UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to
§240.14a-12
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Simpson Manufacturing Co.,
Inc.
(Name of
Registrant as Specified In Its Charter)
__________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act
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Persons who are to
respond to the collection of information contained in this form are
not required to respond unless the form displays a currently valid
OMB control number.
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SIMPSON MANUFACTURING
CO., INC.
5956 W. Las Positas
Blvd.
Pleasanton, California 94588
Dear Shareholders:
I cordially invite you to attend the 2017 Annual Meeting of
Shareholders (the “2017 Annual Meeting”) of Simpson
Manufacturing Co., Inc. (the “Company” or
“Simpson”), to be held at 10:00 a.m., Pacific Daylight
Time, on Tuesday, May 16, 2017, at our home office located at 5956
W. Las Positas Blvd., Pleasanton, California, 94588.
At the 2017 Annual Meeting, the Company’s board of directors
(the “Board”) is recommending three highly qualified
and experienced nominees for election to the Board at the 2017
Annual Meeting: Karen Colonias, our CEO, Celeste Volz Ford, the CEO
of an established aerospace company, who joined the Board in 2014,
and Michael A. Bless, a new director candidate and CEO with
top-executive and long-term operating experience in a related
industry. The Board is soliciting you to take the following actions
and vote your shares of our common stock on the following proposals
submitted for the 2017 Annual Meeting in the manner as recommended
below:
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1
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Elect three directors, each to hold office until
the next annual meeting or until his or her successor has been duly
elected and qualified
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For the Board’s three nominees
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2
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Approve our amended Executive Officer Cash
Profit Sharing Plan
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For
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3
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Ratify the appointment of Grant Thornton LLP as
the Company’s independent registered public accounting firm
for the current fiscal year
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For
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4
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Approve, on an advisory basis, the compensation
of our named executive officers
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For
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5
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Approve, on an advisory basis, the frequency of
future advisory votes on the compensation of our named executive
officers
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1 Year
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The accompanying materials include the Notice of Annual Meeting of
Shareholders and Proxy Statement, which provide detailed
information about the matters to be considered at the 2017 Annual
Meeting.
It is important that
your shares be represented at the 2017 Annual Meeting whether or
not you are personally able to attend. Even if you plan to attend
the 2017 Annual Meeting, we hope that you will read the enclosed
Notice of Annual Meeting of Shareholders and Proxy Statement and
the voting instructions on the enclosed proxy card. We urge you to
vote TODAY by completing, signing and dating the proxy card and
mailing it in the enclosed, postage pre-paid envelope, or vote by
telephone or the Internet by following the instructions on the
proxy card. If your shares are not registered in your own name and
you would like to attend the 2017 Annual Meeting, please ask the
broker, bank or other nominee that holds the shares to provide you
with evidence of your share ownership.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION OF EACH OF THE BOARD’S NOMINEES ON PROPOSAL 1
USING, THE ENCLOSED PROXY CARD.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING
FOR
PROPOSALS 2, 3, AND 4, AND FOR
1
YEAR
ON PROPOSAL 5, USING THE ENCLOSED PROXY CARD.
We appreciate your continued interest in the Company. We look
forward to greeting you in person at the 2017 Annual Meeting and
meeting as many of our shareholders as possible. If you have any
questions or require any assistance with voting your shares, or if
you need additional copies of the proxy materials, please
contact:
D.F. King & Co., Inc.
48 Wall Street, 22
nd
Floor
New York, NY 10005
Please Call Toll Free: (888) 869-7406
Email: simpson@dfking.com
Regardless of the number of shares of common stock of the Company
that you own, your vote is important. Thank you for your continued
support, interest and investment in Simpson.
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Very truly yours,
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Brian J. Magstadt
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Secretary
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Pleasanton, California
April 11, 2017
The enclosed Notice of Annual Meeting of Shareholders and Proxy
Statement are first being made available to shareholders of record
as of March 24, 2017 on or about April 11, 2017.
SIMPSON MANUFACTURING
CO., INC.
5956 W. Las Positas
Blvd.
Pleasanton, California 94588
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
To Be Held on May 16, 2017
To the Shareholders of Simpson Manufacturing Co., Inc.:
NOTICE IS HEREBY GIVEN that the 2017 Annual Meeting of Shareholders
(the “2017 Annual Meeting”) of Simpson Manufacturing
(the “Company” or “Simpson”) will be held
at 10:00 a.m., Pacific Daylight Time, on Tuesday, May 16, 2017, at
our home office located at 5956 W. Las Positas Blvd., Pleasanton,
California, 94588 for the following purposes, as more fully
described in the accompanying proxy statement:
1.
To
elect three directors, each to hold office until the next annual
meeting or until his or her successor has been duly elected and
qualified (“Proposal 1”);
2.
To
approve the Company’s amended Executive Officer Cash Profit
Sharing Plan (“Proposal 2”);
3.
To
ratify the Board’s selection of Grant Thornton LLP as the
Company’s independent registered public accounting firm for
the current fiscal year (“Proposal 3”);
4.
To
approve, on an advisory, non-binding basis, the compensation of the
Company’s named executive officers (“Proposal
4”);
5.
To
approve, on an advisory, non-binding basis, the frequency of future
advisory votes on the compensation of the Company’s named
executive officers (“Proposal 5”); and
6.
To
transact such other business properly brought before the 2017
Annual Meeting in accordance with the provisions of our Certificate
of Incorporation and Bylaws.
Only shareholders of record as of March 24, 2017 are entitled to
notice of and will be entitled to vote at the 2017 Annual Meeting
or any postponement or adjournment thereof. Such shareholders are
urged to submit a proxy card as enclosed, even if your shares were
sold after such date. If your brokerage firm, bank, broker-dealer
or other similar organization is the holder of record of your
shares (i.e., your shares are held in “street-name”),
you will receive voting instructions from the holder of record. You
must follow these instructions in order for your shares to be
voted. We recommend that you instruct your broker or other nominee,
by following those instructions, to vote your shares for the
enclosed proxy card.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION OF EACH OF THE BOARD’S NOMINEES ON PROPOSAL 1
USING, THE ENCLOSED PROXY CARD.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING
FOR
PROPOSALS 2, 3, AND 4, AND
FOR
1 YEAR
ON PROPOSAL 5, USING THE ENCLOSED PROXY CARD.
All shareholders are cordially invited to attend the 2017 Annual
Meeting in person. In accordance with our security procedures, all
persons attending the 2017 Annual Meeting will be required to
present a form of government-issued picture identification. If you
hold your shares in “street-name”, you must also
provide proof of ownership (such as recent brokerage statement). If
you are a holder of record and attend the 2017 Annual Meeting, you
may vote by ballot in person even if you have previously returned
your proxy card. If you hold your shares in
“street-name” and wish to vote in person, you must
provide a “legal proxy” from your bank or broker.
Please note that, even if you plan to attend the 2017 Annual
Meeting, we recommend that you vote using the enclosed proxy card
prior to the 2017 Annual Meeting to ensure that your shares will be
represented.
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BY ORDER OF THE BOARD OF DIRECTORS,
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Brian J. Magstadt
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Secretary
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Pleasanton, California
April 11, 2017
IMPORTANT
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE 2017 ANNUAL
MEETING, WE URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, OR
VOTE BY TELEPHONE OR THE INTERNET AS INSTRUCTED ON THE PROXY CARD,
WHETHER OR NOT YOU PLAN TO ATTEND THE 2017 ANNUAL MEETING. YOU CAN
REVOKE YOUR PROXY AT ANY TIME BEFORE THE PROXIES YOU APPOINTED CAST
YOUR VOTES.
If you have any
questions or need any assistance in voting your shares by proxy,
please contact our proxy solicitor:
D.F. King & Co., Inc.
48 Wall Street, 22
nd
Floor
New York, NY 10005
Please Call Toll Free: (888) 869-7406
Email: simpson@dfking.com
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2017 ANNUAL
MEETING: THE PROXY STATEMENT FOR THE 2017 ANNUAL MEETING AND THE
ANNUAL REPORT TO SHAREHOLDERS ON FORM 10-K ARE AVAILABLE FREE OF
CHARGE AT HTTP://WWW.FCRVOTE.COM/SSD.
The Notice of Annual Meeting of Shareholders and the attached Proxy
Statement are first being made available to shareholders of record
as of March 24, 2017 on or about April 11, 2017.
TABLE OF
CONTENTS
QUESTIONS AND ANSWERS ABOUT THE ANNUAL
MEETING
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1
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ANNUAL MEETING PROCEDURES
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6
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FORWARD-LOOKING STATEMENTS
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10
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
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11
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PROPOSAL 1 ELECTION OF DIRECTORS
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13
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BOARD INFORMATION AND PRACTICES
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19
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BOARD COMMITTEES
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25
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CORPORATE GOVERNANCE
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30
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PROPOSAL 2 APPROVAL OF OUR AMENDED EXECUTIVE
OFFICER CASH PROFIT SHARING PLAN
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PROPOSAL 3 RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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PROPOSAL 4 ADVISORY VOTE TO APPROVE NAMED
EXECUTIVE OFFICER COMPENSATION
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38
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PROPOSAL 5 ADVISORY VOTE ON THE FREQUENCY OF
ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS
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39
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EXECUTIVE OFFICERS
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40
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EXECUTIVE COMPENSATION DISCUSSION AND
ANALYSIS
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42
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EXECUTIVE COMPENSATION SUMMARY
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42
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EXECUTIVE COMPENSATION ANALYSIS
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49
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SUMMARY COMPENSATION TABLE
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65
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DIRECTOR COMPENSATION
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71
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CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
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72
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WHERE YOU CAN FIND MORE INFORMATION
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73
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OTHER BUSINESS
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73
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SHAREHOLDER PROPOSALS AND PROXY ACCESS
NOTICES
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74
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ANNUAL REPORT ON FORM 10-K
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75
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i
SIMPSON MANUFACTURING
CO., INC.
5956 W. Las Positas
Blvd.
Pleasanton, California
94588
PROXY
STATEMENT
For the Annual Meeting
of Shareholders
To Be Held on May 16,
2017
April 11, 2017
This proxy statement (the
“Proxy Statement”) is being furnished in connection
with the solicitation of proxies by the Board of Directors (the
“Board of Directors” or the “Board”) of
Simpson Manufacturing Co., Inc. (the “Company” or
“Simpson”), to be held at 10:00 a.m., Pacific Daylight
Time, on Tuesday, May 16, 2017, at our home office located at 5956
W. Las Positas Blvd., Pleasanton, California, 94588, and at any
postponement or adjournment thereof (the “2017 Annual
Meeting”). The 2017 Annual Meeting is being held for the
purposes set forth in this Proxy Statement. This Proxy Statement,
the enclosed proxy card, and the Annual Report to Shareholders on
Form 10-K for the fiscal year ended December 31, 2016 are first
being mailed to shareholders of record as of March 24, 2017 on or
about
April
11, 201
7.
Holders of our common stock at the close of business on March 24,
2017 will be entitled to vote at the 2017 Annual Meeting.
Shareholders are entitled to one vote for each share of common
stock held. The presence of holders of our common stock having a
majority of the votes that could be cast by the holders of all
outstanding shares of our common stock entitled to vote at the 2017
Annual Meeting, in person or represented by proxy, will constitute
a quorum for the transaction of business at the 2017 Annual
Meeting.
We have elected to provide access to our proxy materials both by
sending you this full set of proxy materials, including a Notice of
Annual Meeting of Shareholders, a proxy card and the Annual Report
to Shareholders on Form 10-K for the fiscal year ended December 31,
2016, and by notifying you of the availability of our proxy
materials on the Internet. The Notice of Annual Meeting of
Shareholders, Proxy Statement, proxy card and Annual Report to
Shareholders on Form 10-K for the Company’s fiscal year ended
December 31, 2015 are available at
http://www.fcrvote.com/SSD.
In accordance with rules of the Securities and Exchange Commission
(the “SEC”), the materials on this website are
searchable, readable and printable, and the website does not have
“cookies” or other tracking devices which identify
visitors.
Each of the terms “we,” “our,”
“us” and similar terms used in this Proxy Statement
refer collectively to Simpson Manufacturing Co., Inc., a Delaware
corporation and its wholly-owned subsidiaries, including Simpson
Strong-Tie Company Inc., unless otherwise stated.
“$” signs appearing in this Proxy Statement represent
U.S. dollars, unless otherwise stated.
QUESTIONS AND ANSWERS
ABOUT THE 2017 ANNUAL MEETING
Why am I receiving this Proxy Statement?
At the 2017 Annual Meeting, the Company asks you to vote on five
proposals:
1.
to
elect three directors, each to hold office until the next annual
meeting or until his or her successor has been duly elected and
qualified (“Proposal 1”);
2.
to
approve the Company’s amended Executive Officer Cash Profit
Sharing Plan (“Proposal 2”);
3.
to
ratify the Board’s selection of Grant Thornton LLP as the
Company’s independent registered public accounting firm for
the current fiscal year (“Proposal 3”);
4.
to
approve, on an advisory, non-binding basis, the compensation of the
Company’s named executive officers (“Proposal
4”); and
5.
to
approve, on an advisory, non-binding basis, the frequency of future
advisory votes on the compensation of the Company’s named
executive officers (“Proposal 5”).
The Board may also ask you to participate in the transaction of any
other business that is properly be brought before the 2017 Annual
Meeting in accordance with the provisions of our Certificate of
Incorporation, as amended (the “Certificate of
Incorporation”) and Bylaws, as amended (the
“Bylaws”).
1
You are receiving this Proxy Statement as a shareholder of Simpson
as of March 24, 2017, the record date for purposes of determining
the shareholders entitled to receive notice of and vote at the 2017
Annual Meeting. As further described below, we request that you
promptly use the enclosed proxy card to vote, by Internet, by
telephone or by mail, in the event you desire to express your
support of or opposition to the proposals.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION
OF EACH OF THE BOARD’S NOMINEES ON PROPOSAL 1, USING THE
ENCLOSED PROXY CARD.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING
FOR
PROPOSALS 2, 3, AND 4, AND
FOR
1 YEAR
ON PROPOSAL 5, USING THE ENCLOSED PROXY CARD.
When will the 2017 Annual Meeting be held?
The 2017 Annual Meeting is scheduled to be held at 10:00 a.m.,
Pacific Daylight Time, on Tuesday, May 16, 2017, at our home office
located at 5956 W. Las Positas Blvd., Pleasanton, California,
94588.
Who is soliciting my vote?
In this Proxy Statement, the Board is soliciting your vote.
How does the Simpson Board recommend that I vote?
The Simpson Board unanimously recommends that you vote by proxy
using the proxy card with respect to the proposals, as follows:
•
FOR
the election
of all three Board nominees set forth on the proxy card (Proposal
1);
•
FOR
the approval
of the Company’s amended Executive Officer Cash Profit
Sharing Plan (Proposal 2);
•
FOR
the
ratification the Board’s selection of Grant Thornton LLP as
the Company’s independent registered public accountants for
the current fiscal year (Proposal 3);
•
FOR
the approval,
on an advisory, non-binding basis, of the compensation of the
Company’s named executive officers (Proposal 4); and
•
for the approval, on an advisory, non-binding basis, of
1 YEAR
as the
frequency of future advisory votes on the compensation of the
Company’s named executive officers (Proposal 5).
Why is the Simpson Board recommending FOR the election of each of
the Board’s nominees on Proposal 1, FOR Proposals 2, 3, and
4, and FOR 1 YEAR on Proposal 5?
We describe all proposals and the Board’s reasons for
nominating each of the Board’s nominees on Proposal 1, for
supporting Proposals 2, 3, and 4, and for recommending “1
Year” for Proposal 5, in detail beginning at page 13 of this
Proxy Statement.
Who can vote?
Holders of our common stock at the close of business on March 24,
2017 may vote at the 2017 Annual Meeting.
As of the date of this Proxy Statement, there are 47,654,309 shares
of our common stock outstanding, each entitled to one vote. There
are approximately 600 shareholders of record as of the date of this
Proxy Statement.
How do I vote if I am a record holder?
You can vote by attending the 2017 Annual Meeting and voting in
person, or you can vote by proxy. If you are the record holder of
your stock, you can vote by proxy in three ways:
•
By Internet:
You
may vote by submitting a proxy over the Internet. Please refer to
the proxy card or voting instruction form provided to you by your
broker for instructions of how to vote by Internet.
2
•
By Telephone:
Shareholders located in the United States that receive proxy
materials by mail may vote by submitting a proxy by telephone by
calling the toll-free telephone number on the proxy card or voting
instruction form and following the instructions.
•
By Mail:
If you
received proxy materials by mail, you can vote by submitting a
proxy by mail by marking, dating, signing and returning the proxy
card in the postage-paid envelope.
•
In Person at the 2017
Annual Meeting:
If you attend the 2017 Annual Meeting, you
may deliver your completed proxy card in person or you may vote by
completing a ballot, which we will provide to you at the meeting.
You are encouraged to complete, sign and date the proxy card and
mail it in the enclosed postage pre-paid envelope regardless of
whether or not you plan to attend the 2017 Annual Meeting.
How do I vote if my common shares are held in “street
name”?
If you hold your shares of common stock in “street
name,” meaning such shares are held for your account by a
broker or other nominee, then you will receive instructions from
such institution or person on how to vote your shares. Your broker
or other nominee may allow you to deliver your voting instructions
via the Internet and may also permit you to submit your voting
instructions by telephone.
If you do not provide
voting instructions to your broker or other nominee holding shares
of our common stock for you, your shares will not be voted with
respect to Proposals 1, 2, 4, and 5, as they are
“non-discretionary” proposals under rules of the New
York Stock Exchange (“NYSE”). We therefore encourage
you to provide voting instructions on a proxy card as enclosed or a
provided voting instruction form to your bank or other nominee that
holds your shares by carefully following the instructions provided
in such institution’s or person’s notice to
you.
How many votes do I have?
Shareholders are entitled to one vote for each share of common
stock held. See “
Required
Vote
” below.
How will my shares of common stock be voted?
The shares of common stock represented by any proxy card which is
properly executed and received by the Company prior to or at the
2017 Annual Meeting will be voted in accordance with the
specifications you make thereon. Where a choice has been specified
on the proxy card with respect to the proposals, the shares
represented by the proxy will be voted in accordance with the
specifications. If you return a validly executed proxy card without
indicating how your shares should be voted on a matter and you do
not revoke your proxy, your proxy will be voted:
FOR
the
election of all three Board nominees set forth on the proxy card
(Proposal 1);
FOR
the approval
of the Company’s amended Executive Officer Cash Profit
Sharing Plan (Proposal 2);
FOR
the
ratification the Board’s selection of Grant Thornton LLP as
the Company’s independent registered public accountants for
the current fiscal year (Proposal 3);
FOR
the approval,
on an advisory, non-binding basis, of the compensation of the
Company’s named executive officers (Prop
osal 4
); and for the
approval, on an advisory, non-binding basis, of
1 YEAR
as
the frequency of future advisory votes on the compensation of the
Company’s named executive officers (Proposal 5).
Why is the election of directors at the 2017 Annual Meeting
considered an uncontested election?
On February 6, 2017, Iron Compass Partners, LP (“Iron
Compass”), which indicated that it beneficially owned,
together with certain affiliates, an aggregate of 170,042 shares of
our common stock (representing approximately 0.36% of our
outstanding common stock), delivered notice to the Company of its
intention to nominate one director candidate for election to the
Board at the 2017 Annual Meeting. On March 31, 2017, the Company
received a letter from an affiliate of Iron Compass, stating that
Iron Compass is withdrawing such director nomination. As a result,
the election of directors at the 2017 Annual Meeting is considered
an uncontested election.
What vote is required with respect to the proposals?
Pursuant to our Bylaws, in an
uncontested election, directors are elected by the affirmative vote
of a majority of the votes cast. Under this majority voting
standard, each of the three director nominees on Proposal 1 will
be
3
elected if he or she receives
more “FOR” votes than “AGAINST” votes, with
broker non-votes and abstentions not counted as votes cast either
“FOR” or “AGAINST” the nominee. The
enclosed proxy card enables a shareholder to vote
“FOR,” “AGAINST” or “ABSTAIN”
as to each person nominated by the Board.
Proposals 2, 3, and 4 will be
decided by the affirmative vote of a majority of the votes cast.
The enclosed proxy card enables a shareholder to vote
“FOR,” “AGAINST” or “ABSTAIN”
on these proposals. Each of Proposals 2, 3, and 4 will pass if the
total votes cast “for” a given proposal exceed the
total number of votes cast “against” such given
proposal.
With respect to Proposal 5 regarding the frequency of future
advisory votes on the compensation of the Company’s named
executive officers, the enclosed proxy card enables a shareholder
to vote “1 Year,” “2 Years” “3
Years” or “ABSTAIN” on this proposal. The choice
receiving the largest number of affirmative votes cast, whether or
not a majority of the votes has been cast for such choice, shall be
the election of the shareholders on Proposal 5.
What is the effect of abstentions and broker non-votes on
voting?
Abstentions by shareholders from voting and broker non-votes will
be counted towards determining whether or not a quorum is present.
However, because abstentions and broker non-votes do not count as
affirmative or negative votes cast, they will not affect the
outcome of the vote of any proposal at the 2017 Annual Meeting,
except where brokers or other nominees may exercise their
discretion on “discretionary” proposals.
With respect to the 2017 Annual Meeting, Proposal 3 to ratify the
appointment of our independent registered public accountants is
considered a “discretionary” proposal under rules of
the NYSE for which your broker or other nominee does not need your
voting instruction in order to vote your shares. In contrast, your
broker or other nominee will not have discretion to vote on
Proposals 1, 2, 4, and 5 absent voting instructions from you, as
they are “non-discretionary” proposals.
If you hold your shares in “street-name” through a
broker or other nominee, absent voting instructions from you, your
shares will not be counted as voting and will have no effect on
those proposals requiring shareholder approval. Therefore, you are
urged to instruct your broker or other nominee to submit a proxy
card as enclosed or vote by telephone or the internet as instructed
on the proxy card.
If I have already voted by proxy against the proposals, can I still
change my mind?
Yes. To change your vote by proxy, simply sign, date and return the
enclosed proxy card or voting instruction form in the accompanying
postage-paid envelope, or vote by proxy by telephone or via the
Internet in accordance with the instructions in the proxy card or
voting instruction form.
We strongly urge you to
vote by proxy FOR the election of each of the Board’s
nominees on Proposal 1, FOR Proposals 2, 3, and 4, and FOR 1 YEAR
on Proposal 5.
Only your latest dated proxy will count at
the 2017 Annual Meeting.
Will my shares be voted if I do nothing?
If your shares of our common stock are registered in your name, you
must sign and return a proxy card in order for your shares to be
voted, unless you vote over the Internet or by telephone or attend
the 2017 Annual Meeting and vote in person.
If your shares of common stock are held in “street
name,” that is, held for your account by a broker or other
nominee, and you do not instruct your broker or other nominee how
to vote your shares, then, because all of the Proposals 1-5, except
for Proposal 3, are “non-discretionary” proposals, your
broker or other nominee would only have discretionary authority to
vote your shares on Proposal 3 but not on other proposals. If your
shares of our common stock are held in “street name,”
your broker or other nominee should have provided you a proxy card
as enclosed or a voting instruction form with this Proxy Statement.
We strongly encourage you to authorize your broker or other nominee
to vote your shares by following the instructions provided on the
proxy card or voting instruction form. Please return your proxy
card or voting instruction form to your broker or other nominee.
Please contact the person responsible for your account to ensure
that a proxy card or voting instruction form is voted on your
behalf.
We strongly urge you to
vote by proxy FOR the election of each of the Board’s
nominees on Proposal 1, FOR Proposals 2, 3, and 4, and FOR 1 YEAR
on Proposal 5, by signing, dating and returning the enclosed proxy
card today in the envelope provided
. You may also vote by
proxy over the Internet using the Internet address on the
4
proxy card or by telephone using the toll-free number on the proxy
card. If your shares are held in “street name,” you
should follow the instructions on your proxy card or voting
instruction form provided by your broker or other nominee and
provide specific instructions to your broker or other nominee to
vote as described above.
What constitutes a quorum?
The presence of holders of our common stock having a majority of
the votes that could be cast by the holders of all outstanding
shares of our common stock entitled to vote at the 2017 Annual
Meeting, in person or represented by proxy, will constitute a
quorum for the transaction of business at the 2017 Annual
Meeting.
Votes withheld, abstentions and broker non-votes, if any, will be
counted as present or represented for purposes of determining the
presence or absence of a quorum for this meeting. In the absence of
a quorum, the 2017 Annual Meeting may be adjourned by a majority of
the votes entitled to be cast represented either in person or by
proxy.
Can qualifying shareholders exercise proxy access rights for the
2017 Annual Meeting?
No. The Board amended our Bylaws on March 28, 2017 to provide proxy
access to qualifying shareholders effective as of March 28, 2017.
Pursuant to our amended Bylaws, the notice period for exercising
proxy access rights has already passed for the 2017 Annual Meeting.
Shareholders will therefore be able to exercise proxy access rights
for the first time at the 2018 annual meeting of shareholders.
Whom should I call if I have questions about the 2017 Annual
Meeting?
If you have any questions or require any assistance with voting
your shares, or if you need additional copies of the proxy
materials, please contact:
D.F. King & Co., Inc.
48 Wall Street, 22
nd
Floor
New York, NY 10005
Please Call Toll Free: (888) 869-7406
Email: simpson@dfking.com
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2017 ANNUAL
MEETING: THE PROXY STATEMENT FOR THE 2017 ANNUAL MEETING AND THE
ANNUAL REPORT TO SHAREHOLDERS ON FORM 10-K ARE AVAILABLE FREE OF
CHARGE AT HTTP://WWW.FCRVOTE.COM/SSD.
5
ANNUAL MEETING
PROCEDURES
Annual Meeting
Admission
Only Simpson shareholders or their duly authorized and constituted
proxies may attend the 2017 Annual Meeting. Proof of ownership of
our common stock must be presented in order to be admitted to the
2017 Annual Meeting. If your shares are held in the name of a bank,
broker or other holder of record and you plan to attend the 2017
Annual Meeting in person, you must bring a brokerage statement, the
proxy card mailed to you by your bank or broker or other proof of
ownership as of the close of business on March 24, 2017, the record
date, to be admitted to the 2017 Annual Meeting. Otherwise, proper
documentation of a duly authorized and constituted proxy must be
presented. This proof can be: a brokerage statement or letter from
a broker, bank or other nominee indicating ownership on the record
date, a proxy card, or a valid, legal proxy provided by your
broker, bank or other nominee.
After the chairman of the meeting announces the opening of the
polls for the first matter upon which the shareholders will vote at
the 2017 Annual Meeting, further entry will be prohibited. No
cameras, recording equipment, electronic devices, large bags,
briefcases or packages will be permitted in the 2017 Annual
Meeting. All persons attending the meeting will be required to
present a valid government-issued picture identification, such as a
driver’s license or passport, to gain admittance to the 2017
Annual Meeting.
Who Can Vote,
Outstanding Shares
Holders of record of our common stock at the close of business on
March 24, 2017 may vote at the 2017 Annual Meeting.
As of the date of this Proxy Statement, there are 47,654,309 shares
of our common stock outstanding, each entitled to one vote. There
are approximately 600 shareholders of record as of the date of this
Proxy Statement.
Voting
Procedures
You can vote by attending the 2017 Annual Meeting and voting in
person, or you can vote by proxy. If you are the record holder of
your stock, you can vote by proxy in three ways:
•
By Internet:
You
may vote by submitting a proxy over the Internet. Please refer to
the proxy card or voting instruction form provided to you by your
broker for instructions of how to vote by Internet.
•
By Telephone:
Shareholders located in the United States that receive proxy
materials by mail may vote by submitting a proxy by telephone by
calling the toll-free telephone number on your proxy card or voting
instruction form and following the instructions.
•
By Mail:
If you
received proxy materials by mail, you can vote by submitting a
proxy by mail by marking, dating, signing and returning the proxy
card in the postage-paid envelope.
•
In Person at the 2017 Annual
Meeting:
If you
attend the 2017 Annual Meeting, you may deliver your completed
proxy card in person or you may vote by completing a ballot, which
we will provide to you at the meeting. You are encouraged to
complete, sign and date the proxy card and mail it in the enclosed
postage pre-paid envelope regardless of whether or not you plan to
attend the 2017 Annual Meeting.
If you hold your shares of common stock in “street
name,” meaning such shares are held for your account by a
broker, bank or other nominee, then you will receive instructions
from such institution or person on how to vote your shares. Your
broker, bank or other nominee will allow you to deliver your voting
instructions via the Internet and may also permit you to submit
your voting instructions by telephone.
