Form DEF 14A Gates Industrial Corp For: Jan 01
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E-mailSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement | ||||
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||||
| ☒ | Definitive Proxy Statement | ||||
| ☐ | Definitive Additional Materials | ||||
| ☐ | Soliciting Material Pursuant to §240.14a-12 | ||||
Gates Industrial Corporation plc
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
| ☒ | No fee required | ||||||||||
| ☐ | Fee paid previously with preliminary materials | ||||||||||
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 | ||||||||||
April 28, 2022
Dear Gates Shareholders:
After an unprecedented year in 2020, the Company delivered excellent financial results in 2021, with strong revenue growth and solid margin expansion as compared to the prior year. These results were driven by the efforts and perseverance of Gates associates around the world, who prioritized supporting customers while navigating Covid-19 disruptions, significant inflation and challenges related to material, labor and freight availability, and the resulting inefficiencies. Simultaneously, the Company continued to invest in organic growth initiatives to build on the progress made and support future growth opportunities going forward.
Against this backdrop, we are pleased to invite you to attend the 2022 Annual General Meeting of Shareholders of Gates Industrial Corporation plc to be held on Thursday, June 9, 2022, at 9:00 a.m. Mountain Time. In order to provide a consistent and convenient experience to all shareholders regardless of location, we will hold the 2022 Annual General Meeting of Shareholders virtually through a live audiocast at www.virtualshareholdermeeting.com/GTES2022. The attached Notice of Annual General Meeting of Shareholders and Proxy Statement describe the formal business to be transacted at the meeting and provide detail on the virtual meeting format, including how to register.
In accordance with the Securities and Exchange Commission’s rule allowing companies to furnish proxy materials to their shareholders over the internet, we are primarily furnishing proxy materials to our shareholders of ordinary shares electronically, rather than mailing paper copies of the materials (including our Annual Report on Form 10-K for the fiscal year ended January 1, 2022). On or about April 28, 2022, we mailed certain shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access these materials and how to vote their shares. Such notice provides instructions on how you can request a paper copy of these materials by mail, by telephone or by email. If you requested your materials via email, the email contains voting instructions and links to the materials on the internet. You may also read, print and download our annual report and our proxy statement at www.proxyvote.com.
As a shareholder of Gates Industrial Corporation plc, you play an important role for our company by considering and taking action on these matters. We appreciate the time and attention you invest in making thoughtful decisions. Regardless of whether you plan to participate in the meeting, we encourage you to vote your shares as promptly as possible.
| Sincerely, | ||
 | ||
| Ivo Jurek | ||
| Chief Executive Officer | ||
TABLE OF CONTENTS
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GATES INDUSTRIAL CORPORATION PLC
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
June 9, 2022
Notice is hereby given that the 2022 Annual General Meeting of Shareholders (the “AGM” or the “Meeting”) of Gates Industrial Corporation plc (“Gates” or the “Company”) will be held virtually on Thursday, June 9, 2022, at 9:00 a.m., Mountain Time at www.virtualshareholdermeeting.com/GTES2022. The AGM will be held for the following purposes:
1.To elect the nine director nominees identified in this Proxy Statement.
2.To conduct an advisory vote to approve named executive officer compensation.
3.To conduct an advisory vote on the Company’s directors’ remuneration report (the “Directors’ Remuneration Report”) (excluding the Directors’ Remuneration Policy (as defined below)) contained in Appendix A of this Proxy Statement in accordance with the requirements of the United Kingdom (the “U.K.”) Companies Act 2006 (the “Companies Act”).
4.To approve the Company’s directors’ remuneration policy (the “Directors’ Remuneration Policy”) as contained in Appendix A of this Proxy statement in accordance with the requirements of the Companies Act.
5.To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022.
6.To re-appoint Deloitte LLP as the Company’s U.K. statutory auditor under the Companies Act (to hold office until the conclusion of the next annual general meeting at which accounts are laid before the Company’s shareholders).
7.To authorize the Audit Committee of the Board of Directors of the Company (the “Board” or “Board of Directors”) to determine the remuneration of Deloitte LLP in its capacity as the Company’s U.K. statutory auditor.
8.To transact such other business as may properly come before the AGM or any adjournment thereof.
The above proposals are more fully described in the Proxy Statement following this Notice, which shall be deemed to form a part of this Notice. The Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022 (the “2021 Annual Report”) accompanies the Proxy Statement following this Notice. These documents may also be accessed free of charge at www.proxyvote.com
You can vote and attend the AGM if you were a shareholder of record at the close of business on April 12, 2022.
On the day of the meeting, please visit www.virtualshareholdermeeting.com/GTES2022 and enter the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, voting instruction form, or proxy card. Online access to the audiocast will open approximately fifteen minutes prior to the start of the Meeting. There will be no physical meeting location. The meeting will only be conducted via live audiocast.
It is important that your shares be represented and voted at the AGM. We encourage you to vote by internet or telephone, or complete, sign and return your proxy prior to the AGM even if you plan to attend.
By Order of the Board of Directors,
Ivo Jurek
Chief Executive Officer
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL GENERAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 9, 2022:
The Notice of Annual General Meeting of Shareholders, Proxy Statement and 2021 Annual Report are available at www.proxyvote.com
PROXY STATEMENT
ANNUAL GENERAL MEETING OF SHAREHOLDERS
June 9, 2022
9:00 a.m. Mountain Time
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
What is the purpose of the AGM?
At the AGM, shareholders will act upon the matters outlined in the notice of meeting on the cover page of this Proxy Statement. These matters include: the election of nine directors, approval (on an advisory basis) of the named executive officer compensation, approval (on an advisory basis) of the Directors’ Remuneration Report, approval of the Directors’ Remuneration Policy, ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, re-appointment of Deloitte LLP as the Company’s U.K. statutory auditor under the Companies Act, and authorization for the Audit Committee of the Board to determine the remuneration of Deloitte LLP in its capacity as the Company’s U.K. statutory auditor. Management will be available to respond to questions from shareholders.
Who is entitled to vote at the AGM?
Only the Company’s shareholders of record at the close of business on April 12, 2022 (the “record date” for the Meeting), are entitled to receive notice of and to participate in the virtual AGM. If you were a shareholder of record on that date, you will be entitled to vote electronically all of the shares you held on that date at the Meeting, or any postponement(s) or adjournment(s) of the Meeting. As of the record date, there were 289,596,527 ordinary shares in the capital of the Company in issue, all of which are entitled to be voted at the Meeting. The Company expects the proxy materials and the Notice of Internet Availability of Proxy Materials to be mailed and/or made available to shareholders eligible to vote on or about April 28, 2022.
Any corporation that is a shareholder of record may by resolution of its directors or other governing body authorize such person as it thinks fit to act as its representative at the AGM and the person so authorized shall (on production of a certified copy of such resolution at the Meeting) be entitled to exercise the same powers on behalf of the corporation as that corporation could exercise if it were an individual shareholder of the Company. In the case of joint holders of a share, the vote of the senior holder who tenders a vote, whether in person (virtually) or by proxy, shall be accepted to the exclusion of the vote or votes of the other joint holder or holders, and seniority shall be determined by the order in which the names of the holders stand in the register.
What are the voting rights of the holders of the Company’s ordinary shares?
Holders of ordinary shares are entitled to one vote per share on each matter that is submitted to shareholders for approval.
Who can attend the Meeting?
All shareholders as of the record date may virtually attend the AGM.
How can I attend and vote at the Meeting?
To attend the AGM, please visit www.virtualshareholdermeeting.com/GTES2022 and enter the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, voting instruction form, or proxy card. Online access to the audiocast will open approximately fifteen minutes prior to the start of the Meeting. There will be no physical meeting location. The meeting will only be conducted via live audiocast. If you have any questions about accessing the virtual meeting website for the AGM, please contact Broadridge VSM support at 844-986-0822 / International: 303-562-9302. If you encounter any technical difficulties with the virtual meeting during the log in or meeting time, please call the technical support number that will be posted on the virtual meeting log in page. Rules governing conduct at the AGM will be posted on the virtual meeting platform along with an agenda.
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Will I be able to participate in the virtual Meeting on the same basis I would be able to participate in a live annual general meeting?
The AGM will be held in a virtual meeting format only and will be conducted via live audiocast. The virtual meeting format for the AGM will enable full and equal participation by all of the Company’s shareholders from any place in the world at little to no cost. The Company believes that holding the AGM virtually provides the opportunity for participation by a broader group of shareholders while reducing environmental impacts and the costs associated with planning, holding and arranging logistics for in-person meeting proceedings.
The Company designed the format of the virtual AGM to ensure that its shareholders who attend the AGM will be afforded the same rights and opportunities to participate as they would at an in-person meeting and to enhance shareholder access, participation and communication through online tools. To ensure such an experience, the Company will provide shareholders with the ability to submit appropriate questions real-time through the meeting website.
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
Beneficial owners. If your shares are held for you in the name of your broker, bank or other nominee, your shares are held in “street name” and you are considered the “beneficial owner.” As such, these proxy materials or the Notice of Internet Availability of Proxy Materials are being made available or forwarded to you by your broker, bank or other nominee, who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares in accordance with the voting instruction form provided by your bank, broker or other nominee.
Shareholders of record. If you are registered on the register of members of the Company in respect of ordinary shares, you are considered, with respect to those shares, the shareholder of record, and these proxy materials are being sent directly to you by the Company.
What constitutes a quorum?
The presence at the Meeting, in person (virtually) or by proxy, of the holders of ordinary shares representing at least the majority of the voting rights of all shareholders entitled to vote at the Meeting will constitute a quorum, permitting the Meeting to conduct its business. If a quorum is not present at the Meeting, the director(s) present may adjourn the Meeting to a specified time and place not less than one day after the original date.
What vote is required to approve each item?
Subject to disenfranchisement in accordance with applicable law and/or the Company’s Articles of Association, each of the resolutions shall be decided on a poll in accordance with the Company’s Articles of Association whereby each shareholder present in person (virtually) or by proxy or by representative (in the case of a corporate shareholder) is entitled to one vote for every ordinary share held. The resolutions proposed in proposals 1 through 7 will be proposed as ordinary resolutions, which means that, assuming a quorum is present, each such resolution will be approved by a simple majority (more than 50%) of the votes cast by the shareholders present (in person or by proxy) and entitled to vote.
With respect to the non-binding advisory resolutions in proposal 2 (regarding the advisory approval of named executive officer compensation) and proposal 3 (regarding approval of the Directors’ Remuneration Report), the results of the vote are advisory and will not be legally binding on the Board or any committee thereof to take any action or refrain from taking any action. However, the Board values the opinions of the shareholders as expressed through advisory votes and will carefully consider the outcome of the advisory votes.
Certain proposals on which you are being asked to vote are customary or required for public limited companies incorporated in England and Wales to present to shareholders at each annual general meeting. These proposals may be unfamiliar to shareholders accustomed to proxy statements for companies organized in other jurisdictions. Specifically, proposals 3, 4, 6 and 7 are customary proposals in accordance with English law.
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The inspector of election for the AGM shall determine the number of ordinary shares represented at the Meeting, the existence of a quorum and the validity and effect of proxies, and shall count and tabulate ballots and votes and determine the results thereof. Proxies received but marked as abstentions and broker non-votes that are present and entitled to vote will be included in the calculation of the number of shares considered to be present at the Meeting for purposes of determining a quorum. A “broker non-vote” occurs when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker lacks the authority to vote uninstructed shares at its discretion. Abstentions and “broker non-votes” will have no effect on any of the proposals as abstentions and broker non-votes are not considered votes cast and will not be counted as a vote either for or against these proposals.
What are the Board’s recommendations?
The Board of Directors recommends a vote FOR each of the proposals submitted for shareholder vote. Unless contrary instructions are indicated on the enclosed proxy, all shares represented by valid proxies received pursuant to this solicitation (and which have not been revoked in accordance with the procedures set forth below) will be voted FOR proposals 1 through 7 and, in accordance with the recommendation of the Board of Directors, FOR or AGAINST all other matters that may properly come before the AGM. In the event a shareholder specifies a different choice by means of the enclosed proxy, such shares will be voted in accordance with the specification made.
How do I vote?
If you are a shareholder of record, you may use any of the following methods to vote:
By Written Proxy. All shareholders of record who received proxy materials by mail can vote by returning the proxy card. If you received the proxy materials electronically, you may request a proxy card at any time by following the instructions on the voting website.
By Telephone or Internet. All shareholders of record can vote by telephone from the U.S. and Canada, using the toll-free telephone number on the proxy card, or through the internet using the procedures and instructions described on the proxy card.
In Person. All shareholders of record may vote in person (virtually) during the AGM.
If you are a street-name holder (that is, if you hold your shares through a bank, broker, or other nominee), you must vote in accordance with the voting instruction form provided by your bank, broker or other nominee. The availability of telephone or internet voting will depend upon your bank’s, broker’s or other nominee’s voting process.
All advance votes must be received by 11:59 Eastern Time on June 8, 2022. The return of a completed proxy card, or the submission of proxy instructions via the internet or by telephone, will not prevent a shareholder of record from attending and voting at the AGM. If you are a shareholder of record and have appointed a proxy but also attend the AGM and vote in person (virtually), your proxy appointment will automatically be terminated.
Except as set out in the Proxy Statement, all communications concerning shareholder of record accounts, including address changes, name changes, share transfer requirements and similar issues should be submitted to the Company’s transfer agent, Computershare, at (800) 942-5909 or in writing at 462 S. 4th Street, Louisville, KY 40202. No other means of communication will be accepted. In particular, you may not use any electronic address provided either in the Proxy Statement or in any related documents to communicate with the Company for any purpose other than those expressly stated.
Are my shares voted if I do not provide a proxy?
If you are a shareholder of record and do not provide a proxy, you must attend the AGM in order to vote. If you hold ordinary shares through an account with a bank or broker, your shares may be voted by the bank or broker on some matters if you do not provide voting instructions. Under New York Stock Exchange (“NYSE”) rules governing broker non-votes, proposals 1, 2, 3 and 4 are considered non-routine matters for purposes of broker non-votes, and a broker will lack the authority to vote uninstructed shares at its discretion on such proposals. Proposals 5, 6 and 7 are considered routine matters, and a broker will be permitted to exercise its discretion to vote uninstructed shares on these proposals. This means that, if you do not provide voting instructions on proposal 5, 6 or 7, your broker may nevertheless vote your shares on your behalf with respect to the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022, the re-appointment of Deloitte LLP as the Company’s U.K. statutory auditor for the year ending December 31, 2022 and the authorization of the Audit Committee to determine the remuneration of Deloitte LLP, but cannot vote your shares on any other matters being considered at the AGM.
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Can I change my vote after I return my proxy card?
Yes. Shareholders of record may revoke a proxy and/or change their vote prior to the completion of voting at the AGM by:
•signing another proxy card or voting instruction form with a later date and delivering it to the Corporate Secretary of the Company, 1144 Fifteenth Street, Denver, Colorado 80202 by 11:59 Eastern Time on June 8, 2022;
•voting again over the internet or by telephone by 11:59 Eastern Time on June 8, 2022;
•voting in person (virtually) at the AGM; or
•notifying the Corporate Secretary in writing by 11:59 Eastern Time on June 8, 2022.
Street name holders who wish to revoke or change their votes should contact the bank, broker or other nominee that holds their shares.
Who pays for costs relating to the proxy materials and AGM?
The Company pays for the costs of preparing, assembling and mailing this Proxy Statement, the Notice, the 2021 Annual Report, the proxy card and the U.K. annual report and accounts for the year ended January 1, 2022, and the cost of posting the proxy materials on a website. In addition to the use of mail, the Company’s directors, officers and employees may solicit proxies personally and by telephone, facsimile and other electronic means. They receive no compensation in addition to their regular salaries for this work. The Company may request banks, brokers and other custodians, nominees and fiduciaries to forward copies of the proxy material to their principals and to request authority for the execution of proxies. The Company may reimburse these persons for their expenses in so doing.
Shareholders’ requests under section 527 of the Companies Act
Under section 527 of the Companies Act, shareholders meeting the threshold requirements set out in that section have the right to require the Company to publish a statement on a website setting out any matter relating to: (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the AGM; or (ii) any circumstance connected with an auditor of the Company ceasing to hold office since the last annual general meeting.
The Company may not require the shareholders requesting any such website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act. Where the Company is required to place a statement on a website under section 527 of the Companies Act, it must forward the statement to the Company’s auditor no later than the time when it makes the statement available on the website. The business that may be dealt with at the AGM includes any statement that the Company has been required under section 527 of the Companies Act to publish on a website.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors unanimously recommends that shareholders vote “FOR” each nominee to serve as director.
What am I voting on?
The Company’s Articles of Association provide that each director shall retire from office at each annual general meeting of the Company and shall be eligible for re-election. The first proposal for consideration at the AGM is the election of each of the nine candidates named below as a director for a one-year term expiring at the 2023 annual general meeting of shareholders. Each of these candidates is currently a director. Each nominee has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve.
Upon the recommendation of the Nominating and Governance Committee, the Board has nominated each of the nine directors identified below as a nominee for a one-year term expiring at the 2023 annual general meeting of shareholders or until his or her successor is duly elected and qualified, or until his or her earlier retirement, resignation, disqualification, removal or death. If any director nominee should become unavailable for election prior to the AGM, an event that currently is not anticipated by the Board, either the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board, or the number of directors may be reduced accordingly.
Set forth on the following pages is biographical and other background information concerning each nominee for director, as well as a discussion of the specific experience, qualifications and skills of each director that helped lead the Board to conclude that each respective director should continue to serve as a member of the Board.
The form of shareholder resolutions for this proposal are set forth under the heading “Shareholder Resolutions for the 2022 Annual General Meeting” in this Proxy Statement.
Composition of the Board of Directors
The Company’s business and affairs are managed under the direction of its Board of Directors, which consists of nine directors. The Board has affirmatively determined that all of the directors, except Mr. Jurek who is the Chief Executive Officer of the Company, are independent under the NYSE listing standards. The Company is party to a shareholders agreement with certain affiliates of Blackstone Inc. (“Blackstone” or the “Sponsor”). This agreement grants the Sponsor the right to designate nominees to the Board of Directors subject to the maintenance of certain ownership requirements in the Company. See “Certain Relationships and Related Person Transactions — Shareholders Agreement.” Currently, one of the directors, Mr. Simpkins, is a designee of the Sponsor.
Director Backgrounds
The following presents the names, ages as of April 15, 2022 and selected biographical information for each of the director nominees.
| Name | Age | Position | ||||||||||||
| Neil P. Simpkins | 55 | Director, Chair of the Board | ||||||||||||
| Ivo Jurek | 57 | Director, Chief Executive Officer | ||||||||||||
| James W. Ireland, III | 67 | Director | ||||||||||||
| Julia C. Kahr | 43 | Director | ||||||||||||
| Terry Klebe | 67 | Director | ||||||||||||
| Stephanie K. Mains | 54 | Director | ||||||||||||
| Wilson S. Neely | 66 | Director | ||||||||||||
| Alicia Tillman | 46 | Director | ||||||||||||
| Molly P. Zhang | 60 | Director | ||||||||||||
Neil P. Simpkins has served as a director of Gates Industrial Corporation plc since November 2017 and as the Chair of the Board since January 2020. He has served as a director of Gates entities since 2014. He is currently an Executive Advisor to Blackstone, and prior to that was a Senior Managing Director of Blackstone’s Corporate Private Equity Group. Since joining Blackstone in 1998, Mr. Simpkins has led the acquisitions of TRW Automotive, Vanguard Health Systems, TeamHealth, Apria, Summit Materials, Change Healthcare and Gates. Before joining Blackstone, Mr. Simpkins was a Principal at Bain Capital. While at Bain Capital, Mr. Simpkins was involved in the execution of investments in the consumer
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products, industrial, healthcare and information industries. Prior to joining Bain Capital, Mr. Simpkins was a consultant at Bain & Company in the Asia Pacific region and in London. He currently serves as a director of Apria, Inc., Change Healthcare, Inc. and TeamHealth, Inc. and previously served as a director of Summit Materials, Inc. from 2009 to 2018.
Ivo Jurek has served as a director of Gates Industrial Corporation plc since its formation in September 2017 and has served as the Chief Executive Officer and a director of Gates entities since May 2015. Mr. Jurek oversees and manages all of Gates’ departments and lines of products and services globally. As Chief Executive Officer, Mr. Jurek has led Gates to expand product lines in fluid power and power transmission and strategically grow market share while driving improved financial performance. Mr. Jurek has a deep understanding of new technology development, manufacturing, distribution and international business markets. Prior to joining Gates, Mr. Jurek served as President of Eaton Electrical, Asia Pacific beginning in November 2012 until May 2015. During that time, Mr. Jurek had management oversight of Eaton Electrical’s Asia Pacific portfolio which included optimizing manufacturing plants, identifying new markets, and assisting with the overall performance of the company. Prior to that, Mr. Jurek served as Group President for Cooper Power Systems — Cooper Bussmann, with complete oversight of all business activities there and in significant general management positions in International Rectifier Corporation and TRW Inc.
James W. Ireland, III has served as a director of Gates Industrial Corporation plc since November 2018. From 2011 until his retirement in 2018, Mr. Ireland served as President and Chief Executive Officer of General Electric Africa, a digital and industrial company focused on transforming the industry with machines that have software defined solutions. From 2007 until 2011, Mr. Ireland served as the President and Chief Executive Officer of General Electric’s Asset Management Group. From 1999 to 2007, Mr. Ireland was President of NBC Universal Television Stations and Network Operations (a General Electric wholly-owned subsidiary), one of the world’s leading media and entertainment companies in development, production, and marketing of entertainment, news and information to a global audience.
Julia C. Kahr has served as a director of Gates Industrial Corporation plc since its formation in September 2017 and has served as a director of Gates entities since 2014. She has 20 years of experience managing private equity investments, most recently as a Senior Managing Director of Blackstone’s Corporate Private Equity Group, where she worked from 2004 through September 2021. While at Blackstone, Ms. Kahr was involved in the execution of its investments in SunGard, Encore Medical, DJ Orthopedics, Summit Materials, Precision Medicine Group and Gates. Before joining Blackstone, she was a Project Leader at the Boston Consulting Group, where she worked with companies in a variety of industries, including health care, financial services, media and entertainment, and consumer goods. She is also the sole author of Working Knowledge, a book published by Simon & Schuster in 1998. Ms. Kahr currently serves as a director of Barry-Wehmiller Companies, Inc., Sheltering Arms, BRIC Arts Media and Saint Ann’s School, and previously served as a director of Summit Materials, Inc. from 2009 to 2017.
Terry Klebe has served as a director of Gates Industrial Corporation plc since December 2017 and has served as a director of Gates entities since 2016. Mr. Klebe was previously Senior Vice President and Chief Financial Officer of Cooper Industries plc, a multinational industrial manufacturing company with 2010 revenues of $5.1 billion, until his retirement in February 2010. Following his retirement as Chief Financial Officer, Mr. Klebe remained on the executive management team as Vice Chairman at Cooper Industries plc from February 2010 until April 2011. Mr. Klebe also served on the board of directors of Fairchild Semiconductors and as a head of the company’s Audit Committee until its sale in September 2016.
Stephanie K. Mains has served as a director of Gates Industrial Corporation plc since February 2019. Ms. Mains is currently the CEO of LSC Communications-MCL, an Atlas Holdings portfolio company. Prior to that Ms. Mains was the interim Chief Executive Officer of GE Power Conversion from April 2020 until December 2020, and the President and CEO of ABB Electrification Products Industrial Solutions, a 2018 acquisition from GE, from November 2015 until January 2019. She served as Vice President of GE Distributed Power Global Services from March 2013 until October 2015, and held positions of increasing responsibility from General Manager to Vice President for GE Energy-Power from March 2006 until March 2013. Prior to joining GE Energy, Ms. Mains spent 17 years across multiple GE businesses in financial and transformational leadership positions, including CFO for GE Aviation Services Material Solutions. She currently serves on the board of directors for Diamondback Energy, Inc., Stryten Manufacturing, LLC, and LCI Industries.
Wilson S. Neely has served as a director of Gates Industrial Corporation plc since April 2020. He is currently a strategic advisor to InterNex Capital, an asset-based, digital lender providing innovative and flexible working capital financing to small- and medium-sized businesses. Prior to that, from 1991 until his retirement in January 2020, Mr. Neely served as a Partner of Simpson Thacher & Bartlett LLP with a corporate practice primarily in the areas of mergers and acquisitions and
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capital markets. While at Simpson Thacher, Mr. Neely advised on numerous business combination transactions, including leveraged buyouts, recapitalizations and strategic partnerships between private equity funds and corporate partners. In addition, he oversaw numerous capital markets transactions. He currently serves on the board of directors and select committees for the University of Texas Law School Foundation, Readworks, myFace, and Historic Hudson Valley, of which he serves as board chair.
Alicia Tillman has served as a director of Gates Industrial Corporation plc since April 2021. She is currently the Global Chief Marketing Officer of Capitolis and has over 20 years of experience in global marketing, strategy, operations, and digital transformation in public and private companies. Prior to joining Capitolis, Ms. Tillman worked at SAP from 2015 through March 2021, where she spent four years in the role of Executive Vice President and Global Chief Marketing Officer, leading a marketing organization of over 2,000 employees. At SAP, she was a key contributor to the acquisition and integration of multiple companies, rebuilt the technology foundation to scale digital and demand generation capabilities and developed the brand story. Prior to joining SAP, she worked for American Express from 2004 through 2015, serving as head of Marketing, Public Affairs and Business Services. She currently serves on the board of directors of RainFocus.
Peifang Zhang (also known as Molly P. Zhang) has served as a director of Gates Industrial Corporation plc since July 2020. She is retired from Orica Ltd., a global mining services company, where she served in a number of senior executive roles, including Vice President, Asset Management and Vice President/Manufacturing executive, Mining Systems. Before joining Orica, Dr. Zhang spent 22 years with Dow Inc. where she held executive positions including managing director, SCG-Dow Group, global business vice president for Dow Technology Licensing and Catalyst business, and regional manufacturing director of Dow Asia Pacific. Dr. Zhang currently serves on the board of directors of two other public companies, Arch Resources, Inc. and Aqua Metals, Inc. Her previous public board experience includes GEA Group, Cooper-Standard Holdings Inc. and Newmont Mining Corporation.
Director Qualifications
When considering whether directors have the experience, qualifications, attributes or skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of the Company’s business and structure, the Board of Directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. The Company believes that its directors provide an appropriate mix of experience and skills relevant to the size and nature of the business. In particular, the Board of Directors considered the following important characteristics, among others:
•Mr. Simpkins’ significant financial and business experience, including as a current Executive Advisor to, and former Senior Managing Director in the Corporate Private Equity Group at, Blackstone and former Principal at Bain Capital.
•Mr. Jurek’s extensive business and industry experience as well as his experience leading Gates since May 2015.
•Mr. Ireland’s substantial management expertise, including as former Chief Executive Officer of General Electric Africa and General Electric’s Asset Management Group.
•Ms. Kahr’s extensive knowledge of a variety of different industries and her significant financial and investment experience from her prior employment with Blackstone, including as a Senior Managing Director.
•Mr. Klebe’s financial acumen and business experience, including as former Chief Financial Officer and then Vice Chairman of the Board of Cooper Industries plc.
•Ms. Mains’ leadership and operational experience in various senior management roles, including as current Chief Executive Officer of LSC Communications-MCL and as a former Chief Financial Officer, as well as extensive experience across multiple GE businesses.
•Mr. Neely’s strong knowledge of corporate governance and his legal experience as a retired Partner from Simpson Thacher & Bartlett LLP in the areas of mergers and acquisitions and capital markets.
•Ms. Tillman’s executive experience in global marketing, strategy, operations and digital transformation, including digital and demand generation.
•Dr. Zhang’s global business experience and her strong understanding of the Asia market, as well as her expertise in the industrials sector.
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CORPORATE GOVERNANCE
Board Highlights
Board composition
•Size of Board: 9 members
•Number of independent directors: 8
•Committee independence: 100%
Commitment to Board refreshment and diversity
•Annual election of directors
•Average director tenure in years: 3 years
•New directors in the past two years: 3
•Percent female: 44%
•Percent ethnically diverse: 11%
Highly engaged directors
•Board and committee meetings held in 2021: 21
•Attendance rate: 100%
•During 2021, in addition to the formal meetings, directors received routine briefings and participated in ongoing discussions with management regarding the Company’s response to the Covid-19 pandemic and resulting market conditions.
Directors’ Independence and Controlled Company Exception
As of the record date, April 12, 2022, the Sponsor held more than a majority of the voting power of the Company’s ordinary shares eligible to vote in the election of the directors. As a result, the Company is a “controlled company” within the meaning of the NYSE corporate governance standards. Under these NYSE corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance standards, including the requirements that (1) a majority of the Board of Directors consist of independent directors, (2) the Board of Directors has a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities, and (3) the Board of Directors has a nominating and governance committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. A company whose shares are listed on the NYSE that ceases to be a controlled company may continue to rely on these exemptions during transition periods prescribed by the NYSE.
The Company has previously utilized such exemptions, but beginning in 2020, a majority of the Board now consists of independent directors. Since the beginning of 2021, the Compensation Committee and the Nominating and Governance Committee have been comprised entirely of independent directors with written charters addressing each such committee’s purpose and responsibilities. Thus, at this time, the Company no longer relies on these controlled company exemptions.
The Board has affirmatively determined that all of its directors, except Mr. Jurek who is the Chief Executive Officer of the Company, are independent under the NYSE listing standards.
Board Meetings, AGM and Attendance
Directors are expected to attend Board meetings and meetings of committees on which they serve. In 2021, the Board of Directors met a total of six times. Overall director attendance at meetings of the Board and its committees was 100%, with each individual director attending all meetings of the Board and the committees on which he or she served during his or her tenure in 2021. It is the policy of the Board of Directors that directors are invited to attend the AGM, although such attendance is not mandatory. In 2021, two directors attended the AGM.
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Board Structure
The Board believes that independent leadership is important. The Board also believes that, depending on what appears to be in the best interests of the Company and its shareholders at any given point in time, it should be able to choose whether the roles of Chair of the Board and Chief Executive Officer are combined or separate. Therefore, the Board does not have a policy on whether the role of Chair and Chief Executive Officer should be separate or combined and, if it is to be separate, whether the Chair should be selected from the independent directors. Currently, Mr. Neil Simpkins serves as Chair of the Board and Mr. Ivo Jurek serves as Chief Executive Officer.
In cases where the Board believes that the Chair and Chief Executive Officer roles should be combined or when the Chair is otherwise not “independent” pursuant to the Company’s Corporate Governance Guidelines, the independent directors may elect from among themselves an individual who acts as Lead Director. The Lead Director shall help coordinate the efforts of the independent and non-management directors in the interest of ensuring that objective judgment is brought to bear on sensitive issues involving the management of the Company and, in particular, the performance of senior management.
The Board’s Role in Management’s Succession Planning
The Board of Directors is responsible for reviewing the succession plan relating to the Chief Executive Officer and other executive officers that is developed by management. Directors are expected to have a thorough understanding of the characteristics necessary for a Chief Executive Officer to execute on a long-term strategy that optimizes operating performance, profitability and shareholder value creation. As part of its responsibilities under its charter, the Compensation Committee oversees the evaluation of management and the management continuity planning process. Additionally, it reviews the succession plans relating to the Chief Executive Officer and other executive officers and makes recommendations to the Board with respect to the selection of individuals to occupy these positions. The ongoing succession process is designed to reduce vacancy, transition and readiness risks and develop strong leadership quality and executive bench strength.
Board Committees
The Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. The composition and responsibilities of each committee are described below. The Board of Directors may also establish from time to time any other committees that it deems necessary or desirable. Members serve on these committees until such member’s successor is duly elected and qualified or until such member’s earlier resignation, removal, retirement, disqualification or death.
Each of the standing committees of the Board of Directors discussed below operate under written charters, which are available on the Company’s website at www.gates.com under “About Us: Investor Relations: Governance: Governance Documents.” The information contained on, or accessible from, the website is not part of this Proxy Statement by reference or otherwise.
