BMI DEF 14A
Badger Meter Inc (BMI)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |
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Filed by a Party other than the Registrant |
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Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under Rule 14a-12
(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 all boxes that apply):
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☐ Fee paid previously with preliminary materials.
☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - APRIL 25, 2025
The Annual Meeting of the Shareholders of Badger Meter, Inc. will be held at the Badger Meter headquarters in the Customer Experience Center, 4545 West Brown Deer Road, Milwaukee, Wisconsin on Friday, April 25, 2025, at 8:30 a.m. Central Time for the following purposes:
Our Board of Directors recommends a vote “FOR ALL NOMINEES" in Proposal 1, and “FOR” Proposals 2 and 3. The persons named as proxies will use their discretion to vote on other matters that may properly arise at the Annual Meeting.
Holders of record of our common stock at the close of business on February 28, 2025 are entitled to notice of and to vote at the meeting and any adjournments or postponements thereof. Shareholders are entitled to one vote per share.
By Order of the Board of Directors |
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William R. A. Bergum, |
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Secretary |
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March 17, 2025
We urge you to submit your proxy as soon as possible. If the records of our transfer agent, American Stock Transfer & Trust Company, LLC, show that you own shares in your name, or you own shares in our Dividend Reinvestment Plan, then you can submit your proxy for those shares via the Internet or by using a toll-free telephone number provided on the proxy card. Or you can mark your votes on the proxy card we have enclosed, sign and date it, and mail it in the postage-paid envelope we have provided. Instructions for using these convenient services are set forth on the proxy card. If your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, follow the directions given by the broker, nominee, fiduciary or other custodian regarding how to instruct them to vote your shares.
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on April 25, 2025
This Proxy Statement and our 2024 Annual Report on Form 10-K are available at
www.proxyvote.com
2025 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT TABLE OF CONTENTS
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Advisory Vote to Approve Compensation of Named Executive Officers |
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Ratification of Independent Registered Public Accounting Firm |
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BADGER METER, INC.
4545 West Brown Deer Road
Milwaukee, Wisconsin 53223
PROXY STATEMENT
To the Shareholders of BADGER METER, INC.
We are furnishing you with this Proxy Statement in connection with the solicitation of proxies by the Board of Directors (“Board”) of Badger Meter, Inc. (“company”) to be used at our Annual Meeting of Shareholders (the “Annual Meeting”), which will be held at the Badger Meter headquarters in the Customer Experience Center, 4545 West Brown Deer Road, Milwaukee, Wisconsin on Friday, April 25, 2025, at 8:30 a.m. Central Time and at any adjournment or postponement thereof.
If you execute a proxy, you retain the right to revoke it at any time before it is voted by giving written notice to us, by submitting a valid proxy bearing a later date or by voting your shares in person during the Annual Meeting. Unless you revoke your proxy, your shares will be voted at the Annual Meeting as you instructed in your proxy. Anyone who is a shareholder of record as of the close of business on February 28, 2025 (the “record date”) may attend the Annual Meeting and vote in person. If your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, you may not vote at the Annual Meeting unless you first obtain a proxy issued in your name from your broker, nominee, fiduciary or other custodian.
As of the record date, we had 29,410,868 shares of common stock, par value $1 per share, outstanding and entitled to vote. You are entitled to one vote for each of your shares of common stock.
If your shares are held in “street name” by a broker, nominee, fiduciary or other custodian, you will receive a full meeting package including a voting instruction form to vote your shares. Your broker, nominee, fiduciary or other custodian may permit you to vote by the Internet or by telephone. A broker non-vote occurs when your broker, nominee, fiduciary or other custodian submits a proxy card with respect to your shares, but declines to vote on a particular matter, either because such nominee elects not to exercise its discretionary authority to vote on the matter or does not have discretionary authority to vote on the matter. Your broker, nominee, fiduciary or other custodian has the authority under New York Stock Exchange (“NYSE”) rules to vote your unvoted shares on certain routine matters like the ratification of Ernst & Young LLP as the company’s independent registered public accounting firm for 2025, but not the election of directors or other proposals.
We commenced distribution of this Proxy Statement and accompanying form of proxy on or about March 17, 2025.
Note: Websites disclosed herein are not incorporated into the proxy statement by reference.
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NOMINATION AND ELECTION OF DIRECTORS
You and the other holders of the common stock are entitled to elect nine directors at the Annual Meeting. If you submit a proxy to us, it will be voted as you direct. If, however, you submit a proxy without specifying voting directions, it will be voted in favor of the election of each of the nine nominees for director identified below. If your shares are held in “street name” by your broker, nominee, fiduciary or other custodian, your broker, nominee, fiduciary or other custodian may only vote your shares with your specific voting instructions for the election of directors. Therefore, we urge you to respond to your brokerage firm so that your vote will be cast.
Directors will be elected by a plurality of votes cast at the Annual Meeting (assuming a quorum is present). If you do not vote your shares at the Annual Meeting, whether due to abstentions, broker non-votes or otherwise, and a quorum is present, it will have no impact on the election of directors. Once elected, a director serves for a one-year term or until his/her successor has been duly appointed, or until his/her death, resignation or removal.
If a director receives more “withheld” votes than “for” votes in an uncontested election, the current bylaws of the company state that director will tender his/her resignation to the Chairman of the Board of Directors following certification of the shareholder vote, and the Chairman will refer the resignation to the Board of Directors' Resignation Committee to consider whether or not to accept such resignation. Thereafter, the Board will disclose its decision regarding whether to accept the director’s resignation (or the reason(s) for rejecting the resignation) in a Current Report on Form 8-K furnished to the Securities and Exchange Commission (“SEC”).
The nominees of the Board of Directors for director, together with certain additional information concerning each such nominee, are identified below. All of the nominees are current directors of our company. If any nominee is unable or unwilling to serve, the named proxies have discretionary authority to select and vote for substitute nominees. The Board of Directors has no reason to believe that any of the nominees will be unable or unwilling to serve.
Nominees for Election to the Board of Directors
The Board of Directors currently consists of nine directors, all of whom will be standing for reelection. Proxies may not be voted for any individuals who are not nominees.
The following section provides information as of the date of this Proxy Statement about each of the nine nominees. The information presented includes information each director has given us about his/her age and other demographics, positions held, principal occupation, skills and business experience for the past five years, and the names of other publicly-held companies where he/she currently serves as a director or has served as a director during the past five years.
The information below presents each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he/she should serve as a director. We also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to the company and our Board.
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Summary Information for Board of Directors Candidates
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Todd A. Adams |
Kenneth C. Bockhorst |
Henry F. Brooks |
Melanie K. Cook |
Xia Liu |
James W. McGill |
Tessa M. Myers |
James F. Stern |
Glen E. Tellock |
Age |
54 |
52 |
65 |
52 |
55 |
69 |
49 |
62 |
64 |
Tenure (years) |
8 |
7 |
3 |
3 |
2 |
5 |
6 |
9 |
8 |
Independent |
Yes |
No |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Yes |
Gender |
M |
M |
M |
F |
F |
M |
F |
M |
M |
Diverse Race / Ethnicity |
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Other Public Co. Boards |
1 |
1 |
0 |
1 |
0 |
1 |
0 |
0 |
2 |
Meeting Attendance |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
100% |
Skills and Experience by Director
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Todd A. Adams |
Kenneth C. Bockhorst |
Henry F. Brooks |
Melanie K. Cook |
Xia Liu |
James W. McGill |
Tessa M. Myers |
James F. Stern |
Glen E. Tellock |
Executive Leadership |
☑ |
☑ |
☑ |
☑ |
☑ |
☑ |
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Finance / Accounting |
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Global Business |
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M&A |
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Utility / Water Sector |
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Sales & Marketing |
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Manufacturing Operations |
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Technology / Software |
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Legal / Risk / Governance |
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Detailed Information for Board of Directors Candidates
Pictured left to right, bottom row: Tessa M. Myers, Glen E. Tellock and Xia Liu; top row: Todd A. Adams, Henry F. Brooks, Melanie K. Cook, James F. Stern, Kenneth C. Bockhorst and James W. McGill
Name |
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Business Experience During Last Five Years |
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Todd A. Adams |
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Zurn Elkay Water Solutions Corporation (a provider of water management products, headquartered in Milwaukee, WI) |
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Kenneth C. Bockhorst |
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Badger Meter, Inc. |
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Name |
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Business Experience During Last Five Years |
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Henry F. Brooks |
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Collins Aerospace, an RTX Company (one of the world's largest suppliers of aerospace and defense products, headquartered in Charlotte, NC): President – Power & Controls since 2020 |
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Melanie K. Cook |
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Retired Chief Operating Officer of GE Appliances (a global appliance manufacturer and a Haier Company) |
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Xia Liu |
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WEC Energy Group (one of the nation’s largest electric generation and distribution and natural gas delivery holding companies, headquartered in Milwaukee, WI) |
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James W. McGill |
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Retired Executive – Eaton Corporation (global power management company): President-Electrical Sector Americas, Eaton from 2015 to his retirement in 2017; President Electrical Products Group 2013-2015; other roles of global responsibility, including Chief Human Resources Officer. |
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Name |
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Business Experience During Last Five Years |
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Tessa M. Myers |
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Rockwell Automation, Inc. (world’s largest company dedicated to industrial automation and information, headquartered in Milwaukee, WI) |
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James F. Stern |
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A. O. Smith Corporation (a manufacturer of water heating and water treatment products, headquartered in Milwaukee, WI) |
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Glen E. Tellock |
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Retired President and Chief Executive Officer of Lakeside Foods, Inc. (a premier private brand supplier of canned and frozen vegetables, headquartered in Manitowoc, WI): President and Chief Executive Officer from 2016 until retirement in 2021 Previously, Mr. Tellock served The Manitowoc Company, Inc. from 1991 to 2015, holding various leadership positions including Chief Financial Officer and Chairman, President and Chief Executive Officer. Mr. Tellock currently serves on the boards of Nicolet National Bank and WEC Energy Group. Mr. Tellock’s past experience as Chief Executive Officer of a public manufacturing company enables him to provide valuable advice and insights to the company. |
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR SHAREHOLDERS VOTE “FOR ALL NOMINEES” AS IDENTIFIED ABOVE
Independence, Meetings and Committees
The Board of Directors held four regular meetings and one special meeting in 2024. A closed session for only independent directors was held following each of the regular Board meetings. All members of the Board attended the 2024 Annual Meeting of Shareholders. It is the Board’s policy that all directors participate in the Annual Meeting of Shareholders, unless unusual circumstances prevent such attendance.
Our Board of Directors has three standing committees: the Audit and Compliance Committee (“Audit Committee”), the Compensation and Human Resources Committee (“Compensation Committee”) and the Corporate Governance and Sustainability Committee (“Governance Committee”). The Board of Directors has adopted written charters for each committee, which are available on our website at investors.badgermeter.com under the selection “Company”- “Investors”-“Governance”-“Governance Documents.”
In making independence determinations, the Board observes all criteria for independence established by the SEC, the NYSE, and other governing laws and regulations. The Board has determined that each of the directors (other than Mr. Bockhorst) (i) is “independent” within the definitions contained in the current NYSE listing standards and our Principles of Corporate Governance; (ii) meets the categorical independence standards adopted
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by the Board (set forth below); and (iii) has no other “material relationship” with the company that could interfere with his/her ability to exercise independent judgment. In addition, the Board has determined that each member of the Audit Committee and Compensation Committee, respectively, meets the additional independence standards of the NYSE.
