Gatx Corp DEF 14A, filed Mar 15, 2024
Gatx Corp (GATX)
About this DEF 14A
Gatx Corp filed this DEF 14A on March 15, 2024.
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. )
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March 15, 2024
Dear Shareholders:
On behalf of the Board of Directors, I invite you to attend GATX Corporation’s 2024 Annual Meeting of Shareholders on Friday, April 26, 2024 at 9:00 a.m. Central Time. This year’s annual meeting will be a virtual meeting of shareholders. You will be able to attend the annual meeting online, vote your shares electronically, and submit your questions during the annual meeting by visiting https://meetnow.global/MLSYNVU. The proxy materials for the meeting, which are available for viewing and printing at www.envisionreports.com/GATX, include a notice setting forth the items we expect to address at the meeting, our Proxy Statement, and a copy of our 2023 annual report to our shareholders.
In 2023, GATX’s net income was $259.2 million, or $7.12 per diluted share. Each of our business units contributed to our excellent financial results for the year. Rail North America’s lease revenues increased $62.8 million, or over 7%, from the prior year and exceeded our expectations, as we capitalized on strong demand for existing assets and a favorable railcar leasing environment. Our commercial team did an outstanding job achieving higher lease renewal rates and longer lease terms while maintaining over 99% fleet utilization.
Our Rail International businesses performed well. Fleet utilization in both Europe and India was solid at year-end, and Rail Europe continued to experience higher renewal lease rates compared to expiring rates for most railcar types throughout the year. Strong economic growth continued to support high demand for our railcars in India. In Portfolio Management, the Rolls-Royce and Partners Finance affiliates (“RRPF”) outperformed our original expectation due to the strong recovery in global passenger air travel. Demand for aircraft spare engines within the RRPF portfolio was very strong, and revenues from GATX wholly owned engines exceeded our expectations for the year.
Even in a higher interest rate environment, we identified attractive opportunities in both primary and secondary markets to grow our global asset base, which helps build the foundation for our future success. In addition to placing deliveries of new railcars under our multi-year supply agreements in North America, we identified incremental opportunities to acquire railcars in the secondary market. Rail North America’s investment volume totaled $977 million in 2023 as we acquired over 5,900 new and used railcars. In addition, we added a combined total of over 4,600 new railcars in Europe and India, bringing Rail International’s full-year investment volume to over $380 million. Turning to Portfolio Management, we increased our direct investment in aircraft spare engines through GATX Engine Leasing by acquiring 10 engines for over $260 million. In total, our 2023 investment volume was over $1.6 billion.
Your vote is very important. Whether or not you plan to attend the virtual annual meeting, please ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by internet or telephone or by signing and returning your proxy card, if requested, in the envelope provided. On behalf of the Board of Directors and management, I would like to thank you for your continued support of GATX.
| Sincerely, |
| President and Chief Executive Officer |
Important Notice Regarding the Availability of Proxy Materials
for the Shareholders’ Meeting to be held on April 26, 2024.
The following materials are available at www.envisionreports.com/GATX:
| ● | The Notice of Annual Meeting of Shareholders to be held on April 26, 2024; |
| ● | GATX Corporation 2024 Proxy Statement; and |
| ● | GATX Corporation Annual Report to Shareholders for the year ended December 31, 2023. |
A Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) or the proxy statement, proxy card and annual report are being sent to shareholders beginning on or about March 15, 2024.
Notice of Annual |
GATX 2024 Annual Meeting of Shareholders
Date: | Friday, April 26, 2024 |
| Items of Business: ● Election of 9 Directors ● Adoption of Advisory Resolution to Approve Executive Compensation ● Ratification of Independent Registered Public Accounting Firm |
Time: | 9:00 a.m. Central Time | | |
Place: | The annual meeting will be held as a live audio webcast at | | |
Record Date: | Close of business on March 1, 2024 | | |
Advance Voting Methods and Deadlines
Internet and telephone voting are available 24 hours a day, seven days a week up to these deadlines: ● Registered Shareholders—closing of the polls at the virtual annual meeting ● Beneficial Owners—11:59 p.m. Eastern Time on April 25, 2024 (after which voting is available online at the virtual annual meeting if properly registered in advance) ● Participants in GATX 401(k) Plans—8:00 a.m. Eastern Time on April 24, 2024 |
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Go to the website identified on the Notice of Internet Availability or proxy card ● Enter the Control Number printed on the Notice of Internet Availability or proxy card ● Follow the instructions on the screen. | | Call the toll-free number identified on the proxy card ● Enter the Control Number printed on the Notice of Internet Availability or proxy card ● Follow the recorded instructions. | | Mark your selections on the proxy card A proxy card may be requested by following the instructions on the Notice of Internet Availability ● Date and sign your name exactly as it appears on the proxy card ● Promptly mail the proxy card in the enclosed postage-paid envelope Return promptly to ensure that it is received before the deadlines stated above. | | You can vote online at the virtual annual meeting ● Follow the instructions on the meeting website: https://meetnow.global/MLSYNVU | |||||
By Order of the Board of Directors,
Executive Vice President, General Counsel and
Corporate Secretary
Table of Contents
TABLE OF CONTENTS
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— Process for Determining Executive Compensation (Including NEOs) | 52 |
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Potential Payments upon Termination or Change of Control Table | 61 |
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Proxy Summary
The Board of Directors (the “Board”) of GATX Corporation (“GATX”, the “Company”, “we”, “us”, or “our”) is soliciting proxies for use at the Company’s Annual Meeting of Shareholders to be held on Friday, April 26, 2024 (the “Annual Meeting”). The Notice of Internet Availability or the proxy statement, proxy card and annual report are being mailed to shareholders beginning on or about March 15, 2024.
This summary includes information found elsewhere in this Proxy Statement and does not contain all of the information you should consider in voting. Please read this Proxy Statement carefully before voting your shares.
Annual Meeting of Shareholders
When g April 26, 2024, 9:00 a.m. Central Time | |
Where g The meeting will be held virtually via a live audio webcast at https://meetnow.global/MLSYNVU | |
You may vote if you were a shareholder of record at the close of business on March 1, 2024. We hope that you will be able to attend the Annual Meeting virtually, but if you cannot do so, it is important that your shares be represented.
We urge you to read the Proxy Statement carefully and to vote your shares in accordance with the Board’s recommendations by internet or telephone or by signing and returning the proxy card (if requested) in the postage-paid envelope provided, whether or not you plan to virtually attend the Annual Meeting.
Voting Recommendations of the Board
Item |
| Description |
| For |
| Against |
| Page |
1 | | Election of directors | | | | | | 19 |
2 | | Adoption of advisory resolution approving our executive compensation | | | | | | 31 |
3 | | Ratification of independent registered public accounting firm | | | | | | 70 |
You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting.
Voting at the Annual Meeting (page 79)
If your shares are registered in your name with our transfer agent, you may vote virtually at the Annual Meeting. If you hold your shares through a broker, bank, or other nominee, you will not be able to vote virtually at the Annual Meeting unless you first obtain a legal proxy from your nominee. For further information, please see How do I vote? on page 80.
Questions and Answers (page 79)
We encourage you to review the Questions and Answers about the Annual Meeting beginning on page 79 for answers to common questions about the rules and procedures surrounding the proxy and annual meeting process.
PROXY SUMMARY
CORPORATE GOVERNANCE (PAGE 10)
GATX is committed to strong corporate governance, which promotes the long-term interests of shareholders and strengthens Board and management accountability. Highlights of our corporate governance practices include:
✓ | | Annual Election of Directors | | ✓ | | Annual CEO Succession Planning by Full Board |
✓ | | Majority Voting for Directors | | ✓ | | Risk Oversight by Full Board and Committees |
✓ | | Resignation Policy for Directors who Fail to Receive a Majority Vote | | ✓ | | Annual Board and Committee Self-Evaluations |
✓ | | 8 of 9 Director Nominees are Independent | | ✓ | | No Poison Pill |
✓ | | Diversity of Experience and Skills Among Directors | | ✓ | | Anti-Hedging/Anti-Pledging Policies for Directors, Officers, and Employees |
✓ | | Regular Director Skills Assessment and Board Succession Planning | | ✓ | | Share Ownership Requirements for Directors and Executive Officers |
✓ | | Independent Board Chair | | ✓ | | Clawback Policy |
✓ | | Independent Audit, Compensation, and Governance Committees | | ✓ | | Annual “Say-on-Pay” Advisory Vote |
✓ | | Executive Sessions of Independent Directors After Each Board Meeting | | ✓ | | Active Shareholder Engagement Program |
DIRECTOR NOMINEES (PAGE 22)
The following table provides summary information about each director nominee (with age shown as of Annual Meeting date).
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| Other Public |
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| | | | Director | | | | Committee | | Company |
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Name | | Age | | Since | | Principal Occupation | | Memberships1 | | Boards |
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Diane M. Aigotti* |
| 59 |
| 2016 |
| Retired; Former Executive Vice President, Managing Director and Chief Financial Officer, Ryan Specialty Group, LLC |
| A (Chair) |
| 1 | |
Anne L. Arvia* |
| 61 |
| 2009 |
| Principal, Strategic Transformation and Program Management, Cornerstone Advisors, LLC |
| A, C, G |
| 0 | |
Shelley J. Bausch* |
| 58 |
| 2023 |
| President, Global Industrial Coatings, Axalta Coating Systems Ltd. |
| A, G |
| 0 | |
John M. Holmes* |
| 47 |
| 2024 |
| Chairman, President and Chief Executive Officer, AAR CORP. |
| A |
| 1 | |
Robert C. Lyons |
| 60 |
| 2022 |
| President and Chief Executive Officer, GATX Corporation |
| None |
| 1 | |
James B. Ream* |
| 68 |
| 2008 |
| Retired; Former Senior Vice President – Operations, American Airlines |
| CH |
| 0 | |
Adam L. Stanley* |
| 50 |
| 2019 |
| Retired; Former Executive Vice President and Chief Digital and Technology Officer, Cushman and Wakefield |
| A, G |
| 0 | |
David S. Sutherland* |
| 74 |
| 2007 |
| Retired; Former President and Chief Executive Officer, IPSCO, Inc. |
| C (Chair) |
| 1 | |
Paul G. Yovovich* |
| 70 |
| 2012 |
| Private Investor |
| C, G (Chair) |
| 0 | |
* | Independent Director |
| 1 | A = Audit Committee; C = Compensation Committee; G = Governance Committee; CH = Board Chair |
PROXY SUMMARY
EXECUTIVE COMPENSATION (PAGE 32)
We encourage you to review the Compensation Discussion and Analysis beginning on page 32 for information about our executive compensation program.
OUR EXECUTIVE COMPENSATION PROGRAM SUPPORTS OUR LONG-TERM FOCUS THROUGH INDUSTRY CYCLES
GATX is in the business of owning and leasing long-lived transportation assets. We are the leading global railcar lessor, leasing railcars in North America, Europe, and India. Most of our railcar leases are service-intensive leases under which we provide maintenance, engineering, administrative, and a variety of other value-added services. Railcar leasing accounted for a substantial majority of our 2023 revenues.
| ● | The Railcar Leasing Market is Highly Cyclical. The railcar leasing market in which GATX operates has historically been highly cyclical. Swings in railcar supply in North America typically result in significant volatility in industry-wide railcar utilization and lease rates over time. In addition, many of our rail customers also operate in cyclical markets, such as the chemical, fertilizer, food/agricultural, refined petroleum, transportation, and construction industries. This cyclical demand, combined with changing macroeconomic conditions, may also contribute to volatility in railcar utilization and lease rates. |
| ● | We Manage Our Business With a Long-Term View. Our operating assets have expected economic useful lives of up to 45 years. We proactively manage our business with a long-term view, which includes buying, leasing, maintaining, and selling long-lived assets into constantly changing business conditions over decades. It is critical that we make disciplined investment decisions that match the long lives of our assets. Through multiple industry and economic cycles, we have maintained a long-term focus on investing while executing numerous strategic initiatives to enhance our competitive advantage. |
| ● | Our Strategy is Consistent, but Our Tactics Vary With the Market Cycle. Our different approaches to fleet utilization risk, asset growth, lease rates and the lease term structure at different points in the railcar leasing market cycle enable GATX to generate strong long-term shareholder return. |
| - | In stronger railcar markets, we focus on increasing lease rates and lengthening lease terms to lock in attractive lease revenue as long as possible. We knowingly accept more utilization risk to maximize fleet value as we increase lease rates. At the same time, we may be more selective when making new railcar investments due to high railcar prices unless we identify assets that will earn correspondingly higher lease rates over the asset’s life. |
| - | Conversely, in weaker markets, when railcar prices tend to be lower, we seek to increase railcar investments. We also reduce lease rates to maintain asset utilization and shorten lease terms to position us to capture value when lease rates improve. |
| ● | Our Executive Compensation Program Supports This Long-Term Cyclical Approach and Strategy. Our executive compensation program is designed and managed by our Compensation Committee to motivate and retain management through each stage of the business cycle, including in both strong and weak railcar leasing markets. The Committee sets goals intended to align executive compensation with the appropriate achievement of our dual goals of growth and return at various points in the business cycle. Reflecting this focus, our Compensation Committee uses net income, excluding tax adjustments and other items (non-GAAP), as the performance measure in our annual incentive plan and three-year average LTI-adjusted return on equity (non-GAAP)1 and three-year cumulative investment volume as the performance measures in our long-term incentive plans. The Committee recognizes that our growth, investment, and returns will differ at various points in the cycle and sets the performance goals for each of these measures with the intent of focusing management on achieving results that will have the biggest impact on our ability to generate long-term shareholder value in light of where we are in the business cycle. |
| 1 | LTI-adjusted return on equity (non-GAAP) is calculated as GAAP net income divided by shareholders’ equity, excluding accumulated other comprehensive loss. |
PROXY SUMMARY
STRONG 2023 FINANCIAL AND OPERATIONAL RESULTS
In 2023, we executed our strategic priorities and capitalized on a favorable leasing environment to deliver excellent financial and operating results. At Rail North America, we successfully increased renewal lease rates and extended lease terms while maintaining high fleet utilization. Further, we identified attractive investment opportunities while also optimizing our diverse railcar fleet by selling railcars into an active secondary market. Our international railcar leasing businesses also performed well by achieving solid fleet utilization and increased renewal lease rates. Both Rail Europe and Rail India continued to grow and diversify their fleets during the year. In Portfolio Management, we continued to increase our direct investment in aircraft spare engines, while our Rolls-Royce and Partners Finance joint ventures delivered higher-than-expected earnings as international air travel recovered toward pre-pandemic levels. By executing on our dual growth and return strategies in a solid leasing market, we delivered against key metrics in our compensation plans and produced diluted earnings per share (GAAP) of $7.12 and a total shareholder return of 15.2% for the year. Set forth below is a summary of our key financial and operational achievements during 2023 (dollars in millions, except for per share amounts), as well as an illustration of our stock price performance over the past five years.
| 1 | For a reconciliation of net income, diluted earnings per share (EPS), and return on equity (ROE), excluding tax adjustments and other items (non-GAAP), to net income, diluted EPS, and ROE calculated in accordance with GAAP, as well as for information regarding why we believe these non-GAAP measures present useful information to investors, please see Exhibit A to this Proxy Statement. |
| 2 | Operational data in the charts relates to our Rail North America segment. |
| 3 | Excludes boxcars. |
4GATX CORPORATION - 2024 Proxy Statement
PROXY SUMMARY
Stock Performance (1)
| 1 | Total shareholder return calculation presented on an annualized basis and assumes dividends are reinvested. |
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GATX CORPORATION - 2024 Proxy Statement | 5 |
PROXY SUMMARY
LISTED BELOW ARE SOME KEY ACHIEVEMENTS DURING 2023:
Strong Earnings | | ● Net income of $259.2 million (net income, excluding tax adjustments and other items (non-GAAP), of $257.6 million).1 ● Diluted earnings per share of $7.12 (diluted earnings per share, excluding tax adjustments and other items (non-GAAP), of $7.07).1 ● Return on equity, and return on equity, excluding tax adjustments and other items (non-GAAP), of 12.0%.1 |
Excellent Operating Performance | | ● Capitalized on favorable market conditions by successfully increasing renewal lease rates and extending lease terms, locking in high-quality, long-term committed cash flow. ● Achieved railcar fleet utilization of over 99% at Rail North America. ● Invested over $1.6 billion in attractive transportation assets, including $977 million of investment volume at Rail North America. ● Successfully placed deliveries of new railcars under our multi-year supply agreements and identified incremental opportunities to acquire over 2,300 railcars for $324 million at Rail North America. ● Investment volume was over $380 million at Rail International, with a combined total of over 4,600 new railcars added in Europe and India. ● Increased our direct investment in aircraft spare engines by acquiring 10 engines for over $260 million. ● Invested $35 million in tank containers at Trifleet, further expanding our global transportation asset base. |
Returned Cash to Shareholders | | ● Increased our dividend for the 13th consecutive year to $2.20 (annualized) per share, completing our 105th year of uninterrupted dividends. ● Returned over $83 million to shareholders through dividends and share repurchases. |
| 1 | Our 2023 financial results calculated in accordance with GAAP include a net positive impact of $1.6 million, or $0.05 per diluted share, from tax adjustments and other items. For a reconciliation of net income, diluted earnings per share, and return on equity, excluding tax adjustments and other items (non-GAAP), to net income, diluted earnings per share, and return on equity calculated in accordance with GAAP, as well as for information regarding why we believe these non-GAAP measures present useful information to investors, please see Exhibit A to this Proxy Statement. |
6GATX CORPORATION - 2024 Proxy Statement
PROXY SUMMARY
OUR 2023 EXECUTIVE COMPENSATION PROGRAM REFLECTED OUR PAY FOR PERFORMANCE PHILOSOPHY
| ● | Substantial Majority of 2023 Pay Aligned with Performance. We design our pay programs to reward executives for positive Company performance and align with shareholder interests by having a significant portion of compensation composed of performance-based and long-term incentive awards. As shown in the charts below, 84% of our Chief Executive Officer’s (“CEO’s”) 2023 total target compensation and approximately 68% of the 2023 total target compensation for our other named executive officers listed in the 2023 Summary Compensation table (our “NEOs”) on page 55 were tied to annual and long-term incentives based on Company performance relative to objective, quantifiable financial goals or, with respect to stock options, will only have value if our stock price increases. |
Note: The percentages in the charts above reflect the base salary and incentive targets in effect for the NEOs for 2023, and thus are not intended to match amounts shown in the Summary Compensation Table or the Grant of Plan-Based Awards Table on pages 55 and 56, respectively.
| ● | Rigorous Incentive Targets. Our Compensation Committee carefully considered the market conditions affecting our business and set performance goals that we determined would be appropriately rigorous and difficult to achieve. Annual incentive awards for our NEOs are determined by comparing the Company’s actual performance against our budgeted net income for the year. Long-term incentives in the form of performance shares are earned based on achievement of two equally weighted measures of the three-year average LTI-adjusted return on equity (non-GAAP) (return measure) and the three-year cumulative investment volume (growth measure). Please see Compensation Discussion & Analysis – Performance Measures, Goal Setting, and Pay-for-Performance Alignment on page 42 for more information about how the Compensation Committee establishes our annual and long-term performance measures. |
| ● | Market Data Considered in Designing Competitive Compensation Program. Our Compensation Committee also reviewed market compensation levels and program design to provide a frame of reference for comparison in designing and setting competitive 2023 executive compensation commensurate with market, Company, and NEO performance, and the need to retain executive officers of outstanding ability and potential. |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PAGE 70)
We ask that our shareholders ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for 2024. Below is summary information about Ernst & Young LLP’s fees for services provided in 2023 and 2022.
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| 2023 |
| 2022 |
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Type of Fees | | ($) | | ($) |
|
Audit Fees |
| 3,236,000 |
| 2,920,000 | |
Audit-Related Fees |
| 159,500 |
| 147,000 | |
Tax Fees |
| 45,425 |
| 43,000 | |
All Other Fees |
| 2,000 |
| 5,200 | |
TOTAL Fees |
| 3,442,925 |
| 3,115,200 | |
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GATX CORPORATION - 2024 Proxy Statement | 7 |
Sustainability and Corporate Citizenship
AT GATX, OUR MISSION IS TO PROVIDE INNOVATIVE, UNPARALLELED SERVICE THAT ENABLES OUR CUSTOMERS TO TRANSPORT WHAT MATTERS SAFELY AND SUSTAINABLY WHILE CHAMPIONING THE WELL-BEING OF OUR EMPLOYEES AND COMMUNITIES. |
We are committed to growing our business in a sustainable and socially responsible manner, and we demonstrate our commitment through our programs and initiatives. Our Environmental, Social and Governance (“ESG”) Committee, a multi-functional team, meets periodically to develop, assess, and prioritize ESG topics that are important to our business and our stakeholders and to continually improve both the measurement and transparency of our ESG disclosures and practices. The Governance Committee of GATX’s Board has primary oversight responsibility for our ongoing and developing ESG efforts. We maintain a Sustainability page on our website (www.gatx.com) to highlight our environmental and social responsibility accomplishments and provide certain sustainability-related data to interested stakeholders.1
We believe in the importance of investing in our people and in our communities and operating our business sustainably and ethically, which we believe will create long-term value for our shareholders. Our ESG priorities center on four foundational pillars:
OUR ETHICS AND INTEGRITY | | OUR PEOPLE |
● Committing to operate our business consistent with the highest standards of honest and ethical behavior ● Championing a company-wide ethics and compliance program intended to provide our employees with resources and regular training to assist them in doing their jobs in an ethical manner while empowering them to raise questions and concerns without fear of retaliation | | ● Protecting the health and safety of our employees as our highest priority ● Fostering a diverse and inclusive workplace through our policies and programs ● Investing in our employees through training, professional development, benefit programs, and education |
OUR ENVIRONMENT | | OUR COMMUNITIES |
● Striving for the highest levels of asset quality and safety ● Implementing sustainable policies and practices designed to reduce energy use, decrease waste, increase recycling, and lower water consumption in our operations ● Assessing business, operational, and strategic risks associated with climate change and reporting on key sustainability-related data | | ● Investing in safety training and civic engagement initiatives to support the communities where we live and work ● Encouraging employee involvement in their local communities through volunteer projects and fundraising campaigns |
1 | Nothing on our website shall be deemed incorporated by reference into this Proxy Statement. |
SUSTAINABILITY AND CORPORATE CITIZENSHIP
PROGRAMS AND INITIATIVES
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Health and Safety | | | Our Environment | |||
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✓ GATX continues to strive to maintain the highest levels of safety by fostering a culture that makes safety a top priority. We utilize a continuous improvement methodology to identify safety risks and hazards and drive improvement initiatives. ✓ In addition to being recognized as a Responsible Care® Partner by the American Chemistry Council and the Chemical Industry Association of Canada, we are an active participant in the Transportation Community Awareness and Emergency Response (TRANSCAER®) initiative, a national outreach effort assisting communities to prepare for and respond to a possible hazardous materials transportation incident. In 2023, our Hearne, Texas facility was awarded the 2022 Facility Excellence Award from the American Chemical Council, and an employee at our Red Deer, Alberta facility was awarded the 2022 TRANSCAER Regional Service Award from CIAC. ✓ GATX offers training on the proper use of our equipment and on regulations that impact our business. We hold training events at customer locations across North America through the use of our TankTrainer™ mobile classroom. | | | ✓ We continue to make significant investments in railcars globally, resulting in the ability to transport more goods by rail versus roads, which lowers carbon emissions and reduces highway noise and congestion. ✓ GATX continues to publish Scope 1 and Scope 2 greenhouse gas emissions and continues to assess our full value chain impacts on the environment in an effort to identify opportunities to reduce those impacts. ✓ Beginning in 2021, GATX has issued an annual Sustainability Accounting Standards Board ("SASB") report, which can be found on our website, that discloses metrics related to relevant ESG factors. | |||
| | | Our Communities | |||
| | | ✓ GATX has a long history of supporting causes in communities where our employees live and work, and our company culture values strong corporate citizenship. ✓ In 2023, employees around the globe gave back in their communities, including by volunteering at food banks and feeding centers, picking up litter in natural areas, participating in charity runs and donating blood. ✓ GATX employees held a successful 2023 employee giving campaign and fundraiser for Make-A-Wish Illinois. We have partnered with Make-A-Wish Illinois for over 25 years and provided more than $5 million to help Make-A-Wish Illinois grant wishes to children with critical illnesses. Since 2008, GATX has been the largest corporate partner to the organization in the state of Illinois. ✓ Through our partnership with Big Shoulders Fund, which provides support to inner-city schools in Chicago, employees in Chicago participated in a company-wide service day to clean, beautify, and ready schools for the new school year. GATX employees have also mentored Big Shoulders students since 2016. | |||
Our People | | | | |||
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✓ To facilitate talent attraction and retention, we endeavor to foster a diverse and inclusive environment where employees feel valued and welcomed to be their best personally and professionally and with opportunities for our employees to grow and develop in their careers. ✓ We aim to design a hiring process that reaches across diverse talent pools, seeks to ensure that all candidates receive fair consideration, and aims to mitigate unconscious bias. ✓ We also aim to strengthen our culture of diversity and inclusion through a variety of projects and processes, including a Day of Understanding for employees in North America that includes workshops, panels, and speakers on diversity and inclusion. ✓ We support our employees’ learning and career goals with a multi-pronged approach with training for emerging leaders and people managers, as well as a wide array of e-learning options. ✓ We conduct an annual compensation analysis that seeks to achieve pay equity across gender, race, and ethnicity for professional, managerial, and executive level positions. | | | | |||
Proxy Statement
CORPORATE GOVERNANCE
Board of Directors
The Board of Directors provides oversight, strategic direction, and counsel to management regarding the business, affairs, and long-term interests of GATX and our shareholders. Its responsibilities include the following:
| ● | reviewing and approving our major financial objectives, strategic and operating plans, strategic transactions with third parties, and other significant actions |
| ● | overseeing the conduct of our business |
| ● | assessing business risks to evaluate whether any changes to our business, strategy, or risk management practices may be warranted |
| ● | overseeing our processes for maintaining the integrity of our financial statements and other public disclosures |
| ● | overseeing compliance with law and ethical standards |
GATX has a long-standing commitment to strong corporate governance and ethical standards. Demonstrating this commitment, the Board has adopted the GATX Corporate Governance Guidelines, Code of Business Conduct and Ethics, and Code of Ethics for Senior Company Officers, as well as charters for each of the Board’s committees. These documents constitute the foundation of our corporate governance structure and are available on our website (www.gatx.com) in the Investor Relations section under “Governance.”