Audit Committee
The Audit Committee currently consists of Mr. Ireland, Mr. Klebe, Ms. Mains and Dr. Zhang, with Mr. Klebe serving as chair. The Audit Committee is responsible for, among other things:
•selecting and hiring independent auditors, and approving the audit and non-audit services to be performed by the independent auditors;
•assisting the Board of Directors in evaluating the qualifications, performance and independence of the independent auditors;
•assisting the Board of Directors in monitoring the quality and integrity of the Company’s financial statements and its accounting and financial reporting;
•assisting the Board of Directors in monitoring the Company’s compliance with legal and regulatory requirements;
•reviewing guidelines and policies governing the process by which management assesses and manages the Company’s exposure to risk, including the Company’s major financial and regulatory risk exposures and the steps management takes to monitor and control such exposures;
•reviewing the adequacy and effectiveness of internal controls over financial reporting;
•assisting the Board of Directors in monitoring the performance of the internal audit function;
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•reviewing with management and the independent auditors the Company’s annual and quarterly financial statements;
•establishing procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, auditing matters, and material legal and regulatory matters, as well as the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and
•preparing the audit committee report required by the SEC to be included in the annual proxy statement.
SEC and NYSE rules require the Company to have an Audit Committee comprised of solely independent directors. The Board has affirmatively determined that Mr. Ireland, Mr. Klebe, Ms. Mains and Dr. Zhang qualify as independent directors under the NYSE listing standards and the independence standards of Rule 10A-3 of the Securities Exchange Act of 1934, as amended from time to time (the “Exchange Act”). In addition, the Board has determined that Mr. Ireland, Mr. Klebe, Ms. Mains and Dr. Zhang are each an “audit committee financial expert” within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended from time to time (the “Securities Act”).
The Audit Committee held eight meetings during 2021.
Compensation Committee
The Compensation Committee currently consists of Ms. Kahr, Mr. Klebe and Mr. Simpkins, with Ms. Kahr serving as Chair. The Compensation Committee is responsible for, among other things:
•reviewing and approving corporate goals and objectives relevant to the compensation of the Chief Executive Officer, evaluating the Chief Executive Officer’s performance in light of those goals and objectives and, either as a committee or together with the other independent directors (as directed by the Board of Directors), determining and approving the Chief Executive Officer’s compensation level based on such evaluation;
•reviewing and approving, or making recommendations to the Board of Directors with respect to, the compensation of the other executive officers, including annual base salary, bonus and equity-based incentives and other benefits;
•overseeing the evaluation of management and the management succession planning process;
•reviewing and recommending the compensation of directors;
•reviewing and discussing annually with management the Company’s “Compensation Discussion and Analysis” disclosure required by SEC rules;
•preparing the compensation committee report required by SEC rules to be included in the annual proxy statement; and
•reviewing and making recommendations with respect to incentive and equity compensation plans.
The charter of the Compensation Committee permits the committee to delegate any or all of its authority to one or more subcommittees; provided, however, that when appropriate to satisfy the requirements of Section 16b-3 of the Exchange Act, any such subcommittee shall be composed solely of two or more members that have been determined to be “Non-Employee Directors” within the meaning of Rule 16b-3 under the Exchange Act. The charter of the Compensation Committee also permits the committee to delegate to one or more officers the authority to make awards to employees other than any officer subject to Section 16 of the Exchange Act under the incentive compensation or other equity-based plan, subject to compliance with the plan, the Company’s articles of association and the laws of the jurisdiction of its organization. In addition, the Compensation Committee has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable.
See “Executive Compensation — Compensation Discussion and Analysis — Executive Compensation Determination Process” for a description of the process for determining compensation, including the role of the executive officers and independent compensation consultant.
The Compensation Committee held four meetings during 2021.
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Nominating and Governance Committee
The Nominating and Governance Committee currently consists of Mr. Ireland, Ms. Kahr, Mr. Neely and Mr. Simpkins, with Mr. Simpkins serving as Chair. The Nominating and Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board. The Nominating and Governance Committee may consider (a) minimum individual qualifications, including strength of character, mature judgment, familiarity with the Company’s business and industry, independence of thought and an ability to work collegially with the other members of the Board and (b) all other factors it considers appropriate, which may include age, gender and ethnic and racial background, existing commitments to other businesses, potential conflicts of interest with other pursuits, legal considerations such as antitrust issues, corporate governance background, various and relevant career experience, relevant technical skills, relevant business or government acumen, financial and accounting background, executive compensation background and the size, composition and combined expertise of the existing Board. In addition, although the Nominating and Governance Committee considers diversity of viewpoints, background and experiences, the Board does not have a formal diversity policy. The Nominating and Governance Committee will consider the qualification of any candidate nominated by a shareholder in accordance with the Companies Act. The Nominating and Governance Committee will evaluate candidates recommended by shareholders on a substantially similar basis as it considers other nominees.
The Nominating and Governance Committee is also responsible for, among other things:
•overseeing the evaluation of the Board of Directors;
•reviewing developments in corporate governance practices and developing and recommending a set of corporate governance guidelines; and
•recommending members for each committee of the Board of Directors.
The Nominating and Governance Committee held three meetings during 2021.
The Board’s Role in Risk Oversight
The Board exercises direct oversight of strategic risks to the Company, which includes regular review and evaluation of the Company’s system of financial and operational internal controls, its compliance with applicable laws and regulations, its programs and protocols to minimize information security risks, and its processes for identifying, assessing and mitigating other significant risks that may affect the Company. The Board also exercises direct oversight of the Company’s environmental, social and governance (“ESG”) and human capital management strategies, practices and policies, including the Company’s reporting on such matters.
The Committees also have certain responsibilities related to risk oversight. The Audit Committee reviews guidelines and policies governing the process by which management assesses and manages the Company’s exposure to risk, including the Company’s major financial risk exposures and the steps management takes to monitor and control such exposures. The Audit Committee also oversees the Company’s Code of Business Conduct and Ethics and other material legal and regulatory policies, including the Company’s Whistleblower Policy, and reviews reports and investigations of potential violations under such policies. The Compensation Committee oversees risks relating to the Company’s compensation policies and practices for all employees and conducts a comprehensive compensation risk assessment at least annually. The Compensation Committee has regular discussions related to human capital, including management succession planning. Each committee charged with risk oversight reports to the Board on those matters on a regular basis.
To fulfill its responsibilities related to risk oversight, the Board must understand the significant risks the Company faces and confirm management is identifying and appropriately managing and mitigating such risks. In 2020, the Company implemented a robust Enterprise Risk Management (“ERM”) program, which includes an annual risk assessment and project plan, creation of a risk register to monitor mitigation actions and identify emerging risks, on-going dialogue and collaboration among management, use of data analytics and data science methodologies, quarterly meetings on mitigation plans, and periodic reports to the Board. The ERM process is managed by a management committee called the Enterprise Risk Committee, led by the Chief Financial Officer, Chief Legal Officer, Chief Accounting Officer and Vice President of Global Internal Audit, in coordination with senior functional leaders across the Company.
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With respect to information security risk oversight, the Board receives regular updates from the Company’s senior management team to assess cybersecurity and other information technology risks facing the Company and the measures the Company is taking to mitigate such risks. The Company’s approach to identifying and mitigating such risks is ongoing monitoring of all of its technology systems and a comprehensive process to ensure its technology environment is operating and maintained in accordance with best practices and security standards defined within the NIST Cybersecurity Framework. In the past three years, the Company has not experienced any material information security breaches or incurred any material expenses, penalties, or settlements related to information security breaches. Employees take part in a mandatory internal educational program to ensure continual awareness of new and emerging threats (which includes phishing simulations) and computer-based training that is required at the time of hire and annually thereafter. Employees are subject to information technology policies, including the Company’s Acceptable Use Policy, Dual Use Device Policy, Information Security Policy and Password Policy.
Board Education
The Company provides continuing education for directors through board materials and presentations, discussions with management, and the opportunity to attend external board education programs. In addition, since 2020, the Company has provided all directors with access to the resources of the National Association of Corporate Directors through a Company membership.
Executive Sessions
To ensure free and open discussion and communication among the non-management directors of the Board, the non-management directors meet in executive session at most Board meetings without members of management. The Chair presides over executive sessions of non-management directors.
Code of Business Conduct and Ethics and Corporate Governance Guidelines
The Company maintains a Code of Business Conduct and Ethics that applies to all of its officers, directors and employees, including the chief executive officer, chief financial officer, chief accounting officer and corporate controller, or persons performing similar functions, which is posted on its website at www.gates.com under “About Us: Investor Relations: Governance: Governance Documents.” The Code of Business Conduct and Ethics is a “code of ethics” as defined in Item 406(b) of Regulation S-K. The Company will make any legally required disclosures regarding amendments to, or waivers of, provisions of the code of ethics on its website. The information contained on, or accessible from, the website is not part of this Proxy Statement by reference or otherwise.
The Company’s Corporate Governance Guidelines set forth many of the practices, policies and procedures that provide the foundation of its commitment to strong corporate governance. The policies and practices covered in the Corporate Governance Guidelines include operation of the Board of Directors, Board structure, director independence and Board committees. The Corporate Governance Guidelines are reviewed at least annually by the Nominating and Governance Committee and are revised as necessary or appropriate. The Corporate Governance Guidelines are posted on the Company’s website at www.gates.com under “About Us: Investor Relations: Governance: Governance Documents.”
Director, Officer and Employee Hedging and Pledging
The Company’s insider trading policy contains prohibitions on hedging and pledging. Directors, executive officers and employees are prohibited from trading in puts or calls or similar instruments of Company stock, from engaging in short sales of Company stock and from engaging in transactions (including variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of Company stock. Directors, executive officers and employees are also prohibited from pledging Company stock as collateral for a loan or as part of a margin account.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended January 1, 2022 (“Fiscal 2021”), Mr. Simpkins, Ms. Kahr and Mr. Klebe served on the Compensation Committee. None of these individuals has been an officer or employee of the Company or any of its subsidiaries at any time. In Fiscal 2021, none of the executive officers served as a member of the board of directors or compensation committee of any other company whose executive officer(s) served as a member of the Company’s Board or Compensation Committee. The Company and certain of its affiliates are party to certain transactions with Blackstone described in the “Related-Person Transactions Policy and Procedures” section of this Proxy Statement.
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Communications with the Board of Directors
Any shareholder or other interested party may communicate with the directors, individually or as a group, the Chair or the independent directors as a group, by addressing such communications to the Corporate Secretary of the Company, 1144 Fifteenth Street, Denver, Colorado 80202, who will forward such communications to the appropriate party unless the communications are of a personal nature or not related to the duties and responsibilities of the Board of Directors, including, without limitation, junk mail, mass mailings, business solicitations, spam, surveys and routine product or business inquiries.
Shareholder Engagement
The Company values shareholder engagement and is committed to maintaining open communications with the investment community. Throughout the year, management engages with shareholders on topics including company strategy and performance, corporate governance, compensation practices and sustainability. During 2021, in addition to quarterly earnings calls, the senior management team participated in eleven investor conferences and a number of other investor meetings. These engagements typically included the Company’s Chief Executive Officer, who is also a director, as well as its Chief Financial Officer and its Vice President of Investor Relations. The input from these engagements informs the Company’s decision-making and it intends to continue this outreach going forward.
The Company also submits an advisory vote to its shareholders on an annual basis to approve the Named Executive Officer compensation. At the 2021 AGM, approximately 95% of the votes cast were in favor of the advisory vote to approve executive compensation. The Committee took this into account when making the decisions described in the Compensation Discussion and Analysis in this proxy statement.
The Company welcomes investor interaction and feedback. The Investor Relations department is the point of contact for shareholder interaction with the Company and can be reached through investors.gates.com. The information contained on, or accessible from, the website is not part of this Proxy Statement by reference or otherwise.
Executive Officers
The following presents the positions, ages as of April 15, 2022 and selected biographical information for each of the Company’s current executive officers (other than Mr. Jurek, whose biographical information appears above under “Director Backgrounds”).
Name | Age | Position | ||||||||||||
Cristin Bracken | 54 | Senior Vice President, Chief Legal Officer and Corporate Secretary | ||||||||||||
Grant Gawronski | 59 | Executive Vice President and Chief Commercial Officer | ||||||||||||
Walter Lifsey | 63 | Executive Vice President and Chief Operating Officer | ||||||||||||
L. Brooks Mallard | 55 | Executive Vice President and Chief Financial Officer | ||||||||||||
Thomas Pitstick | 50 | Chief Marketing Officer and Senior Vice President of Strategic Planning | ||||||||||||
Cristin C. Bracken has served as the Company’s Senior Vice President, Chief Legal Officer and Corporate Secretary since October 2020. Ms. Bracken joined the Company in January 2017, previously serving as its Vice President and Assistant General Counsel, Compliance and Litigation, and then serving as its interim General Counsel prior to her appointment as Chief Legal Officer. As Chief Legal Officer, Ms. Bracken is responsible for all legal functions for Gates, including securities and corporate governance, M&A, litigation, commercial, regulatory, compliance, patents and trademarks, real estate, employment and labor, and environmental matters. Ms. Bracken has extensive experience as a lawyer specializing in compliance, complex litigation, risk management, regulatory, commercial agreements and transactions, and employment law for public and private equity-backed corporations. Prior to joining Gates, she held senior legal leadership roles in both the oil and gas and energy trading industries at companies such as SM Energy Company, Forest Oil Corporation and Dynegy Inc. She also previously served as an Assistant District Attorney in Houston, Texas. Ms. Bracken began her legal career at Fulbright & Jaworski LLP in its Dallas office.
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Grant Gawronski has served as the Company’s Executive Vice President and Chief Commercial Officer since December 2018. His direct commercial responsibilities include the first-fit and replacement businesses in the Americas region, the Europe, Middle East & Africa region, and the East Asia & India region, as well as the Company’s global oil & gas business. Mr. Gawronski joined Gates in 2017 as President, Americas, and has broad leadership experience. Prior to joining the Company, Mr. Gawronski served as President, Electrical Industrial and Infrastructure for Eaton Corporation from 2012 to 2017. In that role, Mr. Gawronski oversaw a portfolio that included global oil and gas business units, the power quality business unit, and all Eaton electrical business units in Latin America and Canada. Prior to that, Mr. Gawronski served as Group President at Cooper Industries, and in significant general management positions at GE Lighting.
Walter Lifsey has served as the Company’s Executive Vice President and Chief Operating Officer since August 2015. As Chief Operating Officer, Mr. Lifsey manages and oversees all manufacturing and operations globally for Gates, including the operations function, health, safety and environmental, quality assurance, procurement and certain new product development. Prior to joining Gates, Mr. Lifsey served as Chief Operating Officer of View Inc., a world-class manufacturer of intelligent windows, where Mr. Lifsey was responsible for all aspects of manufacturing, product quality, manufacturing engineering, operational planning, and manufacturing information systems. Before his time at View, Mr. Lifsey served in various roles at Atmel Corporation beginning in 2006 before becoming Chief Operating Officer where he led global operations from May 2010 to November 2012. Prior to Atmel, he served in various senior management roles at International Rectifier Corporation and TRW Inc.
L. Brooks Mallard has served as the Company’s Executive Vice President and Chief Financial Officer since February 2020. As CFO, Mr. Mallard manages Gates’ global corporate finance and accounting functions, including capital structure, resource allocation, financial reporting and the maintenance of the global internal control systems. Previously, Mr. Mallard served as the Chief Financial Officer of Henniges Automotive, a global supplier of highly engineered sealing and anti-vibration systems for the automotive market, beginning June 2019. Prior to Henniges Automotive, he served as the Executive Vice President and Chief Financial Officer of Jeld-Wen beginning in November 2014, where he helped take the company from being private equity held, through an initial public offering on the New York Stock Exchange. He also has held senior financial leadership roles with TRW Automotive, Cooper Industries plc, Thomas & Betts, and Briggs & Stratton during his career.
Thomas G. Pitstick has served as the Company’s Chief Marketing Officer and Senior Vice President of Strategic Planning since October 2020. Prior to that, he served in various leadership roles, including Chief Marketing Officer and Senior Vice President of Product Line Management, as well as Senior Vice President of Innovation, since joining the Company in January 2016. Mr. Pitstick is responsible for global marketing, company branding, corporate communications, global product line management, R&D for engine systems products, strategic planning, corporate development and M&A. Prior to joining Gates, Mr. Pitstick served as Senior Vice President of Marketing — Electrical Sector with Eaton Corporation. Prior to Eaton’s acquisition of Cooper Industries, he served as Vice President and General Manager of the Cooper Power Systems Energy Automation Solutions business unit and held various roles in Cooper’s corporate and business development functions. Before Cooper, Mr. Pitstick held a number of commercial, product line management and business development roles with technology start-up companies.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes the compensation earned by or paid to the Company’s principal executive officer (“Chief Executive Officer”), principal financial officer (“Chief Financial Officer”) and the three other most highly compensated executive officers serving in such capacities as of January 1, 2022 (collectively, referred to as the “Named Executive Officers”). The Named Executive Officers for Fiscal 2021 are listed below:
Name | Position | |||||||
Ivo Jurek | Chief Executive Officer | |||||||
L. Brooks Mallard | Chief Financial Officer | |||||||
Grant Gawronski | Chief Commercial Officer | |||||||
Walter Lifsey | Chief Operating Officer | |||||||
Thomas Pitstick | Chief Marketing Officer and Senior Vice President of Strategic Planning | |||||||
Compensation Philosophy and Objectives
To ensure management’s interests are aligned with those of the shareholders, the Company emphasizes a pay-for-performance compensation philosophy. The Company believes that a significant portion of each executive’s compensation should be “at risk” and tied to overall Company and individual performance. The executive compensation program is designed to enable the Company to attract, motivate, reward and retain high-caliber executives who are capable of creating and sustaining value for customers and shareholders and achieving the Company’s business goals over the long term. In addition, the executive compensation program is designed to provide a fair and competitive compensation opportunity that appropriately rewards executives for their contributions to the Company’s success. As described below, the Company believes that each element of its executive compensation program aligns with this philosophy.
Executive Compensation Structure
The material elements of the executive compensation program include the following, all of which are described in detail in this CD&A:
•Base salary
•Annual Cash Bonus (a short-term incentive tied to the Company’s annual financial performance)
•Long-Term Equity Incentives (a long-term incentive opportunity consisting of performance-based restricted stock units, time-based vesting restricted stock units and stock options)
•Broad-based employee benefits, limited perquisites and severance coverage
Say-on-Pay and Say-on-Frequency Votes
In 2021, the Compensation Committee considered the outcome of the shareholder advisory vote on 2020 executive compensation when making decisions relating to the compensation of the Named Executive Officers and the Company’s executive compensation program and policies. The shareholders voted at the 2021 AGM, in a non-binding, advisory vote, on the 2020 compensation paid to the Named Executive Officers. Approximately 95% of the votes cast were in favor of the Company’s 2020 compensation decisions. Based on this level of support, the Compensation Committee decided that the “say-on-pay” vote result did not necessitate any substantive changes to the compensation program.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), shareholders can vote on the frequency of say-on-pay voting once every six years. The Company expects this vote to next occur at its 2025 annual meeting. Until that time, the Company expects to hold an advisory, non-binding say-on-pay vote on an annual basis.
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Governance Highlights Related to Compensation Practices
The Company is committed to corporate governance practices that promote long-term value and strengthen board and management accountability to its shareholders, including the following:
Compensation Practice | ||||||||
Pay-for-Performance | — The majority of the total executive direct compensation is variable and directly or indirectly tied to Company performance. — No incentive funding when Company performance on a metric does not meet threshold requirements for such metric under the annual short and long term incentive plans (relating to performance awards). — Half of the Chief Executive Officer’s equity-based compensation is performance based to motivate enhancement of long-term shareholder value. — Compensation Committee review of executive tally sheets reflecting all compensation components to ensure that compensation decisions are in line with the Company’s pay-for-performance philosophy. | |||||||
Excellence on the Board | — Annual election of directors by majority vote. — Separation of Chair and Chief Executive Officer roles. — All members of Audit Committee are financial experts. | |||||||
Robust Stock Ownership Guidelines | Stock ownership guidelines of 6x base salary for the Chief Executive Officer; 3x base salary for other executive officers and certain senior vice presidents; 4x cash retainer for directors. | |||||||
Double Trigger Change in Control | Executive Change in Control Plan and, beginning in 2020, equity grants require both a change in control and a qualifying termination for accelerated vesting. | |||||||
Strict Trading Policy; Anti-Hedging and Pledging Policies | Enforcement of a strict trading policy; no short sales or speculative trading, including no hedging or pledging of Company stock, by executives or directors. | |||||||
Clawback Policy | Recovery of cash and equity incentive compensation in certain circumstances if it was paid based on inaccurate financial statements. | |||||||
Tax Gross-Ups | No excise tax or income tax gross-ups (except in the event of relocation). | |||||||
Employment Contracts | None of the current Named Executive Officers have an employment contract. | |||||||
| Independent Compensation Consultant | Retains an independent compensation consultant reporting directly to the Compensation Committee. | |||||||
Executive Compensation Determination Process
Role of Board, Compensation Committee. The Compensation Committee provides assistance to the Board to oversee the Company’s executive compensation program. As part of its responsibilities under its charter, the Compensation Committee oversees the annual compensation decision process for the Named Executive Officers, including the Chief Executive Officer. The Compensation Committee has historically taken into account multiple factors, such as considering the responsibilities, performance, contributions and experience of each Named Executive Officer and their compensation in relation to other employees and other equivalent roles at peer companies.
The Compensation Committee annually reviews the Chief Executive Officer’s performance, base salary, annual incentive target opportunity and outstanding long-term incentive awards and approves any changes to the Chief Executive Officer’s overall compensation package in light of such review. The Chief Executive Officer does not participate in deliberations regarding his own compensation.
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In addition, the Compensation Committee has historically taken into account the recommendations of the Chief Executive Officer based on his judgment and knowledge of the industry when making compensation decisions for the executive officers (other than the Chief Executive Officer). The Chief Executive Officer annually reviews each other executive officer’s performance with the Compensation Committee and recommends to the Compensation Committee an appropriate base salary, annual incentive target opportunity and annual incentive payout and grant of long-term equity incentive award. Based upon this recommendation and the other considerations described below, and in consideration of the executive compensation philosophy described above, the Compensation Committee reviews the overall annual compensation packages for the executive officers, including the Named Executive Officers, and approves such compensation packages, other than the proposed equity grants. Proposed grants of equity to the Named Executive Officers and other Section 16 officers are reviewed and approved by the full Board in order to qualify such grants as exempt from the short-swing profit provisions of Section 16 of the Exchange Act.
Role of the Independent Compensation Consultant. The Compensation Committee retains an independent compensation consultant, Aon’s Human Capital Solutions Practice, a division of Aon plc (the “Consultant”), to support the oversight and management of the executive compensation program. The Compensation Committee retains sole authority to hire or terminate the Consultant, approve its compensation, determine the nature and scope of services, and evaluate performance. One or more representatives of the Consultant attend Compensation Committee meetings, as requested, and communicate with the Compensation Committee Chair between meetings. The Compensation Committee makes all final decisions. The Consultant’s specific roles include, but are not limited to:
•advising the Compensation Committee on executive compensation trends and regulatory developments;
•providing a total compensation study for executives, compared against the companies in the peer group, and recommendations for executive pay;
•working with the Compensation Committee to develop an appropriate peer group of comparable companies to serve as a reference point in executive compensation decision-making;
•providing advice to the Compensation Committee on governance best practices, as well as any other areas of concern or risk;
•serving as a resource to the Compensation Committee Chair for meeting agendas and supporting materials in advance of each meeting;
•reviewing and commenting on proxy disclosure items, including this CD&A;
•reviewing and commenting on the Compensation Committee’s annual compensation risk assessment;
•advising the Compensation Committee on management’s pay recommendations; and
•from time to time, reviewing and providing compensation recommendations for non-employee directors to the Nominating and Governance Committee.
The Compensation Committee has assessed the independence of the Consultant as required by SEC and NYSE rules. The Compensation Committee reviewed its relationship with the Consultant and considered all relevant factors, including those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act. Based on this review, the Compensation Committee concluded that the Consultant is independent and there are no conflicts of interest raised by the work performed by the Consultant.
Role of the Peer Group. The Compensation Committee, with the help of the Consultant, conducts an annual review and evaluation of executive and director compensation in comparison to an industry peer group. In establishing the industry peer group, the Compensation Committee targets approximately 15-20 companies based on the following selection criteria:
•publicly-traded companies within similar Global Industry Classification Standard (“GICS”) code classifications;
•peer companies used by the potential peer companies (peers of peers) within the similar GICS codes;
•peer companies used by proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) in 2020;
•companies with annual revenues of approximately 0.4x to 3x Gates’ annual revenues; and
•companies with enterprise values of approximately 0.2x to 5x Gates’ total enterprise value.
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For Fiscal 2021 compensation decisions, the Compensation Committee selected the same companies used for the fiscal year ended January 2, 2021 compensation decisions, with the addition of one new company, Dover Corporation. The full list of peers, all of which are in the GICS Industrials Sector and Capital Goods Industry Group, is shown below. Regal Beloit Corporation and Rexnord Corporation merged during 2021, but are listed separately as they were included in the peer group pay study prior to the merger.
1.AMETEK, Inc.
2.Colfax Corporation
3.Crane Co.
4.Donaldson Company, Inc.
5.Dover Corporation
6.Flowserve Corporation
7.Graco Inc.
8.IDEX Corporation
9.Ingersoll Rand Inc.
10.Lincoln Electric Holdings, Inc.
11.Nordson Corporation
12.Pentair plc
13.Regal Beloit Corporation
14.Rexnord Corporation
15.SPX Corporation
16.The Timken Company
17.Xylem Inc.
The Compensation Committee uses competitive compensation data from the annual total compensation study of peer companies as a reference point to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the Compensation Committee uses multiple reference points when establishing targeted compensation levels. The Compensation Committee uses the competitive 50th percentile for targeted total compensation as a guide, but does not benchmark specific compensation elements or total compensation to any specific percentile relative to the peer companies or the broader U.S. market. Instead, the Compensation Committee applies judgment and discretion in establishing targeted pay levels, taking into account not only competitive market data, but also factors such as Company, business and individual performance, scope of responsibility, critical needs and skill sets, leadership potential and succession planning.
For the fiscal year ending December 31, 2022 (“Fiscal 2022”), the Compensation Committee, in consultation with the Consultant, reviewed the composition of the peer group and, using the same selection criteria, maintained the same peer group as used for Fiscal 2021 compensation decisions.
Role of Tally Sheets. Each year, the Compensation Committee conducts a comprehensive compensation review for each Named Executive Officer prior to making decisions about executive compensation for the next year. The Committee reviews a tally sheet for each Named Executive Officer that encompasses two years of all elements of compensation, including the value of base salary, short-term incentives, long-term incentives, retirement benefits, health and welfare benefits and personal benefits. This comprehensive review ensures that future compensation decisions are in line with the Company’s pay-for-performance compensation philosophy.
Timing of Compensation Decisions. The Compensation Committee generally makes executive compensation decisions in February of each year, after the Company reports its fourth quarter and year-end financial results for the preceding fiscal year (the “February meeting”). This timing allows the Compensation Committee to have a complete financial performance picture before making compensation decisions. The exception is executive compensation, including equity grants, to executives who are promoted or hired from outside the Company during the year. These executives may receive compensation changes or equity grants effective or dated, as applicable, as of the date of their promotion, hiring date, or other Board approved date.
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Elements of Compensation
The Company’s executive compensation program is designed to recognize an executive’s scope of responsibilities, leadership ability and effectiveness in achieving key performance goals and objectives. As an executive’s level of responsibility within Gates increases, so does the percentage of total compensation that is linked to performance in the form of variable compensation. The Company also provides various retirement and benefit programs and modest, business-related benefits as discussed below.
Total Compensation Mix. The Company’s mix of target total compensation in 2021, as illustrated by the below charts, is significantly skewed towards variable “at-risk” compensation. 
Approximately 86% of the Chief Executive Officer’s compensation in Fiscal 2021 was variable and at-risk, with the majority being performance-based. In addition, the majority of long-term equity incentives were performance-based, consisting of 50% in the form of performance-based vesting restricted stock units (“PRSUs”) and 5% in the form time-based vesting non-qualified stock options (“Options”) that are premium priced. The other 45% of the Chief Executive Officer’s long-term equity incentives consisted of 25% in the form of time-based vested restricted stock units (“RSUs”) and 20% Options. The long-term incentive opportunity is described further below.
Base Salary. Base salaries for the Company’s Named Executive Officers in 2021 were determined by the Compensation Committee after consideration of the Chief Executive Officer’s recommendations (for all Named Executive Officers other than the Chief Executive Officer); the breadth, scope and complexity of the executive’s role; internal equity; current compensation; tenure in position and prior tenure in related roles; skill set; market pay levels; and individual performance. Base salaries are reviewed annually at the February meeting or at other times when appropriate and may be increased from time to time pursuant to such review. The Consultant assists the Compensation Committee with this process by providing market and peer group data and making recommendations.
Effective February 26, 2021, the Company adjusted the annual base salary of Mr. Jurek by 2.5% (from $1,030,000 to $1,055,750), Mr. Mallard by 2.5% (from $550,000 to $563,750), Mr. Gawronski by 2.5% (from $667,575 to $684,264), Mr. Lifsey by 2.5% (from $669,231 to $685,962) and Mr. Pitstick by 0% (base salary remaining at $444,528, as he received an increase following his October 2020 promotion to Chief Marketing Officer and Senior Vice President of Strategic Planning). The Company made these adjustments primarily to align with market compensation practices and reward individual performance. The Summary Compensation Table below shows the base salary earned by each Named Executive Officer during Fiscal 2021.
Short-Term Incentive Opportunity. The Company provides a short-term annual incentive opportunity under the Gates Global Bonus Policy (the “Annual Plan”) to reward certain employees, including its Named Executive Officers, for achieving specific performance goals that would advance the Company’s profitability and drive key business results, and to recognize individuals based on their contributions to those results.
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Payouts under the Annual Plan were based on a combination of the achievement of the Company’s financial performance goals in Fiscal 2021 (the “Gates Financial Performance Factor”), which fund the Annual Plan, and the Named Executive Officer’s performance during the fiscal year against his individual performance goals (the “Individual Performance Factor”).
Gates Financial Performance Factor. The Gates Financial Performance Factor sets the funding levels for the Annual Plan. The Board, after an evaluation of possible financial performance measures, determined to continue using Adjusted EBITDA, Free Cash Flow and Revenue as the financial performance measures for 2021. The Board determined that these financial performance measures would be critical indicators of the Company’s performance for 2021 and, when combined, would contribute to sustainable growth. The Annual Plan financial performance measures and weightings for 2021 are described below.
Performance Measure | Description | |||||||
Adjusted EBITDA (50%) | Adjusted EBITDA under the Annual Plan is defined in substantially the same manner as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Measures,” of the 2021 Annual Report. | |||||||
Free Cash Flow (30%) | Calculated as Adjusted EBITDA (as defined for purposes of the Annual Plan as described immediately above), less capital expenditures, plus or minus the change in trade working capital versus prior year. | |||||||
Revenue (20%) | Revenue under the Annual Plan is defined as consolidated revenue as reflected in the Company’s financial statements, excluding the impacts of acquisitions made during the fiscal year. | |||||||
The Compensation Committee reserved the ability to adjust the actual financial performance results to exclude the effects of extraordinary, unusual or infrequently occurring events. The weighted achievement factor for each of the financial performance measures is determined by multiplying the weight attributed to each performance measure by the applicable achievement factor for each measure. For each of the performance measures, the achievement factor is determined by calculating the payout percentage against the target goal based on a pre-established scale. Funding attainment with respect to these performance measures can range from:
•0% funding for performance below the threshold requirement;
•50% of target incentive for achieving 95% of the target performance requirement (threshold);
•100% of target incentive for achieving 100% of the target performance requirement (target); and
•150% of target incentive for achieving 105% or above of the target performance requirement (maximum).
Payouts for performance between points are interpolated on a straight-line mathematical basis and rounded to the nearest whole number. The following table outlines the calculation of the potential funding of the Annual Plan for 2021 based on the Company’s attainment of the Gates Financial Performance Factor measures without any adjustments.
| (dollars in millions) | Threshold | Target | Maximum | 2021 Attainment | Potential Funding | |||||||||||||||||||||||||||||||||||||||||||||
| Measure | Weighting | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | 50% | $ | 645.4 | $ | 679.4 | $ | 713.4 | $ | 738.5 | 108 | % | $ | 20.6 | 150 | % | |||||||||||||||||||||||||||||||||||
Free Cash Flow | 30% | $ | 481.1 | $ | 506.4 | $ | 531.7 | $ | 554.0 | 109 | % | $ | 12.4 | 150 | % | |||||||||||||||||||||||||||||||||||
Revenue* | 20% | $ | 3,013.1 | $ | 3,110.0 | $ | 3,195.1 | $ | 3,474.4 | 112 | % | $ | 8.3 | 150 | % | |||||||||||||||||||||||||||||||||||
* Revenue threshold and maximum are narrower than 95% and 105% to align with the associated EBITDA levels.
