Timken Co DEF 14A, filed Mar 20, 2023

Timken Co (TKR)

DEF 14A 2023-03-20

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Added on June 12, 2026

About this DEF 14A

Timken Co filed this DEF 14A on March 20, 2023.

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1.	Election of 11 Directors to serve for a term of one year;
2.	Approval, on an advisory basis, of our named executive officer compensation;
3.	Recommendation, on an advisory basis, of the frequency (every 1, 2 or 3 years) of the shareholder advisory vote on named executive officer compensation;
4.	Ratification of the appointment of Ernst & Young LLP as our independent auditor for the fiscal year ending December 31, 2023;
5.	Approval of amendments to our Amended Articles of Incorporation and Amended Regulations to reduce certain shareholder voting requirement thresholds;
6.	Consideration of a shareholder proposal requesting our Board of Directors to take the steps necessary to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting; and
7.	Consideration of such other business as may properly come before the meeting.

	Notice of 2023 Annual Meeting of Shareholders and Proxy Statement
	Chairman’s Letter
	Notice of Annual Meeting
	Table of Contents
1	Proxy Summary
12	Proxy Statement
12	Proposal No. 1: Election of Directors
13	Nominees
18	Independence Determinations
19	Related Party Transactions Approval Policy
19	Board and Committee Meetings
20	Board Leadership Structure
20	Director Compensation
22	Board Committees
22	Audit Committee
22	Compensation Committee
24	Nominating and Corporate Governance Committee
25	Corporate Governance and Social Responsibility Highlights
29	Shareholder Engagement in 2022
29	Risk Oversight
29	Shareholder Communications
30	Beneficial Ownership of Common Shares
33	Proposal No. 2: Shareholder Approval, on an Advisory Basis, of Our Named Executive Officer Compensation
34	Compensation Discussion and Analysis
58	Executive Compensation

73	CEO Pay Ratio
74	Pay Versus Performance
80	Proposal No. 3: Recommendation, on an Advisory Basis, of the Frequency of the Shareholder Advisory Vote on Named Executive Officer Compensation
81	Proposal No. 4: Ratification of Appointment of Independent Auditor
82	Auditor
82	Audit Committee Report
83	Proposal No. 5: Amendments to the Company’s Amended Articles of Incorporation and Amended Regulations to Reduce Certain Shareholder Voting Requirement Thresholds
84	Proposal No. 6: Shareholder Proposal – Improve the Shareholder Right to Call a Special Shareholder Meeting
88	Other Information
88	Participation at the Annual Meeting
88	Proxy Solicitation
88	How Proxies Will be Voted
88	Voting at the Meeting
89	Submission of Shareholder Proposals
89	General
A-1	Appendix A
B-1	Appendix B
C-1	Appendix C

Date and Time:		Friday, May 5, 2023, at 10:00 a.m. local time
Location:		Online-only format, with attendance via the internet at the following web address: www.cesonlineservices.com/tkr23_vm
Record Date:		February 21, 2023
Mail Date:		The approximate date our Proxy Statement and proxy card will be first sent or given to our shareholders is March 20, 2023.

Board Recommends	Proposal		See Page
For	1.	Election of 11 Directors to serve for a term of one year.	12
For	2.	Approval, on an advisory basis, of our named executive officer compensation.	33
Every Year	3.	Recommendation, on an advisory basis, of the frequency (every 1, 2 or 3 years) of the shareholder advisory vote on named executive officer compensation.	80
For	4.	Ratification of the appointment of Ernst & Young LLP as our independent auditor for the fiscal year ending December 31, 2023.	81
For	5.	Approval of amendments to our Amended Articles of Incorporation and Amended Regulations to reduce certain shareholder voting requirement thresholds.	83
Against	6.	A shareholder proposal requesting our Board to take the steps necessary to amend the appropriate company governing documents to give the owners of a combined 10% of our outstanding common stock the power to call a special shareholder meeting.	84

Gender and Ethnic Diversity	Independence



Leadership	Refreshment

2/3	Half
of Committee Chairs are ethnically or gender diverse	of our Board refreshed within the last decade