Committee Composition and Functions
Committee |
Primary Committee Functions |
Audit and Compliance
Xia Liu, Chair Melanie K. Cook Tessa M. Myers James F. Stern 2024 Meetings - 6 |
• oversees our financial reporting process on behalf of the Board and reports the results of its activities to the Board • selecting and engaging, with shareholder ratification, an independent registered public accounting firm (1) • discussing with the independent registered public accounting firm and internal auditors the scope and results of audits • monitoring our internal controls, ethics and compliance risk management, as well as key guidelines and policies governing the company’s processes for enterprise risk management, including cybersecurity risks • pre-approving and reviewing audit fees and other services performed by our independent registered public accounting firm • establishes and oversees procedures for the receipt, retention and treatment, on a confidential basis, of any concerns regarding questionable accounting, internal controls or auditing matters • two members (Ms. Cook and Ms. Liu) qualify as “audit committee financial experts” as defined by the SEC; all members meet the financial literacy requirements of the NYSE
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Compensation and Human Resources
Todd A. Adams, Chair Henry F. Brooks James W. McGill Glen E. Tellock 2024 Meetings - 3 |
• reviews and establishes all forms of compensation for our executive officers and directors • oversees the comprehensive organizational talent process • oversees our compensation plans, including the various stock plans • reviews the various management development and succession programs • addresses compensation-related risks |
Corporate Governance and Sustainability
Glen E. Tellock, Chair Tessa M. Myers James F. Stern James W. McGill 2024 Meetings - 2 |
• recommends nominees for the Board of Directors • oversees all matters related to director performance • assists the Board of Directors in providing oversight of the company’s environmental, social and governance matters • oversees all corporate governance matters, including monitoring and evaluating Board and committee skills, experience, tenure, diversity and performance and developing and recommending to the Board the company’s Principles of Corporate Governance • oversees annual self-assessments of Board and committee effectiveness |
(1) In overseeing the independent registered public accounting firm, the Audit Committee, among other things, (i) reviews the independence of the independent registered public accounting firm; (ii) reviews periodically the level of fees approved for the independent registered public accounting firm and the pre-approved non-audit services it has provided; (iii) reviews the performance, qualifications and quality control procedures of the independent registered public accounting firm; (iv) reviews the selection of the lead engagement partner; (v) conducts the periodic consideration and impact of independent auditor rotations; and (vi) reviews the scope of and overall plans for the annual audit and interactions with the company's internal audit function.
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Leadership Structure
Mr. Bockhorst was appointed Chairman of the Board in January 2020. The Board of Directors believes it is in the best interests of the company to combine the positions of Chairman and CEO because it provides unified leadership and direction. In addition, Mr. Bockhorst has an in-depth knowledge of the business that enables him to effectively set appropriate Board agendas and ensure processes and relationships are established with both management and the independent directors, as the Board works together to oversee the company’s management and affairs. The Board retains the authority to modify this leadership structure as and when appropriate to best address the company’s circumstances and advance the interests of all shareholders.
Because our Chairman is not an independent director, the independent directors on our Board believe it is appropriate to appoint one of the elected independent directors as a lead outside director ("Lead Director"). Once appointed, our Lead Director serves for a three-year term contingent upon annual re-election by shareholders. If reappointed, the Lead Director can serve up to two consecutive terms. The Lead Director works with our Chairman and other Board members to provide strong, independent oversight of our management and affairs. Mr. Tellock currently serves as the independent Lead Director.
The following summarizes the key roles and responsibilities of the Chairman and Lead Director, respectively:
Kenneth C. Bockhorst, Chairman |
Glen E. Tellock, Lead Director |
• Provides strategic vision for the company as Chairman and CEO • Establishes the agenda for Board meetings • Presides at meetings of the Board • Ensures provision of proper meeting materials and attendance of executives and advisors for meetings of the Board • Consults with the Corporate Governance and Sustainability Committee on matters of corporate governance • Consults with the Corporate Governance and Sustainability Committee on Committee composition and leadership structure • Acts as Chairman of and presides at meetings of shareholders • Calls special meetings of the Board • Does not serve on any Committees but attends all Committee meetings
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• Works to ensure the Board functions with appropriate independence from management • Acts as a key liaison between the Chairman and the independent directors • Communicates Board feedback to the Chairman after each Board meeting • Collaborates with the Chairman to develop Board meeting agendas • Collaborates with the Compensation and Human Resources Committee to conduct the annual evaluation of the performance of the Chairman and CEO • Collaborates with the Chairman and Corporate Governance and Sustainability Committee on matters related to Board effectiveness • Presides at independent director sessions of the Board • Presides at Board meetings if the Chairman is not present • Calls meetings of the independent directors when necessary
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In describing his role and responsibilities as Lead Director, Mr. Tellock stated:
"A critical element of our independent oversight includes assessing our performance and driving continuous improvement in our overall effectiveness. It also includes ensuring a productive partnership with management. I work closely with our Chairman and CEO to ensure that in addition to scheduled Board and Committee meetings, our directors engage with management to provide additional insight on matters of strategic importance. As a Board, we remain focused on delivering long-term shareholder value and we appreciate investors' trust and confidence in our leadership."
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Board Role in Risk Oversight
Our Board of Directors recognizes the importance of effective risk oversight in running a successful business and fulfilling its fiduciary responsibilities to the company and its shareholders. Our Board is responsible for assuring that an appropriate culture of risk management exists within the company and for setting the right “tone at the top.” The Board oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational and strategic objectives for the improvement of long-term organizational performance and shareholder value creation.
A fundamental element of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the company. The involvement of the full Board of Directors in setting the company’s business strategy is a key part of its assessment of management’s tolerance for risk and also a determination of what constitutes an appropriate level of risk for the company.
The company’s Enterprise Risk Management ("ERM") process aims to identify, manage and monitor significant and material risks. A cross functional group of executives prioritizes identified risks and assigns an executive to address each major identified risk area and lead action plans to manage each risk. Our Board of Directors provides oversight of the ERM process and reviews the significant identified risks. Our various Board committees also play a role in risk management, as detailed in their respective charters.
Cybersecurity is a critical component of the company’s ERM program. Badger Meter has established an information security framework to help safeguard the confidentiality, integrity, privacy and availability of information assets and ensure regulatory, operational, and contractual requirements are fulfilled. The framework includes an information security training program for all employees as well as incident response planning with regular exercises to help ensure its effectiveness and the company's overall preparedness. As part of the framework, senior management meets monthly as part of the Cybersecurity Steering Committee to direct proper action to mitigate any identified risks. The framework is aligned to industry standards including: NIST (National Institute of Standards and Technology), International Organization for Standardization ("ISO") 27001, Service Organization Control 2 ("SOC2") and Sarbanes Oxley ("SOX"). In addition to the framework, among other mitigating actions, the company maintains cybersecurity liability insurance. The Board and the Audit Committee provide oversight over cybersecurity risk. The Board receives annual cybersecurity updates from senior management, including the Director-Information Systems (who serves as the company's Chief Information Security Officer), and the Audit Committee provides a deeper level of oversight through multiple engagements with senior management. While the company has experienced, and expects to continue to experience cyber threats, no material incidents or breaches have occurred.
While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the Audit Committee focuses on financial risks, including overseeing the integrity of the company’s financial statements, qualifications and independence of the independent registered public accounting firm, internal controls and general corporate ethics and compliance. In addition, the Audit Committee annually reviews and assesses the effectiveness of the company’s overall compliance program. The Compensation Committee focuses on compensation risks, including risks associated with our workforce and the administration and structure of our employee benefit plans. The Governance Committee focuses on corporate governance policies and practices that help mitigate risk as well as risks associated with the environment, climate change and social topics.
Shareholder Outreach
The company regularly engages with its shareholders through proactive outreach efforts covering an array of topics such as financial performance, strategy, compensation matters, human capital management, corporate governance and other sustainability matters. This shareholder outreach takes a combination of forms, including investor conferences, dedicated in-person or virtual meetings and phone calls. Badger Meter management routinely reports to the Board and specific Board committees on the substance and nature of its shareholder discussions.
In conjunction with each year's proxy, the company conducts substantial outreach efforts among its shareholders to gain insight and understanding of their respective views of the company’s compensation and governance matters and shareholder proposals. In 2024, outreach discussions were held with investors collectively holding over 10 million shares, or 35% of the company’s outstanding shares, and included 4 of the company’s top 10 largest shareholders.
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A summary of key topics discussed during our various outreach touchpoints are included below.
What We Heard |
How We Responded |
To further understand the Board's philosophy on refreshment mechanisms, shareholders requested greater clarity on the Board's view of age and director term limits.
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• Added language to the Principles of Corporate Governance(1) that describes the Board's rationale against arbitrary term limits and highlights certain triggers that would prompt evaluation of the director's ongoing participation. These include changes in the director's principal occupation, such as new employment, retirement, or change-in-control, in addition to the mandatory retirement age of 72. |
To further understand the Board's philosophy on monitoring the time commitments of Directors, shareholders requested expanded disclosure on director limits for outside board participation. |
• Added language to the Principles of Corporate Governance(1) that expressly limits executive directors from serving on more than two (2) public company boards, including Badger Meter's, and non-executive directors to four (4) public company boards, including Badger Meter's.
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Shareholders requested additional information on the Board performance assessment practices. |
• Added language to the Principles of Corporate Governance(1) describing the Lead Director's practice of holding one-on-one meetings with each independent director on a discretionary basis, in addition to conducting an annual self assessment of performance.
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(1)Badger Meter's Principles of Corporate Governance are available on our corporate website at: https://investors.badgermeter.com/governance/governance-documents/
Corporate Responsibility
With the support and oversight of our Board of Directors, we continue to advance the tenets of sustainability and corporate responsibility. Sustainability is an essential component of our corporate strategy and our aim to grow both our business and positive impact in the world by enabling our customers to do the same. By managing sustainability as a process, it enables us to reduce our environmental footprint while continuing to grow our business. Taking this holistic approach to sustainability, we prioritize strong governance, effective risk management, product innovation and employee engagement, allowing us to safeguard our future.
The Board, primarily through its Governance Committee, provides oversight of the company’s overall approach to environmental, social and governance ("ESG") matters. The approach is informed by regular engagement with shareholders and other stakeholders. In connection with this oversight, the Board and Governance Committee have reviewed the company’s sustainability strategy and regularly discuss this strategy with management.
The following reflects several of the key recent actions, activities and highlights representing the company’s continuous improvement efforts across sustainability matters:
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For more information on Sustainability, please visit: https://www.badgermeter.com/sustainability-and-ethics/
Nomination of Directors
All members of the Governance Committee meet the definition of independence set forth by the NYSE. The Governance Committee is responsible for recommending nominees for our Board of Directors. The Board has adopted a policy by which the Governance Committee will consider nominees for Board positions, as follows:
The Governance Committee will review each candidate’s qualifications in light of the needs of the Board of Directors and the company, considering the current mix of director attributes and other pertinent factors, with the following minimum qualifications which must be met by each director nominee:
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During 2024, and as of the date of this Proxy Statement, the Governance Committee did not pay any fees to third parties to assist in identifying or evaluating potential candidates.