Notwithstanding the establishment of the performance measures and the formula for determining the payment amounts for the Annual Plan, the Compensation Committee can exercise positive or negative discretion and award a greater or lesser amount to fund the Annual Plan than the amount determined by the formula if, in the exercise of its business judgment, the Compensation Committee determines that a greater or lesser amount is warranted under the circumstances. The Compensation Committee believes its use of positive discretion should be limited to extraordinary circumstances.
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For Fiscal 2021, the Compensation Committee reviewed the Company’s attainment of the Gates Financial Performance Factor and, at the recommendation of the Company’s management team, determined it would be appropriate to exclude the translation impact of foreign exchange gains and losses (the “FX impact”) to both the targets and the attainment calculation, as the FX impact on Adjusted EBITDA target was greater than $10 million. Below is the calculation of the potential funding of the Annual Plan for 2021, with the adjustments for FX impact. This did not change the result of maximum attainment of each measure.
| (dollars in millions) | Adjusted Target (100% Funding) | 2021 Attainment Adjusted for FX | Potential Funding | |||||||||||||||||||||||||||||||||||||||||
| Measure | Weighting | FX Impact | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | 50% | $ | 24.7 | $ | 704.1 | $ | 745.3 | 108 | % | 106 | % | $ | 20.6 | 150 | % | |||||||||||||||||||||||||||||
Free Cash Flow | 30% | $ | 24.7 | $ | 531.1 | $ | 563.5 | 106 | % | $ | 12.4 | 150 | % | |||||||||||||||||||||||||||||||
Revenue | 20% | $ | 95.2 | $ | 3,205.2 | $ | 3,512.7 | 110 | % | $ | 8.3 | 150 | % | |||||||||||||||||||||||||||||||
Finally, the Compensation Committee, at the recommendation of the Company’s management team, exercised negative discretion to the potential funding, reducing it from an aggregate maximum payout of 150% to an aggregate payout of 135%.
After the Gates Financial Performance Factor is calculated and the aggregate amount available to fund the Annual Plan is approved by the Compensation Committee, the Company’s Chief Executive Officer may allocate the funding across the organization as he deems appropriate (excluding with respect to himself) and may adjust the Gates Financial Performance Factor either upward or downward for each functional area or geographic region based on the performance of that specific functional area or geographic region. For Fiscal 2021, the Compensation Committee, based on the recommendation of the Chief Executive Officer, adjusted the Gates Financial Performance Factor for the Company’s corporate function, which includes the Named Executive Officers, from 135% to 130%.
Individual Performance Factor. Under the Annual Plan, the Compensation Committee establishes an individual target award opportunity for each executive that reflected the market median target annual incentive opportunity as determined in the annual review and evaluation of executive compensation described above. At the end of the performance period, the Committee considered both the Company’s 130% corporate function payout factor as described above and individual performance factors that are based on achievement against the performance criteria listed below to determine the appropriate attainment percentage for the Named Executive Officers. There is no stated maximum on the Individual Performance Factor.
•Financial Goals: Achieving the Company’s annual financial plan, as well as the annual financial plan for the executive’s region or function.
•Regional Growth Goals: Focusing on growth opportunities to drive richer margins and mix; appropriate pricing strategies in the face of inflationary environment.
•Operational Excellence: Managing sourcing through an inflationary environment; workplace safety; advancements in product quality and inventory management; effectuate scheduled restructuring activities; operational efficiency/productivity and executing on key company initiatives.
•Building Organizational Capacity: Reinforcing our ethical standards; attracting talent; building an inclusive environment, building a talent pipeline, developing, and promoting diverse talent as a key differentiator, increasing individuals’ organizational capabilities, and fostering cooperation among the global team.
Environmental, Social and Governance measures in categories such as ethics, sustainability, and diversity and inclusion, have been embedded in our short-term incentive plan and are factored into the growth, operational excellence and building organizational capacity goals that influence the Individual Performance Factor.
Payout. Actual amounts paid under the Annual Plan were calculated by multiplying each Named Executive Officer’s base salary in effect on December 31, 2021 by (i) his Annual Plan target bonus opportunity (which is reflected as a percentage of base salary), (ii) the final Gates Financial Performance Factor and (iii) the Individual Performance Factor. The following table illustrates the calculation of the annual cash incentive awards payable to each of the Named Executive Officers under the Annual Plan based on 2021 financial performance and individual performance.
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| Name | Base Salary ($) | Target Annual Plan Opportunity (% of Base Salary) | Target Annual Plan Opportunity ($) | Individual Performance Factor (%) | Financial Performance Factor | 2021 Actual Payout | ||||||||||||||||||||||||||||||||
| Ivo Jurek | $ | 1,055,750 | 150% | $ | 1,583,625 | 100 | % | 130 | % | $ | 2,058,713 | |||||||||||||||||||||||||||
| Brooks Mallard | $ | 563,750 | 100% | $ | 563,750 | 103.85 | % | 130 | % | $ | 761,063 | |||||||||||||||||||||||||||
| Grant Gawronski | $ | 684,264 | 100% | $ | 684,264 | 103.85 | % | 130 | % | $ | 923,757 | |||||||||||||||||||||||||||
| Walt Lifsey | $ | 685,962 | 100% | $ | 685,962 | 100 | % | 130 | % | $ | 891,750 | |||||||||||||||||||||||||||
| Tom Pitstick | $ | 444,528 | 75 | % | $ | 333,396 | 100 | % | 130 | % | $ | 433,415 | ||||||||||||||||||||||||||
Long-Term Incentive Opportunity. The Company believes that its Named Executive Officers’ long-term compensation should be directly linked to the value it delivers to shareholders. Equity awards granted to Named Executive Officers are designed to provide long-term incentive opportunities over a period of several years. In connection with the Company’s initial public offering (the “IPO”), it adopted the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (the “2018 Omnibus Incentive Plan”), a market-based long-term incentive program that allows for awards of a mix of performance shares, restricted shares and stock options. The 2018 Omnibus Incentive Plan was informed by the peer group and broader public company practice and is consistent with the Company’s compensation objective of providing a long-term equity incentive opportunity that aligns compensation with the creation of shareholder value and achievement of business goals.
In February 2021, the Company’s Board approved annual long-term incentive awards (the “2021 LTI”) under the 2018 Omnibus Incentive Plan to incentivize long-term business performance as well as to promote retention. The 2021 LTI for Named Executive Officers, other than the Chief Executive Officer, is comprised of 34% PRSUs, 33% RSUs, and 33% Options. The 2021 LTI for the Chief Executive Officer is comprised of 50% PRSUs, 25% RSUs, 20% Options and 5% premium priced Options with a strike price that reflects a 10% premium over the closing price on the date of grant.
Each Named Executive Officer’s target opportunity for the 2021 LTI is a percentage of his base salary. For 2021, the percentage of base salary was: Mr. Jurek (470%), Mr. Mallard (190%), Mr. Gawronski (240%), Mr. Lifsey (240%), and Mr. Pitstick (105%).
The RSUs and Options will vest in substantially equal annual installments on the first three anniversaries of the grant date, subject to the executive’s continued employment through the vesting date. The PRSUs provide that 50% of the award will vest if the Company achieves a certain level of average annual Adjusted Return on Invested Capital (“Adjusted ROIC”) and the remaining 50% will vest if the Company achieves certain Relative Total Shareholder Return (“Relative TSR”) goals. Performance for the Adjusted ROIC and Relative TSR goals are each measured over a three year performance period based on the pre-established scale. The Compensation Committee selected Adjusted ROIC as a metric to drive focus on making sound investments and efficient use of working capital. The Compensation Committee selected Relative TSR as a metric to align a significant portion of pay delivery directly with shareholder value creation. It also aligns the interests and experience of executive officers with those of the Company and its shareholders and filters out macroeconomic and other factors that are not within management’s control.
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Performance Measure | Description | |||||||
Adjusted ROIC (50%) | 50% of PRSU value is calculated as (Adjusted EBITDA - depreciation and amortization) x (1 - 25% tax rate)) divided by (total assets - non-restricted cash - accounts payable - goodwill and other intangible assets that arose from the acquisition of Gates by Blackstone in 2014). | |||||||
The financial measures used to determine Adjusted ROIC are calculated in accordance with U.S. GAAP as presented in the Company’s financial statements, except (i) Adjusted EBITDA is defined in substantially the same manner as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Measures” of the 2021 Annual Report, (ii) the depreciation and amortization deduction excludes the amortization of intangible assets arising from the acquisition of Gates by Blackstone in 2014 and (iii) total assets excludes both income tax receivables and deferred income tax assets. | ||||||||
Relative TSR (50%) | 50% of PRSU value is based on the Company’s three-year relative TSR ranking against companies in the S&P 400 Capital Goods Industry Index (the “Relative TSR Peer Group”). TSR is measured by stock price change and dividends over the performance period as a percentage of the beginning stock price. The beginning and ending stock prices are based on the 20-day trailing averages. | |||||||
The total number of PRSUs that vest at the end of the three year performance period will range from a payout of 0% to a maximum of 200% as determined by measuring actual performance over the performance period for Adjusted ROIC and Relative TSR against the performance goals based on a pre-established scale. Payout for achievement between the performance levels will be determined based on a straight-line interpolation of the applicable payout range rounded to the nearest whole percentage. Payouts are subject to the Named Executive Officer’s continued employment through the end of the applicable performance period and are paid out after the certification of the performance results by the Compensation Committee. The Compensation Committee chose Adjusted ROIC and Relative TSR performance goals that are, in the Compensation Committee’s view, challenging but achievable.
2019-2021 PRSUs. For the PRSUs vested and payable in 2022 (granted in 2019 for a three year performance period from 2019-2021 (the “2019-2021 Performance Period”)), the level of achievement of the two weighted metrics of Adjusted ROIC and Relative TSR resulted in an aggregate payout of 40%, as explained below.
Adjusted ROIC. The PRSU payout level for Adjusted ROIC was based on the three year average during the 2019-2021 Performance Period. The three-year threshold, target and maximum goals were 15%, 20% and 25%, respectively. The Adjusted ROIC achievement was 19.4% for 2019, 15.2% for 2020 and 22.4% for 2021, resulting in a three year average of 19.0% and a payout of 80% of this metric.
Relative TSR. The payout goals for Relative TSR are below. Relative TSR achievement for the three year performance period was 15.41%, which ranks 34 out of 38 of the Relative TSR Peer Group. This performance was below the threshold, resulting in a 0% payout for this metric.
| Relative TSR Percentile Rank | Potential Payout Percentage | |||||||
| 75th Percentile or above | 200% | |||||||
| 50th Percentile | 100% | |||||||
| 25th Percentile | 50% | |||||||
| Below 25th Percentile | - | |||||||
Other Aspects of the Company’s Compensation Programs
Sign-on Bonuses. From time to time, the Company may award sign-on bonuses. Sign-on bonuses are used when necessary to attract highly skilled officers to the Company. Generally, they are used to incentivize candidates to leave their current employers or may be used to offset the loss of unvested compensation they may forfeit as a result of leaving their current employers. During Fiscal 2021, the Company did not award any sign-on bonuses to Named Executive Officers.
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Employment Agreements. At this time, none of the Named Executive Officers have employment agreements in place.
Retirement Benefits. The Company offers the following retirement benefits to eligible U.S.-based employees, including the Named Executive Officers, as specified below. Additional details about the Gates Corporation Supplemental Retirement Plan (the “Supplemental Retirement Plan”), as it applies to the Named Executive Officers, is included in the “2021 Nonqualified Deferred Compensation” section of this Proxy Statement.
| Plan | Description | |||||||
Gates MatchMaker 401(k) Plan........... | A qualified defined contribution retirement benefit available to eligible U.S. employees (as defined in the plan document) that is intended to qualify as a profit sharing plan under Section 401(k) of the Internal Revenue Code of 1986, as amended from time to time (the “Code”). | |||||||
Supplemental Retirement Plan............. | A funded, nonqualified plan that provides the Company’s executives, including Named Executive Officers, benefits similar to the Gates MatchMaker 401(k) Plan but without an employer match or the Code contribution and earnings limitations. | |||||||
The Company offers a defined contribution retirement benefit to all eligible U.S. participants through the Gates MatchMaker 401(k) Plan. The Gates MatchMaker 401(k) Plan provides employees with individual retirement accounts funded by (1) an automatic Gates-paid contribution of 3% of employee eligible earnings, and (2) a Gates-paid match on employee contributions dollar-for-dollar on the first 3% of eligible earnings that the employee contributes. The Code sets maximum limitations on employee contributions for participants as well as limitations on the earnings upon which employee/employer contributions may be made.
The Company currently offers participation in the Supplemental Retirement Plan to specified U.S. executives that include the Named Executive Officers. This plan is a nonqualified deferred compensation plan that provides participants with two benefit opportunities:
1. Non elective employer contribution. A 6% employer contribution (the “Retirement Contribution”) on eligible earnings that exceed Section 401(a)(17) of the Code’s dollar limits.
2. Compensation Deferral Opportunity. Employee participants may defer up to 80% of base salary and 80% of bonus compensation. There is no employer paid matching contribution on these deferrals.
These deferrals are in addition to amounts participants may defer in the Gates MatchMaker 401(k) Plan.
Other Benefits. The Company provides other benefits to the Named Executive Officers that its believes are necessary to compete for executive talent. The additional benefits for the Named Executive Officers generally consist of a parking subsidy, tax preparation services and an executive annual physical examination. Tax gross-ups are provided to executive officers, including the Named Executive Officers, for certain relocation benefits which may be provided in connection with an executive’s commencement of employment with the Company. In certain circumstances, the Company provides Named Executive Officers with limited personal use of an airplane leased by the Company pursuant to a fractional lease program. The value of any personal use (including for any family members who accompany the Named Executive Officer) is imputed as income to the Named Executive Officer, who is fully responsible for any associated tax liability. The specific amounts attributable to the other benefits provided to the Named Executive Officers in 2021 are set forth in the “All Other Compensation” column of the Summary Compensation Table of this Proxy Statement.
The Company also provides other benefits such as medical, dental and short-term disability coverage to each Named Executive Officer, which are identical to the benefits provided to all other eligible U.S.-based employees. Executive officers, including the Named Executive Officers, also receive enhanced benefits that are not available to other employees, such as relocation assistance and enhanced life, accidental death and dismemberment (“AD&D”) and long-term disability insurance benefits. Specifically, all Named Executive Officers were eligible for enhanced life and AD&D insurance benefits in the following amounts in 2021: 3x base salary up to $1,000,000 (for Mr. Pitstick), 3x base salary up to $2,000,000 (for Messrs. Gawronski, Mallard, and Lifsey) and 3x base salary up to $3,000,000 (for Mr. Jurek). In addition, all Named Executive Officers were eligible for enhanced long-term disability insurance benefits of 66.7% of their salary (up to $20,000/month). An individual disability insurance plan is offered to executives with an income of over $360,000, including the Named Executive Officers, to cover annual income in excess of $360,000. The plan provides an additional $10,000 of monthly
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benefit above the group disability plan. The Company also provides unlimited flexible time off and paid holidays to the Named Executive Officers.
Change in Control and Severance Benefits. The Board believes that executives are better able to perform their duties with respect to any potential proposed corporate transaction without concern for the impact of the transaction on their individual employment with carefully structured change in control and severance benefits. In addition, the Board believes that the interests of the Company’s shareholders are better protected and enhanced by providing greater certainty regarding executive pay obligations in the context of planning and negotiating any potential corporate transactions. Accordingly, in connection with the IPO, the Company adopted the Executive Severance Plan and the Executive Change in Control Plan for certain executives. Executives are not entitled to payments under the Executive Severance Plan if they are entitled to receive payment under the Executive Change in Control Plan discussed below. For information regarding these plans, including the participants, please see “Potential Payments upon Termination or Change in Control.” Prior to 2020, the Company provided limited single-trigger change in control benefits to certain Named Executive Officers in their Options and RSU award agreements. Beginning in 2020, the Options and RSU award agreements provide for double trigger vesting based upon the occurrence of both a change in control and a qualified termination. The terms of the Company’s Supplemental Retirement Plan also provide for early distribution upon a change in control.
Clawback Policy. The Company has adopted a clawback policy for incentive compensation. Under the policy, if the Compensation Committee determines that cash or equity incentive compensation of its current and former Section 16 officers (or any other current and former employee designated by the Board or the Compensation Committee) was overpaid, in whole or in part, as a result of a restatement of the reported financial results of the Company or any of its segments due to material non-compliance with financial reporting requirements (unless due to a change in accounting policy or applicable law), and such restatement was caused by or contributed to, directly or indirectly, such employee’s fraud, willful misconduct or gross negligence, then the Compensation Committee will determine, in its discretion, whether to seek to recover or cancel any overpayment of incentive compensation paid or awarded based on the inaccurate financial information or restated results. The clawback policy and the 2018 Omnibus Incentive Plan also provide that if a covered person engages in any detrimental activity (as defined in the 2018 Omnibus Incentive Plan) as determined by the Compensation Committee, the Compensation Committee may, in its sole discretion, provide for one or more of the following: (i) cancellation of any or all of such covered person’s outstanding awards; or (ii) forfeiture by the covered person of any gain realized on the vesting or exercise of awards, and prompt repayment of any such gain to the Company.
Executive Stock Ownership Guidelines. To better align the financial interests of the Company’s Named Executive Officers and its shareholders, the Company has executive stock ownership guidelines. The Company, along with the Compensation Committee, reviews the executive ownership annually as of the annual measurement date, February 1, 2021. Any officer who does not meet the threshold is required to retain 50% of stock acquired through the exercise or vesting of equity awards made by the Company. In calculating the ownership, the Company includes direct and certain indirect ownership, unvested time-based vesting restricted stock units and shares underlying vested but unexercised stock options (based on the excess of the market price of the stock over the exercise price). The Company does not include unvested stock options or unvested performance-based restricted stock units.
Currently, each Named Executive Officer is expected to own the Company’s ordinary shares in the amounts listed below. As of the annual measurement date, all of the then-employed Named Executive Officers either met the applicable ownership guidelines or were in compliance with the equity retention mandate.
Chief Executive Officer | 6 times base salary | ||||||||||
Other Named Executive Officers | 3 times base salary | ||||||||||
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COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the 2021 Annual Report.
Submitted by the Compensation Committee of the Board of Directors:
Julia C. Kahr, Chair
Terry Klebe
Neil P. Simpkins
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CEO PAY RATIO
The following table sets forth the ratio of the Chief Executive Officer’s total compensation to that of the Company’s median employee for Fiscal 2021.
CEO total annual compensation | $ | 8,772,300 | ||||||
Median employee total annual compensation | $ | 39,583 | ||||||
Ratio | 222 to 1 | |||||||
The SEC rules for identifying the median employee and calculating the pay ratio allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee population and compensation practices. As a result, the pay ratio reported above may not be comparable to the pay ratio reported by other companies, as other companies may have utilized different methodologies and have different employment and compensation practices. The Company believes the pay ratio above is a reasonable estimate calculated in a manner consistent with the SEC rules.
To calculate the 2021 CEO pay ratio, the Company used the same median employee it used for purposes of calculating the 2019 and 2020 CEO pay ratio, as there has been no material change in the Company’s employee population, employee compensation programs or the median employee compensation, that it believes would significantly impact the CEO pay ratio. This median employee is an hourly employee located in Canada. The methodology and material assumptions, adjustments and estimates used to identify the median employee are set forth in the Company’s proxy statement filed with the SEC on April 1, 2020. The Company calculated the median employee’s total annual compensation in the same manner as it calculated the Chief Executive Officer’s total annual compensation in the Summary Compensation Table in this Proxy Statement.
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COMPENSATION TABLES
2021 Summary Compensation Table
The following table sets forth the compensation for the 2019, 2020 and 2021 fiscal years for Mr. Jurek, Mr. Gawronski and Mr. Lifsey, the 2020 and 2021 fiscal years for Mr. Mallard, and the 2021 fiscal year for Mr. Pitstick. Mr. Mallard and Mr. Pitstick were not named executive officers prior to the 2020 fiscal year and the 2021 fiscal year, respectively, and therefore no compensation information for such prior years appears in this table for these individuals.
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation(4)($) | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Ivo Jurek | 2021 | $ | 1,051,392 | $ | — | $ | 4,204,468 | $ | 1,240,104 | $ | 2,058,713 | $ | — | $ | 217,623 | $ | 8,772,300 | |||||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | 2020 | $ | 1,063,962 | $ | 1,545,000 | $ | 3,827,542 | $ | 1,158,749 | $ | — | $ | — | $ | 84,867 | $ | 7,680,120 | |||||||||||||||||||||||||||||||||||||||
| 2019 | $ | 989,635 | $ | — | $ | 3,350,070 | $ | 5,982,476 | $ | — | $ | — | $ | 164,509 | $ | 10,486,690 | ||||||||||||||||||||||||||||||||||||||||
| L. Brooks Mallard | 2021 | $ | 561,423 | $ | — | $ | 788,522 | $ | 353,326 | $ | 761,063 | $ | — | $ | 75,349 | $ | 2,539,683 | |||||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2020 | $ | 465,385 | $ | 568,852 | $ | 745,450 | $ | 344,849 | $ | — | $ | — | $ | 102,331 | $ | 2,226,867 | |||||||||||||||||||||||||||||||||||||||
| Grant Gawronski | 2021 | $ | 681,440 | $ | — | $ | 1,208,953 | $ | 541,718 | $ | 923,757 | $ | — | $ | 90,821 | $ | 3,446,689 | |||||||||||||||||||||||||||||||||||||||
| Chief Commercial Officer | 2020 | $ | 688,997 | $ | 634,196 | $ | 1,156,005 | $ | 528,715 | $ | — | $ | — | $ | 51,461 | $ | 3,059,374 | |||||||||||||||||||||||||||||||||||||||
| 2019 | $ | 636,519 | $ | — | $ | 1,152,394 | $ | 509,972 | $ | — | $ | — | $ | 74,818 | $ | 2,373,703 | ||||||||||||||||||||||||||||||||||||||||
| Walt Lifsey | 2021 | $ | 683,131 | $ | — | $ | 1,211,973 | $ | 543,063 | $ | 891,750 | $ | — | $ | 96,582 | $ | 3,426,499 | |||||||||||||||||||||||||||||||||||||||
| Chief Operating Officer | 2020 | $ | 690,706 | $ | 669,231 | $ | 1,158,882 | $ | 530,030 | $ | — | $ | — | $ | 56,884 | $ | 3,105,733 | |||||||||||||||||||||||||||||||||||||||
| 2019 | $ | 639,703 | $ | — | $ | 1,155,267 | $ | 511,237 | $ | — | $ | — | $ | 83,436 | $ | 2,389,643 | ||||||||||||||||||||||||||||||||||||||||
| Tom Pitstick | 2021 | $ | 444,528 | $ | — | $ | 343,578 | $ | 153,966 | $ | 433,415 | $ | — | $ | 56,417 | $ | 1,431,904 | |||||||||||||||||||||||||||||||||||||||
| Chief Marketing Officer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)The amounts reported in the “Salary” column consist of base salary earned in Fiscal 2021. The following base salary increases were effective February 26, 2021: Mr. Jurek (from $1,030,000 to $1,055,750); Mr. Mallard (from $550,000 to $563,750); Mr. Gawronski (from $667,575 to $684,264); Mr. Lifsey (from $669,231 to $685,962); and Mr. Pitstick (unchanged at $444,528, as he received an increase following his October 2020 promotion to Chief Marketing Officer and Senior Vice President of Strategic Planning).
(2)The amounts reported in the “Stock Awards” and “Option Awards” columns for 2021 represent the grant date fair value of the time-based RSUs, PRSUs, and time-based options granted under the 2018 Omnibus Incentive Plan calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“Topic 718”). For information regarding the assumptions used in determining the fair value of these awards, please refer to Note 18, Share-based Compensation, of the audited consolidated financial statements included in the Annual Report. Where the number of shares ultimately issued depends on a performance or market condition, the target number of awards is used for the purpose of the above table. With respect to the PRSUs, 50% vest subject to attainment of certain levels of Adjusted ROIC and 50% vest subject to attainment of a certain Relative TSR. The grant date fair value of the shares that vest according to Adjusted ROIC was computed in accordance with Topic 718 based upon the probable outcome of the performance conditions as of the grant date. As the shares that vest according to Relative TSR are subject to market conditions as defined under Topic 718 and are not subject to performance conditions as defined under Topic 718, they have no maximum grant date fair values that differ from the grant date fair values presented in the table. Assuming the highest level of performance is achieved with respect to the Adjusted ROIC awards, the grant date fair value of the stock awards would be: Mr. Jurek — $5,444,968; Mr. Mallard — $970,607; Mr. Gawronski — $1,488,118; Mr. Lifsey — $1,491,843; and Mr. Pitstick — $422,913.
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(3)The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent amounts earned by Named Executive Officers under the Annual Plan. The terms of the Annual Plan are described more fully above in the “Elements of Compensation — Annual Plan.”
(4)The amounts reported in the “All Other Compensation” column for 2021 reflect the sum of: (i) the amounts contributed by Gates to the Gates MatchMaker 401(k) Plan and the Supplemental Retirement Plan, which are calculated on the same basis for all participants, including the Named Executive Officers, and (ii) the cost of all other executive benefits that are required to be reported by SEC rules. The material provisions of the Gates MatchMaker 401(k) Plan and the Supplemental Retirement Plan are described in the “2021 Nonqualified Deferred Compensation” section of this Proxy Statement. Please see the following table for further information on the aggregate incremental cost of these benefits.
| Name | Company Contributions to Gates MatchMaker 401(k)(a) | Company Contributions to Gates Executive Supplemental Retirement Plan(b) | Other Benefits(c) | Total | ||||||||||||||||||||||
| I. Jurek | $17,400 | $147,654 | $52,569 | $217,623 | ||||||||||||||||||||||
| L. Mallard | $17,400 | $44,417 | $13,532 | $75,349 | ||||||||||||||||||||||
| G. Gawronski | $17,400 | $61,540 | $11,881 | $90,821 | ||||||||||||||||||||||
| W. Lifsey | $17,400 | $63,742 | $15,440 | $96,582 | ||||||||||||||||||||||
| T. Pitstick | $17,400 | $31,276 | $7,741 | $56,417 | ||||||||||||||||||||||
(a)Company Contributions to Gates MatchMaker 401(k) Plan. Gates makes matching contributions of 100% on up to 3% of eligible earnings deferred by all eligible participants, including Named Executive Officers, in accordance with the Gates MatchMaker 401(k) Plan. Gates also makes a non-elective contribution to all eligible participants, including Named Executive Officers, in an amount equal to 3% of eligible earnings, subject to Code limitations.
(b)Company Contributions to Gates Executive Supplemental Retirement Plan. Gates makes a retirement contribution of 6% of eligible compensation on behalf of all eligible participants, including the Named Executive Officers, under the Supplemental Retirement Plan for eligible compensation that exceeds Section 401(a)(17) of the Code.
(c)Other Benefits. Gates provided certain other benefits to Named Executive Officers. The aggregate amount reported in the Other Benefits column consists of the following: For Mr. Jurek, (i) parking subsidy of $3,900, (ii) tax preparation services of $3,860, (iii) enhanced life insurance premium of $4,716, (iv) enhanced AD&D and long-term disability insurance premium of $13,320, and (v) personal use of an airplane leased by the Company pursuant to a fractional lease program of $26,773 This aggregate incremental cost was calculated based on the variable operating costs to the Company for personal usage, which includes fees per flight hour, fuel charges and any additional usage or service fees. Mr. Jurek was accompanied by family members, but there was no aggregate incremental cost associated with these additional passengers. Because the airplane is used primarily for business travel, this methodology excludes costs that do not change based on usage, such as the annual lease fee. For Mr. Mallard, (i) parking subsidy of $3,900, (ii) enhanced life insurance premium of $2,594, and (iii) enhanced AD&D and long-term disability insurance premium of $7,038. For Mr. Gawronski, (i) enhanced life insurance premium of $3,144, and (ii) enhanced AD&D and long-term disability insurance premium of $8,737. For Mr. Lifsey, (i) parking subsidy of $3,900, (ii) enhanced life insurance premium of $3,144, and (iii) enhanced AD&D and long-term disability insurance premium of $8,396. For Mr. Pitstick, (i) parking subsidy of $1,950, (ii) enhanced life insurance premiums of $1,572, and (iii) enhanced AD&D and long-term disability insurance premium of $4,219.
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2021 Grants of Plan-Based Awards
The following table summarizes all grants of plan-based awards to the Named Executive Officers in Fiscal 2021:
| Estimated Future Payouts under non-equity incentive plan awards ($) | Estimated Future Payouts under Equity incentive plan awards (#) | All other stock awards: number of shares of stock units (#) | All other option awards: number of securities underlying options (#) | Exercise or base price of option awards ($/sh) | Grant date fair value of stock and option awards ($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Award Type | Grant Date | Threshold | Target | Max | Threshold | Target | Max | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| I Jurek | Annual Plan(1) | — | $ | 158,363 | $ | 1,583,625 | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU(2) | 2/26/2021 | 41,350 | 165,400 | 330,800 | $ | 2,963,968 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(3) | 2/26/2021 | 82,700 | $ | 1,240,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(4) | 2/26/2021 | 148,950 | $15.00 | $ | 992,007 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(5) | 2/26/2021 | 39,009 | $16.50 | $ | 248,097 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| L. Mallard | Annual Plan(1) | — | $ | 56,375 | $ | 563,750 | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU(2) | 2/26/2021 | 6,070 | 24,278 | 48,556 | $ | 435,062 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(3) | 2/26/2021 | 23,564 | $ | 353,460 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(4) | 2/26/2021 | 53,052 | $15.00 | $ | 353,326 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G. Gawronski | Annual Plan(1) | — | $ | 68,426 | $ | 684,264 | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU(2) | 2/26/2021 | 9,306 | 37,222 | 74,444 | $ | 667,018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(3) | 2/26/2021 | 36,129 | $ | 541,935 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(4) | 2/26/2021 | 81,339 | $15.00 | $ | 541,718 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| W. Lifsey | Annual Plan(1) | — | $ | 68,596 | $ | 685,962 | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU(2) | 2/26/2021 | 9,329 | 37,316 | 74,632 | $ | 668,703 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(3) | 2/26/2021 | 36,218 | $ | 543,270 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(4) | 2/26/2021 | 81,541 | $15.00 | $ | 543,063 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| T. Pitstick | Annual Plan(1) | — | $ | 33,340 | $ | 333,396 | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU(2) | 2/26/2021 | 2,645 | 10,578 | 21,156 | $ | 189,558 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(3) | 2/26/2021 | 10,268 | $ | 154,020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(4) | 2/26/2021 | 23,118 | $15.00 | $ | 153,966 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Represents the cash-based award opportunity range under the Annual Plan, the terms of which are summarized under “Elements of Compensation — Annual Plan” above. For purposes of this table and threshold level disclosure, the Company assumed that the lowest weighted of the three performance measures achieved the threshold level of attainment (in other words, 10% of the target award was earned) and the Individual Performance Factor was set at 100%. The calculation uses each Named Executive Officer’s base salary as of December 31, 2021. Please refer to the “2021 Summary Compensation Table” for the actual cash-based award earned under the Annual Plan by each Named Executive Officer for 2021.
(2)Represents the threshold, target and maximum payout shares of the PRSUs granted under the 2018 Omnibus Incentive Plan in 2021. Threshold payout of shares is calculated assuming threshold levels of attainment of 50% for the Adjusted ROIC measure. The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions. Please refer to “Elements of Compensation — Long-Term Incentive” above. The grant date fair value of the PRSUs for the February 26, 2021 award was calculated in accordance with Topic 718 based on target, the probable outcome of the performance conditions.
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(3)Represents RSUs granted in 2021 under the 2018 Omnibus Incentive Plan. The grant date fair value of the RSUs for the February 26, 2021 award was the closing price on the date of the grant.
(4)Represents Options granted in 2021 under the 2018 Omnibus Incentive Plan. The grant date fair value of the Options for the February 26, 2021 award was calculated in accordance with Topic 718 using a Black-Scholes valuation model.
(5)Represents premium time-based stock options (“Premium Options”) granted to the Chief Executive Officer in 2021 under the 2018 Omnibus Incentive Plan. The grant date fair value of the Premium Options for the February 26, 2021 award was calculated in accordance with Topic 718 using a Monte Carlo valuation method. These premium-priced options vest equally on the third, fourth and fifth anniversary of the grant date.