Board Independence	ü	10 of 12 current Directors are independent
Board Independence	ü	Independent Chair of the Board
Director Elections	ü	Commitment to Board refreshment and diversity – 6 new Directors (representing half of our current Board) added in the past decade
	ü	2 of 3 of the committee chairs are ethnically or gender diverse
	ü	All committee members are independent
	ü	Declassified Board with annual Board elections
	ü	Directors are elected by a majority of votes cast, and our Majority Voting Policy requires any Director who fails to receive a majority of the votes cast in favor of his or her election to submit his or her resignation to the Board
Board Practices	ü	Stock ownership requirements for nonemployee Directors (5x cash retainer)
	ü	At each Board meeting, the independent Directors have the opportunity to conduct executive sessions
	ü	Annual Board, committee and Director evaluations
	ü	Over-boarding policy limits the number of public company boards a Director can serve on
Shareholder Rights	ü	Shareholder proxy access with 3/3/20/20 parameters
Shareholder Rights	ü	Special meetings may be called by shareholders holding 25% of the Company’s common shares
Other Best Practices	ü	Annual advisory vote on our named executive officer compensation with consistently strong shareholder support over the past five years
	ü	5 of 12 current Directors are ethnically or gender diverse
	ü	Code of Conduct for Directors, officers and employees
	ü	Strong focus on shareholder engagement – over 400 interactions with investors in 2022
	ü	Audit Committee or Board receives reports on cyber security threats and trends at least annually and receives regular updates on our information security program
	ü	Nominating and Corporate Governance Committee provides oversight for Corporate Social Responsibility (“CSR”) program

	●	Forbes: America’s Best Employers (2021), Best Employers for New Graduates (2021 and 2022) and Best Employers for Women (2021); and
	●	The Ethisphere Institute: World’s Most Ethical Companies® (2021 and awarded 11 times total).

What We Do		What We Do Not Do
	We utilize stock ownership requirements for executives (7x base salary for CEO and 2x-3x for the other named executive officers)		We do not re-price outstanding stock options
	We have “clawback” provisions that permit the recovery of executive compensation if an executive engages in conduct that is detrimental to the Company and results in restatement of financial results		We do not provide excise tax gross-ups on perquisites or under named executive officer severance agreements
	We use shareholder-approved plans to provide short-term and long-term incentives		We do not allow hedging or pledging of our shares
	We use different metrics for short-term and long-term incentive plans that are designed to align pay with performance		We do not have single-trigger vesting
	We provide very limited perquisites		We do not have employment agreements for our named executive officers

	●	There was a 140.5% payout under the annual cash incentive plan, which reflected above-target performance for 2022, due primarily to strong revenue growth, higher pricing and solid operational execution, which more than offset the impact of continued cost and supply chain-related headwinds across the enterprise; and
	●	There was a 91.8% payout for 2020-2022 performance-based restricted stock units, which reflected strong overall performance in a dynamic environment. While 2020 results were adversely impacted by the COVID-19 pandemic, we then achieved record adjusted EPS results in 2021 and 2022, and strong average adjusted ROIC performance over the period.

	●	if the Director is, or has an immediate family member who is, a partner, principal or member (or any comparable position) of, an executive officer or employee of, or a director of, any organization to which Timken made, or from which Timken received, immaterial payments for property or services in the current or any of the past three fiscal years;

	●	if the Director, or an immediate family member of the Director, serves as an officer, director or trustee of a foundation, university, charitable or other not-for-profit organization, and Timken’s discretionary charitable contributions to the organization are immaterial, in the aggregate; or

	●	if the Director serves on the board of directors of another company at which another Timken Director or executive officer also serves as a director.

	●	competing against the Company;
	●	holding a significant financial interest in a company doing business with or competing with the Company;
	●	accepting gifts, gratuities or entertainment from any customer, competitor or supplier of goods or services to the Company, except to the extent they are customary and reasonable in amount and not in consideration for an improper action by the recipient;
	●	using for personal gain any business opportunities that are identified through a person’s position with the Company;
	●	using the Company’s property, information or position for personal gain;
	●	using the Company’s property other than in connection with our business;
	●	maintaining other employment or a business that adversely affects a person’s job performance at the Company; and
	●	doing business on the Company’s behalf with a relative or another company employing or owned by a relative.