Communications with the Board of Directors
Shareholders and non-shareholders may communicate with the full Board of Directors, non-management directors as a group or individual directors, including the Chairman or Lead Director, by submitting such communications in writing to the intended recipient, c/o Secretary, Badger Meter, Inc., P.O. Box 245036, Milwaukee, WI 53224-9536, via certified mail. The Secretary will forward communications received to the appropriate party.
Categorical Independence Standards for Directors
The company’s categorical independence standards for directors are contained in the company’s Principles of Corporate Governance, which are annually reviewed by the Governance Committee. If appropriate, changes are recommended to the Board of Directors for approval.
A director who at all times during the previous three years has met all of the following categorical standards and has no other material relationships with Badger Meter, Inc. will be deemed to be independent:
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In addition to satisfying the criteria set forth above, directors who are members of the Audit Committee will not be considered independent for purposes of membership on the Audit Committee unless they satisfy the following additional criteria:
Available Corporate Governance Information
The company’s Code of Business Conduct, Principles of Corporate Governance, Code of Conduct for Financial Executives and Charters of all current Board Committees are available on our website at investors.badgermeter.com under the selection “Company” - “Investors” – “Governance”- “Governance Documents”. Copies can also be obtained by writing to the Secretary of Badger Meter, Inc., P.O. Box 245036, Milwaukee, WI 53224-9536.
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We had no transactions during 2024, and none are currently proposed, in which we were a participant and in which any related person had a direct or indirect material interest. Our Board of Directors has adopted policies and procedures regarding related person transactions. For purposes of these policies and procedures:
Each of our executive officers, directors or nominees for director is required to disclose to the Governance Committee certain information relating to related person transactions for review and approval by the Governance Committee. Disclosure to the Governance Committee must occur before the executive officer, director or nominee for director enters into the related party transaction. The Governance Committee’s decision whether or not to approve a related person transaction is to be made in light of the Governance Committee’s determination that consummation of the transaction is not inconsistent with the interests of the company and its shareholders. Any related person transaction must be disclosed to the Board of Directors.
Certain related person transactions are deemed pre-approved, including, among others, (a) any transaction with another company, or charitable contribution, grant or endowment to a charitable organization, foundation or university, at which a related person’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than ten percent of that company’s shares, if the aggregate amount involved does not exceed the greater of $1 million or 2% of the company’s total annual revenues or the charitable organization’s total annual receipts, and (b) any transaction involving a related person where the rates or charges involved are determined by competitive bids.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table provides information concerning persons known by us to beneficially own more than five percent of our common stock as of February 28, 2025.
Name |
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Aggregate |
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Percent of |
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BlackRock, Inc. |
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5,423,141 |
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18.4 |
% |
(1) |
50 Hudson Yards |
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The Vanguard Group, Inc. |
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3,841,879 |
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13.1 |
% |
(1) |
100 Vanguard Boulevard |
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State Street Corporation |
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1,585,429 |
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|
|
5.4 |
% |
(1) |
State Street Financial Center |
|
|
|
|
|
|
|
||
One Congress Street, Suite 1 |
|
|
|
|
|
|
|
||
Boston, MA 02114 |
|
|
|
|
|
|
|
||
The following table sets forth, as of February 28, 2025, the number of shares of common stock beneficially owned and the number of exercisable options outstanding by (i) each of our directors and nominees, (ii) each of the executive officers named in the Summary Compensation Table set forth below (referred to as the named executive officers or “NEOs”), and (iii) all of our directors and executive officers as a group. SEC rules define “beneficial owner” of a security to include any person who has or shares voting power or investment power with respect to such security.
Named Executive Officers and Director Nominees |
|
Aggregate Number of |
|
|
Percent of |
|
|
||
Todd A. Adams |
|
|
- |
|
|
* |
|
(2) |
|
Kenneth C. Bockhorst |
|
|
98,086 |
|
|
|
0.3 |
% |
(3) |
Henry F. Brooks |
|
|
1,791 |
|
|
* |
|
|
|
Melanie K. Cook |
|
|
1,791 |
|
|
* |
|
|
|
Xia Liu |
|
|
- |
|
|
* |
|
(4) |
|
James W. McGill |
|
|
6,236 |
|
|
* |
|
|
|
Tessa M. Myers |
|
|
6,979 |
|
|
* |
|
|
|
James F. Stern |
|
|
9,732 |
|
|
* |
|
|
|
Glen E. Tellock |
|
|
9,732 |
|
|
* |
|
|
|
Sheryl L. Hopkins |
|
|
4,236 |
|
|
* |
|
(5) |
|
Richard Htwe |
|
|
1,133 |
|
|
* |
|
(6) |
|
Kimberly K. Stoll |
|
|
16,506 |
|
|
|
0.1 |
% |
(7) |
Robert A. Wrocklage |
|
|
26,361 |
|
|
|
0.1 |
% |
(8) |
All Director Nominees and Executive Officers as a Group (18 persons, including those named above) |
|
|
263,090 |
|
|
|
0.9 |
% |
(9) |
15
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of our common stock, to file initial reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. Such executive officers, directors and ten percent stockholders are also required by SEC rules to furnish Badger Meter with copies of all such forms that they file. Based on our review of the reports filed with the SEC and written representations, the Company inadvertently neglected to timely file Form 4s for the Performance Stock Units (PSUs) earned as a result of the achievement of performance criteria and approved by the Compensation and Resources Committee of the Board relating to the 2021-2023 performance period which occurred on February 6, 2024. The forms were subsequently filed March 6, 2024. The reporting of earned shares for Kenneth C. Bockhorst, Robert A. Wrocklage, Kimberly K. Stoll, William R. A Bergum, Fred J. Begale, Sheryl L. Hopkins, Daniel R. Weltzien and Karen Bauer were therefore delinquent. No other reports were required under Section 16(a) of the Exchange Act, and we believe that all remaining Section 16(a) filing requirements were met during fiscal 2024.
16
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides information about our executive compensation programs for 2024 and discusses the compensation decisions that we made with respect to our Named Executive Officers ("NEOs"). For 2024, our NEOs were:
Overview of Compensation Policies and Procedures
Our executive compensation program for all executive officers, including each NEO, is administered by the Compensation and Human Resources Committee (“Compensation Committee”). The Compensation Committee is comprised of four independent directors.
The Compensation Committee is committed to developing and implementing an executive compensation program that rewards our executives for achieving specific strategic goals of the company and directly aligns the interests of all executive officers with the interests of shareholders. Some highlights of our executive compensation program are as follows:
While the Compensation Committee retains sole authority in making its decisions and recommendations regarding executive compensation, it considers and reviews, among other things:
17
Executive Compensation and Governance Practices and Standards
We endeavor to maintain sound governance practices and standards consistent with our executive compensation philosophies. Below is a summary of those practices and standards:
What We Do |
|
What We Do Not Do |
Use performance metrics that align pay with performance Cap payouts under our annual cash bonus and long-term incentive plans Employ robust stock ownership guidelines for our CEO, NEOs and all executive officers Apply clawback provisions to annual cash bonus and long-term incentive plans, including time-based equity compensation Engage an independent compensation consultant that reports to the Compensation Committee Prohibit short sales, hedging or pledging of our stock by our executive officers and directors Comprise the Compensation Committee of entirely independent directors Compensation Committee regularly meets in executive session without management present Compensation Committee performs an annual risk assessment of compensation practices |
Provide excise tax gross-ups Offer excessive executive perquisites Provide single-trigger change-in-control severance benefits Reprice stock options Provide incentive programs that encourage excessive risk taking |
Role of Compensation Consultant
For 2024, the Compensation Committee engaged Willis Towers Watson PLC (“WTW”), an independent executive compensation consultant. The Compensation Committee generally engages an independent
18
compensation consultant and has the authority to approve fees and other terms of the engagement. The consultant’s duties for 2024 were to evaluate executive compensation, to discuss with the Compensation Committee general compensation trends, to assist the Compensation Committee with reviewing the company’s peer group, to provide the Compensation Committee with competitive market data relating to the compensation of each of our NEOs, and to assist our CEO in developing compensation recommendations to present to the Compensation Committee for the executive officers other than himself. The compensation consultant provides the Committee with advice, consultation and market information on a regular basis, as requested, throughout the year. The executive compensation consultant does not make specific recommendations on individual compensation amounts for the executive officers, nor does the consultant determine the amount or form of executive compensation. The Compensation Committee has assessed the independence of WTW pursuant to SEC rules and NYSE listing standards and affirmatively determined that WTW's services have not raised any conflicts of interest.
Total Compensation and Link to Performance
We strive to compensate our executive officers at market competitive levels, with the opportunity to earn above-median compensation for above-market performance, through programs that emphasize variable, performance-based incentive compensation in the form of annual cash bonuses, equity-based awards and a long-term incentive program. To that end, total executive compensation is tied to company performance and is structured to ensure that, due to the nature of our business, there is an appropriate emphasis on balancing critical annual objectives and long-term strategy. We also strive to strike a balance between company financial performance and the individual performance of our executive officers. For example, the annual bonus plan is based primarily on select annual financial metrics, but includes an individual performance component for each NEO other than our CEO. The long-term incentive plan, in contrast, is based solely on financial performance, and includes awards that vest based upon the achievement of financial targets measured over a three-year performance period, and equity grants that increase or decrease in value with changes in the stock price. These programs are further described under “Amount and Elements of Compensation” below.
For those compensation components where individual performance is a consideration, individual performance is considered as part of the overall evaluation process. This evaluation of individual performance impacts the annual adjustment to base salaries for all of our executive officers and also may impact payments made under the annual bonus plan for all officers except the CEO. For the period disclosed, the Compensation Committee determined that the performance of all executive officers was satisfactory. As such, annual base salary adjustments were made for each executive officer based upon recommendations from the CEO (for all executive officers except the CEO) and the judgment of the Compensation Committee, and there were no discretionary increases or decreases to payments made under the annual bonus plan for 2024.
Amount and Elements of Compensation
The Compensation Committee determines the amounts and elements of compensation under our compensation program for our executive officers. The program involves base salaries, benefits, short-term annual cash bonus plan and a long-term incentive program utilizing a mix of restricted stock and performance share awards.
Compensation Survey Data. Compensation levels are established for each executive officer by the Compensation Committee, with general reference to data supplied by WTW on organizations of similar size and business activity. WTW provided data from two sources: general industry survey data and the recent proxy statements of a peer group (discussed in the section below). The general industry survey data was obtained from the 2024 WTW Executive Compensation Database Survey. This compensation data incorporates primarily publicly-traded companies, and has a broad definition of similar business activity, thereby providing a comprehensive basis for evaluating Badger Meter’s compensation compared to market. The survey includes salaries, bonuses, total cash compensation, long-term incentive compensation and total direct compensation. Where appropriate, the data was size-adjusted using regression analysis based on company revenues.
