Form DEF 14A ALLEGHENY TECHNOLOGIES For: May 20

April 5, 2021 4:18 PM
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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Table of Contents

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2021 PROXY STATEMENT AND NOTICE OF ANNUAL MEETING OF STOCKHOLDERS


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Our Vision Solving the World's Challenges through Materials Science ATI competes by serving customers in: Strategic Markets Aerospace Defense Diversified Applications Specialty Energy Medical Electronics Materials Science Advanced, Integrated Process Technologies Relentless, Innovative People Our Commitment Creating long-term shareholder value through Relentless Innovation(R)


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ATI 2021 Proxy Statement

     

 

 

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Allegheny Technologies Incorporated

1000 Six PPG Place

Pittsburgh, PA 15222

DEAR STOCKHOLDERS

 

I am pleased to invite you to attend Allegheny Technologies Incorporated’s 2021 Annual Meeting of Stockholders. After careful consideration and in light of ongoing public health concerns and the importance of safeguarding the health of our stakeholders, we have decided to conduct this year’s meeting virtually. We look forward in future years to again conducting an in-person annual meeting in one of the many communities in which we operate. You will find information about how to participate in this year’s meeting, including information about how to pose questions to our Board and management, in this Proxy Statement. I encourage you to attend.

I will retire from ATI’s Board at the conclusion of the 2021 Annual Meeting. It has been my great privilege to serve as a member of your Board and as your Board Chair. As I near the completion of my tenure, I would like to share with you our plans for future Board leadership and the role that the Board continues to play in helping ATI to navigate the ever-evolving risks and opportunities of today’s world.

Two years ago, at the outset of 2019, the other members of your Board and I were pleased to welcome Bob Wetherbee in his new role as ATI’s Chief Executive Officer and as a new member of our Board. Having served as Lead Independent Director, I assumed the role of Board Chair, consistent with our Board’s desire to support Bob in devoting his full attention to the leadership transition and his strategic vision for the Company. Bob seamlessly assumed leadership of ATI, working quickly to build his leadership team, drive the achievement of strong results in 2019, and develop a longer-term strategic vision and plans. When the pandemic emerged in early 2020, upending many of our expectations for the year, Bob and his team rose to confront the many challenges facing our people, operations and results. In doing so, they ensured the safety of our workforce, consistency of our ongoing operations, and strength and resiliency of our balance sheet, and kept our focus firmly on the future. Today, I confidently express my belief that ATI will emerge from the current downturn as a stronger company with a clear vision.

With this backdrop, I’m privileged to announce that your Board has appointed Bob as Chairman and CEO, effective with my retirement at the close of the 2021 Annual Meeting. We believe that combining the roles of CEO and Chair promotes unified leadership and direction for the Company, allowing for a clear, sharp focus on the efficient implementation of ATI’s strategies to grow shareholder value.

At the same time, we recognize the fundamental importance of independent Board oversight. To that end, current Board member J. Brett Harvey will serve alongside Bob as your Lead Independent Director. In this role, Brett will serve as the principal liaison between the independent members of your Board and ATI’s management, while also providing an avenue for stockholders wishing to communicate with the Board other than through the Chair. With his deep background in ATI’s business and service on your Board, and his past experience serving as a public company chairman and chief executive, Brett is well positioned to continue ATI’s long tradition of independent Board leadership and oversight.    

The challenges of the past year have highlighted the rapidly evolving nature of the global climate for ATI and the Board’s indispensable role in identifying and overseeing appropriate responses to the many and varied risks we face. Throughout 2020, strategic and risk oversight remained central themes of every Board meeting, and our role as stewards of your investment is continually at the forefront of our leadership effort. More than ever, we view your feedback as integral to our decision-making process. To that end, ATI continuously engages in outreach efforts to gain the benefit of your views. Through our annual governance outreach program, we address topics such as Board composition and refreshment and other governance practices, executive compensation and ESG matters. The Board reviews your feedback and your input has helped to form the basis for the strategies that ATI has implemented and will continue to pursue.

As we look to 2021 and beyond, your Board remains committed to doing its utmost to remain effective custodians of your

investment and advocates for your interests and concerns. We look forward to continuing to interact with you in 2021, and we thank you for your ongoing support of ATI.

 

Sincerely,

 

LOGO

 

Diane C. Creel

Board Chair

April 5, 2021

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ATI 2021 Proxy Statement

  

 

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Allegheny Technologies Incorporated

1000 Six PPG Place

Pittsburgh, PA 15222

DEAR STOCKHOLDERS

 

There is no question that 2020 was a demanding year for ATI, marked by the sudden onset of widespread uncertainty and challenges for our business. Our team persevered and focused on doing the right things, quickly and decisively, positioning ATI to emerge from this crisis stronger and prepared for a renewed future. The team and I are very proud of what we accomplished together.

When the COVID-19 pandemic emerged, we took immediate action to keep our people safe. As a critical manufacturing sector business, we continued to operate throughout the year. Thanks to our strong safety value, we were able to put in place protocols to mitigate the spread of COVID. As a result, we had limited COVID-related operational disruption. More importantly, thanks to our team’s continuing vigilance, we have had no COVID-related deaths among our employees and very little known workplace transmission of the virus. We thank our employees for doing the right things to keep themselves, each other, and their families safe and healthy.

While we addressed the unprecedented consequences of the pandemic, what really defined our year — and what I believe defines ATI — is our steady focus on the future. Our leadership priorities drove the actions necessary to ensure our long-term profitability and growth and the health of your investment: preserving cash and maintaining liquidity; optimizing our cost structure to meet changing customer demand; supporting our customers through continued strong execution; and being recovery ready, poised to leverage market share gains for new growth.

During 2020, we extended our debt maturity profile and ended the year with nearly a billion dollars of total liquidity, including significant cash on hand. With the benefit of our close customer relationships, we proactively and aggressively reduced costs, nimbly matching capacity with rapidly declining demand and limiting the impact on our bottom line. We continue to pursue operational improvements, and we expect much of our cost savings to become structural, continuing to benefit ATI as we return to growth over time. Moreover, as we worked to implement these structural changes, we never wavered from our commitment to strong execution and operational excellence. Our customers continue to count on us to deliver the mission-critical materials and components to keep their planes flying, vehicles moving, energy flowing and medical equipment and electronics working flawlessly, and we’ve been rewarded with more of our customers’ business as a result of our efforts.

We also announced that we will be exiting production of standard stainless steel sheet products, our lowest margin product line, and taking steps to streamline our Advanced Alloys & Solutions segment, redeploying capital in ways that will enhance our specialty capabilities. By taking what we do best, our core strengths in materials science and advanced process technologies, and applying them to further penetrate differentiated applications offering higher returns, these actions accelerate the execution of our high value strategy and intensify our focus on aerospace and defense markets.

In short, we took the actions in 2020 necessary to ensure ATI would not only survive the global recession but emerge stronger in recovery. As we evolve and grow our business, we remain committed to our core values: we do what we say we’re going to do, when we say we’re going to do it, and we do it the right way. We believe these values strongly resonate with all of our stakeholders, and they permeate our corporate governance practices, investor outreach efforts and compensation programs. You’ll see that reflected in this Proxy Statement.

Looking ahead to 2021, when I anticipate becoming Chair of your Board of Directors: I am both honored and humbled by the confidence placed in me, and I look forward to continuing to lead the team as we accelerate the creation of significant shareholder value. I thank our retiring Board Chair, Diane Creel, and our other retiring directors, John Pipski and Jim Rohr, for their service to ATI and outstanding leadership, and I am pleased to join Diane in inviting you to our virtual 2021 Annual Meeting.

 

As always, I value feedback from our

investors and look forward to

our ongoing dialogue.

 

Sincerely,

 

 

LOGO

Robert S. Wetherbee

President and
Chief Executive Officer

April 5, 2021

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ATI 2021 Proxy Statement

     

 

 

Notice of Annual Meeting of Stockholders

      

 

Annual Meeting Information

 

 
 

 

DATE & TIME:

Thursday, May 20, 2021

11:00 a.m. Eastern Time

 
 

 

VIRTUAL MEETING SITE:

www.meetingcenter.io/271924418

 

 

RECORD DATE:

March 22, 2021

 

Agenda

 

1.

Election of three directors;

 

2.

Advisory vote to approve the compensation of our named executive officers; and

 

3.

Ratification of the selection of Ernst & Young LLP as our independent auditors for 2021.

 

YOUR VOTE IS IMPORTANT

Please vote as soon as possible.

 

You can help the Company reduce expenses by voting your shares by telephone or Internet; your proxy card or voting instruction card contains the instructions. Or complete, sign and date your proxy card or voting instruction card and return it as soon as possible in the enclosed postage-paid envelope.

 

How to vote

 

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Via the internet Visit the website listed on our proxy card

 

 

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By mail Sign, date and return your proxy card in the enclosed envelope

 

 

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By telephone Call the telephone number on your proxy card

 

 

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During the Virtual Meeting Attend the Annual Meeting which is being presented virtually via webcast and vote online during the meeting

Admission to the Meeting

We are committed to the safety of our employees and stockholders. After careful consideration, and in light of continued public health concerns regarding the COVID-19 pandemic, we have decided to forego an in-person meeting this year in favor of a virtual meeting format only.

Our goal is to ensure that our stockholders will be able to participate in the virtual meeting like they would at an in-person meeting. You are entitled to participate, vote and submit questions at the virtual 2021 Annual Meeting if you were a stockholder of record as of the close of business on March 22, 2021, the record date, or hold a legal proxy for the meeting provided by your bank, broker or nominee.

Stockholders of Record. You will be able to participate in the 2021 Annual Meeting, vote electronically and submit questions during the live webcast of the meeting, without advance registration. The two items of information needed to access the live webcast of the meeting are the following:

Username/Computershare Control Number: the 15-digit control number on the proxy card or the “Notice Regarding the Availability of Proxy Materials” (the “Notice”) you previously received

Meeting password: ATI2021

Beneficial Owners. If you are a beneficial owner and hold your shares through an intermediary, such as a bank, broker or nominee, you must register in advance to participate in the 2021 Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register in advance, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. You must forward a copy of the legal proxy, along with your email address, to Computershare Trust Company, N.A. (“Computershare”) by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time, on Monday, May 17, 2021. You will receive a confirmation of your registration and instructions on how to attend the meeting by email after Computershare receives your registration materials.

Beneficial owners that are unable to register in advance may still attend the 2021 Annual Meeting by visiting www.meetingcenter.io/271924418 as a “guest” but will not have the option to vote shares electronically or submit questions during the live webcast of the meeting. However, you may submit questions in advance of the meeting by emailing your question, along with proof of ownership, to investors@ATImetals.com.

Our Proxy Statement and 2020 Annual Report are available for review by stockholders of record at envisionreports.com/ATI and by beneficial owners at edocument-review.com/ATI. For further information about ATI, please visit our website at atimetals.com.

On behalf of the Board of Directors:

 

LOGO

Elliot S. Davis

Corporate Secretary

April 5, 2021

Important notice regarding the availability of proxy materials for the ATI Annual Meeting of Stockholders to be held on Thursday, May 20, 2021.

As permitted under applicable SEC rules, we are mailing our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials and submit proxy votes online. Our Proxy Statement, proxy card and 2020 Annual Report are available for review at: envisionreports.com/ATI.

 


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ATI 2021 Proxy Statement

  

 

Table of Contents

 

Proxy Statement Summary      5  
Item 1: Election of Directors      12  
Director Terms      12  
Our Director Nomination Process      12  
Our 2021 Director Nominees and Continuing Directors      15  
Our Corporate Governance      19  
Our Commitment to Integrity, Corporate Governance and Sustainability      19  
ATI Corporate Governance at a Glance      20  
Corporate Governance Guidelines      21  
Corporate Guidelines for Business Conduct and Ethics      21  
Environmental and Social Sustainability      22  

Sustainability Report Highlights

     22  

Human Capital Management

     24  

Diversity and Inclusion

     25  
Investor Outreach and Stockholder Engagement      26  
Board Information      27  

Board Composition and Independence

     27  

Board Leadership Structure

     27  

Board and Committee Membership—Director Attendance at Meetings

     29  

Board Committees

     29  

Board Self-Assessment

     32  

Our Board’s Role in Risk Oversight

     33  

Process for Communicating with Directors

     34  
Director Compensation      34  
Related Party Transactions      36  
Compensation Committee Interlocks and Insider Participation      36  
Stock Ownership Information      37  

Five Percent Owners of Common Stock

     37  

Stock Ownership of Directors, Board Nominees and Executive Management

     38  
Members of ATI’s Executive Management      39  
Item 2: Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers      40  
Executive Compensation      42  

Compensation Discussion and Analysis (See separate Table of Contents)

     42  
Item 3: Ratification of the Selection of Independent Auditors      75  
Audit Committee Report      76  
Annual Meeting Information      77  

2021 Annual Meeting of Stockholders—Questions & Answers

     77  

2022 Annual Meeting and Stockholder Proposals

     83  

Other Business and Information

     83  


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ATI 2021 Proxy Statement

     

 

 

Proxy Statement Summary

This summary highlights information that is contained elsewhere in this Proxy Statement. You should carefully read this Proxy Statement in its entirety before voting, as this summary does not contain all of the information that you should consider.

 

 

ANNUAL MEETING OF STOCKHOLDERS

     

 

DATE & TIME:

Thursday, May 20, 2021

11:00 a.m. Eastern Time

 

VIRTUAL MEETING SITE:

www.meetingcenter.io/271914418

 

RECORD DATE AND VOTING:

March 22, 2021

 

ATI stockholders as of the record date are entitled to vote on the matters presented at the meeting. Each share of common stock of the Company is entitled to one vote for each director nominee and one vote on each other matter presented.

MEETING AGENDA AND VOTING MATTERS

 

  Proposal    Board’s recommendation      Page reference     

  1. Election of three directors

 

   LOGO   FOR      12

 

   

  2. Advisory vote to approve the compensation of our named executive officers

 

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  3. Ratification of Ernst & Young LLP as our independent auditors for 2021

 

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DIRECTOR NOMINEES – CLASS I – TERM TO EXPIRE IN 2024

 

Name    Director Since      Experience and Qualifications    Board Committees
Herbert J. Carlisle      2018     

   Leadership/Governance

  

   Audit

     

   Finance

  

   Finance

     

   Industry/Manufacturing

  

   Technology

     

   Operations

   Technical

  
             

   Government/Environmental

    
David P. Hess      2019     

   Leadership/Governance

  

   Finance

     

   Finance

  

   Nominating & Governance

     

   Industry/Manufacturing

  

   Personnel & Compensation

     

   Operations

   Technical

   Labor/HR

  
             

   International/M&A

    
Marianne Kah      2019     

   Leadership/Governance

  

   Audit

     

   Finance

  

   Technology

     

   Industry/Manufacturing

  
     

   Government/Environmental

  
             

   International/M&A

    


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ATI 2021 Proxy Statement

  

 

Proxy Statement Summary

 

BOARD COMPOSITION

ATI has a diverse, highly credentialed and highly experienced Board. Our directors possess a variety of tenure, qualifications, backgrounds, skills and experiences contributing to a Board that is well-rounded and well-positioned to effectively oversee our business and promote the interests of our stakeholders.

Highly Engaged Board Guides the Strategic Direction of Our Company

 

 

Actively oversees long-term strategic planning and capital allocation decisions, including through an annual, multi-day strategic planning meeting in addition to regular quarterly and other Board meetings.

 

 

Regularly assesses and oversees management and mitigation of known and emergent risks to our business.

 

 

Conducts site visits at our facilities throughout the United States. Though our recent ability to conduct these visits has been curtailed by the ongoing COVID-19 pandemic, they are a valuable component of our normal governance practices; visiting our facilities allows our directors to meet with management and other employees and to gain both firsthand exposure to the technologies that drive our success and deeper knowledge of the strengths and challenges of our business and how they tie to our near and long-term strategic goals.

 

 

Actively and continuously engages in robust Board and senior management succession planning.

 

 

100% overall attendance rate for Board and Committee meetings during 2020, and more than 96% over the last three years.

 

 

Market-driven stock ownership guidelines.

Focused and Thoughtful Board Refreshment

 

 

Our Board routinely engages in succession planning and adds new members on an opportunistic basis when it identifies candidates whom it believes have experience, skill sets and other characteristics that will enhance Board effectiveness.

 

 

We have a mandatory retirement age, and our Board engages in recruitment as appropriate to support its refreshment efforts.

 

 

Our annual Board evaluation process assesses the Board’s existing skill sets and the need or desirability of adding members; the Board can appoint new members when presented with candidates who fill a particular need or otherwise would serve as an asset to the Board.

