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March 9, 2020

To our Stockholders:

It is our pleasure to invite you to attend our annual meeting of stockholders, which is to be held on April 23, 2020 at The Daniel Island Club, 600 Island Park Drive, Charleston, South Carolina. The meeting will begin at 9:30 a.m., local time. The following Notice of the 2020 Annual Meeting of Stockholders outlines the business to be conducted at the meeting.

During 2019, we made significant progress on our strategic initiatives aimed at delivering organic and inorganic growth. And, despite a sluggish global industrial economy, our execution was crisp. We delivered significant revenue and earnings growth, margin accretion, lower core selling, general & administrative (SG&A) expenses, improved working capital and outstanding cash flow.

For the company overall, in light of the global macroeconomic headwinds we encountered, our financial performance was strong. Revenues for the year were $1.293 billion, up 14%. Net income of $183.7 million was up 1% versus prior year; net income as a percentage of revenue of 14.2% was down 180 basis points versus the prior year. Our adjusted EBITDA^* of $397 million was up 24% versus the prior year. Adjusted EBITDA margin^* accreted to 30.7% of sales, up approximately 240 basis points from 2018.

In 2019, we continued to make significant strides in the implementation of our sustainability program. As environmental, social and governance (ESG) factors grow in importance to investors, we believe that we are uniquely positioned given not only our longstanding commitments to operate responsibly, but also due to the way in which our products and technologies benefit the planet and its people. Also in the year, we continued our employee engagement efforts. We firmly believe that an engaged workforce – based on a clear understanding of our purpose, vision and values – will enhance our productivity and profitability.

In terms of our governance, we were pleased in February to welcome two new members of our board of directors: Karen Narwold, executive vice president, chief administrative officer, general counsel and corporate secretary at Albemarle Corporation, and Diane Gulyas, former president, Performance Polymers, at E.I. du Pont de Nemours and Company. Their counsel has already, and will continue to be, a great asset to Ingevity as we advance our strategic initiatives and pursue our growth agenda.

Lastly, in addition to our annual meeting and required filings with the U.S. Securities and Exchange Commission, we have maintained a robust investor relations program. In 2019, we maintained strong relationships with nine sell-side analysts, and attended 13 conferences and conducted seven non-deal roadshows.

Whether or not you plan to attend the Annual Meeting, please vote as soon as possible to ensure that your shares will be represented and voted. Your vote will mean that you are represented at the Annual Meeting regardless of whether you attend.

We look forward to seeing you at the meeting.

Best regards,

 

Richard B. Kelson
Chairman of the Board, and Interim President and CEO

This summary highlights information about Ingevity Corporation (“Ingevity”, “we”, “our”, “us” or the “Company”) and certain information contained elsewhere in this Proxy Statement for our 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting” or the “meeting”). It does not contain all of the information that you should consider. Please read the entire Proxy Statement carefully before voting.

During 2019, we made significant progress on our strategic initiatives aimed at delivering organic and inorganic growth. And, despite a sluggish global industrial economy, our execution was crisp. We delivered significant revenue and earnings growth, margin accretion, lower core selling, general & administrative (SG&A) expenses, improved working capital and outstanding cash flow.

We recognize that strong corporate governance contributes to long-term stockholder value. We are committed to sound governance practices, including those described below.

Ingevity is governed by a Board of Directors (the “Board”) and committees of the Board that meet throughout the year. The Board is elected by the stockholders to oversee and provide guidance on the Company’s business and affairs. The Board is actively engaged in the process of strategic development and oversight of ongoing execution of the Company’s strategic plan. It oversees management’s activities in connection with the proper safeguarding of the assets of the Company, maintenance of appropriate financial and other internal controls, compliance with applicable laws, regulations and ethical standards, and proper governance. One of the Board’s most important functions is oversight of risk management, including cyber security. The Board is committed to sound corporate governance policies and practices that are designed to enable the Company to operate its business responsibly, with integrity, enabling the Company to compete effectively, sustain its business and build long-term stockholder value. The Company’s Corporate Governance Guidelines which have been adopted by the Board and set forth certain corporate governance practices are available on our website at http://ir.ingevity.com/governance/documents. These guidelines form a transparent framework for the effective governance of the Company, addressing matters such as the respective roles and responsibilities of the Board and management, the Board’s leadership structure, director independence, Board and committee membership criteria.

The Corporate Governance Guidelines are periodically reviewed by the NG&S Committee in light of changing regulations, evolving best practices and other governance matters. As a result of such a review in 2019, the Board elected to assign oversight of the Company’s Corporate Responsiblity and Sustainability program to its then Nominating & Governance Committee, renaming the committee to Nominating, Governance & Sustainability, and specifying the range of the Committee’s oversight responsibilities.

Since the Company’s separation from its former parent company, WestRock Corporation (“WestRock”) in May 2016 (the “Separation”), the roles of CEO and Chairman of the Board have been separate, with D. Michael Wilson serving as our CEO, and Richard B. Kelson serving as our independent Chairman. On February 20, 2020, in connection with Mr. Wilson’s resignation as the Company’s President and CEO, Mr. Kelson was appointed as the Company’s interim President and CEO to serve in such capacities while the CEO Search Committee of the Board conducts a search for a permanent President and CEO. The Board determined that it was in the best interest of the Company for Mr. Kelson to continue to serve as the Chairman of our Board during this leadership transition given his strong leadership skills and in order to maintain continuity, and therefore determined to combine the roles of CEO and Chairman. In light of the combination of the roles, the Board determined to appoint Frederick J. Lynch to serve as our Board’s Lead Independent Director. According to our Corporate Governance Guidelines, the Lead Independent Director presides at all meetings of the Board at which the Chairman is not present and presides at executive sessions of the independent directors, retains the authority to call meetings of the independent directors, serves as liaison between the Chairman and the independent directors, and, if requested by a major stockholder, ensures that he is available for consultation and direct communication. Our Board regularly reviews the Company’s Board leadership structure, how the structure is functioning and whether the structure continues to be in the best interest of our stockholders.

The Board actively oversees the development and execution of our strategies, including those related to business, operations and finance, as well as strategies focused on legal and regulatory matters, corporate responsibility and sustainability, shareholder engagement, innovation and protection of intellectual property, cybersecurity, talent development and executive succession.

The Board, acting as a full Board and through its committees, oversees risk management on behalf of the Company. Our Board believes it has in place effective processes to identify and oversee the material risks facing the Company. The Company’s enterprise risk management processes help management and the Board identify, prioritize and manage risks that have the

potential to present the most significant obstacles to achieving the Company’s business objectives or that otherwise present significant risk to the enterprise. The Company’s risk management processes are regularly refreshed, including priorities and planned remediations. Management reports regularly to the Board on this process.

