirement after reaching age 55 with at least 10 years of employment with the Company. For purposes of calculating the number of MSUs vested and the corresponding number of shares to be issued as of the Settlement Date, the Target Number of shares covered by the MSU awards will be adjusted according to the pro-rata portion of the Measurement Period that has elapsed as of the effective date of termination of employment. The Committee may also exercise its discretion to provide for monthly pro-rata vesting of MSUs awarded to a recipient who resigns or is terminated by the Company for reasons other than good cause.
Payment of required withholding taxes due with respect to the settlement of an MSU award, if any, will be covered through withholding of shares by the Company. The Company will issue a net number of shares to the recipient for a vested MSU award after withholding shares having a value as of the Settlement Date equal to the required tax withholding obligation.
The performance vesting provisions of MSU awards are based on relative TSR for the Company over the Measurement Period as compared to the total return (“Return”) for the Index as reported for total return (with dividends reinvested), as published by Russell Investments. For purposes of computing the relative TSR for the Company as compared to the Return for the Index, dividends paid with respect to the Shares will be treated as having been reinvested as of the ex-dividend date for each declared dividend.
The Applicable Percentage of the Target Number of shares will be determined for each of the NEOs based on the absolute percentage point difference between the TSR for the Company as compared to the Return for the Index (the “Relative TSR”) as set forth in the table below:
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|
|
|
|
|
|
Relative TSR
|
|
|
|
(absolute percentage point difference)
|
|
Applicable Percentage
|
|
> 20%
|
|
200%*
|
|
20%
|
|
200%*
|
|
15%
|
|
175%*
|
|
10%
|
|
150%
|
|
5%
|
|
125%
|
|
Equal
|
|
100%
|
|
-5%
|
|
75%
|
|
-10%
|
|
50%
|
|
>-10%
|
|
0%
|
|
|
|
|
* The MSU award granted to Ms. Olsem in fiscal year 2019 provides for a maximum Applicable Percentage of the Target Number of shares of 150% if the Relative TSR is 10% or greater. Otherwise, the Applicable Percentage for the MSU awards granted to Ms. Olsem will be calculated in the same manner as for the other NEOs.
The Applicable Percentage will be determined on a straight-line sliding scale from the minimum 50% Applicable Percentage achievement level to the maximum 200% Applicable Percentage achievement level (150% for Ms. Olsem for the MSU award granted in fiscal year 2019). For purposes of determining the TSR for the Company and the Return for the Index, the beginning and ending values for each measure will be determined on an average basis over a period of all market trading days within the ninety (90) calendar days prior to the beginning of the fiscal year for the beginning of the Measurement Period and over a period of all market trading days within the ninety (90) calendar days prior to the end of the third fiscal year of the Measurement Period. For purposes of determining relative achievement, actual results are to be rounded to the nearest tenth of one percent and rounded up from the midpoint. The number of MSU Shares to be issued on the Settlement Date is to be rounded to the nearest whole share and rounded upward from the midpoint.
In the event of a Change in Control (as defined in the Stock Incentive Plan), the Measurement Period will end as of the effective date of the Change in Control and the ending values for calculating the TSR for the Company and the Return for the Index will be determined based on the closing price of the Company’s common stock and the value of the Index, respectively, immediately prior to the effective date of the Change in Control. The Applicable Percentage will be applied to a proportionate amount of the Target Number of MSUs based on the portion of the Measurement Period elapsed as of the effective date of the Change in Control. The recipient NEO will receive RSUs for the portion of the Target Number of MSUs to which the Applicable Percentage is not applied. Those RSUs will time vest, subject to rights under the NEO’s Change of Control Severance Agreement, as of the Settlement Date.
Deferred Performance Unit Awards
DPU awards provide for performance-based vesting over a performance measurement period of the fiscal year in which the DPU awards are granted (the “Measurement Year”). The DPU awards provide for vesting of a number of DPUs equal to an “Applicable Percentage” of the “Maximum Number” of DPUs awarded to the NEOs following conclusion of the Measurement Year (“Vested DPUs”). Except as noted below with respect to vesting upon retirement, the recipient must remain employed with the Company for vesting purposes until August 31 of the Measurement Year. Except as noted below as to non-residents of the United States, the Vested DPUs must be held until termination of employment. Following termination of employment, each Vested DPU will be settled by issuance of one share of the Company’s common stock (a “DPU Share”). The Maximum Number of DPUs refers to the maximum number of DPU Shares that may be issued with respect to a DPU award upon full achievement of the applicable performance goal as described below. The Applicable Percentage is determined by reference to the performance vesting provisions of the DPU Award Agreement as described below. For NEOs who are not residents of the United States, the Compensation Committee has discretion to either defer settlement of each Vested DPU by issuance of a DPU Share following termination of employment or settle each Vested DPU in cash by immediate payment of an amount equal to the closing price of
one share of the Company’s common stock as of the date of the Compensation Committee’s certification of achievement of the performance measure applied in determination of the Applicable Percentage.
Each Vested DPU that is not settled in cash will include the right to receive a dividend equivalent payment in an amount equal to the dividends declared with respect to the Company’s common stock for each Vested DPU. Such dividend equivalent payments are to be paid in cash as ordinary compensation income as and when common stock dividends are paid by the Company, provided, however, that the Company may elect to accumulate such dividend equivalent payments for later payment not less often than annually.
DPU Award Agreements provide for monthly pro-rata vesting of DPUs as of the end of the Measurement Year in the event of the earlier termination of the award recipient’s employment due to death, disability, or retirement after reaching age 65, or retirement after reaching age 55 with at least 10 years of employment with the Company. For purposes of calculating the number of Vested DPUs earned, the Maximum Number of shares covered by the DPU awards will be adjusted according to the pro-rata portion of the Measurement Year that has elapsed as of the effective date of termination of employment.
Vested DPUs not otherwise settled in cash will be settled by issuance of the DPU Shares as of 6 months following termination of employment (the “Settlement Date”). Payment of required withholding taxes due with respect to the settlement of a Vested DPU award, if any, will be covered through withholding of shares by the Company. The Company will issue a net number of shares to the recipient for a Vested DPU award after withholding shares having a value as of the Settlement Date equal to the required tax withholding obligation.