 

 

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Proxy Statement Summary

 

 

ATI 2021 Proxy Statement

     

 

 

GOVERNANCE HIGHLIGHTS

Our commitment to good corporate governance is illustrated by the following practices:

 

  Board independence (11 out of 12 directors are independent)

 

  Independent Board Chair/Lead Independent Director

 

  Independent directors regularly meet in executive sessions without management present

 

  100% independent Audit, Personnel & Compensation, Finance and Nominating & Governance Committees

 

  Annual Board and committee self-assessments

 

  Strong corporate governance guidelines and policies

 

  Majority voting/director resignation policy for uncontested elections

 

  Board diversity (female and minority directors comprise over 30% of our current Board) and mandatory director retirement age

 

  Proxy access

 

  Limits on future severance arrangements

 

  Robust stock ownership guidelines for directors and executive management

 

  Intensive succession planning for our Board and executive leadership

 

  Well-established Board strategic and risk oversight function
 

 

OUR COVID-19 RESPONSE

When the potential impact of the COVID-19 pandemic on our people and business began to emerge in early 2020, we recognized that the urgency of the situation required significant and comprehensive action. Beginning in the first quarter of 2020, ATI immediately developed responsive plans and strategies that centered on the key leadership priorities illustrated below.

 

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Ensuring the Health and Safety of Our Team

Consistent with our values and past practices, the safety and well-being of our employees is our top concern. As a critical manufacturing sector business, we have been able to continue operating throughout the pandemic, which required an immediate focus on the measures necessary to maintain employee safety.

Our Global Rapid Response Team. During the first quarter of 2020, we convened a cross-functional and global rapid response team comprised of leaders across various disciplines from within our organization, including environmental health and safety, human resources, benefits, legal and communications. The team was tasked with helping to develop our response and monitoring the rapidly evolving nature and impact of the pandemic. The response team quickly established pandemic-related safety policies and guidelines for our business and implemented uniform safety protocols, such as mandatory masking, social distancing requirements and signage, deep cleaning procedures as appropriate and mandatory quarantining in cases of direct exposure, across all of our operating facilities, worldwide. At the same time, our procurement team members worked to ensure that employees at all of our facilities were well supplied with personal protective equipment and other materials necessary for them to meet our safety protocols.

Our Remote Work Force. Since March 2020, members of our workforce who were able, given the nature of their job responsibilities, have been strongly encouraged to work remotely. At the outset of the pandemic, our digital technology team rapidly accelerated the implementation of new tools and security measures across our business to provide highly reliable and highly secure remote access for much of our global workforce. These efforts have enabled secure and seamless remote work and interaction among members of our leadership and other team members, helping to minimize in-person interaction and mitigate the risk of virus spread within our own ATI community.

As a result of these efforts, although we have not been spared from infections among our employees, ATI’s instances of known workplace transmission have been very limited.


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ATI 2021 Proxy Statement

  

 

Proxy Statement Summary

 

Maintaining the Health of Our Business

In tandem with our efforts to ensure continued safe working conditions for our employees, we swiftly adjusted our production levels and cost profile to match declining customer demand. We aggressively implemented measures to improve our operational efficiency and enacted other cost reductions to limit the impact of rapidly changing market conditions on our bottom line. These efforts included rolling facility idlings, targeted adjustments to crewing levels and work schedules, staffing reductions through furloughs, and layoffs. We reduced compensation and benefits for our leadership and nearly all of our salaried workforce for a portion of 2020.

Our compensation actions included:

 

  For our NEOs and other executive leadership: a 20% reduction in base salary levels from May 1, 2020 to December 1, 2020, and
  For our Board: a 20% reduction in the cash component of our Director compensation program for the second half of 2020.
 

 

Additionally, we curtailed planned capital expenditures for the year and reduced inventory, yielding meaningful improvements in working capital levels.

Through these difficult but necessary actions, ATI has ensured ongoing production capabilities for our customers, preserved jobs for employees and maintained a strong balance sheet to ensure that we are recovery and growth ready when changing market conditions present opportunities for our business.

Ensuring Appropriate Risk Oversight. Our response team met frequently and regularly throughout 2020 to monitor and assess the health of our employee population, the impact of evolving federal, state and local actions and requirements in response to the pandemic and other matters. The team also reported regularly to our executive management. Additionally, updates regarding ATI’s response to the pandemic were a central point of reporting and discussion at every meeting of our Board throughout 2020, helping to ensure Board-level oversight of the pandemic’s inherent risks and impacts to our business.

 

 

Cybersecurity Program. Throughout 2020, special attention was and continues to be given to improving and implementing Cybersecurity Maturity Model Certification controls in support of protecting ATI’s technology and customer data. For more information, see “Corporate Governance, Cybersecurity Risk Oversight” on page 34.

 

BUSINESS TRANSFORMATION

Effective January 1, 2020, we re-aligned our senior management reporting structure and financial reporting segments. Our new Advanced Alloys and Solutions (“AA&S”) segment includes the operations that comprised our former Flat Rolled Products segment, as well as our Specialty Alloys and Components business and certain other assets that formerly were managed as part of our HPMC segment.

 

 

In December 2020, we announced plans to exit production of low-margin standard stainless sheet products during 2021, streamline the operations of our AA&S segment and redeploy capital to invest in our specialty capabilities, sharpening our focus on higher-margin opportunities, including in aerospace and defense.

 

These changes align with and will help drive our corporate strategy by sharpening the focus of our business and optimizing key assets.

 

 

High Performance Materials & Components (HPMC)

 

   Forged Products: broad range of forging capabilities for aerospace & defense, plus other high-performance applications including isothermal, hot-die and closed-die forging.

 

   Specialty Materials: broad range of nickel-based, cobalt-based and titanium-based alloy mill products and powers, and additive parts primarily for aero-engine and airframe applications.

 

 

Advanced Alloys & Solutions (AA&S)

 

   Specialty Alloys & Components: (formerly part of HPMC segment) specialty alloys and refractory metals in all conventional product forms, including custom shapes and near-net shape components.

 

   Specialty Rolled Products: (formerly part of Flat Rolled Products segment) specialty-grade flat products formed through unique process capabilities.

 

   Standard Stainless Sheet Products: (formerly part of Flat Rolled Products segment) standard stainless sheet products for the North American market

 

   Joint Ventures

  STAL: precision-rolled stainless strip

  Uniti Titanium: commercially pure titanium products for target markets

  A&T Stainless: stainless steel products (idled)

 


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Proxy Statement Summary

 

 

ATI 2021 Proxy Statement

     

 

 

2020 BUSINESS PERFORMANCE

ATI’s business and financial performance was significantly affected in 2020 by the sudden onset of widespread uncertainty and sweeping challenges to the global community and economy. Some of our most important end markets — such as the commercial aerospace industry — are among those most deeply impacted by the onset of the COVID-19 pandemic and its many repercussions. As a result, our business witnessed marked declines in customer demand for our products and, consequently, its financial performance.

In response to these challenges, we aggressively implemented cost reductions and other measures to limit the impact of rapidly changing market conditions on our bottom line. We also were able to leverage our customer relationships and reputation for operational excellence to grow our future market share in the industries and with the customers we serve. While we experienced significant losses in 2020, we believe that the comprehensive actions we took helped to mitigate those losses, improve the efficiency of our business and, importantly, position our business for recovery and growth.

 

 

Sales of $2.98 billion compared to $4.12 billion in the prior year

 

    Reflected significant impact of the COVID-19 pandemic and associated economic downturn on many of the end markets that we serve

 

    Achieved 10% sequential improvement in fourth quarter revenue compared to the third quarter of 2020

Gross profit of $293 million compared to $638 million in 2019

Net loss attributable to ATI of $1,573 million, including $1,507 million in restructuring and other charges, net of associated tax impacts, compared to net income attributable to ATI of $258 million in 2019

Preserved strong liquidity and cash position

 

    Refinanced more than $200 million in long-term debt at a meaningfully improved interest rate, ensuring that our next significant debt maturity does not occur until mid-2023.

 

    Ended the year with total liquidity of over $950 million, including $646 million of cash on hand at December 31, 2020, compared to $491 million at December 31, 2019

Positioned our business for future recovery and growth

 

    Reduced costs by nearly $150 million

 

    Reduced inventories and improved managed working capital throughout 2020

 

    Announced plans to exit production of low-margin standard stainless steel sheet products, streamline the operations of our AA&S segment and redeploy capital
 

 

 

 

LOGO

 

 
                                                    

   Our customers continue to count on us to deliver the mission-critical materials and components to keep their planes flying, vehicles moving, energy flowing and medical equipment and electronics working flawlessly, and we’ve been rewarded with more of our customers’ business as a result of our efforts.

 

— Robert S. Wetherbee, President and CEO

 


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ATI 2021 Proxy Statement

  

 

Proxy Statement Summary

 

STOCKHOLDER ENGAGEMENT

We value the input we receive from our stockholders. As part of our investor relations program, we regularly communicate with our investors and actively engage with them throughout the year. We solicit their feedback on environmental, social and governance — or “ESG” — topics and ATI’s executive compensation program. Our goal is to be responsive to our stockholders and to ensure that we understand and address their concerns and observations. As a result of our stockholder engagement, we have sharpened our ESG reporting and have made significant changes to our corporate governance practices and executive compensation program since 2015.

 

2020 Say On Pay Vote

 

Last year, our Say On Pay proposal received the support of approximately 87% of the shares voted at our 2020 Annual Meeting. Approximately 99% and 96% of the shares voted at our 2019 and 2018 annual meetings, respectively, were voted in favor of our Say On Pay proposal. Our Board believes this continued support from our stockholders is a result of our commitment to ensure a strong link between pay and performance.

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OUR COMPENSATION PHILOSOPHY—PAY FOR PERFORMANCE

ATI’s executive compensation program is designed to support our long-term strategic vision and to align with our pay-for-performance philosophy. The goals of our program are to compensate executive management based on performance, create long-term stockholder value and attract and retain key employees. Paying for performance is a key attribute of ATI’s compensation philosophy. As such, a significant portion of the compensation of each named executive officer (“NEO”) is subject to the achievement of rigorous performance goals and, therefore, is “at risk.”

2020 Target Pay Mix

 

 

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Proxy Statement Summary

 

 

ATI 2021 Proxy Statement

     

 

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TOTAL REALIZED COMPENSATION

When making determinations and awards under our incentive plans, the Personnel and Compensation Committee looks to the actual dollar value of awards to be delivered to the NEOs in any given year, as illustrated by the Total Realized Compensation figures below.

The comparison of 2020 target compensation to realized compensation for our NEOs reflects the significant and unanticipated negative impact on our business of the COVID-19 pandemic, in contrast to our successful performance in 2019 and 2018. Similar to 2020, total realized compensation was meaningfully lower than target for each of our NEOs in 2016 and 2017, when our business performed below our expectations.

2016-2020 Total Realized Compensation as % of Target

 

CEO                                                                                         Other NEOs (Average)

 

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These multi-year trends demonstrate our ongoing commitment to compensating our leadership based on the Company’s performance and placing a significant portion of senior executive compensation “at risk.”

2020 Target Compensation Comparison to Total Realized Compensation

 

 

 Named Executive Officer*    2020 Target
Compensation
       2020 Total Realized
Compensation
            % of Target
Realized
 

 

  Wetherbee

  

 

 

 

$6,081,250

 

 

    

 

 

 

$2,437,085

 

 

 

 

 

 

 

 

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40%

 

 

 

  Newman

  

 

 

 

$2,242,000

 

 

    

 

 

 

$1,784,722

 

 

 

 

 

 

 

 

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80%

 

 

 

  Fields

  

 

 

 

$2,090,000

 

 

    

 

 

 

$1,040,992

 

 

 

 

 

 

 

 

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50%

 

 

 

  Sims

  

 

 

 

$2,090,000

 

 

    

 

 

 

$1,474,348

 

 

 

 

 

 

 

 

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71%

 

 

 

  Kramer

  

 

 

 

$1,938,000

 

 

    

 

 

 

$1,476,072

 

 

 

 

 

 

 

 

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76%

 

 

 

*

Mr. Newman joined the Company in January 2020. Patrick J. DeCourcy, who served as the Company’s Chief Financial Officer for a portion of January 2020 and retired in April 2020, received nominal compensation during 2020. Mr. Sims retired effective February 28, 2021. See Summary Compensation Table for 2020 on page 63 for more information.

Total Realized Compensation is calculated as follows:

 

 

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ATI 2021 Proxy Statement

  

 

Item 1: Election Of Directors  Director Terms

 

Item 1:

Election Of Directors

Our Board of Directors has nominated three directors for election. Herbert J. Carlisle, David P. Hess and Marianne Kah are standing for election to the Board as Class I directors for three-year terms expiring in 2024.

Plurality Voting: Directors are elected by a plurality of the votes cast. This means that the three individuals nominated for election to the Board who receive the most “FOR” votes (among votes properly cast in person, electronically, telephonically or by proxy) will be elected.

Director Resignation Policy: While directors are elected by a plurality of the votes cast, our Bylaws include a director resignation policy. This policy states that, in an uncontested election, if any director nominee receives a greater number of votes “WITHHELD” from his or her election, as compared to votes “FOR” such election, the director nominee must tender his or her resignation. The Nominating and Governance Committee of the Board is required to make recommendations to the Board regarding any such tendered resignation. The Board will act on the tendered resignation within 90 days from the certification of the vote and will publicly disclose its decision, including its rationale.

Only votes “FOR” or “WITHHELD” are counted in determining whether a plurality has been cast in favor of a director nominee; abstentions are not counted for purposes of the election of directors. If you withhold authority to vote with respect to the election of some or all of the nominees, your shares will not be voted with respect to those nominees indicated. For a “WITHHOLD” vote, your shares will be counted for purposes of determining whether there is a quorum and will have a similar effect as a vote against that director nominee for purposes of our director resignation policy.

If a nominee becomes unable or unwilling to serve, the proxies will vote for a Board-designated substitute or the Board may reduce the number of directors. The Company has no reason to believe that any of the nominees for election will be unable or unwilling to serve.

DIRECTOR TERMS

Our directors currently are divided into three classes, and the directors in each class generally serve for three-year terms unless unable to serve due to death, retirement or disability. The term of one class of directors currently expires each year at our annual meeting of stockholders. The Board may fill a vacancy by electing a new director to the same class as the director being replaced or by effectively reassigning a director from another class. The Board may also create a new director position in any class and elect a director to hold the newly created position.

Mandatory Retirement Policy: Our Corporate Governance Guidelines include a mandatory retirement requirement that applies to our directors. Under this policy, an ATI director is expected to retire from the Board no later than the conclusion of the term of office that follows his or her 72nd birthday. If a director will reach his or her 72nd birthday during his or her next upcoming term, the Nominating and Governance Committee takes that fact into account in determining whether to recommend nomination of the director for reelection.

OUR DIRECTOR NOMINATION PROCESS

The Board is responsible for recommending director nominees to the stockholders and for selecting directors to fill vacancies between stockholder meetings. The Nominating and Governance Committee recommends candidates to the Board.

The Committee considers director candidates suggested by sitting directors, senior management and stockholders, among other sources. Additionally, the Board has, at times, engaged an external search firm to facilitate nationwide candidate searches as part of its refreshment efforts. The Committee believes that a wide-ranging and robust search is the best way to identify those candidates who most aptly meet the experience, skill and other criteria established by the Committee as necessary or desirable additions to the Board.


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Item 1: Election Of Directors  Our Director Nomination Process

 

 

ATI 2021 Proxy Statement

     

 

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Director Criteria for Nominees

Director candidates are generally selected on the basis of the following criteria:

 

  their business or professional experience;

 

  recognized achievement in their respective fields;

 

  integrity and judgment;

 

  ability to devote sufficient time to the affairs of ATI;
  the diversity of their backgrounds;

 

  ability to represent the interests of all stockholders; and

 

  the skills and experience that their membership adds to the overall competencies of the Board.
 

 

Board Diversity is one of many criteria considered by the Board when evaluating candidates. A key factor in determining director nominees is our interest in building a cognitively diverse board representing a wide breadth of experience and perspectives.