Outstanding Equity Awards at January 1, 2022
The following table provides information regarding outstanding equity awards held by each Named Executive Officer as of January 1, 2022.
| Option Awards (*) | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant date and award type | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity Incentive Plan Awards: Number of securities underlying unexercised unearned options (#)(2) | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#)(3) | Market value of shares or units of stock that have not vested ($)(4) | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(5) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| I. Jurek | 5/18/2015 Tier I(1) | 1,017,239 | — | $6.56 | 5/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/18/2015 Tier II | 1,017,239 | $6.56 | 5/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/18/2015 Tier III | 1,017,239 | $6.56 | 5/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/18/2015 Tier IV | 1,017,239 | $9.84 | 5/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/2/2017 Tier I(1) | 108,397 | 27,099 | $7.87 | 5/2/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 Tier II | 135,496 | $7.87 | 5/2/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 Tier III | 135,496 | $7.87 | 5/2/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 Tier IV | 135,496 | $11.80 | 5/2/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2019 Options(7) | 168,081 | 84,041 | $16.46 | 2/22/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2019 Options(8) | — | 796,460 | $19.00 | 2/22/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 RSU | 30,073 | $ | 478,461 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 PRSU | 24,167 | $ | 384,497 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2020 Options(7) | 80,468 | 160,938 | $12.60 | 2/21/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 RSU | 61,310 | $ | 975,442 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 PRSU | 47,821 | $ | 760,832 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2021 Options(7) | — | 148,950 | $15.00 | 2/26/2031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2021 Options(9) | — | 39,009 | $16.50 | 2/26/2031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 RSU | 82,700 | $ | 1,315,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 PRSU | 82,700 | $ | 1,315,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| L. Mallard | 2/24/2020 Options(7) | 25,431 | 50,863 | $11.76 | 2/24/2030 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/24/2020 RSU | 19,549 | $ | 311,025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/24/2020 PRSU | 7,855 | $ | 124,973 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2021 Options(7) | — | 53,052 | $15.00 | 2/26/2031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 RSU | 23,564 | $ | 374,903 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 PRSU | 12,139 | $ | 193,131 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| G. Gawronski | 3/9/2018 Options(10) | 165,000 | 55,000 | $17.72 | 3/9/2028 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2019 Options(7) | 57,819 | 28,911 | $16.46 | 2/22/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Option Awards (*) | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant date and award type | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity Incentive Plan Awards: Number of securities underlying unexercised unearned options (#)(2) | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#)(3) | Market value of shares or units of stock that have not vested ($)(4) | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(5) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 RSU | 10,346 | $ | 164,605 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 PRSU | 8,313 | $ | 132,260 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2020 Options(7) | 36,716 | 73,433 | $12.60 | 2/21/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 RSU | 27,975 | $ | 445,082 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 PRSU | 11,240 | $ | 178,828 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2021 Options(7) | — | 81,339 | $15.00 | 2/26/2031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 RSU | 36,129 | $ | 574,812 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 PRSU | 18,611 | $ | 296,101 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| W. Lifsey | 8/24/2015 Tier I(1) | 250,668 | — | $6.56 | 8/24/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/24/2015 Tier II | 250,668 | $6.56 | 8/24/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/24/2015 Tier III | 250,668 | $6.56 | 8/24/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/24/2015 Tier IV | 250,668 | $9.84 | 8/24/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/12/2016 Tier I(1) | 84,685 | — | $6.56 | 5/12/2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/12/2016 Tier II | 84,685 | $6.56 | 5/12/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/12/2016 Tier III | 84,685 | $6.56 | 5/12/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/12/2016 Tier IV | 84,685 | $9.84 | 5/12/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2019 Options(7) | 57,963 | 28,982 | $16.46 | 2/22/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 RSU | 10,371 | $ | 165,003 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 PRSU | 8,334 | $ | 132,594 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2020 Options(7) | 36,807 | 73,616 | $12.60 | 2/21/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 RSU | 28,044 | $ | 446,180 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 PRSU | 11,268 | $ | 179,274 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2021 Options(7) | — | 81,541 | $15.00 | 2/26/2031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 RSU | 36,218 | $ | 576,228 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 PRSU | 18,658 | $ | 296,849 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| T. Pitstick | 1/11/2016 Tier I(1) | 84,685 | — | $6.56 | 1/11/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/11/2016 Tier II | 84,685 | $6.56 | 1/11/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/11/2016 Tier III | 84,685 | $6.56 | 1/11/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/11/2016 Tier IV | 84,685 | $9.84 | 1/11/2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5/2/2017 Tier I(1) | 28,579 | 7,145 | $7.87 | 5/2/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 Tier II | 35,724 | $7.87 | 5/2/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 Tier III | 35,724 | $7.87 | 5/2/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 Tier IV | 35,724 | $11.80 | 5/2/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/22/2019 Options(7) | 15,463 | 7,732 | $16.46 | 2/22/2029 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 RSU | 2,767 | $ | 44,023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 PRSU | 2,223 | $ | 35,368 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/21/2020 Options(7) | 8,777 | 17,557 | $12.60 | 2/21/2030 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 RSU | 6,689 | $ | 106,422 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 PRSU | 2,687 | $ | 42,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2/26/2021 Options(7) | — | 23,118 | $15.00 | 2/26/2031 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Option Awards (*) | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant date and award type | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity Incentive Plan Awards: Number of securities underlying unexercised unearned options (#)(2) | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#)(3) | Market value of shares or units of stock that have not vested ($)(4) | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(5) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 RSU | 10,268 | $ | 163,364 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 PRSU | 5,289 | $ | 84,148 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(*)The Company has a number of awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with the initial public offering in January 2018. No new awards have been granted under this plan since 2017. The options are split equally into four tiers, each with specific vesting conditions. Tier I options vested evenly over 5 years from the grant date, subject to the participant’s continuing to provide service to Gates on the vesting date. Tier II, III and IV options vest on achievement of specified investment returns by Blackstone at the time of a defined liquidity event, which is also subject to the participant’s continued provision of service to Gates on the vesting date. The performance conditions associated with Tiers II, III and IV must be achieved on or prior to July 3, 2022 in order for vesting to occur. All the options expire ten years after the date of grant.
(1)Represents Tier I time-vesting stock options.
(2)Represents Tier II, III and IV exit-vesting stock options.
(3)The RSUs vest in substantially equal annual installments on each of the first, second and third anniversaries of the grant date.
(4)Reflects the aggregate market value of the unvested time-vesting RSUs, based on a price of $15.91 per ordinary share, which was the share price of the Company’s ordinary shares on December 31, 2021, the last trading day of Fiscal 2021.
(5)The PRSUs vest on the date the Compensation Committee certifies the achievement of the performance measures following the three-year performance period, with 50% subject to attainment of certain levels of Adjusted ROIC and 50% subject to attainment of Relative TSR. For 2019 and 2020 PRSU awards, the amounts shown in this column represent threshold payout shares of the outstanding PRSUs assuming both an attainment of 0.1% above threshold for the Adjusted ROIC measure and a threshold 50% payout under the TSR measure. For 2021 PRSU awards ,the amounts shown in this column represent threshold payout shares of the outstanding PRSUs assuming threshold levels of attainment of 50% under both measures. The number of shares ultimately issued, which could be zero or greater than the number presented above, will be based on achieving specific performance conditions. Please refer to “Elements of Compensation — Long-Term Incentive” above. For the PRSUs granted on February 22, 2019, the Compensation Committee certified the Company’s achievement of 80% of the Adjusted ROIC measure and 0% of the Relative TSR metric for the 2019 -2021 performance period, resulting in a vesting of 40% of the grant amount effective January 28, 2022.
(6)Represent the aggregate market value of the threshold payout shares of the unvested PRSUs, based on a price of $15.91 per ordinary share, which was the share price of the Company’s ordinary shares on December 31, 2021, the last trading day of Fiscal 2021.
(7)Represents time-based stock options granted under the 2018 Omnibus Incentive Plan. These options vest in substantially equal annual installments on the first three anniversaries of the grant date.
(8)Represents premium- priced time-based stock options granted to the Chief Executive Officer under the 2018 Omnibus Incentive Plan. These premium-priced options vest equally on the third, fourth and fifth anniversary of the grant date.
(9)Represents premium- priced time-based stock options granted to the Chief Executive Officer under the 2018 Omnibus Incentive Plan. These premium-priced options vest in substantially equal annual installments on the first three anniversaries of the grant date.
(10)Represents time-based stock options granted to Mr. Gawronski. The options vest in substantially equal annual installments on the first four anniversaries of the grant date.
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2021 Option Exercises and Stock Vested
The following table provides information regarding the Named Executive Officers’ option exercises and stock that vested during 2021.
| Option Awards | Stock Awards | |||||||||||||||||||||||||
| Name | Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Shares or Units Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||||
| I. Jurek | — | $ | — | 60,727 | $ | 1,031,752 | ||||||||||||||||||||
| L. Mallard | — | $ | — | 9,774 | $ | 174,661 | ||||||||||||||||||||
| G. Gawronski | — | $ | — | 24,331 | $ | 413,384 | ||||||||||||||||||||
| W. Lifsey | — | $ | — | 24,392 | $ | 414,420 | ||||||||||||||||||||
| T. Pitstick | — | $ | — | 6,110 | $ | 103,809 | ||||||||||||||||||||
(1)Based on a share price of $17.87 for Mr. Mallard, and $16.99 for all other Named Executive Officers, which was the closing price of the Company’s ordinary shares on the trading day prior to the vesting date.
2021 Nonqualified Deferred Compensation
The Company offers to its executives, including all of the Named Executive Officers, the opportunity to participate in the Supplemental Retirement Plan. The table below provides information as of January 1, 2022, for those Named Executive Officers who were eligible to participate in this plan.
| Name | Executive Contributions in Last FY(1) | Registrant Contributions in Last FY(2) | Aggregate Earnings (Losses) in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(4) | |||||||||||||||||||||||||||
| I. Jurek | $ | — | $ | 147,654 | $ | 167,558 | $ | — | $ | 1,528,517 | ||||||||||||||||||||||
| L. Mallard | $ | — | $ | 44,416 | $ | 1 | $ | — | $ | 55,240 | ||||||||||||||||||||||
| G. Gawronski | $ | 312,716 | $ | 61,540 | $ | 49,151 | $ | — | $ | 854,155 | ||||||||||||||||||||||
| W. Lifsey | $ | — | $ | 63,742 | $ | 33,651 | $ | — | $ | 389,889 | ||||||||||||||||||||||
| T. Pitstick | $ | — | $ | 31,276 | $ | 18,013 | $ | — | $ | 164,764 | ||||||||||||||||||||||
(1)This column reflects 2021 base salary and/or bonus earned by the Named Executive Officers with respect to Fiscal 2021 that have been deferred on a voluntary basis. Mr. Gawronski elected to defer 12% of his base salary and 25% of his 2021 bonus. The amounts reported in this column are included in the 2021 Summary Compensation Table as either “Salary” or “Bonus” as appropriate.
(2)This column contains contributions by us with respect to Fiscal 2021 under the Supplemental Retirement Plan, which provides for benefits in excess of amounts permitted to be contributed under the Gates MatchMaker 401(k) Plan as a result of Section 401(a)(17) of the Code. As a result, participants are eligible to receive a Retirement Contribution paid by the Company in an amount equal to 6% of eligible compensation that exceeds Section 401(a)(17) of the Code, which is earned in 2021 and paid in the first quarter of 2022. These amounts are included in the “All Other Compensation” column of the Summary Compensation Table.
(3)Because amounts included in this column do not include above-market or preferential earnings, none of these amounts are included under the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the Summary Compensation Table.
(4)Balances at the end of Fiscal 2021 consist of (1) executive contributions, which reflect salary, bonus, and equity compensation deferrals made by the Named Executive Officers over time, beginning when they first became eligible to participate in the Supplemental Retirement Plan, plus (2) the Company’s contributions, plus (3) earnings and losses credited on all deferrals, less (4) pre-retirement distributions, if any, taken by the Named Executive Officer since they began participating in the Supplemental Retirement Plan. Of the amounts reported in this column, $46,738, $10,823, $24,240, and $24,342 were reported as compensation to Messrs. Jurek, Mallard, Gawronski, and Lifsey respectively, in the Summary Compensation Table for 2020, and $125,927, $48,697, and $55,620 were reported as compensation to Messrs. Jurek, Gawronski, and Lifsey for 2019.
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Narrative to 2021 Nonqualified Deferred Compensation Table
The Company currently offers participation in the Supplemental Retirement Plan to specified U.S. employees including the Named Executive Officers. This plan is a nonqualified deferred compensation plan that provides participants with two benefit opportunities: a Retirement Contribution and a Compensation Deferral Opportunity, as described under the heading “Other Aspects of the Company’s Compensation Programs — Retirement Benefits.”
These deferrals are in addition to amounts participants may defer in the Gates MatchMaker 401(k) Plan. Each Named Executive Officer who participates in the deferral feature of the Supplemental Retirement Plan is 100% vested in both elective deferrals and employer contributions at all times. The amounts deferred are credited to accounts selected by the Named Executive Officer that mirror the investment alternatives available in the Gates MatchMaker 401(k) Plan. Participants are permitted to select the investment alternatives in which they want their accounts to be deemed to be invested and are credited with earnings and/or losses based on the performance of the relevant investments. Participants are able to periodically change the investment elections for their accounts.
A Named Executive Officer’s vested account will commence to be paid at the earliest to occur of the following events: (1) the specified date elected by the participant (provided the date specified is at least two years from the end of the Supplemental Retirement Plan year in which the contribution to the Supplemental Retirement Plan is made); (2) the participant’s Disability (as defined in the Supplemental Retirement Plan); (3) the participant’s termination of employment; (4) the participant’s death; or (5) upon a Change in Control (as defined in the Supplemental Retirement Plan).
If the distribution is made on account of a termination of employment (other than death), the vested account will be distributed in accordance with the form of distribution as elected (as a single lump-sum or in annual installments over two, three, four or five years with the first installment made as soon as possible after the first day of the seventh month following the termination of employment). If a distribution is made on account of death, the participant’s vested account will be distributed to his or her beneficiary in a single lump-sum as soon as practicable following the participant’s death, regardless of the form of benefit elected, with the distribution made as soon as possible on the first day of the month following the payment event. If a distribution is made on account of a specified date or Change in Control, the distribution will be made or begin as soon as is reasonably practical, but in no event later than the last day of the calendar year that such event occurred.
Potential Payments upon a Termination or Change in Control
Severance and other benefits that are payable upon a termination of employment or upon a change in control under the Executive Severance Plan and Change in Control Plan are described below. The table following this narrative discussion summarizes the amounts that would have been payable upon termination or a change in control under certain circumstances to Named Executive Officers, assuming that their employment terminated on January 1, 2022.
Executive Severance Plan. In connection with the IPO in 2018, the Company adopted the Executive Severance Plan. The Executive Severance Plan provides for severance payments upon certain terminations of employment to its Named Executive Officers and other executive officers who are expected to make substantial contributions to its success and thereby provide for stability and continuity of operations. All of the Company’s Named Executive Officers participate in the Executive Severance Plan pursuant to individual participation agreements.
The Executive Severance Plan provides that, if the Company terminates the employment of a Named Executive Officer for any reason other than “cause”, death or disability, or if the Named Executive Officer voluntarily terminates as a result of “constructive termination,” then the Named Executive Officer will be entitled to receive:
•salary continuation payments in an amount equal to (a) the sum of two times base salary and two times previous year bonus for Mr. Jurek, (b) two times base salary for Mr. Mallard, Mr. Gawronski and Mr. Lifsey, paid in substantially equal installments over a period of 24 months, or (c) one times base salary for Mr. Pitstick, paid in substantially equal installments over a period of 12 months.
•the Named Executive Officer’s annual bonus under the Annual Plan as earned (without the adjustment for an individual performance factor) for the year in which the separation occurs (pro-rated for days of service during the fiscal year), payable concurrently with cash bonus payments to other employees under the Annual Plan;
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•cash payments in an amount equal to the total amount of Gates’ portion of the monthly insurance premiums for participation in the health and dental benefit programs in which the Named Executive Officer participated immediately prior to separation, payable monthly for each month of the welfare continuation period, which is equal to (a) 24 months for Mr. Jurek, Mr. Mallard, Mr. Gawronski and Mr. Lifsey, and (b) 12 months for Mr. Pitstick.
•reimbursement for reasonable outplacement services that are directly related to the Named Executive Officer’s termination and incurred only during a six-consecutive month period that ends within or with the 12-month period following the termination of his employment.
For these purposes, “cause” and “constructive termination” have the meanings ascribed to such terms in the Executive Severance Plan.
The Executive Severance Plan contains a “best-of-net” provision. With a “best-of-net” provision, if any of the participants is subject to an excise tax under Code Section 280G and Code Section 4999, then the amount of severance the participant receives may be reduced so that the excise tax does not apply; however, such reduction will only occur if it results in the receipt of a greater after-tax severance than would otherwise be provided.
Named Executive Officers are not entitled to payments under the Executive Severance Plan if they are entitled to receive payment under the Executive Change in Control Plan discussed below. In addition, in order to receive payments under the Executive Severance Plan, the Named Executive Officer must execute and not revoke a release of claims against the Company and continue to comply with confidentiality, non-compete, non-solicitation and non-disparagement covenants during the executive’s employment and for the one-year period following any termination of employment (or such longer period as the Named Executive Officer is eligible to receive severance payments from us).
Executive Change in Control Plan. In connection with the IPO in 2018, the Company adopted the Executive Change in Control Plan in which the Named Executive Officers, excluding Mr. Pitstick, participate pursuant to individual participation agreements. The Executive Change in Control Plan serves to encourage these key executives to carry out their duties and provide continuity of management in the event of a “change in control” of Gates.
If a change in control occurs and the eligible Named Executive Officer’s employment is terminated by us or a successor for reasons other than “cause” or is terminated voluntarily by the individual for “constructive termination,” in each case within the period beginning 90 days prior to the consummation of a change in control and ending on the second anniversary of the date of such change in control, then the Executive Change in Control Plan generally provides that the individual would be entitled to receive:
•a lump-sum payment in the amount of two and one-half times base salary plus target bonus amount (for Mr. Jurek) and one and one-half times base salary plus target bonus amount (for the other participating Named Executive Officers);
•a lump-sum payment equal to the Named Executive Officer’s target annual bonus amount in effect prior to the change in control (pro-rated for days of service during the fiscal year), plus any earned and unpaid bonus from the prior fiscal year.
•cash payments in an amount equal to the total amount of the monthly insurance premiums for participation in the health and dental benefit programs as well as the monthly premiums for the life and long-term disability insurance benefit programs in which the Named Executive Officer participated in immediately prior to separation, payable monthly for each month of the welfare continuation period, which is equal to 30 months for Mr. Jurek and 24 months for each other participating Named Executive Officers; and
•reimbursement for reasonable outplacement services that are directly related to the Named Executive Officer’s termination and incurred only during a six-consecutive month period that ends within or with the 12-month period following the termination of his employment.
For these purposes, “change in control”, “cause” and “constructive termination” have the meanings ascribed to such terms in the Executive Change in Control Plan.
The Executive Change in Control Plan contains a “best-of-net” provision. With a “best-of-net” provision, if any of the participants is subject to an excise tax under Code Section 280G and Code Section 4999, then the amount of severance the participant receives may be reduced so that the excise tax does not apply; however, such reduction will only occur if it results in the receipt of a greater after-tax severance than would otherwise be provided.
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To the extent a payment or benefit that is paid or provided under the Executive Change in Control Plan would also be paid or provided under the terms of another plan, program, agreement, arrangement or legal requirement, the participating Named Executive Officer would be entitled to payment under the Executive Change in Control Plan or such other applicable plan, program, agreement, arrangement or legal requirement, whichever provides for greater benefits, but would not be entitled to benefits under both the Executive Change in Control Plan and such other plan, program, agreement, arrangement or legal requirement.
In addition, in order to receive payment and benefits under the Executive Change in Control Plan, the participating Named Executive Officer must execute and not revoke a release of claims against the Company and continue to comply with confidentiality, non-compete and non-solicitation covenants during the executive’s employment and for the one-year period following any termination of employment (or such longer period as the Named Executive Officer is eligible to receive severance payments from us).
Neither plan contains a single trigger or a modified single trigger for benefits. In addition, the Executive Change in Control Plan does not provide for benefits upon death or disability following a change in control.
Annual Plan. All of the Named Executive Officers participate in the Annual Plan, which provides that a participant has to be an employee at the time of a payout in order to receive a payout under the Annual Plan, except (i) in the case of death, Disability (as defined in the Annual Plan) or Retirement (as defined in the Annual Plan), (ii) if such payment is required by local law or individual employment agreement or (iii) at the discretion of the Gates Global Bonus Policy Review Committee, under the terms of a Company-approved severance arrangement (referred to as “Termination with Severance”). In the case of death, Disability or Retirement, any bonus payout, if applicable, would have been calculated based on the target achievement of annual financial performance targets (without the adjustment for an individual performance factor), and prorated to reflect the number of full months the participant worked for the Company in the year of such termination. In the case of Termination with Severance, the bonus payout would have been calculated in accordance with the Executive Severance and Change in Control Plans, as applicable.
Retirement Benefits. The Supplemental Retirement Plan that is made available to all Named Executive Officers has payment provisions relating to the termination of employment with the Company and a Change in Control (as defined in the Supplemental Retirement Plan), which are described more fully above under “Nonqualified Deferred Compensation for Fiscal 2021.”
Long-Term Incentive Awards
Pre-IPO Option Grants. The Company has a number of awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan (the “2014 Incentive Plan”) in connection with the Company’s initial public offering in January 2018. No new awards have been granted under this plan since 2017. Of the Company’s Named Executive Officers, Mr. Jurek, Mr. Lifsey, and Mr. Pitstick were issued options pursuant to the 2014 Incentive Plan. The options are split equally into four tiers, each with specific vesting conditions. Tier I options vest evenly over 5 years from the grant date, subject to the participant’s continuing to provide service to the Company on the vesting date. Tier II, III and IV options vest on Blackstone’s achievement of specified investment returns at the time of a defined liquidity event, which is also subject to the participant’s continued provision of service to the Company on the vesting date. The performance conditions associated with Tiers II, III and IV must be achieved on or prior to July 3, 2022 in order for vesting to occur. All the options expire ten years after the date of grant.
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Additionally, for Mr. Jurek, vesting of one additional “tranche” of the Tier I time-vesting options will accelerate upon termination of employment by (i) the Company without Cause, (ii) the participant for Good Reason, or (iii) death or Disability ((i) – (iii) collectively referred to as a “Good Leaver Termination”). In addition, for all Named Executive Officers with options granted prior to May 2017, with respect to the Tier II, III and IV exit-vesting options, if there is a separation from service due to a Good Leaver Termination prior to July 3, 2022, then a percentage of such options equal to the “Specified Portion” listed below will remain outstanding and eligible to vest for a period ending on the earlier of (x) the date that is 24 months following the date of termination or (y) July 3, 2022.
| Date of Good Leaver Termination | Specified Portion (Jurek and Lifsey) | Specified Portion (Pitstick) | ||||||||||||
| Prior to the first anniversary of the date of grant/vesting reference date | 20% | 0% | ||||||||||||
| On or after the first anniversary of the date of grant/vesting reference date and prior to the second anniversary of the date of grant/vesting reference date | 40% | 20% | ||||||||||||
| On or after the second anniversary of the date of grant/vesting reference date and prior to the third anniversary of the date of grant/vesting reference date | 60% | 40% | ||||||||||||
| On or after the third anniversary of the date of grant/vesting reference date and prior to the fourth anniversary of the date of grant/vesting reference date | 80% | 60% | ||||||||||||
| On or after the fourth anniversary of the date of grant/vesting reference date and prior to the fifth anniversary of the date of grant/vesting reference date | 100% | 80% | ||||||||||||
| On or after the fifth anniversary of the date of grant/vesting reference date | 100% | |||||||||||||
In addition, for options granted prior to May 2017, if the participant retires on or after the third anniversary of the vesting commencement date, is at least age 62 and has completed three years of service, then the Board may, in its discretion, treat such retirement as a Good Leaver Termination with respect to Tiers II, III and IV.
For all option awards under the 2014 Incentive Plan, upon a “Change in Control” (as such term is defined in the 2014 Incentive Plan) during the participant’s employment, all unvested Tier I time-vesting options will accelerate and become fully vested. The Tier II, III and IV exit-vesting options do not automatically become fully vested in connection with a Change in Control; however, all or a portion of the Tier II, III and IV exit-vesting options may become vested to the extent a Change in Control occurs prior to July 3, 2022, which results in the applicable vesting conditions being met. If not, then the Tier II, III and IV exit-vesting options would remain outstanding and eligible to vest until July 3, 2022, or until Blackstone ceases to own any of the Company’s ordinary shares.
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2018 Omnibus Incentive Plan — Outstanding Equity Awards
Options. With respect to the Options granted pursuant to the 2018 Omnibus Incentive Plan, in the event of a termination for “cause” (as defined under the 2018 Omnibus Incentive Plan), all outstanding vested and unvested Options will immediately terminate and expire. In the event of a termination for death or disability, all outstanding unvested Options shall vest and all outstanding vested Options shall remain exercisable for one year thereafter. In the event of a termination for any other reason, including a voluntary termination, all outstanding unvested Options shall immediately terminate and expire, and all outstanding vested Options shall remain exercisable for 60 days after such termination (or, if such termination occurs during or up to seven days before a blackout under the Company’s Trading Policy, then 30 days after such blackout period ends). In the event of a “Change in Control” as defined in the 2018 Omnibus Incentive Plan, Options awarded in 2018 and 2019 will vest immediately. The Options granted in 2020 and thereafter require both a Change in Control and a termination of the executive by the Company without Cause (as defined in the 2018 Omnibus Incentive Plan), by the executive by reason of Constructive Termination (as defined in the Executive Change in Control Plan) or a termination for death or disability for accelerated vesting.
RSUs and PRSUs. With respect to RSUs and PRSUs granted pursuant to the 2018 Omnibus Incentive Plan, in the event of a termination for any reason other than death or disability prior to the vesting of the RSUs and PRSUs, all unvested RSUs and PRSUs shall be forfeited. In the event of termination for death or disability, RSUs will fully vest and PRSUs representing a pro-rata portion of the number of PRSUs that would have vested based on the Company’s actual performance for the entire performance period will be eligible to vest on a pro-rata basis based on days employed during the performance period. In the event of a “Change in Control” (as defined in the 2018 Omnibus Incentive Plan), RSUs granted in 2018 and 2019 will vest immediately and PRSUs will be earned based on the Company’s Relative TSR performance as measured through the date of the change in control and Adjusted ROIC as measured through the most recently completed fiscal quarter relative to the performance criteria determined by the Compensation Committee, with 50% of the earned PRSUs vesting on the date of the Change in Control and the remaining 50% of the earned PRSUs vesting on the first anniversary of the date of the Change in Control; provided that, the remaining 50% will vest immediately upon a termination by the Company without Cause (as defined in the 2018 Omnibus Incentive Plan). Additionally, the target number of PRSUs will be earned if a Change in Control occurs within the first six months of the performance period, with the earned PRSUs vesting as set forth in the preceding sentence. The target number of PRSUs will vest on the date of such Change in Control if the PRSUs are not continued, converted, assumed or replaced by the Company, any of its subsidiaries or a successor entity thereto. RSUs granted in 2020 and thereafter require both a Change in Control and a termination of the executive by the Company without Cause (as defined in the 2018 Omnibus Incentive Plan), by the executive by reason of Constructive Termination (as defined in the Executive Change in Control Plan) or a termination for death or disability, for accelerated vesting.
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Payments and Benefits Upon Termination or Change in Control
The following table describes the potential payments and benefits that would have been payable to the Named Executive Officers assuming an eligible termination (as described above under “Summary of Potential Payments”) of their employment on the last business day of Fiscal 2021.
The amounts shown in the table below do not include:
•payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of the Named Executive Officers; or
•distributions of previously vested plan balances under the Gates MatchMaker 401(k) Plan and the Supplemental Retirement Plan (see the “2021 Nonqualified Deferred Compensation” section above for information about the Supplemental Retirement Plan).
•Payments related to any accidental death and dismemberment and long-term disability insurance any Named Executive Officers holds.
| I. Jurek | L. Mallard | G. Gawronski | W. Lifsey | T. Pitstick | ||||||||||||||||||||||||||||
| Termination – Disability or Death | ||||||||||||||||||||||||||||||||
Cash Severance Payments(1) | $ | 1,583,625 | $ | 563,750 | $ | 684,264 | $ | 685,962 | $ | 333,396 | ||||||||||||||||||||||
Equity Awards(2) | 10,692,461 | 1,812,223 | 3,290,311 | 3,298,498 | 919,178 | |||||||||||||||||||||||||||
| Total | $ | 12,276,086 | $ | 2,375,973 | $ | 3,974,575 | $ | 3,984,460 | $ | 1,252,574 | ||||||||||||||||||||||
| Termination – By the Company without Cause | ||||||||||||||||||||||||||||||||
Cash Severance Payments(3) | $ | 3,695,125 | $ | 1,691,250 | $ | 2,052,793 | $ | 2,057,885 | $ | 777,924 | ||||||||||||||||||||||
Health Plan Continuation(4) | 25,456 | 20,977 | 25,456 | 7,991 | 25,456 | |||||||||||||||||||||||||||
Outplacement(5) | 8,000 | 8,000 | 8,000 | 8,000 | 8,000 | |||||||||||||||||||||||||||
Equity Awards(2) | 217,876 | — | — | — | — | |||||||||||||||||||||||||||
| Total | $ | 3,946,457 | $ | 1,720,227 | $ | 2,086,249 | $ | 2,073,876 | $ | 811,380 | ||||||||||||||||||||||
| Change in Control – (with Termination) | ||||||||||||||||||||||||||||||||
Cash Severance Payments(6) | $ | 6,598,438 | $ | 2,255,000 | $ | 2,737,058 | $ | 2,743,847 | $ | 333,396 | ||||||||||||||||||||||
Health Plan Continuation(4) | 68,360 | 54,346 | 51,544 | 25,851 | 48,400 | |||||||||||||||||||||||||||
Outplacement(5) | 8,000 | 8,000 | 8,000 | 8,000 | 8,000 | |||||||||||||||||||||||||||
Equity Awards(2) | 10,692,461 | 1,812,223 | 3,290,311 | 3,298,498 | 919,178 | |||||||||||||||||||||||||||
| Total | $ | 17,367,259 | $ | 4,129,569 | $ | 6,086,913 | $ | 6,076,196 | $ | 1,308,974 | ||||||||||||||||||||||
| Change in Control – (without Termination) | ||||||||||||||||||||||||||||||||
Equity Awards(2) | $ | 7,733,012 | $ | 866,936 | $ | 1,953,334 | $ | 1,958,219 | $ | 570,241 | ||||||||||||||||||||||
| Total | $ | 7,733,012 | $ | 866,936 | $ | 1,953,334 | $ | 1,958,219 | $ | 570,241 | ||||||||||||||||||||||
(1)Cash Severance Payments (Death or Disability): Amounts reported reflect the Fiscal 2021 Annual Plan payment (without the adjustment for an individual performance factor).
(2)Equity Awards: For Mr. Jurek, if the executive’s employment is terminated by the Company without Cause, by the executive for Good Reason or as a result of death or Disability, then vesting of one additional “tranche” of the Tier I time-vesting options will accelerate. In the event of a Change in Control, all such unvested Tier I time-vesting options will accelerate and become fully vested. For options granted pursuant to the 2018 Omnibus Incentive Plan, if the Named Executive Officer’s employment is terminated as a result of death or disability, all outstanding unvested options will accelerate and become exercisable and all RSUs will vest. For the options granted in 2019, in the event of a Change in Control, all such unvested options will accelerate and become exercisable. For the options granted in 2020 and 2021, all unvested options will accelerate if the executive’s employment is terminated by the Company without Cause, by the executive by reason of Constructive Termination (as defined in the Executive Change in Control Plan) or a as a result of death or disability, in each case, following a Change in Control. The amounts
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reported in “Change in Control — (without Termination)” reflect the “spread” value for the Tier I time-vesting options granted prior to Fiscal 2017 and also includes the “spread” value for the options granted under the 2018 Omnibus Incentive Plan, in each case representing the difference between the closing stock price of Gates’ ordinary shares on January 1, 2022 and the applicable exercise price, unless the stock option exercise price is higher than the close price, in which case the stock options were not assigned a value. Amounts reported assume that Tier II, III and IV exit-vesting options do not vest upon a Change in Control. With respect to all RSUs, in the event of the executive’s termination for death or disability, all unvested RSUs will accelerate. For the RSUs granted in 2019, in the event of a Change in Control during the executive’s employment, all unvested RSUs will accelerate. For the RSUs granted in 2020 and 2021, all unvested RSUs will accelerate if the executive’s employment is terminated by the Company without Cause, by the executive by reason of Constructive Termination (as defined in the Executive Change in Control Plan) or a as a result of death or disability, in each case, following a Change in Control. The amounts reported in both the “Change in Control — (with Termination)” and “Change in Control — (without Termination)” reflect the value of unvested RSUs based on the closing price of Gates’ ordinary shares on January 1, 2022. In the event of termination for death or disability, the amount reported for PRSUs is calculated at target. Upon a Change in Control, the amount reported is calculated at target and assumes that the PRSUs are not continued, converted, assumed or replaced by the Company or successor entity.