Set forth below are key areas of risk overseen by the Board, directly or through its committees:

Our Board with the assistance of the NG&S Committee annually conducts an assessment of the independence of each director in accordance with our Governance Guidelines, applicable rules and regulations of the Securities and Exchange Commission (the “SEC”), and the general listing standards of the New York Stock Exchange (the “NYSE”). The Board assesses each director’s independence by reviewing any potential conflicts of interest and significant outside relationships. In determining each director’s independence, the Board broadly considers all relevant facts and circumstances, including specific criteria included in the NYSE’s general listing standards. For these purposes, the NYSE requires the Board to consider certain relationships that existed during a three-year look-back period. The Board considers the materiality and importance of such relationships not merely from the standpoint of the director, but also from the standpoint of persons or organizations with which the director has an affiliation. An independent director is a director who our Board affirmatively determines has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company).

Upon the recommendation of the NG&S Committee, the Board has affirmatively determined that each of Mses. Blackwell, Gulyas, and Narwold, and Messrs. Fernandez-Moreno, Fitzpatrick, Lynch, and Sansone, is independent, in accordance with applicable rules and regulations of the SEC and the general listing standards of the NYSE. During the time that Mr. Kelson will serve as our interim President and CEO, he will not be considered as an independent director. It is expected that Mr. Kelson will regain his status as an independent director when he relinquishes his duties as interim President and CEO.

The NG&S Committee assists the Board in annually assessing the effectiveness of the Board and its committees in carrying out their respective roles.

 

Examples of actions the Board has taken in recent years in response to the annual evaluation process include increasing the size of the board in order to create more opportunity for diversity, followed by the subsequent appointment of two additional women to the Board, the assignment of oversight of corporate responsibility and sustainability to the newly renamed Nominating, Governance & Sustainability Committee, and the rotation of the chairmanship of the NG&S Committee.

Our Board meets on a regularly scheduled basis during the year to review significant developments affecting our Company and to act on matters requiring Board approval, and may hold special meetings between scheduled Board meetings when appropriate. The Board met five times during fiscal year 2019. All directors attended 75 percent or more of the aggregate of (i) the number of meetings of the Board held during the period he or she was a director and (ii) the number of meetings of all committees of the Board held during the period he or she was a member of the respective committee. All directors attended the 2019 Annual Meeting.

Our Governance Guidelines require that the non-management members of our Board meet in executive session without management present at each regularly scheduled Board meeting. Our Committees generally also meet in executive session without management participation at each regularly scheduled Committee meeting.

Our Board is committed to ensuring that it has the right mix of skills, background, tenure, experience and diversity. The current composition of our board is as follows:

 

 

Our Board has established three standing committees to assist it with the performance of its responsibilities. Our Board elects the members of these committees annually, based on the recommendations of the NG&S Committee. After each committee meeting, a report is provided by the committee Chair to the full Board. Each committee is composed entirely of directors who have been determined to be independent under the relevant SEC and NYSE standards. Each committee operates under a charter, which is reviewed annually. The committee charters are available under the Corporate Governance tab at http://ir.ingevity.com. The Board also has established an Executive Committee, currently composed of Messrs. Kelson (chair), Fitzpatrick and Lynch, and Ms. Blackwell. The Executive Committee is authorized to exercise the powers of the Board between board meetings; this committee did not meet during the past fiscal year. On February 20, 2020, our Board established a CEO Search Committee, composed of Messrs. Fitzpatrick, Lynch and Ms. Blackwell.

The Audit Committee assists our Board in fulfilling its responsibilities with respect to the oversight and evaluation of: (1) the integrity of our financial statements; (2) our system of internal control over financial reporting; (3) the performance of our internal audit function; (4) the independence, qualifications and performance of our independent auditor; (5) our risk review and system of compliance with legal and regulatory requirements; (6) our financial management and resources; (7) specific financial strategy initiatives as requested by the Board or management; and (8) risk management over cybersecurity. Among other things, the Audit Committee, under its charter, directly appoints, compensates, retains and oversees the work of our independent auditor, which reports directly to the Audit Committee.

Ms. Karen Narwold will join the Audit Committee on April 22, 2020. The Board has determined that each of Ms. Blackwell and Messrs. Fitzpatrick and Sansone is an “audit committee financial expert” as that term is defined under SEC rules. The Board has also determined that all Audit Committee members, including Ms. Narwold, are financially literate, as that qualification is interpreted by the Board in its business judgment, in compliance with the NYSE listing standards requirements for audit committee members. The Board has also determined that all members of the Audit Committee, including Ms. Narwold, are independent in accordance with the heightened independence standards established by the Securities and Exchange Act of 1934 (the “Exchange Act”) and adopted by the NYSE for audit committee members.

The Compensation Committee’s duties include setting the overall compensation strategy and policies for our executives and non-employee directors. The committee is responsible for determining and approving CEO compensation and reviewing the compensation of our other executive officers, including salary, annual incentive awards and long-term incentive awards. The Compensation Committee also oversees the development of executive succession plans and evaluates and makes recommendations to our Board regarding potential CEO candidates. In addition, the committee evaluates the design and effectiveness of our compensation programs and monitors risks related to such design. See pages 25 - 38 for further matters related to the Compensation Committee, including a discussion of its procedures and its report. The Compensation Committee consists entirely of non-management directors all of whom our Board has determined are independent within the meaning of the listing standards of the NYSE and non-employee directors for the purposes of Rule 16b-3 of the Exchange Act.

The NG&S Committee identifies individuals qualified to become Board members consistent with the criteria established by our Board and described in our Corporate Governance Guidelines, and recommends a slate of nominees for election at each annual meeting of stockholders; makes recommendations to our Board concerning the appropriate size, function, needs and composition of our Board and its Committees; advises our Board on corporate governance matters; oversees the annual Board and Committee self-evaluation process; and provides oversight over corporate responsibility and sustainability matters, including the Company’s ESG programs and policies.

Ms. Diane Gulyas will join the NG&S Committee on April 22, 2020. The NG&S Committee, including Ms. Gulyas, consists entirely of non-management directors all of whom our Board has determined are independent within the meaning of the listing standards of the NYSE.

No member of the Compensation Committee has served as an employee of Ingevity at any time. During the past fiscal year, no executive officer of Ingevity served as a member of the Compensation Committee (or other committee performing similar functions) or on the board of directors of any entity at which a member of the Compensation Committee or Board served as an executive officer.

The NG&S Committee evaluates all director candidates in accordance with the director qualification standards described in our Governance Guidelines. These standards include (1) an absence of conflicts of interest and other legal and ethical issues that would interfere with such candidate’s service as a director, (2) a commitment to discharge his or her duties as a director in accordance with our Governance Guidelines, (3) a willingness and ability to devote sufficient time and energy to carry out his or her duties, and (4) having sufficient experience to enable the director to meaningfully participate in deliberations of the Board and one or more of its committees and to otherwise fulfill his or her duties. In addition, the NG&S Committee will evaluate a candidate’s independence, skills and experience in the context of our Board’s needs. While the Board does not have a specific diversity policy, pursuant to our Governance Guidelines, the Board strives to select as director candidates a mix of individuals who represent diverse experience, background and thought at policy-making levels that are relevant to the Company’s activities, as well as other characteristics that will contribute to the overall ability of the Board to perform its duties and meet changing conditions.