The performance vesting provisions of the DPUs are based on relative achievement within an established performance measure range of the Company’s EBITDA (before deduction of the stock-based compensation expense for the Vested DPUs and excluding other non-operating income and expense amounts (“Adjusted Global EBITDA”) for the Measurement Year.
For fiscal year 2020, the performance vesting provisions for the DPUs were established as set forth in the table below:
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|
|
|
|
|
|
|
|
Adjusted Global EBITDA1
|
|
Applicable Percentage
|
|
> $101,109,000
|
|
100%
|
|
$101,109,000
|
|
100%
|
|
$96,284,000
|
|
5%
|
|
< $96,284,000
|
|
0%
|
|
$96,030,000*
|
|
0%
|
|
* Implied zero percentage achievement level.
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|
|
|
|
|
|
|
|
1
|
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The calculation of Adjusted Global EBITDA for purposes of the performance vesting provisions of the DPUs accounts for full payment of all Incentive Compensation earned for the fiscal year.
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The Applicable Percentage will be determined on a straight-line sliding scale from the implied zero percentage achievement level to the maximum 100% Applicable Percentage achievement level, but the Applicable Percentage shall not be less than 5%. For purposes of determining the Applicable Percentage, the calculated percentage is to be rounded to the nearest tenth of one percent and rounded upward from the midpoint. The number of Vested DPUs is to be rounded to the nearest whole unit and rounded upward from the midpoint.
EQUITY AWARDS – FISCAL YEAR 2020
For fiscal year 2020, equity awards to our executive officers were granted to satisfy goals for executive officer retention, to provide incentives for current and future performance, and to meet objectives for overall levels of compensation and pay mix. RSU, MSU and DPU awards were granted to the NEOs by the Committee in October 2019. All of the equity awards are set forth below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2020. In establishing award levels for the NEOs for fiscal year 2020, the Committee placed emphasis on long-term retention goals and desired incentives for current and future contributions. The RSU and MSU awards to our CEO were, consistent with past practice, larger than the awards to the other NEOs in recognition of his higher level of responsibility for overall Company performance and based upon market data that supports a higher level of equity compensation for our CEO. The specific RSU award amounts and Target Number of shares covered by MSU awards were determined for each NEO based on an assessment of the NEO’s achievement of individual performance goals as well as Company performance for fiscal year 2019 in areas over which the NEO had particular influence. The DPU award amounts were established by reference to each NEO’s Incentive Compensation opportunity amount based on fiscal year 2019 base salary amounts and fiscal year 2020 maximum percentage opportunity for Incentive Compensation – the share equivalent value of the DPUs awarded to each NEO as of the date of grant equals 50% of the NEO’s maximum Incentive Compensation opportunity amount.
Market Share Unit Award Vesting for Three Fiscal Year Performance Achievement
On October 12, 2020, the Committee certified achievement of the performance measure applicable to MSU awards granted to the NEOs in October 2017. The Committee certified the Company’s relative TSR as compared to the Return for the Index for the performance Measurement Period ended August 31, 2020 for purposes of calculating the vested number of shares of the Company’s common stock for those MSU awards. The relative TSR as compared to the Return for the Index (as an absolute percentage point difference) over the three fiscal year Measurement Period ending August 31, 2020 was 79.2%. As a result, based on the table above in the description of the MSU awards, the Applicable Percentage of the Target Number of shares underlying the MSU awards granted in October 2017 was 200% for each of the NEOs other than Ms. Olsem, and 150% for Ms. Olsem.
The following table sets forth the Target Number and vested number of shares underlying the MSU awards granted to each NEO in October 2017:
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|
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|
|
|
|
|
|
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Executive Officer
|
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Target Number
|
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Vested Shares
|
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Garry O. Ridge
|
|
4,434
|
|
8,868
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Jay W. Rembolt
|
|
798
|
|
1,596
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|
Steven A. Brass
|
|
864
|
|
1,728
|
|
Richard T. Clampitt
|
|
665
|
|
1,330
|
|
Patricia Q. Olsem
|
|
345
|
|
518
|
|
|
|
|
|
|
Deferred Performance Unit Award Vesting for Fiscal Year 2020 Performance Achievement
DPU awards granted to the NEOs for fiscal year 2020 lapsed without value to the NEOs. Vesting of the DPUs would have required a level of Adjusted Global EBITDA equal to or greater than $96,284,000 (the minimum Adjusted Global EBITDA goal for DPU vesting as set forth in the table on the preceding page). Since the actual Adjusted Global EBITDA for fiscal year 2019 was less than $96,284,000, the DPUs did not vest and they have lapsed.
BENEFITS AND PERQUISITES
As is the case with most Company employees, the NEOs are provided with standard health and welfare benefits, and the opportunity to participate in the WD-40 Company Profit Sharing/401(k) Plan (the “Plan”). The Plan serves to provide our executive officers, including the eligible NEOs, with tax-advantaged retirement savings as an additional component of overall compensation. Employees have the right to invest the Company’s contributions to the Plan in shares of the Company’s common stock as an alternative to other investment choices available under the Plan.
The Company maintains individual Supplemental Death Benefit Plan agreements for both Mr. Ridge and Mr. Rembolt. The Company’s Supplemental Death Benefit Plan agreement obligations are funded by life insurance policies owned by the Company.
The Company also provides leased vehicles or a vehicle allowance to its executive officers. The costs associated with the perquisites and other personal benefits provided to the NEOs are included in the Summary Compensation Table below and they are separately identified for fiscal year 2020 in the footnote disclosure of such perquisites and other personal benefits included with the Summary Compensation Table.
The Committee considers the cost of the foregoing health and welfare benefits and perquisites in connection with its approval of the total compensation for each of our NEOs. All such costs are considered appropriate in support of the Committee’s objective of attracting and retaining high quality executive officers because they are common forms of compensation for senior executives and are expected by such executives when they consider competing compensation packages.
POST-EMPLOYMENT OBLIGATIONS
The Company has change of control severance agreements with each of the NEOs. The specific terms of the agreements are described in detail below under the heading, Change of Control Severance Agreements. In establishing the terms and conditions for the change of control severance agreements consideration was given to possible inclusion of severance compensation to be paid to the executive officers in the event of their termination of employment without cause (or for good reason) without regard to the existence of a change of control of the Company. No such provisions were included and severance compensation is payable only following a termination of employment without “cause” or for “good reason” within two years following a “change of control” of the Company (as the quoted terms are defined in the severance agreements).