(3)Cash Severance Payments (Termination without Cause): For Mr. Jurek, the amount reported reflects the sum of (a) the Fiscal 2021 Annual Plan payment (without the adjustment for an individual performance factor), which would be paid concurrently with cash bonus payments to other employees under the Annual Plan, and (b) two times Mr. Jurek’s then-current base salary, which would be paid in substantially equal installments over a period of 24 months for Mr. Jurek. For the remaining Named Executive Officers, the amount reported is the sum of (a) the Fiscal 2021 Annual Plan bonus (without an adjustment for an individual performance factor), which would be paid concurrently with cash bonus payments to other employees under the Annual Plan, and (b) two times his then-current base salary for Messrs. Mallard, Gawronski, and Lifsey and one time his then-current base salary for Mr. Pitstick, which would be paid in substantially equal installments over a period of 24 months for Messrs. Mallard, Gawronski, and Lifsey and 12 months for Mr. Pitstick.
(4)Health Plan Continuation: The amounts reported in “Termination — By the Company without Cause” represent cash payments in an amount equal to the estimated total amount of Gates’ portion of the monthly COBRA insurance premiums for participation in the health and dental benefit programs in which the Named Executive Officer participated immediately prior to termination for a period of (i) 24 months for Mr. Jurek, Mr. Mallard, Mr. Gawronski and Mr. Lifsey and (ii) 12 months for Mr. Pitstick. The amounts reported in “Change-in-Control — (with Termination)” represent cash payments in an amount equal to the estimated total amount of the monthly COBRA insurance premiums for participation in the health and dental benefit programs as well as the monthly premiums for the life and long-term disability insurance programs in which the Named Executive Officer participated immediately prior to termination for a period of (i) 30 months for Mr. Jurek and (ii) 24 months for Mr. Mallard, Mr. Gawronski and Mr. Lifsey.
(5)Outplacement: Amounts reported represent costs of outplacement services for a six-month period for each Named Executive Officer based on rates in effect as of January 1, 2022.
(6)Cash Severance Payments (Change in Control): The amounts reported reflect the sum of (a) (i) for Mr. Jurek, two and one-half times and (ii) for Mr. Mallard, Mr. Gawronski and Mr. Lifsey, one-half times, the sum of the executive’s then-current base salary and the Fiscal 2021 Annual Plan target bonus, the total of which would be paid in a lump sum no later than the 60th day following the termination date. The Executive Change in Control Plan provides that if the executive is subject to an excise tax under Code Section 280G and Code Section 4999 then the amount of severance the executive receives may be reduced so that the excise tax does not apply, however, such reduction will only occur if the receipt of a greater after-tax severance than would otherwise be provided. For purposes of the above disclosure, the Company assumed the executive’s severance amounts will not be reduced.
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Equity Compensation Plan Information
The following table summarizes the Company’s equity compensation plan information as of January 1, 2022:
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights(1) | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights(2) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the 1st Column of This Table)(3) | ||||||||||||||||||
| Equity compensation plans approved by security holders | 20,203,059 | $9.64 | 10,561,932 | |||||||||||||||||
(1)Consists of 20,203,059 shares of the Company’s common stock issuable upon the exercise of 17,574,676 outstanding stock options and vesting of 2,628,383 outstanding restricted stock units awarded under the Company’s 2014 Incentive Plan, 2015 Non-Employee Director Incentive Plan or 2018 Omnibus Incentive Plan, and excludes any cash-settled stock appreciation rights.
(2)Excludes shares issuable upon the vesting of restricted stock units which are included in the first column of this table for which there is no exercise price.
(3)The Company’s 2018 Omnibus Incentive Plan provides that the total number of ordinary shares that may be issued under the 2018 Omnibus Incentive Plan is 12,500,000 (the “Absolute Share Limit”); provided, however, that the Absolute Share Limit shall be increased on the first day of each fiscal year beginning with the 2019 fiscal year in an amount equal to the least of (x) 6,500,000 ordinary shares, (y) 2.5% of the total number of ordinary shares outstanding on the last day of the immediately preceding fiscal year, and (z) a lower number of ordinary shares as determined by the Board. The number in this column represents the number of ordinary shares available as of January 1, 2022, prior to the annual replenishment.
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PROPOSAL 2: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
The Board of Directors unanimously recommends that shareholders vote “FOR” the advisory approval of the compensation of Gates’ Named Executive Officers.
What am I voting on?
Under Dodd-Frank and Section 14A of the Exchange Act, the Company’s shareholders are entitled to vote to approve, on a nonbinding advisory basis, the compensation of its Named Executive Officers, as disclosed in this Proxy Statement in accordance with SEC rules, commonly known as “say-on-pay.”
As discussed in the Compensation Discussion and Analysis, the Company’s executive compensation program is designed to enable it to attract, motivate, reward and retain high-caliber executives who are capable of creating and sustaining value for its customers and shareholders and achieving the Company’s business goals over the long term. In addition, the Company’s executive compensation program is designed to provide a fair and competitive compensation opportunity that appropriately rewards executives for their contributions to its success. The Company also believes that a significant portion of each executive’s compensation should be “at risk” and tied to overall Company and individual performance, and accordingly the Company employs performance metrics tied to its strategy to encourage performance that creates long-term value. The Company’s Compensation Committee oversees its executive compensation program and maintains a focus on paying its executive officers for performance, not only through the use of performance metrics tied to Company strategy, but also by using a mix of compensation elements that emphasizes pay that varies based on the Company’s performance.
The form of shareholder resolution for this proposal is set forth under the heading “Shareholder Resolutions for the 2022 Annual General Meeting” in this Proxy Statement.
Is this vote binding on the Board?
As this vote is advisory, the result will not be binding upon the Board or the Compensation Committee, and neither the Board nor the Compensation Committee will be required to take any action (or refrain from taking any action) as a result of the outcome of the vote on this proposal. The Compensation Committee will review and consider the outcome of the vote in connection with the ongoing review of the Company’s executive compensation program.
DIRECTOR COMPENSATION
Director Compensation
The Company’s employee director and Sponsor-affiliated directors receive no additional compensation for serving on the Board. In September 2021, Ms. Kahr resigned from her position with the Sponsor but remained on the Company’s Board. Following her resignation with the Sponsor, the Board approved the non-employee director standard annual compensation package, as described below, for Ms. Kahr. Accordingly, effective November 1, 2021, she received an equity grant of $125,000 in value of restricted stock units, a prorated annual cash retainer of $100,000, and a prorated additional cash retainer of $10,000 for her service as Chair of the Compensation Committee. As such, only Mr. Jurek and Mr. Simpkins did not receive director compensation for Fiscal 2021.
Every two years, the Board reviews and approves the non-employee director compensation based on the recommendation of the Compensation Committee. In making a recommendation, the Compensation Committee considers market data for the Company’s peer group, which is the same peer group used for the Company’s executive compensation peer group, as well as a general industry group consisting of comparably sized general industry companies (excluding financial services) with median revenues of approximately the Company’s size. The Board last reviewed and reapproved, with no changes, the non-employee director standard annual compensation package in October 2021.
In Fiscal 2021, all eligible directors received this standard annual compensation package of $225,000, consisting of $100,000 as an annual cash retainer (payable in quarterly installments in arrears) and $125,000 in value of restricted stock units (payable annually). Restricted stock units vest in full on the first anniversary of the grant date. The chairpersons of the Company’s three standing committees are entitled to receive the additional annual cash retainers (payable in quarterly installments in arrears) listed below. In 2021, the Chair of the Company’s Nominating and Governance Committee was a Sponsor-affiliated director and thus did not receive this additional cash retainer. Effective November 1, 2021, and following her resignation with the Sponsor, Ms. Kahr received a prorated amount of the additional cash retainer for her service as the
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Chair of the Compensation Committee; prior to such time, the Company did not pay a cash retainer with respect to the Chair of the Compensation Committee in 2021.
| Role | Additional Annual Cash Retainer | |||||||
| Chair, Audit Committee | $ | 25,000 | ||||||
| Chair, Compensation Committee | $ | 10,000 | ||||||
| Chair, Nominating and Governance Committee | $ | 10,000 | ||||||
The Company reimburses all directors for expenses associated with each meeting attended. Under the Supplemental Retirement Plan, directors may also elect to defer 20% to 100% of their annual cash retainer and any committee chair fees, if applicable, as well as 100% of their annual RSU grant.
Director Stock Ownership Guidelines
To better align the financial interest of its non-employee, non-Sponsor affiliated directors with its shareholders, the Company requires such directors to own a minimum level of shares. Each of the Company’s non-employee, non-Sponsor affiliated directors is required to own stock in an amount equal to four times his or her annual cash retainer. Any such director who does not meet the threshold will be required to retain 50% of stock acquired through the exercise or vesting of equity awards made by the Company. As of the Company’s annual measurement date of February 1, 2021, all of its non-employee, non-Sponsor affiliated directors either met the applicable ownership guidelines or were in compliance with the equity retention mandate.
Director Compensation Table
The following table provides summary information concerning the compensation of the Company’s directors, other than the employee director, who served during Fiscal 2021.
| Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Option Awards ($) (3) | Total ($) | ||||||||||||||||||||||
| J. Ireland | $ | 100,000 | $ | 124,995 | $ | — | $ | 224,995 | ||||||||||||||||||
| T. Klebe | $ | 125,000 | $ | 124,995 | $ | — | $ | 249,995 | ||||||||||||||||||
| S. Mains | $ | 100,000 | $ | 124,995 | $ | — | $ | 224,995 | ||||||||||||||||||
| W. Neely | $ | 100,000 | $ | 124,995 | $ | — | $ | 224,995 | ||||||||||||||||||
| M. Zhang | $ | 100,000 | $ | 124,995 | $ | — | $ | 224,995 | ||||||||||||||||||
| A. Tillman | $ | 68,681 | $ | 124,985 | $ | — | $ | 193,666 | ||||||||||||||||||
| J. Kahr | $ | 18,737 | $ | 124,985 | $ | — | $ | 143,722 | ||||||||||||||||||
| N. Simpkins | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
(1)Represents director fees earned during Fiscal 2021. Directors who served on the Board for a portion of the fiscal year received a pro-rated amount of the annual cash retainer. Mr. Klebe’s director fees include an additional $25,000 for his service as Chair of the Audit Committee. Ms. Kahr’s director fees include an additional $10,000 for her service as Chair of the Compensation Committee and are pro-rated for her service following her resignation from the Sponsor.
(2)The amounts shown represent the aggregate grant date fair value of stock awards granted in Fiscal 2021 calculated in accordance with Topic 718. As of January 1, 2022, the aggregate number of unvested RSUs held by the Company’s directors was as follows: Mr. Ireland (8,333), Mr. Klebe (8,333), Mr. Neely (8,333), Ms. Mains (8,333) and Dr. Zhang (8,333), all of which vested on February 26, 2022; Ms. Tillman (7,142), which will vest on April 27, 2022; and Ms. Kahr (7,292), which will vest on November 1, 2022. Ms. Mains and Dr. Zhang elected to defer their shares pursuant to the Supplemental Retirement Plan.
(3)The Company has not granted options to non-employee directors since 2016. As of January 1, 2022, the aggregate number of options outstanding for Mr. Klebe was 76,293, all of which are vested.
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PROPOSAL 3: ADVISORY VOTE ON DIRECTORS’ REMUNERATION REPORT
The Board of Directors unanimously recommends that shareholders vote “FOR” advisory approval of the Directors’ Remuneration Report contained in Appendix A of this Proxy Statement.
What am I voting on?
The Board considers that appropriate remuneration of directors plays a vital part in helping to achieve the Company’s overall objectives, and accordingly, in compliance with the Companies Act, the Company is providing shareholders with the opportunity to vote on an advisory resolution approving the Directors’ Remuneration Report.
This proposal is similar to proposal 2 regarding the advisory vote to approve the compensation of the Company’s Named Executive Officers. However, the Directors’ Remuneration Report is concerned solely with the remuneration of the Company’s management and non-management directors and is required under the Companies Act.
The Company encourages shareholders to read the Directors’ Remuneration Report set forth in Appendix A to this Proxy Statement, which describes in detail how its compensation policies and procedures operate and are designed to achieve its compensation objectives for its management director, and to attract and retain high-quality non-management directors. The form of shareholder resolution for this proposal is set forth under the heading “Shareholder Resolutions for the 2022 Annual General Meeting” in this Proxy Statement.
Is this vote binding on the Board?
As this vote is advisory, the result will not be legally binding upon the Board or the Compensation Committee, and payments made or promised to directors will not have to be repaid, reduced, or withheld in the event that the resolution is not passed. The Compensation Committee will review and consider the outcome of the vote in connection with the ongoing review of the Company’s management director and non-management director compensation programs. If the advisory resolution on the Directors’ Remuneration Report is not passed, the Directors’ Remuneration Policy must be put up for re-approval at the Company’s next annual general meeting.
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PROPOSAL 4: APPROVAL OF THE DIRECTORS’ REMUNERATION POLICY
The Board of Directors unanimously recommends that shareholders vote “FOR” approval of the Directors’ Remuneration Policy contained in Appendix A of this Proxy Statement.
What am I voting on?
The Board believes that appropriate remuneration of directors plays a vital part in helping to achieve the Company’s overall objectives, and, accordingly, and in compliance with the Companies Act, the Company is providing shareholders with the opportunity to vote on a resolution to approve the Directors’ Remuneration Policy.
The Directors’ Remuneration Policy sets out the Company’s forward-looking policy on directors’ remuneration and describes the components of the executive and non-executive directors’ remuneration. Once approved, all payments by the Company to its directors will be made in accordance with the policy, unless a payment has been separately approved by a shareholder resolution.
The Company encourages shareholders to read the Directors’ Remuneration Report, which includes the Directors’ Remuneration Policy, contained in Appendix A to this Proxy Statement. The Board and the Compensation Committee believe that the policies and procedures described in the Directors’ Remuneration Report are effective in achieving the Company’s compensation objectives for its executive director and serve to attract and retain high-quality non-executive directors.
In accordance with the Companies Act, the Directors’ Remuneration Policy has been approved by and signed on behalf of the Board and, if approved by the shareholders at the AGM, will be delivered to the Registrar of Companies in the U.K. following the AGM.
The form of shareholder resolution for this proposal is set forth under the heading “Shareholder Resolutions for the 2022 Annual General Meeting” in this Proxy Statement.
What happens if the Directors’ Remuneration Policy does not receive shareholder approval?
If shareholders do not approve the Directors’ Remuneration Policy, the Company will be required to incur additional expenses to comply with English law, as it will be required to hold additional shareholder meetings until the policy is approved. In addition, if the Directors’ Remuneration Policy is not approved, the Company may not be able to pay the expected compensation to its directors, including its Chief Executive Officer, which could materially affect the Company’s ability to retain its top executives and manage its business.
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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Disclosure of Fees Paid to Independent Registered Public Accounting Firm
The following table presents fees for professional services rendered by Deloitte & Touche LLP and its affiliates, all of which were pre-approved by the Audit Committee pursuant to the policy described below, related to the audit of the Company’s consolidated financial statements and other services in 2021 and 2020.
| (dollars in millions) | Fiscal 2021 | Fiscal 2020 | ||||||||||||
Audit Fees(1) | $ | 4.6 | $ | 4.9 | ||||||||||
Audit-Related Fees(2) | 0.4 | 0.1 | ||||||||||||
Tax Fees(3) | 0.4 | 0.2 | ||||||||||||
| All Other Fees | — | — | ||||||||||||
| Total | $ | 5.4 | $ | 5.2 | ||||||||||
(1)Includes the audit and review of the Company’s financial statements and various statutory audits in several countries outside the United States.
(2)Includes other attestation engagements unrelated to the Company’s financial statements and accounting consultations.
(3)Includes tax compliance, tax planning and tax advice.
Audit Committee’s Consideration of Independence of Independent Registered Public Accounting Firm
The Audit Committee has reviewed the nature of non-audit services provided by Deloitte & Touche LLP and its affiliates and has concluded that these services are compatible with maintaining the firm’s ability to serve as the Company’s independent registered public accounting firm.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditors
The Audit Committee charter requires the Audit Committee to pre-approve all audit and non-audit services provided by the Company’s independent registered public accounting firm. On an ongoing basis, the Company’s management presents specific projects and categories of service to the Audit Committee to request advance approval. The Audit Committee reviews those requests and advises management if the Audit Committee approves the engagement of Deloitte & Touche LLP or its affiliates. On a periodic basis, the Company’s management reports to the Audit Committee regarding specific engagements undertaken under the pre-approved services. The Audit Committee may also delegate the authority to pre-approve audit and permitted non-audit services, excluding services related to the Company’s internal control over financial reporting, to a subcommittee of one or more committee members, provided that any such pre-approvals are reported at a subsequent Audit Committee meeting.
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PROPOSAL 5: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors unanimously recommends that shareholders vote “FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022.
What am I voting on?
The Audit Committee has appointed Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022. The Board has proposed that shareholders ratify this appointment at the AGM. If shareholders do not ratify the appointment of Deloitte & Touche LLP, the Audit Committee will reconsider the appointment, but is not obligated to appoint another independent registered public accounting firm.
Representatives of Deloitte & Touche LLP are expected to be present at the AGM, will have an opportunity to make a statement if they so desire, and will be available to respond to questions from shareholders.
The form of shareholder resolution for this proposal is set forth under the heading “Shareholder Resolutions for the 2022 Annual General Meeting” in this Proxy Statement.
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PROPOSAL 6: REAPPOINTMENT OF DELOITTE LLP AS THE COMPANY’S U.K. STATUTORY AUDITOR UNDER THE COMPANIES ACT
The Board of Directors unanimously recommends that shareholders vote “FOR” the reappointment of Deloitte LLP as the Company’s U.K. statutory auditor under the Companies Act, to hold office from the conclusion of this meeting until the conclusion of the next annual general meeting at which accounts are laid before the Company.
What am I voting on?
Under the Companies Act, the Company’s U.K. statutory auditor must be appointed at each general meeting at which the annual report and accounts are presented to shareholders. Deloitte LLP has served as the Company’s statutory auditor since its registration as a public limited company in September 2017. If the shareholders do not re-appoint Deloitte LLP, the Board may appoint an auditor to fill the vacancy.
The form of shareholder resolution for this proposal is set forth under the heading “Shareholder Resolutions for the 2022 Annual General Meeting” in this Proxy Statement.
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PROPOSAL 7: AUTHORIZATION OF THE AUDIT COMMITTEE TO DETERMINE THE COMPANY’S U.K. STATUTORY AUDITOR’S REMUNERATION
The Board of Directors unanimously recommends that shareholders vote “FOR” the authorization of the Audit Committee of the Board to determine the Company’s U.K. statutory auditor’s remuneration.
What am I voting on?
Under the Companies Act, the remuneration of the Company’s U.K. statutory auditor must be fixed in a general meeting or in such manner as may be determined in a general meeting. The Company is asking its shareholders to authorize its Board to determine Deloitte LLP’s remuneration as the Company’s U.K. statutory auditor for the year ending December 31, 2022. It is proposed that the Board would delegate the authority to determine the remuneration of the U.K. statutory auditor to the Audit Committee in accordance with the Board’s procedures and applicable law.
The form of shareholder resolution for this proposal is set forth under the heading “Shareholder Resolutions for the 2022 Annual General Meeting” in this Proxy Statement.
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RELATED-PERSON TRANSACTIONS POLICY AND PROCEDURES
The Company’s Board of Directors has adopted a written Related-Person Transactions Policy. This policy requires that a “related person” (as defined in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to the Company’s Chief Legal Officer any “related person transaction” (defined as any transaction that it is anticipated would be reportable by the Company under Item 404(a) of Regulation S-K, in which the Company was, is or will be a participant, the amount of which exceeds $120,000, and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. The Company’s Chief Legal Officer will then promptly communicate that information to the Company’s Board. No related-person transaction will be executed without the approval or ratification of the Company’s Board or a duly authorized committee of the Board. It is the Company’s policy that any director interested in a related-person transaction will recuse himself or herself from any vote on a related person transaction in which he or she has an interest.
Shareholders Agreement
In connection with the IPO, the Company entered into a shareholders agreement with its Sponsor, Blackstone. The shareholders agreement requires the Company to, among other things, nominate a number of individuals designated by its Sponsor for election as directors at any meeting of shareholders (each a “Sponsor Director”) such that, following the election of any directors and taking into account any director continuing to serve as such without the need for re-election, the number of Sponsor Directors serving as directors of the Company will be equal to: (i) if the Company’s pre-IPO owners and their affiliates together continue to beneficially own at least 50% of the Company’s ordinary shares entitled to vote generally in the election of directors as of the record date for such meeting, the lowest whole number that is greater than 50% of the total number of directors comprising the Board; (ii) if the Company’s pre-IPO owners and their affiliates together continue to beneficially own at least 40% (but less than 50%) of the ordinary shares entitled to vote generally in the election of directors as of the record date for such meeting, the lowest whole number that is at least 40% of the total number of directors comprising the Board; (iii) if the Company’s pre-IPO owners and their affiliates together continue to beneficially own at least 30% (but less than 40%) of the ordinary shares entitled to vote generally in the election of directors as of the record date for such meeting, the lowest whole number that is at least 30% of the total number of directors comprising the Board; (iv) if the Company’s pre-IPO owners and their affiliates together continue to beneficially own at least 20% (but less than 30%) of the ordinary shares entitled to vote generally in the election of directors as of the record date for such meeting, the lowest whole number that is at least 20% of the total number of directors comprising the Board; and (v) if the Company’s pre-IPO owners and their affiliates together continue to beneficially own at least 5% (but less than 20%) of the ordinary shares entitled to vote generally in the election of directors as of the record date for such meeting, the lowest whole number that is at least 10% of the total number of directors comprising the Board. In the case of a vacancy on the Company’s board created by the removal or resignation of a Sponsor Director, the shareholders agreement requires the Company to nominate an individual designated by its Sponsor for election to fill the vacancy. The above-described provisions of the shareholders agreement will remain in effect until the Sponsor is no longer entitled to nominate a Sponsor Director pursuant to the shareholders agreement, unless the Sponsor requests that it terminate at an earlier date.
The shareholders agreement also provides that, to the fullest extent permitted by law, the Company renounce any interest or expectancy that it has in, or right to be offered an opportunity to participate in, specified business opportunities that may be presented from time to time to the Sponsor or to members of the Board of Directors who are not employees.
Registration Rights Agreement
In connection with the IPO, the Company entered into a registration rights agreement to provide to its Sponsor an unlimited number of “demand” registration rights. The registration rights agreement also provides the Sponsor customary “piggyback” registration rights and provides that the Company will pay certain expenses relating to such registrations and indemnify its Sponsor against certain liabilities which may arise under the Securities Act.
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Support and Services Agreement
In connection with the IPO, the Company entered into a Support and Services Agreement with Blackstone Management Partners L.L.C. (“BMP”), under which the Company and certain of its direct and indirect subsidiaries reimburse BMP for customary support services provided by Blackstone’s portfolio operations group to the Company at BMP’s direction. BMP will invoice the Company for such services based on the time spent by the relevant personnel providing such services during the applicable period and Blackstone’s allocated costs of such personnel. During Fiscal 2021, no amounts were paid or outstanding under this agreement. This agreement terminates on the date the Sponsor beneficially owns less than 5% of the Company’s ordinary shares and such shares have a fair market value of less than $25.0 million, or such earlier date as may be chosen by Blackstone.
Commercial Transactions with Sponsor Portfolio Companies
The Company’s Sponsor and its affiliates have ownership interests in a broad range of companies. The Company has entered, and may in the future enter, into commercial transactions in the ordinary course of its business with some of these companies, including the sale of goods and services and the purchase of goods and services. None of these transactions or arrangements was material to the Company in Fiscal 2021.
Indemnification Agreements
The Company is party to indemnification agreements with its directors and executive officers to indemnify them to the maximum extent allowed under applicable law. These agreements indemnify these individuals against certain costs, charges, losses, liabilities, damages and expenses incurred by such director or officer in the execution or discharge of his or her duties or the exercise of his or her powers or otherwise in relation to or in connection with his or her duties, powers or office. These agreements do not indemnify the directors against any liability attaching to such individuals in connection with any fraud, willful default or gross negligence, or in breach of his or her fiduciary duties, which would be rendered void under the Companies Act.
There is currently no pending material litigation or proceeding involving any of the Company’s directors, officers or employees for which indemnification is sought.
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AUDIT COMMITTEE REPORT
Pursuant to rules adopted by the SEC designed to improve disclosures related to the functioning of corporate audit committees and to enhance the reliability and credibility of financial statements of public companies, the Audit Committee of the Board of Directors of the Company submits the following report:
Audit Committee Report to Shareholders
The Audit Committee of the Board of Directors of the Company is comprised of four non-employee directors: Mr. Ireland, Mr. Klebe, Ms. Mains and Dr. Zhang, with Mr. Klebe serving as Chair. The Board of Directors has determined that all of the members of the Audit Committee are independent within the meaning of the listing standards of the NYSE, the rules of the SEC and the Company’s Corporate Governance Guidelines, are financially literate as defined by the NYSE, and are audit committee financial experts as defined by the SEC. The Audit Committee operates under a written charter adopted by the Board of Directors. Consistent with this charter, the Audit Committee assists the Board of Directors with its oversight responsibilities as they relate to:
•the quality and integrity of the Company’s financial statements;
•the effectiveness of the Company’s internal controls over financial reporting;
•the Company’s compliance with legal and regulatory requirements;
•the independent auditor’s qualifications, performance and independence; and
•the performance of the Company’s internal audit function.
The Audit Committee also has responsibility for preparing this report, which must be included in the Company’s Proxy Statement, and appointing and retaining the Company’s independent registered public accounting firm. In order to meet the responsibilities assigned to it under its charter, the Audit Committee performs a number of tasks, including the following:
•Advance review of all audit and legally permitted non-audit services to be provided by the Company’s independent auditor. This task includes sole approval authority for the fees and terms of the auditor’s engagement.
•Review of the Company’s audited financial statements and quarterly financial statements. In connection with this task, the Audit Committee focuses on several factors, including the independent auditor’s judgment of the quality of the Company’s accounting principles, the results of management’s and the independent auditor’s procedures related to potential fraud, and major issues regarding judgments made in connection with the preparation of financial statements.
•At least an annual evaluation of the independent auditor’s qualifications, performance and independence. The Audit Committee established a process for evaluating the Company’s independent auditor that includes obtaining an annual assessment from the Company’s management. That assessment includes several factors related to the independent auditor, including qualifications and expertise, past performance and appropriateness of fees. The Audit Committee also considers the communications and interactions with the independent auditor over the course of the year and the results of any Public Company Accounting Oversight Board (United States) (“PCAOB”) inspections, and conducts a review of the independent auditor’s internal quality control procedures.
•Periodic reviews of the Company’s earnings press releases and guidance provided to investors and rating agencies.
•Periodic reviews of the adequacy and effectiveness of the Company’s accounting and internal control policies, procedures and disclosures.
•Periodic reviews of the Company’s guidelines and policies for assessing and managing risks, including steps management has taken to monitor and control exposures to such risks.
Management is responsible for the Company’s internal controls and its financial reporting process. The Company’s independent registered public accounting firm, Deloitte & Touche LLP, is responsible for performing an independent audit of the Company’s consolidated financial statement and the effectiveness of the Company’s internal control over financial reporting in accordance with the standards of the PCAOB, and expressing an opinion as to the conformity of the financial statements with generally accepted accounting principles and the effectiveness of the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes.
53
In the performance of its oversight function, the Audit Committee has reviewed and discussed, with both management and Deloitte & Touche LLP, the audited financial statements of the Company. The Audit Committee also discussed with Deloitte & Touche LLP all matters required to be discussed under applicable standards of the PCAOB and the SEC. In addition, the Audit Committee received the written disclosures and the letter required by the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with Deloitte & Touche LLP the independent registered public accounting firm’s independence. In considering the independence of the independent registered public accounting firm, the Audit Committee took into consideration whether the provision of non-audit services is compatible with maintaining the independence of the independent registered public accounting firm.
Based upon the Audit Committee’s review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022 filed with the SEC.
Submitted by the Audit Committee of the Board of Directors:
Terry Klebe, Chair
James W. Ireland, III
Stephanie K. Mains
Molly P. Zhang
54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 12, 2022, with respect to the number of ordinary shares owned by (a) each director and nominee for director of the Company, (b) each named executive officer of the Company, (c) all directors and executive officers and nominees as a group and (d) each shareholder known by the Company to own beneficially more than five percent of a class of the outstanding common stock. As of April 12, 2022, there were 289,596,527 ordinary shares outstanding. This number includes 8,000,000 shares repurchased by the Company on March 31, 2022 that had not been cancelled as of that date. Unless otherwise noted, each person and group identified possesses sole voting and investment power with respect to the shares shown opposite such person’s or group’s name, and the address of each beneficial owner is 1144 Fifteenth Street, Denver, Colorado 80202.
| Ordinary Shares Beneficially Owned | ||||||||||||||
| Name of Beneficial Owner | Number | % | ||||||||||||
5% or greater shareholders: | ||||||||||||||
Blackstone(1) | 178,587,591 | 61.67% | ||||||||||||
Directors and Named Executive Officers: | ||||||||||||||
James W. Ireland, III(2) | 30,762 | * | ||||||||||||
Ivo Jurek(3) | 4,521,084 | 1.56% | ||||||||||||
Julia C. Kahr(2) | — | * | ||||||||||||
Terry Klebe(2)(4) | 142,008 | * | ||||||||||||
Stephanie K. Mains(2) | 16,119 | * | ||||||||||||
Wilson S. Neely(2) | 26,172 | * | ||||||||||||
Neil P. Simpkins(5) | — | * | ||||||||||||
Alicia Tillman(2) | — | * | ||||||||||||
Molly P. Zhang(2)(6) | — | * | ||||||||||||
Grant Gawronski(7) | 551,520 | * | ||||||||||||
Walt Lifsey(8) | 1,329,420 | * | ||||||||||||
L. Brooks Mallard(9) | 87,815 | * | ||||||||||||
Tom Pitstick(10) | 198,935 | * | ||||||||||||
Directors and executive officers as a group (14 persons)(11) | 6,962,099 | 2.40% | ||||||||||||
___________________
*Represents less than 1%.
(1)Reflects 81,033,144 ordinary shares directly held by BX Gates ML-1 Holdco LLC; 268,295 ordinary shares directly held by BX Gates ML-3 Holdco LLC; 78,356,260 ordinary shares directly held by BX Gates ML-2 Holdco LLC; 16,527,684 ordinary shares directly held BX Gates ML-4 Holdco LLC; and 2,402,208 ordinary shares directly held by BX Gates ML-5 Holdco LLC (together, the “Blackstone Entities”).
The sole member of BX Gates ML-1 Holdco LLC is Blackstone Capital Partners (Cayman) VI L.P. The sole member of BX Gates ML-2 Holdco LLC is Blackstone GTS Co-Invest L.P. The sole member of BX Gates ML-3 Holdco LLC is Blackstone Family Investment Partnership (Cayman) VI-ESC L.P. The sole member of BX Gates ML-4 Holdco LLC is BTO Omaha Holdings L.P. The sole member of BX Gates ML-5 Holdco LLC is Omaha Aggregator (Cayman) L.P.
The general partner of each of Omaha Aggregator (Cayman) L.P., Blackstone Capital Partners (Cayman) VI L.P. and Blackstone GTS Co-Invest L.P. is Blackstone Management Associates (Cayman) VI L.P. The general partners of each of Blackstone Management Associates (Cayman) VI L.P. and Blackstone Family Investment Partnership (Cayman) VI-ESC L.P. are BCP VI GP L.L.C. and Blackstone LR Associates (Cayman) VI Ltd.
55
The general partner of BTO Omaha Holdings L.P. is BTO Omaha Manager L.L.C. The managing member of BTO Omaha Manager L.L.C. is Blackstone Tactical Opportunities Management Associates (Cayman) L.P. The general partners of Blackstone Tactical Opportunities Management Associates(Cayman) L.P. are BTO GP L.L.C. and Blackstone Tactical Opportunities LR Associates (Cayman) Ltd.