The NG&S Committee will consider director candidates recommended by stockholders and will do so in the same manner as candidates recommended by other sources. Any stockholder wishing to recommend a director candidate should provide the NG&S Committee with the information required by the Company’s By-Laws to be provided with respect to director nominees submitted by stockholders. The process for stockholders to nominate an individual for election as a director is discussed on page 54.

Interested parties, including stockholders, may communicate by mail with all or selected members of the Board. Correspondence should be addressed to the Board or any individual director(s) or group or committee of directors either by name or title (for example, “Chairman of the Board,” “Lead Independent Director,” “Chair of the NG&S Committee” or “All Non-Management Directors”). All correspondence should be sent via U.S. Mail to: Ingevity Corporation, 5255 Virginia Ave, N. Charleston, SC 29406, Attn: Katherine P. Burgeson, Secretary, or by Email to: [email protected]. In general, any communication delivered to the Company for forwarding to the Board, a Board committee, a particular group of directors or specified Board members will be forwarded in accordance with the stockholder’s instruction, except that we reserve the right not to forward any soliciting or advertising materials, any abusive, threatening or otherwise inappropriate materials.

During 2019, each non-employee director received $85,000 as an annual cash retainer for service as a director. Directors who are also employees of the Company receive no additional compensation for service as a director.

Each non-employee director who served as either the Board Chair or as a Committee Chair received an additional retainer as follows: Chairman of the Board: $85,000; Audit Committee Chair: $20,000, Compensation Committee Chair: $15,000 and NG&S Committee Chair: $12,000.

Each non-employee director receives an annual award grant of Ingevity restricted stock units (“RSUs”) equivalent to $95,000 at the time of grant. These are made to non-employee directors under the Company’s 2016 Omnibus Incentive Plan (the “Omnibus Plan”) and under the terms and conditions applicable to their grants. The directors become vested in their RSUs on the first anniversary of the award date. For the fiscal year ended 2019, the number of RSUs granted was determined based on the closing price of the Company’s Common Stock as traded on the NYSE on April 25, 2019.

Non-employee directors have the option to elect to receive their annual cash retainer (both regular annual retainer for Board service, Board Chair retainer and Committee Chair retainer) in the form of deferred stock units (“DSUs”) under the Omnibus Plan. In addition, each non-employee director may also elect to receive their annual stock RSU award in the form of DSUs. DSUs representing cash retainers vest in full upon grant, but settle upon termination of service with the Board. RSUs converted into DSUs (annual stock award) are subject to one-year vesting and are also settled upon termination of service with the Board.

A non-employee director must make his or her election to receive DSUs (in lieu of cash or RSUs) by December 31 of the calendar year preceding the year in which the compensation is earned, or within thirty days of becoming a director. No changes to the DSU settlement date are permitted absent a hardship.

Under our stock ownership guidelines, each non-employee director is expected to hold an amount of Ingevity common stock equal to five times the annual base cash retainer. Shares owned outright by the director, or his or her immediate family members residing in the same household, in family trusts and shares held in retirement plan accounts are deemed to be owned shares for purposes of these guidelines, as well as vested and unvested RSUs and DSUs. Until a non-employee director meets these guidelines, he or she must hold 50 percent of his or her vested RSUs. If a non-employee director does not meet these guidelines within five years, he or she must hold 100 percent of his or her vested RSUs. Each non-employee director is deemed to be on track towards achieving the ownership goal.

Our directors are not permitted to engage in hedging activities with respect to our stock. See page 35 for more information about the Company’s anti-hedging policy.

The following table includes information concerning compensation for service as a director paid to or earned by our directors during the fiscal year ended December 31, 2019:

Our NG&S Committee has recommended, and the Board of Directors has nominated for election as directors at the Annual Meeting the eight nominees named below. Each nominee currently serves as a director of the Company, and each nominee was elected by our stockholders to serve until the 2020 Annual Meeting of stockholders and until his or her successor has been elected and qualified. Except for Ms. Gulyas and Ms. Narwold who began board service in February 2019, each nominee has served as a director of Ingevity since the Company became public in May 2016.

Each director elected at the meeting will serve until the 2021 Annual Meeting of Stockholders and until his or her successor has been elected and qualified. Each director nominee has consented to being named in this proxy statement and to serving as a director if elected. If any nominee is unable to stand for election for any reason, the shares represented at our annual meeting by proxy may be voted for another candidate proposed by our Board, or our Board may choose to reduce its size.

At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a majority of the votes cast by the stockholders entitled to vote in the election, except that in the case of a contested election, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election.

Any director who is not elected shall offer to tender his or her resignation to the Chairman of the Board and the NG&S Committee. The NG&S Committee will promptly consider the resignation offer and make a recommendation to the Board as to whether to accept or reject the tendered resignation and whether other action should be taken. The Board will act on the tendered resignation within 90 days following the stockholders’ meeting at which the election occurred. The NG&S Committee, in making its recommendation, and the Board, in making its decision, may consider all the information, factors and alternatives it considers appropriate. Any director who offers his or her resignation pursuant to this provision may not participate in the NG&S Committee deliberations and recommendation or in the Board’s deliberations and decision whether to accept or reject the resignation offer.

The information below and in the matrix on page 10 provides information as to the particular experiences, qualifications, attributes and skills of each nominee. The NG&S Committee and the Board believe that, as a group, these nominees provide our Board with an optimal balance of experience, leadership, qualifications, attributes and skills and that each individual nominee can make a significant contribution to the Board and should serve as a director of the Company.

The Board recommends a vote “FOR” each of the eight director nominees named in this Proxy Statement.

 

The following table shows the fees paid by the Company to PricewaterhouseCoopers LLP (“PwC”) for audit and other services provided for the fiscal years 2019 and 2018, all of which were preapproved by the Audit Committee or the Audit Committee Chair.

Audit Fees. Fees for professional services performed for the integrated audit of the Company’s annual consolidated financial statements included in the Company’s Form 10-K filing and review of financial statements included in the Company’s Form 10-Q filings. The amount also includes other services that are normally provided by PwC in connection with statutory and regulatory filings or engagements. Also included for 2019 were audit services related to the acquisition of the Capa caprolactones business and for 2018, audit services related to the acquisition of the Georgia-Pacific pine chemicals business.

Audit-Related Fees. This includes fees paid for services that are reasonably related to the performance of the audit or review of the Company’s financial statements. For 2018, this includes services provided in connection with debt financing transactions.

Tax Fees. This includes fees and expenses for U.S. federal, state, and international tax planning and tax compliance services.