Peer Group Data. As noted above, the Compensation Committee also references compensation data from proxy statements of a peer group when establishing pay levels for executive officers. The Compensation Committee annually reviews and approves the appropriateness of the selected peer group utilizing criteria and considerations such as: complexity and business model, size, size of peer group, competitive talent market and investor profile/industry similarity. For 2024, this analysis resulted in minor adjustments to the peer group which
19
included the removal of one company which was acquired during the year, and the addition of Mirion Technologies, Inc. The companies in the peer group for 2024 were:
Brady Corporation |
ESCO Technologies, Inc. |
Kadant, Inc. |
Standex International Corporation |
CTS Corporation |
The Gorman-Rupp Company |
Lindsay Corporation |
Strattec Security Corporation |
Douglas Dynamics, Inc. |
Helios Technologies, Inc. |
Mirion Technologies, Inc. |
Watts Water Technologies, Inc. |
Enerpac Tool Group |
Itron, Inc. |
Mueller Water Products, Inc. |
Zurn Elkay Water Solutions |
Base Salary. Our policy is to pay executive officers at market, with appropriate adjustments for performance and levels of responsibility. To aid the Compensation Committee in its understanding of each executive officer’s performance and levels of responsibility, the Compensation Committee is given a five-year history, which sets forth the base salary, short-term incentive awards, and long-term compensation of each such officer.
Base salary increases across all executive officers for calendar year 2024 were approved by the Compensation Committee on November 9, 2023 and ranged from 2% to 16%. Base salary increases were approved for Mr. Bockhorst and Mr. Wrocklage at 11% each, in recognition of their current and future contributions to record financial and strategic results. More tenured executives received increases in the 2%-7% range. Two less tenured officers received increases of 14% and 16%, respectively, reflecting salary progression to market. The increases were based primarily on our philosophy to set base salaries at market to maintain competitive salary levels based on a review of their roles, responsibilities and contributions.
Annual Bonus Plan. Our annual bonus plan is designed to reward executive officers, along with most salaried and non-union hourly/non-exempt employees globally not otherwise eligible to participate in other incentive or statutory bonus programs. The plan is intended to provide a competitive level of compensation when performance objectives and metrics are achieved.
Under the 2024 annual bonus plan, the target bonus level for the CEO was 110% of base salary, the CFO target bonus level was 70% and the target bonus levels for the remaining officers including the other NEOs ranged from 40% to 50% of base salary, depending on the role and the scope of the NEOs duties and responsibilities.
The targets set pursuant to the annual bonus plan for 2024 were comprised of two equally weighted, financial performance metrics: adjusted EBITDA (50% weighting) and adjusted absolute free cash flow (50% weighting). We generally define EBITDA as GAAP net earnings plus interest, income taxes, depreciation and amortization. We define absolute free cash flow as GAAP cash flow from operations less capital expenditures. The company believes EBITDA is an important supplemental measure of performance and is frequently used by analysts, investors, lenders and other interested parties in evaluating companies in our industries. Further, the company believes absolute free cash flow is in an important metric as it captures the company’s ability to generate cash and therefore, grow the company’s revenues, profits, and returns over time. The company provides a reconciliation of GAAP to Non-GAAP financial measures in its Annual Report filed with the SEC.
The Compensation Committee considered multiple factors in setting the financial performance threshold, target and maximum performance goals including our annual financial and strategic business plans, our historical performance, the projected contributions of recently completed acquisitions, carry-over implications of accruals and adjustments, and other factors the Compensation Committee deemed appropriate.
Per the terms of our annual bonus plan, the Compensation Committee may make adjustments to reported EBITDA and free cash flow for certain items. For example, in the past the Compensation Committee has excluded pension curtailment or termination charges, costs (other than internal labor) associated with actual or potential acquisitions, results of newly acquired entities not contemplated at the time of target setting and other non-operating items such as the impact of foreign exchange rate changes and significant gains or losses from the disposal or impairment of long-term assets. For 2024, the Compensation Committee approved adjustments to EBITDA (and related bonus payments) for costs associated with acquisition due diligence activities and the effects of foreign exchange rates on actual results from when targets were established.
Details of the annual bonus targets and achievement for the two financial performance metrics for 2024 were as follows (in millions):
20
|
|
2024 Annual Bonus Scale |
|
|
2024 Annual |
|
||||||||||
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Actual |
|
||||
2024 Adjusted EBITDA |
|
$ |
146.7 |
|
|
$ |
158.4 |
|
|
$ |
170.1 |
|
|
$ |
191.5 |
|
Bonus Payout |
|
|
50 |
% |
|
|
100 |
% |
|
|
200 |
% |
|
|
200 |
% |
2024 Absolute Free Cash Flow |
|
$ |
95.0 |
|
|
$ |
106.0 |
|
|
$ |
116.0 |
|
|
$ |
142.2 |
|
Bonus Payout |
|
|
50 |
% |
|
|
100 |
% |
|
|
200 |
% |
|
|
200 |
% |
The blended results of the individual metric achievement noted above equated to a combined bonus payout for all NEOs of 200%.
The 2024 annual bonus for each executive officer, except the CEO, could also be adjusted up or down 10% at the discretion of the Compensation Committee. Further, the Compensation Committee has the authority to award special performance bonuses. No such adjustments were made for 2024 for the regular program, and no special performance bonuses were awarded.
Long-Term Incentive Plan (LTIP)
In determining the amount of incentive compensation to be awarded to each NEO under the LTIP, the Compensation Committee considers the amount of long-term incentives provided by companies in the competitive market data supplied by WTW and the peer group as a guidepost. The Compensation Committee primarily structures the LTIP equity mix based on our compensation objectives, specifically, the desire to ensure that executive compensation is tied to our performance, with an appropriate balance of time-based and performance-based vesting. Furthermore, the individual performance of each NEO was considered as part of the overall evaluation process, with the Compensation Committee determining that the performance of each of the NEOs was satisfactory.
Awards under the LTIP are comprised of two forms of equity compensation - performance share units (PSUs) which are earned based on the achievement of objective performance criteria over a three-year period, and restricted stock awards (RSAs), which vest ratably over a three-year period. The LTIP award mix between PSUs and RSAs is intended to promote share ownership (aligned with our share ownership guidelines) and motivate our executives to drive durable, long-term performance. Consistent with prevailing market practice of emphasizing performance-based equity compensation, the grants awarded in 2023 and prior years reflected a mix of 70%/30% PSUs to RSAs for the CEO and 50%/50% for the other NEOs’ target LTIP compensation. For the 2024 LTIP award, the grant reflected a mix of 75%/25% PSUs to RSAs for the CEO and 60%/40% for the other NEOs' target LTIP compensation. This change continued to advance the Board's emphasis on aligning incentive pay with performance.
Achievement/vesting of the PSUs is based upon two equally weighted financial performance metrics – adjusted free cash flow conversion (50% weighting) and adjusted return on invested capital (“ROIC”) (50% weighting) as measured over a three-year performance period. We generally define free cash flow conversion as free cash flow (defined above) divided by net earnings before special items. We believe free cash flow conversion is a valuable metric that captures the efficient generation and use of cash. We generally define ROIC as net operating profit after-tax, utilizing a fixed tax rate, divided by the simple average of beginning and ending net debt plus shareholder’s equity. We believe ROIC is a valuable metric that ensures our executives remain focused on effectively deploying capital, while maximizing shareholder value creation in the execution of our growth strategy. The PSUs are only earned if performance targets are achieved at the end of a three-year measurement period (i.e. no interim vesting).
The Compensation Committee approved a threshold, target and maximum performance goal for each of the free cash flow conversion and ROIC metrics. The number of PSUs that would vest for such achievement levels are 50% for threshold, 100% for target, and 200% for maximum, with vesting pro-rated for performance between these points. If the company does not achieve the threshold performance level, then no portion of the PSUs tied to that performance metric will vest.
In setting the free cash flow conversion and ROIC targets, the Compensation Committee considered multiple factors, including: our annual financial and long-term strategic business plans, investor expectations, peer and broader market historical performance and Badger Meter’s historical performance. The free cash flow
21
conversion and ROIC targets are established at levels that are intended to incentivize achievement of our long-term strategic plans and the continuous improvement of returns relative to historic levels and our ongoing cost of capital.
LTIP Performance Shares Earned for the 2022-2024 Performance Period
Details of the targets and achievement for the two equally weighted performance metrics for the three-year performance period ending December 31, 2024 were as follows :
|
|
2022-2024 LTIP Incentive Plan Performance Awards |
|
|
LTIP Incentive |
|||||||||
Performance Metric |
|
Threshold (50%) |
|
|
Target (100%) |
|
|
Maximum (200%) |
|
|
Actual |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Free Cash Flow Conversion |
|
|
100.0 |
% |
|
|
112.5 |
% |
|
|
125.0 |
% |
|
111.6% |
ROIC |
|
|
14.5 |
% |
|
|
17.0 |
% |
|
|
19.5 |
% |
|
28.9% |
The blended results of the individual metric achievement noted above equated to a combined performance award vesting of 148.1% of target. As such, the target and actual shares that were earned (in aggregate for all NEOs employed at the time of vesting) for the three-year performance period ending December 31, 2024 are 13,132 and 19,448, respectively.
In addition to the stock awards described above, one-time stock awards may be granted to new executive officers either upon hire or within one year of becoming an executive officer. No such awards were granted to NEOs in 2024.
In selecting a date of grant for any stock awards, the Compensation Committee establishes a date in an open trading window. Stock awards use an average of the prior 10 days closing prices to determine the number of shares granted based on a predetermined dollar value. The Compensation Committee does not take into account material nonpublic information in determining the timing and terms of equity-based awards, and we have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.
Other Benefits
Salary Deferral Plan. All executive officers are eligible to participate in a Salary Deferral Plan described in Note 1 of the “Non-Qualified Deferred Compensation" table below. The Compensation Committee believes that it is appropriate to offer this program to enable the executive officers to better manage their taxable income and retirement planning. Based on its analysis and the advice of WTW, the Compensation Committee believes that this program is competitive with comparable programs offered by other companies. As of December 31, 2024, four current executive officers, one of which is an NEO for 2024, had balances in the Plan.
Supplemental Retirement Plans. We offer a supplemental retirement plan to certain employees, including executive officers. The purpose of this plan is to compensate certain employees for compensation reductions caused by salary deferrals or by regulatory compensation limitations on qualified plans. The Compensation Committee believes that this supplemental retirement plan is appropriate to attract and retain qualified executives. For more information, see “Retirement Benefits” below.
Additional Benefits. All executive officers participate in the Badger Meter, Inc. Employee Savings and Stock Ownership Plan (“ESSOP”) and other benefit plans provided to all of our U.S. employees. Executive officers are provided with a company-paid long-term disability plan that provides replacement income for approximately 60% of executive base salary and bonus in the event of a qualified long-term disability. Executive officers are provided a vehicle allowance, and are provided a taxable benefit up to $5,000 of annual financial/estate planning reimbursement. In addition, executive officers are required to participate in an annual executive physical program designed to proactively identify and address medical issues and health risks.