The Committee believes that the change of control severance agreements help ensure the best interests of stockholders by fostering continuous employment of key management personnel. As is the case in many public companies, the possibility of an unsolicited change of control exists. The uncertainty among management that can arise from a possible change of control can result in the untimely departure or distraction of key executive officers. Reasonable change of control severance agreements reinforce continued attention and dedication of executive officers to their assigned duties and support the Committee’s objective of retaining high quality executives.
OVERALL REASONABLENESS OF COMPENSATION
The Committee believes that the Company is achieving its compensation objectives and rewards executive officers for driving operational success and stockholder value creation. Based on reviews of tally sheets and a “pay-for-performance” analysis by the Committee, and in light of the Company’s compensation objectives, the Committee and the Board of Directors believe that the pay mix and target pay position relative to market for each of the NEOs are reasonable and appropriate. The “pay-for-performance” analysis includes a review of the individual components of executive officer compensation that are tied to Company performance, as measured by identified financial performance metrics as well as the price of the Company’s common stock. In particular, the Committee reviews executive officer Incentive Compensation to determine whether it appropriately rewards achievement of specific financial performance goals and does not otherwise provide rewards in the absence of reasonable measures of individual and Company success. Similarly, with respect to equity awards, the Committee considers the effectiveness of such awards in providing a reasonable incentive to the executive officers to increase profits (as measured by Regional and Global EBITDA) and total stockholder return without inappropriately rewarding the executive officers if performance targets are not achieved over the long term.
The following table sets forth the total compensation for each of our NEOs (based on cash compensation received as base salary and earned Incentive Compensation, plus the value of equity awards (other than the DPUs) at their date of grant per share values) for fiscal year 2020, together with the relative position to market mid-point with 100% equaling market median for each NEO:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Base Salary
|
|
Other
Earned Compensation1
|
|
Value of
Stock Awards2
|
|
Total
Compensation
|
|
Present Value of Total Compensation Received as a Percentage of Market Median
|
|
|
Garry O. Ridge
|
|
$ 675,240
|
|
$ 337,365
|
|
$ 1,599,630
|
|
$ 2,612,235
|
|
83%
|
|
|
Jay W. Rembolt
|
|
$ 327,011
|
|
$ 81,671
|
|
$ 299,814
|
|
$ 708,496
|
|
89%
|
|
|
Steven A. Brass
|
|
$ 446,422
|
|
$ 177,888
|
|
$ 649,908
|
|
$ 1,274,218
|
|
84%
|
|
|
Richard T. Clampitt
|
|
$ 286,716
|
|
$ 64,462
|
|
$ 229,795
|
|
$ 580,973
|
|
76%
|
|
|
Patricia Q. Olsem
|
|
$ 300,375
|
|
$ 104,419
|
|
$ 259,963
|
|
$ 664,757
|
|
80%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Other Earned Compensation includes earned Incentive Compensation plus the supplemental cash compensation awards granted to NEOs as described above under the heading, Supplemental Cash Compensation Award for Fiscal Year 2020.
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|
|
2
|
|
For purposes of comparing total compensation for fiscal year 2020 to market median compensation levels for each NEO, the Committee included the Value of Stock Awards (RSUs and MSUs) based on the closing price of the Company’s common stock on the grant date for those awards. The October 7, 2019 grant date closing price was $186.22. MSUs are valued based on the target number of shares of the Company’s common stock to be issued upon achievement of the applicable performance measure. Information concerning all of the Stock Awards (including DPUs) for fiscal year 2020 is set forth below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2020.
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For fiscal year 2020, total compensation for our NEOs was assessed by the Committee’s compensation consulting firm as part of the process for executive compensation decision-making for fiscal year 2021. As noted in the table above, total compensation for the NEOs ranged from 72% to 85% of the market median compensation level for each position as determined by the Committee’s compensation consulting firm. The levels of compensation are considered by the Committee to be under, but appropriately in line with, target compensation levels for the NEOs in a year in which the Company’s performance was considered by the Committee to be reasonably strong under circumstances of widespread global economic disruption brought on by the global COVID-19 pandemic. These market position comparisons are based on an analysis from the Committee’s compensation consultant that incorporates peer group proxy analysis and general industry survey data for current NEO roles.
OTHER COMPENSATION POLICIES
EXCHANGE ACT RULE 10b5-1 TRADING PLANS AND INSIDER TRADING GUIDELINES
A description of the Company’s insider trading policies applicable to our executive officers is included above in this Proxy Statement under the heading, Insider Trading Policy – Prohibited Hedging Transactions.
EXECUTIVE OFFICER STOCK OWNERSHIP GUIDELINES
The Board of Directors has approved guidelines for executive officer ownership of the Company’s common stock. The guidelines specify that each executive officer will be expected to attain, within a period of five years from the later of the date of election of the executive officer or the date of adoption of the guidelines, and to maintain thereafter, equity ownership in the Company valued at not less than one times his or her current base salary for executive officers other than our CEO and CFO, two times the current base salary for our CFO, and five times the current base salary for our CEO. Valuation for purposes of the guidelines is to be determined at the higher of cost or current fair market value for shares of the Company’s common stock held outright and shares underlying vested RSUs, MSUs and DPUs then held.
The Board of Directors believes that the stock ownership guidelines serve to improve alignment of the interests of our executive officers and the Company’s stockholders. At the present time, all NEOs have exceeded the expected level of stock ownership.
As noted above under the heading Equity Compensation, the NEOs receive both time-vesting RSU awards and performance-based vesting MSU and DPU awards. As the RSU and MSU awards vest, shares of the Company’s common stock are issued to the NEOs and these shares may then be sold or retained, subject to the stock ownership guidelines described above. Vested DPU awards provide for deferred issuance of shares to the NEOs upon termination of employment. Outstanding unvested RSU and MSU awards held as of August 31, 2020 by the NEOs are set forth in the table below under the heading, Outstanding Equity Awards at 2020 Fiscal Year End. All NEOs hold Vested DPUs and Mr. Ridge holds vested RSU awards that must be retained until termination of employment as noted above in the footnotes to the tables under the heading, Security Ownership of Directors and Executive Officers.