Proxy Card
The shares represented by any proxy card which is properly executed
and received by the Company prior to or at the 2017 Annual Meeting
will be voted in accordance with the specifications made thereon.
Where a choice has been specified on the proxy card with respect to
the proposals, the shares represented by the proxy card will be
voted in accordance with the specifications. If you return a
validly executed proxy card without indicating how your shares
should be voted on a matter and you do not revoke your proxy, your
proxy will be voted:
FOR
the election
of all three Board nominees set forth on the proxy card (Proposal
1);
FOR
the approval
of the Company’s amended Executive
6
Officer Cash Profit Sharing Plan (Proposal 2);
FOR
the
ratification the Board’s selection of Grant Thornton LLP as
the Company’s independent registered public accountants for
the current fiscal year (Proposal 4);
FOR
the approval,
on an advisory, non-binding basis, of the compensation of the
Company’s named executive officers (Proposal 4); and for the
approval, on an advisory, non-binding basis, of
1 YEAR
as
the frequency of future advisory votes on the compensation of the
Company’s named executive officers (Proposal 5).
The Board is not aware of any matters that are expected to come
before the 2017 Annual Meeting other than those described in this
Proxy Statement. If any other matter should be presented at the
2017 Annual Meeting upon which a vote may be properly taken, shares
represented by all proxy cards received by the Board will be voted
with respect thereto at the discretion of the persons named as
proxies in the enclosed proxy card.
Record Date
Only holders of record of common stock at the close of business on
March 24, 2017 will be entitled to notice of and to vote at the
2017 Annual Meeting.
Quorum
The presence of holders of our common stock having a majority of
the votes that could be cast by the holders of all outstanding
shares of our common stock entitled to vote at the 2017 Annual
Meeting, in person or represented by proxy, will constitute a
quorum for the transaction of business at the 2017 Annual Meeting.
Votes withheld, abstentions and broker non-votes, if any, will be
counted as present or represented for purposes of determining the
presence or absence of a quorum for this meeting. In the absence of
a quorum, the 2017 Annual Meeting may be adjourned by a majority of
the votes entitled to be cast represented either in person or by
proxy.
Required Vote
As a holder of our common stock, you are entitled to one vote per
share on any matter submitted to a vote of the shareholders.
Pursuant to our Bylaws, in an uncontested election, directors are
elected by the affirmative vote of a majority of the votes cast.
Under this majority voting standard, a director nominee will be
elected as a director if the nominee receives the affirmative vote
of a majority of the votes cast for the nominee, meaning that to be
elected the number of votes cast “FOR” a nominee must
exceed the number of votes cast “AGAINST” the nominee,
with broker non-votes and abstentions not counted as votes cast
either “FOR” or “AGAINST” the nominee.
As a result, each of the three director nominees on Proposal 1 will
be elected if he or she receives more “FOR” votes than
“AGAINST” votes at the 2017 Annual Meeting.
The enclosed proxy card enables a shareholder to vote
“FOR,” “AGAINST” or “ABSTAIN”
as to each person nominated by the Board. Abstentions and broker
non-votes, if any, will not constitute votes cast or votes withheld
on Proposal 1 and will accordingly have no effect on the outcome of
the vote on Proposal 1. Under our Certificate of Incorporation and
Bylaws, shareholders will not be able to cumulate their votes in
the election of directors.
Proposals 2, 3, and 4 will be decided by the affirmative vote of a
majority of the votes cast. The enclosed proxy card enables a
shareholder to vote “FOR,” “AGAINST” or
“ABSTAIN” on these proposals. Any of Proposals 2, 3,
and 4 will pass if the total votes cast “for” such
proposal exceed the total number of votes cast
“against” the proposal.
With respect to Proposal 5 regarding the frequency of future
advisory votes on the compensation of the Company’s named
executive officers, the enclosed proxy card enables a shareholder
to vote “1 Year,” “2 Years” “3
Years” or “ABSTAIN” on this proposal. The choice
receiving the largest number of affirmative votes cast, whether or
not a majority of the votes has been cast for such choice, shall be
the election of the shareholders on Proposal 5.
Abstentions, if any, will not
constitute votes cast on any of Proposals 2, 3, 4, and 5 or
“for” or “against” with respect to any
director nominee on Proposal 1 and will accordingly have no effect
on the outcome of the vote on such proposals.
7
Broker non-votes, if any, will not constitute votes cast on any of
Proposals 2, 4, and 5 or “for” or “against”
with respect to any director nominee on Proposal 1 and will
accordingly have no effect on the outcome of the vote on such
proposals. Since Proposal 3 to ratify the appointment of our
independent registered public accountants is considered a
“discretionary” proposal, your broker may vote your
shares without your voting instruction.
Proposals 4 and 5 are advisory proposals only and are not binding
on the Board or the Company.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR
THE ELECTION
OF EACH OF THE BOARD’S NOMINEES ON PROPOSAL, 1 USING THE
ENCLOSED PROXY CARD.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING
FOR
PROPOSALS 2, 3, AND 4, AND
FOR
1 YEAR
ON PROPOSAL 5, USING THE ENCLOSED PROXY CARD.
Abstentions and Broker
Non-Votes
Abstentions by shareholders from voting and broker non-votes will
be counted towards determining whether or not a quorum is present.
However, because abstentions and broker non-votes do not count as
affirmative or negative votes cast, they will not affect the
outcome of the vote of any proposal at the 2017 Annual Meeting,
except where brokers may exercise their discretion on
“discretionary” proposals, as discussed below.
A “broker non-vote” occurs when shares held by a broker
or other nominee are not voted with respect to a particular
proposal because the broker or other nominee does not have
discretionary authority to vote on the matter and has not received
voting instructions from its clients at least 10 days before the
date of the meeting. If your bank, broker or other nominee holds
your shares in its name and you do not instruct your broker or
other nominee how to vote, your broker or other nominee will only
have discretion to vote your shares on “discretionary”
proposals.
Rules of the NYSE determine whether proposals presented at
shareholder meetings are “discretionary” or
“non-discretionary.” If a proposal is determined to be
discretionary, your broker or other nominee is permitted under NYSE
rules to vote on the proposal without receiving voting instructions
from you. If a proposal is determined to be non-discretionary, your
broker or other nominee is not permitted under NYSE rules to vote
on the proposal without receiving voting instructions from you.
With respect to the 2017
Annual Meeting, Proposal 3 to ratify the appointment of our
independent registered public accountants is considered a
“discretionary” proposal under NYSE rules for which
your broker or other nominee does not need your voting instruction
in order to vote your shares. In contrast, your broker or other
nominee will not have discretion to vote on Proposals 1, 2, 4, and
5 absent voting instructions from you, as they are
“non-discretionary” proposals.
We encourage you to provide voting instructions on a proxy card as
enclosed or a provided voting instruction form to the bank, broker,
trustee or other nominee that holds your shares by carefully
following the instructions provided in their notice to you.
Revocability of
Proxy
A shareholder of record who has properly executed and delivered a
proxy may revoke such proxy at any time before the 2017 Annual
Meeting in any of the four following ways:
•
timely complete and return a new proxy card bearing a later
date;
•
vote on a later date by using the Internet or telephone;
•
deliver a written notice to our Secretary prior to the 2017 Annual
Meeting by any means, including facsimile, stating that your proxy
is revoked; or
•
attend the meeting and vote in person.
If your shares are held of record by a bank, broker, trustee or
other nominee other nominee and you desire to vote at the meeting,
you may change your vote by submitting new voting instructions to
your broker in accordance with such broker’s procedures.
8
Appraisal
Rights
Holders of shares of common stock do not have appraisal rights
under Delaware law in connection with this proxy solicitation.
Proxy Access
The Board amended our Bylaws on March 28, 2017 to provide proxy
access to qualifying shareholders effective as of March 28, 2017.
Pursuant to our amended Bylaws, the notice period for exercising
proxy access rights has already passed for the 2017 Annual Meeting.
Shareholders will therefore be able to exercise proxy access rights
for the first time at the 2018 annual meeting of shareholders.
Shareholder
List
A list of shareholders entitled to vote at the 2017 Annual Meeting
will be available for examination by any shareholder for any
purpose germane to the 2017 Annual Meeting during ordinary business
hours at our corporate headquarters located at 5956 W. Las Positas
Blvd., Pleasanton, California, 94588, for the ten days prior to the
2017 Annual Meeting, and also will be available for examination by
any shareholder at the 2017 Annual Meeting.
Communications with the
Board
We encourage shareholders and interested parties to communicate any
concerns or suggestions directly to the independent members of the
Board, by writing to:
Board
of Directors
Simpson Manufacturing Co., Inc.
P.O. Box 1394
Alamo, CA 94507-7394
Other Matters
If you have any questions or require any assistance with voting
your shares, or if you need additional copies of the proxy
materials, please contact:
D.F. King & Co., Inc.
48 Wall Street, 22
nd
Floor
New York, NY 10005
Please Call Toll Free: (888) 869-7406
Email: simpson@dfking.com
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2017 ANNUAL
MEETING: THE PROXY STATEMENT FOR THE 2017 ANNUAL MEETING AND THE
ANNUAL REPORT TO SHAREHOLDERS ON FORM 10-K ARE AVAILABLE FREE OF
CHARGE AT HTTP://WWW.FCRVOTE.COM/SSD.
Persons Making the
Solicitation
We are required by law to
convene annual meetings of shareholders at which directors are
elected. The Board is soliciting proxies from our shareholders for
the 2017 Annual Meeting. United States federal securities laws
require us to send you this Proxy Statement, and any amendments and
supplements thereto, and to specify the information required to be
contained in it. The Company will bear the expenses of calling and
holding the 2017 Annual Meeting and the solicitation of proxies
therefor. These costs will include, among other items, the expense
of preparing, assembling, printing and mailing the proxy materials
to shareholders of record and beneficial owners, and reimbursements
paid to brokerage firms, banks and other fiduciaries for their
reasonable out-of pocket expenses for forwarding proxy materials to
shareholders and obtaining beneficial owner’s voting
instructions. In addition to soliciting proxies by mail, our
directors, officers and employees may solicit proxies on behalf of
the Board, without additional compensation, personally or by
telephone. We may also solicit proxies by email from shareholders
who are our employees or who previously requested to receive proxy
materials electronically. The Company has retained D.F. King &
Co., Inc. to solicit proxies for the 2017 Annual Meeting for a fee
estimated at $25,000 plus the reimbursement of reasonable
expenses.
9
FORWARD-LOOKING
STATEMENTS
This Proxy Statement contains forward-looking statements within the
meaning of the Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), Section 21E of the
Securities Exchange Act of 1934 (the “Exchange Act”)
and the Private Securities Litigation Reform Act of 1995. All
statements relating to events or results that may occur in the
future, including, but not limited to, the Company’s future
costs of solicitation, record or meeting dates, compensation
arrangements, plans or amendments (including those related to
profit sharing and stock-based compensation), company policies,
corporate governance practices, documents or amendments (including
charter or bylaw amendments, shareholder rights plans or similar
arrangements) as well as capital and corporate structure (including
major shareholders, board structure and board composition), are
forward-looking statements. Forward-looking statements generally
can be identified by words such as “expect,”
“will,” “change,” “intend,”
“target,” “future,”
“potential,” “estimate,”
“anticipate,” “to be,” and similar
expressions. These statements are based on numerous assumptions and
involve known and unknown risks, uncertainties and other factors
that could significantly affect the Company’s operations and
may cause the Company’s actual actions, results, financial
condition, performance or achievements to be substantially
different from any future actions, results, financial condition,
performance or achievements expressed or implied by any such
forward-looking statements. Those factors include, but are not
limited to, (i) general economic and construction business
conditions; (ii) changes in market conditions; (iii) changes in
regulations; (iv) actual or potential takeover or other
change-of-control threats; (v) the effect of merger or acquisition
activities; (vi) changes in the Company’s plans, strategies,
targets, objectives, expectations or intentions; and (vii) other
risks, uncertainties and factors indicated from time to time in the
Company’s reports and filings with the SEC including, without
limitation, most recently the Company’s Annual Report to
Shareholders on Form 10-K for the period ended December 31, 2016,
under the heading Item 1A - “Risk Factors” and the
heading “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” The Company
does not intend, and undertakes no obligation to update or publicly
release any revision to any such forward-looking statements,
whether as a result of the receipt of new information, the
occurrence of subsequent events, the change of circumstance or
otherwise. Each forward-looking statement contained in this Proxy
Statement is specifically qualified in its entirety by the
aforementioned factors. You are hereby advised to carefully read
this Proxy Statement in conjunction with the important disclaimers
set forth above prior to reaching any conclusions or making any
investment decisions.
10
SECURITY OWNERSHIP OF
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information, as of March 31, 2017,
unless otherwise indicated, about the beneficial ownership of our
common stock by -
•
each shareholder known by us to be the beneficial owner of more
than 5% of our common stock,
•
each of our directors and each of our director nominees,
•
each of our Principal Executive Officer, our Principal Financial
Officer and our three other most highly compensated executive
officers (collectively, the “Named Executive Officers”
or “NEOs”) as named in the Summary Compensation Table
(See “
Executive
Compensation
” below), and
•
all of our executive officers and directors as a group.
Name and, for Each 5% Beneficial Owner,
Address
(1)
|
|
Beneficial
Ownership of
Shares of
Common
Stock
(1)
|
|
|
Sharon Simpson
21C Orinda Way
Orinda, CA 94563
|
|
6,689,786
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
BlackRock, Inc.
55 East 52
nd
Street
New York, NY 10055
|
|
4,774,034
|
(3)
|
|
10.0
|
%
|
|
|
|
|
|
|
|
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
|
|
3,437,990
|
(4)
|
|
7.2
|
%
|
|
|
|
|
|
|
|
Janus Capital Management, LLC
151 Detroit Street
Denver, CO 80206
|
|
2,794,330
|
(5)
|
|
5.9
|
%
|
|
|
|
|
|
|
|
Michael A. Bless
|
|
0
|
|
|
*
|
|
|
|
|
|
|
|
|
Thomas J Fitzmyers
|
|
7,523
|
|
|
*
|
|
|
|
|
|
|
|
|
Karen Colonias
|
|
44,367
|
|
|
*
|
|
|
|
|
|
|
|
|
Roger Dankel
|
|
13,623
|
(6)
|
|
*
|
|
|
|
|
|
|
|
|
Ricardo M. Arevalo
|
|
10,846
|
|
|
*
|
|
|
|
|
|
|
|
|
Jeffrey E. Mackenzie
|
|
6,429
|
|
|
*
|
|
|
|
|
|
|
|
|
Brian J. Magstadt
|
|
15,543
|
|
|
*
|
|
|
|
|
|
|
|
|
James S. Andrasick
|
|
7,669
|
|
|
*
|
|
|
|
|
|
|
|
|
Jennifer A. Chatman
|
|
14,094
|
(7)
|
|
*
|
|
|
|
|
|
|
|
|
Gary M. Cusumano
|
|
14,894
|
(7)
|
|
*
|
|
|
|
|
|
|
|
|
Celeste Volz Ford
|
|
6,340
|
|
|
*
|
|
|
|
|
|
|
|
|
Peter N. Louras, Jr.
|
|
13,777
|
|
|
*
|
|
|
|
|
|
|
|
|
Robin G. MacGillivray
|
|
14,094
|
(7)
|
|
*
|
|
|
|
|
|
|
|
|
All executive officers, directors and director
nominees as a group
(14 persons)
|
|
173,910
|
(8)
|
|
*
|
|
11
12
PROPOSAL 1
ELECTION OF DIRECTORS
Composition of the
Board
The Board currently consists of eight members. At the 2017 Annual
Meeting, Thomas J Fitzmyers, will retire as Vice Chairman of the
Board and will not stand for re-election, and one new independent
candidate, Michael A. Bless, has been nominated by the Board for
election as a director to fill the vacancy created by Mr.
Fitzmyers’ retirement. Information about our current Board
members and the new Board director nominee as of the 2017 Annual
Meeting is set forth in the table below:
|
|
|
|
|
|
|
|
Year Current Term Will Expire
|
Michael A. Bless
|
|
51
|
|
N/A
|
|
X
|
|
Being nominated by the Board for election to the
Board at the 2017 Annual Meeting
|
Karen Colonias
(CEO)
|
|
59
|
|
2013
|
|
|
|
2017
|
Celeste Volz Ford
|
|
60
|
|
2014
|
|
X
|
|
2017
|
Thomas J Fitzmyers
(Vice Chairman of the
Board)
|
|
76
|
|
1978
|
|
|
|
Retiring following the 2017 Annual
Meeting
|
Jennifer A. Chatman
|
|
57
|
|
2004
|
|
X
|
|
2018
|
Robin G. MacGillivray
|
|
62
|
|
2004
|
|
X
|
|
2018
|
Peter N. Louras, Jr.
(Chairman of the
Board)
|
|
67
|
|
1999
|
|
X
|
|
2019
|
James S. Andrasick
|
|
73
|
|
2012
|
|
X
|
|
2019
|
Gary M. Cusumano
|
|
73
|
|
2007
|
|
X
|
|
2019
|
The Board is comprised of directors with strong professional
reputations, skills and experience in established companies and
other organizations of comparable status and size to us and/or in
areas or industries relevant to our business, strategy and
operations. Core skills and experiences represented by continuing
members of the Board and the new Board director nominee are
included in the summary graphic below:
13
The current composition of the Board and its director nominees
reflect director-selection criteria developed by the Nominating and
Governance Committee to address the needs and priorities of the
Company and satisfy certain regulatory requirements. See
“
Director Selection
Criteria
” below.
Board
Nominees
The Board, on the
recommendation of its Governance and Nominating Committee, which is
composed only of independent members of the Board, has nominated
our incumbent directors Karen Colonias and Celeste Volz Ford, whose
terms are currently set to expire at the 2017 Annual Meeting, for
re-election to the Board. The Board, on the recommendation of its
Governance and Nominating Committee, has additionally nominated a
new director candidate, Michael A. Bless, for election to the Board
at the 2017 Annual Meeting. Mr. Bless was originally identified to
the Governance and Nominating Committee as a potential new director
through a search conducted with the assistance of Korn Ferry, a
third-party executive search and recruiting firm engaged by the
Governance and Nominating Committee to identify and evaluate
potential director candidates. The Board recommends that
shareholders vote to elect each of Ms. Colonias, Ms. Ford and Mr.
Bless to hold office until the election and qualification of
directors at the 2020 annual meeting of shareholders. Pursuant to
the Company’s Certificate of Incorporation and Bylaws, any
new director candidate and each of our incumbent directors who are
up for re-election will be elected at the 2017 Annual Meeting for a
3-year term expiring upon the election and qualification of
directors at the annual meeting of shareholders to be held in
2020.
Each of Ms. Colonias, Ms. Ford and Mr. Bless has consented to be
named in this Proxy Statement and to serve as a director if
elected. Unless otherwise instructed, the persons named as proxies
in the enclosed proxy card will vote the proxies received by them
for the three Board nominees. The Board knows of no reason why any
of the nominees named in this Proxy Statement would be unable or
for good cause will not serve, but if any nominee should for any
reason be unable to serve or for good cause will not serve, the
Board reserves the right to nominate substitute nominees for
election prior to the 2017 Annual Meeting, in which case the
Company will file an amendment to this Proxy Statement disclosing
the identity of such substitute nominees and related information
and the proxies received will be voted for such substitute
nominees.
Each incumbent director who is up for election has submitted his or
her resignation as a director, which resignation becomes effective
only if such nominee does not receive the affirmative vote of a
majority of the votes cast and the Board accepts his or her
resignation. Even if such nominee does not receive the affirmative
vote of a majority of the votes cast, he or she will nevertheless
continue to serve as a director until the Board accepts his or her
resignation.
Board Nominee and
Director Qualifications and Biographical Information
Our directors are individuals of reputation, integrity and
accomplishment. They bring to the Board a range of expertise,
talents and insights. In addition, they bring practical industry
experience in a variety of areas. See “
Composition of
the Board
” above. As is required by our Governance
Guidelines, a majority of our outside (non-management) directors
must be independent. To be independent, a director must have no
financial, family or close personal ties to us or our executive
officers and must meet the NYSE independence standards. See
“
Board
Independence
” below. We undertake serious and
deliberate consideration to evaluate periodically our current
directors’ skill sets and are committed to Board refreshment
and succession planning. For prospective director candidates, we
seek individuals with qualifications and attributes that are
complementary to our business, industry, strategy and current
directors’ skills and experience. See “
Director Selection
Criteria
” below.
14
Board Nominees for Election as Directors at the 2017 Annual
Meeting
1.
Karen Colonias
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Experience
:
Ms. Colonias has been our Chief Executive Officer since January
2012, and in 2013 she was appointed to the Board. From 2009 –
2012 she was our Chief Financial Officer, Secretary and Treasurer.
Prior to that, she held the position of Vice President of our
global structural product solutions subsidiary, Simpson Strong-Tie
Company Inc. and, in that capacity from 2004 to 2009, served as the
Branch Manager of Simpson Strong-Tie’s manufacturing facility
in Stockton, California. She joined Simpson Strong-Tie in 1984 as
an engineer in the research and development department, where she
was responsible for the design and testing of new products and code
development. In 1998 she was promoted to Vice President of
Engineering, responsible for Simpson Strong-Tie’s research
and development efforts. Before joining Simpson Strong-Tie, she
worked as a civil engineer for the Bechtel Corporation, a global
engineering, construction, and project management company. Since
2016, she has served as a director of Reliance Steel and Aluminum
Co.
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Contribution to and
function on the Board
: Ms.
Colonias brings to the Board her deep industry knowledge and her
dedication to the ongoing success of the Company. She is our
management’s only representative on the Board. She actively
shapes the Company’s strategic objectives and brings her
extensive knowledge and understanding to the Company culture, its
operations, its employees, customers, suppliers, investors and
other stakeholders. She has demonstrated a commitment to integrity
in all aspects of the Company’s business and transparency in
her leadership of the Company. She is currently a member of the
Acquisition and Strategy Committee.
|
2.
Celeste Volz Ford
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Experience
:
Ms. Ford joined the Board in 2014. She has been the Chief Executive
Officer of Stellar Solutions, Inc. since she founded the company in
1995. Stellar Solutions is a global provider of systems engineering
expertise and a recognized leader in government and commercial
aerospace programs. She is a proven leader of the Stellar
companies, including Stellar Solutions, Inc., which provides
engineering services, Stellar Solutions Aerospace Ltd, their
UK-based affiliate, QuakeFinder, the humanitarian R&D division
of Stellar Solutions, and the Stellar Solutions Foundation, a
division focused on charitable giving to promote community
involvement and outreach efforts. Ms. Ford sits on the boards of
Seagate Government Solutions, The University of Notre Dame Board of
Trustees, the American Conservatory Theater and the business
Advisory Counsel of Illuminate Ventures.
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Contribution to and function on the Board
:
Ms. Ford brings to the Board her proven record of leadership and
entrepreneurial spirit as well as her deep understanding of and
experience with cyber, technology and software. She also brings her
deep knowledge of strategic planning, a significant focus of the
Company, and risk management. Additionally, she brings her valuable
insights regarding activities in the UK. She is a member of the
Compensation and Leadership Development Committee and the
Acquisition and Strategy Committee.
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15
3.
Michael A. Bless
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Experience
:
Mr. Bless has been President and Chief Executive Officer of Century
Aluminum Company since November 2011 and was Century
Aluminum’s Executive Vice President and Chief Financial
Officer from January 2006 to October 2011. He has been a board
member of Century Aluminum, a public company, since December, 2012.
He has been National Trustee of Boys and Girls Clubs of America
since January 2014.
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Contribution to and function on the Board
:
Having held senior management positions at a public company in a
related industry, Mr. Bless brings valuable leadership, industry,
risk-management, investor-relation, international operations
experience and strategy-development experience to the Board. His
business insights, financial acumen and expansive knowledge of the
construction materials industry and global market conditions
enhance the collective corporate governance, strategic growth and
financial expertise of the Board. If Mr. Bless is elected to the
Board at the 2017 Annual Meeting, the Board currently anticipates
to appoint him to one or more committee positions as
appropriate.
|
See “
New Director
Nominee
” below.
Continuing Directors
1.
Jennifer A. Chatman
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Experience
:
Ms. Chatman joined the Board in 2004. She is the Paul J. Cortese
Distinguished Professor of Management Haas School of Business,
University of California, Berkeley. Before joining the Berkeley
faculty in 1993, she was a professor of the Kellogg Graduate School
of Management, Northwestern University. She received her Ph.D. from
Berkeley in 1988. She is a Trustee of Prospect Sierra School. In
addition to her research and teaching at Berkeley, she consults
with a wide range of organizations and is the faculty director of
the Berkeley Executive Leader Program.
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Contribution to and function on the
Board
:
Ms. Chatman brings to the Board a deep understanding of
organizational structure, leadership and compensation that gives us
an objective perspective in interpreting and leveraging our unique
culture to achieve our strategic objectives. She also brings
insights into the Company’s strategy and process of
formulating a sound, realistic strategy. She is able to focus on
the organizational culture and its significance to the Company
along with important considerations as the Company grows and
changes. She brings her expertise in human resources along with a
balanced perspective and her academic knowledge from a research
perspective of business. She is the Chair of the Compensation and
Leadership Development Committee and a member of the Audit
Committee.
|
2.
Robin G. MacGillivray
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Experience
:
Ms. MacGillivray joined the Board in 2004. She retired from
AT&T Inc. in 2014 with nearly 15 years of executive leadership
experience as a corporate officer. From 2010 until her retirement
in 2014 she was Senior Vice President — One AT&T
Integration where she led the implementation of hundreds of
world-wide initiatives designed to integrate merged organizations
for optimal customer service and financial performance. Prior to
that, she was Senior Vice President — Regional and Local
Markets, responsible for service and sales of AT&T’s
small business customers nationwide. Previously, she was President
of Business Communications Services for AT&T’s western
region, where she served the needs of small, medium and large
businesses, including government, education and health care
accounts. Over the course of her 35-year career, she held
leadership positions in a variety of other areas, including
engineering, operations, construction, finance and human
resources.
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16
Contribution to and function on the Board
:
Ms. MacGillivray brings to the Board her significant experience
with mergers and acquisitions, particularly the integration of
acquired entities. As a result of her accomplishments at AT&T,
she also brings her substantial experience with and understanding
of corporate culture, how to build teams, leadership development
and change management. She also brings her dedication to corporate
governance. She is the Chair of the Governance and Nominating
Committee and a member of the Audit Committee and the Acquisition
and Strategy Committee.
3.
Peter N. Louras, Jr.
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Experience
:
Mr. Louras joined the Board in 1999. He is a retired corporate
executive and was appointed Chairman of the Board in April, 2014.
He joined The Clorox Company in 1980 and was Group Vice President
from May, 1992 until his retirement in July 2000. In this position,
he served on The Clorox Company’s executive committee with
overall responsibility for its international business activities
and business development function, including acquisitions and
divestitures. Before joining The Clorox Company, Mr. Louras, a
certified public accountant, worked at Price Waterhouse in its
offices in both San Francisco, California and Philadelphia,
Pennsylvania. Mr. Louras actively participates in civic projects
and serves on the boards of various non-for-profit
organizations.
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Contribution to and
function on the Board
: Mr.
Louras brings to the Board and to his role as its Chair a highly
effective collaborative and consensus-building and style of
leadership. His business acumen stemming from his significant
business background, which includes acquisition and international
operating experience, brings a global perspective to the Board on
the Company’s U.S. and international operations. He also
brings a balanced perspective on a wide range of corporate
governance, management and compensation issues, and he has been
active in engagement with shareholders to both address their
concerns and also preserve the philosophy behind the company value,
structure and culture developed by the Company’s founder,
Barclay Simpson. He is a member of the Audit Committee, the
Compensation and Leadership Development Committee and the
Acquisition and Strategy Committee.
|
4.
James S. Andrasick
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Experience
:
Mr. Andrasick joined the Board in 2012. He was the Chairman of
Matson Navigation Company’s board of directors, until his
retirement in 2009, and was its President and Chief Executive
Officer from 2002 through 2008. Prior to his positions at Matson
Navigation, he was the Chief Financial Officer of Alexander &
Baldwin, Inc., the parent company of Matson Navigation, and was
responsible for all business development activity. He recently
served as a Trustee and Chair of the finance committee of Mills
College and is presently a Trustee of the U.S. Coast Guard
Foundation. He also previously served as a director and the
Chairman of the board of the American Red Cross, Hawaii State
Chapter, as well as served on the boards of the Aloha United Way,
Arthritis Foundation and Hawaii Maritime Center. He was the
Chairman and a Trustee of the University of Hawaii
Foundation.