 

 

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ATI 2021 Proxy Statement

  

 

Item 1: Election Of Directors  Our Director Nomination Process

 

In evaluating the needs of the Board, the Nominating and Governance Committee considers the qualifications and past contributions to the Board of sitting directors and consults with other members of the Board (including as part of the Board’s annual self-evaluation), our President and Chief Executive Officer, and other members of executive management. At a minimum, all recommended candidates must exemplify the highest standards of personal and professional integrity, meet any required independence standards, and be willing and able to constructively participate in and contribute to Board and committee meetings. Our Board engages, as appropriate, in refreshment efforts that focus on these and other more specific criteria, including ensuring that the Board continues to include key skill sets. In 2019, the Board appointed: David P. Hess, who has extensive executive leadership experience in the aerospace industry, our most significant end market; Marianne Kah, an acknowledged expert on global energy markets who led a more than 25-year career in the oil & gas industry, another key end market for ATI, and has deep expertise in strategic planning; and Leroy M. Ball, who possesses characteristics that the Board viewed as valuable additions to its overall composition (including his experience as a sitting CEO), and has been designated as a second “Audit Committee Financial Expert” under applicable SEC and New York Stock Exchange (“NYSE”) rules, in addition to John R. Pipski, who currently chairs our Audit Committee.

Director Skills Summary

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CEO EXPERIENCE gives our Board strong leadership and experience across a range of corporate governance, strategic planning, finance, operational and management and succession planning matters.  

 

 

 

     

 

     

 

 

 

     

 

     

 

 

 

INDUSTRY/MANUFACTURING KNOWLEDGE provides valuable, in-depth knowledge of our industry and/or the end markets we serve, with a detailed understanding of our business challenges and opportunities.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     

 

     

 

OPERATIONS/PRODUCTION experience gives our Board a practical understanding of the development and implementation of our business plan and of the risks and opportunities that can impact our operations and strategies.  

 

 

 

 

 

 

 

     

 

 

 

     

 

         

 

FINANCIAL EXPERTISE provides our Board with the financial acumen necessary to inform its oversight of our financial performance and reporting, internal controls and long-term strategic planning.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TECHNICAL OR LEGAL experience brings important perspectives for our business to develop innovative products and technologies and to the Board’s risk management function.          

 

 

 

 

 

 

 

 

 

                 

 

LABOR/HUMAN RESOURCES experience enables directors to make important contributions to our efforts to engage in robust succession planning, to attract, motivate and retain high-performing employees and to interact effectively with our workforce.  

 

         

 

 

 

 

 

 

 

     

 

     

 

 

 

MARKETING/COMMUNICATIONS experience helps guide our strategic efforts to develop new and existing markets and to communicate effectively with our stakeholders.  

 

 

 

     

 

     

 

 

 

     

 

     

 

 

 

GOVERNMENT/ENVIRONMENTAL backgrounds and experience gives directors a deep understanding of the regulatory environment in which we operate.      

 

     

 

 

 

 

 

     

 

 

 

           

INTERNATIONAL/M&A experience is relevant to the global nature of our business and to our long-term strategic planning.

 

 

 

     

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

 

 

CORPORATE GOVERNANCE/CORPORATE RESPONSIBILITY experience supports our emphasis on strong Board and management accountability, transparency, protection of shareholder interests and long-term value creation.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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Item 1: Election Of Directors  Our 2021 Director Nominees and Continuing Directors

 

 

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OUR 2021 DIRECTOR NOMINEES AND CONTINUING DIRECTORS

Our Board determined that each of the three director nominees qualifies for election under the criteria for evaluation of directors. The Board determined that Ms. Kah and Messrs. Carlisle and Hess qualify as independent directors under applicable rules and regulations and our categorical Board independence standards.

All of our directors bring to our Board a wealth of leadership experience derived from their service in executive and managerial roles, as well as extensive board experience. Background information about the nominees and the continuing directors, including their business experience and directorships held during the past five years, and certain individual qualifications and skills of our directors that contribute to the Board’s effectiveness as a whole, is provided below.

Consistent with our mandatory retirement policy, three of our current Class I directors, including Diane Creel, John Pipski and James Rohr, are not standing for re-election and will retire from our Board at the conclusion of the 2021 Annual Meeting. Ms. Kah, who currently serves as a Class II director, is standing for re-election as a Class I director, prior to what otherwise would be the conclusion of her current term as a Class II director. Concurrently with the adjournment of the 2021 Annual Meeting, our Board will be reduced in size to nine directors.

 

 

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Nominees – Class I – Term to Expire at the 2024 Annual Meeting

 

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Herbert J. Carlisle

 

    
  

 

Director since 2018

 

Age 65

      

 

General Carlisle has been President and Chief Executive Officer of the National Defense Industrial Association (NDIA) since March 2017, when he retired from the United States Air Force as a four-star general following a 39-year military career. His last Air Force assignment was as Commander, Air Company Command at Langley Air Force Base in Virginia. Prior to that, he was the Commander of the Pacific Air Forces, the air component Commander for the U.S. Pacific Command, and served as executive director of Pacific Air Combat Operations staff, Joint Base Harbor in Hawaii, following various operational and staff assignments throughout the Air Force, including as chief of air operations, U.S. Central Command Forward in Riyadh, Saudi Arabia and as director of legislative liaison at the Office of the Secretary of the Air Force.  

    

 

      

 

Board Committees:

Member, Audit, Finance and Technology Committees.

 

Skills and Qualifications

The Board believes that General Carlisle’s qualifications include his executive leadership experience as a senior military official, his legislative and government experience and his experience and knowledge in the aerospace and defense fields.

 

Current Directorships:

   IAP Worldwide Services, Inc.

   The Entwistle Company


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ATI 2021 Proxy Statement

  

 

Item 1: Election Of Directors  Our 2021 Director Nominees and Continuing Directors

 

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David P. Hess

 

    
  

 

Director since 2019

 

Age 65

      

 

Mr. Hess has 40 years of experience in the aerospace industry, including 38 at United Technologies Corporation where he most recently served as Executive Vice President and Chief Customer Officer for UTC Aerospace from January 2015 until his retirement in January 2017. From 2009 to 2014 he was President of Pratt & Whitney, a subsidiary of UTC, responsible for the company’s global operations in the design, manufacture and service of engines for commercial and military aircraft. Most recently, Mr. Hess served as a board member for Arconic Corporation from March 2017 to May 2019, and as Arconic’s Chief Executive Officer from April 2017 to January 2018.                  

Board Committees:

Member, Finance, Nominating & Governance and Personnel & Compensation Committees.

 

Skills and Qualifications

The Board believes that Mr. Hess’s qualifications include his extensive aerospace background and leadership experience, including his recent service as a Chief Executive Officer.

 

Current Directorships:

   Woodward, Inc.

 

Past Directorships:

   Arconic Corporation

 

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Marianne Kah

 

    
  

 

Director since 2019

 

Age 67

      

 

Ms. Kah is a global energy and raw materials markets expert with experience in board-level strategic planning and risk analysis. She served as Chief Economist for ConocoPhillips, an oil and gas exploration and production company, for more than 20 years until her retirement in 2017, developing market outlooks, risk assessments and scenario plans that drove corporate strategy. She currently serves as an adjunct senior research scholar and Advisory Board member of Columbia University’s Center on Global Energy Policy, with a current focus on the impact of disruptive technologies, such as electrification, automation and shared mobility, on energy demand and transportation.                  

Board Committees:

Member, Audit and Technology Committees.

 

Skills and Qualifications

The Board believes that Ms. Kah’s qualifications include her energy markets experience and expertise, her leadership skills and past role as a senior leader of a global public company, and her extensive strategic planning background.

 

Current Directorships:

   PGS ASA


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Item 1: Election Of Directors  Our 2021 Director Nominees and Continuing Directors

 

 

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Continuing Directors – Class II – Term to Expire at the 2022 Annual Meeting

 

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Leroy M. Ball, Jr.

 

    
  

 

Director since 2019

 

Age 52; Audit Committee Financial Expert

      

 

Mr. Ball has been the President and Chief Executive Officer of Koppers Holdings Inc., a leading integrated global provider of treated wood products, wood treatment chemicals and carbon compounds, since January 2015, having served as its Chief Operating Officer from August 2014 through December 2014, as both its Chief Operating Officer and Chief Financial Officer from May 2014 to August 2014, and as its Chief Financial Officer from 2010 to May 2014. Before joining Koppers, Mr. Ball served as the Senior Vice President and Chief Financial Officer of Calgon Carbon, Inc., a provider of services, products and solutions for purifying water and air, from 2002 to 2010.

 

                 

Board Committees:

Member, Audit, Personnel & Compensation, and Technology Committees.

 

Skills and Qualifications

The Board believes that Mr. Ball’s qualifications include his experience in senior leadership positions and his operational, financial and public company accounting expertise.

 

Current Directorships:

   Koppers Holdings Inc.

   Koppers, Inc. (a subsidiary of Koppers Holdings Inc.)

 

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Carolyn Corvi

 

    
  

 

Director since 2012

 

Age 69

      

 

Upon her retirement in 2008, Ms. Corvi concluded a 34-year career with The Boeing Company, a diversified aerospace company, where she most recently served as Vice President, General Manager of Airplane Programs, Boeing Commercial Airplanes, a position she held from 2005 until her retirement.

 

Board Committees:

Chair, Technology Committee and member, Nominating & Governance and Personnel & Compensation Committees.

                 

Skills and Qualifications

The Board believes that Ms. Corvi’s qualifications include her extensive experience in the aerospace industry (ATI’s largest end market) and her knowledge of and experience in manufacturing.

 

Current Directorships

   Hyster-Yale Materials Handling, Inc.

   United Continental Holdings, Inc.

 

Past Directorships:

   Goodrich Corporation and Continental Airlines, Inc.

 

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Robert S. Wetherbee

 

    
  

 

Director since 2019 and Chairman Elect

 

Age 61

      

 

Mr. Wetherbee was appointed to serve as ATI’s President and Chief Executive Officer effective January 1, 2019, when he was also appointed to the Board. He served as Executive Vice President, ATI Flat Rolled Products Group, from January 2015 to December 2018, and prior to that, was the President of ATI Flat Rolled Products from April 2014 to January 2015. From March 2013 to February 2014, Mr. Wetherbee was President and Chief Executive Officer of Minerals Technologies, Inc. He served as President of ATI’s tungsten business from 2010 through 2012, following a 29-year career with Alcoa Inc.

 

                 

Skills and Qualifications

The Board believes that Mr. Wetherbee’s qualifications include his experience in senior leadership positions both at ATI and at other publicly traded manufacturers and his intimate knowledge of the industry and of ATI’s business given his tenure with the Company and his past long-tenured experience with another major metals producer.


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ATI 2021 Proxy Statement

  

 

Item 1: Election Of Directors  Our 2021 Director Nominees and Continuing Directors

 

Continuing Directors – Class III – Term to Expire at the 2023 Annual Meeting

 

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James C. Diggs

 

    
  

 

Director since 2001

 

Age 72

      

 

From 1997 until his retirement in 2010, Mr. Diggs was Senior Vice President and General Counsel of PPG Industries, Inc., a manufacturer and distributor of a broad range of paints, coatings and specialty materials. He held the position of Secretary from 2004 to 2009.

 

Board Committees:

Chair, Finance Committee and member, Audit and Nominating & Governance Committees.

 

          

   

Skills and Qualifications

The Board believes that Mr. Diggs’s qualifications include his experience with industry and legal matters, his senior leadership at a global public company, and his experience with domestic and international operations.

 

Current Directorships:

   Brandywine Realty Trust

 

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J. Brett Harvey

 

    
  

 

Director since 2007, Lead Independent Director Elect

 

Age 70

      

 

Mr. Harvey previously served as Chairman Emeritus of CONSOL Energy Inc., a leading diversified energy company in the United States, from May 2016 to May 2017. He served as Chairman of CONSOL from 2010 until his retirement in May 2016 and was Executive Chairman from May 2014 to January 2015. Mr. Harvey was Chief Executive Officer of CONSOL from 1998 until May 2014. He also served as President from 1998 until 2011. Mr. Harvey was Chairman of CNX Gas Corporation, a subsidiary of CONSOL, from 2009 to 2010 and was a Director of CNX from 2005 to 2014.

 

Board Committees:

Member, Finance, Nominating & Governance and Personnel & Compensation Committees

 

    

 

      

 

Skills and Qualifications

The Board believes that Mr. Harvey’s qualifications include his significant oversight experience from serving as the chief executive officer of public companies, his industry experience in the oil and gas market (a large end market for ATI), and his operational expertise.

 

Current Directorships:

   Barrick Gold Corporation (Lead Director since 2013)

   Warrior Met Coal (Lead Independent Director since 2018)

 

Past Directorships:

   CONSOL Energy Inc. (Chairman from 2010 to 2016) and CNX Gas Corporation (Chairman from 2009 to 2010)

 

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David J. Morehouse

 

    
  

 

Director since 2015

 

Age 60

      

 

Mr. Morehouse is Chief Executive Officer and President of Pittsburgh Penguins LLC, which owns and operates the Pittsburgh Penguins National Hockey League team. He was named President of the Pittsburgh Penguins in 2007 and has also served as Chief Executive Officer since 2010. He joined the Pittsburgh Penguins in 2004 as a consultant for special projects, including the construction of the team’s current arena.                  

Board Committees:

Member, Audit and Technology Committees.

 

Skills and Qualifications

The Board believes that Mr. Morehouse’s qualifications include his leadership, strategic planning and development, operations, branding and marketing, and government experience.


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Our Corporate Governance  Our Commitment to Integrity, Corporate Governance and Sustainability

 

 

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Our Corporate Governance

We are committed to a strong self-governance program. Our corporate governance practices are designed to maintain high standards of oversight, compliance, integrity and ethics, while promoting growth in long-term stockholder value. The role of our Board of Directors is to ensure that ATI is managed for the long-term benefit of our stockholders and other stakeholders.

Each year, we review our corporate governance and compensation policies and practices and engage with our stockholders. In our ongoing effort to ensure that our governance policies and practices consistently reflect best practices, we take suggestions from our stockholders into consideration, along with developments and evolving trends reflected in the standards established by proxy advisory firms, as well as in the policies, practices and disclosures of other public companies. In this way, we affirm our commitment to RELENTLESS INNOVATION by continually evolving our programs to benefit all of our stakeholders.

OUR COMMITMENT TO INTEGRITY, CORPORATE GOVERNANCE AND SUSTAINABILITY

 

 

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ATI is committed to conducting its business in an honest, ethical and lawful manner. Our employees strive to satisfy the spirit and intent, as well as the technical requirements, of the contracts we enter into and the laws, regulations and rules that govern us.

 

 

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We are committed to protecting the health and safety of our employees, the environment, and our communities. We support sustainable development and consistently work to improve our operations to the benefit of our stockholders, employees, customers and local communities.

 

 

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  We are committed to providing a workplace where employees are treated with dignity and respect, free of harassment and discrimination, and where all employees can fulfill their potential based on merit and ability.

 

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We value our reputation. We pledge to promptly address issues in a lawful and proper manner. We strive to create value for our stakeholders while continually improving our performance as a good corporate citizen.

 

 

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We are also committed to providing information in our financial reporting that is accurate, complete, objective, relevant, timely and transparent, and we have a robust system of internal controls.

 

 

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  We take these commitments seriously. Our management and our Board have instilled a culture throughout our organization that supports and honors these commitments. We expect that the actions of our employees, officers and directors comply with these principles and all polices undertaken to further these objectives.
 

 

Corporate Governance Information on Our Website

 

The following governance documents are available on our website atimetals.com, at “Investors – Corporate Governance”:

 

 

Corporate Governance Guidelines

 

 

Corporate Guidelines for Business Conduct and Ethics (including Financial Code of Ethics)

 

 

Board Committee Charters

 

 

Certificate of Incorporation and Bylaws

Paper copies can be obtained by writing to the Corporate Secretary, Allegheny Technologies Incorporated, 1000 Six PPG Place, Pittsburgh, PA 15222-5479.

Additionally, our current Sustainability Report is available at ATImetals.com/aboutati/sustainability-report. For more information, see page 22 of this Proxy Statement.


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ATI 2021 Proxy Statement

  

 

Our Corporate Governance  ATI Corporate Governance at a Glance

 

ATI CORPORATE GOVERNANCE AT A GLANCE

Presented below are some highlights of the ATI corporate governance program. You can find details about these and other corporate governance policies and practices within this Proxy Statement.

 

   
Board
Independence
 

   11 of our 12 current directors, and 8 of our 9 continuing directors, are independent.

Independent
Board Chair/ Lead Independent Director
 

   Diane C. Creel currently serves as our Independent Board Chair. Following Ms. Creel’s retirement, J. Brett Harvey will serve as our Lead Independent Director

 

   Our independent directors meet in regularly scheduled executive sessions without the presence of management.

 

   Stockholders can communicate with the independent directors through the Board Chair or Lead Independent Director.

Board
Composition
 

   Currently, the Board has fixed the number of directors at 12. Concurrently with the adjournment of the 2021 Annual Meeting, the Board will be reduced in size to nine directors.