TAX CONSIDERATIONS
Section 162(m) of the Internal Revenue Code of 1986 (the “Code”) limits the deductibility of compensation payable in any tax year to certain covered executive officers. Section 162(m) of the Code generally provides that a company covered by the statute cannot deduct compensation paid to its most highly paid executive officers to the extent that such compensation exceeds $1 million per officer per taxable year. Under the law prior to the passage of the legislation known as the Tax Cuts and Jobs Act (the “Act”) compensation that is “performance-based” within the meaning of the Code did not count toward the $1 million limit. The performance-based compensation exception to the deductibility limit was repealed by the Act. However, under a transition rule provided for in the Act, the value of vested shares under MSU awards granted prior to November 2, 2017 is still expected to qualify for deductibility under the performance-based compensation exception.
While the Compensation Committee will always seek to maximize the deductibility of compensation paid to the Company’s executive officers, the Committee provides total compensation to the executive officers in line with competitive practice, the Company’s compensation philosophy, and the interests of stockholders. Therefore, the Company presently pays some compensation to its executive officers that may not be deductible under Section 162(m) and it is anticipated that the Company will continue to do so.
ACCOUNTING CONSIDERATIONS
We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”) for our stock-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including restricted stock awards and performance-based awards, based on the grant date fair value of these awards. Depending upon the type of performance conditions applicable to performance-based awards, ASC Topic 718 may require the recording of compensation expense over the service period for the award (usually, the vesting period) based on the grant date value (such as for our MSUs) or compensation expense may be recorded based on the expected probability of vesting over the vesting period, subject to adjustment as such probability may vary from period to period (such as for our DPUs). This calculation is performed for accounting purposes and amounts reported in the compensation tables below are based on the compensation expense expected to be recorded over the vesting periods for the awards, determined as of the grant date for the awards. In the case of our MSUs, the grant date values fix the compensation expense to be recorded over the vesting period. These amounts are reported in the tables below even though our executive officers may realize more or less value from their MSU awards depending upon the actual level of achievement of the applicable performance measure. In the case of our DPUs, no value is included in the Summary Compensation Table or in the table under the heading, Grants of Plan-Based Awards – Fiscal Year 2020, because ASC Topic 718 requires that we assess the probability of vesting of the DPUs as of the grant date. As of the grant date, we did not consider it probable that the DPUs would become vested even though it was possible that our executive officers would receive Vested DPUs as of the end of the fiscal year
COMPENSATION COMMITTEE REPORT
The Compensation Committee of WD-40 Company’s Board of Directors has reviewed and discussed with management of the Company the Compensation Discussion and Analysis included in this Proxy Statement and the Company’s annual report on Form 10-K for the year ended August 31, 2020, and, based upon that review and discussion, recommended to the board that it be so included.
Compensation Committee
Gregory A. Sandfort (Chair)
Melissa Claassen
David B. Pendarvis
Anne G. Saunders
Neal E. Schmale
EXECUTIVE COMPENSATION
None of our executive officers has an employment agreement or other arrangement, whether written or unwritten, providing for a term of employment or compensation for services rendered other than under specific plans or programs described herein.
For fiscal year 2020, our executive officers received compensation benefits for services rendered in fiscal year 2020 as more fully described and reported in the Compensation Discussion and Analysis section of this Proxy Statement and in the compensation tables below. As a relative share of reported total compensation for fiscal year 2020, annual salary, bonus (the supplemental cash award described in the Compensation Discussion and Analysis section), and earned Incentive Compensation was 35% of total compensation for our CEO and from 43% to 51% of total compensation for the other NEOs.
SUMMARY COMPENSATION TABLE
The following table shows information for the three fiscal years ended August 31, 2020, August 31, 2019, and August 31, 2018, concerning the compensation of our CEO, our CFO and the three most highly compensated executive officers other than the CEO and CFO as of the end of fiscal year 2020 (collectively, the “Named Executive Officers” or “NEOs”):
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|
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|
|
|
|
|
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|
|
|
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|
|
|
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|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock Awards1
|
|
Non-Equity
Incentive Plan
Compensation2
|
|
All Other
Compensation3
|
|
Total
|
|
Garry O. Ridge
|
|
2020
|
|
$ 675,240
|
|
$ 196,718
|
|
$ 1,775,853
|
|
$ 140,647
|
|
$ 119,403
|
|
$ 2,907,861
|
|
Chief Executive Officer
|
|
2019
|
|
662,000
|
|
-
|
|
1,405,209
|
|
897,285
|
|
115,347
|
|
3,079,841
|
|
and Chairman of the Board
|
|
2018
|
|
648,840
|
|
-
|
|
975,657
|
|
698,111
|
|
107,384
|
|
2,429,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay W. Rembolt
|
|
2020
|
|
$ 327,011
|
|
$ 47,634
|
|
$ 332,844
|
|
$ 34,037
|
|
$ 101,178
|
|
$ 842,704
|
|
Vice President, Finance,
|
|
2019
|
|
320,599
|
|
-
|
|
297,297
|
|
217,275
|
|
98,645
|
|
933,816
|
|
Treasurer and Chief Financial Officer
|
|
2018
|
|
314,313
|
|
-
|
|
175,592
|
|
198,874
|
|
91,064
|
|
779,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Brass
|
|
2020
|
|
$ 446,422
|
|
$ 103,727
|
|
$ 721,505
|
|
$ 74,161
|
|
$ 96,810
|
|
$ 1,442,625
|
|
President and Chief Operating Officer
|
|
2019
|
|
365,937
|
|
-
|
|
216,024
|
|
95,272
|
|
92,651
|
|
769,884
|
|
|
|
2018
|
|
312,476
|
|
-
|
|
190,114
|
|
197,365
|
|
85,181
|
|
785,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard T. Clampitt
|
|
2020
|
|
$ 286,716
|
|
$ 37,588
|
|
$ 255,111
|
|
$ 26,874
|
|
$ 86,638
|
|
$ 692,927
|
|
Vice President, General Counsel
|
|
2019
|
|
281,094
|
|
-
|
|
161,842
|
|
152,401
|
|
83,058
|
|
678,395
|
|
and Corporate Secretary
|
|
2018
|
|
275,582
|
|
-
|
|
146,327
|
|
139,060
|
|
75,632
|
|
636,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia Q. Olsem4
|
|
2020
|
|
$ 300,375
|
|
$ -
|
|
$ 288,602
|
|
$ 104,419
|
|
$ 96,630
|
|
$ 790,026
|
|
Division President, Americas
|
|
2019
|
|
249,533
|
|
-
|
|
105,589
|
|
19,304
|
|
87,825
|
|
$ 462,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Stock Awards other than DPUs for fiscal years 2020, 2019 and 2018 are reported at their grant date fair values. Grant date fair value assumptions and related information is set forth in Note 15, Stock-based Compensation, to the Company’s financial statements included in the Company’s annual report on Form 10-K filed on October 21, 2020. Stock Awards consisting of MSUs awarded in fiscal years 2020, 2019, and 2018 are included based on the value of 100% of the target number of shares of the Company’s common stock to be issued upon achievement of the applicable performance measure. Stock Awards consisting of DPUs awarded in fiscal years 2020, 2019 and 2018 are reported as having no value under applicable disclosure rules and ASC Topic 718 due to the lack of any expected probability of vesting of the DPUs as of the grant date, as discussed above in the Compensation Discussion and Analysis section under the heading, Accounting Considerations. For achievement of the highest level of the applicable performance measure for the MSUs, the NEOs, other than Ms. Olsem for awards granted in fiscal year 2019, will receive 200% of the target number of shares. For achievement of the highest level of the applicable performance measure for the MSUs awarded to Ms. Olsem in fiscal year 2019, she will receive 150% of the target number of shares. For achievement of the highest level of the applicable performance measure for the DPUs, NEOs would receive Vested DPUs covering the maximum number of shares reported for purposes of the table under the heading, Grants of Plan-Based Awards – Fiscal Year 2020 and as described above in the Compensation Discussion and Analysis section under the heading, Equity Compensation.