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Contribution to and function on the Board
:
Mr. Andrasick brings to the Board a balanced perspective and his
consensus-building style along with his business acumen stemming
from his 40 years of business experience, including international
experience. He also brings his financial and capital allocation and
management expertise, and a strong understanding of developing
markets. His experience in developing the China market for Matson
Navigation, in real estate development for Alexander & Baldwin
and in mergers and acquisitions gives him a unique understanding of
the Company’s current opportunities, and his strong financial
and operations background adds depth to the Board’s
understanding of our business. He is the Chair of the Audit
Committee and a member of the Governance and Nominating Committee
and the Acquisition and Strategy Committee.
|
17
5.
Gary M. Cusumano
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Experience
:
Mr. Cusumano joined the Board in 2007. He was with the Newhall Land
and Farming Company for more than 35 years, most recently as the
Chairman of its board of directors, until his retirement in 2006.
He is a director of Forest Lawn Memorial Park and the J.G. Boswell
Company and was a director of Granite Construction, Inc., Sunkist
Growers, Inc., Watkins-Johnson Company and Zero Corporation and has
served on the boards of many not-for-profit and community service
organizations.
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Contribution to and function on the Board
:
Mr. Cusumano brings to the Board his deep understanding of real
estate development, and along with his business acumen and focus,
give him the ability to constructively challenge management in a
positive manner. He also brings to the Board a balanced perspective
from both the management and board member perspectives given his
extensive leadership abilities and significant boardroom
experience. He is the Chair of the Acquisition and Strategy
Committee and a member of the Compensation and Leadership
Development Committee and the Governance and Nominating
Committee.
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Retiring Director
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Thomas J Fitzmyers
was appointed as Vice Chairman of the Board in April 2014,
after serving as Chairman of the Board since January 2012. Prior to
that, he served as our President and as a director since 1978 and
served as our Chief Executive Officer since 1994. Mr.
Fitzmyers’ prior experience as President and Chief Executive
Officer of Simpson Manufacturing Co., Inc. gives him unique and
invaluable insights into the challenges facing our business and our
industry. Mr. Fitzmyers has informed us that he will retire
following the end of his current term at the 2017 Annual
Meeting.
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Required Vote
Pursuant to our Bylaws, in an uncontested election, directors are
elected by the affirmative vote of a majority of the votes cast.
Under this majority voting standard, a director nominee will be
elected as a director if the nominee receives the affirmative vote
of a majority of the votes cast for the nominee, meaning that to be
elected the number of votes cast “FOR” a nominee must
exceed the number of votes cast “AGAINST” the nominee,
with broker non-votes and abstentions not counted as votes cast
either “FOR” or “AGAINST” the nominee. At
the 2017 Annual Meeting, our shareholders will vote to elect three
directors. As a result, each of the three director nominees on
Proposal 1 will be elected if he or she receives more
“FOR” votes than “AGAINST” votes at the
2017 Annual Meeting. Under our Certificate of Incorporation and
Bylaws, shareholders will not be able to cumulate their votes in
the election of directors. The enclosed proxy card enables a
shareholder to vote “FOR,” “AGAINST” or
“ABSTAIN” as to each person or all three individuals
nominated by the Board. Abstentions and broker non-votes, if any,
will not constitute the votes cast either “for” or
“against” with respect to a nominee and will
accordingly have no effect on the outcome of the election of
directors at the 2017 Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU USE THE PROXY CARD TO
VOTE “FOR” THE ELECTION OF ALL THREE BOARD NOMINEES,
KAREN COLONIAS, CELESTE VOLZ FORD AND MICHAEL A. BLESS, TO THE
BOARD AT THIS ANNUAL MEETING.
18
BOARD INFORMATION AND
PRACTICES
Board
Diversity
While the Company does not have a formal policy with regard to
diversity in identifying director nominees, the Board
believes that the backgrounds and qualifications of directors,
considered as a group, should provide a significant composite mix
of experience, knowledge and abilities that will allow the Board to
fulfill its responsibilities. The Board, half of whom are
women, consists of directors with a variety of backgrounds. We do
not discriminate against nominees on the basis of race, color,
religion, gender, gender identity or expression, sexual
orientation, age, national origin, disability, covered veteran
status, or any other status protected by law.
Director
Tenure
The Board currently believes that a robust board evaluation process
— one focused on the assessment and alignment of director
skills with company strategy and priorities — is more
effective than relying solely on age or tenure limits to achieve
board refreshment. Therefore, we do not have a fixed retirement age
for directors. Under our Governance Guidelines updated in 2016, no
outside director will be nominated for re-election after 20 years
of board service, and the Board generally will not nominate outside
directors who come on Board after 2016 for re-election after 15
years of board service. If all three Board nominees, including Mr.
Bless, are elected to the Board at the 2017 Annual Meeting, the
average tenure of our directors will be 7 years. Board tenure of
continuing members of the Board, including our CEO, and the new
Board director nominee following the 2017 Annual Meeting (if the
new nominee was elected to the Board) is broken into three groups
as indicated in the summary graphic below:
Board Self-Assessment
and Third-Party Evaluation
The Board has a regular practice of assessing the diversity of
skill sets of its members, the alignment of areas of expertise with
the Company’s strategy and priorities, and stewardship of
company performance.
In recognition of the Board’s commitment to regular
evaluation, and in light of planned board member retirement, during
2016, the Board engaged, Veaco Group, an independent third-party
corporate governance consulting firm, to conduct an assessment of
the Board to help evaluate the current skills and experiences and
identify key attributes for new director candidates based on the
Company’s current strategy and priorities. Veaco
Group’s evaluation process included reviewing public filings,
director surveys, board and committee materials and processes, and
prior board evaluations as well as engaging each Board member and
members of senior management with tailored written questions and
oral interviews. The results of this evaluation were provided to
the Governance and Nominating Committee for it to develop, on an
informed basis, selection criteria for identifying, screening and
recommending potential director candidates. In addition to the
Board’s annual evaluations of its own and its
committees’ functioning and operations, Veaco Group carried
out an independent review of the Board’s functioning and
overall effectiveness. Based on the Veaco Group’s independent
review, the Board believes that it and its committees are currently
functioning effectively.
19
Director Selection
Criteria
In selecting director candidates, the Board seeks to achieve a mix
of members who collectively bring significant value to the Company
through their experience and personal backgrounds relevant to the
Company’s strategic priorities and the scope and complexity
of the Company’s business and industry. In light of the
Company’s strategic priorities, and based on its
self-assessment and a corporate governance consultant’s
evaluation (see “
Board
Self-Assessment
and Third-Party
Evaluation
” below), the Board identified key skills
and experiences for director candidates that included current
public company senior executive and public company board experience
in managing a diversified enterprise, industry experience or
understanding, an appreciation of the impacts of rapidly changing
technologies and experience in managing and expanding business
outside of the United States, especially in Europe. To complement
its oversight responsibilities, the Board also identified
implementing or overseeing company growth, strategy development,
mergers and acquisitions and operations experience as key Board
skills.
Based on this guidance, the
Governance and Nominating Committee, working closely with the full
Board and outside advisors, has developed a list of current
criteria for nominating director candidates for open positions on
the Board. In developing these criteria, the Governance and
Nominating Committee took into account a variety of factors,
including the current composition of the Board, the current
strategy and future outlook of the Company, the range of experience
and skills that would best complement those already represented on
the Board, and the need for specialized expertise. Below are the
skills and experiences that the Governance and Nominating Committee
currently identifies as most valuable to the Board:
•
Current Public Company
Senior Executive Leadership
Experience,
•
Asset Management and
Capital Markets Expertise,
•
Strategy Experience,
•
Public Company Board Experience,
•
Mergers & Acquisitions Experience,
•
Financial Expertise,
•
International Operations Experience,
•
Industry Experience,
•
Corporate Governance Experience,
•
Risk Management Experience,
•
Talent Management and Human Resource Experience, and
•
Technology Experience.
The Governance and Nominating Committee also believes that the
following attributes, qualities and skills are important for our
Board members to possess:
•
Good judgment,
•
Ability to identify issues and ask constructive questions,
•
Ability to communicate effectively and have a positive relationship
with management and fellow Board members,
•
Ability to think critically and be a collegial disrupter,
•
Concurrence with our deep commitment to shareholders and address
their concerns,
•
Ability to contribute to the development of forward-looking
strategies, and
•
Ability to manage conflict
.
20
Based on Veaco Group’s
report and in light of the Company’s current priorities, the
Governance and Nominating Committee recommended to the Board that
the ideal prospective director candidate should have the following
attributes: Current Chief Executive Officer, Chief Financial
Officer or other senior executive officer of a public company in
the same or a related industry (such as construction materials,
manufacturing or distribution industries) with financial acumen,
given the Board’s financial oversight responsibilities,
public company board experience and experience with strategy
development, leading company growth and managing international
operations.
Director Selection
Process
The Governance and Nominating Committee has retained, Korn Ferry, a
leading executive search and recruiting firm, to identify and/or
review new candidates upon request of the Governance and Nominating
Committee. The Governance and Nominating Committee also considers
new candidates for Board membership suggested by its members, other
Board members, management, and shareholders.
Once a prospective candidate has come to the Governance and
Nominating Committee’s attention, including candidates
recommended by its advisors or suggested by shareholders, the
Governance and Nominating Committee evaluates the candidate’s
leadership, boardroom, transaction and industry experience,
financial, management and technology expertise, business acumen,
strategic ability as well as interpersonal skills, teamwork, vision
and integrity, against the desired director attributes, and makes
an initial determination as to whether to conduct a full
evaluation. In making this determination, the Governance and
Nominating Committee takes into account the information provided to
it with the recommendation of the candidate, as well as the
Governance and Nominating Committee’s own knowledge and
information obtained through inquiries to third parties to the
extent the Governance and Nominating Committee deems appropriate.
The preliminary determination is based primarily on the current
need for additional Board members and the likelihood that the
prospective candidate can satisfy the criteria that the Governance
and Nominating Committee has established (See “
Director Selection
Criteria
” above). If the Governance and Nominating
Committee determines, in consultation with the Chairman of the
Board and other directors as appropriate, that additional
consideration is warranted, it may request its executive search and
recruiting advisor to gather additional information about the
prospective candidate’s background and experience and to
report its findings to the Governance and Nominating Committee. The
Governance and Nominating Committee then evaluates the prospective
candidate against the Board selection criteria that it has
developed, as well as the following factors:
•
the extent to which the prospective candidate contributes to the
range of talent, skill and expertise appropriate for the Board;
•
the prospective candidate’s willingness to comply with our
governance policies and guidelines, including our compensation
recovery policy, our anti-hedging and anti-pledging policy, and our
Governance Guidelines (which include our stock ownership guidelines
for outside directors) (
See
“
Corporate
Governance
—
Governing
Documents
” below).
•
the prospective candidate’s willingness to represent the
interests of all of the Company’s shareholders;
•
the prospective candidate’s commitment to integrity and
independence of thought and judgment;
•
the prospective candidate’s ability to dedicate sufficient
time, energy and attention to the diligent performance of his or
her duties and avoid conflict of interest, including his or her
current board memberships; and
•
the prospective candidate’s ability to resonate with the
company value, structure and culture developed by the
Company’s founder, Barclay Simpson, and at the same time,
appreciate the Company’s growth potential.
If the Governance and
Nominating Committee decides, on the basis of its preliminary
review, to proceed with further consideration, members of the
Governance and Nominating Committee, as well as other members of
the Board as appropriate, then reach out to interview the
candidate. After completing its evaluation, the Governance and
Nominating Committee makes a recommendation to the full Board,
which makes the final determination whether to nominate or appoint
the new candidate after considering the Governance and Nominating
Committee Committee’s recommendation.
21
Pursuant to our Bylaws, a shareholder who wishes to recommend a
prospective candidate for the Board to us may notify the
Company’s Secretary in writing with materials and information
required by our Bylaws and other supporting materials that the
shareholder considers appropriate. In considering whether to
nominate any person suggested by a shareholder, the Governance and
Nominating Committee will evaluate such candidate in the same way
as it evaluates director candidates identified by itself.
In making its recommendations with respect to the nomination for
re-election of existing directors at annual meetings of
shareholders, the Governance and Nominating Committee assessed the
current composition of the Board and considered the extent to which
the Board continues to reflect the criteria set forth above. The
“
Composition of the
Board
” section sets out how each of the current Board
members contributes to the mix of experience, skills and
qualifications that we seeks to be represented on the Board.
New Director
Nominee
As a part of the Board’s succession plan, when Mr.
Fitzmyers’ announced his retirement following the 2017 Annual
Meeting, we planned to nominate a new independent director
candidate to be elected to the Board at the 2017 Annual Meeting.
Through its ongoing board evaluation and director succession
planning process, the Governance and Nominating Committee had been
actively conducting searches to identify qualified candidates who
would enhance the collective experience and expertise of the Board,
including identifying the candidate to fill the vacancy created by
Mr. Fitzmyers’ retirement.
Korn Ferry, the executive search and recruiting firm engaged by the
Governance and Nominating Committee, through extensive searches,
identified and performed reference check and background
investigation on several potential director candidates. Members of
the Governance and Nominating Committee, as well as other members
of the Board as appropriate, reviewed their qualifications,
evaluated them against the same selection criteria discussed under
“
Director Selection
Criteria
” above, and interviewed some of the
candidates.
Following a rigorous vetting and selection process, the Governance
and Nominating Committee recommended Michael A. Bless, current
Chief Executive Officer and board member as well as former Chief
Financial Officer of Century Aluminum Company, a global producer of
primary aluminum, for election to the Board at the 2017 Annual
Meeting. Prior to joining Century Aluminum, Mr. Bless served as
Managing Director of M. Safra & Co., Chief Financial Officer of
Maxtor Corporation and Chief Financial Officer of Rockwell
Automation, Inc., and was responsible for finance, accounting,
treasury, investor relations and information technology functions.
Mr. Bless’ experience in driving growth and leading major
companies, as both Chief Executive Officer and Chief Financial
Officer, brings valuable leadership, industry, risk-management,
investor relations, international operations experience and
strategy-development experience to the Board. Prior to holding a
number of senior management positions at public and private
companies, Mr. Bless spent years in investment banking, working for
Merrill Lynch and Dillon, Read & Co. in a variety of areas,
including mergers and acquisitions, equities, fixed income and
restructurings. His business insights, financial acumen and
expansive knowledge of the construction materials industry and
global market conditions enhance the collective corporate
governance, strategic growth and financial expertise of the Board.
Applying the NYSE independence standards, the Board has
affirmatively determined that Mr. Bless is independent in that he
has no material relationship with us, either directly or as a
partner, shareholder, officer or employee of an organization that
has a relationship with us.
We believe that our director nominees for the 2017 Annual Meeting,
consisting of three Chief Executive Officers ((1) our own Chief
Executive Officer, Ms. Colonias, (2) the Chief Executive Officer of
Stellar Solutions, Inc., Ms. Ford and (3) the Chief Executive
Officer of Century Aluminum Company, Mr. Bless,), represent highly
experienced and qualified Directors, that collectively with our
other Board members provide effective oversight and governance of
the Company, and evaluate all opportunities for building
sustainable value without commitments to implement a pre-determined
agenda.
22
Board
Independence
The NYSE listing standards require that the board of directors of a
listed company consist of a majority of independent directors. A
majority of our current directors are independent under those
rules.
The Board follows the independence standards required by the NYSE
to determine our directors and Board nominees’ independence.
Those standards generally provide, among other tests, that a
director will not be independent of a listed company if:
•
the director is, or has been within the last 3 years, an employee
of the listed company, or an immediate family member is, or has
been within the last 3 years, an executive officer, of the listed
company;
•
the director has received, or has an immediate family member who
has received, during any 12-month period within the last 3 years,
more than $120,000 in direct compensation from the listed company,
other than director and committee fees and pension or other forms
of deferred compensation for prior service, provided such
compensation is not contingent in any way on continued service;
•
the director is a current partner or employee of a firm that is the
company’s internal or external auditor;
•
the director has an immediate family member who is a current
partner of such a firm;
•
the director has an immediate family member who is a current
employee of such a firm and personally works on the listed
company’s audit;
•
the director or an immediate family member was within the last 3
years a partner or employee of such a firm and personally worked on
the listed company’s audit within that time;
•
the director or an immediate family member is, or has been within
the last 3 years, employed as an executive officer of another
company where any of the listed company’s present executive
officers at the same time serves or served on the other
company’s compensation committee; or
•
the director is a current employee, or an immediate family member
is a current executive officer, of another company that has made
payments to, or received payments from, the listed company for
property or services in an amount that, in any of the last 3 fiscal
years, exceeded the greater of $1,000,000 or 2% of consolidated
gross revenues of the other company and its parent and subsidiary
entities in a consolidated group.
For purposes of these standards, “immediate family
member” includes a director’s spouse, parents,
children, siblings, mothers- and fathers-in-law, sons- and
daughters-in-law, brothers- and sisters-in-law, and anyone, other
than any domestic employee, who shares the director’s
home.
Applying the NYSE
independence standards, based on their completed questionnaires
provided to the Board, the Board has determined that Mr. Andrasick,
Ms. Chatman, Mr. Cusumano, Ms. Ford, Mr. Louras, Ms. MacGillivray
and Mr. Bless are each independent in that none of them has a
material relationship with us, either directly or as a partner,
shareholder, officer or employee of an organization that has a
relationship with us. The Board has determined that Ms. Colonias is
not independent under those standards. As a result, among the three
Board nominees for election at the 2017 Annual Meeting, Ms. Ford
and Mr. Bless are independent, and Ms. Colonias is not independent.
In making its determination, the Board considered all relevant
facts and circumstances, including commercial, industrial, banking,
consulting, legal, accounting, charitable and familial
relationships, and considered the issue not merely from the
standpoint of a director, but also from that of persons or
organizations with which a director has an affiliation. If all
three Board nominees are elected to the Board at the 2017 Annual
Meeting, the percentage of independent directors on
23
the Board will be 87%, and
Ms. Colonias, our CEO, will be the only non-independent director
sitting on the Board, as indicated in the summary graphic
below.
Director Orientation and
Education
New directors are oriented to our business and governance through
meetings with our officers and directors and visits to our
facilities. We also support, and pay for, participation in
continuing education programs to assist directors in performing
their Board responsibilities.
24
BOARD
COMMITTEES
Board Committee
Membership Summary
The table below sets forth continuing directors’ Board
committee membership as of December 31, 2016:
Compensation and
Leadership Development Committee
The Compensation and Leadership Development Committee is
responsible for the development and review of our compensation
policy for all of our salaried employees, including equity-based
compensation, and is responsible for reviewing and approving the
compensation discussion and analysis for inclusion in our Annual
Reports on Form 10-K and/or our proxy statements. The Compensation
and Leadership Development Committee currently comprises 4
independent directors, as determined pursuant to the NYSE listing
standards and Rule 10A-3 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). In addition, the members
of the Compensation and Leadership Development Committee are
both:
•
“non-employee directors” — directors who satisfy
the requirements established by the Securities and Exchange
Commission (the “SEC”) for non-employee directors under
Rule 16b-3 under the Exchange Act; and
•
“outside directors” — directors who satisfy the
requirements established under Internal Revenue Code section
162(m).
The Board currently appoints the members of the Compensation and
Leadership Development Committee for indefinite terms and may
remove any member from the Compensation and Leadership Development
Committee at any time. The Compensation and Leadership Development
Committee operates under a written charter that the Board adopted,
which is also available on our website at
http://www.simpsonmfg.com/social-responsibility/governance/compensation.html
.
We will provide a printed copy of the charter to any shareholder on
request.
Compensation and
Leadership Development Committee Interlocks and Insider
Participation
The Compensation and Leadership Development Committee currently
comprises Jennifer A. Chatman, as its Chair, Gary M. Cusumano,
Celeste Volz Ford and Peter N. Louras, Jr., all of whom are
independent directors. Ms. Chatman, Mr. Cusumano, Ms. Ford and Mr.
Louras have no relationships with us or any of our subsidiaries,
other than as members of the Board and its committees.
None of the members of the Board who served on the Compensation and
Leadership Development Committee in 2016 was ever an officer or
employee of the Company or of any of its subsidiaries or since the
beginning of 2016 was a participant in a related person transaction
that requires disclosure under Item 404 of Regulation S-K adopted
by the SEC. During 2016, none of the Company’s executive
officers served on the board of directors, its compensation
committee or any similar committee of another entity (not including
tax-exempt entities under the Internal Revenue Code Section
501(c)(3)) that has one or more of its executive officers serving
on the Board or the Compensation and Leadership Development
Committee.
25
Compensation
Consultant
The Compensation and
Leadership Development Committee has the authority under its
charter to retain or obtain the advice of advisers, including
compensation consultants, as it may deem appropriate. In accordance
with this authority, since 2014, the Compensation and Leadership
Development Committee has engaged Mercer LLC, Mercer (US) Inc. and
Mercer Health and Benefits LLC (collectively, “Mercer”)
as its independent compensation consultant to provide it with
objective and expert analyses, advice and information with respect
to executive compensation. All executive compensation services
provided by Mercer were conducted under the direction or authority
of the Compensation and Leadership Development Committee. In
addition to Mercer, members of our Human Resources and Finance
Departments support the Compensation and Leadership Development
Committee in its work.
During 2016, Mercer made
recommendations to the Compensation and Leadership Development
Committee to (1) position the total compensation of the
Company’s Named Executive Officers at the median level within
a group of updated peer companies when the Company has a median
performance; and (2) adjust the framework of the Company’s
non-equity incentive and equity incentive compensation programs to
effectuate such pay positioning. See “
Compensation
Discussion and Analysis — Executive Summary
”
below. Taking into account, among other considerations, the
feedback received by the Board from our shareholders, the latest
guidelines from proxy advisors, and peer companies’
practices, the Compensation and Leadership Development Committee
incorporated these recommendations into the equity-based
compensation program for our Named Executive Officers, beginning
with equity-based compensation awarded in 2017 for operating and
strategic goals achieved for 2016. See “
Executive
Compensation Analysis — Long-Term Equity Awards
”
below. We paid Mercer total fees of $480,197 for these services in
2016.
The engagement of Mercer was
the result of a selection process, conducted by management and the
chair of the Compensation and Leadership Development Committee,
among three firms. At the conclusion of the selection process,
Mercer was recommended and the Compensation and Leadership
Development Committee approved Mercer’s selection. The
Compensation and Leadership Development Committee considered the
required independence factors outlined by the SEC and NYSE rules.
Mercer was engaged by the Compensation and Leadership Development
Committee in 2016 to:
•
identify an updated industry peer group,
•
assess the appropriateness and competitiveness of our compensation
programs as compared to compensation programs maintained by the
selected industry peer group,
•
evaluate our executive and director compensation, and
•
recommend changes to our short-term and long-term incentive
programs
.
We have engaged Mercer to
perform additional services for us, including evaluating long-term
equity compensation, conducting compensation benchmarking analysis,
and providing employee benefits consulting services. We paid Mercer
total fees of $56,535 for these services in 2016. In addition, in 2016, Mercer received brokerage fees of $351,971 from an insurance carrier related to the placement of a stop-loss insurance policy for us. We also paid Mercer (Hong Kong) Limited, an affiliate of Mercer, $2,049 related to the placement of an insurance policy
for our Hong Kong subsidiary in 2016. We have engaged
Marsh USA Inc. (“Marsh”), an affiliate of Mercer, for
the placement of our various lines of business insurance. In 2016,
we paid Marsh $3,814,274, including $335,000 brokerage fees that
Marsh retained and $3,479,274 insurance policy premiums that were
passed through from Marsh to insurance carriers. The decision to
engage Mercer and Marsh for these additional services was made by
management, not subject to approval by the Board or the
Compensation and Leadership Development Committee.
Report of the
Compensation and Leadership Development Committee
The Compensation and Leadership Development Committee reviewed the
above Compensation Discussion and Analysis, discussed it with our
officers, and based on such review and discussions, recommended its
inclusion in this Proxy Statement.
Compensation and Leadership Development
Committee
|
Jennifer A. Chatman, Chair
|
Gary M. Cusumano
|
Celeste Volz Ford
|
Peter N. Louras, Jr.
|
26
Audit
Committee
The Audit Committee is responsible for financial and accounting
oversight and risk management. Its policies and practices are
described below.
Composition
The Audit Committee comprises 4 independent directors, as
determined pursuant to the NYSE listing standards and Rule 10A-3 of
the Exchange Act. It operates under a written charter that the
Board adopted, which is available on our website at
http://www.simpsonmfg.com/social-responsibility/governance/audit.html
.
We will provide a printed copy of the charter to any shareholder on
request. The current members of the Audit Committee are James S.
Andrasick, as its Chair, Jennifer A. Chatman, Peter N. Louras, Jr.
and Robin G. MacGillivray. The Board has determined that each of
them meets the definitions and standards for independence and is
financially literate, and that James S. Andrasick and Peter N.
Louras, Jr., have financial management expertise as required by
NYSE listing standards and meet the SEC definition of an
“audit committee financial expert.”
Responsibilities
The Audit Committee is directly responsible for the appointment,
compensation, retention and oversight of the accounting firm that
we engage as our independent registered public accounting firm. The
Audit Committee must pre-approve fees to be paid to our principal
independent registered public accounting firm before it begins
work. Our officers are responsible for our internal controls and
financial reporting process. Subject to the Audit Committee’s
oversight, our independent registered public accounting firm is
responsible for performing an independent audit of our internal
controls over financial reporting, for performing an independent
audit of our consolidated financial statements in accordance with
generally accepted auditing standards, and for reporting on those
audits.
Report of the Audit
Committee
The Audit Committee met 7 times in 2016 and has held discussions
with our officers and Grant Thornton LLP (“Grant
Thornton”), a registered public accounting firm and our
independent registered public accounting firm. Our officers
represented to the Audit Committee that our consolidated financial
statements were prepared in accordance with accounting principles
generally accepted in the United States. The Audit Committee has
reviewed and discussed the consolidated financial statements with
our officers and Grant Thornton. The Audit Committee has discussed
with Grant Thornton the matters that are required to be discussed
under Auditing Standard No. 16, “
Communications with
Audit Committees
,” issued by the Public Company
Accounting Oversight Board.
The Audit Committee has received the written disclosures and the
letter from Grant Thornton as required by applicable requirements
of the Public Company Accounting Oversight Board affirming the
registered public accounting firm’s independence in
compliance with Rule 3526. The Audit Committee discussed with Grant
Thornton that firm’s independence. On that basis, the Audit
Committee believes that Grant Thornton is independent.
Based on the Audit Committee’s discussions with our officers
and Grant Thornton, the Audit Committee’s review of the
representations of our officers, and the report of Grant Thornton,
to the Audit Committee, the Audit Committee recommended that the
Board include the audited consolidated financial statements in our
Annual Report to Shareholders on Form 10-K for the year ended
December 31, 2016, as filed with the SEC. The Audit Committee
believes that it has satisfied its responsibilities under its
charter.
Audit
Committee
|
James S. Andrasick, Chair
|
Jennifer A. Chatman
|
Peter N. Louras, Jr.
|
Robin G. MacGillivray
|
27
Governance and
Nominating Committee
The Board has a standing
Governance and Nominating Committee, which is primarily responsible
for nominating candidates to the Board. It operates under a written
charter that the Board adopted, which is available on our website
at
http://www.simpsonmfg.com/social-responsibility/governance/governance.html.
We will provide a printed copy of the charter to any shareholder on
request. The 3 current members of the Governance and Nominating
Committee, Robin G. MacGillivray, Chair, James S. Andrasick and
Gary M. Cusumano, are independent and meet all applicable
independence requirements under the NYSE listing standards and Rule
10A-3 of the Exchange Act.
The Governance and Nominating Committee considers all candidates
identified as potential directors, including those submitted by
shareholders for its consideration. Any of our shareholders can
recommend a director candidate to the Governance and Nominating
Committee by following instructions stated below.
When evaluating a director candidate, whether or not recommended by
a shareholder, the Governance and Nominating Committee uses for
guidance our Governance Guidelines (available on our website at
http://www.simpsonmfg.com/social-responsibility/governance/governance-guidelines.html)
,
including the guidelines’ “
Director
Qualification Standards
” and “
Key
Director Responsibilities
” sections, and considers the
candidate’s education, business experience, financial
expertise, industry experience, business acumen, interpersonal
skills, vision, teamwork, integrity, strategic ability and customer
focus. The Governance and Nominating Committee will review and
discuss potential candidates who come to its attention, whether
from internal or external sources. From the review and discussion,
the Governance and Nominating Committee may narrow the list of
potential candidates and interview the remaining candidates. The
Governance and Nominating Committee will recommend for
consideration by the full Board any candidate that the Governance
and Nominating Committee considers to be suitable.