Clawback Policy. The company has a Compensation Recoupment Policy (“clawback policy”). The clawback policy is designed to ensure that incentive-based compensation is paid to executive officers based on accurate financial statements and ethical and legal conduct. Under the policy, in the event that the company is required to prepare an accounting restatement due to material noncompliance with accounting rules, and/or if the company determines that an executive officer engaged in illegal or fraudulent conduct or a material breach of the company's
22
Code of Conduct, the result of which is adverse to the company, whether financial or reputational harm, the company will, in the case of a restatement, or may, in the case of misconduct, require reimbursement of compensation from executive officers who, during the applicable period, (1) received payment of non-equity incentive compensation, or (2) received or realized compensation from certain equity-based awards.
Tax Considerations. When designing the company’s compensation programs for executive officers, the Compensation Committee considers factors that may impact financial performance, including tax rules. One such tax rule is Section 162(m) of the Internal Revenue Code, which limits the tax deductibility of compensation that we pay to certain covered employees, generally including our NEOs, to $1 million in any year. Although the Compensation Committee seeks to structure compensation in a tax-efficient manner when possible, it may award compensation that is not fully deductible under Section 162(m) if it believes such compensation will contribute to the achievement of our business objectives.
Tax Gross-ups. The company does not provide tax gross-ups to any of the executive officers.
Potential Payments Upon Termination or Change-in-Control
We have entered into Key Executive Employment and Severance Agreements ("KEESAs") with all executive officers, whose expertise has been critical to our success, to encourage them to remain with us in the event of any merger or transition period. The Compensation Committee has reviewed these agreements and determined that they are appropriate given competitive market practices. Each KEESA requires a “double-trigger,” providing for payments in the event there is a change-in-control and (1) the executive officer’s employment with us terminates (whether by us, the executive officer or otherwise) within 180 days prior to the change-in-control and (2) it is reasonably demonstrated by the executive officer that (a) any such termination of employment by us (i) was at the request of a third party who has taken steps reasonably calculated to effect a change-in-control or (ii) otherwise arose in connection with or in anticipation of a change-in-control, or (b) any such termination of employment by the executive officer took place because of an event that allowed the termination for good reason, which event (i) occurred at the request of a third party who has taken steps reasonably calculated to effect a change-in- control or (ii) otherwise arose in connection with or in anticipation of a change-in-control. The KEESAs do not provide for payments upon a change-in-control without a qualifying termination. For more information regarding the KEESAs, see the discussion in “Potential Payments Upon Termination or Change-in-Control” below.
Common Stock Ownership Guidelines and Hedging and Pledging Policies
We believe that it is important to align executive and shareholder interests by defining stock ownership guidelines for our executives. As a result, each executive officer is expected to hold common stock equal to at least two-times his or her annual base salary, except the CEO who is expected to hold common stock equal to at least three-times his annual base salary. New executive officers are expected to achieve this level of stock ownership within a reasonable time, but in any event, within six years of becoming an executive officer. Each executive officer, including each NEO either met/exceeded the targeted level of stock ownership, or are within the permitted six-year window to achieve the ownership requirement as of December 31, 2024.
Additionally, we have a policy that prohibits our executive officers, as well as our directors, from engaging in short selling, hedging transactions (including the purchase of prepaid variable forward contracts, equity swaps, collars and exchange funds) and from holding our common stock in a margin account or pledging our common stock as collateral for a loan.
For purposes of the common stock ownership calculation, the company includes all outright owned shares, share equivalents held on a unitized basis in the company's ESSOP and the value of "in-the-money" vested stock options (although all officers also met/exceeded targeted levels when excluding the vested option value). It does not include any unvested options, restricted stock awards or performance share unit awards. No option awards have been granted since March 2020.
23
Risk Assessment
The Compensation Committee conducts an annual risk assessment of our compensation programs to determine whether our compensation policies and practices are reasonably likely to have a material adverse effect on the company. Based on this assessment, the Compensation Committee believes that our compensation program is balanced and does not motivate or encourage unnecessary or excessive risk taking because of, in part, the following:
Summary Compensation Table
The following table sets forth information concerning compensation earned or paid to each of the NEOs for each of the last three fiscal years in which they were an NEO, as applicable. The NEOs are our principal executive officer, principal financial officer and three other most highly compensated executive officers employed as of December 31, 2024.
Summary Compensation Table for 2024 (all amounts in $)
|
|
|
|
|
|
|
|
Non-Equity Incentive |
|
Change in |
|
|
|
|
|
||||||||||
Name & Principal Position |
Year |
Salary |
|
Bonus |
|
Stock |
|
Annual |
|
LTIP Cash (5) |
|
Deferred |
|
All Other Compensation (7) |
|
Total |
|
||||||||
Kenneth C. Bockhorst |
2024 |
|
830,000 |
|
|
- |
|
|
2,235,842 |
|
|
1,826,000 |
|
|
- |
|
|
103,034 |
|
|
89,701 |
|
|
5,084,577 |
|
Chairman, President & |
2023 |
|
750,000 |
|
|
- |
|
|
1,962,621 |
|
|
1,650,000 |
|
|
- |
|
|
97,362 |
|
|
84,305 |
|
|
4,544,288 |
|
CEO |
2022 |
|
675,000 |
|
|
- |
|
|
1,380,249 |
|
|
968,220 |
|
|
804,752 |
|
|
34,012 |
|
|
78,611 |
|
|
3,940,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Robert A. Wrocklage |
2024 |
|
450,000 |
|
|
- |
|
|
645,437 |
|
|
630,000 |
|
|
- |
|
|
27,439 |
|
|
58,550 |
|
|
1,811,426 |
|
Senior Vice President - Chief |
2023 |
|
405,000 |
|
|
- |
|
|
464,756 |
|
|
526,500 |
|
|
- |
|
|
22,452 |
|
|
50,737 |
|
|
1,469,445 |
|
Financial Officer |
2022 |
|
368,000 |
|
|
- |
|
|
359,925 |
|
|
263,930 |
|
|
197,392 |
|
|
7,748 |
|
|
47,970 |
|
|
1,244,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sheryl L. Hopkins |
2024 |
|
330,000 |
|
|
- |
|
|
203,098 |
|
|
330,000 |
|
|
- |
|
|
12,632 |
|
|
49,094 |
|
|
924,824 |
|
Vice President - Human |
2023 |
|
285,000 |
|
|
- |
|
|
154,836 |
|
|
228,000 |
|
|
- |
|
|
5,219 |
|
|
42,333 |
|
|
715,388 |
|
Resources |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Kimberly K. Stoll |
2024 |
|
310,000 |
|
|
- |
|
|
177,831 |
|
|
279,000 |
|
|
- |
|
|
12,446 |
|
|
53,440 |
|
|
832,717 |
|
Vice President - Sales and |
2023 |
|
290,000 |
|
|
- |
|
|
180,704 |
|
|
232,000 |
|
|
- |
|
|
8,123 |
|
|
49,370 |
|
|
760,197 |
|
Marketing |
2022 |
|
275,000 |
|
|
- |
|
|
147,894 |
|
|
143,440 |
|
|
102,492 |
|
|
6,433 |
|
|
43,475 |
|
|
718,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Richard Htwe |
2024 |
|
310,000 |
|
|
- |
|
|
203,098 |
|
|
248,000 |
|
|
- |
|
|
12,315 |
|
|
46,490 |
|
|
819,903 |
|
Vice President - Global |
2023 |
|
300,000 |
|
|
50,000 |
|
|
154,836 |
|
|
240,000 |
|
|
- |
|
|
- |
|
|
36,366 |
|
|
781,202 |
|
Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
24
Grants of Plan-Based Awards
The following table sets forth information regarding all plan-based awards that were granted to the NEOs during 2024, including incentive plan awards (equity-based) and other plan-based awards. Disclosure on a separate line item is provided for each grant of an award made to an NEO during the year. Non-equity incentive plan awards are awards that are not subject to FASB ASC Topic 718 and are intended to serve as an incentive for performance to occur over a specified period. The equity incentive awards are subject to a performance condition or a market condition as those terms are defined by FASB ASC Topic 718.
Grants of Plan-Based Awards for 2024
|
|
|
|
Estimated Future Payouts Under |
|
|
Estimated Future Payouts Under |
|
|
All Other |
|
|
Grant Date |
|
||||||||||||||||||||
Name |
|
Grant |
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Awards: |
|
|
Fair Value of Stock |
|
||||||||
Kenneth C. |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,495 |
|
|
|
558,921 |
|
||||||
Bockhorst |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
5,243 |
|
|
|
10,486 |
|
|
|
20,972 |
|
|
|
|
|
|
1,676,921 |
|
||||
|
|
2/8/2024 |
(2) |
|
456,500 |
|
|
|
913,000 |
|
|
|
1,826,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Robert A. |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,614 |
|
|
|
258,111 |
|
||||||
Wrocklage |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
1,211 |
|
|
|
2,422 |
|
|
|
4,844 |
|
|
|
|
|
|
387,326 |
|
||||
|
|
2/8/2024 |
(2) |
|
157,500 |
|
|
|
315,000 |
|
|
|
630,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sheryl L. |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
508 |
|
|
|
81,239 |
|
||||||
Hopkins |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
381 |
|
|
|
762 |
|
|
|
1,524 |
|
|
|
|
|
|
121,859 |
|
||||
|
|
2/8/2024 |
(2) |
|
82,500 |
|
|
|
165,000 |
|
|
|
330,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Kimberly K. |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444 |
|
|
|
71,004 |
|
||||||
Stoll |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
334 |
|
|
|
668 |
|
|
|
1,336 |
|
|
|
|
|
|
106,827 |
|
||||
|
|
2/8/2024 |
(2) |
|
69,750 |
|
|
|
139,500 |
|
|
|
279,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Richard |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
508 |
|
|
|
81,239 |
|
||||||
Htwe |
|
3/1/2024 |
(1) |
|
|
|
|
|
|
|
|
|
|
381 |
|
|
|
762 |
|
|
|
1,524 |
|
|
|
|
|
|
121,859 |
|
||||
|
|
2/8/2024 |
(2) |
|
62,000 |
|
|
|
124,000 |
|
|
|
248,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
25
Equity Incentive Plan Awards represent the fair value of performance share units granted to each NEO on March 1, 2024 under the 2021 Omnibus Incentive Plan and are valued at the closing price of the common stock on that date ($159.92 per share). Share vesting is subject to performance criteria which are discussed in the “Compensation Discussion and Analysis – Amount and Elements of Compensation.”
Stock Awards represent the fair value of restricted stock awards granted to each NEO on March 1, 2024 under the 2021 Omnibus Incentive Plan and are valued at the closing price of the common stock on that date ($159.92 per share). The restricted stock vests ratably over three years from the date of grant. Dividends on the restricted shares are accrued during the vesting period and paid to the recipient upon full vesting of the shares.
Outstanding Equity Awards At Year-End
The following table sets forth information on outstanding option and stock awards held by the NEOs at December 31, 2024, including the number of shares underlying both exercisable and unexercisable portions of each stock option award as well as the exercise price and expiration date of each outstanding option.