The Board and its committees meet throughout the year on an established schedule and hold special meetings from time to time as appropriate. Following each meeting, the Board’s independent directors meet in executive sessions without the Chief Executive Officer or other members of management present. The independent Chair of the Board serves as Chair of the executive sessions of the Board.
The Board met 10 times during 2023, and each director nominee attended at least 75% of the meetings of the Board and the committees on which he or she served during the year. We encourage all directors to attend the 2024 Annual Meeting of Shareholders, and in 2023 all directors then serving on the Board attended the annual meeting.
Board Independence
In accordance with the listing standards of the New York Stock Exchange (“NYSE”), our Corporate Governance Guidelines provide that a majority of members of the Board of Directors must qualify as independent. The Board evaluates director independence in accordance with the independence requirements specified in the NYSE listing standards. A director may not qualify as independent unless the Board affirmatively determines that the director has no material relationship with GATX other than as a member of the Board. The Board no longer has categorical standards of materiality for independence purposes apart from those set forth in the NYSE listing standards.
In accordance with the NYSE listing standards, and considering all relevant facts and circumstances, the Board has made an affirmative determination, based on the recommendation of the Governance Committee, that none of the following directors has a material relationship with GATX other than as a member of the Board and that all of the following directors are independent: Diane M. Aigotti, Anne L. Arvia, Shelley J. Bausch, John M. Holmes, James B. Ream, Adam L. Stanley, David S. Sutherland, Stephen R. Wilson, and Paul G. Yovovich.
CORPORATE GOVERNANCE
Board Leadership Structure
Our By-Laws afford the Board flexibility to separate or combine the positions of Chair of the Board and Chief Executive Officer based on particular circumstances. When the two positions are combined (or the Chair is not otherwise independent), then the independent directors designate an independent Lead Director to provide leadership to the non-management members of the Board and to work with the Chair and Chief Executive Officer and the other Board members to provide effective and independent oversight of our management and affairs. The Company would notify shareholders of any change in the Board’s leadership structure in our proxy statements, unless we are required to disclose earlier.
Likewise, our Board is structured to promote independence whether or not its Chair is a member of executive management. The entire Board, with the exception of Robert C. Lyons, currently consists of independent directors, and the Audit, Compensation, and Governance Committees also are composed entirely of independent directors. The independent directors on the Board meet after each Board meeting in executive sessions that are not attended by Mr. Lyons or other members of management.
Mr. Lyons’s predecessor as Chief Executive Officer also served as Chair of the Board. In connection with the CEO leadership transition in 2022, the Board appointed Mr. Ream to serve as the independent Chair of the Board based on its belief that with a newly-appointed Chief Executive Officer, it was in the best interests of our shareholders to have a separate, independent Chair.
As Board Chair, Mr. Ream serves an important role in our governance structure, as he did as Lead Director prior to the 2022 CEO leadership transition, with roles and responsibilities that include, among other things:
| ● | presiding at all shareholder and Board meetings, including executive sessions of the independent directors |
| ● | attending the meetings of all Board committees |
| ● | calling Board meetings and meetings of the independent directors |
| ● | establishing Board meeting schedules and agendas in consultation with the Chief Executive Officer |
| ● | serving as the Board’s principal liaison with the Chief Executive Officer |
| ● | interviewing all director candidates and making recommendations to the Governance Committee |
| ● | determining the composition and leadership of the Board’s committees |
| ● | representing the Board in our shareholder engagements and outreach meetings |
CORPORATE GOVERNANCE
Board Committees
| | | | |
Director* | Board of | Audit | Compensation | Governance |
Diane M. Aigotti | ⚫ | C | | |
Anne L. Arvia | ⚫ | ⚫ | ⚫ | ⚫ |
Shelley J. Bausch | ⚫ | ⚫ | | ⚫ |
John M. Holmes | ⚫ | ⚫ | | |
Robert C. Lyons | ⚫ | | | |
James B. Ream | C | | | |
Adam L. Stanley | ⚫ | ⚫ | | ⚫ |
David S. Sutherland | ⚫ | | C | |
Stephen R. Wilson | ⚫ | ⚫ | ⚫ | |
Paul G. Yovovich | ⚫ | | ⚫ | C |
Number of 2023 meetings | 10 | 6 | 5 | 5 |
| * | In the table above, “C” means Chair. |
The Board has three standing committees: the Audit Committee, the Compensation Committee, and the Governance Committee. Each committee is composed of directors determined by the Board to be independent in accordance with the applicable listing standards of the NYSE, including the heightened independence standards for members of the Audit and Compensation Committees, which incorporate Securities and Exchange Commission (“SEC”) rules. Mr. Ream serves as Chair of the Board and attends all meetings of all Board committees. The principal responsibilities of each of these committees are described generally below and in detail in their respective committee charters, which are available on our website (www.gatx.com) in the Investor Relations section under “Governance.”
Audit Committee
The Board has determined that each member of the Audit Committee has accounting or related financial management expertise and is “financially literate,” as that term is used in the listing standards of the NYSE. In addition, the Board has determined that each of Diane M. Aigotti, Anne L. Arvia, John M. Holmes and Stephen R. Wilson qualifies as an “audit committee financial expert,” as that term is defined by SEC rules.
The Audit Committee’s functions include the appointment, retention, compensation, and oversight of our independent registered public accounting firm. The Audit Committee also reviews any related party transactions and assists the Board in oversight of:
| ● | the integrity of our financial statements |
| ● | our compliance with legal and regulatory requirements |
| ● | our guidelines, policies, and procedures with respect to risk assessment and risk management |
| ● | the independent registered public accounting firm’s qualifications and independence with respect to services performed, including non-audit fees and services |
| ● | the performance of our internal audit function and the independent registered public accounting firm |
| ● | our cybersecurity risks, controls and procedures, and our use of financial derivatives |
The Audit Committee maintains free and open communication, and meets separately at each regularly scheduled committee meeting, with our independent registered public accounting firm, our internal auditor, and management.
CORPORATE GOVERNANCE
Compensation Committee
The Compensation Committee’s functions include:
| ● | conducting an annual evaluation of the Chief Executive Officer’s performance |
| ● | annually setting the Chief Executive Officer’s compensation level and reviewing and approving compensation levels of our other senior officers |
| ● | establishing and administering our incentive compensation plans, equity-based plans, and other bonus plans, including granting awards and approving payouts under our plans |
| ● | administering our clawback policy |
| ● | annually reviewing the corporate goals and objectives relating to compensation of our Chief Executive Officer and other senior officers |
| ● | periodically reviewing and making recommendations to the Board regarding the compensation of our non-management directors |
| ● | retaining and evaluating the qualifications and independence of the Compensation Committee’s independent compensation consultant |
Pay Governance LLC (“Pay Governance”) served as the Compensation Committee’s independent compensation consultant during 2023. In addition to providing advice on various aspects of GATX’s compensation plans, programs, and policies, Pay Governance also advises the Compensation Committee periodically on current trends and best practices and reviews the agendas and supporting materials with management and the Compensation Committee Chair in advance of each committee meeting. A Pay Governance representative attends all Compensation Committee meetings, including executive sessions at which management is not present, and meets independently with the Compensation Committee as appropriate. In addition, Pay Governance provides specific recommendations for the Chief Executive Officer’s compensation and advice on the recommendations made by the Chief Executive Officer with respect to the compensation of other executives.
Governance Committee
The Governance Committee’s functions include:
| ● | identifying individuals qualified to become Board members and recommending to the Board a slate of director nominees for election at each annual meeting of shareholders |
| ● | ensuring that all of the Board committees have the benefit of qualified and experienced independent directors |
| ● | regularly reviewing a matrix of director profiles and skills to ensure a diversity of relevant experience, fresh perspective, skills, backgrounds, and other attributes on the Board |
| ● | developing and overseeing an effective set of corporate governance policies and procedures designed to ensure that GATX adheres to strong corporate governance and ethical standards and complies with all applicable legal and regulatory requirements |
| ● | overseeing the evaluation of the Board’s performance and effectiveness, including the directors’ attendance and contributions to Board deliberations, and making such recommendations to the Board as may be appropriate |
| ● | overseeing ESG matters and receiving periodic reports from management on related strategic initiatives |
Annual Board and Committee Evaluations
The Board conducts an evaluation of its performance and effectiveness on an annual basis. The purpose of the evaluation is to obtain the directors’ feedback on the Board’s performance and identify ways to enhance its effectiveness. As part of the evaluation, each director receives a written questionnaire developed by the Governance Committee to solicit input on the Board’s performance, effectiveness, composition, priorities, and culture. Using the questionnaire as a guide, the Governance Committee Chair conducts personal interviews with all directors to obtain their feedback and discuss any
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GATX CORPORATION - 2024 Proxy Statement | 13 |
CORPORATE GOVERNANCE
other issues or concerns they may have. The Governance Committee Chair compiles the collective views and comments of the directors and then reports the results of the evaluation to the full Board.
Each of the Board’s committees conducts its own evaluation using the same process as the Board evaluation. Utilizing a questionnaire developed by the committee, the Chair of each committee conducts personal interviews with the other committee members and, after compiling the results, presents a report to the committee and the full Board.
Retirement and Resignation Policies
The Board has a retirement policy for directors, included in our Corporate Governance Guidelines, under which a director is expected to retire from the Board and not stand for re-election at the first annual meeting of shareholders after he or she reaches the age of 75. However, the Governance Committee and the Board may waive that policy in any particular case for good reason.
If a director’s principal position changes or if the director has an opportunity to serve on another board, the director is expected to notify the Chair of the Board, the Chair of the Governance Committee and the General Counsel of the Company, and the director may be expected to offer to resign from the Board. The Board believes the Governance Committee should have the opportunity to assess each situation based on the individual circumstances and make a recommendation to the Board.
Likewise, each director is expected to tender his or her resignation when nominated for election to the Board, and that resignation will become effective only if the director receives more votes AGAINST his or her election than FOR votes and the Governance Committee, or other duly authorized committee of the Board, decides to accept the resignation.
Board Refreshment and Diversity
The Board, led by the Governance Committee, regularly evaluates its own composition and succession plans in light of the Company’s evolving business and strategic needs. The focus of this process is to ensure that the Board is composed of directors who possess a wide variety of relevant skills, professional experience, and backgrounds, bring diverse viewpoints and perspectives, and effectively represent the long-term interests of shareholders. The Governance Committee also considers a candidate’s gender, race, identification as an underrepresented minority, specialized experience, and other individual qualities and attributes that contribute to an active, effective Board. The Board believes that new ideas and perspectives are critical to a forward-looking and strategic Board, as are the extensive experience and deep understanding of our business and industry that long-serving directors possess. Accordingly, in its board refreshment and succession planning process, the Board considers both the benefits of continuity and fresh perspectives that new directors can bring.
In considering potential director candidates, the Governance Committee and Board take into account, among other factors, the needs of the Board and the Company in light of the overall composition of the Board with a view to achieving a balance of the skills, experience, and attributes that would be beneficial to the Board’s oversight role. For more information, see Director Criteria and Nomination Process on page 19.
14GATX CORPORATION - 2024 Proxy Statement
CORPORATE GOVERNANCE
Succession Planning
The Board regularly reviews long-term and emergency succession plans for the Chief Executive Officer and for other senior management positions. In addition, the Board ensures that directors have repeated and substantial opportunities to engage with possible succession candidates.
In assessing and evaluating possible Chief Executive Officer candidates, the independent directors identify the key skills, experience, and attributes they believe are required to be an effective Chief Executive Officer in light of the Company’s business strategies, opportunities, and challenges. The Board also considers its own leadership structure as part of this succession planning process. The Board believes the smooth and successful nature of the 2022 CEO leadership transition is a testament to the effectiveness of its robust succession planning process.
As part of these long-term succession planning efforts, we have also implemented organizational changes to some of our other senior leadership positions in recent years in order to enhance our growth efforts and further drive the excellent performance our shareholders expect.
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GATX CORPORATION - 2024 Proxy Statement | 15 |
CORPORATE GOVERNANCE
Risk Oversight
FULL BOARD While management is responsible for managing risk, the Board and its committees play a role in overseeing our risk management practices and programs. We have internal processes and an internal control environment that facilitates identification and management of risk and regular communication with the Board. These include an enterprise risk management program, regular internal management disclosure committee meetings, codes of business conduct and ethics, a strong ethics and compliance program, and a comprehensive internal and external audit process. The Board implements its risk oversight function both as a whole and through delegation to Board committees, which meet regularly and report back to the Board. | |||||||
| | | | | | | |
Audit Committee |
| Compensation Committee |
| Governance Committee | |||
Plays a key role in the Board’s risk oversight process, particularly in relation to risks that could have a financial impact, such as financial reporting, taxes, accounting, disclosure, internal controls, legal matters, cybersecurity, and our ethics and compliance programs. Discusses our risk assessment and risk management guidelines and policies with management, the internal auditors, and the independent registered public accounting firm. Receives regular reports from management and discusses steps taken by management to monitor and control risk exposures. Reviews all of our annual and quarterly financial reports, including any disclosure therein of risk factors affecting us and our business. Receives periodic presentations and reports on cybersecurity risks addressing recent developments, evolving standards, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to the Company’s peers and third parties, as well as information (and ongoing updates) regarding cybersecurity incidents impacting the Company that are deemed more significant under our cybersecurity incident response plan. Provides regular reports to the Board on its risk oversight activities and any issues identified thereby. | | Manages risks associated with personnel and compensation issues, including executive compensation. Receives regular reports from the independent compensation consultant and management concerning our compensation plans, policies, and practices. Sets performance goals under our annual and long-term incentive plans and oversees our compensation plans, policies, and practices. Provides regular reports to the Board on its oversight of compensation-related risks. Together with the Compensation Committee’s independent consultant, provides input to our human resources staff in conjunction with their annual assessment of potential risks that may be created by our compensation plans, policies, and practices. The assessment conducted for 2023 found that our compensation plans, policies, and practices did not create risks that would be reasonably likely to have a material adverse effect on GATX. In reaching this conclusion, we considered the mix of compensation paid to employees, as well as the risk control and mitigation features of our plans, including appropriate performance measures and targets, incentive plan payout maximums, our compensation clawback policy, and mandatory stock retention requirements for our executive officers. | | Manages risks associated with governance issues, such as the independence of the Board, Board effectiveness and organization, corporate governance, and director succession planning. Reviews the skills and experience of the directors on a regular basis to ensure the diversity of relevant experience necessary for an effective Board. Maintains corporate governance guidelines and procedures designed to assure compliance with all applicable legal and regulatory requirements and governance standards. Oversees environmental, social, and governance matters, including but not limited to, receiving regular reports from management on environmental risks and opportunities and ESG disclosures. Provides regular reports to the Board on its risk oversight activities. | |||
| | | | | |||
16GATX CORPORATION - 2024 Proxy Statement
CORPORATE GOVERNANCE
Anti-Hedging, Anti-Pledging Policies
In addition to prohibiting our directors, officers, and other employees from trading in GATX stock while in possession of material non-public information, our Insider Trading Policy also prohibits certain transactions in GATX stock that may create the potential for the interests of a director, officer, or employee to diverge from the interests of GATX and its shareholders. In particular, our policy prohibits directors, officers, and employees from engaging in hedging transactions, including short sales, transactions in publicly traded options involving GATX stock, and the use of financial instruments such as prepaid variable forwards, equity swaps, collars, and exchange funds. The policy also prohibits directors, officers, and employees from holding GATX stock in a margin account or pledging GATX stock as collateral for a loan.
Related Party Transactions
We recognize that transactions with related parties present a heightened risk of real or perceived conflicts of interest and, therefore, may raise questions as to whether those transactions are consistent with the best interests of GATX and its shareholders. Accordingly, we have a policy that requires all related party transactions to be reviewed and approved by the Audit Committee, and we disclose in our proxy statement any transactions that are required to be disclosed in accordance with Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). A “related party transaction” means any transaction (or series of transactions) valued at over $120,000 in which GATX is a participant and in which any “related party” has or will have a direct or indirect material interest, and a “related party” is defined to include all of our directors and executive officers, holders of more than 5% of our voting stock, and the immediate family members of those persons.
Under our policy, the Audit Committee will approve a related party transaction only if it determines that the transaction is in, or not inconsistent with, the best interests of GATX and our shareholders, including, for example, situations where:
| ● | the transaction may enable us to obtain products or services of a nature, quantity, or quality, or on other terms, that are not readily available from alternative sources |
| ● | the transaction is on “arm’s length” terms comparable to the terms on which we provide products or services to unrelated third parties or to our employees generally |
Upon completion of its review, the Audit Committee will approve or disapprove the related party transaction. In approving any related party transaction, the Audit Committee also will make a determination that the transaction does not constitute a conflict of interest under our Code of Business Conduct and Ethics.
Since January 1, 2023, GATX has not been a participant in any transaction, and is not a participant in any currently proposed transaction, in which any related person had or will have a direct or indirect material interest that would require disclosure under Item 404(a) of Regulation S-K.
Director and Officer Indemnification and Insurance Arrangements
As required by our By-Laws, we indemnify our directors and officers to the fullest extent permitted by the New York Business Corporation Law. In addition, we have entered into indemnification agreements with each member of the Board that contractually obligate us to provide this indemnification to our directors.
As permitted by the New York Business Corporation Law and our By-Laws, we maintain insurance policies that provide liability protection to our directors and officers for claims for which they may not be indemnified by the Company. These insurance policies also provide reimbursement to GATX for indemnification payments we make on behalf of our directors and officers, subject to the conditions and exclusions specified in the policies.
Shareholder Engagement
We believe that understanding issues of importance to our shareholders is critical for us to address their interests in a meaningful and effective way. It is also a tenet of good corporate governance. In that light, we engage with our
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GATX CORPORATION - 2024 Proxy Statement | 17 |
CORPORATE GOVERNANCE
shareholders on a regular basis to discuss a range of topics, including our performance, strategy, executive compensation, and corporate governance. Dialogue and engagement with our shareholders help us understand how they view us, set goals and expectations for our performance, and identify emerging issues that may affect our strategies, corporate governance, compensation practices, or other aspects of our operations.
Our shareholder outreach and engagement program takes many forms and is a year-round activity. We participate in numerous investor conferences, analyst meetings, and investor road shows. We also provide investors with access to our executive officers in an effort to provide a full perspective on business operations, market conditions, and our long-term strategy. We communicate with the investment community through various media, including our annual report and SEC filings, Proxy Statement, press releases, and our website. We hold conference calls for our quarterly earnings releases and other major corporate events which are open to all.
During the past 18 months, we contacted our largest shareholders, representing more than 80% of our outstanding shares, and offered them the opportunity to meet with members of our Board and management to discuss a range of governance issues. Topics discussed included our strategy, performance, corporate governance, capital allocation priorities, risk management practices, executive compensation, and ESG matters.
During our interactions with shareholders, we hear a diverse range of views. In general, our investors appreciate our transparency and the willingness of our senior executives and members of the Board to engage with, and listen to, shareholders.
Communication with the Board
GATX shareholders and other interested parties may, at any time, communicate directly with the Board, any of our directors individually (including the Chair of the Board), or our non-management directors as a group through the office of our Corporate Secretary as follows:
| ● | by mail addressed to the Board, any director, or the non-management directors as a group, c/o the Corporate Secretary, GATX Corporation, 233 South Wacker Drive, Chicago, Illinois 60606-7147 |
| ● | electronically by sending an e-mail to contactboard@gatx.com |
| ● | anonymously through our hotline vendor, Convercent, by internet at www.convercent.com/report or by telephone at (800) 461-9330 |
Our Corporate Secretary will review communications received by any of these methods and forward the communication promptly to the Board, individual directors, the Board Chair, or the non-management directors as a group, as appropriate, depending on the subject matter and facts and circumstances described in the communication.
Communications that are not related to the duties and responsibilities of the Board, are patently frivolous, or are otherwise considered to be improper for submission to the intended recipient(s) will not be forwarded.
18GATX CORPORATION - 2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
Director Criteria and Nomination Process
Each year, the Board nominates a slate of director candidates for election at the Annual Meeting of Shareholders. The Board has delegated the process for screening potential director candidates to the Governance Committee with input from the Chair of the Board and the Chief Executive Officer. When the Governance Committee determines that it is desirable to add a director or fill a vacancy on the Board, it will identify one or more individuals qualified to become directors and recommend them to the Board. In identifying qualified individuals, the Governance Committee generally retains a third-party search firm for this purpose. In evaluating individuals for potential membership on the Board, the Governance Committee gives due consideration to the following criteria:
| ● | the highest level of personal and professional ethics, integrity, and values |
| ● | an inquisitive and objective perspective |
| ● | broad experience at the policy-making level in business, finance, accounting, government, or education |
| ● | expertise and experience relevant to GATX and complementary to the background and experience of other Board members, so that an optimal balance and diversity of Board members may be achieved and maintained |
| ● | broad business and social perspective and mature judgment |
| ● | the candidate’s diversity of background and perspective, including but not limited to, age, gender, race, identification as an underrepresented group, and experience |
| ● | commitment to serve on the Board for an extended period of time to ensure continuity and to develop knowledge about the Company’s business |
| ● | demonstrated ability to communicate freely with management and the other directors, as well as the ability and disposition to meaningfully participate in a collegial decision-making process |
| ● | willingness to devote the required time and effort to carry out the duties and responsibilities of a Board member |
| ● | independence from any particular constituency, and the ability to represent the best interests of all shareholders and to appraise objectively the performance of management |
Nominees are selected so that the Board represents a diversity of viewpoints, professional experiences, education, skills, backgrounds, and other individual qualities and attributes, including age, gender, race, identification as an underrepresented group, and experience, that contribute to an active and effective Board. The Board evaluates each individual nominee in the context of the Board as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment using its diversity of experience and other factors.
ELECTION OF DIRECTORS
Director Demographics, Experience, Qualifications, and Skills
The Governance Committee is responsible for recommending to the full Board a slate of director nominees who collectively have the complementary experience, qualifications, skills, and attributes to guide the Company and function effectively as a Board. We believe that each of the nominees satisfies the criteria for membership set forth above and has key skills and attributes that are important to an effective board. Each of the nominees, other than Mr. Lyons, is also independent of the Company and management. See Board Independence on page 10.
Listed below are certain demographics and key experiences, qualifications, and skills of our director nominees that the Governance Committee believes are relevant and important in light of GATX’s business and structure.
Individual Directors’ Profiles
| Robert C. | James B. | Diane M. | Anne L. | Shelley J. | John M. | Adam L. | David S. | Paul G. |
|---|---|---|---|---|---|---|---|---|---|
Knowledge, Skills and Experience | |||||||||
Tenure* | 2 | 15 | 7 | 14 | <1 | <1 | 4 | 16 | 11 |
Age* | 60 | 68 | 59 | 61 | 58 | 47 | 50 | 74 | 70 |
Business / Operations | |||||||||
Rail & Other Transportation | ✓ | ✓ | ✓ | | ✓ | ✓ | | ✓ | |
Air Transportation | ✓ | ✓ | ✓ | | | ✓ | | ✓ | |
Strategy | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Sales & Business Development | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Operations | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Supply Chain | ✓ | ✓ | | | ✓ | ✓ | | ✓ | ✓ |
Raw Materials | ✓ | ✓ | | | ✓ | ✓ | | ✓ | |
Customer Viewpoints | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
International & Emerging Markets | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Joint Ventures | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | ✓ |
FINANCE / TRANSACTIONS | |||||||||
M&A | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Capital Markets/ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
LEGAL / ACCOUNTING / OTHER RISK / RELATED EXPERIENCE | |||||||||
Risk Management | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Accounting & Financial Controls | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Information Technology & Data | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
ELECTION OF DIRECTORS
| Robert C. | James B. | Diane M. | Anne L. | Shelley J. | John M. | Adam L. | David S. | Paul G. |
|---|---|---|---|---|---|---|---|---|---|
Cybersecurity | ✓ | | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Human Capital & Talent Development | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Diversity, Equity & Inclusion | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Legal | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
Regulatory, Governance & Public Affairs | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
demographics | |||||||||
Race / Ethnicity | |||||||||
Black or African American | | | | | | | ✓ | | |
White or Caucasian | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | | ✓ | ✓ |
GENDER | |||||||||
Male | ✓ | ✓ | | | | ✓ | ✓ | ✓ | ✓ |
Female | | | ✓ | ✓ | ✓ | | | | |
| * | As of Annual Meeting date. |
ELECTION OF DIRECTORS
Shareholder Recommendation and Nomination of Directors
The Board also will consider any candidates who may be recommended by shareholders. The Board conducts such inquiry into each candidate’s background, qualifications, and independence as it believes is necessary or appropriate under the circumstances and regardless of whether the candidate was recommended by shareholders or by others. Any recommendations of director candidates by shareholders should be submitted to the Governance Committee, c/o the Corporate Secretary, GATX Corporation, 233 South Wacker Drive, Chicago, Illinois 60606-7147. In order to be considered, the recommendation must be received not more than 120 and not less than 90 days prior to the first anniversary of the preceding year’s annual meeting and must include all information required by the proxy rules, applicable law, and our By-Laws.
Nominees for Election to the Board of Directors
Our Board is currently composed of ten directors, nine of whom are standing for re-election for a term of one year, to serve until the 2025 Annual Meeting of Shareholders and until their successors are elected and qualified. In accordance with the Board’s retirement policy for directors, Stephen R. Wilson, who currently serves on the Board, will not be standing for re-election, and therefore his term will end as of the date of the 2024 Annual Meeting of Shareholders. The size of the Board will accordingly be reduced to nine at the 2024 Annual Meeting of Shareholders. The Board is grateful to Mr. Wilson for his nine years of dedicated and valuable service to the Company.
All director nominees have consented to serve on the Board, if elected. At the time of the Annual Meeting, if any director nominee is unable or declines to serve, the proxies may be voted for any other person who may be nominated by the Board to fill the vacancy, or the size of the Board may be reduced accordingly.
Please see below for information on the age (as of Annual Meeting date) and other background of each of the nine director nominees, as well as each individual’s specific experience, qualifications, and skills that led the Board to conclude that such individual should serve on the Board in light of the Company’s business and leadership structure.