 

   Our Board regularly assesses its performance and can adjust the number of directors according to need or as the opportunity arises to enhance the overall mix of skills and experience represented on our Board. It is anticipated that our Board will consist of nine directors immediately following the 2021 Annual Meeting.

 

   As shown under Item 1 – Election of Directors, our Board has a diverse mix of skills, experience and background. We also have a mandatory retirement age, as described elsewhere in this Proxy Statement.

Accountability to Stockholders  

   Engagement with Stockholders. We actively reach out to our stockholders through our annual engagement program and communicate with them on important compensation, governance and environmental and social sustainability issues. Also, stockholders can contact our Board, Board Chair or management by email or regular mail.

 

   Proxy Access. We allow a stockholder or group of up to 20 stockholders owning an aggregate of 3% or more of our outstanding common stock for at least three years to nominate and include in our proxy materials director nominees constituting up to 20% of the number of directors then in office or two nominees, whichever is greater, provided the stockholders and nominees otherwise satisfy the requirements of our Bylaws.

 

   Majority Voting/Director Resignation Policy. Our director resignation policy provides that any nominee for director in an uncontested election who receives a greater number of votes “withheld” than votes “for” his or her election must promptly tender his or her resignation to the Board for the Board’s consideration.

Independent
Board Committees
 

   We have five Board committees: Audit; Finance; Nominating & Governance; Personnel & Compensation; and Technology.

 

   All of the Board committees are composed entirely of independent directors, and each has a written charter that is reviewed and reassessed annually and is posted on our website.

Risk Oversight  

   Our full Board is responsible for risk oversight, and has designated committees to have particular oversight of certain key risks. Our Board oversees management as it fulfills its responsibilities for the assessment and mitigation of risks and for taking appropriate risks.

Succession
Planning
 

   The Board actively monitors our management succession plans and receives regular updates on employee engagement, diversity and retention matters. At least annually, the Board reviews senior management succession and development plans.

 

   Additionally, the Board evaluates matters related to Board succession and the processes by which additional directors with strong and diverse experience can be attracted and selected for future Board seats.

Self-Evaluations  

   We have an annual self-evaluation process for the Board and for each standing committee of the Board.

Director and NEO
Stock Ownership
 

   Each director is expected to own at least 10,000 shares of our common stock.

 

   Executives are expected to own ATI common stock with a value equivalent to:

 

   CEO: six times base salary;

 

   Executive Vice Presidents and the Chief Financial Officer: three times base salary; and

 

   Senior Vice Presidents: two times base salary.

Ethics/Corporate Responsibility  

   Our Corporate Guidelines for Business Conduct and Ethics, as well as the Company’s attention to environmental, social and governance issues, are disclosed on our website.

 

   The Company has an active ethics and compliance program, which includes regular employee training.


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CORPORATE GOVERNANCE GUIDELINES

ATI’s Board of Directors has adopted Corporate Governance Guidelines that are designed to assist the Board in the exercise of its duties and responsibilities to the Company. The Guidelines reflect the Board’s commitment to monitor the effectiveness of decision making at the Board and management levels, with a view to achieving ATI’s strategic objectives. The Guidelines are subject to modification by the Board at any time.

CORPORATE GUIDELINES FOR BUSINESS CONDUCT AND ETHICS

Our Corporate Guidelines for Business Conduct and Ethics (our “Code of Ethics”) apply to all directors, officers and employees, including our principal executive officer, our principal financial officer, and our controller and principal accounting officer. We require all directors, officers and employees to adhere to our Code of Ethics in addressing legal and ethical issues encountered in their work.

Our Code of Ethics requires that our directors, officers and employees avoid conflicts of interest, comply with applicable laws, conduct business in an honest and ethical manner, and otherwise act with integrity and honesty in all of their actions by or on behalf of the Company. It includes a financial code of ethics specifically for our Chief Executive Officer, our Chief Financial Officer, and all other financial officers and employees, which supplements the general principles in the Code of Ethics and is intended to promote honest and ethical conduct, full and accurate reporting, and compliance with laws, as well as other matters.

Only the Audit Committee of the Board can amend or grant waivers from the provisions of the Code of Ethics relating to the Company’s executive officers and directors, and any such amendments or waivers will be promptly posted on our website at ATImetals.com. To date, no such amendments have been made or waivers granted.

Mandatory Employee Training

All employees are provided with a copy of the Code of Ethics. Each year, we require all officers and managers to certify as to their understanding of and compliance with the Code of Ethics. In addition, all directors, officers and other employees must annually complete an interactive online ethics course addressing the Code of Ethics. This course is part of ATI’s broader ethics and compliance program, which includes online ethics training that is administered by a third party. In 2020, ATI’s online ethics courses addressed:

 

 

anti-corruption/anti-bribery

 

 

cybersecurity

 

 

protecting intellectual property

 

 

sexual harassment

 

 

diversity and inclusion, and

 

 

reporting ethical concerns.

We encourage employees to communicate concerns before they become problems. We believe that building and maintaining trust, respect and communication between employees and management and between fellow employees is critical to the overarching goal of efficiently producing high quality products, providing the maximum level of customer satisfaction, and ultimately fueling profitability and growth.

The ATI Ethics Helpline provides for confidential, secure, and anonymous reporting and is available 24 hours a day. Additionally, our Chief Compliance Officer and ethics officers at our operating companies also provide confidential resources for employees to surface their concerns without fear of reprisal.


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ATI 2021 Proxy Statement

  

 

Our Corporate Governance  Environmental and Social Sustainability

 

ENVIRONMENTAL AND SOCIAL SUSTAINABILITY

At ATI, we recognize that long-term excellence and profitability require sustainable practices. Sustainability can mean many things, and for ATI it is an evolving and developing effort. Our core values emphasize the safety and sustainability of our products, people and the communities in which we operate, and we continually review and refine our efforts to enrich those communities, improve the health and safety of our employees, ensure the sustainability and quality of our workforce and lessen our environmental impact. Recently, we were pleased to be named by Newsweek as one of America’s Most Responsible Companies for 2021.

The following discussion highlights some of our key sustainability initiatives and areas of current focus.

 

 

 

Under our short-term incentive program, the Personnel and Compensation Committee of our Board has expressly reserved the broad discretion to reduce or eliminate any annual cash incentive award that may otherwise be payable to one or more participants, including each NEO, if any facet of our financial or operational performance, especially in relation to the Committee’s expectations for workplace safety, the environmental impact of our business or other aspects of our annual performance with the potential to affect the sustainability of our business, is sub-standard in the view of the Committee.

 

 

Sustainability Report Highlights

ATI published its most recent Sustainability Report in August 2020. Recognizing that “sustainability” can mean many things, the Report provides an overview of environmental, workforce health and safety and community sustainability efforts and achievements across our business. We also report specific environmental sustainability goals that ATI will pursue through 2030, using our 2018 results as the baseline against which we will measure our achievement. We intend to publish our report and update our stakeholders on our progress toward these goals annually.

ATI’s Sustainability Report is available at ATImetals.com/aboutati/Pages/safety-sustainability.aspx

All ATI operations are committed to:

 

 

Reducing their energy intensity through conservation efforts and energy efficiency;

 

 

Reducing greenhouse gas emissions through operational efforts, energy conservation and procurement strategies;

 

 

Reducing consumption of water withdrawal through conservation, reuse, and equipment modification; and

 

 

Increasing the amount of recycled materials used in our processes to eliminate waste in all phases of our manufacturing processes. Approximately 77% of the raw materials that ATI uses to manufacture specialty metals start from scrap material, which is either purchased or internally generated by our own manufacturing processes.

 

 

2018 Environmental Performance Benchmarks:

 

  3.02GJ/ton produced energy intensity

 

  877,390 tons CO2e emissions

 

  1.12kgal/ton produced water intensity

 

  Approximately 75% of raw materials used to manufacture specialty metals sourced from scrap material

 

  Approximately 42% of ATI operations operate according to an ISO 14001 certified Environmental Management System

 

        

 

 

2022 Goals:

 

  All facilities to be included in metrics

 

  All facilities ISO 14001 and 45001 certified

 

2025 Goals:

 

  Reduce Energy Intensity 5%

 

  Reduce CO2e Emissions 5%

 

  Reduce Freshwater Intake 5%

 

  Increase Recycled Materials to 80%

 

2030 Goals:

 

  Reduce Energy Intensity 7%

 

  Reduce CO2e Emissions 7%

 

  Reduce Freshwater Intake 3%

 

  Increase Recycled Materials to 83%

 


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LOGO

 

 

 

Products that Promote Sustainability

Our materials enable our customers to do amazing things, from operating jet engines at 2,800º F, to equipping our nation’s defense, to safely and efficiently transporting corrosive liquids and exhaust streams and enabling life-changing medical insights.

The materials that we produce improve quality of life by reducing air pollution, providing advanced medical solutions, enabling clean water and eliminating waste.

Our alloys are used in products and equipment that:

 

  Enable commercial aircraft that operate longer and are lighter, quieter and more fuel efficient;

 

  Reduce air pollution produced by electrical power generation by enabling solar, geothermal, wind and other renewable power applications;

 

  Remove water pollution in marine applications;
  Promote the generation and use of renewable energy, such as solar cells;

 

  Can operate in highly corrosive environments for decades at a time, reducing the need for replacement; and

 

  In the context of medical equipment such as prosthetic devices, offer the potential for less frequent replacement.
 

 

 

LOGO

 

 

 

Environmental Stewardship

We are also committed to sound environmental practices in our own business operations.

 

  We have established specific emissions reduction and other environmental goals for 2022, 2025 and 2030.

 

  Approximately 77% or more of the raw materials that we use to manufacture our products are sourced from scrap metal.

 

  Our facilities employ other recycling and waste reduction equipment and processes. For example:

 

    one of our facilities includes equipment for the regeneration of spent sulfuric and other acids resulting in significant reductions in both usage and waste generation; and

 

    other facilities now recycle and/or reuse baghouse dust.
  We purchase energy from renewable sources.

 

  Approximately 52% of ATI operations had achieved ISO 14001 certified Environmental Management System compliance as of the end of 2019, compared to 42% in at the end of 2018.

 

  We established a Company-wide efficient lighting program and invested in other equipment upgrades to reduce energy consumption.

 

  Our cross-functional water conservation team evaluates and implements projects to achieve reductions in fresh water consumptions and to reduce water waste.
 

 

LOGO

 

 

 

Health and Safety

As part of our continuous improvement culture, we are committed to making our operations the safest in the industry for our employees and the communities surrounding our plant locations.

 

  We are committed to finishing each day incident- and injury-free. Employees are expected to guard against workplace injuries by recognizing risks and taking action to minimize injuries.

 

  Lost time from work was reduced by 62% in 2019 compared to 2018, following a 63% reduction for 2018 compared to the prior year.
  As of year-end 2019, 65% of our operations had achieved OSHAS 18001 or ISO 45001 certification.
 

 

 

LOGO

 

 

 

Community

We support local communities and contribute to their sustainability through measures such as locally sourcing goods and services and charitable giving. Examples include:

 

  funding scholarship and cooperative work experiences for local residents; and

 

  fostering employee volunteerism through United Way, the ATI Veterans Network and other community-based Programs.
 


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Human Capital Management

We believe that world-class leadership and fostering a culture that enables us to build and grow a talented team through career development and opportunities is foundational to our vision. Attracting, retaining and developing members of our workforce is key to the sustainability of our business. As the economy and our business grow, so do both demand for qualified candidates and the retirement rate for older workers; hence we are always competing for talent in an environment of increasingly challenged supply. To that end, we have developed — and continue to enhance and refine — a robust and comprehensive talent management program that spans from recruitment and selection to performance management, career development and retention of our top talent and, ultimately, to succession planning across our organization.

Talent Acquisition

 

 

 

Partner closely with a targeted number of colleges and universities specifically known for programs that are relevant to our business in order to identify materials science, STEM expertise and other relevant talent, and have developed similar partnerships with high schools and relevant trade schools.

 

 

Engage with external professional recruiting firms to enhance our recruiting efforts for key positions.

 

 

Use pre-employment assessment tools to identify candidates who we believe would adapt well to our culture and be most suited to a particular opportunity.

 

 

Actively engage with campus and professional diversity groups.

Professional Development

 

 

 

Global Leadership Development Program (GLDP). The GLDP is our Company-wide, flagship program designed to build the skills of our employees across each level of leadership. It includes a series of multi-day training programs tailored to reach and serve a broad range of current and potential leaders across the ATI organization.

 

 

Business Acumen Series. This more narrowly focused leadership education program is designed to develop skills in key areas, such as finance. The purpose of this program is to facilitate a common framework and understanding of financial business acumen to improve decision making critical to the sustainable success of our business.

 

 

Early Career Leadership Development Program. Our selective Early Career Leadership Program is designed for high-potential and motivated college graduates. This five-year program, which is designed to prepare our future leaders, accelerates participants’ professional development by rotating them through a variety of business-critical assignments and development opportunities.

 

 

Insights Discovery Program. This program, which we incorporate as an element of our other professional development programs, is designed to support employees in exploring and developing targeted competencies such as self-awareness, communication, conflict management, giving and receiving feedback, influencing others and other skills.

Engagement and Performance Management

 

 

 

Senior Leader Communication and Transparency. We actively seek opportunities for regular engagement and communication by our CEO and other senior executive leaders with our broader employee population. For example, we hold a quarterly CEO Review that follows the release of our quarterly earnings and is accessible to hundreds of employees across the Company. These reviews provide an opportunity for our CEO and other senior leaders to communicate their perspectives on our recent financial results, as well as financial education and enterprise-level education on topics such as global commercial and other growth initiatives, cybersecurity, ethics and compliance, talent and development programs, opportunities for community engagement and safety.

 

 

Annual Employee Engagement Surveys. Annually, we conduct a confidential company-wide employee engagement survey. Feedback from these surveys provides our management team with valuable information about our workplace culture. It is reviewed with our Board and used to develop and refine other aspects of our overall human capital management and other growth strategies.

 

 

Performance Management Framework. We maintain a robust annual performance management process across the organization. Together with their supervisors, employees identify annual goals and, at the end of the year, provide their own self assessments as to goal achievement and defined core competencies. Employees are reviewed based on the same criteria by both their managers and a second-level reviewer. The results of each annual assessment inform short term incentive compensation and career advancement decisions and are reviewed with employees in one-on-one sessions with their managers.

Succession Planning

 

We maintain a formal succession planning process and career mapping framework that is designed to work in concert with our performance management processes and ensure a systematic and ongoing dialog regarding career development and succession planning at both the individual employee level and more broadly at an enterprise level. We believe that the robust and systematic nature of these programs is critical to optimizing our talent management and ensuring sustainably high-quality management of our business over the long term.


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Diversity and Inclusion

Ultimately, continuing ATI’s long tradition of relentless innovation and operational excellence demands the contributions of leaders and other team members with a wide array of characteristics, backgrounds, experiences, knowledge and skills. One of the principal aspirations of our comprehensive human capital management effort is the cultivation of a workforce that is diverse in every sense and a climate of inclusion that promotes the development, advancement and well-being of our key talent. Simply put, for our business to continue thriving, we must attract, coach and retain the best, and that requires a commitment to workforce diversity.

To identify opportunities to improve our recruiting efforts and enhance the inclusiveness of our workplace culture, we collect and regularly review with our senior leadership various diversity statistics relating to gender, ethnicity, age, military service and other attributes, some of which are illustrated below. We also use our annual Employee Engagement Survey to solicit employee perceptions of the diversity and inclusiveness of our corporate culture. Quantitative analysis of our employee population, coupled with a more qualitative understanding of how we are perceived and of the particular challenges we may face as a manufacturing company in the specific regions in which we operate, helps to inform our policy decisions and initiatives related to workforce diversity.

Gender and Ethnic Diversity

We recognize that the proportions of women and ethnic and racial minorities included in our leadership and total workforce do not reflect the composition of the general population. However, we have long benefited from gender diversity on our Board, and women contribute to our business at the highest levels of senior leadership. In fact, we have been recognized for at least ten consecutive years by 2020 Women on Boards for having a Board comprised at least 20% of women, and in 2019, appointed Diane Creel as our Independent Board Chair, following her multi-year service as our Lead Independent Director. Additionally, two of the seven current members of our Executive Council, including our Executive Vice President, AA&S and HPMC and our Chief Human Resources Officer, are women.

Our most recent employee engagement survey results demonstrated year-over-year improvement in employee perceptions of the diversity and inclusiveness of our corporate culture. A majority of respondents agreed that as an organization we value diversity and cultivate a work environment that is accepting of individual differences. However, our ultimate goal is that all respondents take a positive view of our efforts to promote diversity and inclusion.