|
SUMMARY COMPENSATION TABLE (footnote 1 continued)
The following table sets forth the amounts that would have been included for the Stock Awards for fiscal years 2020, 2019 and 2018 for each of the NEOs if the grant date fair values for the MSUs had been based on the maximum number of shares to be received and if the value of the DPUs were included at their grant date fair values based on the maximum number of shares covered by the DPUs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Year
|
|
RSUs
|
|
MSUs
(Maximum)
|
|
DPUs
(Maximum)
|
|
Total Stock Awards
|
|
|
Garry O. Ridge
|
|
2020
|
|
$
|
776,364
|
|
$
|
1,998,979
|
|
$
|
652,585
|
|
$
|
3,427,928
|
|
|
|
|
2019
|
|
|
630,133
|
|
|
1,550,151
|
|
|
639,395
|
|
|
2,819,679
|
|
|
|
|
2018
|
|
|
480,424
|
|
|
990,467
|
|
|
535,878
|
|
|
2,006,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay W. Rembolt
|
|
2020
|
|
$
|
145,512
|
|
$
|
374,663
|
|
$
|
157,913
|
|
$
|
678,088
|
|
|
|
|
2019
|
|
|
133,316
|
|
|
327,961
|
|
|
154,757
|
|
|
616,034
|
|
|
|
|
2018
|
|
|
86,463
|
|
|
178,257
|
|
|
151,369
|
|
|
416,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Brass
|
|
2020
|
|
$
|
315,426
|
|
$
|
812,158
|
|
$
|
317,112
|
|
$
|
1,444,696
|
|
|
|
|
2019
|
|
|
96,871
|
|
|
238,306
|
|
|
153,955
|
|
|
489,132
|
|
|
|
|
2018
|
|
|
93,614
|
|
|
193,000
|
|
|
142,739
|
|
|
429,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard T. Clampitt
|
|
2020
|
|
$
|
111,529
|
|
$
|
287,164
|
|
$
|
124,678
|
|
$
|
523,371
|
|
|
|
|
2019
|
|
|
72,574
|
|
|
178,535
|
|
|
108,570
|
|
|
359,679
|
|
|
|
|
2018
|
|
|
72,053
|
|
|
148,548
|
|
|
96,487
|
|
|
317,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia Q. Olsem
|
|
2020
|
|
$
|
126,170
|
|
$
|
324,863
|
|
$
|
131,472
|
|
$
|
582,505
|
|
|
|
|
2019
|
|
|
52,853
|
|
|
79,182
|
|
|
53,724
|
|
|
185,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Amounts reported as Non-Equity Incentive Plan Compensation represent Incentive Compensation payouts under the Company’s Performance Incentive Program as described in the narrative preceding the Summary Compensation Table and in the Compensation Discussion and Analysis section of this Proxy Statement. Threshold, target and maximum payouts for each of the NEOs for fiscal year 2020 are set forth below in the table under the heading, Grants of Plan-Based Awards - Fiscal Year 2020.
|
|
|
3
|
|
All Other Compensation for each of the NEOs includes the following items: (i) employer profit sharing and matching contributions to the Company’s 401(k) Profit Sharing Plan for each of the NEOs (“Retirement Benefits”); (ii) dividend equivalent amounts paid to Mr. Ridge with respect to RSUs held by him that are vested and that will not be settled in shares until termination of employment and dividend equivalent amounts paid to each of the NEOs with respect to Vested DPUs that will not be settled in shares until termination of employment (“Dividend Equivalents”); (iii) the value of supplemental life insurance benefits received by Messrs. Ridge and Rembolt described below under the heading, Supplemental Death Benefit Plans and Supplemental Insurance Benefits (“Death Benefits”);(iv) perquisites and benefits received by each of the NEOs include group life, medical, dental, vision, wellness and other insurance benefits (“Welfare Benefits”); and (v) vehicle allowance costs which include lease or depreciation expense, fuel, maintenance and insurance costs for each of the NEOs “Vehicle Allowance”).