Committee	Chairperson Fee	Member Fee
Audit	$35,000	$15,000
Compensation	$22,500	$7,500
Nominating & Corporate Governance	$19,500	$7,500

Name ⁽¹⁾	Fees Earned or Paid in Cash	Stock Awards ⁽²⁾	All Other Compensation ⁽³⁾	Total
Maria A. Crowe	$124,500	$140,286	$1,608	$266,394
Elizabeth A. Harrell	$105,000	$140,286	$1,852	$247,138
Sarah C. Lauber	$112,500	$140,286	$2,084	$254,870
John A. Luke, Jr.	$105,000	$140,286	$1,608	$246,894
Christopher L. Mapes	$112,500	$140,286	$1,608	$254,394
James F. Palmer	$132,500	$140,286	$1,608	$274,394
Ajita G. Rajendra	$127,500	$140,286	$1,608	$269,394
Frank C. Sullivan	$112,500	$140,286	$1,608	$254,394
John M. Timken, Jr.	$215,000	$140,286	$1,608	$356,894
Ward J. Timken, Jr.	$90,000	$140,286	$1,608	$231,894
Jacqueline F. Woods	$105,000	$140,286	$1,608	$246,894

	(1)	Richard G. Kyle, our President and CEO, is not included in this table as he is an employee of the Company and receives no additional compensation for his services as a Director.

	(2)	The amount shown for each Director includes the grant date fair value of the award of 2,310 restricted stock units made on May 6, 2022. These restricted stock units vest 100% one year following the grant date. Ms. Harrell elected to defer the award made on May 6, 2022 under the Director Deferred Compensation Plan for distribution in the future. The amounts shown in this

	Hansal N. Patel
	Vice President, General Counsel & Secretary

		column are computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718.

	(3)	All other compensation reflects cash dividend equivalents paid to the Directors in 2022 for unvested restricted stock units granted in the prior year and cash dividends paid to certain Directors for unvested restricted shares or restricted stock units granted in connection with their initial election to the Board, in each case upon vesting of such restricted stock units or restricted shares in 2022. Ms. Harrell elected to defer her annual restricted stock unit award granted in 2022 under the Director Deferred Compensation Plan for distribution in the future. The table above includes cash dividend equivalents in the amount of $1,608 which were also deferred by Ms. Harrell under the Director Deferred Compensation Plan.

Name		Unvested Restricted Stock Units
Maria A. Crowe		2,310
Elizabeth A. Harrell		2,310
Sarah C. Lauber		3,910
John A. Luke, Jr.		2,310
Christopher L. Mapes		2,310
James F. Palmer		2,310
Ajita G. Rajendra		2,310
Frank C. Sullivan		2,310
John M. Timken, Jr.		2,310
Ward J. Timken, Jr.		2,310
Jacqueline F. Woods		2,310

Board Independence, Refreshment, Diversity and Experience
ü	Strongly independent Board (10 of 12 Directors on our current Board are independent)
ü	Independent Chairman of the Board
ü	Commitment to Board refreshment and diversity – 6 new Directors (representing half of our current Board) added in the past decade
ü	5 of 12 current Directors and 2 of 3 committee chairs are ethnically or gender diverse
ü	6 current or former public company Chief Executive Officers serve on the Board
Shareholder Rights
ü	Shareholder proxy access with 3/3/20/20 parameters
ü	Special meetings may be called by shareholders holding 25% of the Company’s common shares
Other Strong Governance Practices
ü	Declassified Board – all Directors are elected annually
ü	Annual Board, Committee and Director evaluations
ü	Majority Voting Policy that requires any Director who fails to receive a majority of the votes cast in favor of his or her election to submit his or her resignation to the Board
ü	Over-boarding policy limits the number of public company boards a Director can serve on
ü	“Clawback” provisions permit recovery of executive compensation if an executive engages in conduct that is detrimental to the Company and that results in restatement of financial results
ü	Stock ownership requirements for Directors and executive officers
ü	Audit Committee or Board receives reports on cyber security threats and trends at least annually and receives regular updates on our information security program
ü	Strong focus on shareholder engagement – over 400 interactions with investors in 2022