Veterans

Understanding that we have many opportunities to improve our diversity initiatives, we believe that ATI stands out in its efforts to support and provide career opportunities to veterans of the U.S. armed forces. More than 5% of our senior leadership and nearly 9% of our total employee population are military veterans. The defense market is critical to ATI and a growing component of our business, and we have a formal company-wide strategy and commitment to the recruitment, career development and retention of veterans and the extended military community. We value the contributions of our military community members and recognize the technical and leadership skills earned through the devotion to our company and country.

 

Diversity & Inclusion in Leadership    Employee and New Hire Diversity & Inclusion

 

 

LOGO

 

 

We are committed to increasing the representation of women and of racial and ethnic minorities and military veterans of all backgrounds among our employee ranks. To support this objective, we have an enterprise-wide target for 80% of all job candidate slates to include a minimum of 30% diverse candidates.

 


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Our Corporate Governance  

 

 

Additionally, we are making extensive efforts to identify and attract diverse candidates through comprehensive recruiting strategies that include, among other initiatives, campus partnerships with female and minority student chapters of targeted professional groups, such as the Society of Women Engineers, Society of Hispanic Engineers, and Society of Asian Scientists and Engineers at our partner universities and increased outreach through engagement with additional networking groups, such as the National Society of Black Engineers, the National Association of Black Accountants and the Association of Latino Professions in Accounting and Finance.

 

 

We believe that we are seeing the impact of our diversity initiatives. Notably, our 2020 new hires statistics outpace the composition of our existing employee base for both women and ethnic minorities. While military veterans as a proportion of our total workforce exceeds the percentage of veteran new hires in 2020, at 5.9% of 2020 new hires, our success in recruiting veterans during 2020 is consistent with the representation of military veterans in the general U.S. population. Military veterans comprise nearly 9% of our total workforce, or nearly 50% higher than their proportion of the general U.S. population.

INVESTOR OUTREACH AND STOCKHOLDER ENGAGEMENT

We value the input we receive from our stockholders. As part of our investor relations program, we engage in a structured communication program with certain investors, actively engaging with them throughout the year. We solicit their feedback on a variety of relevant matters, which may include corporate governance topics, our executive compensation program and sustainability initiatives, among other matters. Our goal is to be responsive to our stockholders and to ensure that we understand and address their concerns and observations.

Stockholder Engagement Cycle

 

 

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  INVESTOR OUTREACH—CREATING A COLLABORATIVE DIALOGUE

          
 

 

Throughout the year, management conducts regular meetings and discussions with investors. Each Fall, we offer our largest stockholders a more structured opportunity for one-on-one discussions with representatives of our management team. As a result, during the fourth quarter of 2020, we conducted outreach sessions with several of our largest investors, covering topics of discussion including, among others:

 

 
 

 

 key current corporate governance policies and practices;

 

 our COVID-19 pandemic response;

 

 recent key leadership changes;

 

 continuing Board refreshment efforts and our Board’s focus on diversity of background, experience, skill and other characteristics;

 

 

 our Sustainability program; and

 

 the ongoing success of our redesigned executive compensation.

 
 

 

Our 2020 outreach dialogue generally solicited very positive feedback from our investors, in particular with regard to the best practices reflected in our executive compensation programs.

 

 

BOARD INFORMATION

Board Independence

The Board does not consider Robert S. Wetherbee, President and Chief Executive Officer of ATI, to be independent. At its February 26, 2021 meeting, the Board determined that the remaining eight continuing directors are independent in accordance with NYSE listing standards, our own Board independence standards and applicable SEC rules.

Board Leadership Structure and 2021 Changes

Currently, our Board operates under the leadership of an Independent Board Chair. Our Board has the flexibility to determine whether it is in the best interests of ATI and its stockholders to separate or combine the roles of Chairman and Chief Executive Officer at any given time. In making that determination, the Board assesses whether the roles should be separated or combined based on its evaluation of the existing composition of the Board and the circumstances at the time.

In 2018 as part of its succession planning process, the Board considered the roles and responsibilities of the Chairman and the Chief Executive Officer in connection with the Company’s CEO transition and determined that the Company and its stockholders would be best served by separating the two roles. The Board made this decision to support Mr. Wetherbee’s ability to focus his attention and efforts exclusively on the development and execution of the Company’s near and longer-term strategies as he transitioned to his new role. The Board also determined that appointing an Independent Board Chair would enhance its level of independent oversight during this time of leadership transition.

In view of Mr. Wetherbee’s success in assuming his duties and responsibilities as our Chief Executive Officer and his well-established leadership capabilities, and given Ms. Creel’s pending retirement as Independent Board Chair, our Board reassessed its leadership structure. After careful consideration, the Board determined that the Company and its stockholders will be best served by re-combining the roles of Board Chair and Chief Executive Officer. Accordingly, it is anticipated that concurrently with the conclusion of the 2021 Annual Meeting, Mr. Wetherbee will assume the role of Chairman, President and Chief Executive Officer, and J. Brett Harvey will become our Board’s Lead Independent Director.

Why the transition to a combined Board Chair and CEO role is best for ATI and our stockholders at this time

 

Our Board believes that combining the roles of Board Chair and Chief Executive Officer will promote unified leadership and direction for the Company and will facilitate the efficient implementation of our strategies to create shareholder value over the long-term. Additionally, the Board believes that Mr. Wetherbee, serving in both capacities, will effectively bridge communication between the Board and our management.

Our Board’s ability to maintain appropriate independent oversight of our business strategies and activities is enhanced by ATI’s existing strong governance structures and policies, such as:

 

 

establishing a Lead Independent Director;

 

 

appointing only independent directors to the standing committees of the Board; and

 

 

regularly scheduling executive sessions of the independent directors.


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  OUR NEW LEAD INDEPENDENT DIRECTOR

          
 

 

First elected to the Board in 2007, J. Brett Harvey will now also serve as our Lead Independent Director. The Lead Independent Director is the principal liaison between the independent directors and the Board Chair on Board-wide issues.

 

Role and Responsibilities:

 

 
      

   Preside, in the absence of the Chairman, at meetings of the Board, including executive sessions of the independent directors;

 

   Call meetings of the independent directors when necessary and appropriate;

 

   Facilitate communication with, and among, independent directors between meetings, when appropriate;

 

   Advise the Chairman regarding schedules, agendas and the quantity, quality and timeliness of information for Board and committee meetings;

 

 

 

   Serve as a contact for stockholders wishing to communicate with the Board other than through the Chairman, when appropriate;

 

   Communicate with other external constituencies, as needed; and

 

   Advise and consult with the Chairman on matters related to corporate governance and Board performance and generally serve as a resource for, and counsel to, the Chairman.

      

 

 
                                                    

    With his deep background in ATI’s business and service on your Board and his past experience serving as a public company chairman and chief executive, Brett is well-positioned to continue ATI’s long tradition of independent Board leadership and oversight.

 

— Diane C. Creel, Retiring Board Chair

 


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Board and Committee Membership—Director Attendance at Meetings

During 2020, the Board of Directors held eight meetings, including a multi-day strategy meeting. In 2020, our current directors attended 100% of all Board meetings and meetings of Board committees of which they were members.

The independent, non-management directors meet separately in regularly scheduled executive sessions without members of management (except to the extent that the non-management directors request the attendance of a member of management). The Board Chair currently presides over meetings of the independent directors. Following the 2021 Annual Meeting, our Lead Independent Director will preside over such meetings.

A Board meeting is typically scheduled in conjunction with our Annual Meeting of Stockholders, and it is expected that our directors will attend the Annual Meeting absent good reason. In 2020, all directors attended our Annual Meeting of Stockholders, which was conducted virtually, due to the COVID-19 pandemic.

The table below provides information about the Board committee memberships that our independent directors currently hold. The table also shows the number of meetings held by each Board committee in 2020.

Board Committees

The Board has five standing committees: Audit Committee; Finance Committee; Nominating and Governance Committee; Personnel and Compensation Committee; and Technology Committee. All of the standing committees of the Board are comprised entirely of independent directors.

Each committee has a written charter that describes its responsibilities. Each of the Audit Committee, the Nominating and Governance Committee and the Personnel & Compensation Committee has the authority, as it deems appropriate, to independently engage outside legal, accounting or other advisors or consultants. In addition, each committee annually conducts a review and evaluation of its performance and reviews and reassesses its charter.

 

  Director   Audit   Finance   Nominating
and Governance
  Personnel and
Compensation
  Technology

 

         
  L. M. Ball          

 

         
  H. J. Carlisle          

 

         
  C. Corvi           CHAIR

 

         
  D. C. Creel(1)       CHAIR    

 

         
  J. C. Diggs     CHAIR      

 

         
  J. B. Harvey          

 

         
  M. Kah          

 

         
  D. P. Hess          

 

         
  D. J. Morehouse          

 

         
  J. R. Pipski   CHAIR        

 

         
  J. E. Rohr         CHAIR  
 
         
  Number of Meetings held in 2020   7   6   5   6   2
 

 

(1)

Ms. Creel is the Board Chair. The Board Chair may attend each Committee meeting, except to the extent that a Committee requests to meet without the Chair present.


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Audit Committee

 

 

  Number of 2020 Meetings: 7

 

      

 

Chair:

John R. Pipski*

 

Members:

Leroy M. Ball, Jr.*

Herbert J. Carlisle

James C. Diggs

Marianne Kah

David J. Morehouse

 

*Mr.Pipski and Mr. Ball meet the SEC criteria for an “audit committee financial expert” and the NYSE requirements for accounting or related financial management expertise.

 

Role and Primary Responsibilities:

Leads the Board in its oversight of the integrity of the Company’s financial statements, compliance with legal and regulatory requirements, the qualifications, independence and performance of the Company’s independent auditors, and the performance of the Company’s internal audit function.

 

   Responsible for the appointment, retention, compensation, evaluation, oversight and, as appropriate, termination of ATI’s independent auditors, including among other matters:

 

   pre-approval of all audit and non-audit services to be performed by the independent auditors;

 

   pre-approval of engagement fees;

 

   review and approval of the annual audit plan;

 

   oversight of auditor independence and internal quality and control procedures; and

 

   periodic review of the experience and qualifications of the independent auditors’ lead partner and evaluation of compliance with applicable partner rotation requirements.

 

   Maintains oversight of the Company’s internal audit function, including staffing levels and the annual internal audit plan.

 

   Reviews, with the Company’s independent auditors and with management, the Company’s quarterly and annual financial statements and earnings releases and related SEC reports, including review and discussion of:

 

   critical accounting policies and practices, new accounting pronouncements and related disclosures;

 

   significant financial reporting issues and judgments and the treatment of complex or unusual transactions;

 

   significant internal control matters, including recommendations as to the adequacy of the Company’s system of internal controls; and

 

   critical audit matters and related disclosures.

 

   Receives regular updates regarding the Company’s various compliance programs.

 

   Responsible for oversight of major financial risk exposures, including cybersecurity risk, and mitigating actions and for reviewing, approving and ratifying any related party transaction.

 

Both the independent auditors and the internal auditors have full access to the Committee and meet on a routine basis without management being present.

Finance Committee

 

 

  Number of 2020 Meetings: 6

 

      

 

Chair:

James C. Diggs

 

Members:

Herbert J. Carlisle

J. Brett Harvey

David P. Hess

John R. Pipski

 

Role and Primary Responsibilities:

Primarily responsible for making recommendations and providing guidance to the Board regarding major financial policies and actions of the Company.

 

   Reviews and evaluates the Company’s debt and equity structure, dividends, authorized capital stock, and credit agreements.

 

   Serves as named fiduciary of certain employee benefit plans maintained by the Company, which includes the:

 

   appointment, evaluation and removal of employee benefit plan trustees and investment managers;

 

   establishment of funding methods and policies;

 

   review of funded status and investment policies and practices; and

 

   appointment of plan administrators.


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Nominating and Governance Committee

 

 

  Number of 2020 Meetings: 5

 

      

 

Chair:

Diane C. Creel

 

Members:

Carolyn Corvi

James C. Diggs

J. Brett Harvey

David P. Hess

 

Role and Primary Responsibilities:

Responsible for overseeing corporate governance matters.

 

   Oversees the annual evaluation of the Board and its committees.

 

   Recommends director nominees to the Board, including evaluation of new candidates and current directors who are being considered for re-election.

 

   Makes recommendations to the Board concerning committee membership and Board composition.

 

   Administers ATI’s director compensation program.

Personnel and Compensation Committee

 

 

  Number of 2020 Meetings: 6

 

     

 

Chair:

James E. Rohr

 

Members:

Leroy M. Ball, Jr.

Carolyn Corvi

Diane C. Creel

J. Brett Harvey

David P. Hess

 

Each member of the Personnel and Compensation Committee is a “non- employee director” of the Company
as defined under Rule 16b-3 of the Securities Exchange Act of 1934.

 

Role and Primary Responsibilities:

Primarily responsible for establishing and annually reassessing the Company’s executive compensation program and executive compensation philosophy.

 

   Reviews, with outside compensation consultants and other advisors, the compensation policies and practices at peer companies.

 

   Oversees CEO and other executive officer compensation.

 

   Reviews and approves corporate goals and objectives relevant to CEO and other executive officer compensation, evaluates the CEO’s performance in light of those goals and objectives, and determines and approves the CEO’s compensation level (either as a Committee or together with the other independent directors) based on this evaluation.

 

   Reviews and approves non-CEO executive officer compensation and makes recommendations to the Board regarding incentive compensation plans and equity-based plans that require Board approval.

 

   Reviews and approves recommendations from management within plan parameters regarding the compensation of other executives. The Committee may not delegate any authority under those plans for matters affecting the compensation and benefits of the Company’s executive officers.

 

   Administers ATI’s incentive compensation plans.

 

   Monitors and encourages the development of intellectual capital.

 

   Reviews management succession planning and makes recommendations to the Board concerning executive management organization matters generally.

 

The Personnel and Compensation Committee has the sole authority to retain, approve fees and other terms for, and terminate any compensation consultant used to assist the committee in the evaluation of CEO or other executive compensation. The Committee also may obtain advice and assistance from internal or external legal, accounting or other advisors.

 

   The Committee has retained an independent compensation consultant, Meridian Compensation Partners, LLC.

 

   The Committee also utilizes external legal advisors and assesses the independence of its advisors.

 

Please see the “Executive Compensation — Compensation Discussion and Analysis” section of this Proxy Statement for more discussion about the Committee’s role in executive officer compensation.

Technology Committee

 

 

  Number of 2020 Meetings: 2

 

     

 

Chair:

Carolyn Corvi

 

Members:

Leroy M. Ball, Jr.

Herbert J. Carlisle

Marianne Kah

David J. Morehouse

 

Role and Primary Responsibilities:

Primarily responsible for reviewing changing technologies and evaluating how they affect ATI and its technical capabilities and competitive position.

 

   Considers the impact of technologies on the well-being of the Company.

   Assesses ATI’s technical capabilities in relation to corporate strategies and plans.

   Makes recommendations to the Board concerning priorities, asset deployment, and other matters relating to the Company’s technical activities.


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Our Corporate Governance  Board Information

 

Board Self-Assessment

Annually, our Board Chair facilitates the Board’s own self-assessment process, the results of which help to inform Board-level discussions regarding Board and Committee composition, Board succession planning and potential director candidates, corporate governance practices and other matters.

 

 

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Board’s Role in Risk Oversight

The Board, as a whole, actively oversees the risk management of the Company. Enterprise risks—the specific financial, operational, business and strategic risks that the Company faces, whether internal or external—are identified and prioritized by the Board and management together, and then each specific risk is assigned to the full Board or a Board committee for oversight.

Board/Committee Primary Areas of Risk Oversight

 

 

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Our Corporate Governance  Director Compensation

 

Cybersecurity Risk Management and Oversight

ATI recognizes the increasing significance that cybersecurity has to our operations and the success of our business. We also recognize the need to continually assess cybersecurity risk and evolve our response in the face of a rapidly and ever-changing environment. We appointed a Chief Digital & Information Officer in 2019 and, to enhance an already comprehensive cybersecurity program, appointed a Chief Information Security Officer to lead our efforts to address and mitigate digital technology risks in partnership with ATI’s business leaders.

In 2020, the need to ensure cybersecurity while enabling a comprehensive and highly-reliable remote working environment for a significant proportion of our workforce was a central component of our response to the COVID-19 pandemic. Throughout 2020, special attention was and continues to be given to improving and implementing Cybersecurity Maturity Model Certification controls in support of protecting ATI’s technology and customer data.