|
The following table sets forth the separate amounts included in All Other Compensation for fiscal year 2020 for each of the NEOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Retirement Benefits
|
|
Dividend Equivalents
|
|
Death Benefits
|
|
Welfare Benefits
|
|
Vehicle Allowance
|
|
Total All Other
Compensation
|
|
|
Garry O. Ridge
|
|
$ 47,223
|
|
$ 17,950
|
|
$ 6,131
|
|
$ 34,933
|
|
$ 13,166
|
|
$ 119,403
|
|
|
Jay W. Rembolt
|
|
$ 47,223
|
|
$ 812
|
|
$ 6,115
|
|
$ 33,202
|
|
$ 13,826
|
|
$ 101,178
|
|
|
Steven A. Brass
|
|
$ 47,223
|
|
$ 283
|
|
$ -
|
|
$ 31,730
|
|
$ 17,574
|
|
$ 96,810
|
|
|
Richard T. Clampitt
|
|
$ 47,223
|
|
$ 469
|
|
$ -
|
|
$ 20,600
|
|
$ 18,346
|
|
$ 86,638
|
|
|
Patricia Q. Olsem
|
|
$ 47,223
|
|
$ 233
|
|
$ -
|
|
$ 32,577
|
|
$ 16,597
|
|
$ 96,630
|
|
|
4
|
|
No compensation information is provided for Ms. Olsem for fiscal year 2018 because she was first designated as an executive officer in fiscal year 2019.
|
GRANTS OF PLAN-BASED AWARDS - FISCAL YEAR 2020
In December 2016, the Company’s stockholders approved the WD-40 Company 2016 Stock Incentive Plan to authorize the issuance of stock-based compensation awards to employees, directors and consultants. In addition to base salary and the Performance Incentive Compensation, for fiscal year 2020 the executive officers were granted RSU, MSU and DPU awards under the Company’s 2016 Stock Incentive Plan. Descriptions of the RSU, MSU and DPU awards are provided above in the Compensation Discussion and Analysis section under the heading, Equity Compensation.
Information concerning the grant of RSU, MSU and DPU awards to the NEOs is provided in the following Grants of Plan-Based Awards table. The table also contains information with respect to Performance Incentive Program opportunity awards for fiscal year 2020 as described above in the Compensation Discussion and Analysis section under the heading, Performance Incentive Program. The table provides threshold, target and maximum payout information relating to the Company’s fiscal year 2020 Performance Incentive Program.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards1
|
|
Estimated Future Payouts Under
Equity Incentive Plan Awards2
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
(#)
|
|
Target
(#)
|
|
Maximum
(#)
|
|
All Other Stock Awards:
Number of Shares of Stock or Units3
(#)
|
|
Grant Date Fair Value of Stock and Options Awards4
($)
|
|
Garry O. Ridge
|
|
10/7/2019
|
|
$ 1
|
|
$ 675,240
|
|
$ 1,350,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/7/2019 (MSU)
|
|
|
|
|
|
|
|
2,147
|
|
4,295
|
|
8,590
|
|
|
|
$ 999,489
|
|
|
|
10/7/2019 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,295
|
|
$ 776,364
|
|
|
|
10/7/2019 (DPU)
|
|
|
|
|
|
|
|
177
|
|
|
|
3,554
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay W. Rembolt
|
|
10/7/2019
|
|
$ 1
|
|
$ 163,506
|
|
$ 327,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/7/2019 (MSU)
|
|
|
|
|
|
|
|
402
|
|
805
|
|
1,610
|
|
|
|
$ 187,332
|
|
|
|
10/7/2019 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
805
|
|
$ 145,512
|
|
|
|
10/7/2019 (DPU)
|
|
|
|
|
|
|
|
43
|
|
|
|
860
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven A. Brass
|
|
10/7/2019
|
|
$ 1
|
|
$ 287,478
|
|
$ 574,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/7/2019 (MSU)
|
|
|
|
|
|
|
|
872
|
|
1,745
|
|
3,490
|
|
|
|
$ 406,079
|
|
|
|
10/7/2019 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,745
|
|
$ 315,426
|
|
|
|
10/7/2019 (DPU)
|
|
|
|
|
|
|
|
86
|
|
|
|
1,727
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard T. Clampitt
|
|
10/7/2019
|
|
$ 1
|
|
$ 129,022
|
|
$ 258,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/7/2019 (MSU)
|
|
|
|
|
|
|
|
308
|
|
617
|
|
1,234
|
|
|
|
$ 143,582
|
|
|
|
10/7/2019 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
617
|
|
$ 111,529
|
|
|
|
10/7/2019 (DPU)
|
|
|
|
|
|
|
|
33
|
|
|
|
679
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patricia Q. Olsem
|
|
10/7/2019
|
|
$ 1
|
|
$ 120,068
|
|
$ 240,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10/7/2019 (MSU)
|
|
|
|
|
|
|
|
349
|
|
698
|
|
1,396
|
|
|
|
$ 162,432
|
|
|
|
10/7/2019 (RSU)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
698
|
|
$ 126,170
|
|
|
|
10/7/2019 (DPU)
|
|
|
|
|
|
|
|
35
|
|
|
|
716
|
|
|
|
$ -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
The Estimated Future Payouts Under Non-Equity Incentive Plan Awards represent Threshold, Target and Maximum payouts under the WD-40 Company Performance Incentive Compensation Plan for Incentive Compensation payable for fiscal year 2020 performance. The Target amount represents fifty percent of the Maximum payout for each NEO. The Maximum amount represents the Incentive Compensation opportunity for each NEO that assumes full achievement of the performance measures for Level A of the Performance Incentive Program (as more fully discussed above in the Compensation Discussion and Analysis section under the heading, Performance Incentive Program) and attainment by the Company of a level of Global EBITDA sufficient to maximize such payouts under Level C of the Performance Incentive Program.
|
|
|
2
|
|
The Estimated Future Payouts Under Equity Incentive Plan Awards represent the Threshold, Target and Maximum number of shares to be issued upon performance vesting of MSU and DPU awards as described in the Compensation Discussion and Analysis section under the heading, Equity Compensation. There is no applicable Target number of shares for DPU awards to be earned by the NEOs.
|
|
|
3
|
|
All Other Stock Awards represent RSUs described in the Compensation Discussion and Analysis section under the heading, Equity Compensation.
|
|
|
4
|
|
Information relating to the amounts disclosed as the Grant Date Fair Value of Stock Awards is included in footnote 1 to the Summary Compensation Table above.