CSR Report Highlights
People	We remain focused on advancing the diversity and education of our global workforce through our hiring practices, succession planning, training and development programs, and inclusive culture. Examples of regular, formal training and development activities include: • Our Operations Development Program, which is designed to increase the internal pool of people who are ready to take on leadership roles at Timken; • Our Associate Sales Engineer Training Program, which helps new engineering graduates gain a complete understanding of friction management and power transmission concepts; • Our Timken Engineering Co-Op Program, which gives engineering students with diverse backgrounds the opportunity to work up to five semesters alongside our experienced engineers while completing their bachelor’s degrees; and • Our Inclusive Leader Program, which is designed to deliver real-world impact through associate listening, feedback, mutual learning, adaptability and collaboration. The program is focused on increasing our global managers’ understanding of the day-to-day impacts of their own cultural tendencies, style and biases at work. It’s also designed to drive inclusion by providing our leaders with tools to increase and leverage the diversity that surrounds them. We are also committed to providing competitive and equitable compensation based on the local markets in which we operate while supporting employee health. We conduct market studies around the world to ensure full-time associates receive competitive benefits relative to the markets where they work.
Environment	We continue to pursue greater sustainability across our product portfolio through product design, lifetime performance improvements, and the use of recyclable content. We also set new emissions reduction targets in 2022. Since 2020, renewable energy has been our single largest end-market sector in terms of total sales. The Company’s products, technology and innovation continue to support the global trend towards sustainability and meet customers’ evolving requirements for optimized reliability and performance.
Community	We continue to further equal access to basic needs, education and STEM careers though strategic partnerships with United Way, Feeding America, Habitat for Humanity, American Red Cross, NASA, LeBron James Foundation, Maison pour la Science and others.
Governance	We provided detail on the features of our ethics and compliance program, including how we maintain active board oversight, support compliance, and educate our employees. We also provided examples of our ongoing efforts to keep our data secure through our enterprise-wide information security program.

Amount and Nature of Beneficial Ownership of common shares

Name ⁽¹⁾	Sole Voting or Investment Power ⁽²⁾			Shared Voting or Investment Power			Aggregate Amount ⁽²⁾		Percent of Class

Christopher A. Coughlin		285,454			0			285,454		*
Maria A. Crowe		21,851			0			21,851		*
Philip D. Fracassa		127,871			0			127,871		*
Elizabeth A. Harrell		11,945			0			11,945		*
Richard G. Kyle		656,280			0			656,280		*
Sarah C. Lauber		2,140			0			2,140		*
John A. Luke, Jr.		70,545			0			70,545		*
Christopher L. Mapes		22,500			0			22,500		*
James F. Palmer		17,545			0			17,545		*
Hansal N. Patel		10,469			0			10,469		*
Ajita G. Rajendra		20,590			0			20,590		*
Andreas Roellgen		86,533			0			86,533		*
Frank C. Sullivan		61,382			0			61,382		*
John M. Timken, Jr.		458,825	⁽³⁾		915,427	⁽⁴⁾		1,374,252		1.89	%
Ward J. Timken, Jr.		520,051			3,864,031			4,384,082		6.04	%
Jacqueline F. Woods		14,770			0			14,770		*
All Directors, nominees for Director and executive officers as a group⁽⁵⁾		2,395,273			4,782,655			7,177,928		9.89	%

	(1)	Excludes Mr. Landin due to his separation from the Company on August 1, 2022. At the time of his departure, Mr. Landin possessed sole voting or investment power over 29,826 common shares.

	(2)	The following table provides additional details regarding beneficial ownership of our common shares:

Name	Outstanding Options and Time- based Restricted Stock Units ^(a)	Deferred Common Shares ^(b)
Christopher A. Coughlin	180,333	0
Maria A. Crowe	0	0
Philip D. Fracassa	42,212	0
Elizabeth A. Harrell	0	6,925
Richard G. Kyle	316,437	0
Sarah C. Lauber	400	0
John A. Luke, Jr.	0	0
Christopher L. Mapes	0	0
James F. Palmer	0	0
Hansal N. Patel	4,160	0
Ajita G. Rajendra	0	0
Andreas Roellgen	25,850	0
Frank C. Sullivan	0	2,000
John M. Timken, Jr.	0	0
Ward J. Timken, Jr.	0	0
Jacqueline F. Woods	0	2,500