Additionally, we have a robust Cybersecurity Incident Response Plan in place that provides a documented framework for handling high severity security incidents and facilitates coordination across multiple parts of ATI. We routinely perform simulations and drills at both a technical and management level. We incorporate external expertise and reviews in all aspects of our program, and all personnel receive regular cybersecurity awareness training.

As part of its program of regular oversight, the Audit Committee is responsible for overseeing ATI’s cybersecurity risk. The Audit Committee receives quarterly reports from the Chief Digital Information Officer and the Chief Information Security Officer on ATI’s cybersecurity risk profile and enterprise cybersecurity program.

Process For Communicating With Directors

 

We maintain a process for stockholders and interested parties to communicate with the Board, the Board Chair, or any individual director.

 

ATI stockholders or interested parties who want to communicate with the Board, the Board Chair or Lead Independent Director, or any individual director can write to:

 

 

LOGO

 

Board Chair/Lead Director

c/o Corporate Secretary

Allegheny Technologies Incorporated

1000 Six PPG Place

Pittsburgh, PA 15222-5479

 

LOGO  

or call:

1-877-787-9761 (toll free).

Your letter or message should indicate whether you are an ATI stockholder.

Depending on the subject matter, the Board Chair or Lead Independent Director and/or Corporate Secretary will:

 

  forward the communication to the director or directors to whom it is addressed;

 

  attempt to handle the inquiry directly when, for example, it is a request for information about the Company or it is a stock-related matter; or

 

  not forward the communication if it is primarily commercial in nature or it relates to an improper or irrelevant topic.

At each Board meeting, the Corporate Secretary presents a summary of all communications received since the last meeting that were not forwarded and makes those communications available to the directors on request.

 

 

 

DIRECTOR COMPENSATION

Board of Directors’ Role and Compensation

Non-employee directors receive compensation for their service that is designed to fairly compensate them for their Board responsibilities and align their interests with our stockholders. The Nominating and Governance Committee periodically reviews and evaluates our non-employee director compensation program to ensure that it is competitive with ATI’s industry peers and best practices and serves the purposes of attracting and retaining high quality directors. The Nominating and Governance Committee uses an independent consultant, Meridian Compensation Partners LLC, which is the same consultant retained by the Personnel and Compensation Committee, to provide market and comparison data and information on current developments and practices in director compensation. ATI’s non-employee director compensation program is competitive and market-based.

Director Stock Ownership Guidelines

The Board encourages directors to obtain a meaningful stock ownership interest in ATI. Under the stock ownership guidelines applicable to all non-employee directors, each non-employee director is expected to own at least 10,000 shares of ATI Common Stock within five years of his or her initial election to the Board. Furthermore, directors are required to retain one-third of any awarded stock until compliance with the guidelines is achieved. Our Directors may opt to receive all or a portion of their cash retainer in shares of ATI stock.

Each of the directors complied with the guidelines as of December 31, 2020 or is reasonably proceeding with compliance as of the applicable five-year anniversary of his or her initial election to the Board.


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Elements of Director Compensation

 

 

Pay Component    2020 Compensation
Annual Retainer   

$225,000

– $125,000 Cash

– $100,000 Restricted Stock Value

Independent Board Chair Retainer    $150,000
Committee Chair Retainers   

Audit Committee $20,000

Personnel and Compensation Committee $15,000

Finance, Nominating and Governance and Technology Committees $10,000

Board service travel expenses are also paid by the Company

In 2004, the Board froze and discontinued the Company’s Fee Continuation Plan for Non-Employee Directors. Under the frozen plan, an amount equal to the annual retainer fee in effect for 2004 (which was $28,000) will be paid annually to each member of the Board as of December 31, 2004, following the termination of his or her service as a Board member. In each case, the fee will be paid for each year of the director’s credited service as a director (as defined in the Plan) up to a maximum of ten years.

In response to the COVID-19 pandemic and its impact on our business, our Board elected to reduce director cash compensation by 20% beginning June 1, 2020, impacting quarterly installments for the third and fourth quarters of 2020, which is reflected in the following table. Our Board members’ compensation was restored to prior levels effective with the first quarter of 2021.

2020 Non-Employee Director Compensation

 

Name(1)    Fees Earned Or
Paid In Cash
($)(2)
       Stock
Awards
($)(3)
      

All Other

Compensation

       Total
($)
 
L. M. Ball      112,500          99,995                   212,495  
H. J. Carlisle      112,500          99,995                   212,495  
C. Corvi      61,250          161,242                   222,492  
D. C. Creel      272,500          99,995                   372,495  
J. C. Diggs      122,500          99,995                   212,495  
J. B. Harvey      56,250          156,241                   212,491  
D. P. Hess      112,500          99,995                   212,495  
M. Kah      112,500          99,995                   212,495  
D. J. Morehouse      56,250          156,241                   212,491  
J. R. Pipski      132,500          99,995                   232,495  
J. E. Rohr      0          227,492                   227,492  

Non-employee directors are not granted option awards or non-equity incentive plan compensation awards, and do not have company pensions or non-qualified deferred compensation earnings.

 

(1)

Robert S. Wetherbee, President and Chief Executive Officer, does not receive any compensation for his service on the Board.

 

(2)

This column reflects annual retainer fees, including committee Chair and Board Chair fees. During 2020, our non-employee directors had the option to receive all or a specified portion of such fees in restricted shares of our common stock. Ms. Corvi, Mr. Harvey and Mr. Morehouse each elected to receive ATI stock in lieu of 50% of the portion of his or her 2020 director compensation that would otherwise have been paid in cash, and Mr. Rohr elected to receive stock in lieu of any cash compensation for 2020.

 

(3)

This column reflects the aggregate grant date fair value, determined in accordance with FASB ASC Topic 718, of the restricted stock awards granted to directors under the Company’s Non-Employee Director Restricted Stock Program. Shares granted in 2020 vest on the first anniversary of the date of grant, or earlier upon retirement, death or change of control, and expense is recognized over the vesting period. The fair value of nonvested stock awards is measured based on the average of the high and low trading prices for a share of the Company’s stock price on the date of grant.


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ATI 2021 Proxy Statement

  

 

Related Party Transactions / Compensation Committee Interlocks and Insider Participation

 

Related Party Transactions

The Board has adopted a written Statement of Policy with respect to Related Party Transactions. The Policy applies to transactions or arrangements between ATI and a related person (namely directors, executive officers, and their immediate family members, and 5% stockholders) with a direct or indirect material interest in the transaction, including transactions requiring disclosure under Item 404(a) of Regulation S-K.

Under the Policy, no related party transaction may occur unless it is approved or ratified by the Audit Committee or approved by the disinterested members of the Board. The Audit Committee is primarily responsible for approving and ratifying related party transactions, and in doing so, will consider all matters it deems appropriate, including the dollar value of the proposed transaction, the relative benefits to be obtained and obligations to be incurred by the Company, and whether the terms of the transaction are comparable to those available to third parties.

Compensation Committee Interlocks and Insider Participation

No member of the Personnel and Compensation Committee is an officer or employee of the Company. No member of the Committee has a current or prior relationship, and none of our executive officers have a relationship, to any other company that is required to be described under the SEC rules relating to disclosure of executive compensation.


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Stock Ownership Information

 

 

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Stock Ownership

Information

 

FIVE PERCENT OWNERS OF COMMON STOCK

The entities listed in the following table are beneficial owners of five percent or more of ATI Common Stock as of December 31, 2020, based on information filed with the SEC. In general, “beneficial ownership” includes those shares a person has the power to vote or transfer currently, and shares such person has the right to acquire within 60 days.

 

Name and Address of Beneficial Owner    Amount and Nature of
Beneficial Ownership
       Percentage
Of Class(1)
 

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

    
19,831,058
(2) 
 
       15.59%  

The Vanguard Group

100 Vanguard Boulevard

Malvern, PA 19355

    
12,908,138
3) 
 
       10.14%  

Capital International Investors

333 South Hope Street

Los Angeles, CA 90071

    
11,430,419
(4) 
 
       8.98%  

State Street Corp.

State Street Financial Center, One Lincoln Street

Boston, MA 02111

     6,678,608 (5)         5.25%  

Dimensional Fund Advisors

6300 Bee Cave Road

Austin, TX 78746

     6,562,319 (6)         5.15%  

 

(1)

Percentages are based on shares of Company Common Stock outstanding as of March 22, 2021, as of which date there were 127,203,072 shares of Company Common Stock outstanding.

 

(2)

Based on a Schedule 13G/A filing under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), made on February 5, 2021 by BlackRock, Inc., reporting sole voting power with respect to 19,605,888 shares and sole dispositive power with respect to 19,831,058 shares at December 31, 2020.

 

(3)

Based on a Schedule 13G/A filing under the Exchange Act, made on February 10, 2021, by The Vanguard Group, reporting shared voting power with respect to 123,546 shares, sole dispositive power with respect to 12,689,260 shares, and shared dispositive power with respect to 218,878 shares at December 31, 2020.

 

(4)

Based on a Schedule 13G filing under the Exchange Act, made on February 16, 2021, by Capital International Investors, a division of Capital Research and Management Company, reporting sole voting power with respect to 9,559,019 shares, and sole dispositive power with respect to 11,430,419 shares at December 31, 2020.

 

(5)

Based on a Schedule 13G filing under the Exchange Act, made on February 5, 2021, by State Street Corp., reporting shared voting power with respect to 6,160,129 shares and shared dispositive power with respect to 6,678,608 shares at December 31, 2020.

 

(6)

Based on a Schedule 13G filing under the Exchange Act, made on February 12, 2021, by Dimensional Fund Advisors LP (“Dimensional”), reporting sole voting power with respect to 6,331,690 shares and sole dispositive power with respect to 6,562,319 shares at December 31, 2020. Dimensional notes that it furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (collectively, the “Funds”). In certain cases, Dimensional subsidiaries may act as an adviser or sub-adviser to certain Funds. In its role as investment adviser, sub-adviser and/or manager, Dimensional or its subsidiaries may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds. However, all securities reported in its Schedule 13G/A are owned by the Funds, and Dimensional and its subsidiaries disclaim beneficial ownership of such securities.


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Stock Ownership Information  Stock Ownership of Directors, Board Nominees and Executive Management

 

STOCK OWNERSHIP OF DIRECTORS, BOARD NOMINEES AND EXECUTIVE MANAGEMENT

The following table shows the shares of Common Stock reported to ATI as beneficially owned as of March 22, 2021 by the nominees for director, the continuing directors, each officer named in the Summary Compensation Table, and for all directors, officers and other statutory insiders as a group. Unless indicated otherwise below, the information provided in the following table is based on the Company’s records, information filed with the SEC, and information furnished by the respective individuals and includes as “beneficially owned” those shares that each such person has the power to vote or transfer currently, or the right to acquire within 60 days following March 22, 2021.

For biographical information regarding the beneficial owners, please see information under “Item 1—Election of Directors” and “Members of ATI’s Executive Management” of this Proxy Statement. The business address for each beneficial owner is c/o Allegheny Technologies Incorporated, 1000 Six PPG Place, Pittsburgh, PA 15222.

 

Beneficial Owner    Amount and Nature of
Beneficial  Ownership(1)
       Percentage
Of Class
 
Leroy M. Ball      20,107          *  
Herbert J. Carlisle      21,158          *  
Carolyn Corvi      54,787          *  
Diane C. Creel      68,984          *  
James C. Diggs      49,980          *  
Kimberly A. Fields      14,778          *  
J. Brett Harvey      70,844          *  
David P. Hess      16,693          *  
Marianne Kah      18,693          *  
Kevin B. Kramer      101,552          *  
David J. Morehouse      47,679          *  
Donald P. Newman      26,792          *  
John R. Pipski      55,620          *  
James E. Rohr      96,498          *  
John D. Sims      5,809          *  
Robert S. Wetherbee      128,795          *  
All directors, nominees, named executive officers and other statutory insiders as a group (20 persons)      972,628          *  

*Indicates beneficial ownership of less than one percent (1%) of the outstanding shares of Company Common Stock. As of March 22 2021, there were 127,203,072 shares of Company Common Stock outstanding.

 

(1)

The table includes aggregate restricted stock awards as follows: (a) 13,577 shares for each of Ms. Creel, Ms. Kah and Messrs. Ball, Carlisle, Diggs and Pipski; (b) 21,893 shares for Ms. Corvi, 21,214 shares for each of Messrs. Harvey and Morehouse, (c) 23,251 shares for Mr. Rohr; and (d) 521,043 shares held by all directors, nominees and officers as a group. The table includes shares jointly held with named individuals’ spouses. The table does not include restricted stock units granted to our NEOs in 2019, 2020 and 2021, none of which vest within 60 days following March 22, 2021.


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Stock Ownership Information  Members of ATI’s Executive Management

 

 

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MEMBERS OF ATI’S EXECUTIVE MANAGEMENT

The following lists our executive officers as of March 22, 2021.

 

Name    Biographical information

Robert S. Wetherbee, 61

President and Chief Executive Officer since January 2019

   Mr. Wetherbee served as Executive Vice President, Flat Rolled Products, from January 2015 through December 2018, and prior to that, was President, ATI Flat Rolled Products from April 2014 to January 2015. He also served as President of ATI’s tungsten materials business from 2010 until early 2013, following a 29-year career with Alcoa Inc. At the conclusion of the 2021 Annual Meeting, he will become Chairman, President and Chief Executive Officer, succeeding Diane Creel as Board Chair.

Kimberly A. Fields, 51

Executive Vice President, AA&S and HPMC, since January 2021 (EVP, Flat Rolled Products from April-December 2019 and EVP, AA&S in 2020)

   Ms. Fields joined ATI in April 2019 after serving as Group President at IDEX Corporation since 2015. Previously, Ms. Fields served as Executive Vice President for the integrated global steel producer EVRAZ, where she had full responsibility for all activities for the $2 billion North American Flat Products business. Prior to that, Ms. Fields was General Manager of Industrials for GE Energy, with global responsibility for growing GE’s penetration in metals, petrochemicals and mining segments, after holding a series of leadership positions with Alcoa, Inc., The Boston Consulting Group and Owens Corning Fiberglass.

Elliot S. Davis, 59

Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary since May 2011

   Mr. Davis was Vice President and General Counsel from 2010 to May 2011. Previously, he served as Assistant General Counsel from 2008, when he joined the Company, to 2010. Prior to that, Mr. Davis was a partner of the law firm K&L Gates LLP, where he practiced for nearly 20 years in its corporate, mergers and acquisitions and securities group.

Timothy J. Harris, 46

Senior Vice President, Chief Digital and Information Officer since May 2019

   Mr. Harris joined ATI in May 2019 after serving as Chief Information Officer at Andeavor from November 2016 to April 2019. Prior to that, he held a series of senior positions at Mylan N.V., including most recently Chief Technology Officer and head of Global Technology Services from June 2013 to March 2016. Before joining Mylan, Mr. Harris held several global technology roles for Aviva PLC, following over ten years in a variety of leadership positions at Rockwell Collins.

Kevin B. Kramer, 61

Senior Vice President, Chief Commercial and Marketing Officer since February 2014

   Prior to joining ATI in February 2014, Mr. Kramer was President—Stoneridge Wiring Division and Vice President of Stoneridge, Inc., from May 2012 through January 2014. Previously, Mr. Kramer worked for Alcoa, Inc. from 2004 until 2012, where he served as President—Growth Initiatives and President—Wheel and Transportation Products.

Donald P. Newman, 56

Senior Vice President, Finance and Chief Financial Officer since January 2020

   Mr. Newman joined ATI in January 2020, having served as Chief Financial Officer of Stelco Holdings, Inc. from August 2017 through December 2019. Previously, Mr. Newman was Chief Financial Officer of Headwaters Incorporated from December 2010 until it was acquired in May 2017. In previous roles, Mr. Newman served as Vice President – Controller and Interim Chief Financial Officer at Boart Longyear Limited and as Chief Accounting Officer at ACI Worldwide, Inc., and held leadership roles in accounting, finance and financial planning and analysis for over 12 years at NRG Energy, Inc.

Elizabeth C. Powers, 61

Senior Vice President, Chief Human Resources Officer since November 2014

   Ms. Powers served as Vice President, Human Resources and Chief Administrative Officer for Dresser-Rand Group, Inc. from 2010 until 2012 and from 2005 to 2009. She was named Vice President, Human Resources of Dresser-Rand Group in April 2004. From 2012 until she joined ATI in November 2014, Ms. Powers worked in academia. In 2009 and 2010, Ms. Powers worked in the public policy and non-profit sectors.