|
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR END
The following table provides detailed information concerning the RSU and MSU awards that were not vested as of the end of the last fiscal year for each of the NEOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares or
Units of Stock That
Have Not
Vested
(#)1
|
|
Market Value of Shares or Units of Stock That Have Not Vested
($)2
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)3
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)4
|
|
Garry O. Ridge
|
|
8,394
|
|
$ 1,715,566
|
|
25,446
|
|
$ 5,200,653
|
|
Jay W. Rembolt
|
|
1,624
|
|
$ 331,913
|
|
4,896
|
|
$ 1,000,644
|
|
Steven A. Brass
|
|
2,434
|
|
$ 497,461
|
|
6,446
|
|
$ 1,317,433
|
|
Richard T. Clampitt
|
|
1,138
|
|
$ 232,584
|
|
3,484
|
|
$ 712,060
|
|
Patricia Q. Olsem
|
|
1,031
|
|
$ 210,716
|
|
2,416
|
|
$ 493,782
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Represents RSU awards to the NEOs that were not vested as of the fiscal year end.
|
|
|
2
|
|
The Market Value of the RSU awards that were not vested as of the fiscal year end was $204.38 per unit, determined by reference to the closing price for the Company’s common stock as of August 31, 2020.
|
|
|
3
|
|
Represents the maximum number of shares to be issued with respect to MSU awards granted to the NEOs that were not vested as of the fiscal year end. The maximum number of shares to be issued with respect to MSU awards equals the number of shares to be issued with respect to the MSU awards upon achievement of the highest level of achievement for such MSU awards as described above in the Compensation Discussion and Analysis section under the heading, Equity Compensation.
|
|
|
4
|
|
The Market Value of the maximum number of shares to be issued with respect to unvested MSU awards at fiscal year end was $204.38 per share, determined by reference to the closing price for the Company’s common stock as of August 31, 2020.
|
OPTION EXERCISES AND STOCK VESTED - FISCAL YEAR 2020
No shares of the Company’s common stock were acquired on exercise of stock options in the Company’s last fiscal year for the NEOs. The following table sets forth the number of shares of the Company’s common stock acquired upon the vesting of RSU and MSU awards in the Company’s last fiscal year and the aggregate dollar value realized with respect to such vested RSU and MSU awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
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Executive Officer
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Number of Shares
Acquired on Vesting1
(#)
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Value Realized
on Vesting2
($)
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Garry O. Ridge
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12,723
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$ 2,313,678
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Jay W. Rembolt
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2,374
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$ 431,712
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Steven A. Brass
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1,928
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$ 350,607
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Richard T. Clampitt
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1,940
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$ 352,789
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Patricia Q. Olsem
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647
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$ 117,657
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1
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The Number of Shares Acquired on Vesting for each NEO includes shares of the Company’s common stock issued upon vesting of RSU and MSU awards on October 22, 2019.
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2
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The Value Realized on Vesting for shares of the Company’s common stock issued on October 22, 2019 is calculated based on the number of vested RSU and MSU awards multiplied by the closing price of $181.85 for the Company’s common stock as of that date.
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NONQUALIFIED DEFERRED COMPENSATION – FISCAL YEAR 2020
The following table provides information concerning compensation received by the NEOs that is subject to deferral under applicable RSU and DPU award agreements:
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Executive Officer
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Aggregate
Earnings
in Last FY1
($)
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Aggregate
Balance
at Last FYE2
($)
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Garry O. Ridge
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$ 151,270
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$ 1,400,207
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Jay W. Rembolt
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$ 6,845
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$ 63,358
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Steven A. Brass
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$ 2,385
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$ 22,073
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Richard T. Clampitt
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$ 3,952
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$ 36,584
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Patricia Q. Olsem
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$ 1,965
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$ 18,190
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1
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The Aggregate Earnings in Last FY represents the increase in value from August 31, 2019 to August 31, 2020 of the shares underlying deferred settlement RSUs and Vested DPUs held by each NEO that will be settled in shares of the Company’s common stock following termination of employment as disclosed in footnotes to the table under the heading, Security Ownership of Directors and Executive Officers. The number of such deferred settlement RSUs and Vested DPUs for each NEO was multiplied by the difference in the closing price of the Company’s common stock on August 31, 2020 of $204.38 and on August 31, 2019 of $182.30, an increase in value of $22.08 per share. Amounts included as the Aggregate Earnings in Last FY are not otherwise included as compensation in the Summary Compensation Table for fiscal year 2020.
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2
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The Aggregate Balance at Last FYE represents the value as of August 31, 2020 of the deferred settlement RSUs and Vested DPUs held by each NEO as noted in the footnote above. The value for each deferred settlement RSU and each Vested DPU is based on the closing price of the Company’s common stock as of August 31, 2020 in the amount of $204.38 per share. The underlying deferred settlement RSUs and Vested DPUs were included in prior disclosures for the NEOs to the extent that the NEOs were included in Summary Compensation Table disclosures for the years in which such awards were first granted to the NEOs.
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SUPPLEMENTAL DEATH BENEFIT PLANS AND SUPPLEMENTAL INSURANCE BENEFITS
The Company maintains Supplemental Death Benefit Plans for Messrs. Ridge and Rembolt. Under the death benefit plan agreements, the NEO’s designated beneficiary or estate, as applicable, will receive a death benefit equal to the NEO’s then current base salary in the event of his death prior to retirement from the Company. Each of the NEOs is also eligible to receive life insurance benefits offered to all employees of the Company.
The death benefits under the Supplemental Death Benefit Plans are not formally funded but the Company has purchased key man life insurance policies owned by the Company to cover its benefit obligations. Non-employee directors do not have death benefit plan agreements.