The Board of Directors recommends that you vote FOR each director nominee named below. |
22GATX CORPORATION - 2024 Proxy Statement
ELECTION OF DIRECTORS
Diane M. Aigotti | ||
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| Years of Service: 7 Age: 59 Board Committees: Audit (Chair) Ms. Aigotti served as Executive Vice President, Managing Director and Chief Financial Officer of Ryan Specialty Group, LLC from January 2010 to March 2021. Prior to joining Ryan Specialty Group, Ms. Aigotti served as Senior Vice President, Chief Risk Officer and Treasurer of Aon plc (f/k/a Aon Corp.) from 2000 to 2008. Earlier in her career, she served as the Vice President of Finance at The University of Chicago Hospitals and Health System from 1998 to 2000 and as Budget Director for the City of Chicago from 1995 to 1997. She also serves on the boards of OneDigital Health and Benefits, Inc., which provides consulting and technology solutions to employers for their employees’ health and welfare benefits, and Pinstripes Holdings, Inc., an experiential dining and entertainment brand. The Board has determined that Ms. Aigotti qualifies as an Audit Committee Financial Expert. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Extensive financial expertise, including in capital markets transactions, financial reporting, and internal controls |
| ● | Deep understanding of the insurance industry gained through her experience as the Chief Financial Officer of a large global insurance organization |
| ● | Substantial expertise in key areas such as financial planning and reporting, operations, risk management, treasury management, mergers and acquisitions, information technology, and tax and regulatory compliance enables her to provide valuable insights on issues critical to the Board’s oversight of our business, strategy, and operations |
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GATX CORPORATION - 2024 Proxy Statement | 23 |
ELECTION OF DIRECTORS
Anne L. Arvia | ||
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| Years of Service: 14 Age: 61 Board Committees: Audit, Compensation, Governance Ms. Arvia has served as Principal, Strategic Transformation and Program Management, of Cornerstone Advisors, LLC, a management and technology consultancy firm for banks, credit unions and fintech firms, since April 2023. She previously served as a strategic bank advisor since May 2022. Previously Ms. Arvia served as Executive Vice President, Banking and Financial Services, The Auto Club Group and President, CEO, The Auto Club Trust, from September 2018 to April 2022, and as Acting President, USAA Bank from November 2016 to May 2017 and USAA Bank’s Senior Vice President and Managing Director from August 2015 to December 2017. Before joining USAA, Ms. Arvia was President, Nationwide Direct Distribution from August 2012 to July 2015, President of Nationwide Retirement Plans from November 2009 to August 2012, and Chief Executive Officer of Nationwide Bank, a unit of Nationwide Mutual Insurance Company, from 2006 to November 2009. Prior to joining Nationwide, she served as President and Chief Executive Officer of ShoreBank, a community development and environmental bank, from 2001 to August 2006. She joined ShoreBank in 1991 as Assistant Controller and was named Chief Financial Officer in 1998. Prior to that she was an Auditing Manager at Crowe LLP. The Board has determined that Ms. Arvia qualifies as an Audit Committee Financial Expert. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Deep understanding of auditing, accounting standards, and financial reporting rules and regulations |
| ● | Qualified as a Certified Public Accountant and an Audit Committee Financial Expert |
| ● | Wealth of experience in investment, strategic transformation, operations, risk management, and financial matters gained through her many years of senior management experience in the financial services sector |
24GATX CORPORATION - 2024 Proxy Statement
ELECTION OF DIRECTORS
Shelley J. Bausch | ||
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| Years of Service: <1 Age: 58 Board Committees: Audit, Governance Ms. Bausch currently serves as President, Global Industrial Coatings of Axalta Coating Systems Ltd., a leading global manufacturer, marketer and distributor of high-performance coatings systems that serves a variety of industrial end markets. Prior to joining Axalta in January 2021, she led the Asia Pacific region and the Fluid Technologies business unit for Carlisle Companies Incorporated. Before joining Carlisle in 2017, she led the Global Industrial Coatings business for PPG Industries, Inc. Ms. Bausch started her career at Dow Corning Corporation and spent 25 years in a variety of commercial roles with increasing responsibilities. Ms. Bausch served on the board of directors of the Kraton Corporation from 2017 to 2022. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Extensive experience leading international business across industries |
| ● | Wealth of experience in transforming business models, including through disruptive innovation |
| ● | Extensive commercial expertise, including in e-commerce and marketing |
John M. Holmes | ||
| | |
| Years of Service: <1 Age: 47 Board Committees: Audit Mr. Holmes is Chairman, President and Chief Executive Officer of AAR CORP., a leading provider of aviation services to commercial and government customers. Mr. Holmes has served as AAR’s President since June 2017, CEO since June 2018 and Chairman since January 2023. Mr. Holmes joined AAR in 2001 as Director of Mergers and Acquisitions and became General Manager of AAR’s parts trading business in 2003. He progressively assumed roles of increasing responsibility of other businesses that comprise Aviation Services with a focus on achieving growth and operational efficiencies. Prior to joining AAR, Mr. Holmes worked in investment banking and private equity. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Extensive knowledge of the global aviation industry from over two decades in various leadership roles at AAR CORP. |
| ● | Operational expertise and deep international business experience |
| ● | Extensive experience in finance and transactions from certain roles at AAR and also from his prior positions in investment banking and private equity |
| |
GATX CORPORATION - 2024 Proxy Statement | 25 |
ELECTION OF DIRECTORS
Robert C. Lyons | ||
| | |
| Years of Service: 2 Age: 60 President and Chief Executive Officer Mr. Lyons was elected as President and Chief Executive Officer and as a director of GATX Corporation in April 2022, after having served as our Executive Vice President and President, Rail North America since August 2018. Previously, Mr. Lyons served as our Executive Vice President and Chief Financial Officer from 2012 to August 2018, Senior Vice President and Chief Financial Officer from 2007 to 2012, Vice President and Chief Financial Officer from 2004 to 2007, Vice President, Investor Relations from 2000 to 2004, Project Manager, Corporate Finance from 1998 to 2000, and Director of Investor Relations from 1996 to 1998. Mr. Lyons has served as a director of Packaging Corporation of America since 2011 and is a member of its Audit Committee. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Deep knowledge of our core railcar leasing business gained through his leadership role as President of Rail North America |
| ● | Substantial transportation industry experience, including in aircraft spare engine leasing |
| ● | Extensive expertise in capital market transactions, mergers and acquisitions, expansion of asset portfolios, operations, and business strategy |
| ● | Strategic leadership skills and expertise consistently demonstrated in various roles during his long tenure at GATX |
James B. Ream | ||
| | |
| Years of Service: 15 Age: 68 Chair of the Board of Directors Board Committees: None Mr. Ream served as Senior Vice President – Operations of American Airlines from 2012 to 2014 and as American’s Senior Vice President, Maintenance and Engineering from 2010 to 2012. Previously, Mr. Ream served as Chief Executive Officer of ExpressJet Holdings, Inc., an operator of regional jets in North America, from 2001 to 2010 and President of ExpressJet from 1999 to 2010. Prior to joining ExpressJet, Mr. Ream held various positions of increasing responsibility with Continental Airlines and American Airlines. Mr. Ream was a director of ExpressJet Holdings, Inc. from 2002 to 2010. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Significant experience in management, strategy, finance, and operations gained through his various senior executive roles in the transportation industry, including as Chief Executive Officer of ExpressJet Holdings, Inc. |
| ● | Deep experience in financing, management, maintenance, customer relations, regulatory issues, and operations of large fleets of transportation assets |
| ● | Extensive financial, accounting, and risk management expertise |
| ● | Enhanced perspectives on corporate governance, risk management, and other issues applicable to public companies |
26GATX CORPORATION - 2024 Proxy Statement
ELECTION OF DIRECTORS
Adam L. Stanley | ||
| | |
| Years of Service: 4 Age: 50 Board Committees: Audit, Governance Mr. Stanley retired as Executive Vice President and Chief Digital and Technology Officer at Cushman and Wakefield in January 2022. After retirement, he served as the Chief Experience Officer at Teach for America, a non-profit organization that seeks to overcome education inequality, from January 2022 until January 2023. He continues to serve as a strategic advisor to nonprofits and company employee resource groups and co-owns AT Real Estate Group LLC. Prior to joining Cushman and Wakefield in 2014, he served as the Technology and Security Services Officer at Aviva Corporation from 2011 – 2012 and the Global Chief Technology Officer at Aon Corporation from 2008 – 2011. Mr. Stanley joined Aon from ABN AMRO LaSalle Bank, where he held various positions including Head of North America Technology Services and Solutions, and began his career in 1995 at Deloitte & Touche LLP. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Deep experience in information technology systems, security, data, and digital transformation |
| ● | Extensive human capital management and process integration expertise |
| ● | Significant financial and risk management skills and experience |
| ● | Far-reaching exposure to global business markets and mergers and acquisitions |
David S. Sutherland | ||
| | |
| Years of Service: 16 Age: 74 Board Committees: Compensation (Chair) Mr. Sutherland retired as President and Chief Executive Officer of IPSCO, Inc., a steel producer, in July 2007, having served in that position since January 2002. During his 30-year career with IPSCO, Mr. Sutherland held a number of strategically important roles for the company, including Executive Vice President and Chief Operating Officer from April 2001 to January 2002 and Vice President of Raw Materials and Coil Processing from 1997 to 2001. Mr. Sutherland serves as non-executive chairman and a director of United States Steel Corporation. He served as a director of Imperial Oil Ltd. from 2010 through April 2023. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Proven leadership and record of achievement as the former Chief Executive of a publicly held steel producer |
| ● | Deep knowledge of the steel industry, which is a critical raw material for the production of railcars, and the manufacturing industry, which is a key sector for the Company’s business |
| ● | Substantial senior management experience, which enables him to provide valuable insights on business operations and strategy, global markets, financial matters, and risk management |
| ● | Broad experience on corporate governance issues gained through his experience on public company boards of directors, including his past service as our Lead Director |
| |
GATX CORPORATION - 2024 Proxy Statement | 27 |
ELECTION OF DIRECTORS
Paul G. Yovovich | ||
| | |
| Years of Service: 11 Age: 70 Board Committees: Compensation, Governance (Chair) Mr. Yovovich is a private investor and until December 2023 served as a principal of Lake Capital, a private equity firm he co-founded in 1998. He has over 40 years of experience as a senior executive, principal and corporate director, including serving as President of Advance Ross Corporation from 1993 to 1996 and in various executive positions with Centel Corporation from 1982 to 1992. | |
Specific Qualifications, Attributes, Skills, and Experience
| ● | Broad strategic, operating, financial, accounting, regulatory, and business management experience gained through his more than 40 years of experience as a senior executive, principal, and corporate director |
| ● | Qualified as a Certified Public Accountant |
| ● | Significant experience in technology and data security issues |
| ● | Deep expertise in transactional, investment, and capital markets matters, as well as fostering growth and value creation, through his many years as an executive and as a private equity professional |
| ● | Substantial corporate governance expertise gained through his experience on serving on public and private company boards of directors |
28GATX CORPORATION - 2024 Proxy Statement
DIRECTOR COMPENSATION
The Compensation Committee, with assistance from Pay Governance, reviews and makes recommendations to the Board regarding the form and amount of compensation for non-employee directors. GATX’s non-employee director compensation program is designed to enable continued attraction and retention of highly qualified directors and to address the time, effort, expertise, and accountability required of active Board membership.
Mr. Lyons receives no director compensation for his service on the Board. The Company’s non-employee director compensation program currently consists of the elements and amounts shown in the table below:
Our Non-Employee Director Compensation Program
|
| Current Annual |
|
Type of Fee | | Fee Amount ($) |
|
- Cash Retainer |
| 90,000 | |
- Equity Retainer – Restricted Stock Units (“RSUs”) |
| 125,000 | |
- Non-Executive Chair of the Board |
| 75,000 | |
- Audit Committee Chair |
| 22,500 | |
- Compensation Committee Chair |
| 17,500 | |
- Governance Committee Chair |
| 15,000 | |
We offer a Directors’ Voluntary Deferred Fee Plan (the “Deferred Fee Plan”) in which non-employee directors may defer receipt of up to 100% of their cash retainer and other cash fees in the form of either a deferred cash account or deferred RSUs with a value equivalent to the deferred cash fees. Prior to April 22, 2022, deferrals were permitted into phantom stock units. If the deferral is in cash, the deferred amount accrues interest at a rate equal to the 20-year US government bond rate. If the deferral is in RSUs (or prior to April 22, 2022, phantom stock units), the units are credited to an account for each participating director along with dividends and are settled, following expiration of the director’s service on the Board (or, if earlier, the director’s death or a change in control), in accordance with his or her election/distribution form(s) on file.
Non-employee directors may elect to defer all (but not less than all) of their equity retainer, which is issued as an RSU award on the date of the annual meeting. The RSUs vest in full and, unless deferred per a deferral election, are settled in shares of GATX common stock on the date of the first annual meeting at which the director is elected following the grant date, subject to his or her continued service through such date. Prior to April 22, 2022, each non-employee director received automatic quarterly awards of deferred phantom stock units under the Directors’ Phantom Stock Plan for both cash deferrals and the equity retainer. Outstanding RSUs and deferred director RSU awards and deferred phantom stock accounts are credited with additional RSUs or phantom stock units, as applicable, representing dividends declared on GATX common stock based on the date such dividend is paid. At the expiration of each director’s service on the Board (or, if earlier, the director’s death or a change in control), settlement of deferred RSUs and phantom stock units is made in shares of common stock equal to the number of RSUs or phantom stock units, as applicable, then credited to his or her account in accordance with his or her election/distribution form(s) on file. Any fractional units are paid in cash. The Directors’ Phantom Stock Plan was frozen to new contributions effective April 22, 2022, but that plan continues to govern phantom stock unit deferrals prior to that date.
The stock ownership goal for non-employee directors is 5.0 times the annual cash retainer. New directors have five years following election to the Board to achieve this ownership goal. All of our non-employee directors are in compliance with this ownership policy.
DIRECTOR COMPENSATION
2023 Non-Employee Director Compensation
|
| Fees earned |
| Stock |
| |
|
| | or paid in cash | | Awards | | Total |
|
Name | | ($)(1) | | ($)(2)(3)(4) | | ($) |
|
(a) | | (b) | | (c) | | (h) |
|
Diane M. Aigotti |
| 99,375 |
| 125,000 |
| 224,375 | |
Anne L. Arvia |
| 103,125 |
| 125,000 |
| 228,125 | |
Shelley J. Bausch |
| 37,500 |
| 93,750 |
| 131,250 | |
James B. Ream |
| 150,000 |
| 125,000 |
| 275,000 | |
Adam L. Stanley |
| 90,000 |
| 125,000 |
| 215,000 | |
David S. Sutherland |
| 107,500 |
| 125,000 |
| 232,500 | |
Stephen R. Wilson |
| 90,000 |
| 125,000 |
| 215,000 | |
Paul G. Yovovich |
| 105,000 |
| 125,000 |
| 230,000 | |
(1) | Under the Directors' Voluntary Deferred Fee Plan, the following directors have deferred a portion of their cash retainer into restricted stock units during 2023: Ms. Aigotti ($99,395), Mr. Ream ($30,000), and Mr. Sutherland ($107,500). |
(2) | Mses. Aigotti, Arvia, and Messrs. Ream, Stanley, Sutherland, Wilson, and Yovovich received an equity grant of 1,093 RSUs with a grant date fair value of $125,000 on April 28, 2023. Ms. Bausch was elected as a board member on July 28, 2023 and received an equity grant of 739 RSUs with a grant date fair value of $93,750 on July 28, 2023. These RSUs will vest in full and be paid in shares of GATX common stock on April 26, 2024, if not deferred per their deferral election, and the phantom awards were fully vested upon grant. The amounts shown represent the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 31, 2023, in accordance with Accounting Standards Codification (ASC) Topic No. 718, Compensation - Stock Compensation. Assumptions used to calculate these amounts are included in the Notes to the Company's audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023. |
(3) | The aggregate number of phantom stock units held on December 31, 2023 was: Ms. Aigotti (12,734), Ms. Arvia (29,652), Mr. Ream (37,029), Mr. Stanley (4,187), Mr. Sutherland (69,548), Mr. Wilson (13,672), and Mr. Yovovich (33,897). |
(4) | The aggregate number of restricted stock units held on December 31, 2023 was: Ms. Aigotti (3,580), Ms. Arvia (2,256), Ms. Bausch (742), Mr. Ream (2,649), Mr. Stanley (2,266), Mr. Sutherland (3,751), Mr. Wilson (1,093), and Mr. Yovovich (1,093). |
30GATX CORPORATION - 2024 Proxy Statement
PROPOSAL 2: ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION
We are seeking your approval, on a non-binding advisory basis, of the compensation of our NEOs as described in the Compensation Discussion and Analysis beginning on page 32. We believe that we have designed compensation programs that pay for performance and align compensation with the long-term interests of our shareholders. In deciding how you vote on this proposal, we encourage you to read the Compensation Discussion and Analysis for a full description of our executive compensation philosophy and programs, the decisions our Compensation Committee has made under those programs, and the factors it considers in making those decisions.
We value the feedback provided by our shareholders, who approved our executive compensation program at the 2023 Annual Meeting of Shareholders by a favorable vote of approximately 97%. We have discussions with many of our shareholders on an ongoing basis regarding various topics, including executive compensation, and we take into account the views of shareholders regarding the design and effectiveness of our executive compensation program.
Shareholders are being asked to approve the following resolution at the Annual Meeting:
“RESOLVED, that the shareholders of GATX Corporation (the “Company”) approve, on an advisory basis, the compensation of the Company’s NEOs as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, and the Executive Compensation Tables, together with the narrative discussion related thereto.”
The Board of Directors recommends that you vote FOR adoption of the advisory resolution to approve the compensation of our NEOs as disclosed in this Proxy Statement. |
COMPENSATION DISCUSSION AND ANALYSIS
Named Executive Officers
This section discusses material information relating to our executive compensation program and plans for our Named Executive Officers (“NEOs”):
Robert C. Lyons | Kim Nero |
President and Chief Executive Officer | Executive Vice President and Chief Human Resources Officer |
Thomas A. Ellman | Brian L. Glassberg |
Executive Vice President and Chief Financial Officer | Executive Vice President, General Counsel and Corporate Secretary |
Paul F. Titterton | |
Executive Vice President and President, Rail North America | |
TABLE OF CONTENTS:
This Compensation Discussion and Analysis makes reference to financial data derived from our financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) and certain other financial data prepared using non-GAAP components. For a reconciliation of these non-GAAP components to the most comparable GAAP components, see Exhibit A to this Proxy Statement.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Our Executive Compensation Program Supports Our Long-Term Focus Through Industry Cycles
GATX is in the business of owning and leasing long-lived transportation assets. We are the leading global railcar lessor, leasing railcars in North America, Europe, and India. Most of our railcar leases are service-intensive leases under which we provide maintenance, engineering, administrative, and a variety of other value-added services. Railcar leasing accounted for a substantial majority of our 2023 revenues.
| ● | The Railcar Leasing Market is Highly Cyclical. The railcar leasing market in which GATX operates has historically been highly cyclical. Swings in railcar supply in North America typically result in significant volatility in industry-wide railcar utilization and lease rates over time. In addition, many of our rail customers also operate in cyclical markets, such as the chemical, fertilizer, food/agricultural, refined petroleum, transportation, and construction industries. This cyclical demand, combined with changing macroeconomic conditions, may also contribute to volatility in railcar utilization and lease rates. |
| ● | We Manage Our Business With a Long-Term View. Our operating assets have expected economic useful lives of up to 45 years. We proactively manage our business with a long-term view, which includes buying, leasing, maintaining, and selling long-lived assets into constantly changing business conditions over decades. It is critical that we make disciplined investment decisions that match the long lives of our assets. Through multiple industry and economic cycles, we have maintained a long-term focus on investing while executing numerous strategic initiatives to enhance our competitive advantage. |
| ● | Our Strategy is Consistent, but Our Tactics Vary With the Market Cycle. Our different approaches to fleet utilization risk, asset growth, lease rates and lease term structure at different points in the railcar leasing market cycle enable GATX to generate strong long-term shareholder return. |
| - | In stronger railcar markets, we focus on increasing lease rates and lengthening lease terms to lock in attractive lease revenue as long as possible. We knowingly accept more utilization risk to maximize fleet value as we increase lease rates. At the same time, we may be more selective when making new railcar investments due to high railcar prices unless we identify assets that will earn correspondingly higher lease rates over the asset’s life. |
| - | Conversely, in weaker markets, when railcar prices tend to be lower, we seek to increase railcar investments. We also reduce lease rates to maintain asset utilization and shorten lease terms to position us to capture value when lease rates improve. |
| ● | Our Executive Compensation Program Supports This Long-Term Cyclical Approach and Strategy. Our executive compensation program is designed and managed by our Compensation Committee to motivate and retain management through each stage of the business cycle, including in both strong and weak railcar leasing markets. The Committee sets goals intended to align executive compensation with the appropriate achievement of our dual goals of growth and return at various points in the business cycle. Reflecting this focus, our Compensation Committee uses net income, excluding tax adjustments and other items (non-GAAP), as the performance measure in our annual incentive plan and three-year average LTI-adjusted return on equity (non-GAAP) and three-year cumulative investment volume as the performance measures in our long-term incentive plans. The Committee recognizes that our growth, investment, and returns will differ at various points in the cycle and sets the performance goals for each of these measures with the intent of focusing management on achieving results that will have the biggest impact on our ability to generate long-term shareholder value in light of where we are in the business cycle. |
COMPENSATION DISCUSSION AND ANALYSIS
Our Long-Term Focus Through Industry Cycles Has Been Successful
Managing Leases Through Cycles. As illustrated in the table below, prior to strengthening beginning in 2021, the North American railcar leasing market was in a weakened position for six years due to a significant industry-wide oversupply of railcars that led to lower lease rates and a highly competitive leasing environment, as well as the impact of COVID-19 at the end of that period. As described in the previous section, we utilize different lease rates and lease term strategies depending on where we are at in the market cycle. The chart below illustrates the results of our approach to managing leases through these cycles since 2007.
* | The Lease Price Index (“LPI”) is an internally generated business indicator that measures renewal activity for GATX’s railcar fleet, excluding boxcars. The LPI renewal rate change is reported as the percentage change between the average renewal lease rate and the average expiring lease rate. As of 12/31/2023; reflects modified LPI methodology announced in July 2023. |
Investment Focus in Relatively Weaker Markets; Attractive Investment Opportunities Found at All Points in Cycle. The cyclicality of our industry is also illustrated by the backlog of orders at the railcar manufacturers. Rising backlogs tend to represent a strengthening market while falling backlogs tend to represent a weakening market. We strive to achieve lower railcar cost by seeking to place large, multi-year new railcar orders and acquire existing fleets in relatively weaker markets at attractive prices, as illustrated by the following chart. However, having the most diverse fleet in the industry affords us opportunities to make attractive investments at any point in the business cycle. As an example, we acquired over 2,300 railcars outside of our multi-year supply agreements during 2023.
COMPENSATION DISCUSSION AND ANALYSIS
Strong 2023 Financial and Operational Results
In 2023, we executed our strategic priorities and capitalized on a favorable leasing environment to deliver excellent financial and operating results. At Rail North America, we successfully increased renewal lease rates and extended lease terms while maintaining high fleet utilization. Further, we identified attractive investment opportunities while also optimizing our diverse railcar fleet by selling railcars into an active secondary market. Our international railcar leasing businesses performed well by achieving solid fleet utilization and increased renewal lease rates. Both Rail Europe and Rail India continued to grow and diversify their fleets during the year. In Portfolio Management, we continued to increase our direct investment in aircraft spare engines, while our Rolls-Royce and Partners Finance joint ventures delivered higher-than-expected earnings as international air travel recovered toward pre-pandemic levels. By executing on our dual growth and return strategies in a solid leasing market, we delivered against key metrics in our compensation plans and produced diluted earnings per share (GAAP) of $7.12 and a total shareholder return of 15.2% for the year. Set forth below is a summary of our key financial and operational achievements during 2023 (dollars in millions, except for per share amounts), as well as an illustration of our stock price performance over the past five years.