Our Bylaws permit our shareholders directly to nominate directors
for election at an annual meeting. To do so, a shareholder must
notify our Secretary at least 75 days, but not more than 90 days,
before the annual meeting, unless we do not publicly disclose the
date of the meeting at least 85 days before the date that the
meeting is scheduled to be held, in which case our Secretary must
receive the shareholder’s notice within 10 days after we
publicly disclose the meeting date. Shareholders may make
nominations to the Company by writing a letter to:
Simpson Manufacturing Co., Inc.
Board of Directors Governance and Nominating Committee
5956 W. Las Positas Blvd.
Pleasanton, CA 94588
A shareholder’s nomination notice must state as to each of
its candidates -
•
the candidate’s name, age, business address and residence
address,
•
the candidate’s principal occupation or employment,
•
the number of shares of our common stock that the candidate
beneficially owns and other information, if any, required by our
Bylaws,
•
any other information relating to the candidate that is required to
be disclosed in solicitations of proxies for election of directors,
or is otherwise required, pursuant to Regulation 14A under the
Exchange Act (including, without limitation, the candidate’s
written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and
•
a description of all direct and indirect compensation and other
material monetary agreements, arrangements and understandings
during the past three years, and any other material relationships,
between or among such shareholder and shareholder associated
person, if any, and their respective affiliates and associates, or
others acting in concert therewith, on the one hand, and each
proposed nominee, and his or her respective affiliates and
associates, or others acting in concert therewith, on the other
hand, including, without limitation, all information that would be
required to be disclosed pursuant to Item 404 or any other
provision of Regulation S-K, if the shareholder making the
nomination and any shareholder associated person on whose behalf
the nomination is made, or any affiliate or associate thereof or
person acting in concert therewith, were the
“registrant” for purposes of such Regulation S-K and
the nominee were a director or executive officer of such
registrant.
28
The shareholder’s notice
must also state its name and address, as they appear on our books,
and the number of shares of our common stock that the shareholder
beneficially owns and other information, if any, required by our
Bylaws.
In addition, each person whom a shareholder proposes to nominate
for election as our director must have previously delivered to our
Secretary at our principal executive offices a written
questionnaire with respect to the background and qualification of
such proposed nominee and a written representation and agreement,
both in form provided by our Secretary upon written request, that
such proposed nominee (i) genuinely intends to serve, once elected,
as our director for the entire term for which he or she is standing
for election, (ii) is not and will not become a party to (x) any
agreement, arrangement or understanding with, and has not given any
commitment or assurance to, any person or entity as to how such
proposed nominee, if elected as our director, will act or vote on
any issue or question that has not been disclosed to the Company or
(y) any such voting commitment that limit or interfere with such
proposed nominee’s ability to comply, if elected as a
director of the Company, with such proposed nominee’s
fiduciary duties under applicable law, (iii) is not, and will not
become a party to, any agreement, arrangement or understanding with
any person or entity other than us with respect to any direct or
indirect compensation, reimbursement or indemnification in
connection with candidacy, service or action as a director that has
not been disclosed to the Company and (iv) if elected as our
director, will comply with all our applicable corporate governance,
conflict of interest, confidentiality, compensation recovery, stock
ownership, and hedging, pledging and trading policies and
guidelines.
We will disregard a purported nomination that does not comply in
all respects with our Bylaws. In addition, under our Bylaws, if the
nominating shareholder, or its qualified representative, does not
appear at the meeting to present the proposed nomination, such
proposed nomination shall not be considered (unless otherwise
required by law to be considered).
We have received a nomination notice from a shareholder with
respect to one director candidate for the 2017 Annual Meeting.
Meeting
Attendance
In 2016, the Board held 9 meetings, and its committees held a total
of 33 meetings, including 7 meetings of the Audit Committee, 11
meetings of the Compensation and Leadership Development Committee,
10 meetings of the Governance and Nominating Committee and 5
meetings of the Acquisition and Strategy Committee.
In 2016, each of our directors attended at least 75% of the
aggregate of the total number of meetings of the Board and the
total number of meetings of the Board committee(s) on which he or
she served.
Although we do not have a policy that requires our directors to
attend annual meetings of shareholders, all of our current
directors attended the 2016 annual meeting of our shareholders. In
2016, outside directors of the Board held 3 meetings in executive
session on days when regular meetings of the entire Board were
scheduled and no meetings in executive session on days when the
entire Board did not meet.
Executive Sessions of
Outside Directors
Pursuant to the NYSE listing standards, our non-management
directors meet at regularly scheduled executive sessions without
members of management. In 2016, Chairman of the Board, Mr. Louras,
presided over these executive sessions.
29
CORPORATE
GOVERNANCE
The Board believes in sound corporate governance practices that
preserve and enhance our long-term value. The following chart
highlights our key governance practices, which include several
governance changes that have recently been approved and adopted by
the Board prior to the 2017 Annual Meeting:
Proxy Access
On February 22, 2017, the Board, based on shareholder feedback,
consultation with outside advisors, and its own review, committed
to amend our Bylaws to provide proxy access to qualifying
shareholders following the March 28, 2017 special meeting of
shareholders.
In keeping with its commitment, the Board adopted a proxy access
bylaw effective on March 28, 2017. The proxy access bylaw provides
a means for the Company’s shareholders to request
shareholder-nominated director candidates to be included in the
Company’s proxy materials, provided that the shareholders and
their nominees satisfy the eligibility, procedural and other
requirements specified in the proxy access bylaw, including the
following:
•
The total number of shareholder nominees for election to the Board
to be included in the Company’s proxy materials for an annual
meeting of the shareholders shall not exceed the greater of (i)
two, or (ii) 20% (rounded down) of the total number of directors of
the Board then in office;
•
Only shareholders who have continuously held a number of shares
representing at least 3% of the outstanding shares of common stock
of the Company for at least three years as of both the record date
of the annual meeting for which the Company’s proxy materials
are being sent and the date of their nomination notice to the
Company may have the ability to request the Company to include
their director nominations in such proxy materials; and
•
A group of no more than 20 shareholders may aggregate their shares
to satisfy the above-described ownership threshold.
Governing
Documents
The Board has adopted our
Governance
Guidelines
, which set forth the framework within which the
Board, assisted by its committees, directs the affairs of the
Company. The
Governance
Guidelines
address, among other things, qualifications of
directors, director independence, stock ownership by and
compensation of Directors, responsibilities, operations and
leadership of the Board, management succession and review as well
as annual performance evaluation of the Board. The Board has
adopted a
Code of Business
Conduct and Ethics Policy
, which are applicable to all
employees of the Company and its subsidiaries, including our Chief
Executive Officer and our Chief Financial Officer. In addition,
during 2016, the Board has adopted a
Compensation Recovery
Policy
, which is applicable to all our current or former
executive officers and other covered employees, and an
Anti-Hedging and
Anti-Pledging Policy
, which is applicable to directors,
officers, and employees of the Company and its subsidiaries, and
such persons’ designees. Each committee of the Board of
Directors is governed by a charter adopted by the Board. The
Governance
Guidelines
, the
Code of Business
Conduct and Ethics Policy
, the
Compensation Recovery
Policy
, the
Anti-Hedging and
Anti-Pledging Policy
and each of the committee charters are
available on our Investor Relations website under the
“Governance”
30
heading at
http://www.simpsonmfg.com/social-responsibility/governance
.
If we amend any aforementioned document, the amendment will be
posted at the same location on our website. We will provide a
printed copy of any aforementioned document, without charge, to any
shareholder who requests it from our Secretary.
Leadership
Structure
Since before our initial public offering in 1994, the roles of
Chairman of the Board and our Chief Executive Officer have been
separated. We believe that this is appropriate under current
circumstances, because it allows management to make the operating
decisions necessary to manage the business, while helping to keep a
measure of independence between the oversight function of the Board
and operating decisions. We feel that this has provided an
appropriate balance of operational focus, flexibility and
oversight.
In 2014, Peter N. Louras, Jr., was appointed as Chairman of the
Board. Because an independent director currently serves as Chairman
of the Board, we do not separately have a Lead Independent
Director. Mr. Louras, as Chairman of the Board, has assumed the
duties that were previously performed by the Lead Independent
Director, which include participating in setting the agenda of
Board and Committee meetings, coordinating the distribution and
presentation of meeting materials, facilitating communications
among members of the Board and between the Board and management,
leading the Board self-evaluation process, and maintaining the
focus and punctuality of Board and Committee meetings. In addition,
the Chairman’s role also includes leading the efforts in
evaluating our Chief Executive Officer and in succession planning,
considering Board committee membership and leadership, and
presiding at annual meetings of shareholders.
The Board’s Role
in Risk Management
The Board and its committees take an active role in overseeing
management of our risks. The Board regularly reviews information
regarding our operational, financial, legal and strategic risks.
Its Compensation and Leadership Development Committee is
responsible for overseeing the management of risks relating to our
compensation plans; its Audit Committee oversees management of our
financial and cyber security risks; and its Governance and
Nominating Committee manages risks associated with the independence
of the Board and potential conflicts of interest. In 2009, the
Board created the Acquisition and Strategy Committee, whose role in
risk management, includes evaluating and managing our strategic
risks. While each committee is responsible for evaluating certain
risks and overseeing the management of these risks, our entire
Board is regularly informed about such risks through committee and
executive officer reports.
Communications with the
Board
We encourage shareholders and interested parties to communicate any
concerns or suggestions directly to the independent members of the
Board, by writing to:
Board of Directors
Simpson Manufacturing Co., Inc.
P.O. Box 1394
Alamo, CA 94507-7394
31
PROPOSAL 2
APPROVAL OF OUR AMENDED EXECUTIVE
OFFICER CASH PROFIT SHARING PLAN
At the 2017 Annual Meeting, we will ask our shareholders to
consider a proposal to approve our amended Executive Officer Cash
Profit Sharing Plan (the “EOCPS Plan”). The proposed
changes to the EOCPS Plan will:
(1)
give the
Compensation and Leadership Development Committee more flexibility
in deciding when awards will be made to the covered officers with
respect to a fiscal year, instead of making fixed quarterly awards;
and
(2)
further
limit the maximum amount of award may be paid to a covered officer
with respect to a particular fiscal year.
Summary of the EOCPS
Plan
The Board adopted the EOCPS Plan on January 14, 2003, and our
shareholders approved it on March 31, 2003. The Board previously
amended the EOCPS Plan on February 25, 2008. Our shareholders
approved the amended EOCPS Plan on April 23, 2008, and re-approved
it on April 23, 2013.
The EOCPS Plan applies to any employee of the Company treated as a
“covered employee” pursuant to 162(m) of the Internal
Revenue Code of 1986, as amended (the “Internal Revenue
Code”), and any other employee designated by the Compensation
and Leadership Development Committee. The EOCPS Plan is designed to
(1) parallel our Cash Profit Sharing Plan maintained for qualified
employees other than our executive officers and provide cash awards
for our executive officers and any other employee designated by the
Compensation and Leadership Development Committee, and (2) meet, at
the same time, the requirements of Internal Revenue Code section
162(m) for the cash awards to be fully deductible as
“performance-based compensation” in excess of the
$1,000,000 limit for each covered employee. This $1,000,000 limit
does not, however, apply to compensation that we pay under a plan
approved by our shareholders, if the compensation is
“performance-based.”
The Board has delegated the administration of the EOCPS Plan to the
Compensation and Leadership Development Committee. The Compensation
and Leadership Development Committee determines the amount of the
award that each of the covered officers is eligible to receive
under the EOCPS Plan. The Compensation and Leadership Development
Committee has discretion to reduce or eliminate any award under the
EOCPS Plan.
A more detailed description of the EOCPS Plan and our related
compensation practices is provided under the “
Executive
Compensation
” below.
2016 Cash Awards under
the EOCPS Plan
The amounts that a covered officer will receive under the EOCPS
Plan in the future, if any, are in the discretion of the
Compensation and Leadership Development Committee and therefore
cannot be determined in advance. A “New Plan Benefits”
table is not included for this reason. The following table sets
forth the amounts that were received by the following individuals
and groups as indicated under the EOCPS Plan with respect to the
fiscal year ended December 31, 2016.
32
Name
and Position of Individual or Description of
Group
|
|
|
|
|
Karen Colonias,
President, Chief Executive Officer
and Director
|
|
2016
|
|
$
|
1,860,346
|
{2}
|
|
|
|
|
|
|
|
Brian J. Magstadt,
Chief Financial Officer,
Treasurer and Secretary
|
|
2016
|
|
$
|
788,374
|
|
|
|
|
|
|
|
|
Roger Dankel,
President of North American Sales,
Simpson Strong-Tie Company Inc.
|
|
2016
|
|
$
|
741,785
|
|
|
|
|
|
|
|
|
Ricardo M. Arevalo,
Chief Operating Officer,
Simpson Strong-Tie Company Inc.
|
|
2016
|
|
$
|
741,785
|
|
|
|
|
|
|
|
|
Jeffrey E. Mackenzie,
Vice President
|
|
2016
|
|
$
|
522,160
|
|
|
|
|
|
|
|
|
All current executive officers as a
group
{3}
|
|
2016
|
|
$
|
4,858,976
|
|
|
|
|
|
|
|
|
All current directors who are not executive
officers as a group
|
|
2016
|
|
$
|
0
|
|
|
|
|
|
|
|
|
All employees, including all current
officers
who are not executive officers, as a group
{3}
|
|
2016
|
|
$
|
4,858,976
|
|
Awards paid to each of our NEOs under the EOCPS Plan with respect
to each of the three years ended December 31, 2016 are set forth in
the “
Summary Compensation
Table
” below.
EOCPS Plan
Amendments
At its meetings on October 19, 2016 and on March 17, 2017, the
Board, at the recommendation of its Compensation and Leadership
Development Committee, authorized further amending the EOCPS Plan
(the “EOCPS Plan Amendments”), which will only become
effective if and when our shareholders approve the EOCPS Plan
Amendments at the 2017 Annual Meeting.
The Board has approved and adopted EOCPS Plan Amendments and
believes that approval of the EOCPS Plan Amendments is in our and
our shareholders’ best interests. Once the EOCPS Plan
Amendments are approved by our shareholders, we will be able to
substantially deduct, for federal income tax purposes,
performance-based incentive compensation that we pay to each of the
covered officers in excess of the $1,000,000 limit to the extent
that the other requirements of Internal Revenue Code section 162(m)
are satisfied.
Pursuant to the EOCPS Plan
Amendments, instead of making quarterly awards, any award under the
EOCPS Plan will be paid at such time as determined by the
Compensation and Leadership Development Committee; provided that
all awards thereunder with respect to periods within a fiscal year
shall be paid by March of the succeeding fiscal year.
The EOCPS Plan Amendments require the Compensation and Leadership
Development Committee to base performance goals on one or more of
the following criteria for making awards under the EOCPS Plan: (i)
earnings;
33
(ii) unit sales, sales volume or revenue; (iii) sales growth; (iv)
stock price (including comparison with various stock market
indices); (v) return on equity; (vi) return on investment; (vii)
total return to shareholders; (viii) economic profit (including
gross or net profit); (ix) debt rating; (x) operating income; (xi)
cash flows; (xii) cost targets; (xiii) return on assets or margins;
or (xiv) implementation, completion or attainment of measurable
objectives with respect to (1) software development, (2) new
distribution channels, (3) customer growth targets, (4) acquisition
identification and integration, (5) manufacturing, production or
inventory targets, (6) new product introductions, (7) product
quality control, (8) accounting and reporting, (9) recruiting and
maintaining personnel, or (10) compliance or regulatory program
targets. Such defined group of goals is similar to the group of
performance goals used under the Company’s current equity
incentive plan.
Under the amended EOCPS Plan, just as it did in the past for the
quarterly awards under the current EOCPS Plan last amended in 2008,
the Compensation and Leadership Development Committee will base the
determination of periodic awards to a covered officer on his or her
applicable individual percentage of the amount (each, a
“Qualified Amount”) by which the performance goal, as
chosen by the Compensation and Leadership Development Committee,
with respect to the Company or the employee’s relevant branch
or subsidiary for the applicable period exceeds a qualifying level
determined by the Compensation and Leadership Development Committee
for that period. The Compensation and Leadership Development
Committee determines the qualifying level and each covered
employee’s individual percentage with respect to a specific
period. In doing so, the Compensation and Leadership Development
Committee bases the covered employees’ individual percentages
on their then-current job functions.
In addition to the existing limitation that no award in excess of
$2,500,000 may be paid to any covered officer under the EOCPS Plan
with respect to any fiscal year, the EOCPS Plan Amendments add an
additional restriction that, with respect to a particular fiscal
year, no award in excess of two times any covered officer’s
target annual payout for that year will be paid to such officer
under the EOCPS Plan. When assessing whether the $2,500,000 cap
and/or the two-times cap under the amended EOCPS Plan have been
crossed, all awards made to a covered officer with respect to
periods within the same fiscal year will be calculated
together.
The EOCPS Plan Amendments do not affect any of the awards made
under the EOCPS Plan for 2016, including the awards for the fourth
quarter of 2016 (which was paid out in early 2017). If the
Company’s shareholders approve the EOCPS Plan Amendments, the
amended EOCPS Plan will apply to awards to be made after the end of
2016. The first award under the amended EOCPS Plan is expected to
be made after the first quarter of 2017 following the 2017 Annual
Meeting. In the event that shareholders do not approve the EOCPS
Plan Amendments at the 2017 Annual Meeting, the Company’s
current EOCPS Plan, last amended on February 25, 2008, will
continue in effect with respect to awards to be made after the end
of 2016.
In the event that our shareholders do not approve the EOCPS Plan
Amendments, the EOCPS Plan, last amended on February 25, 2008, will
continue in effect with respect to awards thereunder to be made for
2017 and future years, until further amendments to such EOCPS Plan
our shareholders approve.
EOCPS Plan
Implementation for 2017
To implement the amended EOCPS Plan for 2017, the Compensation and
Leadership Development Committee determined previously in October
2016 that, subject to the approval of the EOCPS Plan Amendments by
our shareholders at the 2017 Annual Meeting, the awards under the
EOCPS Plan for 2017 will be made through five payments, with each
of the first four payments to be made quarterly and the last
payment to be made at the end of 2017 (or thereafter by March,
2018). For each of the four quarters in 2017, an executive Officer
will receive the awards based on 50% of his or her applicable
individual percentage of the respective quarterly Qualified Amount.
As for the last payment, the executive officer will receive the
awards based on 50% of his or her applicable individual percentage
of the annual Qualified Amount for 2017. The net effect of such
five payments is to reduce the amount of quarterly awards and
proportionately increase the amount of awards to be made following
the end of the year, with the year-end awards contingent upon
achieving the Qualified Amount for the entire year.
In February, 2017, the Compensation and Leadership Development
Committee also determined to use 2017 qualified operating profit of
our primary operating subsidiary, Simpson Strong-Tie Company Inc.,
as the EOCPS Performance Goal for 2017 and base the determination
of periodic awards to an executive officer in 2017 under the
amended EOCPS Plan on his or her applicable individual percentage
of the amount of that EOCPS Performance Goal in excess of a
specified qualifying level. Such EOCPS Performance Goal uses the
same methodology that was used
34
in 2016 and prior fiscal years to measure Qualified Amounts under
the current EOCPS Plan last amended in 2008. For additional
information on our Named Executive Officers’ 2017 EOCPS
awards, see “
Executive
Compensation Analysis — Executive Officer Cash Profit Sharing
(EOCPS) Awards
” below.
EOCPS Plan as
Amended
A copy of the EOCPS Plan, as amended by the EOCPS Plan Amendments,
is attached to this Proxy Statement as
Exhibit A
, with
additions of text indicated by underlining and deletions of text
indicated by strike-outs, and is incorporated herein by this
reference. The foregoing description of the EOCPS Plan and the
EOCPS Plan Amendments is only a summary and is qualified in its
entirety by reference to the actual text of the proposed amendment,
a copy of which is provided in
Exhibit A
attached hereto.
Shareholders are encouraged to read the full text of the proposed
amendment.
Required Vote
The affirmative vote of a majority of the votes cast on Proposal 2
at the 2017 Annual Meeting is required to approve the EOCPS Plan
Amendments. The enclosed proxy card enables a shareholder to vote
“FOR,” “AGAINST” or “ABSTAIN”
on this proposal. The proposal will pass, and the EOCPS Plan
Amendments will become effective, if the total votes cast
“for” Proposal 2 exceed the total number of votes cast
“against” Proposal 2. Abstentions and broker non-votes,
if any, will not constitute votes cast on Proposal 2 and will
accordingly have no effect on the outcome of the vote on this
proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU USE THE PROXY CARD TO
VOTE “FOR” APPROVAL OF OUR AMENDED EXECUTIVE OFFICER
CASH PROFIT SHARING PLAN.
35
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Board has selected Grant Thornton LLP (“Grant
Thornton”) as the principal independent registered public
accounting firm to audit our internal controls over financial
reporting and our financial statements for 2017. At the 2017 Annual
Meeting, you will be asked to ratify that selection. Grant Thornton
has audited our financial statements since 2015. A Grant Thornton
representative will be present at the meeting, will be given an
opportunity to make a statement at the meeting if he or she desires
to do so, and will be available to respond to appropriate
questions.
Dismissal of Former
Independent Registered Public Accounting Firm
On June 19, 2015, the Board, on the recommendation of its Audit
Committee, dismissed PricewaterhouseCoopers LLP (“PwC”)
as our independent registered public accounting firm. We provided
PwC with a copy of the disclosures that were made regarding its
dismissal in a Current Report on Form 8-K (the
“Report”) prior to the time the Report was filed with
the SEC on June 24, 2015. We requested that PwC furnish a letter
addressed to the SEC stating whether or not PwC agrees with the
statements made therein. A copy of PwC’s letter dated June
24, 2015, was attached as Exhibit 16.1 to the Report.
The reports of PwC on our consolidated financial statements for the
fiscal years ended December 31, 2014 and 2013 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting
principles.
During the fiscal years ended December 31, 2014 and 2013 and the
subsequent interim period through June 19, 2015, there were no
“disagreements” (as defined in Item 304(a)(1)(iv) of
Regulation S-K and related instructions) with PwC on any matter of
accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of PwC, would have caused PwC to make
reference thereto in their reports on the consolidated financial
statements for such fiscal years. During the fiscal years ended
December 31, 2013 and 2014 and any subsequent interim period
through June 19, 2015, there were no “reportable
events” (as defined in Item 304(a)(1)(v) of Regulation S-K),
except that our internal control over financial reporting was not
effective due to the existence of material weaknesses in our
internal control over financial reporting. As disclosed in our
Annual Report to Shareholders on Form 10-K for the fiscal year
ended December 31, 2013, and Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2014, June 30, 2014, and September 30,
2014:
•
Our management did not design and maintain effective controls over
the valuation of goodwill. Specifically, management did not design
a review precise enough to determine the accuracy and support of
certain forecasts and assumptions related to the goodwill
impairment assessments. This material weakness resulted in errors
in our step-one goodwill impairment models, which were not detected
by our internal control review process; and
•
Our management did not design and maintain effective internal
controls related to the valuation of indefinite-lived in-process
research and development intangible assets. Specifically,
management did not design a process or controls to evaluate
impairments at the individual asset level in accordance with
accounting principles generally accepted in the United States.
PwC discussed each of these matters with the Audit Committee. We
have authorized PwC to fully respond to the inquiries of Grant
Thornton, the successor independent registered public accounting
firm, concerning these matters.
The aforementioned material weaknesses have been remedied and no
material weaknesses in our internal control over financial
reporting have been reported for any subsequent reporting periods
following September 30, 2014.
36
Audit and Non-Audit
Fees
The following table sets
forth (1) the fees accrued or paid to our current principal
independent registered public accounting firm, Grant Thornton, for
the two periods indicated in footnotes 1 and 2 thereto, and (2) the
fees accrued or paid to our former principal independent registered
public accounting firm, PwC, for the period indicated in footnote 3
thereto:
|
|
|
|
|
|
|
Audit fees
{4}
|
|
$
|
1,868,000
|
|
$
|
1,616,000
|
|
$
|
645,000
|
Audit-Related fees
{5}
|
|
|
—
|
|
|
—
|
|
|
28,000
|
Tax fees
{6}
|
|
|
21,000
|
|
|
14,000
|
|
|
970,000
|
All other fees
|
|
|
—
|
|
|
—
|
|
|
2,000
|
Total
|
|
$
|
1,889,000
|
|
$
|
1,630,000
|
|
$
|
1,645,000
|
The Audit Committee must pre-approve fees to be paid to our
principal independent registered public accounting firm before it
begins work. The Audit Committee pre-approved all fees and services
for Grant Thornton’s work in 2016 and 2015 and PwC’s
work in 2015 while PwC was our principal independent registered
public accounting firm. The Audit Committee has determined that the
fees for services rendered were compatible with maintaining the
independence of Grant Thornton and PwC.
For additional information concerning the audit committee and its
activities with our principal independent registered public
accounting firm, see “
Report of the Audit
Committee
” above.
Required Vote
The affirmative vote of a majority of the votes cast on Proposal 3
at the 2017 Annual Meeting is required to ratify the Board’s
selection of Grant Thornton as the Company’s independent
registered public accountants for 2017. The enclosed proxy card
enables a shareholder to vote “FOR,”
“AGAINST” or “ABSTAIN” on this proposal.
The proposal will pass, and the Board’s selection of Grant
Thornton as the Company’s independent registered public
accountants for 2017 will be ratified, if the total votes cast
“for” Proposal 3 exceed the total number of votes cast
“against” Proposal 3. Abstentions and broker non-votes,
if any, will not constitute votes cast on Proposal 3 and will
accordingly have no effect on the outcome of the vote on this
proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU USE THE PROXY CARD TO
VOTE “FOR” RATIFICATION OF THE SELECTION OF GRANT
THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR 2017.
37
PROPOSAL 4
ADVISORY VOTE TO APPROVE NAMED
EXECUTIVE OFFICER COMPENSATION
At each annual meeting, we provide our shareholders with the
opportunity to vote to approve, on a non-binding, advisory basis,
the compensation of our Named Executive Officers as disclosed in
this Proxy Statement in accordance with the compensation disclosure
rules of the Securities and Exchange Commission (the
“SEC”). This resolution is required pursuant to Section
14A of the Securities Exchange Act of 1934, as amended.
As described in detail below under “
Executive
Compensation Discussion and Analysis
,” we seek to
closely align the interests of our Named Executive Officers with
the interests of our shareholders. Our compensation programs are
designed to reward our Named Executive Officers for the achievement
of short-term and long-term strategic and operational goals and the
achievement of increased total shareholder value, while at the same
time avoiding the encouragement of unnecessary or excessive
risk-taking. Please read the “
Executive
Compensation Discussion and Analysis
” and the
compensation tables and narrative disclosure that follow for
additional details about our executive compensation program,
including information about the 2016 compensation of our Named
Executive Officers. Our executive compensation program is designed
to attract, motivate and retain the Named Executive Officers, who
are critical to our success. Please refer to the
“
Executive
Officers
” below for qualifications and biographical
Information about our Named Executive Officers.
Accordingly, at the 2017 Annual Meeting, we ask that you vote
“FOR” the following resolution:
“RESOLVED that the compensation paid to this
corporation’s named executive officers, as disclosed in this
corporation’s proxy statement for the 2017 annual meeting of
stockholders, pursuant to Item 402 of Regulation S-K, including the
“Compensation Discussion and Analysis,” compensation
tables and narrative discussion within such proxy statement, is
hereby approved on a non-binding advisory basis.”
The vote on this resolution is not intended to address any specific
element of compensation, the overall compensation of the Named
Executive Officers and the compensation philosophy, policies and
practices described in this Proxy Statement.
This vote is advisory, which means that it is not binding on us,
the Board or its Compensation and Leadership Development Committee.
The Board and its Compensation and Leadership Development
Committee, however, value the views of our shareholders and will
take into account the outcome of the vote when making future
compensation decisions for our Named Executive Officers.
Required Vote
The affirmative vote of a majority of the votes cast on Proposal 4
at the 2017 Annual Meeting will approve, on a non-binding, advisory
basis, the compensation of our Named Executive Officers. The
enclosed proxy card enables a shareholder to vote
“FOR,” “AGAINST” or “ABSTAIN”
on this proposal. The proposal will pass, and the compensation of
our Named Executive Officers will be approved, if the total votes
cast “for” Proposal 4 exceed the total number of votes
cast “against” Proposal 4. Abstentions and broker
non-votes, if any, will not constitute votes cast on Proposal 4 and
will accordingly have no effect on the outcome of the vote on this
proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU USE THE PROXY CARD TO
VOTE “FOR” APPROVAL OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS.