Based upon their fiscal year 2020 base salaries, the supplemental death benefit to be provided to Messrs. Ridge and Rembolt as of the end of fiscal year 2020 would have been as set forth in the following table:
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Executive Officer
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Death Benefit
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Garry O. Ridge
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$ 675,240
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Jay W. Rembolt
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$ 327,011
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CHANGE OF CONTROL SEVERANCE AGREEMENTS
Each executive officer serves at the discretion of the Board of Directors. The Company has entered into Change of Control Severance Agreements (“Severance Agreements”) with each of the NEOs. The Severance Agreements provide that each executive officer will receive certain severance benefits if his or her employment is terminated without “Cause” or if he or she resigns for “Good Reason”, as those terms are defined in the Severance Agreements, within two years after a “Change of Control” as defined in the Severance Agreements and summarized below. If the executive officer’s employment is terminated during the aforementioned two-year period by the Company without “Cause” or by the executive officer for “Good Reason”, the executive officer will be entitled to a lump sum payment (subject to limits provided by reference to Section 280G of the Internal Revenue Code which limits the deductibility of certain payments to executives upon a change in control) of twice the executive officer’s
salary, calculated based on the greater of the executive officer’s then current annual salary or a five-year average, plus twice the executive officer’s earned Incentive Compensation, calculated based on the greater of the most recent annual earned Incentive Compensation or a five-year average. Further, any of the executive officer’s outstanding equity incentive awards that are not then fully vested (with the exception of DPU awards), will be accelerated and vested in full following such termination of employment within such two-year period and the executive officer will be entitled to continuation of health and welfare benefits under the Company’s then existing benefit plans or equivalent benefits for a period of up to two years from the date of termination of employment. No employment rights or benefits other than the change of control severance benefits described in this paragraph are provided by the Severance Agreements.
For purposes of the Severance Agreements and subject to the express provisions and limitations contained therein, a “Change of Control” means a transaction or series of transactions by which a person or persons acting together acquire more than 30% of the Company’s outstanding shares; a change in a majority of the incumbent members of the Company’s Board of Directors as specified in the Severance Agreements, a reorganization, merger or consolidation as specified in the Severance Agreements or a sale of substantially all of the assets or complete liquidation of the Company. As specified more particularly in the Severance Agreements, a “Change of Control” does not include a reorganization, merger or consolidation or a sale or liquidation where a majority of the incumbent members of the Company’s Board of Directors continue in office and more than 60% of the successor company’s shares are owned by the Company’s pre-transaction stockholders.
The Severance Agreements have a term of two years, subject to automatic renewal for successive two-year periods unless notice of non-renewal is provided by the Company’s Board of Directors not less than six months prior to the end of the current term. The term of the Severance Agreements will be automatically extended for a term of two years following any “Change of Control.”
The following table sets forth the estimated amounts payable to each of the NEOs pursuant to their respective Severance Agreements on the assumption that the employment of each NEO was terminated without “Cause” or otherwise for “Good Reason” effective as of the end of fiscal year 2020 following a “Change of Control” as provided for in the Severance Agreements. The table also includes the value, as of the end of the fiscal year, of all RSU and MSU awards that were not vested as of the end of fiscal year 2020.
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Executive Officer
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Severance Pay1
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Welfare Benefits2
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Accelerated Vesting of
RSUs and MSUs3
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Total Change of
Control Severance
Benefits
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Garry O. Ridge
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$ 3,145,050
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$ 63,145
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$ 4,315,893
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$ 7,524,088
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Jay W. Rembolt
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$ 1,088,572
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$ 62,745
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$ 832,235
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$ 1,983,552
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Steven A. Brass
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$ 1,083,388
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$ 58,745
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$ 1,156,178
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$ 2,298,311
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Richard T. Clampitt
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$ 878,234
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$ 37,919
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$ 588,614
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$ 1,504,767
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Patricia Q. Olsem
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$ 698,395
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$ 61,745
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$ 492,352
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$ 1,252,492
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1
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For each NEO other than Ms. Olsem, Severance Pay includes two times the reported Salary for fiscal year 2020 plus two times the reported Non-Equity Incentive Plan Compensation for fiscal year 2019. For Ms. Olsem, Severance Pay includes two times the reported Salary for fiscal year 2019 plus two times the average of reported Non-Equity Incentive Plan Compensation for the five years ended August 31, 2019.
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2
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For each NEO, Welfare Benefits includes an estimate of the Company’s cost to provide two years of continuation coverage under the Company’s welfare benefit plans, which does not include life insurance or long-term disability insurance.
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3
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Acceleration of vesting of RSU and MSU awards is governed by applicable provisions of the Severance Agreements and the MSU Award Agreements. The value included for accelerated vesting of RSU and MSU awards equals the value of the RSU and MSU awards that were not vested at $204.38 for each RSU and MSU based on the closing price for the Company’s common stock as of August 31, 2020. MSUs are valued for this purpose based upon the Target Number of shares of the Company’s common stock to be issued with respect to the MSUs as described above in the Compensation Discussion and Analysis section under the heading, Equity Compensation.
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CEO PAY RATIO
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and the SEC pay ratio disclosure rule, we are providing the ratio of the total annual compensation of our CEO, Mr. Ridge, to that of the Company’s “median employee” for fiscal year 2020. For fiscal year 2020, the pay ratio of the CEO’s compensation to the median employee’s compensation was approximately 29 to 1.
As authorized by applicable CEO pay ratio disclosures, we identified the Company’s median employee from all employees of the Company (excluding the CEO) as of August 31, 2018. During the years ended August 31, 2019 and 2020 there were no changes in the Company’s employee population or compensation practices that could reasonably result in a significant change in the reported pay ratio disclosure. In identifying the Company’s median employee as of August 31, 2018, we included all worldwide employees, including full-time, part-time and temporary employees. As of August 31, 2018, the Company employed 491 individuals located in 15 countries. As of August 31, 2020, the Company employed 522 individuals located in 15 countries.
For purposes of identifying the Company’s median employee as of August 31, 2018, we calculated total compensation for fiscal year 2018 for each employee other than the CEO by including salary or regular hourly wages paid in the fiscal year, Incentive Compensation paid during the fiscal year under the Company’s Performance Incentive Program, and the grant date value of equity awards (RSUs and MSUs) granted to employees in the fiscal year. Compensation paid to employees who were hired after the beginning of the fiscal year or who terminated prior to the end of the fiscal year was not annualized. For employees who received compensation denominated in a foreign currency, such amounts were converted to U.S. dollars at average annual exchange rates as of August 31, 2018.
To determine the CEO pay ratio, the total annual compensation for the median employee was calculated for fiscal year 2020 by including all elements of compensation required to be included in the Summary Compensation Table for fiscal year 2020 in the same manner as such compensation was calculated for the CEO. The Company’s median employee is located in the United States.
For fiscal year 2020, the total annual compensation of our CEO was $2,907,861 and the total annual compensation of our median employee was $99,580. Accordingly, the ratio of the total annual compensation of our CEO to that of our median employee was approximately 29 to 1.