1 | For a reconciliation of net income, diluted earnings per share (EPS), and return on equity (ROE), excluding tax adjustments and other items (non-GAAP), to net income, diluted EPS, and ROE calculated in accordance with GAAP, as well as for information regarding why we believe these non-GAAP measures present useful information to investors, please see Exhibit A to this Proxy Statement. |
2 | Operational data in the charts relates to our Rail North America segment. |
3 | Excludes boxcars. |
| |
GATX CORPORATION - 2024 Proxy Statement | 35 |
COMPENSATION DISCUSSION AND ANALYSIS
Stock Performance (1)
1 | Total shareholder return calculation presented on an annualized basis and assumes dividends are reinvested. |
36GATX CORPORATION - 2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Listed below are some key achievements during 2023:
Strong Earnings | | ● Net income of $259.2 million (net income, excluding tax adjustments and other items (non-GAAP), of $257.6 million).1 ● Diluted earnings per share of $7.12 (diluted earnings per share, excluding tax adjustments and other items (non-GAAP), of $7.07).1 ● Return on equity, and return on equity, excluding tax adjustments and other items (non-GAAP), of 12.0%.1 |
Excellent Operating Performance |
| ● Capitalized on favorable market conditions by successfully increasing renewal lease rates and extending lease terms, locking in high-quality, long-term committed cash flow. ● Achieved railcar fleet utilization of over 99% at Rail North America. ● Invested over $1.6 billion in attractive transportation assets, including $977 million of investment volume at Rail North America. ● Successfully placed deliveries of new railcars under our multi-year supply agreements and identified incremental opportunities to acquire over 2,300 railcars for $324 million at Rail North America. ● Investment volume was over $380 million at Rail International, with a combined total of over 4,600 new railcars added in Europe and India. ● Increased our direct investment in aircraft spare engines by acquiring 10 engines for over $260 million. ● Invested $35 million in tank containers at Trifleet, further expanding our global transportation asset base. |
Returned Cash to Shareholders | | ● Increased our dividend for the 13th consecutive year to $2.20 (annualized) per share, completing our 105th year of uninterrupted dividends. ● Returned over $83 million to shareholders through dividends and share repurchases. |
1 | Our 2023 financial results calculated in accordance with GAAP include a net positive impact of $1.6 million, or $0.05 per diluted share, from tax adjustments and other items. For a reconciliation of net income, diluted earnings per share, and return on equity, excluding tax adjustments and other items (non-GAAP), to net income, diluted earnings per share, and return on equity calculated in accordance with GAAP, as well as for information regarding why we believe these non-GAAP measures present useful information to investors, please see Exhibit A to this Proxy Statement. |
| |
GATX CORPORATION - 2024 Proxy Statement | 37 |
COMPENSATION DISCUSSION AND ANALYSIS
Summary of Key 2023 Compensation Actions
HOW WE DETERMINED NEO PAY FOR 2023
| ● | Substantial Majority of Pay Aligned with Performance. We design our pay programs to reward executives for positive Company performance and align with shareholder interests by having a significant portion of compensation comprised of performance-based and long-term incentive awards. As shown in the charts on page 41, 84% of our current CEO’s 2023 total target compensation and approximately 68% of the 2023 total target compensation for our other NEOs were tied to annual and long-term incentives based on Company performance relative to objective, quantifiable goals using key financial metrics or, with respect to stock options, will only have value if our stock price increases. Please see the Pay Versus Performance Disclosure on page 66 for required information about the relationship between the executive compensation we actually paid and our financial and stock price performance. |
| ● | Rigorous Incentive Targets. Our Compensation Committee carefully considered the market conditions affecting our business and set performance goals that would be appropriately difficult and rigorous to achieve. Annual incentive awards for our NEOs are determined by comparing the Company’s actual performance against our budgeted net income for the year. Long-term incentives in the form of performance shares are earned based on achievement of two equally weighted measures of the average LTI-adjusted return on equity (non-GAAP) (return measure) and the cumulative investment volume (growth measure) over a three-year performance period. Please see Compensation Discussion & Analysis – Performance Measures, Goal Setting, and Pay-for-Performance Alignment on page 42 for more information about how the Compensation Committee establishes our annual and long-term performance measures. |
| ● | Market Data Considered in Designing Competitive Compensation Program. Our Compensation Committee also reviewed market compensation levels and program design to provide a frame of reference for comparison in designing and setting competitive 2023 executive compensation commensurate with market, Company and NEO performance, and the need to retain executive officers of outstanding ability and potential. |
HOW WE PAID OUR NEOS IN 2023
| ● | Annual Increases in Base Salaries Were Modest Relative to High Inflation Rate and in Line with Employees Generally. In 2023, all of our NEOs (except Mr. Glassberg) received the Company’s standard general increase of 4.5% to their base salaries, effective March 1, 2023, consistent with the broader employee base. Mr. Lyons received an additional increase of 4.25%, effective March 1, 2023, to bring his salary in line with the 25th percentile of the relevant market survey data. Mr. Glassberg’s salary had been adjusted in December 2022, in connection with his promotion to his current position, so it was not further adjusted in 2023. |
| ● | Annual Incentive Payouts for NEOs Tied to Strong Performance. Annual incentive awards for our NEOs are based on objective, quantitative corporate financial goals. In February 2024, the Compensation Committee determined that the achieved payout for our NEOs relative to the corporate financial goals for 2023 was 107.1% of target as a result of our net income, excluding tax adjustments and other items (non-GAAP), results highlighted above. |
| ● | Long-Term Incentives. For 2023, the value of long-term incentives granted to each NEO was divided equally between non-qualified stock options (“NQSOs”) and performance shares. NQSOs vest ratably over three years and performance shares are earned based on achievement of two equally weighted measures: the three-year average LTI-adjusted return on equity (non-GAAP) (return measure) and the three-year cumulative investment volume (growth measure). |
| ● | Vesting of 2021-2023 Performance Shares. The performance shares granted in 2021 vested at the end of 2023 and were weighted equally between three-year average LTI-adjusted return on equity (non-GAAP) (achieving 8.3% versus a goal of 10%) and three-year cumulative investment volume (achieving $4.05 billion versus a goal of $3.65 billion), resulting in a payout of 101.1% of target. |
38GATX CORPORATION - 2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
2023 Say-on-Pay Vote
At our 2023 Annual Meeting of Shareholders, approximately 97% of shareholder votes were cast in favor of an advisory resolution approving the compensation of our NEOs as disclosed in our 2023 Proxy Statement (the “say-on-pay” resolution). Approximately 97%, 97%, 97%, 98%, 98% and 98% of shareholder votes were cast in favor of the say-on-pay resolutions in 2023, 2022, 2021, 2020, 2019 and 2018, respectively. The Compensation Committee believes that the overwhelming shareholder votes in favor of these recent say-on-pay resolutions are a continuing affirmation of shareholders’ support of our approach to executive compensation and, therefore, did not make any changes to its executive compensation plans or programs as a result of the 2023 vote.
| |
GATX CORPORATION - 2024 Proxy Statement | 39 |
COMPENSATION DISCUSSION AND ANALYSIS
Executive Compensation Practices
We regularly review and refine our executive compensation program to ensure that it continues to reflect practices and policies that are aligned with our pay-for-performance philosophy. We believe that our practices and policies set forth below are in line with current best practices for aligning executive and shareholder interests and sound corporate governance practices.
| ||
What We Do | | What We Don’t Do |
✓ Pay for Performance — Approximately 84% of our current CEO’s (and 68% of other NEOs’) total direct compensation is performance-based ✓ Robust Stock Ownership Guidelines — We have stock ownership guidelines for executive officers of 5.0x base salary for our CEO and 2.5x base salary for other executive officers ✓ Stock Retention Requirements — We require our executive officers to retain 50% of the after-tax profits realized from their GATX equity awards until stock ownership guidelines are met ✓ Annual “Say-on-Pay” Vote — We seek an annual non-binding advisory vote from our shareholders to approve compensation paid to our NEOs as disclosed in our Proxy Statement ✓ Clawback Policy — Recovery of annual incentive and performance share awards from executive officers in the event of an accounting restatement covered by our policy ✓ Independent Compensation Consultant — The Compensation Committee retains an independent compensation consultant and reassesses independence annually ✓ Annual Review of Compensation — The Compensation Committee, with input from its independent compensation consultant, conducts an annual review of all of our compensation programs in light of current best practices ✓ Annual Compensation Risk Assessment — Each year we perform an assessment of any risks that could result from our compensation plans and programs | | ✘ Employment Agreements — We do not provide our executive officers with employment agreements, other than agreements entered into prior to 2023 that provide severance in connection with a change of control ✘ Hedging/Pledging of Company Stock — We prohibit our officers, directors, and employees from hedging, margining, pledging, short-selling, or publicly trading options in our stock ✘ Tax Gross-Ups — We do not provide tax gross-ups, other than in one agreement entered into prior to 2009, and we will eliminate the tax gross-up from that agreement if it is amended in the future ✘ Dividends on Unvested Equity Awards — We do not pay dividends on unvested equity awards, including options, restricted stock, and performance shares ✘ Perquisites — We do not provide excessive perquisites to our NEOs ✘ Repricing or Exchange of Underwater Options — We prohibit share repricing without shareholder approval ✘ Single-Trigger Change of Control Vesting/Benefits — We do not allow for single-trigger vesting or payment of benefits upon a change of control. Rather, we require double-trigger, or both a change of control and termination of executive’s employment, before vesting is accelerated |
40GATX CORPORATION - 2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Principles and Plan Design
Compensation Principles
Our Compensation Committee is responsible for the oversight of our executive compensation program, including approval of our Chief Executive Officer’s compensation and establishing the performance goals used to determine the compensation of our executive officers. Our executive compensation program is based on the following principles:
| ● | a substantial majority of management’s compensation should be performance-based and closely linked to our financial performance to align the interests of management with those of our shareholders |
| ● | performance goals should be robust and reward executives for the achievement of our annual and long-term business goals through changes in business cycles |
| ● | compensation opportunities should be competitive to enable us to attract, motivate, and retain key executives who are critical to delivering long-term shareholder value |
The Compensation Committee expects our executive team to create long-term shareholder value by growing capital employed while also earning an attractive return on that capital. The inherent cyclicality of the railcar leasing business is an important consideration in how we structure our executive compensation programs to appropriately incentivize management to achieve the financial goals that will positively impact the Company’s performance over the long-term.
Due to the cyclicality of our business, management must strategically shift the emphasis we place on each of these dual objectives (i.e., growth in capital employed and financial returns) to adapt to changes in market conditions. Our compensation programs reflect this cyclicality by appropriately rewarding management to emphasize current financial returns over growth in capital employed, and vice versa, when appropriate. As a result, the level of performance on which we measure our incentives reflects this cyclicality and may not reflect year-over-year increases. In this way, the Compensation Committee believes that our plans have been designed to reward executives for achieving those goals that will maximize long-term shareholder value.
Compensation Plan Design
The overarching goal of our compensation philosophy and incentive plan design is to motivate management by aligning their interests with those of our shareholders. The Compensation Committee establishes performance metrics for our annual and long-term plans through a multi-step process that considers the business plan and the macroeconomic environment impacting the railcar leasing industry each year. This approach to goal setting and creating alignment with shareholders is important to the Committee, and accordingly, each of our executive officers receives the vast majority of pay from equity — which is 100% performance-based and only tied to quantitative, objective financial metrics. In 2023, approximately 84% of total direct compensation for our current Chief Executive Officer and approximately 68% for our other NEOs was performance-based and not guaranteed. The following charts provide a snapshot of the elements of pay for these NEOs and explain why each element is provided:
Note: The percentages in the charts above reflect the base salary and incentive targets in effect for the NEOs for 2023, and thus are not intended to match amounts shown in the Summary Compensation Table or the Grant of Plan-Based Awards Table on pages 55 and 56, respectively.
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COMPENSATION DISCUSSION AND ANALYSIS
| | | | | | | | |
Incentive Type |
| Compensation |
| How Determined/ |
| Key Features & |
| Form of Payment |
FIXED |
| Base Salary |
| Typically consider market pay levels, specific responsibilities and experience of each NEO, and his or her individual performance |
| ● Attract and retain key talent ● Provide a degree of financial certainty |
| Cash |
PERFORMANCE-BASED INCENTIVES |
| Annual Incentive Awards |
| Achievement of Company net income, excluding tax adjustments and other items (non-GAAP), goal. We set annual incentive opportunities to be competitive with the market | ● Drive achievement of key business results on an annual basis |
| Cash | |
| Long-Term Equity Based Incentive Awards |
| Achievement of Company LTI-adjusted return on equity (non-GAAP) and investment volume goals. We set target long-term incentive opportunities to be competitive with market. The value of regular, annual long-term incentive awards to each NEO is divided equally between stock options and performance shares |
| ● Directly tie interests of our NEOs to those of our shareholders ● Reward achievement of long-term objectives, typically over a three-year performance period ● Reward creation of long-term shareholder value |
| Non-qualified stock options or performance shares (cash election available for those who have exceeded 150% of their share ownership requirements or are near retirement) |
Performance Measures, Goal Setting, and Pay-for-Performance Alignment
Performance Measures Tied to Financial Performance. Our unique position as an independent, publicly traded railcar lessor means that there are no directly comparable peers against which we can assess pay and performance. Over the last few years, our Compensation Committee has considered multiple approaches for identifying a relevant peer group but has found all of them to lack appropriate comparability. For example, the companies in our General Industry Classification Standard (“GICS”) code have significantly different business models, customer bases, and asset composition, and they lack GATX’s focus on very long-lived assets. Our competitors in the railcar leasing industry are typically very small parts of much larger diversified companies, which may or may not be publicly traded, making comparisons extremely difficult. However, we compete for executive talent against these much larger organizations. Lacking a clear group of peers for comparison, our Compensation Committee has chosen to use multiple data points to assess our executive compensation, including:
| ● | market data for companies with annual revenues between $1-3 billion |
| ● | results from our annual internal talent assessment, which includes survey data on pay for particular executive positions |
| ● | individual performance |
In addition to the unavailability of relevant peer pay data, lack of a peer group makes it difficult to compare GATX’s total shareholder return (“TSR”) to the TSR of other companies in our industry because there are no other independent, publicly traded railcar leasing companies that we believe would provide a useful basis for comparison. This is the primary reason why our Compensation Committee does not use relative TSR as a performance measure in our annual and long-term incentive plans. Instead, the Compensation Committee has chosen to use performance measures that reflect our financial performance and the cyclical nature of our business.
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Performance Goals Aligned with Budget and Annual Objectives. In setting the performance measures for our annual and long-term plans, our Compensation Committee reviews the Company’s budgets and business plans with management in a multi-meeting process each year. The Committee sets goals intended to align executive compensation with the appropriate achievement of our dual goals of growth and return at various points in the business cycle. Reflecting this focus, our Compensation Committee uses net income, excluding tax adjustments and other items (non-GAAP), as the performance measure in our annual incentive plan and the three-year average LTI-adjusted return on equity (non-GAAP) and three-year cumulative investment volume as the performance measures in our long-term incentive plans. The Committee recognizes that our growth/investment and returns will differ at various points in the cycle and sets the performance goals for each of these measures with the intent of focusing management on achieving results that will have the biggest impact on our financial performance and long-term shareholder value in light of where we are in the business cycle. As a result of this balanced approach to goal setting, our long-term incentive plans will pay out at the maximum level only if performance is exceptional over the three-year performance period.
The following graphs show our compensation plan goals for our NEOs in 2023, and our actual achievement against such goals, for each of net income, excluding tax adjustments and other items (non-GAAP), LTI-adjusted return on equity (non-GAAP), and investment volume.
Annual Incentive Plan Measure
Net Income, excluding tax adjustments and other items (non-GAAP) (in millions)1
1 | For annual incentive award purposes, we use net income, excluding tax adjustments and other items (non-GAAP) (as measured against the Company’s budgeted net income target). For a reconciliation of net income, excluding tax adjustments and other items (non-GAAP), to net income calculated in accordance with GAAP, as well as for information regarding why we believe this non-GAAP measure presents useful information to investors, please see Exhibit A to this Proxy Statement. |
2023 Annual Incentive Plan Target Reflected Expectation of Continued Improvement Despite Macroeconomic Uncertainty. Our budgeted net income varies from year to year based on anticipated lease rates, renewal success, and other factors specific to our business, including industry cycles and expected headwinds. Given the highly cyclical nature of our business, our budgeted net income may increase or decrease from year to year as we manage our dual goals of growth and return at various points in the business cycle. As a result, the target level of performance under our annual incentive plan may also increase or decrease each year as well.
When the Compensation Committee set the target for our annual incentive plan at the beginning of 2023, there was anticipation of continued improvement in the business despite uncertainty about certain macroeconomic trends. In establishing the target and related performance and payout opportunities, the Compensation Committee considered the following expectations and uncertainties, among others:
| ● | We expected higher segment profit at Rail North America in 2023 due to increased lease rates on railcar renewals with the market for existing railcars in North America benefiting from a congested rail network and high new railcar prices. |
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COMPENSATION DISCUSSION AND ANALYSIS
| ● | We expected favorable year-over-year performance at Rail International with railcar leasing in Europe continuing to benefit from political support for rail transportation. |
| ● | In Portfolio Management, we projected an increase in segment profit with the global aviation market continuing to recover from the impact of the COVID-19 pandemic. |
| ● | As a result of these factors, we expected GATX’s total net income in 2023 to be up approximately $18 million from the prior year. |
Our Compensation Committee desired to set a target for our NEOs that would be appropriately rigorous and challenging. The Committee set the 2023 target at $235.4 million, which was the Company’s budgeted net income. Our Compensation Committee believes that consistently tying the target for purposes of our annual incentive plan to budgeted net income for the applicable year closely aligns management with the financial objectives set by the Board for the Company. Given the highly cyclical nature of our business, our budgeted net income may increase or decrease from year to year as we manage our dual goals of growth and return at various points in the business cycle. As a result, the target level of performance under our annual incentive plan may also increase or decrease each year as well.
Our 2023 earnings exceeded our expectations, as the operating environment was stronger than anticipated across our global railcar leasing markets and global air travel recovered toward pre-pandemic levels. Strong financial and operational performance across all our businesses led to strong GATX net income, excluding tax adjustments and other items (non-GAAP), with the result being achievement of 109.4% of target. Based on our plan design, this performance resulted in a payout to our NEOs at 107.1% of their target awards. Our Committee did not adjust the target or otherwise intervene in the determination of the final achievement and payouts under the annual incentive plan. See Annual Incentive Awards on page 46 for more details about our annual incentive plan and how this payout was determined.
Performance Share Plan Measures
1 | For performance share plan purposes, we use LTI-adjusted return on equity (non-GAAP), which excludes accumulated other comprehensive loss from the equity component for each year. Please see Exhibit A of this Proxy Statement for a reconciliation of LTI-adjusted return on equity (non-GAAP), as calculated for performance share purposes, to return on equity calculated in accordance with GAAP as reported in our financial statements. |
Long-Term Incentive Plan Targets Reflect Focus on Appropriate Balance of Growth and Return Over Long Term. The LTI-adjusted return on equity (non-GAAP) and investment volume measures are weighted equally in calculating our Performance Share Plan results. Our Compensation Committee believes that these two measures strike an appropriate balance between achieving a meaningful return for our shareholders while holding to a disciplined investment strategy through business cycles. As with the targets under our annual incentive plan, our investment volume targets are typically tied to our budgeted investment volume for the applicable year, which similarly fluctuates from year to year. Under the terms of our 2021-2023 performance share program, our cumulative investment volume exceeded target, while our
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COMPENSATION DISCUSSION AND ANALYSIS
average LTI-adjusted return on equity (non-GAAP) fell short of target. Based on these results, our executives earned 101.1% of their target performance shares. However, the actual value of the payouts depends upon the market price of our common stock on the determination date, which may be higher or lower than the grant date price. See 2023-2025 Performance Share Measures and Goal Setting on page 48 for a description of our performance share program.
CEO Pay-For-Performance Alignment
We continue to maintain a strong pay and performance linkage through all points in the business cycle, as illustrated in the 2023 compensation decisions described above and in the following charts, which show our Chief Executive Officer’s compensation measured against our financial performance for the years 2008-2023 on the measures in our annual and long-term incentive plans. Please see the Pay Versus Performance Disclosure on page 66 for required information about the relationship between the executive compensation we actually paid and our financial and stock price performance for the years 2021-2023. As we continue to manage through cyclical market conditions in the railcar leasing industry, our Compensation Committee expects management to emphasize disciplined growth and investment over short-term financial returns.
1 | For a reconciliation of net income and return on equity, excluding tax adjustments and other items (non-GAAP), to net income and return on equity calculated in accordance with GAAP for 2021, 2022 and 2023, as well as for information regarding why we believe these non-GAAP measures present useful information to investors, please see Exhibit A to this Proxy Statement. |
2 | Amounts are as reported in the Summary Compensation Table, less change in pension value. |
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COMPENSATION DISCUSSION AND ANALYSIS
Detailed Compensation Discussion and Analysis
In 2023, our executive compensation program consisted of three elements: base salary, annual incentive, and long-term equity compensation. We also provide various retirement and benefit programs. Further details on each element are discussed below.
Base Salary
Base salary constitutes approximately 16% of total targeted compensation for our current Chief Executive Officer (approximately 32% for our other NEOs), which is consistent with our philosophy that a majority of executive compensation should be performance-based.
In establishing salary levels, we typically consider market pay levels, the specific responsibilities and experience of each NEO, and his or her individual performance. Base salaries may be adjusted during the Compensation Committee’s annual review for:
| ● | Annual salary increases |
| ● | Changes in role, such as promotions or added responsibilities |
| ● | Market adjustments |
In 2023, all of our NEOs (except Mr. Glassberg) received the Company’s standard general increase of 4.5% to their base salaries, effective March 1, 2023, consistent with the broader employee base. Mr. Lyons received an additional increase of 4.25%, effective March 1, 2023, to bring his salary in line with the 25th percentile of the relevant market survey data. Mr. Glassberg’s salary had been adjusted in December 2022, in connection with his promotion to his current position, so it was not further adjusted in 2023.
Annual Incentive Awards
Process for Setting Annual Incentive Targets
Target incentive opportunities for NEOs are expressed as a percentage of base salary and are intended to be competitive with the market. Please see The Determination of Market Competitive Pay on page 52 for a description of how we determine competitive pay levels. In 2023, Mr. Lyons’s target incentive opportunity was 100% of his base salary, and the target incentive opportunities for our other NEOs were 70% of base salary for Mr. Ellman and for Mr. Titterton and 55% of base salary for Ms. Nero and Mr. Glassberg.
Annual Incentive Plan Design
Our NEOs earn their annual incentive awards based on achievement against targeted net income established from a financial plan which is reviewed by the full Board. The Compensation Committee has chosen net income as the goal because it provides executives with a strong incentive to increase our profitability. Please see Performance Measures, Goal Setting, and Pay-for-Performance Alignment on page 42 for a discussion of how the Compensation Committee selects performance measures and designs annual performance goals.
The performance metrics and payout levels are established at the beginning of each year by the Compensation Committee with input from the independent consultant and management. The level of financial performance required for the maximum payout is established based on the Compensation Committee’s assessment of the level of performance that shareholders would likely consider superior in view of general economic conditions and the outlook for GATX and its industry in particular. This process is essentially reversed to establish the threshold or minimum performance level, defined as the level of financial performance below which no incentive is payable.
2023 Annual Incentive Plan Design. As described earlier at page 43, at the time of budgeting and forecasting, expectations were that 2023 would be a year of continued improvement despite macroeconomic uncertainty and high interest rates, due to strong demand for existing railcars and the resulting favorable environment for railcar lease renewals at Rail North America and in Europe and a recovery toward pre-pandemic levels for international air travel. As a result of these factors, we expected GATX’s total net income in 2023 to be up approximately $18 million from the prior year. During its review of the budget and business forecasts over multiple meetings, the Compensation Committee sought to set a
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COMPENSATION DISCUSSION AND ANALYSIS
target for our NEOs that would be appropriately rigorous and challenging, given these market headwinds. The Compensation Committee set the 2023 net income target at $235.4 million, which was the budgeted net income for the year.
The goals and payout levels under the 2023 annual incentive plan design, which are tied to fully quantitative, objective metrics, are shown in the following table:
2023 Annual Incentive Plan Design | |||||||
| | Net Income, excluding | | | | | |
| | tax adjustments and | | | | | |
| | other items | | | | | |
| | (non-GAAP) | | Achievement | | | |
|
| (Millions) |
| (Actual/Budget) |
| Payout | |
Threshold | | $188.3 |
| 80% | | 80% | |
Target (Goal) | | $235.4 |
| 100% | | 100% | |
Maximum | | $376.6 |
| 160% | | 170% | |
2023 Annual Incentive Plan Payouts. Net income, excluding tax adjustments and other items (non-GAAP),1 for 2023 was $257.6 million, which was 109.4% of the target net income level of performance. Based on the targets illustrated above, this level of performance resulted in incentive payouts to our NEOs of 107.1% of their target award levels.
Long-Term Equity-Based Incentive Awards
Process for Granting Awards
We set target long-term incentive opportunities for our NEOs to be competitive with the market. Long-term incentive target values for our NEOs are generally set between the 50th and 75th percentiles based on market survey data used by our Compensation Committee in setting executive compensation, as described below under Process for Determining Executive Compensation (Including NEOs). The reason for targeting up to the 75th percentile is to encourage and reward above-market performance and to provide flexibility to compensate officers with longer tenure. The Compensation Committee generally establishes an NEO’s target long-term incentive value for each year within this range based on its evaluation of individual performance and responsibilities and overall leadership within the organization. The value of the regular, annual long-term incentive awards to each NEO is divided equally between non-qualified stock options (“NQSOs”) and performance shares. We chose this combination of grant types because it focuses executive attention on total shareholder return and on specific financial goals, both of which are essential to our long-term success. The grant date for regular long-term incentive awards is the date of the Compensation Committee’s first meeting of each calendar year. We grant NQSOs to NEOs at the same time we grant them to other employees. NQSOs vest ratably over a three-year period and expire seven years after the grant date. We have no program, plan, or practice to time NQSO grants to NEOs or any other employees in coordination with the release of material non-public information.
1 | See Exhibit A for a reconciliation of net income, excluding tax adjustments and other items (non-GAAP), to net income calculated in accordance with GAAP, as well as for information regarding why this non-GAAP measure presents useful information to investors. |
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COMPENSATION DISCUSSION AND ANALYSIS
Award Types and How Each Fits Into Our Program
Non-Qualified Stock Options. NQSOs are granted to align the interests of our NEOs and other employees with our shareholders. NQSOs are granted at a price equal to fair market value of our common stock (the average of the high and low trading prices on the date of grant) as approved by the Compensation Committee. Because TSR is composed of stock price appreciation and dividends, dividend equivalents are attached to NQSOs. We believe that rewarding both components of shareholder return better aligns management and shareholder interests. Dividend equivalents accrue until vesting and are paid in cash thereafter until the NQSO is exercised or expires. Because the value of dividend equivalents is fully factored into the determination of grant size, the number of NQSOs granted is correspondingly smaller than it would be if dividend equivalents were not attached because the value of each NQSO is higher.
Performance Shares. Performance shares are designed to focus attention on, and to reward the achievement of, our long-term financial and strategic objectives. The Compensation Committee establishes the goals for which the performance shares may be earned at the beginning of a three-year performance period rather than annually. At the end of the performance period, a percentage ranging from 0% to 200% of the number of performance shares initially awarded will be earned based on the extent to which the three-year goals are achieved. Each earned performance share equals one share of our common stock at the end of the performance period, with payment of earned performance shares made in the form of GATX common stock.
| ● | Performance Metrics Design. Performance shares are earned based on achievement of two equally weighted measures of three-year LTI-adjusted return on equity (non-GAAP) (return measure) and three-year cumulative investment volume (growth measure). |
| ● | Dividends Paid Only on Performance Shares Earned. Accumulated dividend equivalents are paid on performance shares, only if earned, at the end of the performance period. |
| ● | Cash Election Feature. Participants have the opportunity to elect to receive their performance share payout in the form of cash if the participant meets one of two conditions: (1) the participant has exceeded 150% of his or her stock ownership goal or (2) the participant is within five years of normal retirement age (65) under the Company’s pension plan. This election must be made no later than the determination date for the performance period. The cash value is determined based on the number of performance shares earned multiplied by the fair market value of GATX stock on the day the award is earned. This optional cash election feature was implemented to address the accumulation of high concentrations of GATX stock beyond the required stock ownership requirements and limited opportunities for our NEOs to diversify due to restrictions related to the trading of GATX stock, such as insider trading blackouts. As such, the Compensation Committee believes that there should be an appropriate balance between our compensation programs and philosophy and the participants’ needs for moderate and transparent diversification as they approach retirement. |
Restricted Stock Units. RSUs vest based solely on continued employment and are designed to recognize and incentivize executives, by providing equity value if the executive remains employed through the vesting date. RSUs have not historically been a part of our equity compensation program, and none of our NEOs received a special RSU grant in 2023.