Blackstone Holdings III L.P. is the sole member of each of BCP VI GP L.L.C. and BTO GP L.L.C. and the Class A shareholder of each of Blackstone LR Associates (Cayman) VI Ltd. and Blackstone Tactical Opportunities LR Associates (Cayman) Ltd. The general partner of Blackstone Holdings III L.P. is Blackstone Holdings III GP L.P. The general partner of Blackstone Holdings III GP L.P. is Blackstone Holdings III GP Management L.L.C. The sole member of Blackstone Holdings III GP Management L.L.C. is Blackstone Inc. The sole holder of the Series II preferred stock of Blackstone Inc. is Blackstone Group Management L.L.C. Blackstone Group Management L.L.C. is wholly-owned by Blackstone’s senior managing directors and controlled by its founder, Stephen A. Schwarzman.
Each of such Blackstone Entities (other than each of the Blackstone Entities to the extent they directly hold ordinary shares) and Mr. Schwarzman may be deemed to beneficially own the ordinary shares beneficially owned by the Blackstone Entities directly or indirectly controlled by it or him, but each disclaims beneficial ownership of such ordinary shares. The address of Mr. Schwarzman and each of the other entities listed in this footnote is c/o Blackstone Inc., 345 Park Avenue, New York, New York 10154.
Based on information provided to us, as of April 12, 2022, the Blackstone Entities have pledged, hypothecated or granted security interests in substantially all of the ordinary shares held by them pursuant to a margin loan agreement with customary default provisions. In the event of a default under the margin loan agreement, the secured parties may foreclose upon any and all of the ordinary shares pledged to them and may seek recourse against the borrowers.
(2)Does not include unvested time-based RSUs held by non-employee directors in connection with their service as directors.
(3)Includes (i) 4,199,401 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days, and (ii) 321,683 ordinary shares owned by Mr. Jurek.
(4)Includes (i) 76,293 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days, and (ii) 65,715 ordinary shares owned by Mr. Klebe. Does not include 21,469 restricted stock units that are vested but deferred pursuant to the Supplemental Retirement Plan.
(5)Mr. Simpkins is an Executive Advisor of Blackstone. Mr. Simpkins disclaims beneficial ownership of any ordinary shares owned directly or indirectly by the Blackstone Entities.
(6)Does not include 20,997 restricted stock units that are vested but deferred pursuant to the Supplemental Retirement Plan.
(7)Includes (i) 407,274 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days, and (ii) 144,246 ordinary shares owned by Mr. Gawronski.
(8)Includes (i) 1,193,799 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days, and (ii) 135,621 ordinary shares owned by Mr. Lifsey.
(9)Includes (i) 68,545 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days, and (ii) 19,270 ordinary shares owned by Mr. Mallard.
(10)Includes (i) 409,682 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days, and (ii) 30,071 ordinary shares owned by Mr. Pitstick.
(11)Shares shown as beneficially owned by directors and executive officers as a group reflect: (i) 6,405,849 ordinary shares issuable upon exercise of options that are currently exercisable or exercisable within 60 days, and (ii) and 797,068 ordinary shares owned. Does not include 42,466 restricted stock units that are vested but deferred pursuant to the Supplemental Retirement Plan.
56
SHAREHOLDER PROPOSALS
Shareholders wishing to include proposals in the proxy materials in relation to the Company’s AGM to be held in 2023 must submit the same in writing, by mail, first-class postage pre-paid, to Gates Industrial Corporation plc, 1144 Fifteenth Street, Denver, CO 80202, Attention: Chief Legal Officer, which must be received at the Company’s executive office on or before December 29, 2022. Such proposals must also meet the other requirements and procedures prescribed by Rule 14a-8 under the Exchange Act relating to shareholders’ proposals. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received.
Shareholders who intend to present a proposal at the 2023 AGM, without including such proposal in our proxy statement, must provide our Chief Legal Officer with written notice of such proposal on or before March 14, 2023, in accordance with Rule 14a-4(c). If the requirements of such rule are not followed, we may exercise discretionary voting authority under proxies we solicit to vote in accordance with our best judgment on any such shareholders proposal or nomination. To comply with the universal proxy rules (once effective), shareholders who intend to solicit proxies in support of director nominees other than our nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 10, 2023.
ANNUAL REPORT AND OTHER MATTERS
Upon written request addressed to the Corporate Secretary at 1144 Fifteenth Street, Denver, CO 80202 from any person solicited herein, the Company will provide, at no cost, a copy of its 2021 Annual Report filed with the SEC.
The Company’s Board of Directors does not know of any matter to be brought before the AGM other than the matters set forth in the Notice of Annual General Meeting of Shareholders and matters incident to the conduct of the AGM. If any other matter should properly come before the AGM, the persons named in the enclosed proxy card will have discretionary authority to vote all proxies with respect thereto in accordance with their best judgment.
By Order of the Board of Directors,
Ivo Jurek Chief Executive Officer
April 28, 2022
57
SHAREHOLDER RESOLUTIONS FOR THE 2022 ANNUAL GENERAL MEETING
Proposal 1 — Election of Directors
RESOLVED THAT, the following individuals be and hereby are elected or re-elected, as applicable, by way of separate ordinary resolution, to serve as directors until the election and qualification of his or her respective successor or until his or her earlier removal or resignation pursuant to the Articles of Association:
1.James W. Ireland, III
2.Ivo Jurek
3.Julia C. Kahr
4.Terry Klebe
5.Stephanie K. Mains
6.Wilson S. Neely
7.Neil P. Simpkins
8.Alicia Tillman
9.Molly P. Zhang
Proposal 2 — Advisory Vote to Approve Named Executive Officer Compensation
RESOLVED THAT, the shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers as described in the proxy statement for the annual general meeting of the Company held on June 9, 2022 under “Compensation Discussion and Analysis” and “Executive Compensation,” as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure.
Proposal 3 — Advisory Vote on Directors’ Remuneration Report
RESOLVED THAT, the shareholders approve, on an advisory basis, the Directors’ Remuneration Report, which is included in the Company’s annual report and accounts, in accordance with the requirements of the Companies Act.
Proposal 4 — Ordinary Resolution to Approve the Directors’ Remuneration Policy
RESOLVED THAT, the Directors’ Remuneration Policy included in the Company’s Directors’ Remuneration Report, which is included in the Company’s annual report and accounts, be and is hereby approved in accordance with the requirements of the Companies Act.
Proposal 5 — Ordinary Resolution Ratifying the Appointment of Independent Registered Public Accounting Firm
RESOLVED THAT, the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2022 is ratified and approved.
Proposal 6 — Ordinary Resolution Re-Appointing Deloitte LLP as the Company’s U.K. Statutory Auditor
RESOLVED THAT, the re-appointment of Deloitte LLP as the Company’s U.K. statutory auditor under the Companies Act, to hold office from the conclusion of the 2022 AGM until the next annual general meeting at which accounts are laid before the Company, be and is hereby approved.
Proposal 7 — Ordinary Resolution Authorizing the Audit Committee of the Board of Directors to Determine the Company’s U.K. Statutory Auditor’s Remuneration
RESOLVED THAT, the Audit Committee of the Board of Directors be and is hereby authorized to set Deloitte LLP’s remuneration as the Company’s U.K. statutory auditor.
58
APPENDIX A
Gates Industrial Corporation plc
(the “Company” or “Gates” or “us”)
DIRECTORS’ REMUNERATION REPORT
ANNUAL STATEMENT OF THE CHAIR OF THE COMPENSATION COMMITTEE
Dear Shareholders:
I am pleased to present the Company’s remuneration report for the financial year ended January 1, 2022 (“financial year 2021”). This remuneration report is divided into three sections:
A.this annual statement (the “Annual Statement”) from the Chair of the Compensation Committee;
B.the proposed Directors’ remuneration policy setting out the Company’s policy on Directors’ compensation (the “Directors’ Remuneration Policy”), to be approved by a binding vote of the shareholders at the annual general meeting to be held on Thursday, June 9, 2022 (the “AGM”) for a three-year period; and
C.the annual report on remuneration for financial year 2021 setting out Director compensation and detailing the link between Company performance and compensation for the period specified therein. The annual report on remuneration, together with the Annual Statement (the “Annual Report on Remuneration”) (excluding the Directors’ Remuneration Policy), is subject to a non-binding advisory vote at the AGM.
In January 2018, the Company successfully completed an initial public offering (the “IPO”) on the New York Stock Exchange (“NYSE”). As a NYSE listed company, the Company prepared its proxy statement for the AGM in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). In this proxy statement on Schedule 14A, which was filed with the SEC on or about April 28, 2022, and can be found on the Company’s investor website at investors.gates.com, you will find the Company’s compensation discussion and analysis (“CD&A”) setting forth its overall philosophy regarding compensation of its executive officers, which should be read in conjunction with this Directors’ Remuneration Report. In addition to the rules and regulations of the SEC, as a U.K. public limited company, the Company is also subject to the Companies Act and the regulations promulgated thereunder. Accordingly, the Company has produced this Directors’ Remuneration Report.
The Company’s business and affairs are managed under the direction of its Board of Directors (the “Board”), which currently consists of nine directors, including Mr. Jurek (its Chief Executive Officer and sole “Executive Director”). The Company’s non-employee directors, including its Chair, are referred to as “Non-Executive Directors.” The Company is party to a shareholders agreement with certain affiliates of Blackstone Inc. (its “Sponsor”). This agreement grants the Sponsor the right to designate nominees to the Company’s Board subject to the maintenance of certain ownership requirements in the Company. During financial year 2021, the Sponsor had two director appointees (Ms. Kahr and Mr. Simpkins) until September, at which time Ms. Kahr resigned from her position with the Sponsor but remained on the Company’s Board. They are both Non-Executive Directors and are referred to herein (until September 2021, for Ms. Kahr) as the “Sponsor-affiliated Directors.”
At the Company’s first annual general meeting held on May 23, 2019, its shareholders approved the current directors’ remuneration policy, which applies to the material elements of the compensation package for its executive officers, including its Executive Director, and its Non-Executive Directors. In accordance with relevant laws, the Company is submitting the proposed Directors’ Remuneration Policy for approval again at this AGM, with only a few modifications (as further detailed below). If approved, the Directors’ Remuneration Policy will be in effect until a new policy is submitted for approval at the annual general meeting to be held in 2025, unless an earlier amendment by shareholders is required.
A-1
Under the previously approved directors’ remuneration policy, and in the proposed Directors’ Remuneration Policy, the material elements of compensation for the Company’s Non-Executive directors who are not Sponsor-affiliated Directors are an annual cash retainer and an annual grant of time-based vesting restricted stock units. The material elements of compensation for the Company’s Executive Director are base salary, an annual bonus opportunity and a long-term incentive opportunity, skewed towards variable “at risk” compensation. The Company’s Executive Director does not participate in deliberations regarding his own compensation. This compensation program is designed to recognize the Executive Director’s scope of responsibilities, leadership ability and effectiveness in achieving key performance goals and objectives. The Company also provides its Executive Director with various retirement and benefit programs. The Sponsor-affiliated Directors receive no compensation for serving on the Board in such capacity.
The Board has a compensation committee that oversees risks relating to the Company’s compensation policies and practices (the “Compensation Committee”). The Compensation Committee provides assistance to the Board for oversight of the compensation packages of directors and executive officers, including the Company’s Executive Director. The Compensation Committee is currently comprised of Ms. Julia Kahr (Chair), Mr. Terry Klebe and Mr. Neil Simpkins. The Compensation Committee annually reviews the performance and compensation for the directors and executive officers and, with input and guidance from an independent compensation consultant, approves or recommends to the full Board any changes to their compensation packages in light of such review.
The Company is a leading manufacturer of application-specific fluid power and power transmission solutions. Gates is driven to push the boundaries of materials science to engineer products that continually exceed expectations. To achieve its objectives, the Company must be the destination of choice for the best talent. The Company’s philosophy is to offer a remuneration program that will enable it to attract, motivate, reward and retain high-caliber executives who are capable of creating and sustaining value for its customers and shareholders and achieving the Company’s business goals over the long term. In addition, the Company’s remuneration program is designed to provide a fair and competitive compensation opportunity that appropriately rewards executives for their contributions to its success. The Company also believes that a significant portion of each executive’s compensation should be “at risk” and tied to overall Company and individual performance.
The Company delivered excellent financial results in 2021, with strong revenue growth and solid margin expansion as compared to the prior year. These results were driven by the efforts and perseverance of Gates associates around the world, who prioritized supporting customers while navigating significant inflation and challenges related to material, labor and freight availability, and the resulting inefficiencies. Simultaneously, the Company continued to invest in organic growth initiatives to build on the progress made and support future growth opportunities going forward.
Below is the proposed Directors’ Remuneration Policy. Following that is the Company’s Annual Report on Remuneration for financial year 2021, which aligns with the Company’s previously approved directors’ remuneration policy and supports its pay-for-performance philosophy. For financial year 2021, the Board of Directors made three noteworthy compensation award decisions.
First, as a result of an excellent year of performance by the Company, the Compensation Committee approved an aggregate funding of 135% of the short-term incentive opportunity for eligible employees under the Gates Global Bonus Policy (the “Annual Plan”). The Gates Financial Performance Factor metrics of Adjusted EBITDA, Free Cash Flow and Revenue under the Annual Plan were all above the maximum payout opportunity of 150% for 2021, though the Compensation Committee opted to exercise negative discretion to provide for a payout of 135%, and for the Company’s corporate function, which includes the Executive Director, adjusted the Gates Performance Factor to 130%. Accordingly, the Compensation Committee awarded the Executive Director 130% of his annual short term incentive opportunity for financial year 2021.
A-2
Second, in October 2021, the Board approved the annual compensation package for its Non-Executive Directors with no changes. The Board reviews the Non-Executive Director compensation package every two years, taking into account the recommendations of its independent compensation consultant based on a competitive pay study of the Company’s peer group and the broader market. The independent compensation consultant recommended maintaining the compensation package of $225,000, consisting of $100,000 as an annual cash retainer (payable in quarterly installments in arrears) and $125,000 in value of restricted stock units (payable annually). Restricted stock units vest in full on the first anniversary of the grant date. The chairpersons of the Company’s three standing committees are entitled to receive an additional annual cash retainer of $25,000 for the Audit Committee and $10,000 for each of the Compensation Committee and the Nominating and Governance Committee. The Board believes this compensation package, with approximately 45% as a cash retainer and 55% as an equity grant, is consistent with the median of the peer group and aligns Non-Executive Director compensation with the long-term interests of our shareholders.
Third, in February 2021, the Compensation Committee recommended, and the Board approved, a change to the Executive Director’s long-term incentive (“LTI”) equity mix for awards granted pursuant to the Company’s 2018 Omnibus Incentive Plan. For 2021, a portion of the Executive Director’s equity grants include time-based vesting non-qualified stock options (“Options”) with a strike price that reflects a 10% premium over the closing price on the date of the grant. The Compensation Committee recommended the addition of premium priced Options to strengthen the link between the Executive Director’s compensation and the long-term interests of our shareholders. Accordingly, in financial year 2021, the Board awarded the Executive Director a long-term incentive equity grant comprised of 50% performance-based restricted stock units (“PRSUs”), 25% time-based vesting restricted stock units (“RSUs”), 20% Options and 5% premium-priced Options.
Thank you for your continued interest in Gates.
Julia C. Kahr
Chair of the Compensation Committee
April 28, 2022
A-3
PROPOSED DIRECTORS’ REMUNERATION POLICY
Objectives of the Company’s remuneration programs
It is intended that the Directors’ Remuneration Policy set out in this report, if approved, will, for the purposes of section 226D(6)(b) of the Companies Act 2006, take effect immediately upon shareholder approval and will remain in effect until the annual general meeting to be held in 2025, unless earlier revised by a vote of the shareholders.
Explanation of Determination of Directors’ Remuneration Policy
The key aim of the Directors’ Remuneration Policy is to align the interests of the Executive Director and the Non-Executive Directors with those of the shareholders by emphasizing a pay-for-performance compensation philosophy. The Company believes that a significant portion of the Executive Director’s compensation should be “at risk” and tied to overall Company and individual performance. Similarly, the Company believes that a significant portion of the Non-Executive Directors’ compensation should be tied to the long-term interests of our shareholders. The Company’s compensation program is designed to enable the Company to attract, motivate, reward and retain high-caliber individuals who are capable of creating and sustaining value for customers and shareholders and achieving the Company’s business goals over the long term. In addition, the compensation program for the Executive Director is designed to provide a fair and competitive compensation opportunity that appropriately rewards him for his contributions to the Company’s success. The material elements of compensation for the Executive Director including the following, each designed to align with the Company’s compensation philosophy, and each as described in detail in the Future Policy Table.
•Base salary
•Annual Cash Bonus (a short-term incentive tied to the Company’s annual financial performance)
•Long-Term Equity Incentives (a long-term incentive opportunity consisting of performance-based restricted stock units, time-based vesting restricted stock units and stock options)
The material elements of compensation for the Non-Executive Directors are an annual cash retainer (payable in quarterly installments in arrears) and an annual equity grant of restricted stock units, as described in detail in the Future Policy Table.
In order to avoid any conflict of interest, remuneration is managed through well-defined processes. The Compensation Committee provides assistance to the Board to oversee the Company’s Executive Director compensation program. It retains an independent compensation consultant to support the oversight and management of the Company’s compensation program.
As part of the Compensation Committee’s responsibilities under its charter, it oversees the annual compensation decision process for Executive Director. The Compensation Committee has historically taken into account multiple factors, such as considering the responsibilities, performance, contributions and experience of the Executive Director and his compensation in relation to other employees and other equivalent roles at peer companies. The Compensation Committee annually reviews the Executive Director’s performance, base salary, annual incentive target opportunity and outstanding long-term incentive awards and approves any changes to the Executive Director’s overall compensation package in light of such review. The Executive Director does not participate in deliberations regarding his own compensation.
Every two years, the Board reviews and approves the Non-Executive Director compensation based on the recommendation of the Compensation Committee. In making a recommendation, the Compensation Committee, with the assistance of the independent compensation consultant, reviews and considers market data for the Company’s peer group, which is the same peer group used for the Company’s executive compensation peer group, as well as a general industry group consisting of comparably sized general industry companies (excluding financial services) with median revenues of approximately the Company’s size.
The Compensation Committee has the discretion to amend the Directors’ Remuneration Policy with regard to minor or administrative matters where it would be, in the opinion of the Committee, in the best interests of the Company, and disproportionate to seek or await shareholder approval.
Summary of key changes to the Directors’ Remuneration Policy
The proposed Directors’ Remuneration Policy is substantially similar to the current Director’s Remuneration Policy and will be applied in the same manner as the current policy. The material elements of compensation remain the same.
A-4
Future Policy Table
Executive Director Compensation Table
The below table sets out the compensation package for Mr. Ivo Jurek, the Company’s Chief Executive Officer and its sole Executive Director. In the event that further Executive Directors are appointed during the period for which the proposed policy is in force, the Compensation Committee shall have discretion to determine the compensation package for such appointments in accordance with the policy.
| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
Base Salary | –Attract and retain high-performing individuals. –Reflect an individual’s skills, experience and performance. –Align with market value of role. | The base salary for the Executive Director is determined by the Compensation Committee after consideration of a number of factors, including: (1) the breadth, scope and complexity of his role; (2) internal equity; (3) current compensation; (4) tenure in position and prior tenure in related roles (excepting Gates); (5) market pay levels; and (6) individual performance. | There is no prescribed maximum to base salary. Increases may be made when the Compensation Committee considers it appropriate, including when there is a significant increase in the scale, scope, responsibilities or market comparability of the role. | None. | ||||||||||||||||||||||
The Compensation Committee annually reviews the Executive Director’s base salary and approves any changes to the Executive Director’s compensation package in light of such review. The Executive Director does not participate in deliberations regarding his own compensation. | ||||||||||||||||||||||||||
Annual Cash Bonus (a short-term incentive tied to the Company’s annual financial performance) | –Attract and retain high-performing individuals. –Drive key business results. –Advance profitability. | The Executive Director participates in the Gates Global Bonus Policy (the “Annual Plan”) which is designed to (1) reward achievement of specific performance goals that advance the Company’s profitability; (2) drive key business results; and (3) recognize individuals based on their contributions to those results. Payouts under the Annual Plan are based on a combination of the achievement of the Company’s financial performance goals for the fiscal year (the “Gates Financial Performance Factor”), and the Executive Director’s performance against his individual performance goals (the “Individual Performance Factor”). | There is no maximum on the Annual Plan as the Compensation Committee has the ability to exercise discretion to vary the amount determined by the formula if, in the exercise of its business judgment, it determines that a greater or lesser amount is warranted under the circumstances. | Subject to clawback in accordance with Gates’ Incentive Clawback Policy (as described in the notes to this Future Policy Table). | ||||||||||||||||||||||
A-5
| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
Notwithstanding the establishment of the performance components and the formula for determining the attainment levels as described above, the Compensation Committee has the ability to exercise positive or negative discretion and award a greater or lesser amount to fund the Annual Plan than the amount determined by the formula described below if, in the exercise of its business judgment, the Compensation Committee determines that a greater or lesser amount is warranted under the circumstances. Gates Financial Performance Factor. The Gates Financial Performance Factor determines the quantum of the Annual Plan. The Compensation Committee retains discretion to determine the financial performance measures and their relative contribution weighting, to calculate the Gates Financial Performance Factor, applying measures which are assessed as critical indicators of the Company’s performance and which, when combined, contribute to sustainable growth. For financial year 2022, the financial performance measures are: Adjusted EBITDA (50%), Free Cash Flow (30%) and Revenue (20%). After the Gates Financial Performance Factor is calculated and the “pool” is set to fund bonus payouts, a proportion of the pool is allocated to the Executive Director as determined by the Compensation Committee based on the Company’s performance against the Financial Measures as applied at the discretion of the Compensation Committee. Individual Performance Factor. The Executive Director’s Individual Performance Factor is determined based on both financial and non-financial objectives appropriate for his position. | ||||||||||||||||||||||||||
A-6
| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
Actual amounts paid under the Annual Plan are calculated by multiplying for each fiscal year the Executive Director’s base salary at the end of the fiscal year by (i) his Annual Plan target bonus opportunity (which is reflected as a percentage of base salary), (ii) the final Gates Financial Performance Factor and (iii) the Individual Performance Factor. | ||||||||||||||||||||||||||
Long Term Equity Incentive (a long-term incentive opportunity) | –Attract and retain high-performing individuals. –Incentivize long-term business performance and promote retention. –Ensure long-term compensation is directly linked to the value that is delivered to the shareholders. | In connection with the IPO, the Company adopted the Gates Industrial Corporation plc 2018 Omnibus Incentive Plan (the “2018 Omnibus Incentive Plan”), a market-based long-term incentive program which allows for awards of a mix of performance shares, share options and restricted shares. For 2022, the Compensation Committee approved a new annual award for the Executive Director under the 2018 Omnibus Incentive Plan consisting 50% RSUs and 50% PRSUs. The RSUs will vest in equal annual installments on the first three anniversaries of the grant date, subject to the Executive Director’s continued employment through the applicable vesting date. The PRSUs will vest upon completion of the three year performance period (2022 - 2024) and will be paid after certification of the performance results by the Compensation Committee. The Compensation Committee may make future grants, and may revise the equity mix and vesting schedule for future grants as permitted under and in accordance with the 2018 Omnibus Incentive Plan. | PRSUs have a maximum payout opportunity of 200% of the target. PRSUs have a minimum payout (assuming threshold attainment) of 50% of the target. There is no maximum opportunity for the RSUs or options. | Subject to clawback in accordance with Gates’ Incentive Clawback Policy described elsewhere in this report. | ||||||||||||||||||||||
Retirement Benefits | –Attract and retain high-performing individuals. –Align with market value of role. –Provide mechanism to accumulate retirement benefits. | Gates MatchMaker 401(k) Plan The Executive Director is eligible to participate in a qualified defined contribution retirement benefit plan that provides him with an individual retirement account funded by (1) an automatic Gates-paid contribution of 3% of eligible earnings, and (2) a Gates-paid match on employee contributions dollar-for-dollar on the first 3% of eligible earnings that he contributes. | Gates MatchMaker 401(k) Plan Maximum of 6% of eligible earnings. | None. | ||||||||||||||||||||||
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| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
Supplemental Retirement Plan The Company offers a non-qualified plan that provides the Executive Director with benefits similar to the Gates MatchMaker 401(k) Plan (see above) but without an employer matched contribution, and which is not subject to statutory employer contributions and earnings limitations applicable to a 401(k) plan. | 1.6% of eligible earnings that exceed certain statutory limits. 2.Deferral of up to 80% of base salary and bonus into the plan. | None. | ||||||||||||||||||||||||
This plan provides the Executive Director with two benefit opportunities: 1.Non-elective employer contribution. A 6% employer contribution (the “Retirement Contribution”) on eligible earnings that exceed certain statutory limits. 2.Compensation Deferral Opportunity. The Supplemental Retirement Plan permits the Executive Director to defer up to 80% of his base salary and 80% of bonus compensation into the plan, which is then subject to tax when withdrawn from the plan. | ||||||||||||||||||||||||||
Other Benefits | –Attract and retain high-performing individuals. –Align with market value of role. | The additional benefits for the Executive Director generally consist of a parking subsidy, tax return preparation services, an executive annual physical examination, and certain limited personal use of an airplane leased by the Company pursuant to a fractional lease program. Tax gross-ups to compensate the Executive Director for tax suffered on certain relocation benefits are also provided. | 1.Parking maximum is up to the actual cost of 12 months of parking. The current applicable annual rate for parking is $3,900. 2.Executive physical: no maximum. 3.Tax preparation: no maximum. 4.Preapproval of up to 25 flight hours for personal use. All “Other Benefits” are subject to periodic review. | None. | ||||||||||||||||||||||
Other benefits, such as medical, dental and short-term disability coverage may be provided to the Executive Director, identical to the benefits provided to all other eligible U.S.-based employees. The Executive Director may also receive enhanced benefits that are not available to other employees, such as relocation assistance and enhanced life, accidental death and dismemberment (“AD&D”) and long-term disability insurance benefits. | The Executive Director is currently eligible for enhanced life and AD&D insurance benefits of 3x base salary up to $3,000,000. | None. | ||||||||||||||||||||||||
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| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
An individual disability insurance plan is offered to the Executive Director. | This plan provides for a monthly disability payment upon the occurrence of a qualifying event. This benefit is subject to periodic review. | None. | ||||||||||||||||||||||||
Change in Control and Severance Benefits | –Attract and retain high-performing individuals. –Allows individuals to perform their duties with respect to any potential proposed corporate transaction without concern for the impact of the transaction on their individual employment. –The interests of shareholders are better protected and enhanced by providing greater certainty regarding executive pay obligations in the context of planning and negotiating any potential corporate transactions. | Severance Benefits The Executive Severance Plan provides for severance payments upon certain termination of employment events to the Executive Director. The Executive Severance Plan also provides for reimbursement for reasonable outplacement as well as health and dental benefit continuation assistance. | Severance Benefits The Executive Director is provided with (i) salary continuation payments in an amount equal to the sum of two times base salary and two times previous year bonus, (ii) the annual bonus under the Annual Plan as earned (without the adjustment for the Individual Performance Factor) for the year in which the separation occurs (pro-rated for days of service during the fiscal year), (iii) cash payments in an amount equal to the total amount of Gates’ portion of the monthly insurance premiums for participation in the health and dental programs in which the Executive Director participated in payable for 24 months, and (iv) reimbursement for reasonable outplacement services incurred during a six consecutive month period. This is subject to periodic review. | None. | ||||||||||||||||||||||
Change of Control Benefits The Executive Change in Control Plan provides for payments to the Executive Director in the event of a “change of control” of Gates and a qualifying termination. The Executive Change in Control Plan provides for reimbursement for reasonable outplacement as well as health and dental benefit continuation assistance. | Change of Control Benefits In the event of a “change in control” of Gates and a qualifying termination, the Executive Director is provided with (i) payments in the amount of two and a half times base salary plus target bonus, (ii) the annual bonus under the Annual Plan as earned (without the adjustment for the Individual Performance Factor) for the year in which the separation occurs (pro-rated for days of service during the fiscal year), (iii) cash payments in an amount equal to the total amount of Gates’ portion of the monthly insurance premiums for participation in the health and dental programs in which the Executive Director participated in payable for 30 months, and (iv) reimbursement for reasonable outplacement services incurred during a six consecutive month period. This is subject to periodic review. | None. | ||||||||||||||||||||||||
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| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
Discretionary Bonuses | –Retain high-performing individuals. –Align with market value of role. | From time to time, the Executive Director may receive a discretionary bonus. | There is no maximum discretionary bonus. A bonus may be awarded above this level where the Compensation Committee considers it appropriate including (but not limited to) a significant improvement in the performance of the Company and its subsidiaries (the “Group”). | Potential for clawback if the Executive Director voluntarily terminates within a specified period of time of receiving payment. | ||||||||||||||||||||||
Non-Executive Director Compensation Table
The below table sets out the compensation package for the Company’s Non-Executive Directors. Currently, all Non-Executive, Non-Sponsor directors receive the same compensation package, generally comprised of 45% as a cash retainer and 55% as an equity grant, with an additional cash retainer for directors serving as the Chair of a committee. The Sponsor-affiliated Director does not receive any compensation for his service. In the event that further Non-Executive Directors are appointed during the period for which the proposed policy is in force, the Compensation Committee shall have discretion to determine the compensation package for such appointments in accordance with the policy.
| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
Fees Earned or Paid in Cash | –Attract and retain Non-Executive Directors with a diverse set of skills, background and experience. –Align with market value of role. | $100,000 per annum fees (payable in quarterly installments in arrears) pro-rated for the period of service. The fees are reviewed annually or at other times when appropriate and may be increased from time to time pursuant to such review. | Fees are a fixed amount per annum. | No recovery provisions apply | ||||||||||||||||||||||
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| Compensation Component | Purpose / Link to Gates’s Business Strategy | How Component Operates | Maximum Opportunity | Recovery or withholding | ||||||||||||||||||||||
Stock Awards | –Attract and retain Non-Executive Directors with a diverse set of skills, background and experience. –Align with market value of role. –Align our eligible directors’ financial interests with those of the shareholders. | Annual awards of $125,000 in value of restricted stock units. This is reviewed annually or at other times when appropriate and may be increased from time to time pursuant to such review. | The number of restricted stock units is not adjusted once awarded. | Subject to reduction, cancellation, forfeiture, or recoupment to the extent necessary to comply with (i) any clawback, forfeiture, or other similar policy adopted by the Board or the Compensation Committee and as in effect from time to time, and (ii) applicable law. Further, to the extent that the director receives any amount in excess of the amount that he or she should otherwise have received under the terms of the award for any reason (including, without limitation, by reason of a financial restatement, mistake in calculations, or other administrative error), the director shall be required to repay any such excess amount to the Company. | ||||||||||||||||||||||
Committee Chairperson Fees | –Attract and retain Non-Executive Directors with a specialized set of skills, background and experience –Recognize additional time and responsibility associated with role –Align with market value of role | The Chairpersons of the following committees receive additional annual fixed fees (payable in quarterly installments in arrears): •Chair, Audit Committee: $25,000 •Chair, Compensation Committee: $10,000 •Chair, Nominating and Governance Committee: $10,000 These amounts are reviewed annually or at other times when appropriate and may be increased from time to time pursuant to such review. | Fees are a fixed amount per annum. | No recovery provisions apply | ||||||||||||||||||||||
Reimbursement for preparation of tax filings in U.K. and reimbursement of expenses | –Compensate directors for costs necessarily incurred by them arising from the Company’s choice of country of incorporation. –Compensate directors for costs incurred to attend Board or committee meetings. | The Company reimburses each Non-Executive Director for any advisor fees incurred by such director in connection with the preparation of such director’s U.K. tax return. The Company reimburses all directors for expenses associated with each Board or committee meeting attended. | — | No recovery provisions apply. | ||||||||||||||||||||||
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Notes to Future Policy Table
Incentive Clawback Policy
The Company has adopted a clawback policy for incentive compensation. Under the policy, if the Compensation Committee determines that cash or equity incentive compensation of certain of its current and former officers, including the Executive Director (or any other current and former employee designated by the Board or the Compensation Committee), was overpaid, in whole or in part, as a result of a restatement of the reported financial results of the Company or any of its segments due to material non-compliance with financial reporting requirements (unless due to a change in accounting policy or applicable law), and such restatement was caused or contributed, directly or indirectly, by such employee’s fraud, willful misconduct or gross negligence, then the Compensation Committee will determine, in its discretion, whether to seek to recover or cancel any overpayment of incentive compensation paid or awarded based on the inaccurate financial information or restated results. The clawback policy and the Company’s 2018 Omnibus Incentive Plan also provide that if a covered person engages in any detrimental activity (as defined in the 2018 Omnibus Incentive Plan) as determined by the Compensation Committee, the Compensation Committee may, in its sole discretion, provide for one or more of the following: (i) cancellation of any or all of such covered person’s outstanding awards; or (ii) forfeiture by the covered person of any gain realized on the vesting or exercise of awards, and prompt repayment of any such gain to us.