Outstanding Equity Awards as of December 31, 2024
|
|
Option Awards (1) |
|
|
Stock Awards |
|
||||||||||||||||||||||||||
Name |
|
Securities |
|
|
Securities |
|
|
Option |
|
|
Option |
|
|
Shares of |
|
|
Market Value |
|
|
Equity Incentive Plan Awards: Unearned Shares That |
|
|
Equity Incentive Plan Awards: Market Value |
|
||||||||
Kenneth C. |
|
|
10,540 |
|
|
|
- |
|
|
|
48.20 |
|
|
3/2/2028 |
|
|
|
8,081 |
|
|
|
1,714,142 |
|
|
|
57,831 |
|
|
|
12,267,099 |
|
|
Bockhorst |
|
|
15,329 |
|
|
|
- |
|
|
|
59.85 |
|
|
3/1/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
14,544 |
|
|
|
3,637 |
|
|
|
63.04 |
|
|
3/6/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Robert A. |
|
|
3,296 |
|
|
- |
|
|
|
59.85 |
|
|
3/1/2029 |
|
|
|
3,481 |
|
|
|
738,390 |
|
|
|
11,331 |
|
|
|
2,403,524 |
|
||
Wrocklage |
|
|
3,567 |
|
|
|
892 |
|
|
|
63.04 |
|
|
3/6/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Sheryl L. |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,136 |
|
|
|
240,968 |
|
|
|
3,712 |
|
|
|
787,388 |
|
Hopkins |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Kimberly K. |
|
|
1,217 |
|
|
- |
|
|
|
48.20 |
|
|
3/2/2028 |
|
|
|
1,184 |
|
|
|
251,150 |
|
|
|
3,919 |
|
|
|
831,213 |
|
||
Stoll |
|
|
1,648 |
|
|
- |
|
|
|
59.85 |
|
|
3/1/2029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
1,852 |
|
|
|
463 |
|
|
|
63.04 |
|
|
3/6/2030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Richard |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
925 |
|
|
|
196,211 |
|
|
|
2,776 |
|
|
|
588,845 |
|
Htwe |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
26
Option Exercises and Stock Vested
The following table sets forth information relating to the number of stock options exercised during 2024 for each of the NEOs, as well as the total number of shares of restricted stock that vested during 2024 for each of the NEOs, along with the value realized upon exercise and vesting, respectively.
Option Exercises and Stock Vested for 2024
|
|
Option Awards |
|
|
Stock Awards |
|
||||||||||
|
|
Shares |
|
|
Value Realized on |
|
|
Shares |
|
|
Value Realized on |
|
||||
Kenneth C. Bockhorst |
|
|
— |
|
|
|
— |
|
|
|
17,208 |
|
|
|
2,774,838 |
|
Robert A. Wrocklage |
|
|
— |
|
|
|
— |
|
|
|
4,308 |
|
|
|
694,460 |
|
Sheryl L. Hopkins |
|
|
— |
|
|
|
— |
|
|
|
1,547 |
|
|
|
249,399 |
|
Kimberly K. Stoll |
|
|
— |
|
|
|
— |
|
|
|
1,761 |
|
|
|
283,896 |
|
Richard Htwe |
|
|
— |
|
|
|
— |
|
|
|
208 |
|
|
|
33,263 |
|
For further details regarding equity awards see the description of the LTIP in “Compensation Discussion and Analysis – Amount and Elements of Compensation.”
Retirement Benefits
Qualified Defined Contribution Plan
We maintain a defined contribution retirement plan (through the ESSOP) covering all domestic salaried employees, including each NEO. Under the defined contribution plan, each applicable NEO has an account balance which is credited annually with dollar amounts equal to a percentage of compensation (5% in 2024), plus 2% of compensation in excess of the Social Security wage base. Individuals then invest the funds in various investment vehicles offered to all employees. Any amounts exceeding qualified plan limits are reflected in the “Non-Qualified Unfunded Supplemental Retirement Plan” section below. The qualified amount credited in 2024 for each NEO was $20,778. These are included in “All Other Compensation” in the Summary Compensation Table for 2024. Such amounts were credited to their accounts in early 2025.
Non-Qualified Unfunded Supplemental Retirement Plan
Since benefits under our retirement programs are based on taxable earnings, any deferral of salary or bonus can result in a reduction of these benefits. To make executives whole for this reduction, participants in the salary deferral program also participate in a non-qualified unfunded supplemental retirement benefit plan designed to compensate for reduced retirement benefits caused by the deferral of salary. Benefits under this plan represent the difference between normal retirement benefits that the executive officer would have earned if no salary had been deferred, and the reduced benefit level due to the salary deferral.
Internal Revenue Service regulations limit the amount of compensation to be considered in qualified benefit calculations to $345,000 in 2024, and varying amounts for prior years. Any employee, including any NEO, whose compensation is in excess of the Internal Revenue Service limits also participates in the non-qualified unfunded supplemental retirement plan. Benefits from this plan are calculated to provide the participant the same retirement benefits as if there were no compensation limit. At retirement, the balance accrued is paid out in a lump sum following a six-month waiting period. These benefits are included in the table below.
27
The following table sets forth the actuarial present value of each NEOs accumulated benefit under the Non-Qualified unfunded supplemental retirement plan, assuming benefits are paid at normal retirement age based on current levels of compensation and the present value of the supplemental plan.
Pension Benefits for 2024
Name |
|
|
Years of |
|
|
Present Value of |
|
|
Payments |
|
|||
Kenneth C. Bockhorst |
|
|
|
7.3 |
|
|
|
455,215 |
|
|
|
— |
|
Robert A. Wrocklage |
|
|
|
6.4 |
|
|
|
92,959 |
|
|
|
— |
|
Sheryl L. Hopkins |
|
|
|
4.2 |
|
|
|
24,246 |
|
|
|
— |
|
Kimberly K. Stoll |
|
|
|
16.4 |
|
|
|
55,466 |
|
|
|
— |
|
Richard Htwe |
|
|
|
2.0 |
|
|
|
12,315 |
|
|
|
— |
|
Non-Qualified Deferred Compensation
The following table sets forth annual NEO and company contributions under the non-qualified deferred compensation plan, as well as any withdrawals, earnings and fiscal year-end balances in this plan.
Non-Qualified Deferred Compensation for 2024 ($)
Name |
|
Executive |
|
|
Company |
|
|
Aggregate |
|
|
Aggregate |
|
|
Aggregate |
|
|||||
Robert A. Wrocklage |
|
|
116,394 |
|
|
|
— |
|
|
|
17,703 |
|
|
|
— |
|
|
|
398,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Potential Payments Upon Termination or Change-in-Control
We have entered into Key Executive Employment and Severance Agreements with all executive officers to encourage them to remain with us in the event of any merger or transition period. Each KEESA provides for payments in the event there is a change-in-control and (1) the executive officer’s employment with us terminates (whether by us, the executive officer or otherwise) within 180 days prior to the change-in-control and (2) it is reasonably demonstrated by the executive officer that (a) any such termination of employment by us (i) was at the request of a third party who has taken steps reasonably calculated to effect a change-in-control or (ii) otherwise arose in connection with or in anticipation of a change-in-control, or (b) any such termination of employment by the executive officer took place because of an event that allowed the termination for good reason, which event (i) occurred at the request of a third party who has taken steps reasonably calculated to effect a change-in-control or (ii) otherwise arose in connection with or in anticipation of a change-in-control.
There are two forms of the KEESA. The KEESA for the CEO provides for payment of salary and annual incentive compensation of three years, as well as the actuarial equivalent of the additional retirement benefits he would have earned had he remained employed for three more years, continued medical, dental, and life insurance coverage for three years, outplacement services and financial planning counseling. The KEESA for all other executive officers provides for payment of two years of salary and annual incentive compensation, along with two years coverage pursuant to the other benefits set forth above. Any executive officer who receives compensation under the KEESA is restricted from engaging in competitive activity for a period of six months after termination and is required to maintain appropriate confidentiality relative to all company information. Following the amendment in
28
February 2021, the KEESA also provides that, if excise taxes would be imposed because of the golden parachute excise tax provisions of Code Sections 280G and 4999, payments to be made to the executive shall either be (A) paid in full or (B) reduced such that the value of the aggregate total payments that the executive is entitled to receive shall be one dollar ($1) less than the maximum amount which the executive may receive without becoming subject to the tax imposed by Section 4999 of the Code (or any successor provision) or which the company may pay without loss of deduction under Section 280G(a) of the Code (or any successor provision), whichever of clause (A) or (B) results in the receipt by the executive of the greatest benefit on an after-tax basis (taking into account applicable federal, state and local taxes and the excise tax).
For purposes of each KEESA, a “change-in-control” is deemed to have occurred if (1) any person (other than the company or any of its subsidiaries, a trustee or other fiduciary holding securities under any employee benefit plan of the company or any of its subsidiaries, an underwriter temporarily holding securities pursuant to an offering of such securities or a corporation owned, directly or indirectly, by our shareholders in substantially the same proportions as their ownership of stock in the company) is or becomes the beneficial owner, directly or indirectly, of 25% or more of our voting securities; or (2) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on July 31, 1999, constituted the Board of Directors and any new director whose appointment or election by the Board of Directors or nomination for election by our shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors on July 31, 1999 or whose appointment, election or nomination for election was previously so approved; or (3) our shareholders approve a merger, consolidation or share exchange of the company with any other corporation or approve the issuance of our voting securities in connection with a merger, consolidation or share exchange of the company, with limited exceptions; or (4) our shareholders approve a plan of complete liquidation or dissolution of the company or an agreement for the sale or disposition by us of all or substantially all of our assets (in one transaction or a series of related transactions within any period of 24 consecutive months), other than a sale or disposition by us of all or substantially all of our assets to an entity at least 75% of the combined voting power of the voting securities of which are owned by persons in substantially the same proportions as their ownership of the company immediately prior to such sale.
For purposes of each KEESA, “good reason” means that the executive officer has determined in good faith that any of the following events has occurred: (1) any breach of the KEESA by us other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that we promptly remedy; (2) any reduction in the executive officer’s base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the executive officer in effect at any time during the 180-day period prior to the change-in-control or, to the extent more favorable to the executive officer, those in effect after the change-in-control; (3) a material adverse change, without the executive officer’s prior written consent, in the executive officer’s working conditions or status with us from such working conditions or status in effect during the 180-day period prior to the change-in-control or, to the extent more favorable to the executive officer, those in effect after the change-in-control; (4) the relocation of the executive officer’s principal place of employment to a location more than 35 miles from the executive officer’s principal place of employment on the date 180 days prior to the change-in-control; (5) we require the executive officer to travel on business to a materially greater extent than was required during the 180-day period prior to the change-in-control; or (6) we terminate the executive officer’s employment after a change-in-control without delivering the required notice, in specified circumstances.
The following table describes the potential payments upon termination and a change-in-control. This table assumes the NEOs employment was terminated on December 31, 2024, the last day of our prior fiscal year and that the price per share of the company’s securities is the closing market price as of that date.