2023-2025 Performance Share Measures and Goal Setting
Background
Our target setting process, conducted at the beginning of each three-year performance period, combines goals related to growth and return to reflect the cyclical nature of our business. Our targets are designed to incentivize behavior which enhances long-term shareholder value at all points in the business cycle.
Design
The number of performance shares to be earned in 2025 is subject to two equally weighted measures:
| ● | Three-year average LTI-adjusted return on equity (non-GAAP) (return measure) |
| ● | Three-year cumulative investment volume (growth measure) |
The Compensation Committee set targets of 10.8% for LTI-adjusted return on equity (non-GAAP) and $3.19 billion for cumulative investment volume, which is equal to the Company’s budgeted cumulative investment volume for the three-year performance period.
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COMPENSATION DISCUSSION AND ANALYSIS
Rationale
As stated above, we establish our growth and return objectives depending on where we are in the business cycle. When the market is stronger and asset prices are high, we employ several strategies to maximize returns while investing prudently. When the market is weaker and asset prices are reduced, we emphasize making prudent investments at attractive prices over attempting to earn an unsustainably high short-term return. We believe that a single-minded focus on achieving growth over return, or vice versa, at the wrong points in the cycle is likely to impair shareholder value over the longer term.
The LTI-adjusted return on equity (non-GAAP) and cumulative investment targets, which are quantitative, objective metrics, for the 2023-2025 performance period were set in the first quarter of 2023 amidst an improving operating environment despite continued uncertainty about certain macroeconomic trends. Consistent with our objective of striking an appropriate balance between our growth and return objectives, the Compensation Committee set the LTI-adjusted return on equity (non-GAAP) for the 2023-2025 performance period at 10.8%, which is the budgeted amount and up from the prior year’s three-year plan target, and the cumulative investment volume target for the 2023-2025 performance period at $3.19 billion, which is the budgeted amount and up from the prior year’s three-year plan target.
Formula for Determining Award Numbers
In granting performance shares for the 2023-2025 performance period, we determined the number of shares awarded by dividing the value of the performance share award by the average of the closing prices of our common stock on the four Fridays immediately preceding the Compensation Committee meeting at which the grant was awarded. To determine the number of NQSOs awarded, we used the same average closing price multiplied by 36.5%, which represents the value of the NQSO award based on the Black-Scholes valuation methodology.
2023 Long-Term Incentive Payouts
The performance shares granted in 2021 vested at the end of 2023. Each target award was based 50% on a three-year average LTI-adjusted return on equity (non-GAAP) goal and 50% on a three-year cumulative investment volume goal. The goals and payout levels under the 2021-2023 Performance Share Plan are indicated in the following table:
Performance Share Plan Design
LTI-Adjusted Return on Equity (non-GAAP)1 | |||||
| | Average | | | |
| | Three-Year | | | |
| | LTI-Adjusted | | | |
|
| ROE (non-GAAP) |
| Payout |
|
Threshold | | 6.3% | | 25% | |
Target (Goal) | | 10.0% | | 100% | |
Maximum | | 14.0% | | 200% | |
1 | For performance share plan purposes, we use LTI-adjusted return on equity (non-GAAP), which excludes accumulated other comprehensive loss from the equity component for each year. Please see Exhibit A of this Proxy Statement for a reconciliation of LTI-adjusted return on equity (non-GAAP), as calculated for performance share purposes, to return on equity calculated in accordance with GAAP as reported in our financial statements. |
Investment Volume | |||||
| | Three-Year | | | |
| | Cumulative | | | |
| | Investment | | | |
|
| Volume (billions) |
| Payout | |
Threshold | | $2.55 |
| 25% | |
Target (Goal) | | $3.65 |
| 100% | |
Maximum | | $5.11 |
| 200% | |
As shown in the charts on page 44, the three-year average LTI-adjusted return on equity (non-GAAP) for the period was 8.3% versus a goal of 10.0%, and the cumulative investment volume for the period was $4.05 billion, which was higher than the goal of $3.65 billion. Based on these results, performance share payouts were 101.1% of target. Performance share award values at the determination date were 101.1% of target award values based on average fair market value of GATX stock price on February 14, 2024. Messrs. Lyons, Ellman, and Titterton elected to receive their performance share
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COMPENSATION DISCUSSION AND ANALYSIS
payouts in the form of cash. For details regarding the 2021-2023 performance share payments to the NEOs, please see the Option Exercises and Stock Vested Table on page 59.
Employee Benefits – Severance – Double-Trigger Vesting
Employee Benefit Plans
We sponsor a standard array of retirement, health, and welfare benefits. Our retirement programs include 401(k) and defined benefit pension programs. The pension and 401(k) programs are intended to supplement employees’ personal retirement savings and social security benefits. Health and welfare benefits include medical, dental, vision, life, and disability insurance. These programs provide protection against catastrophic loss and encourage health maintenance. Our NEOs participate in the same programs as other salaried employees. Additionally, we have a supplemental pension plan available to eligible salaried employees, including our NEOs, and intended solely to restore pension benefits limited by law to the level specified by formula in the qualified pension plan applicable to all salaried employees. No excessive perquisites were paid to our NEOs in 2023.
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COMPENSATION DISCUSSION AND ANALYSIS
Executive Severance Plan
In February 2023, following a market review and consultation with Pay Governance, our Compensation Committee adopted an Executive Severance Plan for our eligible executives located in the United States, including our NEOs. Pursuant to the Executive Severance Plan, participants will be eligible to receive the following severance benefits upon a qualifying termination, including in connection with a change of control (“COC”) of the Company.
Executive Benefit |
| Termination other than for “cause” not in |
| Termination other than for “cause” or for |
| | | ||
Base Salary | | Lump sum payment equal to the executive’s base salary for the specified period depending on position: ● 24 months (Chief Executive Officer) ● 18 months (Executive Vice President) ● 12 months (Senior Vice President) |
| Lump sum payment equal to the executive’s base salary for the specified period depending on position: ● 36 months (Chief Executive Officer) ● 24 months (Executive Vice President) ● 18 months (Senior Vice President) |
Annual Bonus | | Lump sum payment equal to a multiple of the executive’s target bonus: ● 2x (Chief Executive Officer) ● 1.5x (Executive Vice President) ● 1x (Senior Vice President) |
| Lump sum payment equal to a multiple of the executive’s target bonus: ● 3x (Chief Executive Officer) ● 2x (Executive Vice President) ● 1.5x (Senior Vice President) |
Prorated Bonus | | Lump sum payment equal to executive’s annual bonus for the year in which the termination occurs, based on the Company’s actual performance, and based on 100% achievement of any individual performance goals, pro-rated for the period of time through the termination date. |
| Lump sum payment equal to executive’s target bonus for the year in which the termination occurs, pro-rated for the period of time through the termination date. |
Prior Year Bonus | | Lump sum payment equal to the executive’s prior year bonus, if any. | ||
COBRA Premiums | | Continued COBRA premiums for the duration of the severance period. | ||
Outplacement Services | | Company-paid outplacement services up to $25,000 for a period of 12 months following the termination date. | ||
Employee Assistance Program | | Continued use of the Company’s Employee Assistance Program during the 90-day period following the termination date. | ||
Tuition Reimbursement | | Tuition reimbursement for classes in which the executive was enrolled in as of the termination date. | ||
The executive’s receipt of any severance benefits is subject to the executive signing a general release of claims in favor of the Company.
Pursuant to the terms of the Executive Severance Plan, our NEOs will not be eligible for benefits under the plan to the extent they are a party to an existing COC agreement and would receive equal or greater benefits under such agreement as a result of any termination. Additionally, for the avoidance of doubt, if an executive’s COC agreement provides for more favorable benefits in the event an excise tax is imposed on “excess parachute payments” by the Code than the benefits provided in the Executive Severance Plan, the more favorable provision contained in the COC agreement shall apply to such executive.
Change of Control Agreements
Prior to the adoption of our Executive Severance Plan, when an individual became an executive officer, the individual executed a COC agreement with the Company that provides certain benefits if employment is terminated in connection with a COC. This protection is provided for competitive reasons and to ensure the stability, continuity, and impartiality of
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our executives in a COC situation. The level of protection provided is intended to be similar to that provided by similarly sized organizations. These existing COC agreements remain in force, including for all NEOs, but individual COC agreements will no longer be offered to executive officers beginning in February 2023.
These COC agreements are “double-trigger” agreements, meaning that benefits are payable only if a COC occurs and an executive’s employment is terminated or constructively terminated. For a description of the key terms of these agreements, please see the Potential Payments upon Termination or Change of Control Table on page 61. Since 2009, we have not entered into any new COC agreements that provide excise tax gross-up benefits, and we do not intend to offer this feature in the future. The COC agreement with Mr. Lyons, however, that was entered into prior to 2009, does contain excise tax gross-up benefits. In the event that we amend such agreement for any reason in the future, we will eliminate such excise tax gross-up.
Double-Trigger Equity Vesting
The vesting of equity awards upon a COC is determined under the GATX Amended and Restated 2012 Incentive Award Plan and related grant agreements. These terms apply to all employees who receive long-term incentive awards. In addition, all grant agreements require both a COC event and an executive’s actual or constructive termination before vesting is accelerated.
Process for Determining Executive Compensation (Including NEOs)
Compensation Committee and Management
The Compensation Committee, with input from the independent compensation consultant, regularly reviews:
| ● | the competitiveness of our compensation program |
| ● | the competitiveness of each NEO’s compensation |
| ● | recent developments and current trends in executive compensation practices |
Our human resources staff and the Chief Executive Officer also provide input to the Compensation Committee regarding base salary increases, target level annual incentives, long-term incentive awards, and the goals applicable to earning such compensation. After reviewing these recommendations, the Compensation Committee determines and approves the compensation of each NEO as well as the performance goals. Our Chief Executive Officer, however, does not participate in, nor is he present during, any discussions of his own compensation. Such discussions occur during the Compensation Committee’s executive sessions. The Compensation Committee also reviews its pay decisions regarding our Chief Executive Officer with the other independent directors on the Board.
The Determination of Market Competitive Pay
We have generally structured our compensation programs to provide total direct compensation opportunities between the 50th and 75th percentiles based on market survey data of companies of similar revenue size to GATX (which we refer to as “competitive” or “market” pay levels throughout this Compensation Discussion and Analysis). GATX is larger in scope (revenues, assets, etc.) in general than the median of the data sources available, as more fully described below.
Because we have no direct peers in the railcar leasing business for which relevant compensation data is available, gathering information on competitive pay levels with precision for our particular industry is not possible. Instead, the Compensation Committee, with assistance from our human resources staff and the independent compensation consultant, regularly reviews information on pay for executives as reported in national compensation surveys published by Aon and Willis Towers Watson for organizations of similar revenue as ours.
These surveys include general, non-company specific compensation information, on an aggregate basis, for approximately 200 public companies with annual revenues between $1-3 billion. We use these surveys to better understand current compensation practices at other companies of similar revenue size and as a data point to assist us in meeting our goal of having the various elements of compensation be market-competitive. The Compensation Committee does not receive individual company information for any of the companies included in the surveys.
While these surveys are a starting point for our compensation review process, actual compensation decisions with respect to specific individuals are influenced by a variety of factors in addition to the surveys, including experience, tenure, skills,
52GATX CORPORATION - 2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
unique responsibilities, individual performance, and our specific talent requirements. For example, the target total direct compensation of Mr. Lyons is currently between the 25th and 50th percentiles of the survey data for CEOs due to his recent internal promotion to the CEO role.
Compensation Governance
Stock Ownership and Stock Retention Requirements
To underscore the importance of stock ownership, we have established mandatory stock ownership and stock retention policies for our NEOs and other members of senior management. These policies require that each executive must retain shares of GATX stock having a value equal to 50% of the after-tax profits realized from GATX equity awards until the executive owns GATX shares equal in value to a multiple of salary based on his or her position. The multiple is 5.0 times salary for the Chief Executive Officer and 2.5 times salary for other NEOs. Our NEOs are in compliance with the stock ownership and stock retention policies and, as of December 31, 2023, owned GATX stock equal to the following percentage of their respective stock ownership goal: Mr. Lyons 185%, Mr. Ellman 526%, Mr. Titterton 168%, Ms. Nero 18% and Mr. Glassberg 73%.
Clawback Policy
In accordance with Rule 10D-1 under the Exchange Act and the corresponding NYSE listing standards, we have a policy that provides for the mandatory recovery from current and former executive officers of incentive-based compensation that was erroneously awarded during the three years preceding the date the Company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. The amount required to be recovered is the excess of the amount of incentive-based compensation received over the amount that otherwise would have been received had it been determined based on the restated financial measure. The policy was adopted by the Board, effective as of October 2, 2023, and is administered and overseen by the Compensation Committee.
Tax Considerations
Our Compensation Committee considers the tax impact on both the executives and the Company in determining executive compensation. However, the Committee also looks at other factors in making its decisions as described earlier in this Compensation Discussion and Analysis and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not tax deductible by GATX.
Compensation Committee’s Independent Consultant
The Compensation Committee retained Pay Governance as its independent compensation consultant during 2023. Pay Governance does not have any other consulting engagements with management or GATX. The Compensation Committee has assessed the independence of Pay Governance and its employees working on GATX matters pursuant to applicable SEC rules and NYSE listing standards and determined that no conflict of interest or independence concerns exist.
With respect to Chief Executive Officer compensation, Pay Governance provides an independent recommendation to the Compensation Committee in the form of a range of possible outcomes, for the Committee’s consideration. In developing its recommendation, Pay Governance relies on its understanding of GATX’s business and compensation programs and its own independent research and analysis. Pay Governance does not meet with our Chief Executive Officer with respect to his compensation. In addition to advising on Chief Executive Officer compensation, Pay Governance reviews the Chief Executive Officer’s recommendations on compensation of his direct reports.
| |
GATX CORPORATION - 2024 Proxy Statement | 53 |
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in our Annual Report on Form 10-K.
David S. Sutherland (Chair)
Anne L. Arvia
Stephen R. Wilson
Paul G. Yovovich
54GATX CORPORATION - 2024 Proxy Statement
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | Change in | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Pension Value | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | and Non- | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Non-Equity | | Qualified | | | | | | | | Total | | |||
| | | | | | | | | | | | | | | | Incentive | | Deferred | | | | | | | | Without | | |||
| | | | | | | | | Stock | | Option | | Plan | | Compensation | | All Other | | | | | Change in | | |||||||
Name and | | | | Salary | | Bonus | | Awards | | Awards | | Compensation | | Earnings | | Compensation | | | | | Pension | | ||||||||
Principal Position | | Year | | ($) | | | ($) | | ($)(1)(2) | | ($)(1) | | ($)(3) | | ($)(4) | | ($)(5) | | Total ($) | | Value ($)(6) | | ||||||||
(a) |
| (b) |
| (c) |
| (d) |
| (e) |
| (f) |
| (g) |
| (h) |
| (i) |
| (j) |
| | |
| ||||||||
Robert C. Lyons |
| 2023 | | $ | 858,333 | | $ | 0 | | $ | 1,809,082 | | $ | 1,794,322 | | $ | 919,015 | | $ | 1,081,846 | | $ | 9,900 | | $ | 6,472,498 | | $ | 5,390,652 | |
President and |
| 2022 | | $ | 734,072 | | $ | 0 | | $ | 1,531,778 | | $ | 1,564,650 | | $ | 719,730 | | $ | 0 | | $ | 9,150 | | $ | 4,559,380 | | $ | 4,559,380 | |
Chief Executive Officer |
| 2021 | | $ | 575,483 | | $ | 0 | | $ | 498,826 | | $ | 505,476 | | $ | 490,215 | | $ | 139,667 | | $ | 8,700 | | $ | 2,218,367 | | $ | 2,078,700 | |
Thomas A. Ellman |
| 2023 | | $ | 596,583 | | $ | 0 | | $ | 619,642 | | $ | 615,900 | | $ | 447,133 | | $ | 507,862 | | $ | 9,900 | | $ | 2,797,020 | | $ | 2,289,158 | |
Executive Vice President and |
| 2022 | | $ | 568,467 | | $ | 0 | | $ | 995,422 | | $ | 598,044 | | $ | 421,284 | | $ | 0 | | $ | 9,150 | | $ | 2,592,366 | | $ | 2,592,366 | |
Chief Financial Officer |
| 2021 | | $ | 534,483 | | $ | 0 | | $ | 498,826 | | $ | 505,476 | | $ | 455,289 | | $ | 175,780 | | $ | 8,700 | | $ | 2,178,554 | | $ | 2,002,774 | |
Paul F. Titterton | | 2023 | | $ | 544,750 | | $ | 0 | | $ | 387,418 | | $ | 385,964 | | $ | 408,284 | | $ | 322,757 | | $ | 9,900 | | $ | 2,059,073 | | $ | 1,736,316 | |
Executive Vice President and |
| 2022 | | $ | 504,244 | | $ | 0 | | $ | 753,013 | | $ | 351,177 | | $ | 351,213 | | $ | 0 | | $ | 9,150 | | $ | 1,968,797 | | $ | 1,968,797 | |
President, Rail North America |
| 2021 | | $ | 448,983 | | $ | 0 | | $ | 288,698 | | $ | 292,644 | | $ | 300,503 | | $ | 91,184 | | $ | 8,700 | | $ | 1,430,712 | | $ | 1,339,528 | |
Kim Nero |
| 2023 | | $ | 415,000 | | $ | 0 | | $ | 242,419 | | $ | 242,254 | | $ | 244,387 | | $ | 29,531 | | $ | 9,900 | | $ | 1,183,491 | | $ | 1,153,960 | |
Executive Vice President and Chief Human Resources | | 2022 | | $ | 397,500 | | $ | 0 | | $ | 232,093 | | $ | 236,436 | | $ | 231,458 | | $ | 31,397 | | $ | 9,150 | | $ | 1,138,034 | | $ | 1,106,637 | |
Officer |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Brian L. Glassberg |
| 2023 | | $ | 400,000 | | $ | 0 | | $ | 232,224 | | $ | 229,936 | | $ | 235,554 | | $ | 45,048 | | $ | 9,900 | | $ | 1,152,662 | | $ | 1,107,614 | |
Executive Vice President, General Counsel and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Corporate Secretary | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | For awards granted under the GATX 2012 Amended and Restated Incentive Award Plan, amounts shown reflect the grant date fair market value of performance stock units and stock options granted in the years shown, in accordance with ASC Topic No. 718, Compensation — Stock Compensation. |
(2) | In the event the performance stock units pay out at maximum value (i.e. 200% of target), the total grant date values for grants of restricted stock units and performance stock units are as follows: Mr. Lyons ($3,618,163, $3,063,629, and $997,652); Mr. Ellman ($1,239,283, $1,582,359, and $997,652); Mr. Titterton ($774,835, $1,097,543, and $577,395); Ms. Nero ($484,838 and $464,186); and Mr. Glassberg ($464,448). |
(3) | The amounts shown reflect the annual incentive awards earned under the GATX Cash Incentive Compensation Plan by each NEO for the years shown. |
(4) | Change in pension value reflects the increase in the present value of the accumulated pension benefit during the years shown. The Pension Benefits Table shows the present value of the accumulated pension benefit as of December 31, 2023 and the assumptions used in the calculation of that value. We determined the December 31, 2023, December 31, 2022 and December 31, 2021 present values using the same assumptions except that the interest rates used for discounting under ASC Topic No. 715, Compensation - Retirement Benefits, were 4.95% in 2023, 5.15% in 2022, and 2.81% in 2021. |
(5) | For 2023, amounts shown reflect matching contributions made to the GATX Salaried Employees Retirement Savings Plan for Messrs. Lyons, Ellman, Titterton, and Glassberg and Ms. Nero ($9,900). For all periods presented, all other compensation excludes dividends on NQSOs and performance shares held by each named executive officer because those dividends are included in the grant date fair value amounts for stock awards as reported in columns (e) and (f) of the table above and in column (l) of the Grants of Plan-Based Awards Table. |
(6) | The amounts shown in this Total Without Change in Pension Value column represent total compensation, as determined under applicable SEC rules (column j), minus the amount reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column (column h). The amounts shown in the Total Without Change in Pension Value column differ substantially from, and are not a substitute for, the amounts required to be reported in the Total column pursuant to SEC regulations. We are presenting this supplemental column to illustrate how the Compensation Committee views the annual compensation elements for the NEOs. While the Compensation Committee does review the table in its totality, we note that the change in pension value amount reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column does not reflect current compensation and represents the present value of an estimated stream of payments to be made following retirement. The methodology used to report the change in pension value under applicable accounting rules is sensitive to external variables such as assumptions about life expectancy and changes in the discount rate determined at each year end, which are functions of economic factors and actuarial calculations that do not relate to our performance and are outside of the control of the Compensation Committee. |
EXECUTIVE COMPENSATION TABLES
Grants of Plan-Based Awards
| | | | | | | | | | | | | | | | | | All Other | | | | | |
| | | | | | | | | | | | | | | | All Other | | Option | | | | Grant | |
| | | | | | | | | | | | | | | | Stock Awards: | | Awards: | | Exercise | | Date Fair | |
| | | | Estimated Future Payouts | | Estimated Future Payouts | | Number | | Number of | | or Base | | Value of | | ||||||||
| | | | Under Non-Equity Incentive | | Under Equity Incentive | | of Shares | | Securities | | Price of | | Stock | | ||||||||
| | | | Plan Awards(1) | | Plan Awards(2) | | of Stock | | Underlying | | Option | | & Option | | ||||||||
Name | | Grant Date | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | or Units | | Options | | Awards | | Awards | |
(a) |
| (b) |
| (c) |
| (d) |
| (e) |
| (f) |
| (g) |
| (h) |
| (i)(3) |
| (j)(4) |
| (k) |
| (l) |
|
Robert C. Lyons | | 1/1/2023 | | 686,665 | | 858,331 | | 1,459,163 | | | | | | | | | | | | | | | |
| | 1/26/2023 | | | | | | | | | | | | | | | | 43,700 | | 113.28 | | 1,794,322 | |
| | 1/26/2023 | | | | | | | | 3,993 | | 15,970 | | 31,940 | | | | | | | | 1,809,082 | |
Thomas A. Ellman | | 1/1/2023 | | 334,087 | | 417,608 | | 709,934 | | | | | | | | | | | | | | | |
| | 1/26/2023 | | | | | | | | | | | | | | | | 15,000 | | 113.28 | | 615,900 | |
| | 1/26/2023 | | | | | | | | 1,368 | | 5,470 | | 10,940 | | | | | | | | 619,642 | |
Paul F. Titterton | | 1/1/2023 | | 305,060 | | 381,325 | | 648,253 | | | | | | | | | | | | | | | |
| | 1/26/2023 | | | | | | | | | | | | | | | | 9,400 | | 113.28 | | 385,964 | |
| | 1/26/2023 | | | | | | | | 855 | | 3,420 | | 6,840 | | | | | | | | 387,418 | |
Kim Nero | | 1/1/2023 | | 182,600 | | 228,250 | | 388,025 | | | | | | | | | | | | | | | |
| | 1/26/2023 | | | | | | | | | | | | | | | | 5,900 | | 113.28 | | 242,254 | |
| | 1/26/2023 | | | | | | | | 535 | | 2,140 | | 4,280 | | | | | | | | 242,419 | |
Brian L. Glassberg | | 1/1/2023 | | 176,000 | | 220,000 | | 374,000 | | | | | | | | | | | | | | | |
| | 1/26/2023 | | | | | | | | | | | | | | | | 5,600 | | 113.28 | | 229,936 | |
| | 1/26/2023 | | | | | | | | 513 | | 2,050 | | 4,100 | | | | | | | | 232,224 | |
(1) | Amounts shown reflect target, threshold and maximum annual incentive payouts for 2023 under the GATX Cash Incentive Compensation Plan based on the achievement of income goals. Threshold amounts represent 80% of target based on the financial goal threshold. |
(2) | Amounts shown reflect the number of performance share units granted in 2023 under the GATX Amended and Restated 2012 Incentive Award Plan. The percentage of each performance share award that will be earned is based upon the achievement of two equally weighted performance goals: three-year average LTI-adjusted return on equity (non-GAAP) and three-year cumulative investment volume. |
(3) | The amounts shown reflect the number of RSUs granted in 2023 under the GATX Amended and Restated 2012 Incentive Award Plan. |
(4) | The amounts shown reflect the number of NQSOs granted in 2023 under the GATX Amended and Restated 2012 Incentive Award Plan. |
(5) | The value of stock awards and option awards is determined using the aggregate grant date fair value computed in accordance with ASC 718 Compensation — Stock Compensation. |
EXECUTIVE COMPENSATION TABLES
Narrative Discussion Related to the Summary Compensation Table and Grants of Plan-Based Awards Table
Annual Incentive Awards
For 2023, our NEOs were eligible for annual incentive awards based solely on GATX’s financial performance achievement against a net income goal established from a financial plan which is reviewed by the full Board. The target incentive awards were payable at 100% of the targeted amount. Threshold and maximum incentive awards (80% and 170%, respectively, of the target awards) were payable at 80% and 160% or more, respectively, of the targeted amount.
Based on individual targets and on actual net income, excluding tax adjustments and other items (non-GAAP), as described in the Compensation Discussion and Analysis, 2023 incentive payouts under the GATX Cash Incentive Compensation Plan are shown in column (g) of the Summary Compensation Table. GATX’s net income, excluding tax adjustments and other items (non-GAAP), achievement for 2023 for incentive payout purposes was $257.6 million, or 109.4% of target for our NEOs, resulting in payouts at 107.1% of their target awards.1
Equity-Based Long-Term Incentives
Equity-based long-term incentive awards in 2023 consisted of NQSOs and performance shares.
NQSOs vest in three equal annual installments and expire seven years after the grant date. The grant price is based on the average of the high and low prices of GATX common stock on the date of grant. Dividend equivalents accrue on NQSO grants and are not paid until vesting and each quarter thereafter until the NQSOs are exercised or expire. The NQSOs granted to the NEOs on January 26, 2023 will vest in three equal installments on January 26 of 2024, 2025, and 2026.