Policy on payment for loss of office
Executive Director
Executive Severance Plan
In connection with the IPO in 2018, the Company adopted the executive severance plan (the “Executive Severance Plan”). The Executive Severance Plan provides for severance payments upon certain terminations of employment to the Executive Director, who is expected to make substantial contributions to the Company’s success and thereby provide for stability and continuity of operations. The Executive Director participates in the Executive Severance Plan pursuant to an individual participation agreement.
The Executive Severance Plan provides that, if the Company terminates the employment of the Executive Director for any reason other than “cause”, death or disability, or if the Executive Director voluntarily terminates as a result of “constructive termination,” then the Executive Director will be entitled to receive:
•salary continuation payments in an amount equal to the sum of two times base salary and two times previous year bonus;
•the Executive Director’s annual bonus under the Annual Plan as earned (without the adjustment for an individual performance factor) for the year in which the separation occurs (pro-rated for days of service during the fiscal year), payable concurrently with cash bonus payments to other employees under the Annual Plan;
•cash payments in an amount equal to the total amount of the Company’s portion of the monthly insurance premiums for participation in the health and dental benefit programs in which the Executive Director participated immediately prior to separation, payable monthly for each month of the welfare continuation period, which is for a period of 24 months; and
•reimbursement for reasonable outplacement services that are directly related to the Executive Director’s termination and incurred only during a six-consecutive month period that ends within or with the 12-month period following the termination of his employment.
For these purposes, “cause” and “constructive termination” have the meanings ascribed to such terms in the Executive Severance Plan.
The Executive Severance Plan contains a “best-of-net” provision. With a “best-of-net” provision, if the Executive Director is subject to an excise tax under Code Section 280G and Code Section 4999, then the amount of severance he receives may be reduced so that the excise tax does not apply; however, such reduction will only occur if it results in the receipt of a greater after-tax severance than would otherwise be provided.
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The Executive Director is not entitled to payments under the Executive Severance Plan if he is entitled to receive payment under the Executive Change in Control Plan discussed below. In addition, in order to receive payments under the Executive Severance Plan, the Executive Director must execute and not revoke a release of claims against the Company and continue to comply with confidentiality, non-compete, non-solicitation and non-disparagement covenants during his employment and for the one-year period following any termination of employment (or such longer period as the Executive Director is eligible to receive severance payments from us).
Executive Change in Control Plan
In connection with the IPO in 2018, the Company adopted the executive change in control plan (the “Executive Change in Control Plan”) in which the Executive Director participates pursuant to an individual participation agreement. The Executive Change in Control Plan serves to encourage the Executive Director to carry out his duties and provide continuity of management in the event of a “change of control” of Gates.
If a change in control occurs and the Executive Director’s employment is terminated by the Company or a successor for reasons other than “cause” or is terminated voluntarily by him for “constructive termination,” in each case within the period beginning 90 days prior to the consummation of a change in control and ending on the second anniversary of the date of such change in control, then the Executive Change in Control Plan generally provides that he would be entitled to receive:
•a lump-sum payment in the amount of two and one-half times base salary plus target bonus amount;
•a lump-sum payment equal to his target bonus amount in effect prior to the change in control (pro-rated for days of service during the fiscal year);
•cash payments in an amount equal to the total amount of the monthly insurance premiums for participation in the health and dental benefit programs as well as the monthly premiums for the life and long-term disability insurance benefit programs in which he participated immediately prior to separation, payable monthly for each month of the welfare continuation period, which is equal to 30 months for the Executive Director; and
•reimbursement for reasonable outplacement services that are directly related to the Executive Director’s termination and incurred only during a six-consecutive month period that ends within or with the 12-month period following the termination of his employment.
For these purposes, “change in control”, “cause” and “constructive termination” have the meanings ascribed to such terms in the Executive Change in Control Plan.
The Executive Change in Control Plan contains a “best-of-net” provision. With a “best-of-net” provision, if the Executive Director is subject to an excise tax under Code Section 280G and Code Section 4999, then the amount of severance he receives may be reduced so that the excise tax does not apply; however, such reduction will only occur if it results in the receipt of a greater after-tax severance than would otherwise be provided.
To the extent a payment or benefit that is paid or provided under the Executive Change in Control Plan would also be paid or provided under the terms of another plan, program, agreement, arrangement or legal requirement, the Executive Director would be entitled to payment under the Executive Change in Control Plan or such other applicable plan, program, agreement, arrangement or legal requirement, whichever provides for greater benefits, but would not be entitled to benefits under both the Executive Change in Control Plan and such other plan, program, agreement, arrangement or legal requirement.
In addition, in order to receive payment and benefits under the Executive Change in Control Plan, the Executive Officer must execute and not revoke a release of claims against the Company and continue to comply with confidentiality, non-compete and non-solicitation covenants during his employment and for the one-year period following any termination of employment (or such longer period as the Executive Director is eligible to receive severance payments from the Company).
Neither plan contains a single trigger or a modified single trigger for benefits. In addition, the Executive Change in Control Plan does not provide for benefits upon death or disability following a change in control.
Policy on recruitment remuneration
The compensation package for a new director will be set in accordance with the terms of the remuneration policy in force at the time of appointment or hiring, save that sign-on bonuses may also be considered as set out below. There is no maximum aggregate value of incentives applicable under the policy, but the Compensation Committee is mindful to pay no more than is necessary to facilitate recruitment of the right talent.
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In the case of an internal appointment/promotion of an individual to the Executive Director or other director position, the Compensation Committee reserves discretion to set base salary at a level it deems appropriate to reflect the material increase in scope and responsibility.
For external hires and internal appointments, the Compensation Committee may agree that the Company will meet certain relocation expenses which includes home finding assistance, home purchase assistance (including reimbursement of closing costs and limited inspection fees), home sale assistance (marketing and closing cost assistance), moving household goods, and a lump sum for miscellaneous expenses.
Sign on bonuses will also be used at the Compensation Committee’s discretion to attract highly skilled officers to the Company. Generally, they are used to incentivize candidates to leave their current employers, or may be used to offset the loss of unvested compensation they may forfeit as a result of leaving their current employers.
On appointment of a new non-executive director, remuneration will be set in accordance with the terms of the remuneration policy in force at the time of appointment.
Service Contracts and Letters of Appointment
Please refer to the “Policy on payment for loss of office” section of this Directors’ Remuneration Policy for a description of the obligations on the Company that could give rise to remuneration or loss of office payments. Directors may resign at any time without notice and are not subject to a specified term. Directors’ letters of appointment are held at the Company’s offices at 1144 Fifteenth Street, Denver, Colorado 80202. The Executive Director is employed on an “at will” basis such that no notice provision applies.
Consideration of employment conditions elsewhere in company
Although the Compensation Committee does not consult directly with the broader employee population on the Company’s executive compensation program, the Compensation Committee considers a variety of factors when determining the Directors’ Remuneration Policy, including but not limited to (1) compensation arrangements covering variable pay and benefits for all employees, (2) recent trends in talent attraction and retention affecting the Company and the industry and (3) employment conditions for the broader employee population. In addition to these considerations, the Compensation Committee believes that the compensation policy for the Executive Director is necessary to reflect the increased qualifications and level of responsibility of the position relative to the typical employee.
Non-Executive Directors
The Company’s general policy is that Non-Executive Directors should be appointed on an “at will” basis such that no notice provision applies. There are no obligations which could give rise to a remuneration or loss of office payment to any of the Non-Executive Directors.
The Compensation Committee may vary these terms if the particular circumstances surrounding the appointment of a new Non-Executive Director require it (in accordance with the policy on the appointment of new Non-Executive Directors above). In particular, the Compensation Committee may determine that these terms may vary substantially where it is necessary or desirable to recruit in a market in which “at will” employment terms are not competitive.
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Illustration of application of Directors’ Remuneration Policy
The following graph sets out the minimum, target and maximum compensation that could be earned by the Executive Director in 2022 based on the policy described above. These amounts reflect three levels of performance: Minimum, Target (at expectation) and Maximum.
•Minimum: Includes the sum of base salary, retirement benefits, other taxable benefits and the grant date fair value of the RSUs. Excludes pay for performance (i.e., assumes no payout of the Annual Plan and no vesting of performance shares). As shown in the graph below, Minimum consists of 33.8% Fixed and 66.2% Equity.
•Target (at expectation): Includes the fixed compensation listed above, plus (i) Annual Plan payout at target level of 100% attainment, and (ii) the grant date fair value of the PRSUs at 100% vesting. As shown in the graph below, Target consists of 16.2% Fixed, 20.3% Annual Plan, and 63.5% Equity.
•Maximum: Includes the fixed compensation listed above, plus (i) Annual Plan payout at the maximum level of 150% attainment, and (ii) the grant date fair value of the PRSUs at 200% vesting. As shown in the graph below, Maximum consists of 11.4% Fixed, 21.4% Annual Plan, and 67.2% Equity.
Additional assumptions used in compiling the graph illustrations are:
•Base Salary, Fees, Pension & Benefits: For all scenarios, reflects the 2022 base salary, which was effective on February 25, 2022. The value of the taxable benefits is as disclosed in the Single Figure Total Remuneration Table for Executive Director in the Directors’ Remuneration Report for financial year 2021.
•Long Term Incentive: For all scenarios, reflects the RSUs at grant date fair value measured using applicable accounting standards. These values do not represent actual amounts that the Executive Director would receive in 2022 as the RSUs vest in equal annual installments over three years and the PRSUs vest, only to the extent earned, at the end of a three-year performance period. In all scenarios, the 2022 long term incentive values assume no share price change relative to the closing price of Gates shares on the grant date.
Consideration of shareholder views
The Compensation Committee will consider the shareholders’ advisory votes on the directors’ remuneration report presented to the Company’s shareholders at each annual general meeting. The Company is committed to continued engagement between shareholders and the Company to fully understand and consider shareholders’ input and concerns.
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THE DIRECTORS’ REMUNERATION REPORT
For the financial year ended January 1, 2022 (“financial year 2021”)
In accordance with the U.K. Large and Medium-sized Companies & Groups (Accounts & Reports) (Amendment) Regulations 2013 (the “Regulations”), this Directors’ Remuneration Report includes disclosure of certain amounts paid to directors for “qualifying services.” This disclosure is presented for (i) financial year 2021, and (ii) for the financial year ended January 2, 2021 (“financial year 2020”).
The following directors served during financial year 2021:
Executive Director
•Mr. Ivo Jurek
Non-Executive Directors
•Mr. James Ireland
•Ms. Julia Kahr (Ms. Kahr was a Sponsor-affiliated director until September 2021, at which time she resigned her position with the Sponsor but remained on the Company’s Board)
•Mr. Terry Klebe
•Ms. Stephanie Mains
•Mr. Wilson Neely
•Ms. Alicia Tillman (appointed effective April 27, 2021)
•Dr. Molly Zhang
Non-Executive Directors; Sponsor-affiliated Directors
•Mr. Neil Simpkins
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Remuneration for each director
Single Figure Total Remuneration Table for Executive Director
This table reflects compensation earned by the Company’s Executive Director during financial year 2021 and during the financial year 2020, which includes base salary, annual cash bonus, long-term equity incentives and certain employee benefits.
| Name | Year | Salary ($)(1) | All Other Benefits ($)(2) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | Total Fixed ($) | Stock Awards ($)(3) | Option Awards ($)(4) | Annual Bonus ($)(5) | Total Variable ($) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ivo Jurek | 2021 | $ | 1,051,392 | $ | 217,622 | $ | — | $ | 1,269,014 | $ | 1,031,752 | $ | 397,796 | $2,058,713 | $ | 3,488,260 | $ | 4,757,275 | ||||||||||||||||||||||||||||||||||||||||||||
| 2020 | $ | 1,025,633 | $ | 84,867 | $ | — | $ | 1,110,500 | $ | 378,907 | $ | — | $ | 1,545,000 | $ | 1,923,907 | $ | 3,034,407 | ||||||||||||||||||||||||||||||||||||||||||||
(1)The amounts reported in the “Salary” column consist of base salary earned during each financial year.
(2)The amounts reported in the “All Other Benefits” column reflect the sum of: (1) the amounts contributed by Gates to the Gates MatchMaker 401(k) Plan and the Supplemental Retirement Plan*; and (2) the cost of all other executive benefits, as shown in the table below:
| Name | Year | Company Contributions to Gates MatchMaker 401(k)(a) | Company Contributions to Gates Executive Supplemental Retirement Plan(b) | Other Benefits(c) | Total | |||||||||||||||||||||||||||
I. Jurek | 2021 | $17,400 | $147,654 | $52,569 | $217,622 | |||||||||||||||||||||||||||
| 2020 | $17,100 | $46,738 | $21,029 | $84,867 | ||||||||||||||||||||||||||||
(a)Company Contributions to Gates MatchMaker 401(k) Plan. Gates makes matching contributions of 100% on up to 3% of eligible earnings deferred by all eligible participants, including the Executive Director, in accordance with the Gates MatchMaker 401(k) Plan. Gates also makes a non-elective contribution to all eligible participants, including the Executive Director, in an amount equal to 3% of eligible earnings, subject to Code limitations.
(b)Company Contributions to the Supplemental Retirement Plan. Gates makes a Retirement Contribution of 6% of eligible compensation on behalf of all eligible participants, including the Executive Director, under the Supplemental Retirement Plan for eligible compensation that exceeds Section 401(a)(17) of the Code.
(c)Other Benefits. Represents the aggregate incremental costs of certain additional limited benefits used by the Executive Director, which are a parking subsidy, tax preparation services and limited personal use of an airplane leased by the Company pursuant to a fractional lease program. For the airplane, the aggregate incremental cost was calculated based on the variable operating costs to the Company for personal usage, which includes fees per flight hour, fuel charges and any additional usage or service fees. Mr. Jurek was accompanied by family members, but there was no aggregate incremental cost associated with these additional passengers. Because the airplane is used primarily for business travel, this methodology excludes costs that do not change based on usage, such as the annual lease fee. The amount reported in this column also includes the full value of the premiums paid by Gates with respect to the enhanced life, AD&D and long-term disability insurance benefits provided to the Executive Director.
(3)During the year, 60,727 time-based restricted stock units vested. The market value of the shares awarded at vesting was $1,031,752, representing an aggregate appreciation in value of $150,510 since these awards were granted. Please see also the “2021 Grants of Plan-Based Awards” section below.
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(4)During the year, 84,040 and 80,468 time-based stock options awarded in 2019 and 2020, respectively, vested. The closing share price on the day prior to the vesting date was $16.99 in each case, compared to the exercise price payable by the Executive Director of $16.46 and $12.60, respectively. In addition, certain options held by the Executive Director, as set out in the “Outstanding Equity Awards at January 1, 2022” section below, vested during financial year 2021 but were awarded in his capacity as a director of a former parent of the group, Omaha Topco Limited, and are therefore not included in this table.
(5)The amount reported in the “Annual Bonus” column consist of amounts earned under the Annual Plan. For a summary of the details of the performance measures used and their relative weighting, the performance targets set at the beginning of the performance period and details of actual performance relative to the targets set and measured over the relevant reporting period, and the resulting level of reward, please see the “2021 Grants of Plan-Based Awards” section below.
*The Supplemental Retirement Plan is a funded, nonqualified plan administered by the Company that provides its executives, including its Executive and Non-Executive Directors, with the ability to contribute portions of their compensation towards retirement on a tax-deferred basis. The Company makes a retirement contribution of 6% of eligible compensation on behalf of eligible employee participants, including its Executive Director, for eligible compensation that exceeds the limits in Section 401(a)(17) of Internal Revenue Code of 1986, as amended from time to time. The Company does not make contributions to this Plan for Non-Executive Directors participants.
2021 Grants of Plan-Based Awards
Executive Director
2021 Long-Term Incentive. In February 2021, the Board approved annual long-term incentive awards (the “2021 LTI”) under the 2018 Omnibus Incentive Plan to incentivize long-term business performance as well as to promote retention. The 2021 LTI for the Executive Director is comprised of 50% performance-based vesting restricted stock units (“PRSUs”), 25% time-based vesting restricted stock units (“RSUs”), 20% time-based vesting non-qualified stock options (“Options”), and 5% premium priced Options with a strike price that reflects a 10% premium over the closing price on the date of grant. The RSUs and Options will vest in substantially equal annual installments on the first three anniversaries of the grant date, subject to the Executive Director’s continued employment through the vesting date.
The PRSUs provide that 50% of the award will vest if the Company achieves a certain level of average annual Adjusted Return on Invested Capital (“Adjusted ROIC”) and the remaining 50% will vest if the Company achieves certain Relative Total Shareholder Return (“Relative TSR”) goals. Performance for the Adjusted ROIC and Relative TSR goals are each measured over a three year performance period based on the pre-established scale. The Compensation Committee selected Adjusted ROIC as a metric to drive focus on making sound investments and efficient use of working capital. The Compensation Committee selected Relative TSR as a metric to align a significant portion of pay delivery directly with shareholder value creation. It also aligns the interests and experience of executive officers with those of the Company and its shareholders and filters out macroeconomic and other factors that are not within management’s control.
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Performance Measure | Description | |||||||
| Adjusted ROIC (50%) | 50% of PRSU value is calculated as (Adjusted EBITDA - depreciation and amortization) x (1 - 25% tax rate)) divided by (total assets - non-restricted cash - accounts payable - goodwill and other intangible assets that arose from the acquisition of Gates by Blackstone in 2014). | |||||||
| The financial measures used to determine Adjusted ROIC are calculated in accordance with U.S. GAAP as presented in the Company’s financial statements, except (i) Adjusted EBITDA is defined in substantially the same manner as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Measures” of the 2021 Annual Report, (ii) the depreciation and amortization deduction excludes the amortization of intangible assets arising from the acquisition of Gates by Blackstone in 2014 and (iii) total assets excludes both income tax receivables and deferred income tax assets. | ||||||||
| Relative TSR (50%) | 50% of PRSU value is based on the Company’s three-year relative TSR ranking against companies in the S&P 400 Capital Goods Industry Index (the “Relative TSR Peer Group”). TSR is measured by stock price change and dividends over the performance period as a percentage of the beginning stock price. The beginning and ending stock prices are based on the 20-day trailing averages. | |||||||
The total number of PRSUs that vest at the end of the three-year performance period will range from 0% to a maximum of 200% as determined by measuring actual performance over the performance period for Adjusted ROIC and Relative TSR against the performance goals based on a pre-established scale. Payout for achievement between the performance levels will be determined based on a straight-line interpolation of the applicable payout range rounded to the nearest whole percentage. Payouts are subject to the Executive Director’s continued employment through the end of the applicable performance period and are paid out after the certification of the performance results by the Compensation Committee. The Compensation Committee chose Adjusted ROIC and Relative TSR performance goals that are, in the Compensation Committee’s view, challenging but achievable.
2019-2021 PRSUs. For the PRSUs vested and payable in 2022 (granted in 2019 for a three year performance period from 2019-2021 (the “2019-2021 Performance Period”)), the level of achievement of the two weighted metrics of Adjusted ROIC and Relative TSR resulted in an aggregate payout of 40%, as explained below.
Adjusted ROIC. The PRSU payout level for Adjusted ROIC was based on the three year average during the 2019-2021 Performance Period. The three-year threshold, target and maximum goals were 15%, 20% and 25%, respectively. The Adjusted ROIC achievement was 19.4% for 2019, 15.2% for 2020 and 22.4% for 2021, resulting in a three year average of 19.0% and a payout of 80% of this metric.
Relative TSR. The payout goals for Relative TSR are below. Relative TSR achievement for the three year performance period was 15.41%, which ranks 34 out of 38 of the Relative TSR Peer Group. This performance was below the threshold, resulting in a 0% payout for this metric.
| Relative TSR Percentile Rank | Potential Payout Percentage | ||||
| 75th Percentile or above | 200% | ||||
| 50th Percentile | 100% | ||||
| 25th Percentile | 50% | ||||
| Below 25th Percentile | —% | ||||
2021 Annual Plan. The Company provides a short-term annual incentive opportunity under the Gates Global Bonus Policy (the “Annual Plan”) to reward certain employees, including the Executive Director, for achieving specific performance goals that would advance the Company’s profitability and drive key business results, and to recognize individuals based on their contributions to those results.
Payouts under the Annual Plan were based on a combination of the achievement of the Company’s financial performance goals in Fiscal 2021 (the “Gates Financial Performance Factor”), which fund the Annual Plan, and the Executive Director’s performance during the fiscal year against his individual performance goals (the “Individual Performance Factor”).
A-19
Gates Financial Performance Factor. The Gates Financial Performance Factor sets the funding levels for the Annual Plan. The Board, after an evaluation of possible financial performance measures, determined to continue using Adjusted EBITDA, Free Cash Flow and Revenue as the financial performance measures for 2021. The Board determined that these financial performance measures would be critical indicators of the Company’s performance for 2021 and, when combined, would contribute to sustainable growth. The Annual Plan financial performance measures and weightings for 2021 are described below.
Performance Measure | Definitions | |||||||
| Adjusted EBITDA (50%) | Adjusted EBITDA under the Annual Plan is defined in substantially the same manner as described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Measures,” of the 2021 Annual Report. | |||||||
| Free Cash Flow (30%) | Calculated as Adjusted EBITDA (as defined for purposes of the Annual Plan as described immediately above), less capital expenditures, plus or minus the change in trade working capital versus prior year. | |||||||
| Revenue (20%) | Revenue under the Annual Plan is defined as consolidated revenue as reflected in the Company’s financial statements, excluding the impacts of acquisitions made during the fiscal year. | |||||||
The Compensation Committee reserved the ability to adjust the actual financial performance results to exclude the effects of extraordinary, unusual or infrequently occurring events. The weighted achievement factor for each of the financial performance measures is determined by multiplying the weight attributed to each performance measure by the applicable achievement factor for each measure. For each of the performance measures, the achievement factor is determined by calculating the payout percentage against the target goal based on a pre-established scale. Funding attainment with respect to these performance measures can range from:
•0% funding for performance below the threshold requirement;
•50% of target incentive for achieving 95% of the target performance requirement (threshold);
•100% of target incentive for achieving 100% of the target performance requirement (target); and
•150% of target incentive for achieving 105% or above of the target performance requirement (maximum).
Payouts for performance between points are interpolated on a straight-line mathematical basis and rounded to the nearest whole number. The following table outlines the calculation of the potential funding of the Annual Plan for 2021 based on the Company’s attainment of the Gates Financial Performance Factor measures without any adjustments.
| (dollars in millions) | Threshold | Target | Maximum | 2021 Attainment | Potential Funding | |||||||||||||||||||||||||||||||||||||||||||||
| Measure | Weighting | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | 50% | $ | 645.4 | $ | 679.4 | $ | 713.4 | $ | 738.5 | 108 | % | $ | 20.6 | 150 | % | |||||||||||||||||||||||||||||||||||
Free Cash Flow | 30% | $ | 481.1 | $ | 506.4 | $ | 531.7 | $ | 554.0 | 109 | % | $ | 12.4 | 150 | % | |||||||||||||||||||||||||||||||||||
Revenue* | 20% | $ | 3,013.1 | $ | 3,110.0 | $ | 3,195.1 | $ | 3,474.4 | 112 | % | $ | 8.3 | 150 | % | |||||||||||||||||||||||||||||||||||
* Revenue threshold and maximum are narrower than 95% and 105% to align with the associated EBITDA levels.
Notwithstanding the establishment of the performance measures and the formula for determining the payment amounts for the Annual Plan, the Compensation Committee can exercise positive or negative discretion and award a greater or lesser amount to fund the Annual Plan than the amount determined by the formula if, in the exercise of its business judgment, the Compensation Committee determines that a greater or lesser amount is warranted under the circumstances. The Compensation Committee believes its use of positive discretion should be limited to extraordinary circumstances.
A-20
For financial year 2021, the Compensation Committee reviewed the Company’s attainment of the Gates Financial Performance Factor and, at the recommendation of the Company’s management team, determined it would be appropriate to exclude the translation impact of foreign exchange gains and losses (the “FX impact”) to both the targets and the attainment calculation, as the FX impact on Adjusted EBITDA target was greater than $10 million. Below is the calculation of the potential funding of the Annual Plan for 2021, with the adjustments for FX impact. This did not change the result of maximum attainment of each measure.
| (dollars in millions) | Adjusted Target (100% Funding) | 2021 Attainment Adjusted for FX | Potential Funding | |||||||||||||||||||||||||||||||||||||||||
| Measure | Weighting | FX Impact | $ | % | $ | % | ||||||||||||||||||||||||||||||||||||||
Adjusted EBITDA | 50% | $ | 24.7 | $ | 704.1 | $ | 745.3 | 108 | % | 106 | % | $ | 20.6 | 150 | % | |||||||||||||||||||||||||||||
Free Cash Flow | 30% | $ | 24.7 | $ | 531.1 | $ | 563.5 | 106 | % | $ | 12.4 | 150 | % | |||||||||||||||||||||||||||||||
Revenue | 20% | $ | 95.2 | $ | 3,205.2 | $ | 3,512.7 | 110 | % | $ | 8.3 | 150 | % | |||||||||||||||||||||||||||||||
Finally, the Compensation Committee, at the recommendation of the Company’s management team, exercised negative discretion to the potential funding, reducing it from an aggregate maximum payout of 150% to an aggregate payout of 135%.
After the Gates Financial Performance Factor is calculated and the aggregate amount available to fund the Annual Plan is approved by the Compensation Committee, the Company’s Executive Director may allocate the funding across the organization as he deems appropriate (excluding with respect to himself) and may adjust the Gates Financial Performance Factor either upward or downward for each functional area or geographic region based on the performance of that specific functional area or geographic region. For Fiscal 2021, the Compensation Committee, based on the recommendation of the Executive Director, adjusted the Gates Financial Performance Factor for the Company’s corporate function, which includes the Executive Director, from 135% to 130%.
Individual Performance Factor. Under the Annual Plan, the Compensation Committee establishes an individual target award opportunity for the Executive Director that reflects the market median target annual incentive opportunity as determined in the annual review and evaluation of director compensation described below. At the end of the performance period, the Committee considered both the Company’s 130% payout factor as described above and individual performance factors that are based on achievement against the performance criteria listed below to determine the appropriate attainment percentage for the Executive Director. There is no stated maximum on the Individual Performance Factor.
◦Financial Goals: Achieving the Company’s annual financial plan.
◦Regional Growth Goals: Focusing on growth opportunities to drive richer margins and mix; appropriate pricing strategies in the face of inflationary environment.
◦Operational Excellence: Managing sourcing through an inflationary environment; workplace safety; advancements in product quality and inventory management; effectuate scheduled restructuring activities; operational efficiency/productivity and executing on key company initiatives.
◦Building Organizational Capacity: Reinforcing our ethical standards; attracting talent; building an inclusive environment, building a talent pipeline, developing, and promoting diverse talent as a key differentiator, increasing individuals’ organizational capabilities, and fostering cooperation among the global team.
Environmental, Social and Governance measures in categories such as ethics, sustainability, and diversity and inclusion, have been embedded in our short-term incentive plan and are factored into the growth, operational excellence and building organizational capacity goals that influence the Individual Performance Factor.
Payout. The actual amount paid to the Executive Director under the Annual Plan was calculated by multiplying his base salary in effect on December 31, 2021 by (i) his Annual Plan target bonus opportunity (which is reflected as a percentage of base salary), (ii) the final Gates Financial Performance Factor as adjusted, and (iii) the Individual Performance Factor. The following table illustrates the calculation of the annual cash incentive awards payable to the Executive Director under the Annual Plan based on 2021 financial performance and individual performance.
| Name | Base Salary ($) | Target Annual Plan Opportunity (% of Base Salary) | Target Annual Plan Opportunity ($) | Individual Performance Factor (%) | Financial Performance Factor | 2021 Actual Payout | |||||||||||||||||||||||||||||
| Ivo Jurek | $ | 1,055,750 | 150% | $ | 1,583,625 | 100 | % | 130 | % | $ | 2,058,713 | ||||||||||||||||||||||||
A-21
2021 Grants of Plan-Based Awards Table
The following table summarizes all grants of plan-based awards to the Company’s Executive Director in financial year 2021 and financial year 2020.
Award Type | Grant Date | Estimated Future Payouts under non-equity incentive plan awards ($) | Estimated Future Payouts under Equity Incentive Plan Awards (#) | All other stock awards: number of shares of stock units (#) | All other option awards: number of securities underlying options (#) | Exercise or base price of option awards ($/sh) | Grant date face value of stock and option awards ($)(6) | Grant date fair value of stock and option awards ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Threshold | Target | Max | Threshold | Target | Max | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Plan(1) | — | $ | 158,363 | $ | 1,583,625 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU(2) | 2/26/2021 | 41,350 | 165,400 | 330,800 | $ | 4,962,000 | $ | 2,963,968 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(3) | 2/26/2021 | 82,700 | $ | 1,240,500 | $ | 1,240,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(4) | 2/26/2021 | 148,950 | $ | 15.00 | $ | 2,234,250 | $ | 992,007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(5) | 2/26/2021 | 39,009 | $ | 16.50 | $ | 585,135 | $ | 248,097 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Plan(1) | — | $ | 154,500 | $ | 1,545,000 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRSU(2) | 2/21/2020 | 1,839 | 183,928 | 367,856 | $ | 4,634,986 | $ | 2,668,795 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RSU(3) | 2/21/2020 | 91,964 | $ | 1,158,746 | $ | 1,158,746 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Options(4) | 2/21/2020 | 241,406 | $ | 12.60 | $ | 3,041,716 | $ | 1,158,749 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Represents the cash-based award opportunity range under the Annual Plan for 2021 and 2020. For purposes of this table and threshold level disclosure, the Company assumed that the lowest weighted of the three performance measures achieved the threshold level of attainment (in other words, 10% of the target award was earned) and the Individual Performance Factor was set at 100%. The calculation uses the Executive Director’s base salary as of December 31, 2021 and 2020. Please refer to the “Single Figure Total Remuneration Table for Executive Directors” for the actual cash based award earned by the Executive Director under the Annual Plan for 2021 and 2020.
(2)Represents the threshold, target and maximum payout shares of the PRSUs granted under the 2018 Omnibus Incentive Plan in 2021 and 2020. Threshold payout of shares is calculated assuming a threshold attainment of 50% and 0.1% for the Adjusted ROIC measure for the PRSUs granted in 2021 and 2020, respectively. The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions. The grant date fair value of the PRSUs for the February 26, 2021 and February 21, 2020 awards were calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“Topic 718”) based on target, the probable outcome of the performance conditions.
(3)Represents RSUs granted under the 2018 Omnibus Incentive Plan. The grant date fair value of the RSUs was the closing price on the date of grant.
(4)Represents Options granted under the 2018 Omnibus Incentive Plan. The grant date fair value of the Options was calculated in accordance with Topic 718 using a Black-Scholes valuation model.
(5)Represents premium priced time-based stock options granted to the Executive Director under the 2018 Omnibus Incentive Plan. The grant date fair value of the Premium Options was calculated in accordance with Topic 718 using a Monte Carlo valuation method. These premium-priced options vest on the third, fourth and fifth anniversary of the grant date.
(6)Face value is calculated based on the closing share price on the date of the grant ($15.00 for grants in 2021) and, in the case of the PRSUs, on the maximum future share payout.
A-22
Outstanding Equity Awards at January 1, 2022
The following table provides information regarding outstanding equity awards held by the Executive Director as of January 1, 2022.