38
PROPOSAL 5
ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES
ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
At the 2017 Annual Meeting, we provide our shareholders with the
opportunity to vote, on a non-binding, advisory basis, for their
preference as to how frequently we should seek future advisory
votes on the compensation of our Named Executive Officers as
disclosed in accordance with the compensation disclosure rules of
the SEC. This resolution is required pursuant to Section 14A of the
Securities Exchange Act of 1934, as amended.
In voting on this Proposal 5, shareholders may indicate whether
they would prefer that we conduct future advisory votes on the
compensation of our Named Executive Officers every one, two or
three years. Shareholders also may, if they wish, abstain from
casting a vote on this proposal. The option receiving the most
votes (not including “abstain” votes) will be the
option chosen by shareholders.
The Board has determined that an annual advisory vote on the
compensation of our Named Executive Officers will allow our
shareholders to provide timely, direct input on our compensation
philosophy, policies and practices as disclosed in our proxy
statement each year. The Board believes that an annual vote is
therefore consistent with our efforts to engage in an ongoing
dialogue with our shareholders on the compensation of our Named
Executive Officers and other corporate governance matters. The
Company, however, recognizes that shareholders may have different
views as to the best approach, and therefore we look forward to
hearing from our shareholders as to their preferences on the
frequency of advisory votes on the compensation of our Named
Executive Officers.
Accordingly, at the 2017 Annual meeting, you will vote on the
following resolution:
“RESOLVED that the stockholders recommend, on a non-binding
advisory basis, whether a non-binding advisory vote to approve the
compensation of this corporation’s named executive officers
should occur every one, two or three years.”
This vote is advisory, which means that it is not binding on us,
the Board or its Compensation and Leadership Development Committee.
The Board may decide that it is in the best interests of our
shareholders to hold an advisory vote on the compensation of our
Named Executive Officers more or less frequently than the frequency
receiving the most votes cast by our shareholders at the 2017
Annual Meeting. The Board and its Compensation and Leadership
Development Committee, however, value the views of our shareholders
and will take into account the outcome of the vote when considering
the frequency of future advisory votes on the compensation of our
Named Executive Officers.
Required Vote
The enclosed proxy card enables a shareholder to vote “1
Year,” “2 Years,” “3 Years” or
“ABSTAIN” on this Proposal 5. The choice receiving the
largest number of affirmative votes cast, whether or not a majority
of the votes has been cast for such choice at the 2017 Annual
Meeting, will be the election on Proposal 5 and the frequency of
advisory votes on the compensation of our Named Executive Officers
chosen by our shareholders. Abstentions and broker non-votes, if
any, will not constitute votes cast on Proposal 5 and will
accordingly have no effect on the outcome of the vote on this
proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU USE THE PROXY CARD TO
VOTE “FOR” THE OPTION OF “ONE YEAR” AS THE
PREFERRED FREQUENCY FOR ADVISORY VOTES ON THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS.
39
EXECUTIVE
OFFICERS
Our executive officers are, or were during 2016, the following
individuals: Karen Colonias, our President and Chief Executive
Officer; Brian J. Magstadt, age 49, our Chief Financial Officer,
Treasurer and Secretary; Jeffrey E. Mackenzie, age 55, our Vice
President; Sunny H. Leung, age 44, our Vice President; Roger
Dankel, age 53, and Ricardo M. Arevalo, age 60, the President of
North American Sales and the Chief Operating Officer, respectively,
of Simpson Strong-Tie Company Inc., our subsidiary. We regard Mr.
Dankel and Mr. Arevalo, as executive officers, because they perform
management policy-making functions for us. Our executive officers
from time to time may serve as directors or officers of our
subsidiaries.
Executive Officers
Qualifications and Biographical Information
Please refer to the “
Board Nominee and
Director Qualifications and Biographical Information
”
above for qualifications and biographical Information with respect
to our President and Chief Executive Officer,
Karen Colonias
.
Brian J. Magstadt
has served as our Chief Financial Officer,
Treasurer and Secretary since January 2012. He joined Simpson
Manufacturing Co., Inc. in 2004 as Financial Reporting Specialist,
and, from 2008 until 2012, served as our Financial Reporting
Manager, overseeing our external reporting program and managing
various other accounting and finance functions. He is a licensed
CPA and holds a Bachelor of Science degree in Business
Administration from California State University, Chico, and a
Masters of Business Administration degree from Santa Clara
University.
Roger Dankel
has been the President of North American Sales
of our subsidiary, Simpson Strong-Tie Company Inc. since July 2014.
He has been employed with us since 1993 as a Field Sales
Representative until 1997, when he was promoted to Sales Manager in
McKinney, Texas, and then Branch Sales Manager in charge of all
sales functions of that branch. He has successfully integrated
multiple new products, both acquired and internally developed, into
Simpson Strong-Tie’s product lines. Mr. Dankel holds a
Bachelor of Science degree in Business Administration from Millsaps
College. As a result of foreclosure proceedings related to a real
estate investment, brought by Wells Fargo Bank, N.A., Mr. Dankel
filed a Chapter 7 bankruptcy petition on June 27, 2013, in the
United States Bankruptcy Court for the Eastern District of Texas.
The court granted a discharge of debtor on October 1, 2013.
Ricardo M. Arevalo
has been the Chief Operating Officer of
our subsidiary, Simpson Strong-Tie Company Inc., since July 2014.
Mr. Arevalo began his career with us in 1999 at the Simpson
Strong-Tie branch in Brea, California, as a Field Sales Engineer
for the Wood Strong-Wall. From 2002 to 2008, he served as Simpson
Strong-Tie’s Branch Engineering Manager for the Southwest
United States. In 2008, he was promoted to Simpson
Strong-Tie’s Vice President of Engineering, and in that
capacity he organized and managed the support structure for
multiple engineering groups (Connectors, Lateral systems,
Fasteners, Anchors, FRP, RPS, Truss and Engineering Services),
standardized policies and modernized and expanded our research and
test capabilities. Mr. Arevalo is a licensed California structural
engineer and civil engineer, previously was a part-time lecturer in
timber design at California Polytechnic University at Pomona and is
the author of several publications on wood structures. He has
represented Simpson Strong-Tie on national television promoting
deck safety. He holds degrees from California Polytechnic
University at San Luis Obispo and the University of California at
Santa Barbara. Prior to joining Simpson Strong-Tie, he spent 19
years in private practice as a structural engineer.
Jeffrey E. Mackenzie
has been our Vice President since
December 2008. He joined Simpson Manufacturing Co., Inc. in 1994
and from 2000 to 2008, served as our Financial Reporting Manager,
overseeing our external reporting program and managing various
other finance functions, including our equity-based compensation
programs. Prior to joining us, he worked for Deloitte & Touche,
LLP as a Senior Accountant in San Francisco, California. He is a
member of the board of directors of The First Tee of the
Tri-Valley, a non-profit organization serving the local community.
Mr. Mackenzie is a licensed CPA (currently inactive) and holds a
Bachelor of Science degree in Business Administration from
California State University, San Diego, and a Master of Business
Administration degree from Santa Clara University. Mr. Mackenzie
has notified us that he has decided to retire as Vice President of
the Company as of April 1, 2017.
40
Sunny H. Leung
has been our Vice President since January
2016. He joined Simpson Manufacturing Co., Inc. in 2001 and served
in several tax related roles including Senior Tax Specialist, Tax
Manager and Tax Director. Mr. Leung is responsible for overseeing
our tax operations in provision, compliance and planning functions.
Prior to joining us, he worked for PricewaterhouseCoopers, LLP as a
Tax Manager in Toronto, Canada, and San Francisco, California. Mr.
Leung is a licensed CPA and a licensed attorney (New York). He
holds a Bachelor of Business Administration degree from the
University of Wisconsin-Madison, a Juris Doctor degree from the
University of Maine, a Master of Public Administration degree from
Harvard University and a Certificate from the International Tax
Program at Harvard Law School.
41
EXECUTIVE COMPENSATION
DISCUSSION AND ANALYSIS
This Executive Compensation Discussion and Analysis explains our
executive compensation program design and how it applies to our
Named Executive Officers (“NEOs”). During 2016, our
NEOs were the following individuals:
|
|
|
Karen Colonias
|
|
President and CEO
|
Brian J. Magstadt
|
|
CFO, Treasurer and Secretary
|
Roger Dankel
|
|
President of North American Sales, Simpson
Strong-Tie Company Inc.
|
Ricardo M. Arevalo
|
|
Chief Operating Officer, Simpson Strong-Tie
Company Inc.
|
Jeffrey E. Mackenzie
{1}
|
|
Vice President
|
Our NEOs are at-will employees, and we do not have a written
employment agreement with any of them. We or the officer can
terminate the employment relationship at any time, for any reason,
with or without cause.
EXECUTIVE COMPENSATION
SUMMARY
Board Responsiveness to Shareholders
Following our 2016 annual meeting of shareholders where our
advisory vote on executive compensation received 58% shareholder
support, the Board undertook a fulsome review of our compensation
program with the support of an independent compensation consultant,
Mercer LLC (“Mercer”), and conducted extensive
shareholder outreach to ensure investor feedback was fully
represented in the review.
Our shareholder engagement efforts were led by the Board and senior
management. The Chairman of the Board and one or more members of
the Compensation and Leadership Development Committee (the
“CLDC”) participated in all such discussions with
shareholders to ensure a direct line of communication between the
Board and our shareholders. As part of our shareholder outreach, we
invited dialogue and feedback from holders of a majority of shares
of our common stock outstanding. These conversations facilitated
direct feedback from shareholders on our compensation program, our
governance practices and changes under consideration, all of which
was promptly relayed to the full Board and incorporated into our
2016 governance and compensation program reviews.
In direct response to shareholder feedback, the Board approved
significant changes to and a major overhaul of our executive
compensation practices that are discussed under “
Shareholder Feedback
and Compensation Program Changes
” below.
2016 Performance Highlights
The Company, through its
subsidiaries, designs, engineers, and manufactures structural
construction products, including connectors, truss plates, anchors,
fasteners and other products, and differentiates itself from
competitors by designing and marketing end-to-end wood and concrete
construction product lines. The Company also provides engineering
services in support of some of its products and increasingly offers
design and other software that facilitates the specification,
selection and use of its products. The Company believes that the
Simpson Strong-Tie brand benefits from strong brand name
recognition among architects and engineers who frequently request
the use of the Company’s products.
The nature of our industry demands that we adhere to a focused
strategy to build shareholder long-term value over time. During
2016 our management team continued to execute against the strategic
goals set by the Board, which resulted in increases in net sales,
income from operations and net income for our shareholders. Key
2016 performance highlights compared to 2015 are set forth
below:
•
Company-wide net sales increased 8.4% to $860.7 million;
•
Gross profit increased 14.9% to $412.5 million; gross margin
increased to 48% from 45%;
•
Income from operations increased 27.9% to $139.5 million;
•
Operating margins increased to 16.2% from 13.7%; and
•
Diluted net income per share of our common stock increased 34.8% to
$1.86.
42
Our management’s focused execution and continued commitment
to a disciplined capital allocation strategy has delivered strong
results for our shareholders in 2016, including the following
achievements:
We also outperformed both the S&P 500 and Dow Jones U.S.
Building Materials & Fixtures Index in terms of total
shareholder returns (“TSR”) delivered to our
shareholders in 2016.
*
The Simpson Compensation Peer Group line represents a peer group
index calculated based on 2016 weighted average TSR of our updated
peer group. See “
Comparative Market
Information
” below for the composition of our updated
peer group.
Shareholder Feedback and Compensation Program Changes
After a comprehensive review of our executive compensation
practices, directly in response to feedback received from our
shareholders, in 2016 the Board approved a wholesale transformation
of our executive compensation programs. The Board believes that the
changes made to our executive compensation programs closely align
our management’s incentive programs with long-term
shareholder value and the Company’s strategic goals by:
•
Benchmarking all elements of our executive compensation to target
median pay for median performance based on our peer group;
•
Extending the performance period of our NEOs’ long-term
equity awards;
•
Revising all outstanding CEO & CFO performance-based equity
awards to be fully at-risk and contingent on achievement of
performance metrics;
43
•
Reducing the proportion of compensation delivered through our
short-term Executive Officer Cash Profit Sharing
(“EOCPS”) program;
•
Adding full-year performance measurement into the EOCPS
program;
•
Establishing distinct performance metrics for our NEOs’
short-term EOCPS awards and long-term equity awards; and aligning
such metrics with our strategy and priorities.
In addition to the changes made to the compensation program, the
Board also approved a number of policy changes in 2016 in order to
enhance our compensation governance practices, including:
•
Adopting a robust claw-back policy; and
•
Adopting a robust anti-hedging and anti-pledging policy.
The table below summarizes the shareholder feedback received on our
compensation program, the specific changes the Board has made or
plans to make in response, and when each of the changes were or
will be implemented.
Implementation of Compensation Program Changes
Due to the number of changes to both our short-term EOCPS program
and long-term equity incentive plan (“LTIP”), there
will be a period of transition. The following chart illustrates the
evolution of our CEO’s key compensation elements and the
timing of when the changes that were approved in 2016 will be
implemented. As illustrated below, significant changes occurred
during 2016 and all changes will be fully implemented by fiscal
year 2018, if not earlier.
44
The CLDC has been very focused on ensuring these changes were
implemented as soon as practical. To effect immediate change, the
2016 long-term equity awards granted to our CEO and CFO in the form
of performance-based restricted stock units (“PSUs”)
were modified in order to subject such awards to the 2017 new
performance metrics (revenue growth and ROIC) and the three-year
performance measure period illustrated above.
Metric Selection to Align Incentive Programs with Our Strategic
Goals
A key element of the Board’s compensation program review
focused on the selection of performance metrics that (1) reflect
our long-term strategic goals set by the Board and (2)
appropriately incentivize our executives to deliver sustainable
performance across key areas.
|
|
|
|
|
|
Alignment with Our Strategy
|
EOCPS
|
|
Short-term Operating Profit
|
|
•
•
•
|
|
Is a key measure of our profitability
Supports long-term value creation
Maintains our long-standing culture of promoting
sense of ownership among employees to deliver shareholder
value
|
|
|
|
|
|
|
|
PSUs
|
|
3-year Revenue Growth
|
|
•
•
|
|
Aligns with our ongoing focus on growing
revenues across key business segments
Facilitates decisions that will drive
sustainable revenue growth
|
|
|
|
|
|
|
|
|
|
3-year ROIC
|
|
•
•
|
|
Reinforces our ongoing focus on maximizing our
investment returns
Prompts thoughtful capital allocation
strategy
|
Targeting Peer Group Median
The overarching goal of our compensation program is to attract,
motivate and retain our employees, including our management team,
with a compensation structure that establishes a strong sense of
ownership and closely aligns our executives’ interests with
those of our shareholders. Given the unique nature of our EOCPS
program, this incentive historically provided the opportunity to
earn levels of compensation above our peer group median. To offset
the magnitude of the potential EOCPS upside, the CEO’s salary
was benchmarked to the lower 25
th
percentile of our peer
45
group. In response to shareholder feedback, and to better align
with the market standard, the CLDC in 2017 revised our pay
positioning philosophy to target median pay for median performance
across all compensation program elements. This change of practice
in targeting total NEO compensation to the median of our peer group
requires increasing NEO salaries that used to be below the peer
group median, while reducing EOCPS payouts. See “
Comparative Market
Information
” below for the composition of our updated
peer group.
Setting Performance Goals
The CLDC sets performance goals for our NEOs’ EOCPS and
long-term equity awards (such as PSUs) prior to granting such
awards and remains engaged to monitor and certify the achievement
of the goals.
The CLDC believes in the
importance of setting challenging, but achievable, performance
goals for our NEOs’ EOCPS and long-term equity awards and
using such goals to support our median pay for median performance
philosophy.
The CLDC engaged in a robust and collaborative performance goal
setting process with its independent compensation consultant and
our management. In establishing performance goals with respect to
our NEOs’ 2017 EOCPS and long-term equity awards, the CLDC
considered:
•
historical and future projected financial performance for our
updated peer group;
•
historical and future projected financial performance more broadly
in our industry;
•
the Company’s historical performance and multi-year
forward-looking business plans; and
•
the expectations of our shareholders.
In addition, before finalizing the performance goals, the CLDC
reviewed projections of realizable pay under our NEOs’ EOCPS
and long-term equity awards at various levels of potential
achievement of the performance goals to ensure that the actual
payouts to our NEOs and our actual performance over the relevant
performance periods are closely aligned.
After carefully evaluating the aforementioned factors and
incorporating inputs from its independent compensation consultant
and our management, the CLDC approved the performance goals for our
NEOs’ 2017 EOCPS and long-term equity awards, which are
discussed in more detail below under “
Executive
Compensation Analysis
.”
2016 CEO Compensation Summary
As in prior years, our CEO’s 2016 compensation was comprised
of three core components: (1) base salary, (2) EOCPS awards, and
(3) equity awards. These components are structured to complement
each other and establish a balanced and performance-based pay
structure. Our CEO’s 2016 compensation mix consisted of the
following:
1.
Base Salary:
$371,316, reflecting a 3% increase from 2015;
2.
EOCPS Awards:
$1,860,346, reflecting a payout of approximately 110% of the target
2016 EOCPS award ($1,697,000), which payout was determined based on
(1) the achievement of our 2016 operating profit goals and (2) the
CLDC’s application of discretion to reduce our CEO’s
2016 EOCPS awards by $800,000 in order to improve pay and
performance alignment with the peer group; and
3.
Equity Awards:
$1,781,207 (valued as of the grant date), an increase in grant date
value from 2015 to reflect the incorporation of the new performance
metrics and longer performance period, with 50% of the equity
awards being time-based restricted stock units (“RSUs”)
and the other 50% being PSUs.
o
The performance metrics of our CEO’s 2016 PSU awards were
adjusted following the first year of the performance period to
replace the TSR modifier with the new performance metrics (revenue
growth and return on invested capital (“ROIC”)) for the
remaining two years (see “
Changes to Our
CEO’s and CFO’s 2016 PSU Awards
”
below).
o
Our CEO’s adjusted 2016 PSU awards are fully at-risk and will
vest only on achievement of performance metrics in 2017-2018
performance period. Such awards will be forfeited if threshold
performance goals are not met. In contrast, prior to the 2017
adjustment, the target shares under her 2016 PSU awards would only
be modified +/-20% before vesting.
46
Please refer to the “
Summary Compensation
Table
” below for a complete disclosure of our
CEO’s 2016 total compensation. Our other NEOs’ 2016
compensation was similarly comprised of the same three core
components. See “
Executive
Compensation Analysis
” below.
2017 CEO Compensation Updates
As discussed in “
Shareholder Feedback
and Compensation Program Changes
” above, to better
align our NEOs’ short- and long-term incentives with our
strategic objectives, the Board, based on the CLDC’s
recommendation, has approved certain updates to the compensatory
arrangements for our NEOs. The Board believes that, with these
updates, median Company performance will result in median
compensation for our NEOs and above median performance will result
in above median compensation. Because our CEO’s salary has
historically been targeted to well below the median of our peer
group while her EOCPS awards were targeted above such median, to
reflect the transition to targeting each component of her
compensation to the median of our peer groups, our CEO’s 2017
compensation reflects an adjustment of these elements.
Our CEO’s 2017 target compensation mix consists of the
following:
1.
Base Salary:
increased to $740,000;
2.
EOCPS Awards:
target annual EOCPS awards reduced to $740,000 and actual EOCPS
awards capped at two times the target awards; and
3.
Equity Awards:
50% comprised of PSUs with a three-year performance period and the
other 50% comprised of RSUs.
o
Our CEO’s 2017 PSU awards are fully at-risk and will vest
only on achievement of performance metrics in the 2017-2019
performance period. Such awards will be forfeited if threshold
performance goals are not met.
o
The CLDC used a formula based on our 2016 net sales to calculate
the number of target shares under her 2017 PSU awards.
o
The CLDC exercised its discretion to reduce the number of target
shares under our CEO’s 2017 PSU awards by 28% in order to
improve pay and performance alignment with the peer group.
Our CEO’s 2016 compensation mix and 2017 target compensation
mix (as updated) are set forth below:
Similar updates have been introduced to our other NEOs’ 2017
compensation. See “
Executive
Compensation Analysis
” below.
Key
Compensation Practices
We are committed to maintaining strong compensation governance
practices that support our pay for performance philosophy, mitigate
risk, and align interests of our executives and our shareholders.
Below is a summary of our key compensation governance practices
following the 2017 compensation program changes.
P
Target Median Pay for
Median Performance:
We revised our benchmarking practices to
target the 50
th
percentile of our peer group for median Company performance.
47
P
Pay for
Performance:
We have created an incentive structure that
places a significant portion of our NEOs’ target compensation
at risk based on our long-term performance.
P
Annual Review of NEO
Compensation:
The CLDC conducts annual evaluations of our
NEOs’ compensation.
P
Cap on Annual EOCPS
Awards:
Following shareholder approval of the proposed plan
amendments at the 2017 Annual Meeting, our NEOs’ annual EOCPS
awards will be capped at 2 times the target awards.
P
Lengthened EOCPS
Performance Period:
Transitioned from a quarterly
measurement period to a mix of annual (50%) and quarterly
measurements (50%).
P
No overlapping
metrics:
Performance metrics in the EOCPS plan and LTIP are
different.
P
Double Trigger
change-in-control provisions:
Maintain double trigger
change-in-control requirements on equity awards.
P
Claw-back policy:
In 2016, we adopted a robust compensation recovery policy.
P
Stock ownership
guidelines:
Stock ownership guidelines in place for all
NEOs.
P
Robust Hedging and
Pledging Policies
: In 2016, we adopted robust hedging and
pledging policies.
P
Limited
perquisites:
We do not provide NEOs with material
perquisites.
P
No guaranteed
bonuses:
Our NEOs’ EOCPS awards are 100%
performance-based and do not guarantee any minimum payments.
P
Independent Compensation
Consultant:
Retained Mercer, an independent compensation
consultant, to provide strategic guidance to the CLDC regarding
executive and director compensation.
48
EXECUTIVE COMPENSATION
ANALYSIS
Executive Compensation
Philosophy
Our overall philosophy is to align the interests of employees and
shareholders and provide employees, including our management,
incentives to increase long-term shareholder value. To motivate and
retain our NEOs and other officers and employees, we aim to
compensate them fairly relative to our performance. To achieve
these objectives, we created compensation programs that reward
achievement of specific performance goals, such as operating
profit, revenue growth and return on investment goals and the
efficient use of assets. We believe that our compensation programs
allow us to attract high-performing employees and help us retain
the services of employees whose contributions are instrumental in
achieving our performance goals.
Beginning with 2017, the CLDC approved a change to our pay
positioning philosophy to position our NEOs’ total target
compensation to the median of our peers. The transition to
targeting the median of our peer group reflects the feedback of our
shareholders and the CLDC believes this pay positioning strategy
supports our guiding principal of pay for performance alignment. We
regularly review and refine our executive compensation programs to
ensure that they continue to reflect practices and policies that
are aligned with our pay-for-performance philosophy and the
interest of our shareholders.
Compensation-Setting
Process
Role of Compensation Committee, Board and Management
The CLDC develops and updates our compensation policies, oversees
our compensation programs, sets performance goals relevant to such
programs, evaluates our performance in light of such goals, and
determines and exercises discretion over executive compensation,
including reviewing and approving annual compensation to our NEOs.
The CLDC does not delegate its role in determining executive
compensation. Our officers do, however, participate in our annual
budgeting process, which forms the basis for the CLDC’s
determination of the pre-determined performance goals under our
compensation programs. The Board reviews and approves the annual
budget, and based on that, the CLDC approves both cash EOCPS
payouts and equity-based awards to our NEOs.
Role of Compensation Consultants
The CLDC has engaged and expects to continue to engage independent
advisers, including compensation consultants, from time to time to
assist in carrying out its responsibilities. Since 2014, the CLDC
has engaged Mercer as its compensation consultant to provide
strategic guidance to the CLDC regarding executive and director
compensation. Specific services provided by Mercer to us in 2016
included, but were not limited to, identification of an updated
industry peer group and benchmarking analysis, assessment of the
appropriateness and competitiveness of our executive compensation
program as compared to those of the selected industry peer group,
recommendation of changes to our executive compensation programs,
especially our NEOs’ compensation mix, and evaluation of our
executive and director compensation.
Compensation Program
Elements
The Board believes that, to maintain a sense of unity and fairness,
the forms of compensation for our NEOs generally should match those
of our other employees. Under this principle, our compensation
programs for a large portion of our salaried employees, including
our NEOs, comprise 3 basic elements:
•
Base salaries and contributions to profit sharing trust
accounts;
•
Cash profit sharing awards, including cash profit sharing awards to
our executive officers (“EOCPS awards”); and
•
Long-term equity awards.
Each element of our compensation programs possesses characteristics
intended to motivate our NEOs and other officers and employees in
different ways. We believe that coordinated compensation elements
work best to help us to retain their services and to motivate them
to achieve results that increase shareholder value. The following
is a summary of each of the basic elements of our compensation
programs.
49
Salaries
A NEO’s salary is a guaranteed minimum amount for his or her
time invested in performing the functions of the job. Salary alone,
however, does not provide performance opportunity for the NEO to
earn additional compensation, and at the same time, increase
shareholder value over the long term. The Board generally
determines our NEOs’ salaries using historical salary levels
for their respective positions and adjusts for changes in cost of
living and responsibilities. A study conducted by Mercer in 2016
confirmed that our NEOs’ 2016 and historical salaries were
below the 25
th
percentile within our peer group.
In 2017, the Board approved certain updates to our NEOs’
compensatory arrangements. As a part of our NEOs’ 2017
compensation updates and in response to a reduction in our
NEOs’ 2017 target and maximum EOCPS awards, the Board
approved a salary increase for each of our NEO’s. The table
below sets forth, for each of our NEOs, his or her respective 2017
annual salary, as increased from his or her 2016 salary:
|
|
|
|
|
Karen Colonias
President and Chief Executive Officer
|
|
$
|
371,316
|
|
$
|
740,000
|
|
|
|
|
|
|
|
Brian J. Magstadt
Chief Financial Officer, Treasurer and Secretary
|
|
$
|
258,157
|
|
$
|
500,000
|
|
|
|
|
|
|
|
Ricardo Arevalo
Chief Operating Officer, Simpson Strong-Tie Company Inc.
|
|
$
|
222,789
|
|
$
|
460,000
|
|
|
|
|
|
|
|
Roger Dankel
President of North American Sales, Simpson Strong-Tie Company
Inc.
|
|
$
|
222,789
|
|
$
|
460,000
|
|
|
|
|
|
|
|
Jeffrey E. Mackenzie
Vice President
|
|
$
|
192,903
|
|
$
|
350,000
|
Salaries paid to each of our NEOs with respect to each of the three
years ended December 31, 2016 are set forth in the
“
Summary Compensation
Table
” below.
The increased 2017 salary for each of the NEOs is part of a change
in the mix of compensation (see “
Targeting Peer Group
Median
” above). On the one hand, there is an increase
in such fixed components (salary and, as discussed below, profit
sharing trust contribution), and on the other hand, there is a
reduction in the 2017 target and maximum EOCPS awards for each of
our NEOs under our Executive Officer Cash Profit Sharing Plan (see
“
Cash Profit Sharing
Awards
” below). This arrangement, along with the
updated 2017 equity awards in the form of restricted stock units to
be issued under the Company’s equity incentive plan, is
intended to balance both short- and long-term incentives for our
NEOs.