The number of NQSOs awarded in 2023 and their grant date fair value are shown in columns (j) and (l), respectively, in the Grants of Plan-Based Awards Table. The grant date fair values of the 2023, 2022, and 2021 NQSO awards are shown in column (f) of the Summary Compensation Table for each year granted.
The percentage of each 2023 performance share award that will be earned is based on the extent to which pre-established goals on two independent performance measures, each of which is weighted at 50%, are achieved over a three-year performance period ending on December 31, 2025. The two performance measures are three-year average LTI-adjusted return on equity (non-GAAP) (defined as GAAP net income divided by shareholders’ equity, excluding accumulated other comprehensive loss) and three-year cumulative investment volume (defined as the sum of cumulative GAAP-basis portfolio investments and capital additions as reported on the Company’s audited statement of cash flows for each year in the performance period).
The number of performance shares earned at the end of the performance period ranges from 0% to 200% of the initial target grant, with the target grant at targeted performance. Dividend equivalents accrue throughout the performance period and are only paid on the number of performance shares earned at the end of the performance period.
The grant date fair values of the 2023, 2022, and 2021 performance shares are shown in column (e) of the Summary Compensation Table. The number of performance shares granted in 2023 that may be earned at threshold, target, and maximum levels is shown in columns (f), (g), and (h), respectively, of the Grants of Plan-Based Awards Table.
1 | For annual incentive award purposes, we use net income, excluding tax adjustments and other items (non-GAAP). For a reconciliation of net income, excluding tax adjustments and other items (non-GAAP), to net income calculated in accordance with GAAP, as well as for information regarding why we believe this non-GAAP measure presents useful information to investors, please see Exhibit A to this Proxy Statement. |
EXECUTIVE COMPENSATION TABLES
Outstanding Equity Awards at Fiscal Year-End Table
The following table summarizes the number of shares of our stock underlying outstanding equity incentive plan awards for each NEO as of December 31, 2023.
| | | | | | Equity | | | | | | | | | | | | | |
| | | | | | incentive | | | | | | | | | | Equity incentive | | Equity incentive | |
| | | | | | plan awards: | | | | | | | | Market | | plan awards: | | plan awards: | |
| | Number of | | | | Number of | | | | | | Number | | value | | Number of | | Market or | |
| | securities | | Number of | | securities | | | | | | of shares | | of shares | | unearned | | payout value of | |
| | underlying | | securities | | underlying | | | | | | or units of | | or units of | | shares, units or | | unearned | |
| | unexercised | | underlying | | unexercised | | | | | | stock | | stock | | other rights | | shares, units or | |
| | options | | unexercised | | unearned | | Option | | Option | | that have | | that have | | that have | | other rights | |
| | (#) | | options (#) | | options | | Exercise | | expiration | | not vested | | not vested | | not vested | | that have | |
Name | | Exercisable | | Unexercisable | | (#) | | Price ($) | | date | | (#) | | ($) | | (#) | | not vested ($) | |
(a) |
| (b) |
| (c) | | (d) |
| (e) |
| (f) |
| (g) | | (h) |
| (i) | | (j)(7) |
|
Robert C. Lyons | | 0 | | 43,700 | (1) | | | 113.2800 | | 1/26/2030 | |
|
|
| | 31,940 | (7) | 3,839,827 | |
| | 15,000 | | 30,000 | (2) | | | 103.1500 | | 1/28/2029 | | | | | | 29,700 | (8) | 3,570,534 | |
| | 11,400 | | 5,700 | (3) | | | 91.3600 | | 1/29/2028 | | | | | | | | | |
| | 18,200 | | | | | | 77.0700 | | 1/31/2027 | | | | | | | | | |
| | 18,500 | | | | | | 71.5250 | | 1/24/2026 | | | | | | | | | |
| | 19,300 | | | | | | 69.7350 | | 1/25/2025 | | | | | | | | | |
Thomas A. Ellman | | 0 | | 15,000 | (1) | | | 113.2800 | | 1/26/2030 | | | | | | 10,940 | (7) | 1,315,207 | |
| | 5,733 | | 11,467 | (2) | | | 103.1500 | | 1/28/2029 | | 2,970 | (4) | 357,053 | | 11,380 | (8) | 1,368,104 | |
| | 11,400 | | 5,700 | (3) | | | 91.3600 | | 1/29/2028 | | | | | | | | | |
| | 18,200 | | | | | | 77.0700 | | 1/31/2027 | | | | | | | | | |
| | 18,500 | | | | | | 71.5250 | | 1/24/2026 | | | | | | | | | |
| | 18,000 | | | | | | 69.7350 | | 1/25/2025 | | | | | | | | | |
Paul F. Titterton | | 0 | | 9,400 | (1) | | | 113.2800 | | 1/26/2030 | | | | | | 6,840 | (7) | 822,305 | |
| | 3,366 | | 6,734 | (2) | | | 103.1500 | | 1/28/2029 | | 2,970 | (4) | 357,053 | | 6,680 | (8) | 803,070 | |
| | 6,600 | | 3,300 | (3) | | | 91.3600 | | 1/29/2028 | | | | | | | | | |
| | 8,800 | | | | | | 77.0700 | | 1/31/2027 | | | | | | | | | |
| | 9,000 | | | | | | 71.5250 | | 1/24/2026 | | | | | | | | | |
Kim Nero | | 0 | | 5,900 | (1) | | | 113.2800 | | 1/26/2030 | | |
| | | 4,280 | (7) | 514,542 | |
| | 2,266 | | 4,534 | (2) | | | 103.1500 | | 1/28/2029 | | | | | | 4,500 | (8) | 540,990 | |
| | 3,533 | | 1,767 | (3) | | | 98.1050 | | 5/28/2028 | | | | | | | | | |
Brian L. Glassberg | | 0 | | 5,600 | (1) | | | 113.2800 | | 1/26/2030 | | | | | | 4,100 | (7) | 492,902 | |
| | 533 | | 1,067 | (2) | | | 103.1500 | | 1/28/2029 | | 520 | (5) | 62,514 | | | | | |
| | 1,466 | | 734 | (3) | | | 91.3600 | | 1/29/2028 | | 690 | (6) | 82,952 | | | | | |
| | 2,000 | | | | | | 77.0700 | | 1/31/2027 | | | | | | | | | |
(1) | NQSOs will vest in three, equal, annual installments on January 25, 2024, 2025 and 2026. |
(2) | 50% of the unexercisable NQSOs will vest on January 31, 2024 and the remainder will vest on January 31, 2025. |
(3) | 100% of the NQSOs will vest on January 24, 2024. |
(4) | The RSUs will vest on January 28, 2025. |
(5) | Amounts shown reflect the number of target performance shares granted in 2023 at the target payout. A portion (ranging from 0% to 200%) will be earned subject to the achievement of specified performance objectives and will vest on December 31, 2025. |
(6) | Amounts shown reflect the number of target performance shares granted in 2022 at the target payout. A portion (ranging from 0% to 200%) will be earned subject to the achievement of specified performance objectives and will vest on December 31, 2024. |
(7) | Market value of performance shares is based on the closing price of GATX common stock on the last trading day of the year, December 29, 2023, which was $120.22 per share. |
58GATX CORPORATION - 2024 Proxy Statement
EXECUTIVE COMPENSATION TABLES
Option Exercises and Stock Vested Table
|
| Option Awards | | Stock Awards(1) |
| ||||
| | Number of | | | | Number of | | |
|
| | shares | | Value | | shares | | Value |
|
| | acquired on |
| realized on |
| acquired on |
| realized on |
|
Name | | exercise (#) | | exercise ($) | | vesting (#) | | vesting ($) |
|
(a) | | (b) | | (c) | | (d) | | (e) |
|
Robert C. Lyons |
| 21,000 |
| 1,096,183 |
| 5,520 |
| 694,361 | |
Thomas A. Ellman |
| 18,900 |
| 1,035,733 |
| 5,520 |
| 694,361 | |
| | | | | | 990 | | 112,281 | |
Paul F. Titterton |
| 8,100 |
| 405,851 |
| 3,195 |
| 401,899 | |
| | | | | | 990 | | 112,281 | |
Kim Nero |
| 0 |
| 0 |
| 1,658 |
| 208,560 | |
Brian L. Glassberg | | 0 | | 0 | | 0 | | 0 | |
| | | | | | 620 | | 70,224 | |
(1) | Amounts shown include the number and value of RSUs vested in 2023 and performance shares earned under the 2021-2023 performance period and as described in the Compensation Discussion and Analysis of this Proxy Statement. Although the 2021-2023 performance share plan performance was determined after the calendar year-end on February 14, 2024, the amounts are reported in the table above (and not in the Outstanding Equity Awards at Fiscal Year-End table) to reflect the actual value earned in 2023 for the 2021-2023 performance period. |
Pension Benefits Table
Each of our NEOs participated in a defined benefit pension plan during the year ended December 31, 2023. The following table contains information about these plans that provide for payments or other benefits to our NEOs at, following, or in connection with retirement.
|
| |
| Number of |
| Present value of |
| Payments |
|
| | | | years credited | | accumulated | | during last |
|
Name | | Plan Name | | service (#) | | benefit ($) | | fiscal year ($) |
|
(a) | | (b) | | (c) | | (d)(1) | | (e) |
|
Robert C. Lyons |
| GATX Non-Contributory Pension Plan for Salaried Employees |
| 27.3 | | 1,110,123 | (2) | 0 | |
|
| GATX Supplemental Retirement Plan |
| 27.3 | | 3,714,186 | | 0 | |
Thomas A. Ellman |
| GATX Non-Contributory Pension Plan for Salaried Employees |
| 27.3 | | 884,282 | (2) | 0 | |
|
| GATX Supplemental Retirement Plan |
| 27.3 | | 2,317,301 | | 0 | |
Paul F. Titterton |
| GATX Non-Contributory Pension Plan for Salaried Employees |
| 26.4 | | 596,100 | (2) | 0 | |
|
| GATX Supplemental Retirement Plan |
| 26.4 | | 1,103,663 | | 0 | |
Kim Nero |
| GATX Non-Contributory Pension Plan for Salaried Employees |
| 2.7 | | 37,063 | | 0 | |
|
| GATX Supplemental Retirement Plan |
| 2.7 | | 23,865 | | 0 | |
Brian L. Glassberg |
| GATX Non-Contributory Pension Plan for Salaried Employees |
| 12.3 | | 161,068 | | 0 | |
|
| GATX Supplemental Retirement Plan |
| 12.3 | | 54,271 | | 0 | |
(1) | The present value of accumulated benefit is calculated as the amount payable at age 65 for Messrs. Lyons, Ellman, and Titterton. The amounts shown for Ms. Nero and Mr. Glassberg represent their cash balance accounts rolled forward to age 65 with the ASC 715 interest crediting rate assumption of 3.99%. This value is then discounted back from age 65 using the ASC 715 discount rate of 5.15% for the Salaried Plan benefit and 5.11% for the Nonqualified Supplemental Plan benefit. The GATX Non-Contributory Pension Plan for Salaried Employees Plan assumption is that 70% elect the lump sum option and 30% elect an annuity option at retirement. The GATX Supplemental Retirement Plan calculations use each executive’s actual election for payment of future benefit; all executives shown have elected a lump sum form of payment. The value of the annuity option is calculated using December 31, 2023, ASC Topic No. 715, Compensation – Retirement Benefits, disclosure assumptions (5.11% interest rate, Pri-2012 White Collar Mortality Table generationally projected by Scale MP-2022). Lump sums are valued at age 65 using the IRS three-segment lump sum rates and are then discounted back from age 65 to December 31, 2023 at 5.15% and 5.11% for the Non-Contributory Pension Plan and Supplemental Pension Plan, respectively. |
(2) | NEOs may also qualify for subsidized early retirement benefits as described in the narrative below. |
| |
GATX CORPORATION - 2024 Proxy Statement | 59 |
EXECUTIVE COMPENSATION TABLES
Narrative Discussion Related to Pension Benefits Table
NEOs participate in our Non-Contributory Pension Plan for Salaried Employees (the “Qualified Plan”), which covers salaried employees of GATX and its domestic subsidiaries.
All NEOs have met the Qualified Plan’s vesting requirement. Subject to certain limitations imposed by law, pensions are based on years of service and average monthly compensation during (i) the five consecutive calendar years of highest compensation during the last 15 calendar years preceding retirement or the date on which employment terminates or (ii) the 60 consecutive calendar months preceding retirement or the date on which employment terminates, whichever is greater. Benefits under the Qualified Plan are not subject to any deduction for Social Security or other offset amounts.
Key provisions of the Qualified Plan include the following:
| ● | Participation. Participation begins on January 1 or July 1 coincident with or next following completion of one year of service and attainment of age 21. |
| ● | Normal Retirement Benefits. Normal retirement is at age 65 with five years of credited service. The basic formula is a base benefit equal to 1% of average monthly compensation multiplied by years of benefit service plus an excess benefit equal to 0.65% of average monthly compensation in excess of monthly Social Security Covered Compensation multiplied by years of benefit service (to a maximum of 35 years). |
| ● | Early Retirement Benefits. Qualified benefits can commence at any age in the form of an annuity with the accrued benefit actuarially reduced for commencement before age 65, or as a single lump sum payment representing the actuarially equivalent present value of the age 65 benefit. Qualified benefits accrued prior to July 1, 2008 and payable in annuity form to employees who (a) are at least age 55 with 15 or more years of service or (b) have at least 30 years of service and whose age plus service total 90 or more, are subject to a partial rather than full actuarial reduction for early commencement. |
“Compensation” is defined as regular earnings during the calendar year, including covered bonuses but excluding deferred and contingent compensation. For NEOs, compensation includes salary and annual incentive awards paid under the GATX Cash Incentive Compensation Plan. For the Final Average Pay Formula, “Social Security Covered Compensation” means the 35-year average of Social Security taxable wage bases in effect up to and including the year in which an individual attains Social Security Normal Retirement Age calculated in accordance with Revenue Ruling 89-70.
For unmarried participants, the normal form of payment is a life annuity. For married participants, the normal form of payment is a 50% joint-and-survivor annuity. Optional forms of payment include a single lump sum of the accrued pension’s actuarially equivalent present value or a joint and survivor co-pensioner annuity. All forms of payment have the same actuarially equivalent value as the life annuity.
Annual benefits in excess of certain limits imposed by the Employee Retirement Income Security Act of 1974 or the Internal Revenue Code (the “Code”) on payments from the Qualified Plan will be paid by the Company under the GATX Supplemental Retirement Plan (the “Non-Qualified Plan”). The Non-Qualified Plan is designed to restore those benefits that would otherwise be limited by statutory regulations. Payments are made as a single lump sum amount representing the actuarially equivalent present value of the benefit payable at age 65. Payments made pursuant to the Non-Qualified Plan are funded from the general assets of the Company.
The present value of accumulated pension benefits for each NEO is shown in column (d) of the Pension Benefits Table.
60GATX CORPORATION - 2024 Proxy Statement
EXECUTIVE COMPENSATION TABLES
Potential Payments upon Termination or Change in Control Table
The table below quantifies certain compensation and benefits that would have become payable to each of our NEOs if his or her employment had terminated on December 31, 2023, as a result of each of the termination scenarios described below, including in connection with a change of control of the Company (“COC”). The table below reflects certain assumptions made in accordance with SEC rules, namely that (a) the COC and/or termination of employment occurred on December 31, 2023, (b) the NEO’s age and years of service at the Company were as they actually were as of December 31, 2023 (for purposes of determining retirement eligibility), and (c) the value of a share of the Company’s common stock on December 29, 2023, the last trading day of the year, was $120.22. The table excludes the following payments and benefits that are not enhanced by the termination of employment or a COC:
| ● | accrued vacation pay, health plan continuation, and other similar amounts payable when employment terminates under programs applicable to our salaried employees generally; |
| ● | stock options that have vested and are exercisable as shown in Column (b) of the Outstanding Equity Awards at Fiscal Year-End Table; |
| ● | performance shares, RSUs and restricted stock that have vested as shown in Column (e) of the Option Exercises and Stock Vested Table; and |
| ● | the present value of pension benefits calculated in accordance with the assumptions applicable to all participants in the GATX Non-Contributory Pension Plan for Salaried Employees as reflected in the Pension Benefits Table. |
| |
GATX CORPORATION - 2024 Proxy Statement | 61 |
EXECUTIVE COMPENSATION TABLES
|
| |
| |
| Termination without |
| |
|
| | | | | | Cause or | | | |
| | | | Termination without | | Resignation for | | | |
| | Voluntary Resignation | | Cause Apart | | Good Reason in | | | |
| | (without Good Reason) | | from a Change in | | Connection with a | | Death or | |
| | or Retirement | | Control | | Change in Control | | Disability | |
Named Executive Officer | | ($) | | ($) | | ($) | | ($) | |
Robert C. Lyons |
|
|
|
|
|
|
|
| |
Cash Severance(1) |
| — |
| 3,480,000 |
| 5,220,000 |
| — | |
Bonus (Accrued Obligations)(2) |
| 870,000 |
| 870,000 |
| 870,000 |
| 870,000 | |
SRP Payment(3) |
| — |
| — |
| 3,184,121 |
| — | |
Gross-up Payment(4) |
| — |
| — |
| — |
| — | |
Accelerated Vesting of Equity Awards(5) |
| |
| |
| |
| | |
Stock Options |
| 327,383 |
| — |
| 979,807 |
| 979,880 | |
RSUs |
| — |
| — |
| — |
| — | |
Performance Shares |
| 1,830,109 |
| 1,190,178 |
| 3,705,180 |
| 1,830,109 | |
Continued Benefits Coverage(6) |
| — |
| 67,283 |
| 100,925 |
| — | |
Outplacement(7) |
| — |
| 25,000 |
| 87,000 |
| — | |
Total |
| 3,027,492 |
| 5,632,461 |
| 14,147,033 |
| 3,679,989 | |
Thomas A. Ellman |
|
|
|
|
|
|
|
| |
Cash Severance(1) |
| — |
| 1,532,300 |
| 3,064,590 |
| — | |
Bonus (Accrued Obligations)(2) |
| 420,630 |
| 420,630 |
| 420,630 |
| 420,630 | |
SRP Payment(3) |
| — |
| — |
| 1,015,312 |
| — | |
Gross-up Payment(4) |
| N/A |
| N/A |
| N/A |
| N/A | |
Accelerated Vesting of Equity Awards(5) |
| |
| |
| |
|
| |
Stock Options |
| 121,526 |
| — |
| 464,310 |
| 464,344 | |
RSUs |
| 228,178 |
| 228,178 |
| 357,053 |
| 228,178 | |
Performance Shares |
| 675,155 |
| 455,994 |
| 1,341,655 |
| 675,155 | |
Continued Benefits Coverage(6) |
| — |
| 50,462 |
| 100,925 |
| — | |
Outplacement(7) |
| — |
| 25,000 |
| 60,090 |
| — | |
Total |
| 1,445,489 |
| 2,712,564 |
| 6,824,565 |
| 1,788,307 | |
Paul F. Titterton |
|
|
|
|
|
|
|
| |
Cash Severance(1) |
| — |
| 1,399,190 |
| 2,798,370 |
| — | |
Bonus (Accrued Obligations)(2) |
| — |
| 384,090 |
| 384,090 |
| 384,090 | |
SRP Payment(3) |
| — |
| — |
| 832,676 |
| — | |
Gross-up Payment(4) |
| N/A |
| N/A |
| N/A |
| N/A | |
Accelerated Vesting of Equity Awards(5) |
|
|
| |
| |
|
| |
Stock Options |
| — |
| — |
| 275,395 |
| 275,423 | |
RSUs |
| — |
| 228,178 |
| 357,053 |
| 228,178 | |
Performance Shares |
| — |
| 267,730 |
| 812,687 |
| 404,781 | |
Continued Benefits Coverage(6) |
| — |
| 50,462 |
| 100,925 |
| — | |
Outplacement(7) |
| — |
| 25,000 |
| 54,870 |
| — | |
Total |
| — |
| 2,354,650 |
| 5,616,066 |
| 1,292,472 | |
Kim Nero |
|
|
|
|
|
|
|
| |
Cash Severance(1) |
| — |
| 971,850 |
| 1,943,700 |
| — | |
Bonus (Accrued Obligations)(2) |
| — |
| 229,900 |
| 229,900 |
| 229,900 | |
SRP Payment(3) |
| — |
| — |
| 101,067 |
| — | |
Gross-up Payment(4) |
| N/A |
| N/A |
| N/A |
| N/A | |
Accelerated Vesting of Equity Awards(5) |
|
|
| |
| |
|
| |
Stock Options |
| — |
| — |
| 146,560 |
| 157,419 | |
RSUs |
| — |
| — |
| — |
| — | |
Performance Shares |
| — |
| 180,330 |
| 527,766 |
| 251,500 | |
Continued Benefits Coverage(6) |
| — |
| 50,462 |
| 100,925 |
| — | |
Outplacement(7) |
| — |
| 25,000 |
| 41,800 |
| — | |
Total |
| — |
| 1,457,542 |
| 3,091,718 |
| 638,819 | |
Brian L. Glassberg |
|
|
|
|
|
|
|
| |
Cash Severance(1) |
| — |
| 930,000 |
| 1,860,000 |
| — | |
Bonus (Accrued Obligations)(2) |
| — |
| 220,000 |
| 220,000 |
| 220,000 | |
SRP Payment(3) |
| — |
| — |
| 137,765 |
| — | |
Gross-up Payment(4) |
| N/A |
| N/A |
| N/A |
| N/A | |
Accelerated Vesting of Equity Awards(5) |
|
|
|
|
| |
|
| |
Stock Options |
| — |
| — |
| 78,235 |
| 78,261 | |
RSUs |
| — |
| 39,913 |
| 145,466 |
| 29,574 | |
Performance Shares |
| — |
| — |
| 246,451 |
| 82,952 | |
Continued Benefits Coverage(6) |
| — |
| 50,462 |
| 100,925 |
| — | |
Outplacement(7) |
| — |
| 25,000 |
| 40,000 |
| — | |
Total |
| — |
| 1,265,375 |
| 2,828,842 |
| 410,787 | |
(1) | Represents the cash severance payable to the executive under the termination scenarios identified above under our Executive Severance Plan and the COC Agreements described below. |
62GATX CORPORATION - 2024 Proxy Statement
EXECUTIVE COMPENSATION TABLES
(2) | Our executives are eligible to receive an annual bonus payout subject to their continued employment through the end of the applicable year. In addition, each executive may receive a prorated annual bonus based on actual performance in the event of an involuntary termination without cause under the Executive Severance Plan and a prorated target bonus upon an involuntary termination under the COC Agreements, upon death or disability, or upon retirement. For purposes of the table above, given that the termination in each of the scenarios identified is assumed to have occurred on December 31, 2023, we have included the executive’s 2023 target bonus amount, which amount would be payable to the executive in the termination scenarios identified in the table. |
(3) | Represents the present value of the incremental portion of non-qualified pension benefits calculated using the discount rate specified in the COC Agreements instead of the GATX Non-Contributory Pension Plan for Salaried Employees, attributable to three additional years of age and service credit. |
(4) | Upon a COC, certain payments made to Mr. Lyons could be subject to the excise tax imposed on “excess parachute payments” by the Code. Pursuant to his existing employment agreement in effect since 2009, Mr. Lyons is eligible for reimbursement for a gross-up payment for any excise taxes payable pursuant to Sections 280G and 4999 of the Code arising as a result of the receipt of any such payments. The value of COC payments to Mr. Lyons as of December 31, 2023 fell below the level that would trigger an excise tax; therefore, he would not receive a gross-up payment. |
(5) | Represents the aggregate value of the accelerated vesting of the equity awards held by the executive in the termination scenarios identified above. With respect to RSUs and performance shares, the value is calculated by multiplying the closing price per share of our common stock on December 29, 2023 by the number of RSUs or performance shares the vesting of which accelerates in connection with the applicable triggering event. For purposes of the table, performance against goals is assumed to be at target with respect to performance shares. The value attributable to the accelerated options, the vesting of which accelerates in connection with the applicable triggering event, represents the excess of the closing price per share of our common stock on December 31, 2023 over the exercise price of the unvested options. The values reflected in the table also include accrued dividends on such unvested awards that would be paid upon vesting. |
(6) | Represents the estimated value of continued benefits to be provided to the executive under the termination scenarios identified under our Executive Severance Plan and the COC Agreements described below. The foregoing estimates are based on the premiums in effect on December 31, 2023. |
(7) | Represents the value of outplacement benefits to which the executive would be entitled under the termination scenarios identified above under our Executive Severance Plan and the COC Agreements described below. |
| |
GATX CORPORATION - 2024 Proxy Statement | 63 |
EXECUTIVE COMPENSATION TABLES
Key Provisions of the COC Agreements
The key provisions of the COC agreements are described below. Each NEO has entered into a COC agreement that provides certain benefits should employment be terminated or constructively terminated following a change of control. Key terms under the agreements include the following:
Executive Benefit |
| Description |
| | |
Term |
| ● Agreement effective for two-year rolling term and renews automatically each year unless GATX gives 60-days’ advance notice of non-renewal |
|
| ● Employment period is two years |
|
| ● Unless a COC occurs, employment is at will |
Payment Triggers |
| ● Involuntary termination without “cause” or voluntary termination for “good reason” within two years following a COC |
|
| ● Failure of a successor to assume the Agreement |
|
| ● Termination prior to, but in contemplation of, a COC |
|
| ● Payments are not triggered in the event of death, disability, “cause,” or voluntary termination for other than “good reason” |
Severance Benefits |
| ● Three times the sum of base salary and target annual bonus (paid in lump sum) |
|
| ● Three years of additional age and service credit for retirement purposes |
|
| ● Three years of additional coverage in health and welfare plans (such coverage becomes secondary if re-employed); thereafter, coverage continues at executive’s cost until eligible for Medicare |
|
| ● Outplacement services at a maximum cost of 10% of salary |
|
| ● Pro rata portion of target bonus for the year in which the COC occurs for the actual period served during the year of the COC prior to termination and payment of previously deferred compensation plus interest |
Excise Tax Gross Up |
| ● Tax gross up not included in COC agreements entered into after 2009 |
|
| ● Provided pursuant to one pre-2009 agreement unless value of severance benefits is within 110% of the level that would not trigger excise taxes; if so, the amount of severance benefits otherwise payable is reduced so that excise taxes are not imposed |
Enforcement and Legal Fees |
| ● Payable by Company unless a court determines that such payment was unjust |
Definition of Key Terms |
| ● COC means any of the following: |
|
| — the acquisition of 20% or more of the Company’s outstanding shares or voting securities |
|
| — a turnover in a majority of the Company’s board members |
|
| — consummation of a reorganization, merger, consolidation, sale, or disposition of substantially all assets unless shareholders immediately prior to the merger beneficially own more than 65% of outstanding shares or voting power of the resulting entity |
|
| — consummation of a reorganization, merger, consolidation, sale, or disposition of substantially all assets of any subsidiary or 10-K business segment that is the primary employer of the executive |
|
| — shareholder approval of liquidation or dissolution of the Company |
|
| ● “Cause” means the willful illegal conduct, gross misconduct, or continued failure of the executive to perform his or her duties after receipt of written notice and explanation of performance shortfalls |
|
| ● “Good Reason” means any of the following: |
|
| — a material diminution of the executive’s authority or duties |
|
| — a material diminution in base compensation |
|
| — a material diminution in the budget over which authority is retained |
|
| — a material change in geographic location at which services must be performed |
64GATX CORPORATION - 2024 Proxy Statement
EXECUTIVE COMPENSATION TABLES
Executive Severance Plan
In February 2023, following a market review and consultation with Pay Governance, our Compensation Committee adopted an Executive Severance Plan for our eligible executives located in the United States, including our NEOs. Pursuant to the Executive Severance Plan, participants will be eligible to receive severance benefits upon a qualifying termination, including in connection with a COC, as described further above in the Compensation Discussion and Analysis under Employee Benefits – Severance – Double-Trigger Vesting – Executive Severance Plan. Pursuant to the terms of the Executive Severance Plan, our NEOs will not be eligible for benefits under the plan to the extent they are a party to an existing COC agreement and would receive benefits under such agreement as a result of any termination. Additionally, for the avoidance of doubt, if an executive’s COC agreement provides for more favorable benefits in the event an excise tax is imposed on “excess parachute payments” by the Code than the benefits provided in the Executive Severance Plan, the more favorable provision contained in the COC agreement shall apply to such executive.
Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the total annual compensation of Robert C. Lyons, our CEO, to the total annual compensation of our median employee for our last completed fiscal year.
In 2023, our last completed fiscal year, the annual total compensation of our CEO was $6,472,498, and the annual total compensation of our median employee was $70,611. As a result, for 2023, the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was approximately 92 to 1.
To determine the annual total compensation of our CEO, we used the amount reported in the “Total” column of the Summary Compensation Table, which includes salary, stock and option awards, bonus, change in pension value, and all other compensation. We then calculated our median employee’s total annual compensation in accordance with the same requirements applicable to the CEO’s compensation, as reported in the Summary Compensation Table, and used that number to calculate the ratio of our CEO’s pay to that of our median employee.
We identified the median employee by examining compensation information derived from payroll records for all employees, excluding the CEO, who were employed by us on October 1, 2023. In identifying our median employee, we selected actual base salary (for salaried employees) and wages (for hourly employees) as the most appropriate measure of compensation and consistently applied that measure to all employees included in the calculation.
As of October 1, 2023, we employed approximately 1,888 people, with 1,103 located in the United States and 785 located outside the United States. We elected to exclude employees as of that date in the Netherlands (31), India (30), Mexico (9), France (8), China (6), and Singapore (4) given the small number of employees located in those jurisdictions.
| |
GATX CORPORATION - 2024 Proxy Statement | 65 |
EXECUTIVE COMPENSATION TABLES
Pay Versus Performance Disclosure
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between executive compensation actually paid and the Company’s financial and stock price performance.
Pay Versus Performance Table
The following table sets forth information concerning the compensation of our Principal Executive Officers (“PEOs”) and non-PEO NEOs for each of the fiscal years ended December 31, 2020, 2021, 2022, and 2023, and our financial performance for each such fiscal year:
| | | | | | | | | | | | | | | | | | | | Net Income |
|
| | | | | | | | | | | | | | Value of Initial Fixed | | | | Excluding |
| ||
| | | | | | | | | | | | | | $100 Investment Based | | | | Tax |
| ||
| | | | | | | | | | Average | | | | on: | | | | Adjustments |
| ||
| | Summary | | Summary | | Compensation | | Compensation | | Summary | | Average | | | | Peer Group | | | | and Other |
|
| | Compensation | | Compensation | | Actually Paid | | Actually Paid | | Compensation | | Compensation | | Total | | Total | | Net | | Items |
|
| | Table Total for | | Table Total for | | to PEO | | to PEO | | Table Total for | | Actually Paid | | Shareholder | | Shareholder | | Income | | (non-GAAP) |
|
| | PEO (Kenney) | | PEO (Lyons) | | (Kenney) | | (Lyons) | | Non-PEO | | to Non-PEO | | Return | | Return | | ($, in | | ($, in |
|
Year |
| ($)(1) |
| ($)(1) |
| ($)(1) |
| ($)(1) |
| NEOs ($)(1) |
| NEOs ($)(1) |
| ($) |
| ($)(2) |
| millions) |
| millions) |
|
2023 |
| — |
| |
| — |
| |
| |
| |
| |
| |
| |
| | |
2022 |
| |
| |
| ( |
| |
| |
| |
| |
| |
| |
| | |
2021 |
| |
| — |
| |
| — |
| |
| |
| |
| |
| |
| | |
2020 |
| |
| — |
| |
| — |
| |
| |
| |
| |
| |
| | |
(1) | Amounts represent compensation actually paid to our PEOs and the average compensation actually paid to our remaining NEOs for the relevant fiscal year, as determined under SEC rules (and described below), which includes the individuals indicated in the table below for each fiscal year: |
Year |
| PEO(s) |
| Non-PEO NEOs |
2023 | | Robert C. Lyons | | Thomas A. Ellman, Brian L. Glassberg, Kim Nero, and Paul F. Titterton |
2022 |
| Robert C. Lyons; |
| Thomas A. Ellman, Deborah A. Golden, Kim Nero, N. Gokce Tezel, Paul F. Titterton, and Robert A. Zmudka |
2021 |
| Brian A. Kenney |
| Thomas A. Ellman, Deborah A. Golden, Robert C. Lyons, and N. Gokce Tezel |
2020 |
| Brian A. Kenney |
| Thomas A. Ellman, Deborah A. Golden, Robert C. Lyons, and N. Gokce Tezel |
(a) | Effective April 22, 2022, Mr. Lyons was appointed as our President and Chief Executive Officer upon the retirement of Mr. Kenney. |
66GATX CORPORATION - 2024 Proxy Statement
EXECUTIVE COMPENSATION TABLES
Compensation actually paid to our NEOs represents the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year (“FY”), as adjusted as follows:
| | 2020 | | 2021 | | 2022 | | 2023 | ||||||||||||||||||||
| | | | | Average | | | | | Average | | | | | | | Average | | | | | Average | | |||||
| | | | | Non-PEO | | | | | Non-PEO | | PEO | | PEO | | Non-PEO | | | | Non-PEO | | |||||||
Adjustments |
| PEO |
| NEOs |
| PEO |
| NEOs |
| (Kenney) |
| (Lyons) |
| NEOs |
| PEO |
| NEOs |
| |||||||||
Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table for Applicable FY | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | |
Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Remain Unvested as of Applicable FY End, determined as of Applicable FY End | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |
Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Vested during Applicable FY, determined as of Vesting Date | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |
Increase/deduction for Awards Granted during Prior FY that were Outstanding and Unvested as of Applicable FY End, determined based on change in ASC 718 Fair Value from Prior FY End to Applicable FY End | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | | |
Increase/deduction for Awards Granted during Prior FY that Vested During Applicable FY, determined based on change in ASC 718 Fair Value from Prior FY End to Vesting Date | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | ( | | $ | ( | |
Deduction of ASC 718 Fair Value of Awards Granted during Prior FY that were Forfeited during Applicable FY, determined as of Prior FY End | | $ | | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | | | $ | | |
Increase based on Dividends Paid to the Executive during Applicable FY on outstanding equity awards | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |
Increase based on Incremental Fair Value of Options Modified during Applicable FY | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |
Deduction for Change in the Actuarial Present Values reported under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” Column of the Summary Compensation Table for Applicable FY | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | ( | | $ | ( | | $ | ( | |
Increase for Service Cost and, if applicable, Prior Service Cost for Pension Plans | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | |
TOTAL ADJUSTMENTS | | $ | ( | | $ | ( | | $ | | | $ | | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | |
(a) | Fair value or change in fair value, as applicable, of equity awards in the “Compensation Actually Paid” columns was determined by reference to (1) for performance stock units (and RSUs, if any), the average of the high and low values of our common stock on applicable year-end date(s) or, in the case of vesting dates, the closing price on the applicable vesting date(s) multiplied by the probability of achievement as of the applicable date, and (2) for stock options, a value derived using the Black-Scholes option pricing model and the present value of dividends we expect to pay over the expected term of the award as of the applicable year-end or vesting date(s), determined based on the same methodology as used to determine grant date fair value of such stock options for financial statement purposes modified to obtain the values as of the relevant valuation dates. The Black-Scholes option pricing model assumptions were determined as follows: a) the average of the high and low values of our common stock on the applicable valuation date as of the current market price, b) in the case of in the money options, an expected term equal to the original ratio of expected term relative to the seven-year contractual term multiplied times the remaining term as of the applicable valuation date, and in the case of underwater stock options, an expected term set equal to the remaining term of the award, c) volatility based on the historical volatility of our stock price over a period equal to the expected term, and d) risk-free interest rates based on the implied yield on recently-issued U.S. Treasury zero-coupon bonds with a term comparable to the expected term. In all cases, these amounts were calculated in accordance with ASC Topic No. 718, Compensation – Stock Compensation. For additional information on the assumptions used to calculate the valuation of the awards, see the Notes to the Company’s audited financial statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and prior fiscal years. |
(2) | For the relevant fiscal year, represents the cumulative TSR (the “Peer Group TSR”) of the S&P MidCap 400 Index (the “Peer Group”). |
| |
GATX CORPORATION - 2024 Proxy Statement | 67 |
EXECUTIVE COMPENSATION TABLES
Narrative Disclosure to Pay Versus Performance Table
Relationship Between Performance Measures and Compensation Actually Paid
The graphs below compare the compensation actually paid to our PEO(s) and the average of the compensation actually paid to our remaining NEOs with our (i) cumulative TSR, (ii) Peer Group TSR, (iii) net income, (iv) net income, excluding tax adjustments and other items (non-GAAP), (v) three-year cumulative investment volume, and (vi) three-year average LTI-adjusted return on equity (non-GAAP), in each case, for the fiscal years ended December 31, 2020, 2021, 2022 and 2023. We consider those last three performance measures to be equally important in linking compensation actually paid to our NEOs to company performance. SEC rules do not permit the last two measures to be in the table above, however, because they are measured over a multi-year period.
TSR amounts reported in the graph assume an initial fixed investment of $100, and that all dividends, if any, were reinvested.
68GATX CORPORATION - 2024 Proxy Statement
EXECUTIVE COMPENSATION TABLES
Pay Versus Performance Tabular List
We believe the following performance measures represent the most important financial performance measures used by us to link compensation actually paid to our NEOs for the fiscal year ended December 31, 2023:
| ● |
| ● |
| ● |
For additional details regarding our most important financial performance measures, please see the sections titled Performance Measures, Goal Setting, and Pay-for-Performance Alignment, Annual Incentive Awards and Long-Term Equity Based Incentive Awards in the Compensation Discussion and Analysis elsewhere in this Proxy Statement.
| |
GATX CORPORATION - 2024 Proxy Statement | 69 |
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP (“EY”) as our independent registered public accounting firm for fiscal year 2024, and our Board is seeking shareholder ratification of the appointment. EY and its predecessor firms have served as our independent registered public accounting firm since 1916.
Shareholder ratification of this appointment is not required by our By-Laws or applicable laws and regulations. However, our Board annually submits this appointment for shareholder ratification as an element of our strong governance program. While this vote cannot be binding, if shareholders do not ratify the appointment of EY, the Audit Committee will take the vote into account in making future appointments.
Representatives of EY are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions by shareholders.
Audit Committee Evaluation
In determining whether to reappoint EY, the Audit Committee considered the qualifications, performance, and independence of the firm and the audit engagement team, the quality of its discussions with EY, and the fees charged by EY for the breadth of services provided. In connection with the 2024 appointment, the Audit Committee considered, among other things, the following:
| ● | Audit Quality — The quality of EY’s audit and non-audit work, based on its oversight of the firm’s work product, as well as its discussions with management in executive session without EY present and its discussions with EY in executive session without management present |
| ● | Performance — EY’s reports on its quality controls and its performance during our 2023 and prior-year audits |
| ● | Qualitative Review — EY’s (i) expertise and resources, (ii) audit planning, (iii) communication and interaction, (iv) independence, objectivity, and professional skepticism, and (v) value for fees |
| ● | Self-Assessment — EY’s annual self-assessment of its accomplishments in connection with its audit, its satisfaction of the service needs and expectations of the Audit Committee and management, and areas of continued focus and improvement opportunities |
| ● | Regulatory Reviews — External data on the firm’s audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on EY and its peer firms |
| ● | Reasonableness of Fees — The appropriateness of EY’s fees for audit and non-audit services, both on an absolute basis and relative to comparable firms |
| ● | Independence — Written disclosures from the firm and the independence letter required by the PCAOB |
| ● | Tenure — EY’s tenure as our independent auditor, including the benefits of having a long-tenured auditor and the institutional knowledge gained from prior years of engagement |
The Audit Committee determined that the appointment of EY is in the best interest of GATX and our shareholders. The Audit Committee has appointed, subject to shareholder ratification, EY as our independent registered public accounting firm for fiscal year 2024 and recommends that shareholders ratify the appointment at the Annual Meeting.
The Board of Directors recommends that you vote FOR the proposal to ratify Ernst & Young LLP as our independent registered public accounting firm for 2024. |
70GATX CORPORATION - 2024 Proxy Statement
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Audit Committee Report
The Audit Committee’s responsibilities, as set forth in its charter, include providing oversight of our financial accounting and reporting process through periodic meetings with our management, independent registered public accounting firm, and internal auditors to review accounting, auditing, internal controls, and financial reporting matters. The Audit Committee Charter is available on our website (www.gatx.com) in the Investor Relations section under “Governance.”
The Audit Committee has the ultimate authority to select and engage our independent registered public accounting firm, evaluate its performance, evaluate the performance of the lead audit partner, oversee the required rotation of the lead audit partner every five years, review and consider the selection of the lead audit partner, approve all audit and non-audit work, and approve all associated fees. The Audit Committee’s oversight includes regular private sessions with the independent registered public accounting firm and discussions with the firm regarding the scope of its audit.
GATX management is responsible for the preparation and integrity of our financial reporting information and related systems of internal control. In the discharge of its functions, the Audit Committee relies on our management (including senior financial management), internal audit staff, and independent registered public accounting firm.
It is not the Audit Committee’s responsibility to plan or conduct audits or to determine that our financial statements are complete and accurate and prepared in accordance with generally accepted accounting principles. That work is the responsibility of GATX management and our independent registered public accounting firm. In making its recommendation to the Board noted below, the Audit Committee has relied on management to prepare the financial statements with integrity and objectivity and in conformance with generally accepted accounting principles and the report of our independent registered public accounting firm with respect to the financial statements.
The Audit Committee currently consists of six directors: Diane M. Aigotti (Chair), Anne L. Arvia, Shelley J. Bausch, John M. Holmes, Adam L. Stanley, and Stephen R. Wilson, each of whom is an “independent director” under the NYSE listing standards applicable to Audit Committee members. The Board has determined that each member of the Audit Committee is financially literate and has accounting and related financial management expertise, and that each of Diane M. Aigotti, Anne L. Arvia, John M. Holmes, and Stephen R. Wilson is an “audit committee financial expert” (as such term is defined by the SEC).
The Audit Committee has reviewed and discussed with management the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The Audit Committee has discussed with EY, our independent registered public accounting firm, the matters required to be discussed under the applicable requirements of the PCAOB and the SEC, including the quality of our accounting policies, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit Committee also has received from EY the written disclosures regarding the auditors’ independence required by PCAOB Ethics and Independence Rule 3256, Communication with Audit Committees Concerning Independence, and the Audit Committee has discussed with EY its independence.
Based on the review and discussions noted above, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2023 for filing with the SEC.
Diane M. Aigotti (Chair)
Anne L. Arvia
Shelley J. Bausch
John M. Holmes
Adam L. Stanley
Stephen R. Wilson
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Pre-Approval Policy
Pursuant to our pre-approval policy, the Audit Committee must pre-approve all audit and non-audit services provided to GATX by our independent registered public accounting firm before the firm is engaged to perform the services. Each year, the Audit Committee reviews the annual audit plan submitted by the independent registered public accounting firm and pre-approves all necessary and appropriate audit services for the year.
Each quarter, the Company and the independent registered public accounting firm jointly provide the Audit Committee a report of all the audit-related, tax, and other non-audit services that were performed by the independent registered public accounting firm during the current fiscal quarter pursuant to the authority previously approved by the Committee. In addition, the Company and the independent registered public accounting firm provide the Audit Committee with an estimate of the nature and amount of the services expected to be needed in the next fiscal quarter, together with a joint statement confirming that the services are consistent with the SEC’s rules on auditor independence. The Audit Committee then pre-approves those services, as appropriate. Any proposed changes to the estimate of services reviewed as part of the annual audit plan also are discussed with the Audit Committee at that time. The Audit Committee may delegate pre-approval authority to one or more of its members. Any member or members to whom such authority is delegated must report any pre-approval decisions to the Audit Committee at its next scheduled meeting.
Audit and Other Related Fees
Audit Fees
The aggregate fees for professional services rendered by EY in connection with (i) the audit of the annual financial statements set forth in our Annual Report on Form 10-K, (ii) the review of the interim financial statements in our Quarterly Reports on Form 10-Q, (iii) comfort letters, consents, and other services related to SEC filings, and (iv) related audit services provided to other subsidiaries of GATX were approximately $3,236,000 for 2023 and $2,920,000 for 2022. Audit fees also include the audit of the effectiveness of our internal control over financial reporting as required by SEC rules adopted under Section 404 of the Sarbanes-Oxley Act of 2002.
Audit-Related Fees
The aggregate fees for assurance and related services that were related to the performance of the audit or review of our financial statements were approximately $159,500 for 2023 and $147,000 for 2022. In both years, the services performed included employee benefit plan audits.
Tax Fees
The aggregate fees for professional services rendered for federal and international tax compliance, advice, and planning were approximately $45,425 for 2023 and $43,000 for 2022.
All Other Fees
Fees for other professional services rendered by EY were approximately $2,000 for 2023 and $5,200 for 2022, primarily related to access and use of EY’s online accounting research tool.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Each director, each NEO named in the Summary Compensation Table, and all directors and current executive officers as a group, owned the number of shares of GATX common stock set forth in the following table:
|
| Shares of Common Stock |
|
| | Beneficially Owned as of |
|
Name of Beneficial Owner | | March 1, 2024(1)(2) |
|
Diane M. Aigotti |
| 16,540 | |
Anne L. Arvia |
| 32,365 | |
Shelley J. Bausch |
| 746 | |
Thomas A. Ellman |
| 115,792 | |
Brian L. Glassberg |
| 12,710 | |
John M. Holmes |
| 260 | |
Robert C. Lyons |
| 146,094 | |
Kim Nero |
| 10,955 | |
James B. Ream |
| 44,922 | |
Adam L. Stanley |
| 6,483 | |
David S. Sutherland |
| 83,852 | |
Paul F. Titterton |
| 48,939 | |
Stephen R. Wilson |
| 19,956 | |
Paul G. Yovovich |
| 38,405 | |
All directors and current executive officers as a group (22 persons) |
| 706,954 | |
(1) | Includes (i) units of phantom stock credited to the accounts of individuals and payable in shares of common stock following retirement from the Board and RSUs that will vest in full on April 26, 2024, and be payable in shares of common stock on such date or, if deferred per a deferral election, following retirement from the Board as follows (in the aggregate): Ms. Aigotti (16,540); Ms. Arvia (32,050); Ms. Bausch (746); Mr. Holmes (260); Mr. Ream (39,922); Mr. Stanley (6,483); Mr. Sutherland (73,852); Mr. Wilson (14,828); Mr. Yovovich (35,145); and directors as a group (219,826); and (ii) shares which may be obtained by exercise of previously granted options within 60 days of March 1, 2024, by Mr. Ellman (70,266); Mr. Glassberg (7,132); Mr. Lyons (98,366); Ms. Nero (10,032); Mr. Titterton (37,566); and current executive officers as a group (300,358). |
(2) | Each person has sole investment and voting power (or shares such powers with his or her spouse), except with respect to units of phantom common stock, RSUs, and option grants. None of the directors or NEOs owned 1% or more of the Company’s outstanding shares of common stock. Directors and current executive officers as a group beneficially owned approximately 1.96% of the Company’s outstanding shares of common stock. |
PRINCIPAL SHAREHOLDERS
The entities listed below are the only persons known to us to beneficially own more than 5% of our common stock. To our knowledge, except as indicated in the footnotes to this table, the entities named below have sole voting and sole investment power with respect to all shares beneficially owned by them. Percentage of beneficial ownership is based on 35,538,117 shares outstanding as of March 1, 2024.
|
| Shares Beneficially |
| Percent of Common |
|
Name and Address of Beneficial Owner | | Owned | | Stock |
|
State Farm Mutual Automobile Insurance Company(1) |
| 5,665,488 |
| 15.9 | |
One State Farm Plaza | | | | | |
Bloomington, Illinois 61710 | | | | | |
BlackRock, Inc.(2) |
| 4,659,717 |
| 13.1 | |
50 Hudson Yards | | | | | |
New York, New York 10001 | | | | | |
The Vanguard Group, Inc.(3) |
| 3,917,862 |
| 11.0 | |
100 Vanguard Boulevard | | | | | |
Malvern, Pennsylvania 19355 | | | | | |
EARNEST Partners, LLC(4) |
| 2,969,754 |
| 8.4 | |
1180 Peachtree Street NE, Suite 2300 | | | | | |
Atlanta, Georgia 30309 | | | | | |
GAMCO Investors, Inc.(5) |
| 2,670,379 |
| 7.5 | |
One Corporate Center | | | | | |
Rye, New York 10580 | | | | | |
Dimensional Fund Advisors LP(6) |
| 2,202,403 |
| 6.2 | |
6300 Bee Cave Road | | | | | |
Building One | | | | | |
Austin, Texas 78746 | | | | | |
(1) | Based on a Schedule 13G amendment filed with the SEC on February 12, 2024. Consists of (i) 3,336,000 shares held by State Farm Mutual Automobile Insurance Company, (ii) 882,800 shares held by State Farm Fire and Casualty Company, (iii) 4,200 shares held by State Farm Investment Management Corp., and (iv) 1,442,488 shares held by State Farm Insurance Companies Employee Retirement Trust. State Farm Investment Management Corp. has shared voting and dispositive power as to the shares owned by it, and each of the other foregoing entities has sole voting and dispositive power as to the shares owned by it. Each of the foregoing entities expressly disclaims beneficial ownership as to all shares as to which such person has no right to receive the proceeds of sale of the security and disclaims that it is part of a “group” under the regulations of the SEC with regard to the beneficial ownership of these shares of common stock. |
(2) | Based on a Schedule 13G amendment filed with the SEC on January 23, 2024. BlackRock, Inc. has sole voting power with respect to 4,489,875 of the reported shares and sole dispositive power with respect to all of the reported shares. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, these shares. No one person’s interest in these shares is greater than 5% of the total number of outstanding shares of GATX stock. |
(3) | Based on a Schedule 13G amendment filed with the SEC on February 13, 2024. The Vanguard Group, Inc. and certain of its affiliated entities (collectively, “Vanguard”) have sole voting power with respect to none of the reported shares and shared voting power with respect to 26,084 of the reported shares. Vanguard has sole dispositive power with respect to 3,855,299 of the reported shares and shared dispositive power with respect to 62,563 of the reported shares. No one affiliated entity owns 5% or greater of the total number of outstanding shares of GATX stock. |
(4) | Based on a Schedule 13G amendment filed with the SEC on February 12, 2024. EARNEST Partners, LLC is an investment adviser to its clients. No single client interest in these shares is greater than 5% of the total number of outstanding shares of GATX stock. EARNEST Partners, LLC has sole voting power with respect to 2,319,587 of the reported shares and shared voting power with respect to 3,714 of the reported shares. EARNEST Partners, LLC has sole dispositive power with respect to all of the reported shares. |
(5) | Based on a Schedule 13D amendment filed with the SEC on July 13, 2023. Consists of (i) 1,479,129 shares held by GAMCO Asset Management Inc. (“GAMCO”), (ii) 1,187,250 shares held by Gabelli Funds, LLC, and (iii) 4,000 shares held by MJG Associates, Inc. Each of the persons filing the Schedule 13D has the sole power to vote or direct the vote and sole power to dispose or to direct the disposition of the reported shares, either for its own benefit or for the benefit of its investment clients or its partners, as the case may be, except that (i) GAMCO does not have the authority to vote 58,100 of the reported shares, (ii) Gabelli Funds has sole dispositive and voting power with respect to the shares held by the Funds so long as the aggregate voting interest of all joint filers does not exceed 25% of their total voting interest in GATX and, in that event, the Proxy Voting Committee of each Fund shall respectively vote that Fund’s shares, (iii) at any time, the Proxy Voting Committee of each such Fund may take and exercise in its sole discretion the entire voting power with respect to the shares held by such Fund under special circumstances such as regulatory considerations, and (iv) the power of Mario Gabelli, Associated Capital Group, Inc., GAMCO Investors, Inc. and GGCP, Inc. is indirect with respect to shares beneficially owned directly by other reporting persons. |
74GATX CORPORATION - 2024 Proxy Statement
PRINCIPAL SHAREHOLDERS
(6) | Based on a Schedule 13G amendment filed with the SEC on February 9, 2024. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the Investment Advisers Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such as investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment adviser, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the shares that are owned by the Funds, and may be deemed to be the beneficial owner of the shares held by the Funds. However, all of the reported shares are owned by the Funds. Dimensional disclaims beneficial ownership of such shares. The Funds have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares held in their respective accounts. To the knowledge of Dimensional, the interest of any one such Fund does not exceed 5% of the outstanding shares of GATX. Dimensional has sole voting power with respect to 2,160,660 of the reported shares and sole dispositive power with respect to all of the reported shares. |
FORWARD-LOOKING STATEMENTS
Statements in this proxy statement not based on historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and, accordingly, involve known and unknown risks and uncertainties that are difficult to predict and could cause our actual results, performance, or achievements to differ materially from those discussed. Forward-looking statements include statements as to our future expectations, beliefs, plans, strategies, objectives, events, conditions, financial performance, prospects, or future events. In some cases, forward-looking statements can be identified by the use of words such as “may,” “could,” “expect,” “intend,” “plan,” “seek,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “outlook,” “continue,” “likely,” “will,” “would”, and similar words and phrases. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date they are made, and are not guarantees of future performance. We do not undertake any obligation to publicly update or revise these forward-looking statements.