	(a)	Includes shares that the individual named in the table has the right to acquire on or before March 1, 2023 through the exercise of stock options or the vesting of time-based restricted stock units pursuant to the Equity and Incentive Compensation Plan. Including those listed and other executive officers not individually listed in the table, all Directors, nominees for Director, and executive officers as a group have the right to acquire 570,775 shares on or before March 1, 2023 through the exercise of stock options or the vesting of time-based restricted stock units pursuant to the Equity and Incentive Compensation Plan. These shares have been treated as outstanding for the purpose of calculating the percentage of the class beneficially owned by such individual or group, but not for the purpose of calculating the percentage of the class owned by any other person.

	(b)	Awarded as annual grants under the Equity and Incentive Compensation Plan or The Timken Company 2011 Long-Term Incentive Plan, as amended and restated as of February 13, 2015 (the “Predecessor Long-Term Incentive Plan”), which will not be issued until a later date under the Director Deferred Compensation Plan.

	(3)	Includes 182,166 shares for which John M. Timken, Jr. has sole voting and investment power as trustee of three trusts created as the result of distributions from the estate of Susan H. Timken.

	(4)	Includes 126,000 shares held in an irrevocable trust with his spouse as the sole lifetime beneficiary for which he disclaims beneficial interest.

	(5)	Includes 9,719 shares beneficially owned by other executive officers not individually listed in the table or by their spouses. The number of shares beneficially owned by all Directors, nominees for

Beneficial Owner	Number of Shares	Percent of Class
BlackRock, Inc.⁽¹⁾	6,947,028	9.57%
The Vanguard Group⁽²⁾	6,532,704	9.00%
The Timken Foundation of Canton⁽³⁾	3,667,221	5.05%

	(1)	A Schedule 13G/A filed with the SEC on February 7, 2023, by BlackRock, Inc., 55 East 52^nd Street, New York, New York 10055, indicated that it has sole voting power over 6,513,275 common shares and sole investment power over 6,947,028 common shares.

	(2)	A Schedule 13G/A filed with the SEC on February 9, 2023, by The Vanguard Group, 100 Vanguard Blvd., Malvern, Pennsylvania 19355, indicated that it has sole voting power over 0 common shares, shared voting power over 35,201 common shares, sole investment power over 6,438,739 common shares, shared investment power over 93,965 common shares and aggregate beneficial ownership of 6,532,704 common shares.

	(3)	A Schedule 13G/A filed with the SEC on February 15, 2023, by The Timken Foundation of Canton (the “Foundation”), 200 Market Avenue North, Suite 210, Canton, Ohio 44702, indicated that it has sole voting and investment power over 3,667,221 common shares. Ward J. Timken, Joy A. Timken, Ward J. Timken, Jr., William R. Timken, Jr., Robert R. Timken, and Henry H. Timken, II are trustees of and share the voting and investment power with respect to shares held by the Foundation. All trustees disclaim any beneficial interest in such shares. The Foundation is an Ohio private charitable foundation that is independent of the Company.

	●	align the interests of executive management with those of our shareholders;
	●	reward executive management for sustained, strong business and financial results; and
	●	enable us to attract, retain and motivate the best talent.

35	Executive Summary
35	2022 Performance
38	2022 Compensation Decisions and Actions
40	CEO Pay At-A-Glance
41	Aligning Pay with Performance
43	Consideration of 2022 Say-on-Pay Vote
43	Use of Peer Group and Market Data
44	Determining Compensation for 2022

46	Key Elements of the Executive Compensation Program
47	Analysis of 2022 Compensation
47	Base Salary
48	Annual Cash Incentive
49	Long-Term Incentives
52	Retirement Programs
54	Deferred Compensation
54	Other Benefits
55	Severance Agreements
55	Stock Ownership Guidelines
56	Anti-Hedging/Pledging Policies
56	Compensation Risk Assessment
56	Clawback Provisions
57	Compensation Committee Report

	●	Richard G. Kyle, President and CEO;
	●	Philip D. Fracassa, Executive Vice President and Chief Financial Officer;
	●	Christopher A. Coughlin, Executive Vice President, President of Industrial Motion;
	●	Hansal N. Patel, Vice President, General Counsel & Secretary;
	●	Andreas Roellgen, Executive Vice President and President of Engineered Bearings; and
	●	Hans Landin, former Group Vice President.