Profit Sharing Trust
Contributions
The Company and its U.S. subsidiaries maintain a defined
contribution profit sharing trust plan for U.S.-based employees,
including our NEOs. Some of our non-U.S. subsidiaries maintain
similar plans for their employees. An employee is eligible for
participation in a given calendar year if he or she is an employee
on the first and last days of that year and completes the minimum
service requirement during that year. As of December 31, 2016, the
minimum service requirement was at least 1,000 hours of service. We
currently make contributions to employees’ profit sharing
trust accounts in amounts equal to 7% of the employees’
qualifying salaries. We contribute an additional 3% of their
qualifying salaries or wages to their profit sharing trust accounts
each quarter to comply with the safe-harbor rules that govern the
plan. The safe-harbor contribution is not forfeitable and is fully
vested when the contribution is made. The plan limits trust
contributions to amounts deductible for federal income tax purposes
under section 404(a) of Internal Revenue Code of 1986, as amended
(the “Internal Revenue Code”). Under this plan, other
than the 3% safe-harbor contribution, the Board has exclusive
discretion to authorize the trust contributions and change them at
any time. Subject to such discretion, we expect the current
profit-sharing-trust contribution rate to continue. Our CEO, CFO
and Vice President of Human Resources are currently trustees of the
profit sharing trust plan. In addition, all our employees,
including our NEOs, are entitled to proportionate shares of
forfeited contributions from employees who terminate their
employment before contributions made for them fully vesting in the
profit sharing trust plan. The profit sharing trust plan also
includes a 401(k) feature that allows our employees, including our
NEOs, to contribute their own pre-tax
50
earnings in addition to the amounts that we contribute to their
accounts. The Board generally views compensation through
contributions to employees’ profit sharing trust accounts as
serving a similar objective as salaries.
In 2017, the Board has approved certain updates to our NEOs’
compensatory arrangements, which are not expected to materially
change our contributions to our NEOs’ profit sharing trust
accounts with respect to 2017. The table below sets forth, for each
of our NEOs, the contribution that we expect to make to his or her
respective profit sharing trust account with respect to 2017, as
increased from his or her 2016 profit sharing trust
contribution:
|
|
2016
Profit
Sharing Trust
Contribution
|
|
Estimated 2017
Profit Sharing
Trust
Contribution
{1}
|
Karen Colonias
President and Chief Executive Officer
|
|
$
|
27,044
|
|
$
|
27,000
|
|
|
|
|
|
|
|
Brian J. Magstadt
Chief Financial Officer, Treasurer and Secretary
|
|
$
|
25,748
|
|
$
|
27,000
|
|
|
|
|
|
|
|
Ricardo Arevalo
Chief Operating Officer, Simpson Strong-Tie Company Inc.
|
|
$
|
22,220
|
|
$
|
27,000
|
|
|
|
|
|
|
|
Roger Dankel
President of North American Sales, Simpson Strong-Tie Company
Inc.
|
|
$
|
22,220
|
|
$
|
27,000
|
|
|
|
|
|
|
|
Jeffrey E. Mackenzie
Vice President
|
|
$
|
19,240
|
|
$
|
27,000
|
Payments made to each of our NEOs’ profit sharing trust
account with respect to each of the three years ended December 31,
2016 are set forth in the “
Summary Compensation
Table
” below as part of the “All Other
Compensation.”
Executive Officer Cash
Profit Sharing (EOCPS) Awards
The Board believes that consistent achievement of short-term
performance goals is likely to result in long-term growth and
increased shareholder value. Our employees, including our NEOs, are
motivated to achieve these short-term performance goals by target
awards under our cash profit sharing plans, including our Executive
Officer Cash Profit Sharing Plan (the “EOCPS Plan”) for
our executive officers and our cash profit sharing plan for other
qualified employees. The Board believes that both plans have
significantly contributed to the growth of our business.
The EOCPS Plan is maintained partially to help us to meet the
requirements of Internal Revenue Code section 162(m) for us to
fully deduct the cash awards granted to our NEOs in excess of the
$1,000,000 limit as “strategic compensation”
thereunder. While the Company generally intends that awards under
the EOCPS Plan comply with the requirements of Internal Revenue
Code section 162(m), we do not, and cannot, make any representation
or warranty that any such award will qualify for favorable tax
treatment under Internal Revenue Code or any other provision of
federal, state, local or foreign law, and we explicitly reserve the
right to issue EOCPS awards not in compliance with Internal Revenue
Code section 162(m).
The Board has delegated the oversight of the EOCPS Plan to the
CLDC. The CLDC administers such plans, measures the Company or its
subsidiaries’ performance against the pre-determined
performance goals and approves the amount of the payout that each
of our NEOs may receive. The CLDC generally bases the determination
of an EOCPS award to a covered officer under the EOCPS Plan on his
or her applicable individual percentage of the amount (each, a
“Qualified Amount”) by which the net profit, operating
income or any other performance goal of the Company or the
employee’s relevant branch or subsidiary, including Simpson
Strong-Tie Company Inc., the primary operating
51
subsidiary of the Company, for the applicable period exceed a
qualifying level for the Company, branch or subsidiary for that
same period, a threshold that must be exceeded before the award may
be made to the officer.
2016 Achievements and Awards under the EOCPS Plan
Actual awards under the EOCPS Plan will be made only if the
pre-determined performance goals are met. Under the EOCPS Plan,
through 2016, we paid quarterly incentive compensation out of the
portion of our profits that exceeded a specified qualifying level.
The table below sets forth the actual 2016 full-year qualified
operating profit, the actual 2016 full-year qualifying level and
actual awards that each of our NEOs earned for the full year of
2016 under the EOCPS Plan, in comparison with the target annual
operating profit, the target qualified operating profit, the target
qualifying level and the target annual payout set by the CLDC at
the beginning of 2016.
|
|
|
|
|
|
|
Qualified
Operating
Profit
|
|
|
|
|
|
Qualified
Operating
Profit
|
|
|
|
|
Karen
Colonias
|
|
$
|
152,406,000
|
|
$
|
75,780,000
|
|
$
|
1,697,000
|
|
$
|
208,362,000
|
|
$
|
73,917,000
|
|
$
|
1,860,346
|
{3
}
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
J. Magstadt
|
|
|
152,406,000
|
|
|
75,780,000
|
|
|
499,000
|
|
|
208,362,000
|
|
|
73,917,000
|
|
|
788,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger
Dankel
|
|
|
152,406,000
|
|
|
75,780,000
|
|
|
470,000
|
|
|
208,362,000
|
|
|
73,917,000
|
|
|
741,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo
M. Arevalo
|
|
|
152,406,000
|
|
|
75,780,000
|
|
|
470,000
|
|
|
208,362,000
|
|
|
73,917,000
|
|
|
741,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
E. Mackenzie
|
|
|
152,406,000
|
|
|
75,780,000
|
|
|
331,000
|
|
|
208,362,000
|
|
|
73,917,000
|
|
|
522,160
|
|
The basis for calculating the actual 2016 full-year qualified
operating profit and the actual 2016 full-year qualifying level
used in the table above is as follows:
|
|
|
|
|
|
Company
Qualifying
Income
|
|
Home
Office
Branch Level
Pool
|
First
|
|
$
|
41,519,000
|
|
$
|
16,667,000
|
|
$
|
24,852,000
|
|
$
|
43,000
|
Second
|
|
|
59,715,000
|
|
|
19,208,000
|
|
|
40,507,000
|
|
|
58,000
|
Third
|
|
|
65,781,000
|
|
|
19,108,000
|
|
|
46,673,000
|
|
|
65,000
|
Fourth
|
|
|
41,347,000
|
|
|
18,934,000
|
|
|
22,413,000
|
|
|
39,000
|
|
|
|
208,362,000
|
|
|
73,917,000
|
|
|
134,445,000
|
|
|
205,000
|
The payouts for each of our NEOs for each of the 4 quarters of 2016
were as follows:
|
|
|
|
Individual
Share of
Company
Qualifying
Income
($)
{1}
|
|
Rounding
Adjustments
($)
{2}
|
|
|
Karen
Colonias
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
1.9788
|
%
|
|
$
|
491,759
|
|
|
$
|
(9
|
)
|
|
$
|
491,750
|
Second
|
|
1.9788
|
%
|
|
|
501,532
|
{3}
|
|
|
7
|
|
|
|
501,539
|
Third
|
|
1.9788
|
%
|
|
|
423,562
|
{3}
|
|
|
(5
|
)
|
|
|
423,557
|
Fourth
|
|
1.9788
|
%
|
|
|
443,497
|
|
|
|
3
|
|
|
|
443,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,860,346
|
52
Other
Individual NEO/Quarter
|
|
|
|
Non-CEO
NEO Pool
(as a whole)
(%)
|
|
Individual
Share of
Company
Qualifying
Income
($)
{1}
|
|
Individual
Share of
Home Office
Branch
Level
Pool
($)
{2}
|
|
Rounding
Adjustments
($)
{3}
|
|
|
Brian
J. Magstadt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
0.5435
|
%
|
|
1.9264
|
%
|
|
$
|
135,081
|
|
$
|
12,133
|
|
$
|
(78
|
)
|
|
$
|
147,136
|
Second
|
|
0.5435
|
%
|
|
1.9264
|
%
|
|
|
220,172
|
|
|
16,365
|
|
|
(2
|
)
|
|
|
236,535
|
Third
|
|
0.5435
|
%
|
|
1.9264
|
%
|
|
|
253,692
|
|
|
18,340
|
|
|
(35
|
)
|
|
|
271,997
|
Fourth
|
|
0.5435
|
%
|
|
1.9264
|
%
|
|
|
121,824
|
|
|
11,004
|
|
|
(122
|
)
|
|
|
132,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
788,374
|
Roger
Dankel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
$
|
127,098
|
|
$
|
11,416
|
|
$
|
(73
|
)
|
|
$
|
138,441
|
Second
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
|
207,161
|
|
|
15,398
|
|
|
(2
|
)
|
|
|
222,557
|
Third
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
|
238,700
|
|
|
17,256
|
|
|
(34
|
)
|
|
|
255,922
|
Fourth
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
|
114,625
|
|
|
10,354
|
|
|
(114
|
)
|
|
|
124,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
741,785
|
Ricardo M. Arevalo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
$
|
127,098
|
|
$
|
11,416
|
|
$
|
(73
|
)
|
|
$
|
138,441
|
Second
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
|
207,161
|
|
|
15,398
|
|
|
(2
|
)
|
|
|
222,557
|
Third
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
|
238,700
|
|
|
17,256
|
|
|
(34
|
)
|
|
|
255,922
|
Fourth
|
|
0.5114
|
%
|
|
1.9264
|
%
|
|
|
114,625
|
|
|
10,354
|
|
|
(114
|
)
|
|
|
124,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
741,785
|
Jeffrey E. Mackenzie
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
0.3600
|
%
|
|
1.9264
|
%
|
|
$
|
89,467
|
|
$
|
8,036
|
|
$
|
(51
|
)
|
|
$
|
97,452
|
Second
|
|
0.3600
|
%
|
|
1.9264
|
%
|
|
|
145,825
|
|
|
10,839
|
|
|
(1
|
)
|
|
|
156,663
|
Third
|
|
0.3600
|
%
|
|
1.9264
|
%
|
|
|
168,026
|
|
|
12,147
|
|
|
(23
|
)
|
|
|
180,150
|
Fourth
|
|
0.3600
|
%
|
|
1.9264
|
%
|
|
|
80,687
|
|
|
7,288
|
|
|
(80
|
)
|
|
|
87,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
522,160
|
We compute the company qualifying income, if any, as the difference
between the actual operating profit and the actual qualifying
level. The company qualifying income is the basis for the
computation of amounts available to be distributed under both our
EOCPS Plan and our Cash Profit Sharing Plan for other qualified
employees. The CLDC allocates such amounts among different profit
sharing pools and decides such pools’ percentages based on
historical information about the profitability of each of our
operating units in order to correspond to the effort put forth and
the results achieved by different participants to our cash profit
sharing program. The CLDC may adjust the pools and their
percentages from time to time so that our cash profit sharing
programs will continue to create equitable results for all
participants, including our NEOs.
53
A portion of the company qualifying income is shared with our home
office employees, including our NEOs but excluding our Chief
Executive Officer, in consideration for their contributions to the
success of the home office operating unit. These branch-level
amounts are added to determine the total amounts paid to our NEOs
under our EOCPS Plan.
We then allocated the profit sharing pool(s) among our NEOs based
on their participating percentages as approved by the CLDC at the
beginning of the year. Each NEO’s participating percentage is
decided based on the officer’s level of responsibility and
contribution to the success of the Company or the home office
operating unit. Unless the composition or responsibilities of our
NEOs change, their participating percentages generally do not
change substantially from year to year, although the CLDC has
discretion to make any changes that it considers appropriate.
For 2016, we divided the
profit sharing pool with respect to the company-level qualifying
income under our EOCPS Plan, which was 3.9052% of the company
qualifying income, into (i) a pool for our Chief Executive Officer
(1.9788% of the 2016 company qualifying income), and (ii) a pool
for the other 4 NEOs (in total, 1.9264% of the 2016 company
qualifying income). Each of our NEOs received his or her share of
our 2016 company-level qualifying income.
The amounts of our home office
branch-level profit sharing pool for each of the four quarters of
2016 were $43 thousand, $58 thousand, $65 thousand and $39
thousand, respectively. Therefore, each of our NEOs, other than our
Chief Executive Officer, received additional home office
branch-level payouts for 2016.
CPS awards paid to each of our NEOs with respect to each of the
three years ended December 31, 2016 are set forth in the
“
Summary Compensation
Table
” below.
2017 EOCPS Plan Amendments
As disclosed under Proposal 2 of this Proxy Statement, the Board,
in October 2016, approved amendments to the EOCPS Plan and proposed
such amendments to shareholders for approval at the 2017 Annual
Meeting. Subject to shareholders’ approval, instead of making
quarterly awards, the amended EOCPS Plan allows the CLDC to decide
when awards will be made to the covered employees thereunder with
respect to a fiscal year; provided that all awards with respect to
periods within a fiscal year will be paid by March of the
succeeding fiscal year.
Under the current EOCPS Plan, no award in excess of $2,500,000
could be paid to any covered officer with respect to any fiscal
year. The proposed amendments did not change this restriction and
they added a restriction that, with respect to a particular fiscal
year, no award in excess of two times any covered officer’s
target annual payout for that year will be paid to such officer
under the EOCPS Plan. When assessing whether the $2,500,000 cap
and/or the two-times cap under the amended EOCPS Plan have been
crossed, all awards made to a covered employee with respect to
periods within the same fiscal year will be calculated
together.
If shareholders approve the proposed EOCPS Plan Amendments at the
2017 Annual Meeting, the amended EOCPS Plan will apply to awards to
be made after the end of 2016. The Company expects to make the
first award under the amended EOCPS Plan after the first quarter of
2017. In the event that shareholders do not approve the proposed
EOCPS Plan Amendments at the 2017 Annual Meeting, the
Company’s current EOCPS Plan, last amended on February 25,
2008, will continue in effect with respect to awards to be made
after the end of 2016.
2017 EOCPS Plan Implementation
Based on the flexibility provided by the proposed EOCPS Plan
Amendments, the CLDC has determined that, subject to the approval
of the proposed EOCPS Plan Amendments by shareholders, the 2017
awards under the EOCPS Plan will be made through five payments,
with each of the first four payments to be made quarterly and the
last payment to be made at the end of 2017 (or thereafter by March,
2018). For each of the four quarters in 2017, a NEO will receive
the awards based on 50% of his or her applicable individual
percentage of the respective quarterly Qualified Amount. As for the
last payment, the NEO will receive the awards based on 50% of his
or her applicable individual percentage of the annual Qualified
Amount for 2017.
The effect of this arrangement is to change the payout and timing
of our NEOs’ EOCPS awards from four payments per year (all
paid quarterly) to five payments per year (four paid quarterly and
one paid annually) and reduce the target amount of quarterly awards
(each reduced by half) and proportionately increase the target
amount of awards made following the end of the year (the target
annual award equaling the sum of the four target quarterly awards),
with the year-end awards contingent on achieving the Qualified
Amount for the entire year.
54
The CLDC has also determined to use 2017 qualified operating profit
of Simpson Strong-Tie Company Inc., the primary operating
subsidiary of the Company, as the performance goal for 2017. Such
performance goal uses the same methodology that was used in 2016
and prior fiscal years to measure Qualified Amounts under the EOCPS
Plan. Qualified operating profit of Simpson Strong-Tie Company Inc.
is generally calculated as follows:
Income from operations
Plus:
Stock compensation charges
Certain incentive compensation and commissions
Salaried pension contributions
Self-insured workers’ compensation costs
Equals:
Qualified
operating profit
The CLDC has established the 2017 annual qualifying level at
$130,000,000 and the 2017 quarterly qualifying level at $32,500,000
(one fourth of the annual qualifying level), respectively. Our
annual company-wide target qualified operating profit, qualifying
level and target cash profit sharing pool for 2017 are as
follows:
|
|
Company-Wide
2017 Target
Annual Pool
|
Target Qualified Operating Profit
|
|
$
|
228,800,000
|
Less: Qualifying Level
|
|
|
130,000,000
|
Target Cash Profit Sharing Pool
|
|
$
|
98,800,000
|
Assuming that the qualified operating profit exceeds the qualifying
level for each quarter of 2017, and therefore annually for the
entire year of 2017, each of our NEOs will receive 4 quarterly
payouts and 1 annual payout. If the qualified operating profit is
less than the qualifying level in one or more quarters of 2017, our
NEOs will receive no quarterly payments for such quarters. In
addition, if the qualified operating profit is less than the 2017
annual qualifying level, our NEOs will receive no annual payment
following the end of 2017 but may still receive one or more
quarterly payments during 2017.
The target annual amount and the maximum amount that may be paid
out under the amended EOCPS Plan to each of our NEOs for 2017 are
as follows:
|
|
2017
Target
Annual Payout
{1}
|
|
2017
Maximum
Annual Payout
|
Karen Colonias
|
|
$
|
740,000
|
|
$
|
1,480,000
|
Brian J. Magstadt
|
|
|
250,000
|
|
|
500,000
|
Ricardo Arevalo
|
|
|
230,000
|
|
|
460,000
|
Roger Dankel
|
|
|
230,000
|
|
|
460,000
|
Jeffrey E. Mackenzie
|
|
|
175,000
|
|
|
350,000
|
Long-Term Equity
Awards
Our NEOs’ long-term compensation is entirely equity-based. We
currently grant equity awards under the Company’s equity
incentive plan, the amended and restated 2011 Incentive Plan (the
“2011 Incentive Plan”), to our employees, including our
NEOs, only if our profitability goals were met for the prior year.
Going forward, we plan to replace such profitability metrics with
longer-term metrics in deciding equity grants to our NEOs and other
key employees.
2011 Incentive Plan
We awarded restricted stock units under our 2011 Incentive Plan
annually, usually in the first quarter, on the day that the CLDC
meets to approve the awards that employees earned by meeting our
profitability goals for the preceding fiscal year. In 2016, we
awarded 442,239 restricted stock units, excluding 10,800 restricted
stock units awarded to our outside directors, and no stock
options.
55
Under our 2011 Incentive Plan, the vesting of restricted stock
units may accelerate in two situations. First, when an employee
ceases employment with us upon his or her retirement depending on
whether the employee meets certain age and/or service tenure
conditions to the company, death or disability, all of the
employee’s unvested restricted stock units vest. Second, all
outstanding restricted stock units of an employee vest on a change
in our control that involves a substantial change in his or her
terms of employment or involuntary termination. In addition, the
CLDC may cause awards granted pursuant to our 2011 Incentive Plan,
including awards to our NEOs, to vest earlier in certain other
situations.
Our NEOs’ 2016 equity awards were made in the following two
forms:
1.
Time-based restricted stock units (“RSUs”) that vest in
equal installments over a period of years; and
2.
Performance-based restricted stock units (“PSUs”) that
vest based on the achievement of both revenue growth and long-term
shareholder returns at the end of a multi-year performance
period.
Our NEOs’ 2016 RSU Awards
On granting RSU awards, the CLDC established, and specified in the
grant agreement, the vesting schedule for the awards. The number of
shares of our common stock subject to RSU awards will generally
vest periodically in increments over years.
Because we achieved our operating profit goal for 2015
($145,145,000), in 2016 the CLDC granted each of our NEOs RSUs as
indicated below:
|
|
|
Karen Colonias
|
|
27,250
|
Brian J. Magstadt
|
|
11,350
|
Ricardo Arevalo
|
|
7,950
|
Roger Dankel
|
|
7,950
|
Jeffrey E. Mackenzie
|
|
1,720
|
With respect to our NEOs’ 2016 RSU awards, one fourth of the
shares of our common stock subject to the awards vested or will
vest on the award date and each of the first, second and third
anniversaries thereof. See “
Accelerated Vesting
and Payout
” and “
Potential Payments on
Termination or Change in Control
” below for a
discussion on early vesting of RSU awards.
Our NEOs’ 2016 PSU Awards
On granting PSU awards, the CLDC established, and specified in the
grant agreement, as applicable, the specific performance goals,
performance period, vesting period, the maximum number of shares of
our common stock granted thereunder and the target number of shares
of our common stock to be used as a benchmark. The PSU awards vest
only if specific performance goals (as established by the CLDC) are
achieved at the end of a performance period (also set by the CLDC).
The number of shares of our common stock that eventually vest,
however, will depend on the extent to which the performance goals
are achieved during the performance period. If threshold
performance goals are not met, no shares will vest in favor of the
recipient.
With respect to our NEOs’ 2016 PSU awards, depending on a
linear function of our company-wide 2015 net sales growth above
2014 net sales, the initial target number of shares would be
adjusted between 50% and 200% of the initial target shares. No
shares under our NEOs’ PSUs would vest if our 2015 net sales
growth was below 4.1%. If our 2015 net sales grew between 4.1% and
8.3%, the adjustment would be prorated. The adjustment was capped
at 200% even if our 2015 net sales grew more than 8.3% over
2014.
56
The threshold, initial target and capped number of shares with
respect to each of our NEOs’ 2016 PSUs are as follows:
|
|
|
|
|
|
|
|
|
Shares (50%)
(at 4.1%
Net Sales Growth)
|
|
Shares (100%)
(at 5.5%
Net Sales Growth)
|
|
Shares (200%)
(at or above 8.3%
Net Sales Growth)
|
Karen Colonias
|
|
13,265
|
|
27,250
|
|
54,500
|
Brian J. Magstadt
|
|
5,675
|
|
11,350
|
|
22,700
|
Ricardo Arevalo
|
|
3,975
|
|
7,950
|
|
15,900
|
Roger Dankel
|
|
3,975
|
|
7,950
|
|
15,900
|
Jeffrey E. Mackenzie
|
|
1,325
|
|
2,650
|
|
5,300
|
Because our 2015 net sales growth over 2014 was 5.6%, the CLDC
granted PSUs to each of our NEOs with respect to the adjusted
target shares as indicated below, which reflected a 2.6% upward
adjustment:
|
|
Adjusted Target Shares Under 2016 PSUs
|
Karen Colonias
|
|
27,960
|
Brian J. Magstadt
|
|
11,650
|
Ricardo Arevalo
|
|
8,160
|
Roger Dankel
|
|
8,160
|
Jeffrey E. Mackenzie
|
|
2,720
|
In addition, on granting our NEOs’ 2016 PSUs, the CLDC
established that the adjusted target shares would be further
modified up or down by up to 20% based our total shareholder return
(“TSR”) during a 3-year performance period (from
January 1, 2016 to December 31, 2018), which would be measured
based on our relative performance in the S&P Small Cap 600
Index. If the Company’s TSR ranks at or above the
85
th
percentile (with a ranking in the top 90 companies) in the index
during the performance period, the number of shares, that would
actually vest, is 120% of the adjusted target shares. If the
Company’s TSR ranks at or below the bottom 40
th
percentile (with a ranking below the top 360 companies) in the
index during the performance period, the number of shares, that
would actually vest, is 80% of the adjusted target shares. If the
Company’s TSR falls between the 40
th
percentile and the 50
th
percentile (with a ranking from the 301
st
company to the 360
th
company) in the index during the performance period, the number of
shares, that would actually vest, are prorated between 80% and 100%
of the adjusted target shares. If the Company’s TSR falls
between the 50
th
percentile and the 85
th
percentile (with a ranking from the 91
st
company to the 300
th
company) in the index during the performance period, the number of
shares, that would actually vest, are prorated between 100% and
120% of the adjusted target shares.
The adjusted target shares, the upward 20% TSR multiplier and the
maximum number of shares with respect to each of our NEOs’
2016 PSUs are as follows:
|
|
Maximum Shares Under 2016 PSUs
|
|
|
Adjusted Target PSU Shares
|
|
|
|
|
Karen Colonias
|
|
27,960
|
|
5,592
|
|
33,552
|
Brian J. Magstadt
|
|
11,650
|
|
2,330
|
|
13,980
|
Ricardo Arevalo
|
|
8,160
|
|
1,632
|
|
9,792
|
Roger Dankel
|
|
8,160
|
|
1,632
|
|
9,792
|
Jeffrey E. Mackenzie
|
|
2,720
|
|
544
|
|
3,264
|
57
Therefore, the maximum number of shares of our common stock that
could potentially vest under each of our NEOs’ 2016 RSUs and
2016 PSUs are as follows:
|
|
|
|
|
|
|
|
|
|
Karen Colonias
|
|
27,250
|
|
33,552
|
|
60,802
|
Brian J. Magstadt
|
|
11,350
|
|
13,980
|
|
25,330
|
Roger Dankel
|
|
7,950
|
|
9,792
|
|
17,742
|
Ricardo Arevalo
|
|
7,950
|
|
9,792
|
|
17,742
|
Jeffrey E. Mackenzie
|
|
1,720
|
|
3,264
|
|
4,984
|
Equity awards granted to each of our NEOs with respect to each of
the three years ended December 31, 2016 are set forth in the
“
Summary Compensation
Table
” below.
Pursuant to its broad discretion granted under the Company’s
equity incentive plan, the CLDC may change the performance goals
related to a PSU award to different performance goals as provided
under the incentive plan. The CLDC may also provide for fair-value
adjustments in case of changing the performance goals.
Changes to Our CEO’s and CFO’s 2016 PSU
Awards
At its meeting on October 19, 2016, the Board, at the
recommendation of the CLDC, authorized amending the agreements that
the Company entered into in 2016 with our CEO and CFO with respect
to their 2016 PSU awards (the “PSU Amendments”). These
amendments do not affect our CEO’s and CFO’s 2016 RSU
awards, which are expected to continue to vest over the three years
from the effective date of the award.
Pursuant to the PSU Amendments, our CEO’s and CFO’s
2016 PSU awards would be subject to the original performance goals,
which are based on total shareholder return (“TSR”) at
the Company (see “
Our NEOs’ 2016
PSU Awards
” above), only for a one-year period
starting on January 1, 2016 and ending on December 31, 2016 (the
“First Performance Period”), instead of the original
three-year period. As a result, under the 2016 PSU Amendments, the
adjusted target shares, calculated based on the achievement of the
2015 revenue goal for the Company, were further adjusted for the
accounting fair value of the TSR-based performance goals at the end
of 2016 to become the further adjusted target shares of our common
stock under the amended 2016 PSU awards for our CEO and CFO. The
PSU Amendments also provided that following the end of the First
Performance Period, the further adjusted target shares would be
subject to new performance goals to be determined by the CLDC and
would be measured against such goals for a two-year cliff-vesting
period starting on January 1, 2017 and ending on December 31, 2018
(the “Second Performance Period”).
On February 4, 2017, the CLDC set the new performance goals (the
“New Performance Goals”) for our CEO’s and
CFO’s 2016 PSU awards, which consist of one set of goals
based on the Company’s revenue growth (the “Revenue
Growth Goals”) and another set of goals based on the
Company’s return on invested capital (the “ROIC
Goals”). The CLDC also determined that, during the Second
Performance Period, half of our CEO’s and CFO’s 2016
PSU awards would be measured against the Revenue Growth Goals and
the other half would be measured against the ROIC Goals. As a
result, the number of shares of our common stock, which would vest
in favor of our CEO and CFO, following the end of 2018, is between
0% and 120% of the further adjusted target shares, depending on the
extent to which the New Performance Goals will have been achieved
at the end of 2018.
58
The chart below summarizes the changes made to our CEO’s and
CFO’s 2016 PSU awards by PSU Amendments:
The number of the further adjusted target shares of our common
stock and the maximum amount of shares of our common stock that
could potentially vest under each of our CEO’s and
CFO’s amended 2016 PSU awards is as follows:
|
|
Adjusted Target Shares
Under
Amended
2016 PSU
Awards
{1}
|
|
Maximum
Shares Under
Amended 2016
PSU Awards
|
Karen Colonias
|
|
28,990
|
|
34,788
|
Brian J. Magstadt
|
|
12,080
|
|
14,496
|
Therefore, the maximum number of shares of our common stock that
could potentially vest under each of our CEO’s and
CFO’s 2016 RSUs (see “
Our NEOs’ 2016
RSU Awards
” above) and updated 2016 PSUs are as
follows:
|
|
|
|
|
|
|
|
|
|
Karen Colonias
|
|
27,250
|
|
34,788
|
|
62,038
|
Brian J. Magstadt
|
|
11,350
|
|
14,496
|
|
25,846
|
Our NEOs’ 2017 RSU Awards
Because we achieved our operating profit goals for 2016
($152,406,000), in February 2017, the CLDC granted each of our NEOs
RSUs as indicated below:
|
|
|
Karen Colonias
|
|
24,900
|
Brian J. Magstadt
|
|
10,375
|
Ricardo Arevalo
|
|
7,260
|
Roger Dankel
|
|
7,260
|
Jeffrey E. Mackenzie
|
|
1,720
|
With respect to our NEOs’ 2017 RSU awards, one fourth of the
shares of our common stock subject to the awards vested or will
vest on the award date and each of the first, second and third
anniversaries thereof. See “
Accelerated Vesting
and Payout
” and “
Potential Payments on
Termination or Change in Control
” below for a
discussion on early vesting of RSU awards.