All Other Fees. This category includes fees for services in connection with attestations by PwC that are required by statute or regulation.

The Audit Committee’s pre-approval policy requires that all services to be performed by the Company’s independent registered public accounting firm be pre-approved either on a case-by-case basis by the Audit Committee or its delegate or on a categorical basis based on the Audit Committee’s prior approval of a specific category of service and the expected cost thereof. Any request for services involving less than $150,000 may be approved by the Chair of the Audit Committee, provided that any such approval is presented to the full Audit Committee at its next regularly scheduled meeting.

Management is responsible for the Company’s financial reporting process, including the effectiveness of its internal control over financial reporting. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements and the Company’s internal control over financial reporting and issuing reports thereon. The Audit Committee’s responsibility is, among other things, to monitor and oversee these processes and to report thereon to the Board.

Throughout 2019, the Audit Committee received regular reports from management, the internal auditors and PwC, the Company’s independent registered public accounting firm, regarding the plans for, and scope and results of, their audits and reviews of the Company’s financial statements and internal control over financial reporting.

Management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and PwC.

This review included discussions with PricewaterhouseCoopers LLP of the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board (“PCAOB”).

The Audit Committee also received from PwC the written disclosures and letter required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence and has discussed with PwC the issue of their independence from the Company.

Based on the foregoing, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

THE AUDIT COMMITTEE

Jean S. Blackwell, Chair

Luis Fernandez-Moreno

J. Michael Fitzpatrick

Daniel F. Sansone 

The Audit Committee is directly responsible for appointing, retaining, fixing the compensation of, and overseeing the work of our independent registered public accounting firm. The Audit Committee has appointed PwC to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2020.

Although it is not legally required to do so, the Board has elected to seek stockholder ratification of the appointment of PwC as a matter of good corporate governance. If stockholders do not ratify the appointment of PwC, the Audit Committee will reconsider the appointment. Regardless of the outcome of this proposal, the Audit Committee may, in its discretion, select a new independent registered public accounting firm at any time during the year if it believes such a change would be in the Company’s best interest.

Representatives of PwC will present at the Annual Meeting. They will have the opportunity to make a statement if they so desire and will be available to respond to appropriate questions from stockholders.

The Board recommends a vote “FOR” the ratification of the appointment of PwC as the independent registered public accounting firm of the Company.

Set forth below is information about our named executive officers as of March 9, 2020, with the exception of Mr. Kelson, who is also a director. See page 19 for a description of Mr. Kelson’s experience and skills. Each of the following executive officers has served in their positions with the Company since the Separation from WestRock, except for Mr. Smith, who joined the Company in June 2016 and was promoted to his current position in January 2017.

This Compensation Discussion and Analysis (“CD&A”) discusses the compensation program and the compensation decisions made for fiscal year 2019 with respect to the following Named Executive Officers (“NEOs”):

Effective February 20, 2020, Mr. Wilson resigned from his position as President and Chief Executive Officer of the Company and as a member of our Board. Effective as of the same date, Richard B. Kelson, the Company’s Board Chair assumed the position of interim President and CEO. This CD&A includes compensation paid to and earned by Mr. Wilson in 2019.

See page 4, “Proxy Summary – 2019 Business Highlights.”

Ingevity’s compensation program reflects the Company’s “pay-for-performance” philosophy. Compensation is directly linked to business plans and individual performance, with short and long term incentive programs based on achievement of key financial metrics and individual performance. We are focused on achieving long-term, sustainable stockholder value, while also recognizing significant annual contributions.

When taken as a whole, along with other elements of our executive compensation program, these pay elements are intended to provide a level of compensation sufficient to attract and retain an effective management team, while being generally targeted to market median within the Company’s peer group:

Additional elements of NEO compensation are described on page 36 under “Retirement Plans, Welfare Benefits and Perquisites.” From time to time the Compensation Committee may authorize a special equity award under circumstances where the Committee deems such an award appropriate and in the best interests of the Company, for example to recognize extraordinary performance and/or to enhance retention.

The mix of compensation elements awarded this year to our CEO and the other NEOs, as illustrated below, reflects our compensation philosophy. Performance-based pay (including that reflecting share price), through STIP and LTIP equity awards represents the most significant portion. The information reflected in the chart does not reflect a one-time special equity award made in 2019 to Mr. Fortson. See page 39. Mr. Wilson did not receive a STIP payment for 2019.

 

The Compensation Committee values the input received from our stockholders on the Company’s executive compensation practices. At the 2019 annual meeting, our stockholders cast an advisory vote on the compensation of our NEOs, with 97.8% of the shares voting to approve the compensation. Although the vote was non-binding, the Compensation Committee reviewed the results of the vote and considered the approval rate as an indication that the stockholders support the Company’s executive philosophy and decisions. The company is again soliciting a non-binding advisory vote at the 2020 Annual Meeting. For more information, see “Proposal No. 3 – Advisory Vote To Approve Executive Compensation (Say-on-Pay)” at page 47.

Ingevity’s compensation program reflects the Company’s “pay-for-performance” philosophy. Compensation is directly linked to business plans and individual performance, with short and long term incentive programs based on achievement of key financial metrics and individual performance. We are focused on achieving long-term, sustainable stockholder value.

We designed our executive compensation program to attract, motivate and retain highly-talented executives. In setting compensation, the Compensation Committee considers both our peer group and national survey data (“Comparative Compensation Data”). We also consider other factors including the executive's role and level of responsibilities, the importance of the executive's contributions toward meeting the Company's goals and objectives, individual performance and experience, internal pay equity and the economic and business environment in which the Company operates.

The Company's compensation program is meant to:

The Compensation Committee continues to implement and maintain practices in our compensation programs and related areas that reflect responsible corporate governance and compensation policies. These practices include the following:

The Compensation Committee is responsible for assisting the Board in fulfilling its responsibilities with respect to compensation of the Company’s CEO and other senior executives, including the NEOs. The Compensation Committee’s role includes oversight and risk management relating to the Company’s equity compensation and employee benefit plans.

The Compensation Committee has retained Pearl Meyer as its independent compensation consultant. The Compensation Committee has the sole discretion, and is directly responsible for the appointment, termination, compensation, and oversight of the work of Pearl Meyer. Although the Compensation Committee retains Pearl Meyer directly, in carrying out assignments Pearl Meyer also interacts with Ingevity management when appropriate. Specifically, Pearl Meyer interacts with the Company’s Chief Human Resources Officer and other members of management with respect to compensation and benefits data, best practices, peer group developments and executive compensation trends. In addition, Pearl Meyer may also seek

input and feedback from members of management regarding its consulting work product prior to presentation to the Compensation Committee, for example to confirm its alignment with Ingevity’s business strategy, determine what additional data may need to be gathered, or identify other issues. The Committee regularly meets with the Compensation Consultant in executive session—independent of management—and the Committee Chair also speaks on occasion with the Compensation Consultant on executive compensation matters, also independently of management. The Committee also meets in executive session after each regularly scheduled committee meeting.