Base Salary The Committee awarded base salary increases in 2022 to each NEO, including the CEO.
Executive Officer	2021 Annualized Base Salary	2022 Annualized Base Salary	Percent Increase
Richard G. Kyle	$1,041,046	$1,072,277	3.0%
Philip D. Fracassa	$575,315	$615,012	6.9%
Christopher A. Coughlin	$575,125	$630,337	9.6%
Hansal N. Patel	$420,223	$465,186	10.7%
Andreas Roellgen*	$337,274	$490,079	45.3%
The conversion rate used for purposes of converting the Euros earned by Mr. Roellgen for 2022 into U.S. Dollars was €1.00 = $1.0539 (the average monthly exchange rate for the 2022 calendar year) (compared to €1.00 = $1.1833 used for his 2021 salary (the average monthly exchange rate for the 2021 calendar year). Mr. Roellgen received two base salary increases in 2022 – one in connection with the Company’s annual merit process in March and another effective August 2022 in connection with being named Executive Vice President and President of Engineered Bearings. Annual Cash Incentive* Based on the Company’s 2022 performance, annual cash incentive awards (which are based on adjusted EBITDA, adjusted EBITDA margin and free cash flow) were paid at 140.5% of target for each of the NEOs, reflecting above-target performance for this time period, primarily due to strong revenue growth, higher pricing and solid execution, which more than offset the impact of continued cost and supply chain-related headwinds across the enterprise. Annual cash incentive opportunities were delivered under the Company’s shareholder-approved Equity and Incentive Compensation Plan. For additional details, see the “Annual Cash Incentive” section on page 48. Long-Term Incentives The NEOs received target grants of time-based restricted stock units and performance-based restricted stock units in 2022, with total grant values ranging from approximately $0.5 million to $4.9 million. Performance-based restricted stock units (which are based on adjusted ROIC and adjusted EPS performance achievements) were earned at 91.8% of target for the 2020-2022 performance period, which reflected strong overall performance in a dynamic environment. While 2020 results were adversely impacted by the COVID-19 pandemic, we then achieved record adjusted EPS results in 2021 and 2022, and strong average adjusted ROIC performance over the period. In August 2022, the Company made a one-time grant of 10,000 deferred shares to Mr. Coughlin under the Equity and Incentive Compensation Plan in connection with being named Executive Vice President, President of Industrial Motion. These shares will vest in full on December 31, 2023, contingent on continued employment with the Company.

	●	Reward long-term shareholder value creation
	●	Reinforce ownership in the Company
	●	Support retention of executives
	●	Align executive compensation with shareholder interests

	●	Reward long-term financial results that drive shareholder value
	●	Reinforce ownership in the Company
	●	Align executive compensation with shareholder interests

	Short-Term (Cash) Annual Incentive*	Long-Term (Equity) Performance-Based Restricted Stock Units* 60% of NEO Annual Equity Grants	Long-Term (Equity) Time-Based Restricted Stock Units 40% of NEO Annual Equity Grants
Objective	Short-term financial and operational business priorities and shareholder value creation	Long-term strategic financial goals and shareholder value creation	Long-term shareholder value creation
Time Horizon and 2022 Metrics	One year 60% adjusted EBITDA 20% adjusted EBITDA margin 20% free cash flow	Three years 60% adjusted EPS 40% adjusted ROIC	Four-year vesting period (25% per year)

	●	Stock ownership requirements: Our stock ownership guidelines require all senior executives to meet specific ownership targets based on position. This requirement aligns the interests of our executives with those of our shareholders. See page 55 for more information.

	●	Clawback provisions: The Company maintains specific provisions regarding the recovery (“clawback”) of awards to deter certain types of conduct, including conduct that could affect the accuracy of the Company’s financial statements. In the wake of the SEC’s recent promulgation of final Dodd-Frank Act clawback rules, the Company expects to review and consider changes to its clawback provisions during 2023. See page 56 for more information.