Our NEOs’ 2017 PSU Awards
On February 4, 2017, the CLDC set the new performance goals for our
NEOs’ 2017 PSU awards, which would be measured against such
goals for a three-year cliff-vesting period starting on January 1,
2017, and ending on
59
December 31, 2019 (the “Performance Period”). These
goals are the same type of new performance goals applicable to our
CEO’s and CFO’s amended 2016 PSU awards. The CLDC also
determined that, during the Performance Period, half of the 2017
PSU awards to be granted to each of our NEOs would be measured
against the Revenue Growth Goals and the other half would be
measured against the ROIC Goals (see “
Changes to Our
NEOs’ 2016 PSU Awards
” above). The chart below
summarizes the updated performance goals of our NEOs’ 2017
PSU awards.
Consequently, the number of PSU shares that would vest in favor of
a NEO under his or her 2017 PSU awards, following the end of the
Performance Period, is between 0% and 120% of his or her adjusted
target shares, depending on the extent to which the New Performance
Goals would have been achieved at the end of 2019. The 2017 PSU
awards were granted to our NEOs in early 2017. The number of the
adjusted target shares of our common stock and the maximum amount
of shares of common stock that could potentially vest under the
2017 PSU awards granted to each of our NEOs is as follows:
|
|
Adjusted Target
PSU Shares
Under 2017
PSU Awards
{1}
|
|
Maximum PSU Shares
Under 2017
PSU Awards
{2}
|
Karen Colonias
{3}
|
|
35,874
|
|
43,048
|
Brian J. Magstadt
|
|
20,781
|
|
24,937
|
Ricardo Arevalo
|
|
14,541
|
|
17,449
|
Roger Dankel
|
|
14,541
|
|
17,449
|
Jeffrey E. Mackenzie
|
|
4,586
|
|
5,503
|
Therefore, the maximum number of shares of our common stock that
could potentially vest under each of our NEOs’ 2017 RSUs and
2017 PSUs are as follows:
|
|
|
|
|
|
|
|
|
|
Karen Colonias
|
|
24,900
|
|
43,048
|
|
67,948
|
Brian J. Magstadt
|
|
10,375
|
|
24,937
|
|
35,312
|
Roger Dankel
|
|
7,260
|
|
17,449
|
|
24,709
|
Ricardo Arevalo
|
|
7,260
|
|
17,449
|
|
24,709
|
Jeffrey E. Mackenzie
|
|
1,720
|
|
5,503
|
|
7,223
|
60
Changes to Our NEOs’ Equity Grant Agreements
On February 4, 2017, the CLDC approved changes to the grant
agreements related to our NEOs’ 2017 PSU awards and 2017 RSU
awards and the amendments related to our CEO’s and
CFO’s 2016 PSU awards. The changes mainly focus on two
aspects: (a) accelerated vesting and payout, and (b) change in
control or asset sale.
Accelerated Vesting and Payout
Under our NEOs’ 2016 and prior grant agreements, our
NEOs’ PSU or RSU awards may vest, subject to any applicable
performance goals, before the applicable vesting period expires if
a recipient retires after reaching age 65, dies or becomes
disabled. To increase the compatibility of the awards with the
Internal Revenue Code section 409A and avoid potential negative tax
implications for the recipient and the Company, the new grant
agreements for RSU awards provide that, in case the awards vest
ahead of schedule and are determined by the CLDC to be subject to
section 409A, they may only be paid out in the enumerated
situations as allowed under section 409A. In particular, in case a
recipient is a specified employee under Section 409A, the awards
cannot be paid out until the date that is six months after the
employee’s separation of service, which generally is when the
employee completely stops working for the Company and its
subsidiaries. Similarly, the new grant agreements and amendments
for PSU awards provide that, irrespective of when the PSU awards
vest, they may only be paid out following the last day of the
applicable vesting period after the performance period has
concluded and subject to achievement of the applicable performance
goals. Further, the new grant agreements and amendments require
that the PSU shares that could eventually become payable in favor
of the recipient following the last day of the applicable vesting
period after the performance period be prorated based on the
early-vesting date and the date when the applicable vesting period
is scheduled to expire.
In addition, while still providing for early vesting in case of
death or disability, the new grant agreements and amendments
require that, for the PSU or RSU awards to vest ahead of schedule,
instead of retiring at age 65, a recipient may retire at age 55 and
after having worked at the Company or its subsidiaries for 15 years
(but for each year that the recipient delays his or her retirement
after reaching age 55, he or she may work one year less and still
retire).
Change in Control or Asset Sale
The Company’s equity incentive plan currently provides that,
on a change in control, if the surviving or resulting entity
refuses to continue the PSU or RSU awards and does not substitute
similar awards, and if the nature and terms of employment or
engagement, including compensation and benefits, of a recipient
will change significantly as a result of the change in control,
then the awards will vest ahead of schedule. Individual grant
agreements may alter this default arrangement.
Our NEOs’ 2016 grant agreements do not change the default
rule under the equity incentive plan, but additionally provide
that, in the case of an asset sale, the PSU or RSU awards will vest
ahead of schedule in certain situations, including where a
recipient is not subsequently employed or engaged by the surviving
or resulting entity or the successor to the sold business or there
is a significant change in the nature and terms of the subsequent
employment or engagement of the recipient.
For the ease of administration, our NEOs’ 2017 grant
agreements and our CEO’s and CFO’s 2016 grant agreement
amendments, use a broader definition, “sale event,” to
encompass both change-in-control and asset-sale situations, and
therefore override the Company’s equity incentive plan with
respect to any change in control of the Company affecting the
awards thereunder.
In addition, in order to provide a double-trigger mechanism as
recommended by proxy advisors, the new grant agreements and
amendments require that for the PSU or RSU awards to vest ahead of
schedule on a sale event, a NEO’s employment or engagement
with the Company and its subsidiaries (or the acquiring, surviving
or resulting entity) will first need to be terminated, either by
the officer for good reason or by his or her employer without cause
within 2 years from the sale event. In case of early vesting of the
PSU awards because of a sale event, the PSU shares thereunder will
be subject to the proration described in the “
Accelerated Vesting
and Payout
” section above.
See “
Potential Payments on
Termination or Change in Control
” below for a more
detailed discussion on early vesting of our NEOs’ PSU and RSU
awards.
61
Cap on Annual Awards under the Equity Incentive Plan
Under the Company’s equity incentive plan, the maximum
aggregate number of the shares underlying any and all RSU and PSU
awards issuable or deliverable to such officer in any calendar year
cannot exceed 100,000 shares. All of our NEOs’ 2016 and 2017
RSU and PSU awards are subject to this limitation.
Setting the Framework for Equity Awards in 2018 and
Beyond
In 2018 or any of the following years, the Company may continue to
grant RSUs or PSUs to its NEOs. Based on CLDC’s
recommendation, the Board currently plans to split the number of
the target shares of our common stock under equity awards to a NEO
in 2018 between 20% under RSU awards and 80% under PSU awards. The
RSU Awards are expected to vest over the three years from the
effective date of the award, with 20% of the awards expected to
vest after one year from the effective date of the award, 40% of
the awards expected to vest after two years from the effective date
of the award and 40% of the awards expected to vest after three
years from the effective date of the award. The PSU awards are
expected to be subject to future performance goals and be measured
against such goals for a three-year cliff-vesting period starting
on the first day of the fiscal year during which the awards are
made and ending on the last day of the third year.
Comparative Market
Information
Designation of New Peer Companies for Setting Executive
Compensation
In October 2016, after considering shareholder feedback,
Mercer’s advice, the latest guidelines from proxy advisors
and peer companies’ practices, among other considerations,
the Board, at the recommendation of the CLDC, authorized updating
the 14 peer group companies previously identified with a group of
17 companies for the purposes of setting suitable compensation for
our NEOs. The updated peer group companies include companies in the
building products or construction material industries having
revenues between $400 million and $1.9 billion in 2015, which are
approximately 0.4 to 2.5 times the Company’s 2015 revenue.
Those 17 companies and the Company, ranked based on their 2015
revenues, are set forth below:
|
|
2015
Revenues
(
in
thousands
)
|
|
2015
Assets
(
in
thousands
)
|
AAON, Inc.*
|
|
$
|
359,000
|
|
$
|
233,000
|
PGT Innovations, Inc.*
|
|
|
390,000
|
|
|
346,000
|
Continental Building Products, Inc.*
|
|
|
422,000
|
|
|
643,000
|
Trex Company, Inc.*
|
|
|
441,000
|
|
|
212,000
|
Insteel Industries, Inc.
|
|
|
448,000
|
|
|
260,000
|
Quanex Building Products Corp.
|
|
|
646,000
|
|
|
572,000
|
Simpson Manufacturing Co., Inc
.
|
|
|
794,000
|
|
|
961,000
|
American Woodmark Corp.
|
|
|
825,000
|
|
|
399,000
|
Headwaters Incorporated
|
|
|
895,000
|
|
|
979,000
|
Patrick Industries, Inc.
|
|
|
920,000
|
|
|
386,000
|
Apogee Enterprises, Inc.
|
|
|
934,000
|
|
|
612,000
|
U.S. Concrete, Inc.
|
|
|
975,000
|
|
|
688,000
|
Gibraltar Industries, Inc.
|
|
|
1,041,000
|
|
|
890,000
|
Eagle Materials Corp.
|
|
|
1,066,000
|
|
|
1,883,000
|
Summit Materials, LLC*
|
|
|
1,432,000
|
|
|
2,396,000
|
NCI Building Systems, Inc.
|
|
|
1,564,000
|
|
|
1,080,000
|
Ply Gem Holdings, Inc.
|
|
|
1,840,000
|
|
|
1,286,000
|
Masonite International Corp.
|
|
|
1,872,000
|
|
|
1,499,000
|
Mercer gathered data on the salary, bonus, total cash compensation,
long-term incentives and total direct compensation paid in 2015 by
the 17 peer group companies to support the CLDC’s
compensation decisions.
62
Other Compensation
Considerations and Practices
Stock Ownership Guidelines for NEOs
In February 2015, to strengthen alignment of interests of our
management and shareholders, the CLDC imposed robust stock
ownership guidelines for our NEOs. The guideline counts only common
stock owned by our NEOs and does not include their stock options or
RSUs. Each NEO has until 2020 to comply with his or her guideline.
The guideline for stock ownership for each of our NEOs is as
follows:
|
|
Stock
Ownership
Guideline
|
Karen Colonias
|
|
$
|
3,000,000
|
Brian J. Magstadt
|
|
|
700,000
|
Roger Dankel
|
|
|
700,000
|
Ricardo Arevalo
|
|
|
700,000
|
Jeffrey E. Mackenzie
|
|
|
150,000
|
In addition, all of our NEOs are subject to and currently in
compliance with our anti-hedging and anti-pledging policy, and are
subject to our compensation recovery policy, which policies are
described in detail below.
Board-Recommended Frequency of the Advisory Vote on NEO
Compensation
The Board has determined that an annual advisory vote by our
shareholders on the compensation of our NEOs allows our
shareholders to provide timely, direct input on our compensation
philosophy, policies and practices as disclosed in our proxy
statement each year. The Board continues to believe that such an
annual vote is consistent with our continuing efforts to engage in
an open dialogue with our shareholders on the compensation of our
NEOs and other corporate governance matters and therefore is in the
best interests of our shareholders.
Executive Compensation Recovery (“Claw-back”)
Policy
The Board believes that it is in the best interests of the Company
and shareholders to create and maintain a culture that emphasizes
integrity and accountability.
Reinforcing our pay-for-performance compensation philosophy, the
Board has adopted a compensation recovery policy in 2016 to permit
the recoupment of executive compensation. If we are required to
prepare an accounting restatement to correct one or more errors
that are material to those financial statements, the Company may
recover from (x) any current or former executive officers and (y)
any other employees who have been designated by the Board or the
CLDC as being subject to this policy (each of such officers or
employees, a “Covered Person”), regardless of fault or
responsibility, that portion of incentive-based compensation,
received by a Covered Person during any Covered Period (defined
below) in excess of what would have been paid to a Covered Person
during the Covered Period under the accounting restatement.
A Covered Period means (i) the three completed fiscal years
preceding the date on which the Company is required to prepare an
accounting restatement due to material noncompliance with any
financial reporting requirement under the securities law; and (ii)
in case the Company has changed its fiscal year end during the
three-year period, the transition period between the new fiscal
year that resulted from the change and the prior fiscal year not
exceeding nine months. The Board will decide the manner in which
the Company seeks and enforces recovery. If, after the Company
makes a reasonable attempt to recover, the Board determines that
the direct costs of seeking recovery would exceed the recoverable
amount, the Company may decide not to seek recovery.
Restrictions on Hedging and Pledging Arrangements for All Employees
and Directors
The Board believes that it is inappropriate and undesirable for the
Company’s directors, officers or employees to engage in
hedging or pledging transactions that lock in the value of holdings
in the equity securities of the Company or its affiliates,
including our common stock. Such transactions allow the insiders to
own the Company’s equity securities without the full risks
and rewards of ownership and potentially separate the
insiders’ interests from the public shareholders.
63
The Board has therefore adopted an anti-hedging and anti-pledging
policy in 2016. Directors, officers, and employees of the Company
or any subsidiary of the Company, as well as their designees, are
generally prohibited from: (a) purchasing any financial instruments
or engaging in any transactions that are designed to hedge or
offset or have the effect of hedging or offsetting any decrease in
the market value of our equity securities (such as our common
stock), including, without limitation, prepaid variable forward
contracts, equity swaps, collars, exchange funds and transactions
with economic consequences comparable to the foregoing financial
instruments; and (b) further pledging our equity securities as
collateral for a loan, purchasing such securities on margin, or
holding such securities in a margin account.
Material Risk
Considerations of Compensation Policies
We face various types of risk daily, including market risk, credit
risk and currency risk, as well as general business risk. Our
compensation programs generally look at longer time frames,
currently from one quarter to three or four years. Therefore, we do
not feel that they expose us to undue risk-taking. To successfully
compete in and expand our markets, however, some risk is
unavoidable and in some cases desirable and appropriate. See,
e.g.
, risks,
uncertainties and factors indicated in the Company’s Annual
Report to Shareholders on Form 10-K for the period ended December
31, 2016, under the heading Item 1A
—
“
Risk
Factors
” and the heading “
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
”
While our compensation programs reward our employees for time spent
at work and for the achievement of specific performance goals, we
also consider how and to what extent these programs encourage
risk-taking. We believe that our cash profit sharing and
equity-based awards promote a measured approach to areas of risk
that we face as an organization. While the overall objective of our
compensation programs is to increase shareholder value, we believe
they also encourage sound financial management and the safeguarding
of our assets. In addition, we believe our compensation programs
promote a sense of unity, fairness and cooperation among all of our
employees, not just our management, and afford less opportunity and
incentive for individual employees to take undue risk in an attempt
to increase their own compensation at the expense of the long-term
health of the Company.
Through our short-term cash profit sharing incentive plans,
including the EOCPS Plan, our NEOs and other employees are
encouraged to maximize our short-term profits, for example, by
increasing revenues and reducing operating costs. The qualifying
level component the EOCPS Plan is intended to reward prudent
stewardship of assets and sound allocation of resources. As
disclosed under Proposal 2 of this Proxy Statement, if the proposed
EOCPS Plan Amendments are approved by shareholders at the 2017
Annual Meeting, going forward, payouts under the EOCPS Plan will be
based 50% on quarterly operating profit and 50% on annual operating
profit. Accordingly, each of our NEOs will receive 4 quarterly
payouts and 1 annual payout. If the operating profit or other
performance goal is less than the qualifying level in one or more
quarters of any year, our NEOs will receive no quarterly payments
for such quarters. In addition, if the annual qualified operating
profit or other performance goal is less than the annual qualifying
level in a particular year, our NEOs will receive no annual payment
following the end of that year but may still receive one or more
quarterly payments during the year. We believe that these changes
to the EOCPS Plan reduce the risk that the quarterly time horizon
could potentially create opportunities for employees to maximize
income in one quarter at the expense of a future quarter.
We currently grant equity-based compensation under our equity
incentive plan to our employees, including our NEOs, only if our
profitability goals were met for the prior year. Going forward, we
plan to replace such profitability metrics with longer-term metrics
in deciding equity grants to our NEOs and other key employees, in
order to better counterbalance short-term performance goals under
the EOCPS Plan and promote a measured risk-taking.
After grant, our equity awards generally vest over a period of
years. The value of our equity-based compensation is therefore
affected by the long-term market price of our common stock over
time. As a result, any attempt to maximize short-term profits at
the expense of long-term financial health of the Company would work
against our employees’ incentive to maximize their total
compensation.
64
SUMMARY COMPENSATION
TABLE
The table below provides information on all compensation received
by our Named Executive Officers (“NEOs”)
—
our
Principal Executive Officer, our Principal Financial Officer and
our 3 other most highly compensated executive officers
—
from
us for all their services provided to us and our subsidiaries in
all capacities during the 3 years ended December 31, 2016.
Name
and Principal Position
|
|
|
|
|
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
{2}
|
|
All
Other
Compensation
($)
{3}
|
|
|
Karen Colonias,
|
|
2016
|
|
371,316
|
|
1,781,207
|
|
1,860,346
|
|
27,044
|
{4}
|
|
4,039,913
|
Our President and
|
|
2015
|
|
360,500
|
|
654,698
|
|
2,030,656
|
|
27,044
|
|
|
3,072,898
|
Chief Executive Officer
|
|
2014
|
|
350,000
|
|
715,896
|
|
1,968,953
|
|
27,158
|
|
|
3,062,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian J. Magstadt,
|
|
2016
|
|
258,157
|
|
742,038
|
|
788,374
|
|
26,331
|
{4}
|
|
1,814,900
|
Our Chief Financial
|
|
2015
|
|
250,637
|
|
271,095
|
|
557,798
|
|
26,580
|
|
|
1,106,110
|
Officer and Secretary
|
|
2014
|
|
243,337
|
|
296,464
|
|
540,850
|
|
25,532
|
|
|
1,106,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger Dankel,
|
|
2016
|
|
222,789
|
|
519,749
|
|
741,785
|
|
43,723
|
{4}
|
|
1,528,046
|
President of North
|
|
2015
|
|
216,300
|
|
110,569
|
|
524,835
|
|
64,274
|
|
|
915,978
|
American Sales of Simpson
|
|
2014
|
|
166,455
|
|
37,490
|
|
380,614
|
|
38,609
|
|
|
623,168
|
Simpson Strong-Tie Company Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo M. Arevalo,
|
|
2016
|
|
222,789
|
|
519,749
|
|
741,785
|
|
48,223
|
{4}
|
|
1,532,546
|
Chief Operating Officer of
|
|
2015
|
|
216,300
|
|
110,569
|
|
524,835
|
|
68,375
|
|
|
920,079
|
Simpson Strong-Tie Company Inc.
|
|
2014
|
|
191,276
|
|
229,015
|
|
369,085
|
|
119,152
|
|
|
908,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey E. Mackenzie,
|
|
2016
|
|
192,903
|
|
143,787
|
|
522,160
|
|
20,675
|
{4}
|
|
879,525
|
Our Vice President
|
|
2015
|
|
187,285
|
|
54,696
|
|
369,444
|
|
20,244
|
|
|
631,669
|
|
|
2014
|
|
181,830
|
|
56,072
|
|
358,218
|
|
19,639
|
|
|
615,759
|
65
|
|
Profit
sharing trust
contribution and
share of forfeitures
($)
|
|
Cost
of living
adjustment
($)
(#)
|
|
Charitable
gift
matching
contributions
($)
|
|
|
Karen
Colonias
|
|
27,044
|
|
|
|
|
|
27,044
|
Brian
J. Magstadt
|
|
26,331
|
|
|
|
|
|
26,331
|
Roger
Dankel
|
|
22,723
|
|
21,000
|
|
|
|
43,723
|
Ricardo
M. Arevalo
|
|
22,723
|
|
24,500
|
|
1,000
|
|
48,223
|
Jeffrey
E. Mackenzie
|
|
19,675
|
|
|
|
1,000
|
|
20,675
|
Grants of Plan-Based
Awards
The following table summarizes the cash awards granted to our NEOs
during 2016 under our Executive Officer Cash Profit Sharing Plan
(the “EOCPS Plan”) and the equity awards under our
current equity incentive plan, the amended and restated 2011
incentive plan (the “2011 Incentive Plan”). The
Compensation and Leadership Development Committee (the
“CLDC”) approved the cash awards because our 2016
quarterly operating profits exceeded the qualifying levels that the
CLDC had established at the beginning of 2016. The CLDC approved
the restricted stock unit awards because we achieved our 2015
profitability goals that the CLDC had approved at the beginning of
2015.
|
|
|
|
Estimated
Future Payouts Under
Non-Equity Incentive Plan Awards
{1}
|
|
Estimated
Future Payouts Under
Equity Incentive Plan Awards
{2}
|
|
All
other stock awards: Number of shares of stock or units
{3}
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards
{4}
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen
Colonias
|
|
|
|
|
__
|
|
1,697,000
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/01/16
|
{2}
|
|
|
|
|
|
|
|
22,368
|
|
27,960
|
|
33,552
|
|
|
|
$
|
917,927
|
|
|
02/01/16
|
{3}
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,250
|
|
$
|
863,280
|
Brian
J. Magstadt
|
|
|
|
|
__
|
|
499,000
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/01/16
|
{2}
|
|
|
|
|
|
|
|
9,320
|
|
11,650
|
|
13,980
|
|
|
|
$
|
382,470
|
|
|
02/01/16
|
{3}
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,350
|
|
$
|
359,568
|
Roger
Dankel
|
|
|
|
|
__
|
|
470,000
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/01/16
|
{2}
|
|
|
|
|
|
|
|
6,528
|
|
8,160
|
|
9,792
|
|
|
|
$
|
267,893
|
|
|
02/01/16
|
{3}
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,950
|
|
$
|
251,856
|
Ricardo
M. Arevalo
|
|
|
|
|
__
|
|
470,000
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/01/16
|
{2}
|
|
|
|
|
|
|
|
6,528
|
|
8,160
|
|
9,792
|
|
|
|
$
|
267,893
|
|
|
02/01/16
|
{3}
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,950
|
|
$
|
251,856
|
Jeffrey
E. Mackenzie
|
|
|
|
|
__
|
|
331,000
|
|
2,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/01/16
|
{2}
|
|
|
|
|
|
|
|
2,176
|
|
2,720
|
|
3,264
|
|
|
|
$
|
89,298
|
|
|
02/01/16
|
{3}
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,720
|
|
$
|
54,490
|
66
Outstanding Equity
Awards at Fiscal Year End
As of December 31, 2016, our NEOs held the following stock options
granted under our 1994 Stock Option Plan and restricted stock units
awarded under our 2011 Incentive Plan:
|
|
|
|
|
|
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Option
Exercise
Price ($)
|
|
|
|
Number
of
Shares or
Units of
Stock That
Have Not
Vested (#)
{1}
|
|
Market
Value of Shares or
Units of
Stock That
Have Not
Vested ($)
{4}
|
|
Equity
incentive plan awards:
Number of Shares or Units of Stock That Have Not Vested (#)
{5}
|
|
Equity
incentive plan awards:
Market Value of Shares or Units of Stock That Have Not Vested ($)
{4}
|
Karen
Colonias
|
|
2/6/2013
|
|
|
|
|
|
|
|
5,834
|
{2}
|
|
$
|
255,238
|
|
|
|
|
|
|
|
2/3/2014
|
|
|
|
|
|
|
|
21,960
|
{2}
|
|
$
|
960,750
|
|
|
|
|
|
|
|
2/2/2015
|
|
|
|
|
|
|
|
20,588
|
{2}
|
|
$
|
900,725
|
|
|
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
20,438
|
{3}
|
|
$
|
894,163
|
|
33,552
|
|
$
|
1,467,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian
J. Magstadt
|
|
2/6/2013
|
|
|
|
|
|
|
|
1,460
|
{2}
|
|
$
|
63,875
|
|
|
|
|
|
|
|
2/3/2014
|
|
|
|
|
|
|
|
9,094
|
{2}
|
|
$
|
397,863
|
|
|
|
|
|
|
|
2/2/2015
|
|
|
|
|
|
|
|
8,525
|
{2}
|
|
$
|
372,969
|
|
|
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
8,513
|
{3}
|
|
$
|
372,444
|
|
13,980
|
|
$
|
611,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger
Dankel
|
|
2/3/2014
|
|
4,000
|
|
29.66
|
|
2/2/2018
|
|
288
|
{3}
|
|
$
|
12,600
|
|
|
|
|
|
|
|
2/2/2015
|
|
|
|
|
|
|
|
3,477
|
{2}
|
|
$
|
152,119
|
|
|
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
5,963
|
{3}
|
|
$
|
260,881
|
|
9,792
|
|
$
|
428,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ricardo
M. Arevalo
|
|
2/3/2014
|
|
|
|
|
|
|
|
1,757
|
{3}
|
|
$
|
76,869
|
|
|
|
|
|
|
|
2/2/2015
|
|
|
|
|
|
|
|
3,477
|
{2}
|
|
$
|
152,119
|
|
|
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
5,963
|
{3}
|
|
$
|
260,881
|
|
9,792
|
|
$
|
428,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
E. Mackenzie
|
|
2/3/2014
|
|
|
|
|
|
|
|
430
|
{3}
|
|
$
|
18,813
|
|
|
|
|
|
|
|
2/2/2015
|
|
|
|
|
|
|
|
860
|
{3}
|
|
$
|
37,625
|
|
|
|
|
|
|
|
2/1/2016
|
|
|
|
|
|
|
|
1,290
|
{3}
|
|
$
|
56,438
|
|
3,264
|
|
$
|
142,800
|
67
Stock Option Exercises
and Stock Vested
The following table provides information on (i) the number of
shares of our common stock for which options granted to each of our
NEOs under our 1994 Stock Option Plan were exercised during 2016,
and (ii) the number of shares of our common stock that vested
during 2016 under restricted stock units granted to each of our
NEOs under our 2011 Incentive Plan:
|
|
|
|
|
|
|
Number
of Shares
Acquired on
Exercise (#)
|
|
Value
Realized on
Exercise ($)
|
|
Number
of Shares
Acquired on
Vesting (#)
|
|
Value
Realized on
Vesting ($)
{1}
|
Karen Colonias
|
|
—
|
|
—
|
|
24,311
|
|
787,843
|
Brian J. Magstadt
|
|
—
|
|
—
|
|
7,214
|
|
234,036
|
Roger Dankel
|
|
—
|
|
—
|
|
2,562
|
|
83,144
|
Ricardo M. Arevalo
|
|
—
|
|
—
|
|
5,675
|
|
182,346
|
Jeffrey E. Mackenzie
|
|
—
|
|
—
|
|
4,150
|
|
133,801
|
No Pension
Benefits
Except for a small number of employees in our recently acquired
Swiss subsidiary, we do not currently have or plan to adopt any
defined benefit deferred compensation programs, or supplemental
executive retirement plans.
No Non-Qualified
Deferred Compensation Plans
We do not currently maintain a non-qualified deferred compensation
plan.