KEESA Benefits if Exercised at December 31, 2024 ($)
Name |
|
Salary and |
|
|
Value of |
|
|
Value of Unvested Performance Share Units (2) |
|
|
Retirement |
|
|
Welfare |
|
|
Total |
|
||||||
Kenneth C. Bockhorst |
|
|
5,229,000 |
|
|
|
2,256,346 |
|
|
|
7,688,276 |
|
|
|
143,056 |
|
|
|
110,401 |
|
|
|
15,427,079 |
|
Robert A. Wrocklage |
|
|
1,530,000 |
|
|
|
871,369 |
|
|
|
1,491,408 |
|
|
|
50,728 |
|
|
|
100,102 |
|
|
|
4,043,607 |
|
Sheryl L. Hopkins |
|
|
990,000 |
|
|
|
240,968 |
|
|
|
492,965 |
|
|
|
35,389 |
|
|
|
82,060 |
|
|
|
1,841,382 |
|
Kimberly K. Stoll |
|
|
899,000 |
|
|
|
320,174 |
|
|
|
534,669 |
|
|
|
32,955 |
|
|
|
99,271 |
|
|
|
1,886,069 |
|
Richard Htwe |
|
|
868,000 |
|
|
|
196,211 |
|
|
|
294,423 |
|
|
|
33,005 |
|
|
|
106,742 |
|
|
|
1,498,381 |
|
29
Compensation and Human Resources Committee Report
The Compensation and Human Resources Committee has reviewed and discussed the above Compensation Discussion and Analysis with management and, based on such review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the annual report on Form 10-K for the fiscal year ended December 31, 2024.
|
|
|
Todd A. Adams, Chair |
|
Henry F. Brooks |
|
James W. McGill |
|
Glen E. Tellock |
Director Compensation
Compensation Philosophy and Role of the Compensation and Human Resources Committee
Our compensation policies for directors are designed to attract and retain the most qualified individuals to serve on the Board of Directors. We believe that our director compensation is competitive relative to the market. Director compensation is determined by the Compensation Committee with approval by the full Board of Directors, and equity programs such as our Director Stock Grant Plans, are approved by shareholders.
Recommendations regarding outside director compensation are made by the Compensation Committee. The Compensation Committee refers to independent director compensation studies provided by the National Association of Corporate Directors ("NACD") to obtain relevant market data used in developing compensation recommendations. All decisions on director compensation levels and programs are made by the full Board of Directors based on the recommendations provided by the Compensation Committee.
Director Compensation Table and Components of Director Compensation
The following table summarizes the director compensation for calendar 2024 for all of the non-employee directors. Mr. Bockhorst did not receive any additional compensation for his services as a director beyond the amounts previously disclosed in the Summary Compensation Table.
Director Compensation for 2024 ($)
Name |
|
Fees Earned |
|
|
Stock Awards |
|
|
Total |
|
|||
Todd A. Adams |
|
|
71,000 |
|
|
|
83,964 |
|
|
|
154,964 |
|
Henry F. Brooks |
|
|
64,000 |
|
|
|
83,964 |
|
|
|
147,964 |
|
Melanie K. Cook |
|
|
64,000 |
|
|
|
83,964 |
|
|
|
147,964 |
|
Xia Liu |
|
|
74,000 |
|
|
|
83,964 |
|
|
|
157,964 |
|
James W. McGill |
|
|
64,000 |
|
|
|
83,964 |
|
|
|
147,964 |
|
Tessa M. Myers |
|
|
64,000 |
|
|
|
83,964 |
|
|
|
147,964 |
|
James F. Stern |
|
|
64,000 |
|
|
|
83,964 |
|
|
|
147,964 |
|
Glen E. Tellock |
|
|
81,000 |
|
|
|
83,964 |
|
|
|
164,964 |
|
30
As a result of the review of NACD data and to align director pay to market practices, the Compensation Committee recommended, and the Board approved, the following increases in director compensation for 2025:
Stock Ownership Guidelines. Non-employee directors are required to own four-times their annual Board retainer in company stock within five years of first being elected to the Board. As of February 28, 2025, all non-employee directors met this requirement, or are within the permitted five-year window to achieve the requirement. We also prohibit our non-employee directors from engaging in short sales of our common stock, holding our common stock in a margin account, hedging, or pledging our common stock as collateral for a loan.
Badger Meter Deferred Compensation Plan for Directors. Directors may elect to defer their compensation, in whole or in part, in a stock and/or cash account of the Badger Meter Deferred Compensation Plan for Directors, with all such amounts paid in cash upon ultimate distribution from the plan.
Our non-employee directors do not participate in any incentive plans or pension plans, and receive no perquisites, benefits or other forms of compensation, other than as disclosed above. Members are compensated for direct expenses incurred for travel, lodging and other normal reimbursable expenses associated with Board meeting attendance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no Compensation Committee interlocks or insider participation.
ADVISORY VOTE TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS
Our Board of Directors is committed to and recognizes the importance of responsible executive compensation practices. We have designed our executive compensation program to attract, motivate, reward, and retain senior management required to achieve our corporate objectives and to align compensation practices with our shareholders’ interest.
As required by Section 14A of the Securities Exchange Act, we provide our shareholders with an opportunity to provide an advisory vote to approve the executive compensation of our named executive officers, and currently hold this vote on an annual basis. This annual advisory vote, commonly referred to as “Say on Pay”, is not binding. However, our Board of Directors and the Compensation Committee will review and consider the outcome of the advisory vote when making future compensation decisions for our executive officers. Shareholders are asked to vote on the following resolution:
RESOLVED, that the compensation paid to our named executive officers (NEOs), as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, and compensation tables and any related material disclosed above in this Proxy Statement, is hereby APPROVED.
In addition to reviewing the summary below, we encourage you to carefully review the information on our compensation policies and decisions regarding our NEOs presented in the Compensation Discussion and Analysis as well as the information contained in the preceding Compensation Tables.
31
We employ a strong pay-for-performance philosophy for our entire executive team, including our NEOs. Our compensation philosophy and compensation programs have resulted in compensation that reflects our financial results and other performance factors described in the Compensation Discussion and Analysis, as well as stock price performance. We achieve these objectives through the following:
Furthermore, we do not currently use employment contracts with our executive officers nor provide severance protection other than following a change-in-control of our company. We believe our change-in-control protections are in the best interests of our shareholders. Further, we maintain double-trigger protection (requiring a change-in-control and subsequent employment termination to receive change-in-control severance) following a change-in-control for any executive officer, including our NEOs.
If you submit a proxy to us, it will be voted as you direct. If, however, you submit a proxy without specifying voting directions, it will be voted in favor of the non-binding advisory resolution above. If your shares are held in “street name” by your broker, nominee, fiduciary or other custodian, your broker, nominee, fiduciary or other custodian may only vote your shares on this proposal with your specific voting instructions. Therefore, we urge you to respond to your brokerage firm so that your vote will be cast. The advisory vote to approve compensation of NEOs will be approved if the votes "FOR" exceed the votes "AGAINST." Abstentions will have no effect on this Proposal. We intend to hold the next advisory vote on the compensation of our NEOs at the annual meeting in 2026.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE NON-BINDING ADVISORY RESOLUTION ABOVE.
32
CEO PAY RATIO
Our principal executive officer in 2024 was Kenneth C. Bockhorst, Chairman, President and CEO. The Compensation Committee reviewed a comparison of the CEO’s total pay in 2024 to the median total pay of all our employees as described below. As disclosed in the Summary Compensation Table, the CEO's total compensation for 2024 was $5,084,577, which was approximately 125 times the median total pay of employees of $40,560.
Our CEO to median employee pay ratio is calculated in accordance with SEC rules (Item 402(u) of Regulation S-K). As permitted, we used base salary as our consistently applied compensation measure to determine our median employee pay from our employee population, excluding our CEO, as of December 31, 2024. We included all employees, whether employed on a full-time, part-time, or seasonal basis. For hourly employees, the annual base salary was calculated using a reasonable estimate of hours worked and their hourly wage rate. We annualized base salaries for employees who were employed as of December 31, 2024 but were not employed for the full calendar year. For our non-U.S. employees, we used the foreign exchange rates applicable at December 31, 2024 to convert their base salary into U.S. dollars. We did not make any other assumptions, adjustments, or estimates with respect to base salary pay. Once we had identified our median employee using base salary, we calculated the median employee’s total annual compensation for purposes of the ratio by applying the rules for calculating total compensation under the Summary Compensation Table.
PAY VERSUS PERFORMANCE
The company is providing the following information to comply with the U.S. Securities and Exchange Commission (SEC) final rules for pay-versus-performance disclosure mandated as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.
Pay for Performance Table ($)
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|
Value of Initial Fixed $100 Investment Based On |
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|
|
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|||||||||||
Year |
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Summary Compensation Table Total for CEO ($) (1) |
|
|
Compensation Actually Paid to CEO ($) (1) (2) |
|
|
Average Summary Compensation Table Total for non-CEO NEOs ($) (1) |
|
|
Average Compensation Actually Paid to non-CEO NEOs ($) (1) (3) |
|
|
Total Shareholder Return ($) |
|
|
Peer Group Total Shareholder Return ($) (4) |
|
|
Net Income ($ in 000s) |
|
|
Company Selected Measure: |
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2024 |
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2023 |
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|
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|
|
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|
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2022 |
|
|
|
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||||||||
2021 |
|
|
|
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|
|
|
|
|
|
|
|
|
|
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2020 |
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33
Description of Relationship Between Pay and Performance
Overview
We strive to compensate our executive officers at market competitive levels, with the opportunity to earn above-median compensation for above-market performance, through programs that emphasize variable, performance-based incentive compensation in the form of annual cash payments, equity-based awards that increase or decrease in value with changes in the stock price, and a long-term incentive program ("LTIP") utilizing financial targets measured over a three-year performance period. To that end, total executive compensation is tied to company performance and is structured to ensure that, due to the nature of our business, there is an appropriate emphasis on balancing critical annual objectives and long-term strategy.
Background and Comparability Between Years
In 2020, the LTIP was comprised of 30% restricted stock awards, 30% stock option awards and 40% long term cash-based incentive. In addition, compensation actually paid (as defined) in 2020 include a temporary base salary reduction for all NEOs of 20% for a nine week period in response to the COVID-19 pandemic.
In 2021, the LTIP was revised to enhance the emphasis on performance-based equity compensation. For the periods 2021-2023, it was comprised of restricted stock awards and performance share units, whereby 70% of the CEO's and 50% of the other NEOs LTIP compensation is variable and based on the achievement of objective financial performance criteria as described in the Compensation Discussion and Analysis.
In 2024, the Compensation Committee approved an increase to the weighting of the performance-based equity component of LTIP compensation, reflecting a mix of 75%/25% PSUs to RSAs for the CEO and 60%/40% for the other NEOs. This change continued to advance the Board's emphasis on aligning incentive pay with performance.
34
Overall Pay Versus Performance
The following graphs present the relationships between CEO and other NEO average Compensation Actually Paid ("CAP", as defined) and the company's Total Shareholder Return ("TSR"), Net Income and EBITDA performance. In summary, the company's CAP appears strongly aligned with our performance and the economic interests of our shareholders.
35
Relationship Between Company and Peer TSR
As reflected in the above table, the company's TSR has consistently outperformed the relevant peer group's TSR over the performance periods which is reflective of the company's sales outperformance in relation to competitors with its differentiated portfolio of water management solutions, as well as its consistent operating execution during the COVID pandemic and subsequent macro challenges of supply chain and inflation. In addition, the company has increased its annual dividend rate for 32 consecutive years, which is positively reflected in the TSR calculation which includes the reinvestment of dividends.
36
Other Performance Measures
Inclusive of the company selected financial performance measure included in the table above, the following performance measures are considered to be important in evaluating the link between executive compensation and company performance:
|
Other Performance Measures |
These measures are applicable for the CEO as well as the non-CEO NEOs and are included within the company's short and long term performance plans.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information as of December 31, 2024 regarding total shares subject to outstanding stock options, warrants and rights and total additional shares available for issuance under our existing equity compensation plan.