Pearl Meyer does not provide any services to Ingevity other than its consulting services to the Compensation Committee related to executive and director compensation. The Compensation Committee determined that in fiscal 2019 the work performed for the Compensation Committee by Pearl Meyer did not raise any conflict of interest. In making its determination, the Compensation Committee considered the independence of Pearl Meyer in light of SEC and NYSE listing standards.

The Committee on behalf of the Board is responsible for reviewing and approving the goals and objectives of the Company’s CEO, evaluating the CEO’s performance in light of such goals and objectives, and setting the CEO’s compensation based on such evaluation. The Compensation Committee meets with the CEO to discuss his performance and compensation, but ultimately, decisions regarding the CEO’s compensation are made by the Compensation Committee, meeting in executive session, without the CEO or any other executive present. In setting the compensation for the CEO, the Compensation Committee also takes into account such other matters as the Compensation Committee deems appropriate, including overall leadership and external survey data compiled by Pearl Meyer from our peer group of companies and other Comparative Compensation Data and the advice of its compensation consultant.

The Compensation Committee on behalf of the Board is also responsible for reviewing and approving the compensation of the Company senior executives reporting to the CEO, including the NEOs. In approving compensation for the NEOs, the Compensation Committee takes into account the CEO’s assessment of their performance, addressing such factors as achievement of individual goals and objectives, contribution to Ingevity’s performance and corporate goals and such other matters as the Compensation Committee deems appropriate, including Comparative Compensation Data and the advice of its compensation consultant. In making his recommendations to the Compensation Committee, the CEO is supported by the Company’s Chief Human Resource Officer.

Consistent with Ingevity’s goal to provide compensation that remains competitive, the Compensation Committee considers among other matters the executive compensation practices of companies in a peer group selected by the Compensation Committee based on recommendation of its compensation consultant. In selecting the peer group, the Compensation Committee considered such factors as: (i) revenue size and profit margins; (ii) industry and business characteristics comparable to Ingevity; (iii) location and geographic reach, including global operations and/or distribution; (iv) competition for talent; and (v) data availability. The Compensation Committee generally targets compensation to the market median within the peer group when determining a NEO’s compensation. However, market data provided by the peer group is only one of several reference points in determining the form and amount of compensation. Competitive market data is supplemented with broader Comparative Compensation Data. Compensation decisions also take into account other relevant factors including an executive’s role and responsibilities, performance, the importance of an executive’s contributions towards meeting the Company’s goals and objectives, experience and tenure, internal pay equity, special hiring situations, retention, and other relevant factors that may be present.

The peer group is reviewed periodically for appropriateness and comparability. For 2019, Chemtura Corporation was removed following its acquisition by LANXESS, and Calgon Carbon Corporation was removed following its acquisition by Kuraray.

The following 16 companies comprise the peer group used in connection with evaluating our 2019 executive compensation program:

When taken as a whole, along with other elements of our executive compensation program, the pay elements described below are intended to provide a level of compensation sufficient to attract and retain an effective management team, while being generally targeted to market median within the Company’s peer group. Additional elements of NEO compensation are described on page 36 under “Retirement Plans, Welfare Benefits and Perquisites.”

Our compensation program is designed to discourage excessive risk taking by using several forms of LTI equity instruments, multiple metrics, short and long term programs and active Compensation Committee oversight. The Committee’s independent Compensation Consultant also advises the Committee as to the appropriateness of the compensation program relative to discouraging excessive risk.

Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team when considered in combination with the long-term and short-term incentive awards and other elements of our executive compensation program. The relative levels of base salary for executive officers are designed to reflect each executive officer’s scope of responsibility, experience and performance, competitive pay levels, market trends in salary adjustments, accountability within Ingevity, economic factors, and other relevant factors.

Base salaries are reviewed annually to determine if they are equitably aligned within Ingevity and are at sufficiently competitive levels to attract and retain top talent. In addition, consideration is given to Comparative Compensation Data and such other considerations as the Compensation Committee considers appropriate. The Compensation Committee also reviews base salary compensation with the Compensation Committee’s compensation consultant.

In 2019, prior to implementation of base salary adjustments, our CEO’s base salary was at the median of the companies in our peer group and our other NEOs’ base salaries ranged from 88 percent to 111 percent of the market median based on our peer group and Comparative Compensation Data. In 2019, base pay increases for these NEOs were made to recognize individual performance, experience, roles and responsibilities, and where applicable, to bring compensation more in line with that reflected in Comparative Compensation Data.

Ingevity’s short-term incentive plan (“STIP”) consists of an annual cash incentive that is designed to motivate and reward participants, including NEOs, for achieving Ingevity’s annual financial performance targets and personal performance goals. The incentive award range that a NEO may earn is determined at the beginning of the year as a percentage of the NEO’s base salary. The terms of the plan permit the Committee to make certain discretionary adjustments to exclude the effect of certain non-recurring items of gain or loss, or other adjustments reflecting substantial, out of the ordinary matters.

The STIP will be funded for any given year only if the Company meets pre-established financial performance targets, as determined by the Compensation Committee. If earned, funding runs between 50 percent (threshold), 100 percent (target) to 200 percent (maximum) of the STIP target incentive. For 2019, the “threshold” level of the applicable financial performance objectives was set at 93% of the “target’ level financial performance objectives. Linear interpolation is used to determine awards for performance between the identified points. For each NEO, STIP payout is based in part on business performance, and in part on his or her personal performance through an “individual performance modifier” (but subject to an overall 200 percent cap, regardless of individual performance). No payout is earned, regardless of personal performance, if Ingevity’s results are below threshold.

The Compensation Committee has set 2019 annual earnings before interest, taxes, depreciation and amortization (EBITDA), subject to certain specified adjustments, as the basis for 2019 STIP determinations, believing this to be an appropriate and effective measure of short-term performance. STIP EBITDA is measured company-wide (“Company STIP-Adjusted EBITDA”),

and also for each of the Company’s two business segments (“BU STIP-Adjusted EBITDA”)⁽¹⁾. Funding for corporate employees is based 100 percent on Company STIP-Adjusted EBITDA, and funding for business segment employees are based on a blend of Company STIP-Adjusted EBITDA and their respective BU STIP-Adjusted EBITDA.

Mr. Wilson's, Mr. Fortson's, and Ms. Burgeson's STIP funding was based 100 percent on Company STIP-Adjusted EBITDA. Mr. Smith’s STIP funding was based 70 percent on Company STIP-Adjusted EBITDA and 30 percent on Performance Chemicals STIP-Adjusted EBITDA. Mr. Woodcock’s STIP funding was based 70 percent on Company STIP-Adjusted EBITDA and 30 percent on Performance Materials STIP-Adjusted EBITDA.