The following factors, in addition to those discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and elsewhere in this report and in our other filings with the SEC, could cause actual results to differ materially from our current expectations expressed in forward-looking statements:
| ● | a significant decline in customer demand for our transportation assets or services, including as a result of: |
— | prolonged inflation or deflation |
— | high interest rates |
— | weak macroeconomic conditions and world trade policies |
— | weak market conditions in our customers' businesses |
— | adverse changes in the price of, or demand for, commodities |
— | changes in railroad operations, efficiency, pricing and service offerings, including those related to "precision scheduled railroading," or labor strikes or shortages |
— | changes in, or disruptions to, supply chains |
— | availability of pipelines, trucks, and other alternative modes of transportation |
— | changes in conditions affecting the aviation industry, including global conflicts, geographic exposure, and customer concentrations |
— | customers' desire to buy, rather than lease, our transportation assets |
— | other operational or commercial needs or decisions of our customers |
| ● | inability to maintain our transportation assets on lease at satisfactory rates due to oversupply of assets in the market or other changes in supply and demand |
| ● | competitive factors in our primary markets, including competitors with significantly lower costs of capital |
| ● | higher costs associated with increased assignments of our transportation assets following non-renewal of leases, customer defaults, and compliance maintenance programs or other maintenance initiatives |
| ● | events having an adverse impact on assets, customers, or regions where we have a concentrated investment exposure |
| ● | financial and operational risks associated with long-term purchase commitments for transportation assets |
| ● | reduced opportunities to generate asset remarketing income |
| ● | inability to successfully consummate and manage ongoing acquisition and divestiture activities |
| ● | reliance on Rolls-Royce in connection with our aircraft spare engine leasing businesses, and the risks that certain factors that adversely affect Rolls-Royce could have an adverse effect on our businesses |
| ● | potential obsolescence of our assets |
76GATX CORPORATION - 2024 Proxy Statement
FORWARD-LOOKING STATEMENTS
| ● | risks related to our international operations and expansion into new geographic markets, including laws, regulations, tariffs, taxes, treaties, or trade barriers affecting our activities in the countries where we do business |
| ● | failure to successfully negotiate collective bargaining agreements with the unions representing a substantial portion of our employees |
| ● | inability to attract, retain, and motivate qualified personnel, including key management personnel |
| ● | inability to maintain and secure our information technology infrastructure from cybersecurity threats and related disruption of our business |
| ● | exposure to damages, fines, criminal and civil penalties, and reputational harm arising from a negative outcome in litigation, including claims arising from an accident involving transportation assets |
| ● | changes in, or failure to comply with, laws, rules, and regulations |
| ● | environmental liabilities and remediation costs |
| ● | operational, functional and regulatory risks associated with climate change, severe weather events and natural disasters, and other environmental, social, and governance matters |
| ● | U.S. and global political conditions and the impact of increased geopolitical tension and wars, including the ongoing war between Russia and Ukraine and resulting sanctions and countermeasures, on domestic and global economic conditions in general, including supply chain challenges and disruptions |
| ● | prolonged inflation or deflation |
| ● | fluctuations in foreign exchange rates |
| ● | deterioration of conditions in the capital markets, reductions in our credit ratings, or increases in our financing costs |
| ● | the emergence of new variants of COVID-19 or the occurrence of another widespread health crisis and the impact of measures taken in response |
| ● | inability to obtain cost-effective insurance |
| ● | changes in assumptions, increases in funding requirements or investment losses in our pension and post-retirement plans |
| ● | inadequate allowances to cover credit losses in our portfolio |
| ● | asset impairment charges we may be required to recognize |
| ● | inability to maintain effective internal control over financial reporting and disclosure controls and procedures |
OTHER INFORMATION
Shareholder Proposals
2024 Annual Meeting Proposals
The Board does not know of any matters to be presented at the meeting other than those described in this Proxy Statement, and we have not received notice of any shareholder proposals for the upcoming Annual Meeting. In the event that a shareholder proposal is made at the Annual Meeting, the Proxyholders (as defined on page 80) may exercise their discretionary voting authority under the proxies they hold to vote in accordance with their best judgment on any such proposal.
2025 Shareholder Proposals
Proposals Under SEC Rule 14a-8
In order for a shareholder proposal to be considered for inclusion in our proxy materials for the 2025 annual meeting of shareholders pursuant to SEC Rule 14a-8, the shareholder proposal must be received by the Corporate Secretary, GATX Corporation, 233 South Wacker Drive, Chicago, Illinois 60606-7147 no later than November 15, 2024. Any such proposal may be included in next year’s Proxy Statement only if it complies with our By-Laws and the rules and regulations promulgated by the SEC, including Rule 14a-8. Nothing in this section shall be deemed to require us to include, in our proxy materials relating to any annual meeting, a shareholder proposal that does not meet all of the requirements for inclusion established by the SEC.
Non-14a-8 Proposals
If a shareholder intends to present a proposal for consideration at the 2025 annual meeting of shareholders outside the processes of SEC Rule 14a-8, the proposal must be received by the Corporate Secretary, GATX Corporation, 233 South Wacker Drive, Chicago, Illinois 60606-7147 no earlier than December 27, 2024, and no later than January 26, 2025. The notice must contain, and be accompanied by, all of the information as specified in our By-Laws. We recommend that any shareholder wishing to bring any item before an annual meeting of shareholders review our By-Laws, which are available on our website (www.gatx.com) in the Investor Relations section under “Governance.”
2025 Director Nominations
Director nominations by shareholders for consideration at the 2025 annual meeting of shareholders must be received by the Governance Committee, c/o the Corporate Secretary, GATX Corporation, 233 South Wacker Drive, Chicago, Illinois 60606-7147 no earlier than December 27, 2024, and no later than January 26, 2025. The notice must contain, and be accompanied by all information required by our By-Laws, the proxy rules, and applicable law. In addition to satisfying the foregoing requirements, to comply with the universal proxy rules, 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 under the Exchange Act no later than February 25, 2025.
78GATX CORPORATION - 2024 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Why did I not receive a full set of proxy materials?
This year, the Company is furnishing proxy materials to our shareholders primarily through “notice-and-access” delivery pursuant to SEC rules. As a result, beginning on or about March 15, 2024, we are mailing to many of our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) containing instructions on how to access proxy materials on the Internet. Shareholders who have affirmatively requested electronic delivery of our proxy materials will receive instructions via email regarding how to access these materials electronically.
Using the notice-and-access method of proxy delivery expedites receipt of proxy materials by our shareholders and reduces the cost of producing and mailing the full set of proxy materials. If you receive the Notice of Internet Availability by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice of Internet Availability instructs you on how to access the proxy materials and vote on the Internet. If you would like to receive paper copies of our proxy materials in the mail, you may follow the instructions on the Notice of Internet Availability for making this request.
Who may vote at the Annual Meeting?
Only holders of shares of our common stock as of the close of business on March 1, 2024 (the “Record Date”) will be entitled to vote at the Annual Meeting. On that day, 35,538,117 shares of common stock were issued and outstanding and eligible to vote. Each share is entitled to one vote on each matter presented at the Annual Meeting.
How do I attend the virtual Annual Meeting?
Shareholder of Record. If your shares were registered directly in your name with our transfer agent, Computershare Investor Services, then you are considered the shareholder “of record” with respect to those shares. If you are a shareholder of record, you will need to visit https://meetnow.global/MLSYNVU and enter your 15-digit Control Number to attend the virtual Annual Meeting. Your Control Number was provided in the Notice of Internet Availability or proxy card you received.
Beneficial Owner of Shares Held in Street Name. If you hold your shares through a broker, bank or other nominee, you will need to register in advance to receive a Control Number and participate in the meeting. To register you must obtain a legal proxy, executed in your favor, from the broker, bank, or other nominee that holds your shares and submit proof of your legal proxy reflecting the number of shares of GATX stock you held as of the Record Date, along with your name and email address, to Computershare. Please forward the email from your record holder, or attach an image of your legal proxy to an email, to legalproxy@computershare.com. By mail: Computershare, GATX Corporation Legal Proxy, P.O. Box 43001, Providence, RI 02940-3001. Requests for registration must be labeled as “Legal Proxy” and be received no later than 5:00 p.m., Eastern Time, on April 22, 2024. You will receive a confirmation of your registration, with a Control Number, by email from Computershare. At the time of the meeting, go to https://meetnow.global/MLSYNVU and enter your Control Number to attend the virtual Annual Meeting.
Attending as a Guest. Those without a Control Number may attend as guests, but they will not have the option to vote their shares or participate during the virtual Annual Meeting.
Technical Assistance. The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Note: Internet Explorer is not a supported browser. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the meeting. We encourage you to access the meeting prior to the start time. For further assistance should you need it, you may call 888-724-2416.
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GATX CORPORATION - 2024 Proxy Statement | 79 |
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
How do I vote?
Shareholder of Record. If you are a shareholder of record, you can vote (1) by internet or telephone by following the instructions on the Notice of Internet Availability or proxy card, (2) signing, dating, and returning a written proxy card which may be requested by following the instructions on the Notice of Internet Availability that you received, or (3) attending the virtual Annual Meeting and voting online.
Beneficial Owner of Shares Held in Street Name. If you hold your shares through a broker, bank, or other nominee, then the nominee holding your shares is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that nominee on how to vote the shares held in your account. Your nominee will provide you with instructions on how to vote your shares, including any available telephone or internet voting options. If you hold your shares through a broker, bank, or other nominee and would like to vote online at the Annual Meeting, you must first obtain a legal proxy issued in your name from the nominee that holds your shares and register to attend the Annual Meeting as described above under “How do I attend the Virtual Annual Meeting?” – Beneficial Owner of Shares Held in Street Name.
What does it mean to vote by proxy?
It means that you give someone else the right to vote your shares in accordance with your instructions. In this case, we are asking you to give your proxy to each of our Chief Executive Officer, Chief Financial Officer, and General Counsel (the “Proxyholders”). In this way, you ensure that your vote will be counted even if you are unable to attend the Annual Meeting.
What happens if I do not give specific voting instructions?
Shareholder of Record. If you are a shareholder of record and you indicate when voting by internet or telephone that you wish to vote as recommended by the Board, or you sign and return a proxy card (if you so requested) without giving specific voting instructions, the Proxyholders will vote your shares (1) FOR the election of each of the Board’s nominees for director, (2) FOR the adoption of the shareholder advisory resolution to approve the Company’s executive compensation, and (3) FOR the ratification of the Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for 2024.
Beneficial Owner of Shares Held in Street Name. If you hold your shares through a bank, broker, or other nominee and you do not provide that nominee with specific voting instructions, under the rules of various national and regional securities exchanges, the nominee that holds your shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. If your nominee does not receive instructions from you on how to vote your shares on a non-routine matter, your nominee will inform the inspector of election that it does not have the authority to vote your shares on that matter. This is generally referred to as a “broker non-vote.”
Ratification of the Audit Committee’s appointment of Ernst & Young LLP as our independent registered public accounting firm for 2024 (Proposal No. 3) is considered a “routine” matter. A bank, broker, or other nominee may generally vote on routine matters, and therefore, no broker non-votes are expected to occur in connection with Proposal No. 3. The election of directors (Proposal No. 1) and the advisory vote on executive compensation (Proposal No. 2) are considered “non-routine” matters. A bank, broker, or other nominee cannot vote on those matters without instructions from the beneficial owner of the shares; therefore, broker non-votes may occur on Proposals 1 and 2.
How are the votes counted?
Our transfer agent, Computershare Investor Services, will serve as tabulator and will count the votes. You may vote FOR, AGAINST, or ABSTAIN with respect to each director nominee and on Proposals 2 and 3. If you abstain from voting on any director nominee or item, your abstention will not have an effect on the outcome of the vote. Similarly, broker non-votes will not have an effect on the outcome of the vote. In tabulating the voting results, only FOR and AGAINST votes are counted. Broker non-votes and abstentions are counted only for purposes of determining whether a quorum is present.
80GATX CORPORATION - 2024 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Can I change my mind after I have voted?
You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. If you vote by internet or by telephone, only your latest internet or telephone proxy that is timely submitted prior to the meeting will be counted. If you vote by signing and returning a proxy card, you may change your vote by completing a new proxy card with a later date. You may also revoke your proxy and change your vote by virtually attending the meeting and voting online. However, your virtual attendance at the Virtual Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request that your prior proxy be revoked by delivering written notice to the Company’s Corporate Secretary at 233 South Wacker Drive, Chicago, Illinois 60606-7147.
What happens if other matters come up at the Annual Meeting?
If any matters other than those referred to in the Notice of Annual Meeting properly come before the meeting, the Proxyholders will have the discretion to vote the proxies held by them in accordance with their best judgment. However, we have not received timely and proper notice from any shareholder of any other matter to be presented at the meeting.
What constitutes a quorum?
The Annual Meeting will be held only if a quorum is present. A quorum will be present if a majority of the 35,538,117 shares of our common stock issued and outstanding on the Record Date are represented, virtually, online or by proxy, at the Annual Meeting. Broker non-votes and abstentions will be counted for purposes of determining whether a quorum is present.
How is it determined whether a matter has been approved?
Assuming a quorum is present, each director nominee will be elected by a majority of votes cast with respect to his or her election. A majority of votes cast means that the number of votes cast FOR the election of a director nominee exceeds the number of votes cast AGAINST such director nominee’s election. Under the Board’s existing resignation policy, each director is expected to tender his or her resignation when nominated for election to the Board. The resignation will become effective only if the director receives more votes AGAINST his or her election than FOR votes and the Governance Committee, or other duly authorized committee of the Board, decides to accept the resignation. Abstentions and broker non-votes are not considered votes cast for the foregoing purpose and will have no effect on the election of director nominees.
Approval of Proposals 2 and 3 requires the affirmative vote of a majority of the votes cast in favor of or against the proposal.
What shares are covered by the Notice of Internet Availability or proxy card?
Shareholders Who Are Not Current or Former GATX Employees. If you are not a current or former employee of GATX, the Notice of Internet Availability or proxy card (if so requested) covers all shares held by you of record.
Current or Former GATX Employees. If you are a current or former employee of GATX and you have shares in the GATX Stock Fund as a result of your participation in the GATX salaried or hourly 401(k) plans (collectively, the “401(k) Plans”), you will receive a separate proxy card for any shares you hold in those plans (your “Plan Shares”). This separate proxy card will cover all of your Plan Shares. Subject to applicable law, the trustee of the 401(k) Plans will vote your Plan Shares in accordance with the voting instructions you provide by completing and returning the proxy card for your Plan Shares or by voting your Plan Shares by internet or by telephone. If you do not instruct the trustee how to vote, the trustee will vote your Plan Shares in the same proportion as those Plan Shares for which the trustee receives timely voting instructions from other shareholder participants in the 401(k) Plans. To allow sufficient time for the trustee to vote your Plan Shares in accordance with your direction, your voting instructions must be received by the trustee no later than 8:00 a.m. Eastern Time on April 24, 2024. Please note that the proxy card covering your Plan Shares does not cover any
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
other GATX shares held by you outside of the 401(k) Plans, and you will need to provide separate voting instructions for your non-Plan Shares as described above.
Who pays to prepare, mail, and solicit the proxies?
GATX pays all the costs of preparing, mailing, and soliciting proxies. We ask brokers, banks, voting trustees, and other nominees to forward proxy materials to the beneficial owners and to obtain authority to execute proxies, and we generally reimburse these brokers, banks, voting trustees, and other nominees for their expenses upon request.
We have retained D.F. King & Co., Inc. to aid in the solicitation of proxies by mail, telephone, e-mail, and personal solicitation. For these services, we will pay D.F. King & Co., Inc. a fee of $10,500 plus expenses. In addition, certain directors, officers, or employees of the Company, who will receive no extra compensation for their services, may solicit proxies by telephone, e-mail, or personal contact.
Where can I find the voting results of the Annual Meeting?
We will publish final voting results in a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting.
By Order of the Board of Directors,
Executive Vice President, General Counsel and
Corporate Secretary
82GATX CORPORATION - 2024 Proxy Statement
Exhibit A Reconciliation of Non-GAAP Financial Measures
Non-GAAP Financial Measures
This Proxy Statement includes certain financial measures computed using non-GAAP components, as defined by the SEC. These measures are not in accordance with, or a substitute for, U.S. generally accepted accounting principles (“GAAP”), and our financial measures may be different from non-GAAP financial measures used by other companies. We have provided a reconciliation of our non-GAAP components to the most directly comparable GAAP components.
We exclude the effects of certain tax adjustments and other items for purposes of presenting net income, diluted earnings per share, and return on equity because we believe these items are not attributable to our business operations. Management utilizes this information when analyzing financial performance because such amounts reflect the underlying operating results that are within management’s ability to influence. Accordingly, we believe presenting this information provides investors and other users of our financial statements with meaningful supplemental information for purposes of analyzing year-to-year financial performance on a comparable basis and assessing trends.
EXHIBIT A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Reconciliation
The following table shows our shareholders’ equity, excluding accumulated other comprehensive loss, as of December 31 (in millions):
|
| 2023 |
| 2022 |
| 2021 |
| 2020 |
| ||||
Shareholders’ Equity (GAAP) | | $ | 2,273.0 | | $ | 2,029.6 | | $ | 2,019.2 | | $ | 1,957.4 | |
Add: accumulated other comprehensive loss | |
| 167.6 | |
| 211.6 | |
| 160.6 | |
| 137.5 | |
Shareholders’ Equity, as adjusted (non-GAAP)(1) | | $ | 2,440.6 | | $ | 2,241.2 | | $ | 2,179.8 | | $ | 2,094.9 | |
The following tables show our net income, diluted earnings per share, and return on equity, excluding tax adjustments and other items (non-GAAP), for the years ended December 31 (in millions, except per share data):
Impact of Tax Adjustments and Other Items on Net Income: |
| 2023 |
| 2022 |
| 2021 |
| |||
Net income (GAAP) | | $ | 259.2 | | $ | 155.9 | | $ | 143.1 | |
| | | | | | | | | | |
Adjustments attributable to consolidated pre-tax income: | |
|
| |
|
| |
|
| |
Loss on Specialized Gas Vessels at Portfolio Management(2) | | $ | 4.0 | | $ | 34.3 | | $ | — | |
Net (gain) loss on Rail Russia at Rail International(3) | |
| (0.3) | |
| 14.6 | |
| — | |
Environmental remediation costs(4) | |
| — | |
| 5.9 | |
| — | |
Net insurance proceeds(5) | |
| — | |
| — | |
| (5.3) | |
Debt extinguishment costs(6) | |
| — | |
| — | |
| 4.5 | |
Total adjustments attributable to consolidated pre-tax income | | $ | 3.7 | | $ | 54.8 | | $ | (0.8) | |
Income taxes thereon, based on applicable effective tax rate | | $ | — | | $ | (1.5) | | $ | 0.2 | |
Other income tax adjustments attributable to consolidated income: | |
|
| |
|
| |
|
| |
Income tax rate changes(7) | | $ | (3.0) | | $ | (3.0) | | $ | — | |
Net operating loss valuation allowance adjustment(8) | | | (2.3) | | | — | | | — | |
Total other income tax adjustments attributable to consolidated income | | $ | (5.3) | | $ | (3.0) | | $ | — | |
Adjustments attributable to affiliates’ earnings, net of taxes: | |
|
| |
|
| |
|
| |
Aircraft spare engine impairment at RRPF(9) | | $ | — | | $ | 11.5 | | $ | — | |
Income tax rate change(10) | |
| — | |
| — | |
| 39.7 | |
Total adjustments attributable to affiliates’ earnings, net of taxes | | $ | — | | $ | 11.5 | | $ | 39.7 | |
Net income, excluding tax adjustments and other items (non-GAAP) | | $ | 257.6 | | $ | 217.7 | | $ | 182.2 | |
| | | | | | | | | | |
Impact of Tax Adjustments and Other Items on Diluted Earnings Per Share: |
| 2023 |
| 2022 |
| 2021 |
| |||
Diluted earnings per share (GAAP) | | $ | 7.12 | | $ | 4.35 | | $ | 3.98 | |
Adjustments attributable to consolidated income, net of taxes: | | | | | | | | | | |
Loss on Specialized Gas Vessels at Portfolio Management(2) | |
| 0.11 | |
| 0.96 | |
| — | |
Net (gain) loss on Rail Russia at Rail International(3) | |
| (0.01) | |
| 0.41 | |
| — | |
Environmental remediation costs(4) | |
| — | |
| 0.12 | |
| — | |
Net insurance proceeds(5) | |
| — | |
| — | |
| (0.11) | |
Debt extinguishment costs(6) | |
| — | |
| — | |
| 0.09 | |
Other income tax adjustments attributable to consolidated income: | | | | | | | | | | |
Income tax rate changes(7) | | | (0.08) | | | (0.08) | | | — | |
Net operating loss valuation allowance adjustment(8) | | | (0.06) | | | — | | | — | |
Adjustments attributable to affiliates’ earnings, net of taxes: | |
| | |
|
| |
|
| |
Aircraft spare engine impairment at RRPF(9) | |
| — | |
| 0.32 | |
| — | |
Income tax rate change(10) | |
| — | |
| — | |
| 1.10 | |
Diluted earnings per share, excluding tax adjustments and other items (non-GAAP)* | | $ | 7.07 | | $ | 6.07 | | $ | 5.06 | |
Return on Equity: |
| 2023 |
| 2022 |
| 2021 |
| |
Return on Equity (GAAP) |
| 12.0 | % | 7.7 | % | 7.2 | % | |
Return on Equity, excluding tax adjustments and other items (non-GAAP)(11) |
| 12.0 | % | 10.8 | % | 9.2 | % | |
LTI-Adjusted Return on Equity, applicable for performance share plan measures (non-GAAP)(12) |
| 11.1 | % | 7.1 | % | 6.7 | % | |
EXHIBIT A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(*) | Sum of individual components may not be additive due to rounding. |
(1) | Shareholders’ Equity used for purposes of calculating LTI-Adjusted Return on Equity (non-GAAP) for the performance share plan. |
(2) | In 2022, we made the decision to sell the Specialized Gas Vessels. We have recorded gains and losses associated with the subsequent impairments and sales of these assets. |
(3) | In 2022, we made the decision to exit Rail Russia and recorded losses in 2022 associated with the impairment of the net assets. In the first quarter of 2023, we sold Rail Russia and recorded a gain on the final sale of this business. |
(4) | Reserve recorded as part of an executed agreement for anticipated remediation costs at a previously owned property, sold in 1974. |
(5) | Net gain from insurance recoveries for storm damage to a maintenance facility at Rail North America. |
(6) | Write-off of unamortized deferred financing costs associated with the early redemption of our $150 million 5.625% Senior Notes due 2066. |
(7) | Deferred income tax adjustments attributable to state tax rate reductions in 2023 and an enacted corporate income tax rate reduction in Austria in 2022. |
(8) | Valuation allowance adjustment associated with the realizability of state net operating losses in future tax years. |
(9) | Impairment losses related to aircraft spare engines in Russia that RRPF does not expect to recover. |
(10) | Deferred income tax adjustment due to an enacted corporate income tax rate increase in the United Kingdom in 2021. |
(11) | Calculated as net income, excluding tax adjustments and other items (non-GAAP), divided by GAAP Shareholders’ Equity. |
(12) | LTI-Adjusted Return on Equity (non-GAAP) is calculated as net income divided by Shareholders’ Equity, as adjusted as shown above (non-GAAP). |
01 - Diane M. Aigotti 04 - John M. Holmes 07 - Adam L. Stanley 02 - Anne L. Arvia 05 - Robert C. Lyons 08 - David S. Sutherland 03 - Shelley J. Bausch 06 - James B. Ream For Against Abstain For Against Abstain 09 - Paul G. Yovovich For Against Abstain 1PCF Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. 03XVYB + + A Proposals — The Board of Directors recommends a vote FOR all of the nominees listed, and FOR Proposals 2 and 3. 2. ADVISORY RESOLUTION TO APPROVE EXECUTIVE COMPENSATION 1. ELECTION OF DIRECTORS: For Against Abstain 3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR ENDING DECEMBER 31, 2024 For Against Abstain Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q 2024 Annual Meeting Proxy Card Online Go to www.envisionreports.com/GATX or scan the QR code — login details are located in the shaded bar below. Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/GATX Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada. You may vote online or by phone instead of mailing this card. Your vote matters – here’s how to vote! Votes submitted electronically must be received by the closing of the polls at the virtual Annual Meeting (for registered shares) and 8:00 a.m. Eastern Time, on April 24, 2024 (for Plan Shares, as defined in the Proxy Statement). |
Small steps make an impact. Help the environment by consenting to receive electronic delivery. Sign up at www.envisionreports.com/GATX. 2024 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — April 26, 2024 Robert C. Lyons, Thomas A. Ellman, and Brian L. Glassberg, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of GATX Corporation to be held virtually at www.meetnow.global/MLSYNVU on Friday, April 26, 2024 at 9:00 a.m. Central Time, or at any postponement or adjournment thereof. Shares represented by this proxy will be voted as directed by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR the election of the Board of Directors, and FOR proposals 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side.) GATX Corporation q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Change of Address — Please print new address below. Comments — Please print your comments below. C Non-Voting Items + + Important notice regarding the internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.envisionreports.com/GATX. The 2024 Annual Meeting of Shareholders of GATX Corporation will be held on Friday, April 26, 2024 at 9:00 a.m. Central Time, virtually at www.meetnow.global/MLSYNVU. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. |