Plan Category |
|
Securities to be |
|
|
Weighted-Average |
|
|
Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column 1) (#) |
|
|||
Equity compensation plans approved by security holders |
|
|
|
|
|
|
|
|
|
|||
2021 OMNIBUS INCENTIVE PLAN |
|
|
143,914 |
|
|
|
50.12 |
|
|
|
872,736 |
|
Equity compensation plans not approved by security holders |
|
None |
|
|
N/A |
|
|
N/A |
|
|||
Total |
|
|
143,914 |
|
|
|
50.12 |
|
|
|
872,736 |
|
37
AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee (“Audit Committee”) is established by the Board of Directors (“Board”) for the primary purpose of assisting the Board in overseeing, and assuring the integrity of, the company’s financial statements, the company’s compliance with legal and regulatory requirements, the Board’s assessment and management of risk, the independent auditor’s qualifications and independence, the performance of the internal audit function and the work of the independent auditors, and the systems of disclosure and internal controls regarding finance, accounting, legal compliance and ethics that management and the Board have established. The Audit Committee meets at least quarterly, reports to the Board regularly, and met six times in 2024.
The Audit Committee is vested with all responsibilities and authority required by Rule 10A-3 under the Securities Exchange Act of 1934. It is comprised of the four members of the Board of Directors named below, each of whom is independent as required by the NYSE and U.S. SEC rules currently in effect. The Board evaluates the independence of the directors on at least an annual basis. Of the four members of the Audit Committee, Ms. Cook and Ms. Liu have been determined by the Board to be audit committee financial experts as defined by SEC rules. The Audit Committee has the responsibility for the appointment, retention and oversight of the company's independent auditor, the selection of its lead engagement partner, the evaluation of its qualifications, independence and performance, the approval and negotiation of all audit and other engagement fees and the periodic consideration and impact of independent auditor rotation. The Audit Committee acts under a written charter available on the company’s website at investors.badgermeter.com.
Management of the company has the primary responsibility for the preparation of financial statements and the reporting process, including the systems of internal controls. Management represented to the Audit Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United States. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements as of and for the year ended December 31, 2024, including discussing the propriety of the application of accounting principles, the reasonableness of significant judgments and estimates used in the preparation of the financial statements, and the clarity of disclosures in the financial statements. The Audit Committee also reviewed and discussed the audited 2024 financial statements with our independent auditors, Ernst & Young LLP, who is responsible for expressing an opinion on the conformity of the audited financial statements with U.S. GAAP.
Additionally, the Audit Committee has done, among other things, the following:
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2024 for filing with the U.S. SEC.
All members of the Audit Committee have approved the foregoing report.
|
Xia Liu, Chair Melanie K. Cook |
|
Tessa M. Myers |
|
James F. Stern |
|
|
38
PRINCIPAL ACCOUNTING FIRM FEES
Fees for professional services provided by the independent registered public accounting firm in each of the last two fiscal years are as follows:
|
|
2024 |
|
|
2023 |
|
||
Audit Fees(1) |
|
$ |
981,000 |
|
|
$ |
987,100 |
|
Tax Fees |
|
— |
|
|
— |
|
||
All other Fees |
|
— |
|
|
— |
|
||
Total Fees |
|
$ |
981,000 |
|
|
$ |
987,100 |
|
As part of its duties, the Audit Committee pre-approves services provided by Ernst & Young LLP. Pursuant to the Audit Committee Charter, the Audit Committee must pre-approve all auditing services and permissible non-audit services to be provided. In addition, the Audit Committee Charter provides that the Audit Committee may delegate to one or more of its members the authority to grant such pre-approvals with any such pre-approval reported to the Audit Committee at its next regularly scheduled meeting. During the fiscal year ending December 31, 2024, all of the audit fees and non-audit services provided by the company’s independent registered public accounting firm were pre-approved by the Audit Committee. In selecting Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024, the Audit Committee has reviewed all 2024 audit services provided by Ernst & Young LLP to make sure they were compatible with maintaining the independence of Ernst & Young LLP. There were no additional non-audit services performed in 2024.
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee selected Ernst & Young LLP, independent registered public accounting firm, to audit the consolidated financial statements of the company for the year ending December 31, 2025, as well as its internal control over financial reporting as of December 31, 2025, and requests that the shareholders ratify such selection. If shareholders do not ratify the selection of Ernst & Young LLP, the Audit Committee will reconsider the selection.
In determining whether to reappoint Ernst & Young LLP as the company’s independent registered public accounting firm, the Audit Committee took into consideration a number of factors, including the following:
39
Based on the Audit Committee’s evaluation, the Audit Committee believes that Ernst & Young LLP is independent and that it is in the best interests of the company and its shareholders to retain Ernst & Young LLP to serve as the independent registered public accounting firm.
Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.
If you submit a proxy to us, it will be voted as you direct. If, however, you submit a proxy without specifying voting directions, it will be voted in favor of ratifying Ernst & Young LLP as the company’s independent registered public accounting firm. If your shares are held in “street name” by your broker, nominee, fiduciary or other custodian, your broker, nominee, fiduciary or other custodian may choose to vote for you on the ratification of the appointment of Ernst & Young LLP as independent registered public accountants for the company, even if you do not provide voting instructions to such nominee. The Audit Committee’s selection of Ernst & Young LLP as the company's independent registered public accounting firm for the year ending December 31, 2024 will be ratified if the votes “FOR” exceed the votes “AGAINST.” Abstentions will have no effect on this Proposal. We do not anticipate any broker non-votes on this Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
40
A shareholder wishing to include a proposal in the Proxy Statement for the 2026 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (referred to as Rule 14a-8), must forward the proposal to our Board of Directors, c/o the Secretary with a copy via email to Investor Relations ([email protected]) by November 17, 2025.
A shareholder who intends to present business, other than a shareholder’s proposal pursuant to Rule 14a-8, at the 2026 Annual Meeting of Shareholders (including nominating persons for election as directors) must comply with the requirements set forth in our Restated By-Laws. Among other things, to bring business before an annual meeting, a shareholder must give written notice thereof, complying with the Restated By-Laws, to our Board of Directors, c/o the Secretary not less than 60 days and not more than 90 days prior to the second Saturday in the month of April (that is between January 11, 2026 and February 10, 2026), subject to certain exceptions if the annual meeting is advanced or delayed a certain number of days. If we do not receive the notice within that time frame, then the notice will be considered untimely and we will not be required to present such proposal at the 2026 Annual Meeting of Shareholders. In addition to satisfying the requirements under our Restated By-Laws, shareholders who intend to solicit proxies in support of director nominees other than the company’s nominees must provide notice that sets forth the information required by Rule 14a-19(b) under the Securities Exchange Act of 1934. If the Board of Directors chooses to present such proposal at the 2026 Annual Meeting, then the persons named in proxies solicited by the Board of Directors for the 2026 Annual Meeting may exercise discretionary voting power with respect to such proposal.
OTHER MATTERS
The cost of solicitation of proxies will be borne by us. Brokers, nominees, fiduciaries or other custodians who hold stock in their names and who solicit proxies from the beneficial owners will be reimbursed by us for out-of-pocket and reasonable clerical expenses.
The Board of Directors does not intend to present at the Annual Meeting any matters other than those set forth herein and does not presently know of any other matters that may be presented at the Annual Meeting by others. However, if any other matters should properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxy to vote said proxy on any such matters in accordance with their best judgment.
We have filed an Annual Report on Form 10-K with the Securities and Exchange Commission for our fiscal year ended December 31, 2024. The information under the caption “Stock Compensation” in Note 5 to the Consolidated Financial Statements contained in the Annual Report on Form 10-K and the information under the caption “Employee Benefit Plans” in Note 7 to the Consolidated Financial Statement contained in the Annual Report on Form 10-K is incorporated by reference into this Proxy Statement. The Form 10-K is posted on our website at investors.badgermeter.com. We will provide a copy of the Annual Report on Form 10-K without exhibits to each person who is a record or beneficial holder of shares of common stock on the record date for the Annual Meeting. We will provide a copy of the exhibits to the Annual Report on Form 10-K without charge to each person who is a record or beneficial holder of shares of common stock on the record date for the Annual Meeting who submits a written request for it. Requests for copies of the Annual Report on Form 10-K should be addressed to Secretary, Badger Meter, Inc., 4545 West Brown Deer Road, P.O. Box 245036, Milwaukee, WI 53224.
Pursuant to the rules of the SEC, services that deliver our communications to shareholders that hold their stock through a bank, broker or other holder of record may deliver to multiple shareholders sharing the same address a single copy of our Annual Report on Form 10-K and Proxy Statement to shareholders. Upon written or phone request, we will promptly deliver a separate copy of the Annual Report to shareholders and/or Proxy Statement to any shareholder at a shared address to which a single copy of each document was delivered, or a single copy to any shareholders sharing the same address to whom multiple copies were delivered. Shareholders may notify us of their requests by writing or calling the Secretary, Badger Meter, Inc., 4545 West Brown Deer Road, P.O. Box 245306, Milwaukee, WI, 53224; 414-355-0400.
By Order of the Board of Directors |
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|
|
|
|
William R. A. Bergum, |
|
Secretary |
|
March 17, 2025To Sign up
41
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 01) Todd A. Adams )2) Kenneth C. Bockhorst 03) Henry F. Brooks 04) Melanie K. Cook 05) Gale E. Klappa 06) James W. McGill 07) Tessa M. Myers 08) James F. Stern 09) Glen E. Tellock The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. ADVISORY VOTE TO APPROVE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS. 3. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR 2022. The Board of Directors recommends you vote AGAINST proposal 4. 4. SHAREHOLDER PROPOSAL REQUESTING A REPORT ON BOARD RACIAL EQUITY. For Against Abstain NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such, Joint owners should each sign personally. All holders much sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date 0000536035_1 R1.0.0.24
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and 10K Wrap are available at www.proxyvote.com BADGER METER, INC. Annual Meeting of Shareholders April 29, 2022 8:30 AM This proxy is solicited by the Board of Directors The undersigned hereby appoints Kenneth C. Bockhorst, Robert A. Wrocklage and William R. A. Bergum, or any of them, as proxies for the undersigned at the Annul Meeting of Shareholders of Badger Meter, Inc. to be held at Badger Meter’s headquarters in the Customer Experience Center, located at 4545 West Brown Deer Road, Milwaukee, Wisconsin 53223 on Friday, April 29, 2022 at 8:30 a.m. local time, to vote the shares of stock which the undersigned is entitled to vote at said Meeting or any adjournment or postponement thereof, hereby revoking any other proxy executed by the undersigned for such Meeting. The undersigned acknowledges receipt of the Notice of Annual Meeting of Shareholders and the proxy Statement. This proxy, when properly executed, will be voted I the manner directed herein. If no such direction is made, this proxy will be voted “FOR ALL NOMINEES” identified in Proposal 1, “FOR” Proposals 2 and 3, and “AGAINST” Proposal 4. This proxy is being solicited on behalf of the Board of Directors. Continued and to be signed on reverse side