If Company STIP-Adjusted EBITDA were below the “threshold” level (which for 2019 was set at 93% of target), no STIP payout would be made to Messrs. Wilson, Fortson or Ms. Burgeson. Mr. Smith and Mr. Woodcock would still be eligible to receive a portion of their respective 2019 STIP award based on BU STIP-Adjusted EBITDA results, but only if actual business segment performance was at “threshold” or higher. An additional limitation, however, provided that neither Mr. Smith nor Mr. Woodcock would receive any STIP payout if Company STIP-Adjusted EBITDA were below 85 percent of “target”, regardless of business segment performance.

2019 Target Company STIP-Adjusted EBITDA was set at $400 Million, an increase of $79.5 Million (or 25 percent) over 2018 actual performance. At the time the Compensation Committee set the target performance level, the goal was believed to be challenging, but achievable. The maximum level of performance was based on 108 percent of target and was believed to be achievable, but only with exceptional performance.

The following table shows the 2019 STIP metrics:

For 2019, the Compensation Committee established the following threshold, target, and maximum STIP incentive opportunities for the NEOs:

Individual Performance Multiplier. An individual NEO’s annual incentive award is further influenced by the NEO’s achievement of his or her individual goals and overall performance for the year (the “individual performance modifier”). Performance goals are typically established in the beginning of the year and generally include both leadership objectives and strategic business objectives. Individual NEO performance is evaluated by comparing actual performance to the pre-established individual goals, as well as considering individual accomplishments and other relevant performance criteria. The Compensation Committee annually assesses the performance of the CEO and the other NEOs, and an individual performance modifier is determined for each.

In determining the individual performance element of each NEO’s short-term incentive payment for 2019, and therefore their final STIP payouts, the Compensation Committee considered each NEO’s individual performance as compared to his or her individual goals, and their respective overall contribution to the Company’s performance for the year. See “2019 Business Highlights”, page 4, for a summary of Company performance in 2019.

For Mr. Fortson, the Committee considered his contributions towards financial commitments with respect to revenue, Adjusted EBITDA and cash flow, leadership in negotiating and closing the cross border acquisition of the Capa caprolactone business (“Capa”) of Perstorp Holding A.B., providing strategic flexibility through continued enhancement of the Company’s credit facilities, as well as the continued strengthening of the financial functions of the Company and its cyber security.

For Ms. Burgeson, the Compensation Committee noted continued effective legal counsel, advancing the Company’s business strategies while appropriately balancing risks and opportunities, stewardship of the Company’s ethics and compliance programs and corporate governance practices, and leading complex multi-jurisdiction litigation activity. Her leadership was also noted in respect of managing the search process for and onboarding of the Company’s two new directors.

The Compensation Committee considered for each of Mr. Woodcock and Mr. Smith their effective leadership in the Performance Materials and Performance Chemicals segments respectively. For Mr. Woodcock, the Committee also considered record revenue and Segment EBITDA for the Performance Materials division, including improvements over prior year results, improvements in safety, as well as the effective redesign of global warehousing and logistics. For Mr. Smith, the Committee noted Segment EBITDA and Segment EBITDA margin increases year over year on a reported basis, ongoing integration of the Capa business, and improvements in safety over the prior year.

Mr. Wilson did not receive a STIP payment for 2019. For 2019, the Committee increased Mr. Woodcock’s STIP award to 145% from 130% to reflect the strong performance of the Performance Materials segment under his leadership in 2019. The resulting STIP payments for our NEOs based on the 2019 STIP financial results, after giving effect to each NEO’s individual performance multiplier, were as follows:

Ingevity’s long-term incentive plan (LTIP) is designed to recognize the performance of our executives who drive the development and execution of our long-term business strategies and goals. These awards are designed to further align executives’ interests with those of Ingevity’s stockholders, reward executives for stockholder value creation, maintain the competitiveness of our total compensation packages, foster executive stock ownership and promote retention. LTIP awards are granted under the 2016 Omnibus Incentive Plan, which provides for “double trigger” vesting in connection with a change in control, as described under the heading “Severance and Double Trigger Change of Control Arrangements” on page 35.

The awards granted annually under the Company’s LTIP are delivered in three components: Performance-Based Restricted Stock Units (“PSUs”) represent 50 percent of each NEO’s annual LTIP opportunity, and non-qualified stock options and service based Restricted Stock Units (“RSUs”) each represent 25 percent of each such opportunity. The Committee considers this an appropriate allocation, as performance-orientation is reflected in the PSU and option opportunities, while grants of RSUs

enhance our ability to retain our management team over a longer-term horizon. The values of individual NEO awards as a percentage of base compensation are set early in each year by the Compensation Committee, in accordance with the Company’s executive compensation philosophy. The number of shares subject to each LTIP component is based on the closing price of the Company’s shares on the date of grant.

RSUs generally vest ratably in one-year increments over three years from the date of grant, provided the recipient meets the terms including continued service. 2019 RSU award grants are reflected in the tables “Grants of Plan Based Awards in 2019,” and “Summary Compensation Table”. The 2019 award under our regular LTIP program for each NEO as a percentage of base salary is as follows:

In addition to his 2019 RSU grant under our regular LTIP program described above, Mr. Fortson received a special grant of RSUs in 2019 with a value of $750,000, as described under the heading, “Special LTIP Awards” on page 34.

Options vest ratably in one year increments over three years from the date of grant, provided the recipient meets the terms of the award including continued service. Options have an exercise price equal to the fair market value per share on the date of grant and have a ten-year term. Grants prior to 2019 vested in full on the third anniversary date of the grant. The Compensation Committee approved the change from 3-year cliff vesting to 3-year ratable vesting to bring options vesting in line with peer group practices and Comparative Compensation Data.

The options granted as a part of the 2019 LTIP program to each NEO as a percentage of base salary is as follows:

PSUs vest on the third anniversary of the date of grant, provided the recipient meets the terms including continued service. Payout is dependent on the achievement of pre-determined performance targets set by the Compensation Committee for the related three-year performance period.

The Compensation Committee determined that for PSU awards granted in 2019 (“2019 PSU Awards”), 2021 adjusted return on invested capital (ROIC)¹ and adjusted three-year cumulative earnings per share (Cumulative EPS)¹ continued to be an appropriate and effective measure of Ingevity’s overall performance, and established threshold, target and maximum performance targets for the related three-year performance period from January 1, 2019 through December 31, 2021.

There is no payout for performance under threshold. Payout at threshold is at 50 percent of units granted, at target is 100 percent and at maximum is 200 percent. Linear interpolation is used to determine award payouts between these pre-determined points. At the time that the performance levels were set, target level of performance was believed to be challenging, but achievable; maximum level was believed to be achievable, but only with exceptional performance.