Option Awards * | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Grant Date | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity Incentive Plan Awards: Number of securities underlying unexercised unearned options (#)(2) | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#)(3) | Market value of shares or units of stock that have not vested ($)(4) | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)(7) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($)(8) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Awards without performance measures | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/18/2015 | Tier I(1) | 1,017,239 | — | $ | 6.56 | 5/18/2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 | Tier I(1) | 108,397 | 27,099 | $ | 7.87 | 5/2/2027 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 | Options(5) | 168,081 | 84,041 | $ | 16.46 | 2/22/2029 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 | Options(6) | — | 796,460 | $ | 19.00 | 2/22/2029 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 | RSU | 30,073 | $ | 478,461 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 | Options(5) | 80,468 | 160,938 | $ | 12.60 | 2/21/2030 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 | RSU | 61,310 | $ | 975,442 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 | Options(5) | — | 148,950 | $ | 15.00 | 2/26/2031 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 | Options(6) | — | 39,009 | $ | 16.50 | 2/26/2031 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 | RSU | 82,700 | $ | 1,315,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Awards with performance measures | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/18/2015 | Tier II | 1,017,239 | $ | 6.56 | 5/18/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/18/2015 | Tier III | 1,017,239 | $ | 6.56 | 5/18/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/18/2015 | Tier IV | 1,017,239 | $ | 9.84 | 5/18/2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 | Tier II | 135,496 | $ | 7.87 | 5/2/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 | Tier III | 135,496 | $ | 7.87 | 5/2/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5/2/2017 | Tier IV | 135,496 | $ | 11.80 | 5/2/2027 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/22/2019 | PRSU | 24,167 | $ | 384,497 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/21/2020 | PRSU | 47,821 | $ | 760,832 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/26/2021 | PRSU | 82,700 | $ | 1,315,757 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
* The Company has a number of awards issued under the 2014 Omaha Topco Ltd. Stock Incentive Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with the initial public offering in January 2018. No new awards have been granted under this plan since 2017. The options are split equally into four tiers, each with specific vesting conditions. Tier I options vest evenly over 5 years from the grant date, subject to the participant continuing to provide service to Gates on the vesting date. Tier II, III and IV options vest on achievement of specified investment returns by Blackstone at the time of a defined liquidity event, which is also subject to the participant’s continued provision of service to Gates on the vesting date. The performance conditions associated with Tiers II, III and IV must be achieved on or prior to July 3, 2022 in order for vesting to occur. All the options expire ten years after the date of grant.
(1)Represents Tier I time-vesting stock options, awarded to the Executive Director in his capacity as a director of a former parent of the group, Omaha Topco Limited.
(2)Represents Tier II, III and IV exit-vesting stock options, awarded to the Executive Director in his capacity as a director of a former parent of the group, Omaha Topco Limited.
(3)RSUs vest in substantially equal annual installments on each of the first, second and third anniversaries of the grant date.
(4)Reflects the aggregate market value of the unvested RSUs, based on a price of $15.91 per ordinary share, which was the share price of the Company’s ordinary shares on December 31, 2021, the last trading day of the fiscal year.
(5)Represents time-based stock options granted under the 2018 Omnibus Incentive Plan. These options vest in substantially equal annual installments on the first three anniversaries of the grant date.
(6)Represents premium priced time-based stock options granted to the Executive Director under the 2018 Omnibus Incentive Plan. These premium-priced options vest on the third, fourth and fifth anniversary of the grant date.
A-23
(7)The PRSUs vest upon completion of the three-year performance period, with 50% subject to attainment of certain levels of a defined Adjusted ROIC measure and 50% subject to attainment of a certain defined Relative TSR. For 2019 and 2020 PRSU awards, the amounts shown in this column represent threshold payout shares of the outstanding PRSUs assuming both an attainment of 0.1% above threshold for the Adjusted ROIC measure and a threshold 50% payout under the TSR measure. For 2021 PRSU awards, the amounts shown in this column represent threshold payout shares of the outstanding PRSUs assuming threshold levels of attainment of 50% under both measures. The number of shares ultimately issued, which could be zero or greater than the number presented above, will be based on achieving specific performance conditions. Please refer to “Elements of Compensation — Long-Term Incentive” above.
(8)Represents the aggregate market value of the threshold payout shares of the unvested PRSUs, based on a price of $15.91 per ordinary share, which was the share price of the Company’s ordinary shares on December 31, 2021, the last trading day of the fiscal year.
2021 Option Exercises and Stock Vested for the Executive Director
The table below sets forth certain information concerning each exercise of options and stock vesting events for the Company’s Executive Director during financial year 2021.
| Option Awards | Stock Awards | |||||||||||||||||||||||||
| Name | Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Shares or Units Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | ||||||||||||||||||||||
| I. Jurek | — | $ | — | 60,727 | $ | 1,031,752 | ||||||||||||||||||||
(1) Based on the closing share price of the Company’s ordinary shares on the trading day prior to the vesting date.
Single Figure Total Remuneration Table for Non-Executive Directors
The following table provides the compensation earned in financial years 2021 and 2020 by the Company’s Non-Executive Directors who served during financial year 2021.
| Name | Year | (Fixed) Fees Earned or Paid in Cash ($)(1) | (Variable) Stock Awards ($)(2) | Total ($) | ||||||||||||||||||||||
| J. Ireland | 2021 | $ | 100,000 | $ | 168,541 | $ | 268,541 | |||||||||||||||||||
| 2020 | $ | 100,000 | $ | 76,545 | $ | 176,545 | ||||||||||||||||||||
J. Kahr(3) | 2021 | $ | 18,737 | $ | — | $ | 18,737 | |||||||||||||||||||
| 2020 | $ | — | $ | — | $ | — | ||||||||||||||||||||
T. Klebe(4) | 2021 | $ | 125,000 | $ | — | $ | 125,000 | |||||||||||||||||||
| 2020 | $ | 125,000 | $ | — | $ | 125,000 | ||||||||||||||||||||
S. Mains | 2021 | $ | 100,000 | $ | 168,541 | $ | 268,541 | |||||||||||||||||||
| 2020 | $ | 100,000 | $ | 64,967 | $ | 164,967 | ||||||||||||||||||||
W. Neely | 2021 | $ | 100,000 | $ | 285,533 | $ | 385,533 | |||||||||||||||||||
| 2020 | $ | 74,176 | $ | — | $ | 74,176 | ||||||||||||||||||||
A. Tillman(5) | 2021 | $ | 68,681 | $ | — | $ | 68,681 | |||||||||||||||||||
| 2020 | $ | — | $ | — | $ | — | ||||||||||||||||||||
M. Zhang(6) | 2021 | $ | 100,000 | $ | — | $ | 100,000 | |||||||||||||||||||
| 2020 | $ | 49,176 | $ | — | $ | 49,176 | ||||||||||||||||||||
| N. Simpkins | 2021 | $ | — | $ | — | $ | — | |||||||||||||||||||
| 2020 | $ | — | $ | — | $ | — | ||||||||||||||||||||
(1)Represents director fees earned during the period. Directors who served on the Board for a portion of the financial year received a pro-rated amount of the annual cash retainer, which was $100,000 in 2020 and $100,000 in 2021.
A-24
(2)Represents the value of the stock awards that vested during the period, which is based on the closing share price of the Company’s ordinary shares on the trading day prior to the vesting date. This value for the current period represents an aggregate appreciation in value of $247,632 since these awards were granted. Certain options held by the Mr. Klebe, as set out in the “Outstanding Equity Awards for certain Non-Executive Directors at January 1, 2022” section below, vested during financial year 2021, but were awarded in his capacity as a director of a former parent of the group, Omaha Topco Limited, and are therefore not included in this table.
(3)In September 2021, Ms. Kahr resigned from her position with the Sponsor but remained on the Company’s Board. Following her resignation with the Sponsor, the Board approved the non-employee director standard annual compensation package for Ms. Kahr. Accordingly, effective November 1, 2021, she received an equity grant of $125,000 in value of restricted stock units, a prorated annual cash retainer of $100,000, and a prorated additional cash retainer of $10,000 for her service as Chair of the Compensation Committee.
(4)Represents the annual cash retainer of $100,000 plus an additional $25,000 for Mr. Klebe’s service as Chair of the Audit Committee. Mr. Klebe elected to defer $100,000 of the fees earned in cash in 2020 and all 9,920 shares that vested in 2020, pursuant to the Supplemental Retirement Plan.
(5)Ms. Tillman was appointed to the Board effective April 27, 2021 and the amounts reported represent her pro-rated director fees for 2021.
(6)Dr. Zhang elected to defer $100,000 of the fees earned in cash in 2020 and 2021 and all 12,664 shares that vested in 2021, pursuant to the Supplemental Retirement Plan.
Outstanding Equity Awards for certain Non-Executive Directors at January 1, 2022
The following table provides information regarding outstanding equity awards held by the Non-Executive Directors as of January 1, 2022. Mr. Simpkins did not hold any outstanding equity awards as of January 1, 2022.
| Option Awards | ||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Number of securities underlying unexercised options (#) exercisable(1) | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#)(2) | Market value of shares or units of stock that have not vested ($)(3) | ||||||||||||||||||||||||||||||||
| T. Klebe | 5/12/2016 | 76,293 | $ | 6.56 | 5/12/2026 | |||||||||||||||||||||||||||||||||
| 2/26/2021 | 8,333 | $ | 132,578 | |||||||||||||||||||||||||||||||||||
| J. Ireland | 2/26/2021 | 8,333 | $ | 132,578 | ||||||||||||||||||||||||||||||||||
| J. Kahr | 11/1/2021 | 7,292 | $ | 116,016 | ||||||||||||||||||||||||||||||||||
| S. Mains | 2/26/2021 | 8,333 | $ | 132,578 | ||||||||||||||||||||||||||||||||||
| W. Neely | 2/26/2021 | 8,333 | $ | 132,578 | ||||||||||||||||||||||||||||||||||
| A. Tillman | 4/27/2021 | 7,142 | $ | 113,629 | ||||||||||||||||||||||||||||||||||
| M. Zhang | 2/26/2021 | 8,333 | $ | 132,578 | ||||||||||||||||||||||||||||||||||
(1)Represent vested time-based stock options. These options were award to Non-Executive Directors in their capacity as directors of a former parent of the Company group, Omaha Topco Limited, under the 2014 Omaha Topco Ltd. Stock Incentive Plan, which was assumed by the Company and renamed the Gates Industrial Corporation plc Stock Incentive Plan in connection with the initial public offering in January 2018. No new awards have been granted under this plan since 2017.
(2)Represents unvested time-based RSUs that vest on the first anniversary of the grant date. Ms. Mains and Dr. Zhang elected to defer their unvested time-based RSUs pursuant to the Supplemental Retirement Plan.
(3)Reflects the aggregate market value of the unvested RSUs, based on a price of $15.91 per ordinary share, which was the share price of the Company’s ordinary shares on December 31, 2021, the last trading day of the fiscal year.
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2021 Option Exercises and Stock Vested for certain Non-Executive Directors
The table below sets forth certain information concerning each exercise of options and stock vesting events for the Non-Executive Directors during financial year 2021.
Name | Option Awards | Stock Awards | ||||||||||||||||||||||||
Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Shares or Units Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | |||||||||||||||||||||||
| J. Ireland | — | $ | — | 9,920 | $ | 168,541 | ||||||||||||||||||||
| J. Kahr | — | $ | — | — | $ | — | ||||||||||||||||||||
T. Klebe(2) | — | $ | — | — | $ | — | ||||||||||||||||||||
| S. Mains | — | $ | — | 9,920 | $ | 168,541 | ||||||||||||||||||||
| W. Neely | — | $ | — | 17,857 | $ | 285,533 | ||||||||||||||||||||
| A. Tillman | — | $ | — | — | $ | — | ||||||||||||||||||||
M. Zhang(3) | — | $ | — | — | $ | — | ||||||||||||||||||||
(1)Based on the closing share price of the Company’s ordinary shares on the trading day prior to the vesting date.
(2)Mr. Klebe elected to defer all 9,920 shares that vested, pursuant to the Supplemental Retirement Plan.
(3)Dr. Zhang elected to defer all 12,664 shares that vested, pursuant to the Supplemental Retirement Plan.
Director Pension Scheme
No director who served during the year ended January 1, 2022 has any prospective entitlement to a defined benefit pension or a cash balance benefit arrangement (as defined in s.152, Finance Act 2004).
Scheme interests awarded during financial year 2021
Please refer to the following sub-headings in the “Notes to future policy table” section of the Directors’ Remuneration Policy for a description of the scheme interests granted to the Executive Director: (i) “Annual Plan”; (ii) “Discretionary Bonuses”; and (iii) “Long-Term Incentive”. In addition, please refer to the following sub-headings of this Directors’ Remuneration Report: (i) 2021 Grants of Plan-Based Awards; and (ii) 2021 Grants of Plan-Based Awards Table.
For financial year 2021, the annual compensation package for the Non-Executive Directors (excluding the Sponsor-affiliated Directors) consists partly of $125,000 in value of restricted stock units (payable annually and rounded down to the nearest whole share). Restricted stock units vest in full on the first anniversary of the grant date. Please refer to the section entitled “2021 Option Exercises and Stock Vested for certain Non-Executive Directors” for further information.
Payments to Past Directors and Payments for Loss of Office
There were no payments made to past Directors and no payments to Directors for loss of office during financial year 2021.
Director Shareholdings and Share Ownership Guidelines
The Company has adopted executive stock ownership guidelines for its Executive Director. As of January 1, 2022, the Executive Director was expected to own ordinary shares in the Company with a market value equal to at least six times his base salary. This target has been met. If the Executive Director falls below the threshold, he will be required to retain 50% of stock acquired through the exercise or vesting of equity awards made by the Company.
The Company has adopted share ownership guidelines for its Non-Executive, non-Sponsor affiliated Directors in order to better align its eligible directors’ financial interests with those of its shareholders. Each of the Non-Executive, non-Sponsor affiliated Directors is expected to own shares with a market value equal to four times his or her annual cash retainer. As of January 1, 2022, Mr. Klebe held shares in excess of this target. Given their recent appointments to the Board, the other Non-Executive, non-Sponsor affiliated directors have not yet met this goal. Any such director who does not meet the threshold is required to retain 50% of shares acquired through the exercise or vesting of equity awards made by the Company.
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The table below sets out the number of vested shares held by the Executive Director and each Non-Executive Director as of January 1, 2022.
| Name of Director | Number of shares held in Company as of January 1, 2022 | |||||||
| Executive Director | ||||||||
| I. Jurek | 242,923 | |||||||
| Non-Executive Directors | ||||||||
| J. Ireland | 22,435 | |||||||
T. Klebe(1) | 78,857 | |||||||
| S. Mains | 16,119 | |||||||
| W. Neely | 17,845 | |||||||
M. Zhang(2) | 12,664 | |||||||
A. Tillman | — | |||||||
| J. Kahr | — | |||||||
| Non-Executive Director; Sponsor-affiliated Director | ||||||||
| N. Simpkins | — | |||||||
(1)Includes 21,469 ordinary shares that are vested but deferred pursuant to the Supplemental Retirement Plan.
(2)Represents 12,664 ordinary shares that are vested but deferred pursuant to the Supplemental Retirement Plan .
Please also refer to the “Outstanding Equity Awards at January 1, 2022” and “Outstanding Equity Awards for certain Non-Executive Directors at January 1, 2022” sections above for information regarding outstanding equity awards held by the Executive Director and Non-Executive Directors as of January 1, 2022.
Performance graph and table
Executive Director Remuneration
2021 | 2020 | |||||||||||||
| Total remuneration | $ | 4,757,275 | $ | 3,034,407 | ||||||||||
Annual bonus as a percentage of maximum(1) | 87% | 67% | ||||||||||||
Equity awards vested as a percentage of maximum(2) | 100% | 100% | ||||||||||||
(1)The amount earned by the Executive Director under the Annual Plan equated to 130% attainment of the target performance. The Annual Plan does not have a maximum level of attainment; thus, for purposes of this calculation, this assumes a “stretch” level of performance of a 150% payout.
(2)The only equity awards that could have been received in the year were options and restricted stock units that had a time-based vesting condition.
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Performance Graph
The below graph shows the value, as of January 1, 2022, of $100 invested in Gates Industrial Corporation plc on January 25, 2018, at the IPO price of $19, compared with the value of $100 invested in each of the S&P Midcap 400 Capital Goods Industry Group index and the Russell 2500 index on a daily basis. The S&P Midcap 400 Capital Goods Industry Group index was selected as it is used by the Company as part of the long-term incentive program (one of the performance measures for PRSUs). The performance graph is based on historical results and is not intended to suggest future performance.
Total shareholder return
Source: S&P Capital IQ
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Percentage Change in Compensation of Executive Director Compared with Employees
The following table shows the percentage change in salary, all other benefits and annual bonus awards for the Directors and, as described further in note (1) to the table, the corporate employees (excluding the Executive Director) located in the Denver corporate office and the Denver area customer solutions center.
Percentage change from 2020 to 2021 | Percentage change from 2019 to 2020 | ||||||||||||||||||||||||||||||||||
| Salary/Fees % | All Other Benefits % | Annual Bonus % | Salary/Fees % | All Other Benefits % | Annual Bonus % | ||||||||||||||||||||||||||||||
Employees(1) | 2% | 16% | 31% | 3% | (10)% | 1,220% | |||||||||||||||||||||||||||||
Executive Directors(2) | |||||||||||||||||||||||||||||||||||
| I. Jurek | 3% | 156% | 33% | 4% | (48)% | 100% | |||||||||||||||||||||||||||||
Non-Executive Directors(3) | |||||||||||||||||||||||||||||||||||
| J. Ireland | — | % | —% | —% | (20)% | —% | —% | ||||||||||||||||||||||||||||
J. Kahr(4) | 100 | % | —% | —% | —% | —% | —% | ||||||||||||||||||||||||||||
| T. Klebe | — | % | —% | —% | (17)% | —% | —% | ||||||||||||||||||||||||||||
| S. Mains | — | % | —% | —% | (20)% | —% | —% | ||||||||||||||||||||||||||||
W. Neely(5) | 35 | % | —% | —% | —% | —% | —% | ||||||||||||||||||||||||||||
A. Tillman(5) | 100 | % | —% | —% | —% | —% | —% | ||||||||||||||||||||||||||||
M. Zhang(5) | 103 | % | —% | —% | —% | —% | —% | ||||||||||||||||||||||||||||
(1)Due to the complexity of the Company’s global operations with employees in multiple countries with different currencies, costs of living and work cultures, the Company selected its corporate employees based in its Denver corporate office and its Denver area customer solutions center as the comparator group for the above table. This group of employees is considered an appropriate comparator, as they are compensated in accordance with U.S. customs and standards and participate in similar annual award and benefit programs as the Executive Director who is also based in Denver, Colorado. The percentage changes for salary, all other benefits and annual bonus for the corporate employees were determined by dividing the total annual salary in effect at the end of the year, all other benefits and annual bonus compensated during the year by the total number of corporate employees at the end of each financial year. All other benefits included, but were not limited to: gym reimbursements, tax services reimbursements, and parking reimbursements.
(2)Percentage changes for the Executive Director were calculated based on the 2021 Single Figure Total Remuneration Table.
(3)Percentage changes for Non-Executive Directors have been calculated based on the fees paid in cash reflected in the 2021 Single Figure Total Remuneration Table, except for Mr. Neely and Dr. Zhang, whose 2020 cash retainers are assumed to be on a full-year basis for the purpose of this table to ensure a like-for-like comparison. The number of restricted stock units is not adjusted once awarded, and hence, upon vesting, the value of the restricted stock units may be higher or lower than at the time of the award.
(4)Ms. Kahr’s fees reflect a pro-rated cash retainer for her service following her resignation from the Sponsor.
(5)Mr. Neely, Dr. Zhang and Ms. Tillman were appointed to the Board effective on April 1, 2020, July 1, 2020, and April 27, 2021, respectively.
Executive Director (CEO) Pay Ratio
The following table sets forth the ratio of the Executive Director’s total compensation to the median, 25th and 75th percentile of total compensation of his full-time equivalent U.K.-based employees for financial year 2021 and financial year 2020. The Executive Director (CEO) single figure used in the calculation of the ratios below reflects the single figure total remuneration as disclosed in the Single Figure Total Remuneration Table for the Executive Director table above.
| Financial Year | Method | 25th percentile pay ratio | Median pay ratio | 75th percentage pay ratio | ||||||||||||||||||||||
2021 | C | 223 to 1 | 145 to 1 | 142 to 1 | ||||||||||||||||||||||
2020 | C | 142 to 1 | 110 to 1 | 110 to 1 | ||||||||||||||||||||||
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The increase in the above pay ratios is attributable primarily to the change in the remuneration of the CEO, the reasons for which are set out under the Single Figure Total Remuneration Table for the Executive Director table above.
The calculation methodology used reflects Option C as defined under the relevant regulations. To determine the employees at the three quartiles for 2021, the Company reviewed and analyzed salary data for its permanent employees as of January 1, 2022. Given the variance in pay elements by employee, the Company opted for Method C and selected the annual base salary to identify the best equivalents for the U.K. employees, as base salary represents the single largest component of pay for the majority of employees across the business. The Company then excluded employees whose start dates were after financial year 2021 begun, as they were not paid for the full year. Once the employees were identified, the Company included benefits and all other relevant compensation elements and converted to U.S. dollars using the financial year 2021 average exchange rate in order to provide a like comparison to that of the Executive Director. Each employee’s pay and benefits were calculated using each employee’s aggregated remuneration, consistent with the Executive Director’s aggregated remuneration. The Company did not make any adjustments or omit any components of pay.
The 2021 salary and total remuneration for the 25th, 50th and 75th percentile of U.K. employees are as follows:
| (dollars) | 25th percentile | Median | 75th percentile | ||||||||||||||||||||
| Salary | 17,996 | 30,298 | 30,285 | ||||||||||||||||||||
| Total remuneration | 21,374 | 32,878 | 33,573 | ||||||||||||||||||||
The Company’s U.K. workforce is made up of approximately 550 employees, as compared to approximately 7,000 employees in North America and approximately 15,050 employees globally. The Executive Director works in North America and his compensation is benchmarked against companies in an industry peer group that are listed on the New York Stock Exchange or NASDAQ, as described under Role of the Peer Group below. With this perspective, the Company believes the median pay ratio for financial year 2021 is consistent with the pay, reward and progression policies for the Company’s U.K. employees taken as a whole.
Relative Importance of Spend on Pay
The table below sets out the remuneration the Company paid to its employees and distributions made to its shareholders in the financial year 2021 and financial year 2020.
| (dollars in millions) | 2021 financial year | 2020 financial year | |||||||||
| Employee remuneration | $ | 822.0 | $ | 739.5 | |||||||
| Dividends | $ | — | $ | — | |||||||
| Share buyback | $ | 10.6 | $ | — | |||||||
A-30
Statement of Implementation of Remuneration Policy in 2022
For financial year 2022, the Compensation Committee intends to provide remuneration in accordance with the proposed Directors’ Remuneration Policy, as described below.
Executive Director
2022 Long-Term Incentive. In February 2022, the Compensation Committee recommended, and the Board approved, a new award (the “2022 LTI”) for financial year 2022 under the 2018 Omnibus Incentive Plan for the Company’s Executive Director. The 2022 LTI is comprised of 50% RSUs and 50% PRSUs. The RSUs will vest in equal annual installments on the first three anniversaries of the grant date, subject to the Executive Director’s continued employment through the vesting date. The PRSUs will vest upon completion of the three-year performance period and will be paid out after certification of results by the Compensation Committee. For 2022 PRSUs, the Board determined that the PRSUs shall provide that 75% of the award will vest if the Company achieves a certain level of Adjusted ROIC and the remaining 25% of the PRSUs will vest if the Company achieves certain Relative TSR goals, in each case, measured over a three year performance period. The total number of PRSUs that vest at the end of the performance period will range from 0% to 200% of the target as determined by measuring actual performance over the performance period for Adjusted ROIC and Relative TSR against the performance goals based on a pre-established scale. The target total grant date fair value for the Executive Director’s award was $5,401,564 under the 2022 LTI. The award was made based upon internal pay fairness factors, the Executive Director’s compensation mix and his total direct compensation. The number of target PRSUs was calculated on the date of grant, February 25, 2022, based on that day’s closing price of Gates ordinary shares on the New York Stock Exchange.
The performance period applicable to the PRSUs began on January 2, 2022 and will end on December 28, 2024. The performance results will be measured against the specified cumulative Adjusted ROIC and Relative TSR through the period. The target levels for performance-based compensation have been omitted from the directors’ remuneration report as such targets are considered commercially sensitive. The target levels will be disclosed in the directors’ remuneration report after the completion of the applicable performance period.
2022 Annual Incentive. In February 2022, the Compensation Committee determined that for the annual bonus scheme for financial year 2022, Adjusted EBITDA (50%), Free Cash Flow (30%) and Revenue (20%) should be used as the financial performance measures (“Performance Measures”). The Compensation Committee determined that these Performance Measures are critical indicators of the Company’s performance for 2022 and, when combined, contribute to sustainable growth. The Compensation Committee set the minimum achievement threshold at 95% of the Performance Measures to achieve a 50% payout of the annual bonus and the target at 105% to achieve a 150% payout of the annual bonus. If achievement with respect to any Performance Measure falls between the threshold and target, or between the target and maximum, earned award amounts for that particular Performance Factor will be interpolated on a straight-line mathematical basis (and rounded to the nearest whole number). The Executive Director’s target bonus in 2022 is $1,646,970
2022 Salary. In February 2022, the Compensation Committee increased the Executive Director’s base salary by 4.0%, to $1,097,980.
For additional information on the Company’s Long-Term Incentive, Annual Incentive and Base Salary, please see Elements of Compensation in the proxy statement.
Non-Executive Directors
2022 Remuneration. The compensation program for the other Non-Executive Directors will remain the same in 2022 as it was in 2021. On February 25, 2022, the Board approved an annual total compensation package of $225,000, which will be allocated with approximately 45% as a cash retainer and 55% as an equity grant of time-based vesting restricted stock units vesting in one year. The number of time-based vesting restricted stock units was calculated on that date, based on the closing price of Gates ordinary shares on the New York Stock Exchange.
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Consideration by the Directors of Matters Relating to Directors’ Compensation
The Compensation Committee provides assistance to the Board for oversight of the compensation program for the Executive Director. The Board has historically taken into account multiple factors, such as considering the responsibilities, performance, contributions and experience of the Executive Director and his compensation in relation to other employees and other roles. The Compensation Committee annually reviews the Executive Director’s performance, base salary, annual incentive target opportunity and outstanding long-term incentive awards and approves, or recommends to the Board for approval, any changes to the Executive Director’s compensation package in light of such review. The Executive Director does not participate in deliberations regarding his own compensation. The Compensation Committee held four meetings during 2021.
Pay recommendations for the Company’s high level executive officers, including the Executive Director, are made by the Compensation Committee in February after the Company reports its fourth quarter and year-end financial results for the preceding fiscal year (the “February meeting”). This timing allows the Compensation Committee to have a complete financial performance picture prior to making compensation decisions.
Compensation decisions with respect to prior year performance, as well as annual equity awards and target performance levels under the incentive plans for the current year, are typically made at this February meeting. Annual equity awards to the Company’s executive officers, including the Executive Director, are recommended by the Compensation Committee at this meeting and reviewed by the Board and, if approved by the Board, are dated on the date of such Board approval. An exception to this process is granted to executives who are promoted or hired from outside the Company during the year. These executives may receive compensation changes or equity grants effective or dated, as applicable, as of the date of their promotion, hiring date, or other Board approval date.
Compensation Consultant. The Compensation Committee retains an independent compensation consultant (the “Consultant”) to support the oversight and management of the Company’s executive compensation program. The Consultant has not provided the Company with services other than as described herein. The Compensation Committee retains sole authority to hire or terminate the Consultant, approve its compensation, determine the nature and scope of services, and evaluate performance. The Company selected Aon plc as the Consultant prior to its initial public offering in 2018 and reviews the Consultant’s independence and engagement annually. A representative of the Consultant attends Compensation Committee meetings, as requested, and communicates with the Compensation Committee Chair between meetings. The Compensation Committee makes all final decisions. The Consultant’s specific roles include, but are not limited to:
•advising the Compensation Committee on executive compensation trends and regulatory developments;
•providing a total compensation study for executives, compared against the companies in the peer group, and recommendations for executive pay;
•working with the Committee to develop an appropriate peer group of comparable companies to serve as a reference point in executive compensation decision-making;
•providing advice to the Compensation Committee on governance best practices, as well as any other areas of concern or risk;
•serving as a resource to the Compensation Committee Chair for meeting agendas and supporting materials in advance of each meeting;
•reviewing and commenting on proxy disclosure items, including this CD&A;
•reviewing and commenting on the Compensation Committee’s annual compensation risk assessment;
•advising the Compensation Committee on management’s pay recommendations; and
•from time to time, reviewing and providing compensation recommendations for non-employee directors to the Nominating and Governance Committee.
The Company paid approximately $160,000 in aggregate to the Consultant and its affiliates for its work during financial year 2021. The Company did not pay any other fees to the Consultant or its affiliates.
The Compensation Committee has assessed the independence of the Consultant as required by SEC and NYSE rules. The Compensation Committee reviewed its relationship with the Consultant and considered all relevant factors, including those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act. Based on this review, the Compensation Committee concluded that the Consultant is independent and there are no conflicts of interest raised by the work performed by the Consultant.
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Role of the Peer Group. The Compensation Committee, with the help of the Consultant, conducts an annual review and evaluation of executive and director compensation in comparison to an industry peer group. In establishing the industry peer group, the Compensation Committee targets approximately 15-20 companies based on the following selection criteria:
•publicly-traded companies within similar Global Industry Classification Standard (“GICS”) code classifications;
•peer companies used by the potential peer companies (peers of peers) within the similar GICS codes;
•peer companies used by proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) in 2020;
•companies with annual revenues of approximately 0.4x to 3x Gates’ annual revenues; and
•companies with enterprise values of approximately 0.2x to 5x Gates’ total enterprise value.
For financial year 2021, compensation decisions, the Compensation Committee selected the same companies used for financial year 2020 compensation decisions, with the addition of one new company, Dover Corporation. The full list of peers, all of which are in the GICS Industrials Sector and Capital Goods Industry Group, is shown below. Regal Beloit Corporation and Rexnord Corporation merged during 2021, but are listed separately as they were included in the peer group pay study prior to the merger.
1. AMETEK, Inc.
2.Colfax Corporation
3.Crane Co.
4.Donaldson Company, Inc.
5.Dover Corporation
6.Flowserve Corporation
7.Graco Inc.
8.IDEX Corporation
9.Ingersoll Rand Inc.
10.Lincoln Electric Holdings, Inc.
11.Nordson Corporation
12.Pentair plc
13.Regal Beloit Corporation
14.Rexnord Corporation
15.SPX Corporation
16.The Timken Company
17.Xylem Inc.
The Compensation Committee uses competitive compensation data from the annual total compensation study of peer companies as a reference point to inform its decisions about overall compensation opportunities and specific compensation elements. Additionally, the Compensation Committee uses multiple reference points when establishing targeted compensation levels. The Compensation Committee uses the competitive 50th percentile for targeted total compensation as a guide, but does not benchmark specific compensation elements or total compensation to any specific percentile relative to the peer companies or the broader U.S. market. Instead, the Compensation Committee applies judgment and discretion in establishing targeted pay levels, taking into account not only competitive market data, but also factors such as Company, business and individual performance, scope of responsibility, critical needs and skill sets, leadership potential and succession planning.
For financial year 2022, the fiscal year ending December 31, 2022 (“financial year 2022”), the Compensation Committee, in consultation with the Consultant, reviewed the composition of the peer group and, using the same selection criteria, maintained the same peer group as used for financial year 2021 compensation decisions.
A-33
Consideration of Shareholder Views
At the 2021 AGM, the shareholders approved the Company’s annual remuneration report (as required under the Companies Act) and the compensation of its Named Executive Officers, which includes the Executive Director (on an advisory basis, pursuant to applicable SEC regulations). The voting results were as follows:
Resolution: To approve, on an advisory basis, named executive officer compensation:
Votes For | % of Total | Votes Against | % of Total | Votes Abstain | % of Total | |||||||||||||||||||||||||||
| 266,789,530 | 94.85% | 14,393,290 | 5.11% | 84,753 | 0.03% | |||||||||||||||||||||||||||
Resolution: To approve, on an advisory basis, the Company’s directors’ remuneration report (excluding the Company’s directors’ remuneration policy) in accordance with the requirements of the Companies Act.
Votes For | % of Total | Votes Against | % of Total | Votes Abstain | % of Total | |||||||||||||||||||||||||||
| 270,199,037 | 96.06% | 10,983,539 | 3.90% | 84,753 | 0.03% | |||||||||||||||||||||||||||
In light of the voting results on these resolutions and based on the Company’s compensation philosophy and objectives, the Compensation Committee is maintaining its overall compensation program for the Executive Director and the Non-Executive Directors, with certain modifications as described in the Company’s CD&A in the proxy statement.
The Directors’ Remuneration Report was approved by the Board and authorized for issue on April 28, 2022. It was signed on its behalf by:
| ||
| Ivo Jurek | ||
| Director and Chief Executive Officer | ||
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