Karl D. Schwartz, 57

Vice President, Controller and Chief Accounting Officer since January 2016

   Mr. Schwartz served as Controller and Chief Accounting Officer from May 2011 to January 2016, and Controller and Principal Accounting Officer from 2010 to May 2011. Prior to that, Mr. Schwartz was Assistant Controller beginning in 2002, when he joined the Company.


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Item 2:

Advisory Vote to Approve Compensation of the Company’s Named Executive Officers

Each year we ask our stockholders to approve the compensation of ATI’s named executive officers. This proposal, commonly known as a “Say On Pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement.

While this vote is advisory, and not binding on our Company, it provides valuable information to our Personnel and Compensation Committee regarding investor sentiment about our executive compensation philosophy, policies and practices. The Committee will consider the outcome of this vote when determining executive compensation for the remainder of 2021 and in future years. In 2020, our Say On Pay proposal received the support of 87% of the shares voted at our Annual Meeting, and since 2017, our Say On Pay proposals have received, on average, the support of 94% of the shares voted. We believe that ATI’s 2020 executive compensation is similarly and appropriately aligned with stockholder interests. Notably, in response to the COVID-19 pandemic, our NEOs’ base compensation was reduced by 20% for the period from May 1, 2020 to December 1, 2020, together with reductions in other compensation and benefits that remain in effect. Moreover, in spite of very significant disruptions to our business as a result of the ongoing pandemic, we did not take any action to revise or amend the previously-established company performance goals that determined the 2020 outcome of our short and long-term incentive compensation programs.

Using Executive Compensation to Create Long-Term Stockholder Value

 

The Committee continually reviews the compensation program for our NEOs to ensure that it achieves the desired goal of offering total compensation consisting of base salary that is competitive with an identified peer group of companies and incentive opportunities that are performance-oriented and linked to the interests of stockholders. When casting your Say On Pay vote, we urge you to consider:

Linking compensation to ATI performance

 

 

Approximately 85% of our CEO’s 2020 compensation opportunity was tied to performance and, therefore, “at risk.” Performance drives pay.

 

 

Our short-term cash incentive and long-term equity incentive plans are based on the attainment of business plan performance metrics, such as operating profit, EBITDA, net income, cash flow, return on capital, strategic goals, and total stockholder return relative to a peer group. These previously-established performance metrics were not revised or amended during the course of 2020 in response to the COVID-19 pandemic, in spite of its significant and ongoing negative impact on our business and the markets that we serve.

 

 

Payments with regard to the company performance-vested components of both our annual and long-term incentive programs are made only when at least threshold performance targets are achieved.

Aligning compensation to stockholder interests

 

 

All of the long-term incentive compensation opportunities for our NEOs are equity-based.

 

 

The business plan performance metrics that drive our performance-vested compensation programs are metrics that we believe correlate with the achievement of sustained profitable growth.

 

 

Our stock ownership guidelines for senior executives denote ownership as a multiple of base salary, prescribing 6X ownership for our CEO and 100% retention until ownership guidelines are met.


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Item 2: Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers

 

 

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Before voting, we encourage you to read the “Compensation Discussion and Analysis” section to learn more about our executive compensation program. We ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the stockholders of Allegheny Technologies Incorporated approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders, pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, the compensation tables and any related material disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders.”

Based on the recommendation of our stockholders at our 2017 Annual Meeting of Stockholders, and the Board’s consideration of that recommendation, we have determined that we will hold an advisory vote to approve the compensation of the Company’s named executive officers annually until the next required stockholder vote to recommend the frequency of such votes, which is expected to occur in 2023.

 

 

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Compensation Discussion and Analysis  1. Executive Compensation Summary

 

Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

This section discusses our executive compensation program and plans for our Named Executive Officers, or “NEOs”:

Robert S. Wetherbee

President and Chief Executive Officer

Kimberly A. Fields

Executive Vice President, Advanced Alloys & Solutions and High Performance Materials & Components

Kevin B. Kramer

Senior Vice President, Chief Commercial and Marketing Officer

Donald P. Newman

Senior Vice President, Finance and Chief Financial Officer

John D. Sims

Former Executive Vice President, High Performance Materials & Components

Patrick J. DeCourcy

Former Chief Financial Officer

Each of our NEOs, other than Mr. DeCourcy and Mr. Sims, is a member of our Executive Council, which also includes other key members of our senior management. Mr. DeCourcy served as Chief Financial Officer for a portion of January 2020 and retired in April 2020. Mr. Sims retired as of February 28, 2021.

 

    TABLE OF CONTENTS:

     

 

1. Executive Compensation Summary      43  
2. Our Compensation Framework and Philosophy      48  
3. How We Determine Executive Compensation      50  
Setting Compensation Levels and Pay Targets      50  
Internal Pay Equity      51  
Benchmarking Peer Group      51  
4. 2020 Executive Compensation Program      53  
Elements of Compensation      53  
Base Salary      54  
Annual Performance Plan      54  
Long-Term Incentive Plan      57  
5. NEO Total Realized Compensation      59  
6. Other Compensation Practices and Policies      60  
Compensation Committee Report      62  
2020 Compensation Tables      63  
Summary Compensation Table for 2020      63  
Grants of Plan-Based Awards for 2020      65  
Outstanding Equity Awards at Fiscal Year-End      66  
Option Exercises and Stock Vested for 2020      67  
Pension Benefits for 2020      67  
Non-Qualified Deferred Compensation for 2020      68  
CEO Pay Ratio      69  
Employment and Change in Control Agreements      70  
Potential Payments Upon Termination      71  
 


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Compensation Discussion and Analysis  1. Executive Compensation Summary

 

 

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1.   EXECUTIVE COMPENSATION SUMMARY

Our 2020 Business Performance

ATI’s business and financial performance was significantly affected in 2020 by the sudden onset of widespread uncertainty and sweeping challenges to the global community and economy due to the COVID-19 pandemic. Some of our most important end markets — such as the commercial aerospace industry — were among those most deeply impacted by the onset of the COVID-19 pandemic and its many repercussions. As a result, our business witnessed marked declines in customer demand for our products and, consequently, its financial performance.

In response to these challenges, we aggressively implemented cost reductions and other measures to limit the impact of rapidly changing market conditions on our bottom line. We also were able to leverage our customer relationships and reputation for operational excellence to grow our future market share in the industries and with the customers we serve.

While we experienced significant losses in 2020, we believe that the comprehensive actions we took helped to mitigate those losses, improve the efficiency of our business and, importantly, position our business for recovery and growth.

Executing Our 2020 Leadership Priorities

 

 

      

 

Preserved cash and maintained our strong liquidity position

 

   Refinanced more than $200 million in long-term debt at an improved interest rate, ensuring that we have no significant debt maturities until 2023

 

   Ended the year with total liquidity of over $950 million, including $646 million of cash on hand

 

                    

 

Continued to reposition ATI as a growth-oriented aerospace and defense company to ensure that we are recovery-ready

 

   Announced our 2021 exit from production of standard stainless steel products and streamline the operations of our AA&S segment

 

   Redeployed capital to higher-margin opportunities, sharpening our focus on aerospace and defense

 

      
                
 

 

Supported customers through continued strong execution

 

   Ensured ongoing production capabilities for our customers through our business continuity and safety measures

 

   Earned new long-term customer commitments and increased market share

 

       

 

Adjusted our cost structure to match customer demand

 

   Achieved nearly $150 million in cost savings for 2020

 

   Curtailed capital expenditures

 

Actions Taken to Reduce COVID-19 Business Impact

We took quick and decisive action in the first quarter to 2020 to ensure employee safety and curtail the spread of the virus in our workplace environment, which has enabled us avoid material operational disruption stemming from workplace transmission since the emergence of the pandemic.

Additionally, we adjusted our production levels to align with declining customer demand and effected other cost reductions to limit the impact of rapidly changing market conditions on our bottom line. These efforts included: rolling facility idlings; targeted adjustments to crewing levels and work schedules; staffing reductions through furloughs and layoffs; and reductions in salary and benefits for our board, executive leadership and nearly all of our salaried workforce. For our Directors and NEOs, these reductions included:

 

  a 20% reduction in base salary levels for our NEOs and other executive leadership that extended from May 1, 2020 to December 1, 2020; and

 

  a 20% reduction in the cash component of our Director compensation program for the second half of 2020.
 

 

Additionally, we curtailed planned capital expenditures for the year and reduced inventory, yielding meaningful improvements in working capital levels.

 

 

Through these difficult but necessary actions, ATI ensured ongoing production capabilities for our customers, preserved jobs for employees and maintained a strong balance sheet to ensure that we are recovery and growth ready when continued dynamic market conditions present opportunities for our business.

 


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2020 Year End Performance

Financial and Operational Performance

 

 

 

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Key Achievements

 

 

  Preserved employee safety and maintained healthy workplace conditions

 

  Continued operations with little facility disruption as a result of COVID-19 transmission

 

  Obtained new long-term contract commitments with key customers

 

 

Liquidity and Balance Sheet

 

 

  Ended the year with $646 million in cash on hand and over $300 million of available borrowing capacity under our revolving credit facility

 

  Refinanced more than $200 million in long-term debt at favorable rates and extended debt maturity profile
 

 

Executing Our High-Value Strategy to Drive Profitability

 

Our 2020 Organizational Alignment

We re-aligned our organizational structure with our strategy to sharpen the focus of our business and optimize key assets.

 

 

High Performance Materials & Components (HPMC)

 

   Forged Products: broad range of forging capabilities for aerospace & defense, plus other high-performance applications including isothermal, hot-die and closed-die forging.

 

   Specialty Materials: broad range of nickel-based, cobalt-based and titanium-based alloy mill products and powers, and additive parts primarily for aero-engine and airframe applications.

 

Advanced Alloys & Solutions (AA&S)

 

   Specialty Alloys & Components: (formerly part of HPMC segment) specialty alloys and refractory metals in all conventional product forms, including custom shapes and near-net shape components.

 

   Specialty Rolled Products: (formerly part of Flat Rolled Products segment) specialty-grade flat products formed through unique process capabilities.

 

   Standard Stainless Sheet Products: (formerly part of Flat Rolled Products segment) standard stainless sheet products for the North American market.

 

   Joint Ventures

  STAL: precision-rolled stainless strip

  Uniti Titanium: commercially pure titanium products for target markets

  A&T Stainless: stainless steel products (Idled)

 

Exiting Standard Stainless Sheet Products; Redeploying Capital to Higher-Return Opportunities

 

 

In December 2020, we announced that we will be exiting production of certain standard stainless products, our lowest margin product line, in 2021 and taking steps to streamline our Advanced Alloys & Solutions business, redeploying capital in ways that will enhance our specialty capabilities.

 

We believe these changes are necessary to meet the near-term challenges to our business and to create shareholder value by driving achievement of our key priorities for 2021 and beyond.

For a more detailed discussion of our business and analysis of our 2020 performance, read our 2020 Annual Report.


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Pay For Performance

Paying for performance is a key attribute of ATI’s compensation philosophy. Fundamentally, ATI’s executive compensation program links compensation to the achievement of specific, predetermined financial and performance goals that further ATI’s business strategies. As such, a significant portion of our NEOs’ compensation is subject to the achievement of rigorous performance goals and, therefore, is “at risk.” The Company uses three-year performance measurement periods for all but our annual cash incentive plan in recognition of performance over a longer period of time and to mitigate compensation risk. In this way, our programs both reward actual performance and are effective in driving achievement of the Company’s underlying near and longer-term goals.

We believe that our compensation program is transparent and easy to understand, performance-driven and appropriately aligned with stockholders’ interests. Our program:

 

 

      

 

Places significant emphasis on financial results

 

  Awards under our short-term cash incentive program to our CEO and Executive Council members are 90% contingent on ATI’s financial performance. The Personnel and Compensation Committee has the authority to reduce or eliminate the remaining 10% of these awards (which are contingent on the achievement of individual strategic goals) in order to align as closely as possible with stockholder interests.

 

  70% of the long-term incentive awards to our NEOs and other senior executives are contingent on our performance over a multi-year period and include a shareholder return component to take into account our performance relative to our peers.

 

                          

 

Aligns with our business strategies and performance

 

  Our long-term incentive program incorporates 3-year equity performance-based incentives that are aligned with our business strategies.

 

  Equity awards granted to our CEO and Executive Council are weighted 70% as performance stock units that vest based on our future achievement of financial metrics reflecting our long- term strategies and outlook.

                              

 

Reflects competitive market data

 

  Compensation levels for our NEOs and other senior executives are reviewed annually in light of market benchmarking data.

 

  Our long-term equity incentive plan, adopted in 2020, provides for double- trigger change in control vesting across all awards.

 

  We implemented robust stock ownership guidelines for executives, officers and other top leadership positions.

      

Principal Compensation Components

The following table summarizes the principal components of our executive compensation program. The Committee structures these elements to promote and reward financial performance through a variety of performance metrics and time horizons.

 

Pay Component    Time Horizon      Nature    Purpose
Base Salary    1 year      Fixed (based on median benchmark)    Attract and retain talent
Annual Performance Bonus    1 year      Variable\“at risk”   

Drive near-term corporate and

individual performance goals

Performance Stock Units    3 years      Variable\“at risk”    Drive medium-term performance goals
Restricted Stock Units    3 years      Time-based    Retain talent

2020 Pay For Performance

The compensation of our senior executives during 2020 reflects our financial results and the significant and unexpected challenges that faced our business as a result of the COVID-19 pandemic and related market conditions.

 

 

2020 Short-term incentive payments were below target: Our NEOs received short-term incentive payments under our annual incentive plan for 2020 that ranged from 16% to 80% of their respective target awards, reflecting significant and previously unanticipated declines in the Company’s financial performance during 2020, largely as a result of the COVID-19 pandemic.

 

 

Multi-year trends in short-term incentive reflect commitment to pay for performance: Our 2019 and 2018 payment of short-term incentive awards at greater-than-target levels followed near-target short-term incentive payments for 2017 and short-term


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incentive payments for 2016 and 2015 that were either zero or significantly below target. This trend reflects the many challenges facing our business currently and during the 2015-2016 timeframe and the strong correlation between pay and performance inherent in our executive compensation programs.

 

 

Long-term incentive results similarly reflect cyclical challenges: Notably, as we sought to transform our business over the last several years, the results of our long-term compensation programs also contributed at times to below-target annual compensation for our NEOs. Specifically, a substantial portion of the long-term incentive awards granted to our NEOs for the performance periods ended in 2015, 2016 and 2017 did not vest, because the applicable performance criteria (including market performance as reflected in the total shareholder return component of certain awards) were not satisfied. As a consequence, our NEOs’ aggregate realized compensation was meaningfully lower than the target total annual compensation established for each of them. Awards with performance periods that ended in 2018, which were paid in early 2019, resulted in payments of 39% of each NEO’s target award. By contrast, our 2017 - 2019 PSU awards settled at 132.9% of target for our NEOs. This result reflected improvements in our business in 2017 and 2018 compared to earlier very challenging years. However, as reflected in the table below, our 2018 - 2020 awards settled in early 2021 at only 68.9% of target for our NEOs, consistent with the pandemic-related downturn that we have experienced since early 2020.

These results reflect the cyclical fluctuations in business performance that we have experienced over the last several years, further demonstrating our pay for performance culture.

 

                                 2018-2020 Performance Period Results  
2018 – 2020 Financial Performance Goals    Relative
Weighting (%)
     Threshold      Target      Maximum      Actual
Performance(2)
     Actual Achievement
(% of Goal Target)
 
Net Income(1)      50        $328        $655        $983        $452        68.9%  
Return on Invested Capital      50        4.59%        8.81%        12.72%        7.48%        84.3%  
                                                    76.6%  
+/- 20%TSR Modifier(3)                                          - 10%        68.9%  

 

(1)

Threshold, Target, Maximum and Actual Performance dollar amounts shown in millions.

 

(2)

Actual Performance includes $1,432 million of adjustments, net of tax at a 5% tax rate, for restructuring and other charges, goodwill impairment, debt extinguishment, 2019 divestitures, and A&T Stainless joint venture impacts.

 

(3)

Based on the Company’s Total Shareholder Return for the 2018 – 2020 Performance Period relative to the total shareholder return (“TSR”) of a peer group of companies included in the S&P Midcap 400 Industrials and Midcap 400 Materials indices. For more information, please see page 58.

ATI Performance Impact on NEO Compensation

2020 NEO Performance-Based Compensation

Our NEOs, other than Mr. DeCourcy, received cash incentives for 2020 under our short-term incentive program, the 2020 Annual Performance Plan, at levels ranging from 16% to 80% of their respective target awards. Mr. DeCourcy was not eligible to participate in the 2020 program. The following table shows the compensation paid to each NEO based on ATI’s recent performance.