The 2019 PSU Awards vest on performance certification by the Compensation Committee. The number of vested shares are determined based on the Company’s financial performance relative to the pre-established ROIC and Cumulative EPS targets for the 2019-2021 performance period, with adjusted payouts for threshold, target and maximum performance (capped at 200 percent payout), as determined by the Compensation Committee at the end of the performance period.

In 2019 NEOs were granted the following 2019-2021 PSU opportunity:

Mr. Wilson forfeited the 2019 PSU grant in connection with his resignation.

The Compensation Committee may adjust PSU metrics from time to time to exclude the effect of certain non-recurring items of gain or loss or other significant, out of the ordinary matters, where they had not been factored into established performance targets, such as mergers, acquisitions and dispositions; entry into joint ventures; significant restructurings; changes in accounting rules or tax codes. These adjustments are made to ensure that executives are neither unduly rewarded nor penalized for successfully implementing Board-approved strategic initiatives, or as a result of external events such as changes in effective tax rates.

In late 2018 and early 2019, the Compensation Committee considered the impact of several significant, unplanned 2018 events impacting Company results, including Average ROIC and Cumulative EPS:

Consistent with the approach described above, the Compensation Committee approved adjustments, both positive and negative, to the ROIC and Cumulative EPS targets for the PSUs granted for 2016, 2017, and 2018. This approval reflected the Compensation Committee’s judgment that adjustment of performance targets of unvested LTIP grants was appropriate in light of these significant, non-recurring items, such that executives would not be unduly rewarded nor penalized.

Consistent with the approach described above and the actions taken with respect to 2018 events, the Compensation Committee approved further adjustments, both positive and negative, to the ROIC and Cumulative EPS targets for the PSUs granted for 2017 and 2018 based on unplanned events occurring in 2018 and 2019. This approval similarly reflected the Compensation Committee’s judgment that adjustment of performance targets of unvested LTIP grants was appropriate in light of these significant, non-recurring items, such that executives would not be unduly rewarded nor penalized.

The PSU awards made in 2017 (“2017 PSU Awards”) had ROIC and Cumulative EPS as the performance targets for the related 2017-2019 performance period. The performance targets for these grants were established in the beginning of 2017, reflecting the long-term goals in place at that time. As indicated above under “Metric Adjustments” the Committee made adjustments to these targets to reflect the impact, both positive and negative, from the changes described.

The table below shows the adjustments to the financial metrics for the 2017 PSU awards:

The Compensation Committee approved payment to the NEOs of the 2017 PSU Awards, based upon the achievement of ROIC and Cumulative EPS three-year performance goals at or above the maximum level. As a result, these PSUs were paid

at 200 percent of the amount of the target number of PSUs. In determining performance results, the Committee determined that it would be appropriate to make adjustments for certain unanticipated, extraordinary costs that were incurred in 2018, the year in which the Company initiated litigation to protect certain intellectual property against infringing activity. Therefore, the Committee approved adjustments to actual performance to include those 2018 litigation costs, which resulted in a $0.43 positive adjustment to Cumulative EPS results and a 0.74 percent positive adjustment ROIC costs.

The Compensation Committee certified and approved the payout based on Cumulative EPS of $11.99 and 2019 ROIC of 18.76 percent as described in the table below:

Payment calculation for 2017 PSU Awards settled in February 2020, including for Mr. Wilson, is described in the table below:

From time to time, the Compensation Committee may authorize a special equity award under circumstances where the Committee deems such an award appropriate and in the best interests of the Company, for example to recognize extraordinary performance and/or to enhance retention. In 2019, the Compensation Committee made a special equity award grant to Mr. Fortson in form of $750,000 worth of service-based RSUs with a three year "cliff" vesting period.

This award was in recognition of Mr. Fortson’s leadership in negotiating attractive financings completed during the year including the Company’s inaugural bond offering, expanded credit facility and term loan that provided strategic flexibility enabling acquisitions such as Georgia Pacific’s pine chemicals business and Capa, as well as the continued strengthening of the financial functions of the Company and enhanced IT cybersecurity. The Committee believes that the award value and the three-year vesting schedule were appropriate under the circumstances to both recognize Mr. Fortson’s leadership and to enhance the Company's ability to retain his services for the foreseeable future. This award is described in footnote 2 to the Summary Compensation Table on page 39.

Our NEOs generally participate in the same retirement and welfare benefit plans as other Ingevity employees that are intended to be competitive with market practice. These are described on page 36 under “Retirement Plans, Welfare Benefits and Perquisites”. Where IRS rules limit the ability of executives to participate at the same level as other employees, they may participate in a non-qualified deferred compensation plan which is described more fully on page 36. We do not offer a defined benefit pension plan. However, the Company maintains a Retirement Restoration Plan that mirrors benefits provided under a qualified defined benefit plan sponsored and maintained by our former parent company, WestRock (the “WestRock Pension Plan”).

The Retirement Restoration Plan is a non-qualified plan that was adopted by the Company to honor historical WestRock obligations under an Employee Matters Agreement between WestRock and the Company as part of the Separation. The plan was frozen at the time of the Separation, and none of our NEOs currently accrue a benefit under this plan.

Our perquisites program is limited and designed to promote the security and wellbeing of our executives thereby allowing them to focus on Company business. Executive perquisites are financial counseling and executive physicals. The value of the financial counseling is credited to the NEO as imputed income. There is no tax gross-up.

Our stock ownership guidelines align the long-term interests of our NEOs with those of our stockholders and discourage excessive risk taking. Our guidelines require stock ownership levels as a value of Ingevity shares equal to a multiple of base salary or retainer for non-employee directors. The Ownership Guidelines require all NEOs to retain 50 percent of net shares received under LTIP awards until the following stock ownership levels are met:

In determining compliance with these guidelines, stock ownership includes shares and unvested RSUs. Unvested PSUs and vested but unexercised stock options are not included. Executives generally have five years from the date of their designation to achieve the targeted level of ownership. As of December 31, 2019, Messrs. Wilson and Fortson have met their respective ownership guidelines and the other NEOs are on track to achieve their target ownership levels in a timely manner.

Ingevity’s insider trading policy prohibits members of our Board, officers and other employees from trading in options, warrants, puts and calls or similar instruments of Company securities or selling Company securities “short.” The policy also prohibits holding Company securities in margin accounts.

We maintain a compensation recoupment (or "claw back") policy covering our NEOs. In the event of a material restatement of the Company’s financial statements filed with the SEC, the Company’s Board will review the facts and circumstances that led to the requirement for the restatement. In that review, the Board will consider whether any covered current or former executive received Incentive Compensation (as defined in the policy) that was awarded or paid based in whole or in part on the apparent achievement of financial results that were determined by reference to the originally filed financial information, but which financial results were not achieved under the Company’s restated results. The Board will further consider whether any such current or former executive engaged in Misconduct (as defined in the policy) which resulted in or substantially contributed to the material restatement.