Potential Payments on Termination or Change in Control
We generally do not offer any severance payments or pay benefits
after termination of employment. As discussed above under
“
Executive
Compensation Analysis — Long-Term Equity
Awards
,” the vesting of a NEO’s outstanding
stock options and restricted stock units, or a portion thereof, may
accelerate on, following or in connection with (i) retirement after
reaching certain age and/or service tenure conditions, (ii) death,
(iii) disability or (iv) certain situations linked to a change in
our control or our sale of asset. On, following or in connection
with the applicable NEO’s death, disability or retirement
after reaching certain age and/or service tenure conditions, or a
change in control
68
or asset sale related situation, in each case assumed to have
occurred on December 31, 2016, the potential payments that would be
provided to each of our NEOs are as follows:
|
|
Estimated Payments and Benefits Of Accelerated Stock
Options and Restricted Stock Units
In Connection
With
|
|
|
|
|
|
|
|
|
|
Karen Colonias
|
|
|
—
|
|
$
|
4,234,125
|
|
$
|
4,234,125
|
|
$
|
4,234,125
|
Brian J. Magstadt
|
|
|
—
|
|
$
|
1,716,838
|
|
$
|
1,716,838
|
|
$
|
1,716,838
|
Roger Dankel
|
|
|
—
|
|
$
|
782,600
|
|
$
|
782,600
|
|
$
|
782,600
|
Ricardo M. Arevalo
|
|
$
|
228,988
|
|
$
|
846,869
|
|
$
|
846,869
|
|
$
|
846,869
|
Jeffrey E. Mackenzie
|
|
|
—
|
|
$
|
231,875
|
|
$
|
231,875
|
|
$
|
231,875
|
Under our 2011 Incentive Plan, or the applicable grant agreement,
the vesting of our NEOs’ restricted stock unit awards may
accelerate in four situations: (1) retirement after meeting certain
age and/or service tenure conditions, (2) death, (3) disability,
and (4) certain situations linked to a change in our control or our
sale of asset.
Under our NEOs’ 2016 and prior grant agreements, the
applicable NEO’s PSU or RSU awards may vest before the
applicable vesting period expires if he or she retires after
reaching age 65, dies or becomes disabled. To increase the
compatibility of the awards with the Internal Revenue Code section
409A and avoid potential negative tax implications for the
recipient and the Company, our CEO’s and CFO’s revised
2016 grant agreements and all our NEOs’ 2017 grant agreements
provide that, in case the applicable NEO’s RSU awards vest
ahead of schedule and are determined by the CLDC to be subject to
section 409A, they may only be paid out in the enumerated
situations as allowed under section 409A. In particular, in case
the applicable NEO is a specified employee under section 409A, his
or her RSU awards cannot be paid out until the date that is six
months after the employee’s separation of service, which
generally is when the employee completely stops working for the
Company and its subsidiaries. Similarly, with respect to our
CEO’s and CFO’s revised 2016 PSU grants and all our
NEOs’ 2017 PSU grants, irrespective of when the PSU awards
vest, they may only be paid out following the last day of the
applicable vesting period after the performance-measurement period
has concluded.
In addition, while still providing for early vesting in case of
death or disability, our CEO’s and CFO’s revised 2016
grant agreements and all our NEOs’ 2017 grant agreements
require that, for the PSU or RSU awards to vest ahead of schedule,
instead of retiring at age 65, a NEO may retire at age 55, but only
after having worked at the Company or its subsidiaries for 15
years. For each year, however, that the recipient delays his or her
retirement after reaching age 55, he or she may work one year less
and still retire with accelerated vesting.
The 2011 Incentive Plan currently defines “change in
control” as any of the following transactions; (i) the
consummation of a consolidation or merger of the Company in which
the Company is not the surviving corporation; (ii) the consummation
of a reverse merger in which the Company is the surviving
corporation but the shares of our common stock outstanding
immediately preceding such reverse merger are converted by virtue
of such reverse merger into other property, whether securities,
cash or otherwise; or (iii) the approval by our shareholders of a
plan or proposal for the dissolution and liquidation of the
Company; provided that a “change in control” shall not
be deemed to have occurred by virtue of the consummation of any
transaction or series of related transactions immediately following
which the record holders of our common stock immediately before
such transaction or transactions continue to have substantially the
same proportionate ownership in an entity that owns all or
substantially all of the assets of the Company immediately
thereafter.
The 2011 Incentive Plan currently provides that on a change in
control, if the surviving or resulting entity refuses to continue
our NEOs’ PSU or RSU awards and does not substitute similar
awards, and if the nature and terms of employment or engagement,
including compensation and benefits, of the applicable NEO will
change significantly as a result of the change in control, then the
awards will vest ahead of schedule. The 2011 Incentive Plan,
however, allows individual grant agreements to alter this default
arrangement.
69
Our NEOs’ 2016 grant agreements do not change the default
rule under the 2011 Incentive Plan but additionally provide that,
in the case of an asset sale, the PSU or RSU awards will vest ahead
of schedule in certain situations, including where a recipient is
not subsequently employed or engaged by the surviving or resulting
entity or the successor to the business or there is a significant
change in the nature and terms of the subsequent employment or
engagement of the recipient.
Our CEO’s and CFO’s revised 2016 grant agreements and
all our NEOs’ 2017 grant agreements use a broader definition,
“sale event,” to encompass both change in control and
asset sale situations, and therefore override the 2011 Incentive
Plan with respect to any change in control of the Company affecting
the awards thereunder. To provide a double-trigger mechanism as
recommended by proxy advisors, under such grant agreements, for our
NEOs’ PSU or RSU awards to vest ahead of schedule upon a sale
event, the applicable NEO’s employment or engagement with the
Company and its subsidiaries (or the acquiring, surviving or
resulting entity) will first need to be terminated, either by the
officer for good reason or by his or her employer without cause
within 2 years from the sale event.
Our CEO’s and CFO’s revised 2016 grant agreements and
all our NEOs’ 2017 grant agreements use standard definitions
for what constitutes good reason or cause that can typically be
found in employment agreements. Under our CEO’s and
CFO’s revised 2016 grant agreements and all our NEOs’
2017 grant agreements, before a NEO may quit for good reason, he or
she will first need to provide written notice within 90 days of the
underlying incident and inform his or her employer about the
reason. In addition, the NEO has up to 30 days to cure following
such notice. Similarly, for the Company, a subsidiary thereof, or
the acquiring, surviving or resulting entity to terminate a
recipient with cause, which results in forfeiture of the
NEO’s PSU or RSU awards, the employer will need to provide
notice and the NEO has up to 15 days to cure.
In case of early vesting of our CEO’s and CFO’s 2016
PSU awards and our NEOs’ 2017 PSU awards in any one of the
four situations, shares thereunder that could eventually vest in
favor of the officer will be prorated based on the early-vesting
date and the date when the applicable vesting period is scheduled
to expire.
In addition, the CLDC may cause awards granted under our 2011
Incentive Plan, including awards granted to our NEOs, to vest
earlier in certain other situations.
70
DIRECTOR
COMPENSATION
The following table provides information on compensation paid to
our non-employee directors for the year ended December 31, 2016.
The amounts shown include compensation for all services provided to
us during 2016.
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
|
|
All
Other
Compensation
($)
{2}
|
|
|
James S. Andrasick
|
|
85,000
|
|
68,400
|
|
—
|
|
153,400
|
Jennifer A. Chatman
|
|
85,000
|
|
68,400
|
|
—
|
|
153,400
|
Gary M. Cusumano
|
|
93,000
|
|
68,400
|
|
—
|
|
161,400
|
Celeste Volz Ford
|
|
73,000
|
|
68,400
|
|
—
|
|
141,400
|
Peter N. Louras, Jr.
|
|
131,500
|
|
68,400
|
|
1,000
|
|
200,900
|
Robin G. MacGillivray
|
|
92,000
|
|
68,400
|
|
1,000
|
|
161,400
|
As of December 31, 2016, our outside directors held the following
stock options that had been granted under our 1995 Independent
Director Stock Option Plan and restricted stock units that had been
awarded under our 2011 Incentive Plan:
|
|
|
|
|
James S. Andrasick
|
|
—
|
|
1,070
|
Jennifer A. Chatman
|
|
5,000
|
|
1,070
|
Gary M. Cusumano
|
|
5,000
|
|
1,070
|
Celeste Volz Ford
|
|
—
|
|
713
|
Peter N. Louras, Jr.
|
|
—
|
|
1,070
|
Robin G. MacGillivray
|
|
5,000
|
|
1,070
|
We pay each of our non-employee directors an annual cash retainer
of $65,000. We pay the Chair of the Board an additional annual fee
of $56,500 and we pay the Chair of each of the Audit Committee, the
Compensation and Leadership Development Committee, the Acquisition
and Strategy Committee and the Governance and Nominating Committee
an additional annual fee of $10,000. The annual retainer is paid
quarterly and the fees for the Chair of the Board and each of its
committees are paid at the time of our annual meeting of
shareholders each year, and are not prorated. Outside directors
will also receive $2,000 for every day, in excess of 12 days during
a single calendar year, that a Board and/or committee meeting is
held. We also reimburse outside directors for expenses that they
incur to attend Board and committee meetings or to participate in
educational programs. We pay each outside director $3,000 per day
and reimburse his or her expenses when he or she visits our
facilities to observe operations.
Stock Ownership Guidelines for Outside Directors
In February 2015, the Compensation and Leadership Development
Committee created stock ownership guidelines for each of our
directors, who is not also an officer or employee. The guideline
counts only our common stock owned by them and does not include
their stock options or restricted stock units. Each of such
directors has until 2020 to comply with this guideline. The
guideline for the minimum value for stock ownership of the Company
for each of such directors is computed as 3 times their annual cash
retainer, which is currently $195,000. All of our directors are
currently in compliance with our stock ownership guidelines. In
addition, all of our directors are subject to and currently in
compliance with our anti-hedging and anti-pledging policy that was
adopted by the Board in 2016.
71
CERTAIN RELATIONSHIPS
AND RELATED PARTY TRANSACTIONS
Transactions with
Related Persons
Since January 1, 2016, other than the compensation arrangements
discussed under
“Executive
Compensation” and “Director Compensation”
above, we did not have any transactions to which we have been a
participant, in which the amount involved in the transaction
exceeds or will exceed $120,000 and in which any of our directors,
executive officers or holders of more than 5% of our common stock,
or any child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law of, or person (other than a tenant
or employee) sharing the household with, any of these individuals,
had or will have a direct or indirect material interest.
In 2016, the Company paid Tacit Knowledge, a consultant on a
software implementation project, $1.9 million for its services. The
project started in 2015 and is expected to be continuing in 2017.
Chris Andrasick, the Company’s Director James S.
Andrasick’s son, co-founded Tacit Knowledge in 2002. Tacit
Knowledge was sold to Newgistics, Inc. (“Newgistics”)
in 2013. Chris Andrasick was hired by Newgistics in 2013, as its
Chief Strategy and Innovation Officer for Digital Commerce, but has
had no financial interest in Tacit Knowledge since the 2013
acquisition, other than in his role as an officer of Newgistics.
The payments that the Company made to Tacit Knowledge in 2016 were
less than 0.5% of Newgistics’ consolidated gross revenues for
the fiscal year ended December 31, 2016. Our director Andrasick has
had no financial interest in Tacit Knowledge.
In 2016, Karen Colonias, the Company’s President, Chief
Executive Officer and Director, was named as a director of Reliance
Steel & Aluminum Co. (“Reliance”). Reliance,
through its subsidiaries, has been a provider of steel processing
and handling services for the Company for several years. In 2016,
the Company paid Reliance $0.7 million for its services. The
relationship between the Company and Reliance is expected to be
continuing in 2017. Pursuant to instructions to Item 404(a) of
Regulation S-K, we do not deem Ms. Colonias to have a direct or
indirect material interest in our relationship with Reliance solely
because of her position as a director of Reliance.
Review, Approval or
Ratification of Transactions with Related Persons
The entire Board is responsible for review, approval, and
ratification of transactions between the Company or its
subsidiaries and related persons. We adopted a written
related-parties policy and procedures that apply to any transaction
or series of transactions in which we or any of our subsidiaries is
a participant. In addition to “related persons” defined
in Item 404 of Regulation S-K, our related-parties policy and
procedures also cover (1) each company in which any of the related
persons has a substantial interest, and (2) any employer of any of
our Directors. In accordance with the adopted policy and
procedures, transactions involving related persons are generally
reviewed by our accounting staff, which determines whether a
related person could have a material interest in such a
transaction, and then each transaction identified by our accounting
staff is submitted to the Board for review. The Board will
determine whether or not a particular relationship serves the best
interest of the Company and its shareholders and whether the
relationship should be continued or eliminated. Our related-parties
policy and procedures have been and are followed with respect to
all transactions identified in the “
Transactions
with Related Persons
” above.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires our directors and
officers and persons who own more than 10% of our common stock to
file initial reports of ownership and reports of changes in
ownership of our common stock with the SEC. SEC regulations require
such persons to furnish us with copies of all section 16(a) reports
that they file. Based solely on our review of the copies of such
reports that we received and written representations from the
executive officers and directors, we believe that in 2016 our
directors and officers and 10% shareholders met all of the section
16(a) filing requirements regarding our common stock with the
following exceptions:
Sharon H. Simpson
|
|
Sold shares in three transactions in April of
2016 and was 2 days late filing her current report on Form
4.
|
Simpson PSB Fund
|
|
Sold shares in three transactions in April of
2016 and was 2 days late filing its current report on Form
4.
|
72
WHERE YOU CAN FIND MORE
INFORMATION
We are required to file
annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we
file at the SEC’s public reference room located at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
room. Our SEC filings are also available to the public at the
SEC’s website at
www.sec.gov
.
You also may obtain free copies of the documents we file with the
SEC by going to our website, the address of which is
http://www.simpsonmfg.com
.
The information provided on our website is not part of this Proxy
Statement, and therefore is not incorporated by
reference.
Shareholders may express their views regarding the topics raised in
this Proxy Statement or other matters directly to the Company
through written communications sent directly to the attention of
the Board, any individual director or the non-employee directors as
a group, by written communications addressed to our Secretary, at
Simpson Manufacturing Co., Inc., 5956 W. Las Positas Blvd.,
Pleasanton, California, 94588.
HOUSEHOLDING OF PROXY
MATERIALS
SEC rules permit companies and intermediaries such as brokers to
satisfy delivery requirements for proxy materials with respect to
two or more shareholders sharing the same address by delivering a
single copy of the proxy materials addressed to those shareholders.
This process, which is commonly referred to as
“householding,” provides cost savings for companies.
Some brokers household proxy materials, delivering a single proxy
statement and annual report to multiple shareholders sharing an
address unless contrary instructions have been received from the
affected shareholders. Once you have received notice from your
broker that they will be householding materials to your address,
householding will continue until you are notified otherwise or
until you revoke your consent. If, at any time, you no longer wish
to participate in householding and would prefer to receive a
separate proxy statement in the future, or if you and other
shareholders sharing your address are receiving multiple copies of
the proxy materials and you would like to receive only a single
copy of such materials in the future, please notify your broker.
You may also call (800) 542-1061 or write to: Householding
Department, Broadridge, 51 Mercedes Way, Edgewood, New York 11717,
and include your name, the name of your broker or other nominee,
and your account number(s). If you share an address with another
shareholder and have received only one set of this year’s
proxy materials and you wish to receive a separate copy, please
notify us in writing to our Secretary at Simpson Manufacturing Co.,
Inc., 5956 W. Las Positas Blvd., Pleasanton, California, 94588 and
we will deliver a separate copy to you promptly.
OTHER
BUSINESS
The Board is not aware of any matters that are expected to come
before the 2017 Annual Meeting other than those described in this
Proxy Statement. If any other matter should be presented at the
2017 Annual Meeting upon which a vote may be properly taken, shares
represented by all proxy cards received by the Board will be voted
with respect thereto at the discretion of the persons named as
proxies in the enclosed proxy card.
DISCLAIMER REGARDING
INCORPORATION BY REFERENCE OF THE REPORTS OF
THE AUDIT AND COMPENSATION AND LEADERSHIP DEVELOPMENT
COMMITTEES
ANY INFORMATION SHOWN IN THE SECTIONS ENTITLED “REPORT OF THE
AUDIT COMMITTEE” AND “REPORT OF THE COMPENSATION AND
LEADERSHIP DEVELOPMENT COMMITTEE” SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY
REFERENCE THIS PROXY STATEMENT INTO ANY FILING BY SIMPSON
MANUFACTURING CO., INC. WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT SIMPSON
MANUFACTURING CO., INC. INCORPORATES THE INFORMATION BY SPECIFIC
REFERENCE, AND SUCH INFORMATION SHALL NOT OTHERWISE BE DEEMED
“SOLICITING MATERIAL” OR “FILED” UNDER SUCH
ACTS.
73
SHAREHOLDER PROPOSALS
AND PROXY ACCESS NOTICES
Proposals of shareholders for inclusion in the Company’s
proxy statement for the 2018 annual meeting of shareholders
pursuant to Rule 14a-8 promulgated under the Securities Exchange
Act of 1934, as amended (“Rule 14a-8”) must satisfy the
requirements of Rule 14a-8 and be received by the Secretary,
Simpson Manufacturing Co., Inc., 5956 W. Las Positas Blvd.,
Pleasanton, California, 94588, no later than December 12, 2017.
Nominations for director elections (other than shareholder nominees
submitted for inclusion in the Company’s proxy materials
pursuant to the proxy access provision of our Bylaws) or other
business proposals that shareholders of the Company wish to put
before the shareholders of the Company at the 2018 annual meeting
of shareholders must meet the requirements of Article II, Section 5
of our Bylaws and must be received by the Secretary of the Company,
at the address stated above, not less than 75 days nor more than 90
days prior to the meeting. However, in the event that less than 85
days’ notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder
to be timely must be so received not later than the close of
business on the 10
th
day following the day on which such notice of the date of the 2018
annual meeting was mailed or such public disclosure was made.
Notices for submitting nominees
for election to the Board and being included in the Company’s
proxy materials for the 2018 annual meeting of shareholders
pursuant to the proxy access provision (Article II, Section 9) of
our Bylaws must meet the requirements thereunder and must be
received by the Secretary of the Company, at the address stated
above, not earlier than the close of business on November 12, 2017
nor later than the close of business on December 12, 2017;
provided, however, that in the event that the date of the 2018
annual meeting of shareholders is more than 30 days before or more
than 60 days after April 11, 2018, such notices must be so received
by our Secretary not earlier than the close of business on the
150
th
day prior to such annual meeting and not later than the close of
business on the later of the 120
th
day prior to such annual meeting or, if the first public
announcement of the date of such annual meeting is less than 100
days prior to the date of such annual meeting, the 10
th
day following the day on which public announcement of the date of
such meeting is first made by the Company.
BY ORDER OF THE BOARD
Brian J. Magstadt
Secretary
TO ASSURE THAT YOUR
SHARES ARE REPRESENTED AT THE MEETING, WE URGE YOU TO COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, OR VOTE BY TELEPHONE OR THE
INTERNET AS INSTRUCTED ON THE PROXY OR THE NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS
VOTED.
74
ANNUAL REPORT TO
SHAREHOLDERS ON FORM 10-K
UPON WRITTEN REQUEST TO
OUR SECRETARY, SENT TO:
SIMPSON MANUFACTURING
CO., INC.
5956 W. Las Positas
Blvd.
Pleasanton, California
94588
WE WILL PROVIDE YOU,
WITHOUT CHARGE, A COPY OF OUR ANNUAL REPORT TO SHAREHOLDERS ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016, INCLUDING THE
FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENTS SCHEDULES FILED
THEREWITH, ACCOMPANIED BY A LIST BRIEFLY DESCRIBING ALL THE
EXHIBITS NOT CONTAINED THEREIN. PROVISION OF SUCH EXHIBITS WILL BE
SUBJECT TO THE ADVANCE PAYMENT OF OUR REASONABLE EXPENSES IN
FURNISHING THE EXHIBITS.
75
EXHIBIT A
SIMPSON MANUFACTURING
CO., INC.
EXECUTIVE OFFICER CASH PROFIT SHARING PLAN
Adopted
on
January 14,
2003 and
Amended
first
amended
through February 25,
2008
(hereafter referred to as
the “Original Plan”), and subsequently amended through
October 19, 2016, and March 17, 2017 (hereafter referred to as this
“Plan”)
Purpose
The purpose of this Plan is to recognize outstanding effort and
achievement by executive officers of Simpson Manufacturing Co.,
Inc. and its subsidiaries (together, the “Company”).
The
This
Plan is intended to provide qualified
performance-based compensation in accordance with section 162(m) of
the Internal Revenue Code of 1986, as amended, and the regulations
and interpretations thereunder (the “Code”).
Committee
The
This
Plan shall be administered by a Compensation
Committee (the “Committee”) of the Board of Directors
of the Company. The Committee shall consist of at least two outside
directors of the Company who satisfy the requirements of Code
section 162(m). The Committee shall have the sole discretion and
authority to administer and interpret
the
this
Plan in
accordance with Code section 162(m).
Covered Employees
Any
This Plan applies to any
employee of the Company
treated as a “covered employee” pursuant to section
162(m) of the Code, as
amended and as
interpreted in
Treasury Regulations and notices or other rulings issued by the
Internal Revenue Service, and any other employee of the Company
designated by the Committee
.
(each, a “Covered
Employee”).
Payout Periods
The Committee, in its sole discretion, will determine the
particular periods during a fiscal year for which to make awards
under this Plan and may change such periods from one fiscal year to
another (each of the periods, a “Period”); provided,
however, that each Period shall be within that fiscal year and
shall not exceed 12 months.
Amount of Award
The Committee will determine the amount of the award that each
covered employee
Covered Employee
will be eligible to
receive under
the
this
Plan
for
each
fiscal
quarter.
Period.
Awards
for each Covered Employee
under this Plan
will be based on
a
an individual
percentage
(each, a “Measurement Percentage”)
of
the amount by which
the
net
profits
profit,
operating income or any other performance goal (each, a
“Performance Goal”)
of the Company or a branch or
subsidiary of the Company
(applicable to such employee)
for
a
fiscal quarter
Period
exceed a qualifying level
of net profits
for the Company or
such
the
employee’s relevant
branch or subsidiary, respectively,
for that
fiscal quarter. The results for each fiscal quarter
will be determined independently of the results for any other
fiscal quarter; profits or losses in one fiscal quarter will not be
used to calculate net profits in any subsequent fiscal quarter.
Period. For clarity,
The Committee shall set
the
standards
Committee, in its sole discretion, may make
awards
for
determining net profits, the qualifying levels
and the percentages of excess profits that covered employees are
eligible to receive with respect to a fiscal quarter, no later than
the latest time permitted by the Code for that fiscal quarter.
Qualifying levels will be based on the value of net operating
assets of the Company, the branch or the subsidiary, multiplied by
a rate of return on those assets. Individual percentages will be
based on job function.
any Period based on a Measurement
Percentage applicable to such Period, even if such Period overlaps
with one or more other Periods within the same fiscal year.
No award
A Performance Goal shall be determined by the Committee based on
one or more of (i) earnings; (ii) unit sales, sales volume or
revenue; (iii) sales growth; (iv) stock price (including comparison
with various stock market indices); (v) return on equity; (vi)
return on investment; (vii) total return to stockholders; (viii)
economic profit (including gross or net profit); (ix) debt rating;
(x) operating income; (xi) cash flows; (xii) cost targets; (xiii)
return on assets
A-1
or margins; or (xiv) implementation, completion or attainment of
measurable objectives with respect to (1) software development, (2)
new distribution channels, (3) customer growth targets, (4)
acquisition identification and integration, (5) manufacturing,
production or inventory targets, (6) new product introductions, (7)
product quality control, (8) accounting and reporting, (9)
recruiting and maintaining personnel, or (10) compliance or
regulatory program targets. Any criteria used as a Performance Goal
may be measured, as applicable, (a) in absolute terms, (b) in
relative terms (including but not limited to, the passage of time
or against other companies or financial metrics), (c) on a per
share basis, (d) against the performance of the Company as a whole
or against particular entities, segments, operating units or
products of the Company or (e) on a pre-tax or after tax
basis.
The Committee shall determine in writing the Performance Goal,
the qualifying level and the Covered Employees’ Measurement
Percentages with respect to a Period, no later than the latest time
permitted by the Code for that Period. Each Measurement Percentage
will be based on the respective Covered Employee’s
then-current job function.
For each fiscal year, the Committee shall set a targeted level
for the entire company, or the employee’s relevant branch or
subsidiary, respectively. A Covered Employee’s individual
percentage of the amount by which the annual targeted level exceeds
that year’s qualifying level is such officer’s targeted
annual compensation under this Plan (the “Targeted Annual
Payout”).
No award (when calculated together with any other awards made
with respect to Periods within the same fiscal year in which the
awards are earned)
in excess of $2,500,000 will be paid to any
covered
Covered Employee under this Plan in a fiscal year.
In addition, no award (when calculated together with any other
awards made with respect to Periods within the same fiscal year) in
excess of two times any Covered Employee’s Targeted Annual
Payout for a particular fiscal year will be paid to such
employee under this Plan
with respect to any fiscal year.
.
The Committee, in its sole discretion, may reduce or
eliminate
the
any
award to any
covered
employee
Covered Employee
in any
year
Period
. The reduction in the amount of an award
to any
covered employee
Covered Employee
shall not,
however, affect the amount of the award to any other
covered
employee.
Covered Employee.
Payment of Awards
Awards
Each award under this Plan
will be paid
quarterly, within five weeks of the last day
at the time
as determined by the Committee in its sole discretion (which time
will be specified in the respective award), provided, however, that
all awards under this Plan with respect to Periods within a
particular fiscal year shall be paid by March 15
of the
succeeding
fiscal
quarter.
year.
No
bonus
awards under this Plan
shall be paid unless and
until the Committee certifies in writing that the
performance
goals
Performance Goals
of
the
this
Plan are
satisfied.
No
covered employee
Covered Employee
is eligible to
receive an award under
the
this
Plan until he or she
works an entire
fiscal quarter
Period
for the Company.
Anyone who is terminated by the Company without cause, as
determined by the Committee in its sole discretion, dies, is on
disability or voluntarily quits the Company before the last day of
a
fiscal quarter
Period
, will be paid
following the
Period, upon the actual achievement of the Performance Goal,
on
a pro-rata basis for the days actually worked in that
fiscal
quarter
Period
.
Scope of
the
this Plan
Nothing in this Plan shall be construed as precluding or
prohibiting the Company from establishing or maintaining other
bonus or compensation arrangements, which may be applicable to all
employees and officers or applicable only to selected employees or
officers; provided, however, that an individual who receives an
award under this Plan with respect to a
fiscal
quarter
Period
shall not be permitted to participate in
any
other
cash
bonus arrangement or
cash bonus
plan of the Company for that
fiscal quarter
Period (other
than under this Plan)
that provides
cash
bonuses
similarly
calculated as
based on
a percentage of
profits
a financial reporting measure
in excess of a
qualifying level.
Amendment and Termination
The Company reserves the right to amend or terminate this Plan at
any time with respect to future services of
covered
employees.
Covered Employees. The Company will submit
Plan amendments
will require
for
stockholder approval
only
to the extent required by applicable law
.
or
to the extent necessary for awards under this Plan to be treated as
qualified performance-based compensation under Code section
162(m).
A-2
General
The establishment of
the
this
Plan shall not confer
any legal right on any
covered employee
Covered
Employee
or other person to continued employment, nor shall it
interfere with the right of the Company to discharge any
covered
employee
Covered Employee
and treat him or her without
regard to the effect that such treatment might have on him or her
as a participant in
the
this
Plan. The laws of the
State of California will govern any legal dispute involving
the
this
Plan.
No Funding
The Company shall not be required to fund or otherwise segregate
any cash or any other assets that may at any time be paid to
participants under
the
this
Plan.
The
This
Plan shall constitute an
“unfunded” plan of the Company. Neither the Company nor
the Committee shall, by any provision of
the
this
Plan, be deemed to be a trustee of any property, and any
obligations of the Company to any participant under
the
this
Plan shall be those of a debtor and any
rights of any participant or former participant shall be limited to
those of a general unsecured creditor.
Non-Transferability of Benefits and Interests
Except as expressly provided by the Committee, no benefit payable
under
the
this
Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any such attempted action shall be void.
No benefit payable under
the
this
Plan shall be in any
manner liable for or subject to debts, contracts, liabilities,
engagements or torts of any participant or former participant. This
section shall not apply to an assignment of a contingency or
payment due after the death of the
covered
employee
Covered Employee
to the deceased
covered
employee’s
Covered Employee’s
legal
representative or beneficiary.
Effective Date
Any of the awards made under the Original Plan, including the
awards with respect to any Period within 2016, irrespective of when
such awards are paid out, shall continue to be governed by the
Original Plan.
If the Company’s stockholders approve this Plan at the
Company’s 2017 annual meeting, this Plan shall be effective
as of January 1, 2017 and shall apply to (and the Original Plan
shall not apply to) any and all cash awards made by the Company to
any Covered Employee for any Period following 2016.
In the event that the Company’s stockholders do not
approve this Plan at the Company’s 2017 annual meeting, the
Original Plan shall continue in effect and shall apply to any and
all cash awards made by the Company to any Covered Employee for any
Period following 2016.
A-3