If the Board determines that any covered executive engaged in Misconduct, and received Incentive Compensation within the three-year period preceding the restatement that would not have been payable if the original financial information had reflected the restated results of operations, the Board has the power to direct that the Company recover all or a portion of the excess Incentive Compensation.

The Board may consider such factors as it shall determine relevant in determining the appropriate recoupment from a covered current or former executive and the means of recovery. The Board may seek recoupment from any of the following sources: future payments of incentive compensation, cancellation of outstanding equity awards, future equity awards and direct repayment.

The Compensation Committee has adopted equity grant practices that set forth guidelines for the granting of equity based compensation, including, among others, approval of annual awards by the Compensation Committee at regularly scheduled first quarter committee meeting, no back-dating of awards, and providing limited discretion to the CEO to grant awards to employees who are not executive officers for the purpose of attracting, retaining and motivating such employees.

The Compensation Committee approved severance and double trigger change of control agreements covering each of the NEOs, which became effective on March 1, 2017.

An NEO whose employment is terminated by the Company in the absence of a change of control is entitled to receive severance benefits, provided the termination was without Cause (as defined). An NEO whose employment is terminated within two years after a change of control is entitled to receive severance benefits provided the termination was without

Cause or is a resignation by the NEO for Good Reason (as defined). The purpose of the agreements is to ensure that Ingevity (a) offers benefits that provide an overall compensation package that is competitive with that offered by other companies with whom Ingevity competes for talent; (b) retains and relies upon the undivided focus of its senior executives during and following a change of control; and (c) diminishes the inevitable distraction of our NEOs by virtue of personal uncertainties and risks created by the potential job loss following a change in control. The cash severance entitlement is equal to a multiple of the NEO’s actual base salary and target annual incentive, which varies by executive level, and in the case of change of control severance, the multiple is enhanced. The agreements also include one-year post-termination restrictive covenants relating to non-solicitation of customers and employees, and non-competition provisions. All severance payable is further subject to the NEO signing an appropriate release of claims. None of the agreements include any tax gross ups arising from any excise tax imposed by the Internal Revenue Code on excess parachute payments.

The treatment of Ingevity’s equity awards in the event of a change of control is governed by the award agreements and our 2016 Omnibus Incentive Plan, which was amended in 2019 to clarify that vesting of our NEOs’ awards occurs on a double-trigger basis (that is, upon both a change of control and a qualifying termination of employment without cause or for good reason). In particular, under the 2016 Omnibus Incentive Plan, outstanding Ingevity equity awards that are replaced by the acquirer in a change of control by a qualifying replacement award will not become vested as a result of the change of control, and instead will remain subject to the vesting conditions of the replacement award, with accelerated vesting in full (without pro-ration) only in the event of involuntary termination or termination by the employee for good reason. In the event of a change of control of Ingevity in which the acquirer does not issue replacement awards, outstanding performance based awards would vest on a pro-rata basis up to the date of the change of control, based on performance through that date (or the target level of performance, if higher), and time-based awards would vest in full (without pro-ration) as of the date of the change of control.

NEOs participate in each of the benefit plans or arrangements that generally are made available to all U.S. based salaried employees including:

Additional benefits made available to NEOs are:

The value of the financial counseling is credited to the NEO as imputed income. There is no tax gross-up.

The Company also makes available a non-qualified deferred compensation plan to a select group of highly compensated employees, including the NEOs, which allows participants to defer up to 80 percent of their base compensation and 100 percent of their annual incentive. The plan also contains a restoration component that restores lost defined contribution benefits due to IRS limits.

The Compensation Committee engaged Pearl Meyer to review Ingevity’s executive and non-executive compensation programs to assess whether they encourage or create excessive risk-taking not in the best interest of the Company or its stockholders.

In conducting this assessment, Pearl Meyer reviewed various components and design features of all of the Company’s executive and non-executive plans and programs and analyzed them in the context of risk mitigation. A summary of the findings of the assessment was provided to the Compensation Committee, which concluded that Ingevity’s compensation arrangements are not constructed or administered in a way that is likely to create risks that could materially and adversely affect the Company.

Among the factors considered in Pearl Meyer’s assessment and reviewed by the Compensation Committee were: (i) the balance of the Company’s overall program design, including the mix of cash and equity compensation; (ii) the mix of fixed and variable compensation; (iii) the balance of short-term and long-term objectives of our incentive compensation; (iv) the performance metrics, performance targets, threshold performance requirements and capped payouts related to our incentive compensation; (v) the Company’s share ownership guidelines, including share ownership levels, retention practices and prohibitions on hedging, pledging and other derivative transactions related to Ingevity stock; (vi) the Compensation Committee’s ability to exercise negative discretion to reduce the amount of the annual and long-term incentive awards; (vii) the existence of a recoupment policy; and (viii) internal controls and oversight structures in place at the Company.

Based on Pearl Meyer’s review, the Compensation Committee’s deliberations and such other matters as the Compensation Committee deemed relevant, the Compensation Committee believes Ingevity’s well-balanced mix of salary and short-term and long-term incentives, as well as the performance metrics that are included in the incentive programs, are appropriate and consistent with the Company’s risk management practices and overall strategies.

The Compensation Committee considers tax and accounting considerations in structuring our executive compensation program.

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) was amended by the Tax Cuts and Jobs Act of 2017 to significantly expand the disallowance of tax deductions to public companies for compensation over $1 million paid for any fiscal year to the Company’s covered employees (generally, the chief executive officer, chief financial officer and three most highly compensated executive officers (other than the chief executive officer or chief financial officer). Section 162(m) exempts qualifying performance-based compensation payable pursuant to a binding written agreement in effect on November 2, 2017 that is not materially modified after that date. Certain other compensation also maybe "grandfathered" under Section 162(m). While our Compensation Committee structured certain awards to our executive officers under our annual and long-term plans to qualify for the performance-based compensation exemption, there can be no guarantee that any such awards will be or remain exempt from Section 162(m). Further, the Compensation Committee believes that stockholder interests are best served if the Compensation Committee’s discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expenses. Thus, considering the repeal of the performance-based compensation exception to 162(m) and the expansion of the group of covered employees, our Compensation Committee expects to approve compensation that is not deductible for income tax purposes. However, the Compensation Committee does not anticipate a shift away from variable or performance-based compensation payable to our NEOs in the future, nor do we anticipate applying less rigor in the process by which we establish performance goals or evaluate performance against such pre-established goals, with respect to compensation paid to our NEOs.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for fiscal 2019.

THE COMPENSATION COMMITTEE

Frederick J. Lynch, Chair

Jean S. Blackwell

Diane H. Gulyas

Richard B. Kelson (until February 20, 2020)

Daniel F. Sansone

The table below includes the total compensation of our Chief Executive Officer, our Chief Financial Officer and the three other most highly compensated executive officers of our Company during 2019, whom we refer to in this proxy statement as NEOs, for the fiscal year ended December 31, 2019.