 

Named Executive Officer    2020 Base Salary ($)(1)        2020 Annual Performance
Plan (APP) ($)
       2018-2020 Performance
Restricted Share  Units($)(2)
 
Wetherbee      802,173          566,100          403,064  
Newman      510,123          230,400          0  
Fields      478,423          306,200          0  
Sims      486,115          62,300          403,064  
Kramer      446,915          187,600          353,163  
DeCourcy      128,846          0          287,887  

 

(1)

For the first two months of 2020, the base salary rates for Messrs. Wetherbee, Sims and Kramer and for Ms. Fields were $825,000, $550,000, $485,000 and $500,000, respectively. Mr. Newman joined the Company on January 6, 2020 with a base salary rate of $590,000. Mr. DeCourcy had a 2020 base salary rate of $500,000 until his April 2020 retirement. Effective in February 2020, base salary rates for Mr. Wetherbee, Mr. Kramer and Ms. Fields increased to $925,000, $510,000 and $550,000, respectively. Effective May 1, 2020, the company reduced each NEO’s base salary rate by 20%. This reduction remained in effect until December 1, 2020, when NEO base salaries were restored to their pre-reduction levels.

 

(2)

Based on ATI’s achievement of specific financial performance goals for the period from January 1, 2018 through December 31, 2020. The amounts shown reflect achievement at 68.9% of target, including the impact of the “TSR Modifier” component of the 2018-2020 PSU award, and a per share value of $21.28 per share, which was the average of the high and low trading prices for one share of our common stock on the NYSE on February 25, 2020. Mr. Newman joined the Company in January 2020 and Ms. Fields joined the Company in April 2019; therefore, neither received a 2018 grant.


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2020 NEO Target Compensation Comparison to Realized Compensation

The following comparison of target compensation to realized compensation for our NEOs employed throughout 2020 demonstrates our ongoing commitment to compensating our leadership based on the Company’s performance and placing a significant proportion of senior executive compensation “at risk”:

 

Named Executive Officer    2020 Target        2020 Realized  
Wetherbee      $6,081,250          $2,437,085  
Newman      $2,242,000          $1,784,722  
Fields      $2,090,000          $1,040,992  
Sims      $2,090,000          $1,474,438  
Kramer      $1,938,000          $1,476,072  

Executive Compensation Highlights

 

 

    WHAT WE DO:

   

 

 

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Link compensation to ATI performance.

Performance drives pay. A significant portion of compensation opportunities for our NEOs is variable, meaning it is tied to performance. Cash and equity incentive plans are based on the attainment of business plan performance metrics. Payments are made only when at least threshold performance targets are achieved.

 

 

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Balanced compensation program.

The compensation program includes complementary but diverse performance goals, a balance of types of compensation, and caps on the amount of compensation that can be awarded.

 

 

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Compensation aligned with stockholder interests.

Long-term incentive compensation opportunities for our NEOs are equity-based and tied to business plan performance metrics.

 

 

LOGO

 

Double trigger change in control.

ATI’s equity incentive plan, approved by our stockholders in 2020, includes double trigger change in control provisions that apply to equity awards under the plan.

 

LOGO

 

Independent Compensation Consultant.

Our Personnel and Compensation Committee works closely with an independent compensation consultant.

 

 

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Clawback policy.

Clawback arrangements require the return of compensation to the extent that information used to calculate the achievement of earnings or other performance measures is subsequently determined to be materially incorrect.

 

 

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Robust stock ownership guidelines for directors and executive management.

Our stock ownership guidelines for management include 6X base salary ownership for the CEO and require 100% retention until ownership guidelines are met.

 

 

LOGO

 

Limits on severance arrangements.

Severance arrangements limited to 2.99X base salary.

 

 

LOGO

 

Board compensation risk oversight.

Our board regularly reviews various risks associated with our compensation program, which includes review of an annual risk analysis performed by our independent compensation consultant.

 

 

 

    WHAT WE DON’T DO:

   

 

 

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No employment agreements for executive officers.

 

 

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No excise tax gross-ups in change in control agreements.

 

 

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Executive perquisites.

We do not pay executive perquisites such as personal air travel, club dues or tax gross-ups.

 

LOGO

 

No hedging transactions or pledging of ATI stock by officers and directors.

We prohibit officers and directors from hedging or pledging ATI stock.

 

 

LOGO

 

No repricing of awards.

No previously granted awards can be repriced or surrendered in exchange for new awards.

 

 

 

 

 

 

 


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Compensation Discussion and Analysis  

 

2.   OUR COMPENSATION FRAMEWORK AND PHILOSOPHY

Role of the Personnel and Compensation Committee

The Committee’s primary responsibility is to design compensation plans that support the Board’s and management’s long-term strategic vision for ATI and to ensure that those plans support ATI’s goal of creating stockholder value over the long-term. Over the last several years, the Committee has emphasized design clarity and transparency to better communicate with our stockholders and to ensure that our compensation programs are aligned with evolving best practices.

The Committee is composed of six independent, non-employee directors. The Committee has the sole responsibility to carry out ATI’s overarching policy of linking its executive compensation program to the interests of its stockholders. The Committee is responsible for determining compensation for the NEOs and other members of the management Executive Council, which currently is comprised of seven members of senior management, including the CEO. The Committee also has the responsibility for oversight of the Company’s equity plans, variable compensation plans for management employees and management’s implementation of those plans to ensure a continuing source of leadership and succession planning for ATI. In addition, the Committee reviews compliance with independence standards applicable to ATI’s compensation consultant.

Role of Independent Compensation Consultants

The Committee, under its charter, has the sole authority to retain and terminate any compensation consultant used in the evaluation of executive compensation and has the sole authority to approve the retention terms of the consultant, including fees. The compensation consultant retained by the Committee is responsible only to the Committee. The Committee reviews the consultant’s qualifications, including independence. The Committee re-evaluates the consultant’s independence on an ongoing basis. The Committee may, at any time, contact the consultant without interaction from management.

For 2020, the Committee retained Meridian Compensation Partners, LLC, a nationally recognized executive compensation consultant, for benchmarking compensation and program design and advice on a variety of compensation related matters. Meridian, which the Committee determined is independent, provides no other services to ATI. Further, because Meridian is involved only in the business of executive compensation consulting, Meridian does not attempt to sell other services to the Company.

Our Philosophy

The Committee’s approach to compensation is to offer a base salary that is competitive with an identified benchmarking peer group of companies and incentive opportunities that are performance-oriented and linked to the interests of stockholders. The Committee has developed a balance of annual and long-term programs using diverse criteria to discourage inappropriate risk taking. For the NEOs, the program consists of base salary, an annual performance-based cash incentive, longer-term performance-based equity compensation opportunities and a time-based equity component that is intended to serve as a retention tool.

The Committee views the executive compensation program as a management tool that, through a detailed and quantitative target-setting process, establishes challenging financial performance goals that encourage the management team to achieve or surpass ATI’s business objectives.

The Committee has determined that the executive compensation program should:

 

 

pay competitively by setting overall target compensation, which is realized when performance targets are met, in line with target compensation at peer companies and other companies and industries with which ATI competes for executive talent;

 

 

provide performance-oriented incentive pay opportunities that are linked to the interests of stockholders by putting substantial portions of potential compensation at risk;

 

 

support ATI’s business strategy by tying performance goals to specific annual and longer-term strategic objectives; and

 

 

retain executives who are essential to driving ATI’s strategies and future growth.

Competitive Compensation

The Committee reviews, with outside compensation consultants and other advisors, the compensation policies and practices at peer companies that ATI competes with for talent, or that are in our industry and serving our end markets. We use this information to help establish base compensation levels throughout the management organization at the approximate median of these groups. The variable components of our incentive awards provide opportunities to earn additional amounts if performance goals are met or exceeded, but do not pay out if performance goals are not met.


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Performance-Oriented and Linked to the Interests of Stockholders

The Committee believes that the more senior the manager, the larger the percentage of compensation that, over time, should be at risk. The goals and targets used across all management levels include both company-wide financial performance measures as well as pre-set goals within a particular participant’s area of responsibility. They are designed to encourage a team-oriented approach to achieving ATI profitability and strategic objectives and positioning the Company for the future challenges. The Committee scales compensation challenges and opportunities by level of responsibility and focuses performance on the measures that particular managers can most directly influence.

The Committee implements its pay for performance philosophy by using performance metrics that are linked to the interests of stockholders, such as operating profit, EBITDA, net income/earnings, total stockholder return, and/or strategic goals that are designed to help create stockholder value over the long-term. In 2020, performance goals focused on income, EBITDA, cash flow, and ROCE (return on capital employed). ATI’s business plans have focused on internal generation of the funds necessary for sustainable, profitable growth and product diversification.

Attract and Retain Talent

We designed our compensation program to attract and retain a deep pool of managerial talent, the members of which share ATI’s commitment to enhancing stockholder value in the short- and longer-terms. The Committee believes that the plans and performance goals included in our program will attract, challenge, and retain superior managers experienced in ATI’s businesses and direct their efforts toward achieving specific tasks that the Board and senior management determine to be necessary for profitable growth through business cycles.


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Compensation Discussion and Analysis  3. How We Determine Executive Compensation

 

3.   HOW WE DETERMINE EXECUTIVE COMPENSATION

Compensation Setting Process

Setting Compensation Levels and Opportunities

This section explains the Committee’s multi-step process for setting compensation levels and opportunities and validating our pay targets. The table below, and description that follows, summarizes the analyses involved in this process:

 

Review of Annual and Long-Term Business Plans

 

LOGO

Nov. – Feb.

 

Responsibility/Purpose:

Board and management/Aligning incentive compensation with business objectives

 

  

How It’s Used:

To support determination of performance targets in incentive plans

Individual Performance Assessments

 

LOGO

Nov. – Feb.

 

Responsibility/Purpose:

Committee and CEO/Evaluating individual performance of CEO and, based on CEO input, the members of our management Executive Council

 

  

How It’s Used:

   To determine each executive’s personal performance relative to the individual goals that comprise the 10% component of his or her short-term incentive award and to determine payments for the award period that recently ended

 

   To assist in setting individual award opportunities for the next year/ award cycle

 

Company Achievement of Performance Goals

 

LOGO

Jan. – Feb.

 

Responsibility/Purpose:

Committee and management/Determining award payments based on Company performance in completed performance periods

 

  

How It’s Used:

   To determine award payouts

 

   Considered when determining appropriate performance goals for upcoming periods

Market and Peer Analysis

 

LOGO

Sept. – Feb.

 

Responsibility/Purpose:

Compensation consultants/Setting pay for our executives

  

How It’s Used:

To set competitive base pay and short-term and long-term incentive targets and compensation opportunities for the next year/ award cycle

 

Pay and Performance Analysis

 

LOGO

Ongoing

 

Responsibility/Purpose:

Publicly available financial and compensation information/Evaluating pay and performance to validate individual compensation plans that were established in February

 

  

How It’s Used:

To assess achievement under the incentive plans relative to Company and peer performance

Tally Sheets

 

LOGO

Ongoing

 

Responsibility/Purpose:

Compensation consultants/Internal compensation and benefits data; Evaluating total remuneration and internal pay equity of our executives

  

How It’s Used:

To evaluate the total remuneration and projected payments to the NEOs under various termination scenarios. This helps to determine if each executive’s compensation package is appropriately aligned with that of internal peers and whether any adjustments to our compensation plans or programs, or an individual’s pay package, is necessary

 

Stockholder Outreach

 

LOGO

Ongoing

 

Responsibility/Purpose:

Board/management/To obtain stockholder feedback on concerns and questions relating to plan design and performance

 

  

How It’s Used:

To understand expectations of investors and monitor trends in executive compensation from the perspective of stockholders. Used to evaluate compensation policies, practices and plans.


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Near the end of each year, the Board (including members of the Committee) reviews ATI’s annual and long-term business and strategic plans with management. During the first quarter of the following year, the Committee reviews the Company’s year-end financial results and, based on its assessment of ATI’s achievement of the predefined financial goals and objectives, determines the extent to which awards with performance measurement periods that concluded at the end of the previous year are payable. During the first quarter of each fiscal year, the Committee authorizes compensation programs for the year and establishes specific financial performance goals for the performance period or periods applicable to awards under such programs in light of the Board approved business and strategic plans.

The Committee considers which incentive plans, award levels and performance goals would optimize the achievement of ATI’s future business objectives without introducing systemic risk driven by the executive compensation program. The Committee solicits the views of its advisors as to whether the plans under consideration reflect and support achievement of the Company’s short-term and long-term business objectives and strategies. The Committee also approves individual participation levels in the compensation plans for the CEO and members of the management Executive Council and directs executive management to establish participation levels in the plans for other eligible employees within the guidelines given by the Committee. Generally, prospective compensation opportunities under the long-term compensation plans are awarded during the first quarter.

Internal Pay Equity

Using market data, our independent compensation consultant advises the Committee on relative compensation among the Executive Council members, including the NEOs. In recognition of his ultimate management responsibility as President and CEO, base pay and compensation opportunities are significantly greater for the CEO than for the other NEOs. As a result, the Committee considers the ratios of CEO compensation opportunities and the compensation opportunities of each of the other NEOs in setting compensation opportunities. The ratio of the 2020 total realized compensation for Mr. Wetherbee, President and Chief Executive Officer, compared to the average of the compensation of the other NEOs, as reflected in the Total Realized Compensation Table, is approximately 1.69:1.

Benchmarking Peer Group

The Committee considers, with information provided by the compensation consultant, compensation practices across a peer group of manufacturing companies. The Committee uses the peer group as a reference in developing its executive compensation program and in determining the competitiveness of its executive compensation levels. The Committee also uses information regarding compensation practices across a broader survey of manufacturing companies as a check against the peer group information. Annually, the Committee reviews the composition of its peer group to ensure that the companies constituting the peer group remain relevant and provide meaningful comparisons for compensation and business purposes. ATI believes that there are no other public companies that engage in the full range of the Company’s specialty materials and components manufacturing, fabrication, marketing and distribution. Therefore, the Committee’s independent compensation consultant developed the following criteria to guide the selection of peer companies for benchmarking compensation. Specifically, peer companies should: 1) be competitors for business and/or executive talent and be primarily from the metals industry or adjacent sectors; 2) have stock prices reasonably correlated with ATI over the past five years indicating sensitivity to similar external market influences and 3) be reflective of the general complexity and business orientation of ATI, including with respect to global footprint, product lines and foreign competition.

 

      

 

  CRITERIA FOR PEER GROUP COMPANY SELECTION

          
 

 

Generally, the peers selected have:

 

   Revenues that approximate 50% to 200% of ATI’s with some flexibility;

 

   Capital intensive businesses as indicated by lower asset turnover ratios (i.e., 0.5 to 1.5);

 

   Higher stock price volatility, or “beta” (i.e., greater than 1.0);

 

   Market capitalization reasonably aligned with ATI; Some flexibility for outliers that may be aligned from different perspectives (i.e., revenues, competition); and

 

   Similar number of employees.

 

 

 


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2020 Benchmarking Peer Group

 

As a result, for performance measurement periods under the executive compensation plans beginning on January 1, 2020, the Benchmarking Peer Group consists of the following companies:

 

 

PEER GROUP

COMPANIES

 

Arconic Corporation

 

Carpenter Technology Corp.

 

Commercial Metals Company

 

Crane Co.

 

Howmet Aerospace

 

Kennametal Inc.

 

Oshkosh Corporation

 

Reliance Steel & Aluminum Co.

 

Schnitzer Steel Industries, Inc.

 

SPX FLOW, Inc.

 

Steel Dynamics Inc.

 

Terex Corporation

 

The Timken Company

 

Trinity Industries Inc.

 

Valmont Industries, Inc.

 

Westinghouse Air Brake Technologies Corporation

 

Worthington Industries, Inc.

 

    

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Source: Standard & Poor’s Capital IQ Database (Compustat financials)

Data represents each company’s fiscal year, which may not align with ATI’s fiscal year end of December 31

The peer group used for measuring the Company’s relative total stockholder return (“TSR Peer Group”) is different from the benchmarking peer group. The TSR Peer Group companies, though having a range of sizes, all remain aligned with ATI on the basis of relative similarity to one or more of the aspects of the Company’s businesses. These companies compete in one or more of the markets in which ATI competes, and the risk profiles typically assigned to those companies by the capital markets are similar to ATI. For further information, please see page 58.

Monitoring of Performance and Progress Throughout the Year

The Committee meets regularly during the year to monitor the Company’s performance, as well as the individual performance of members of our management Executive Council, relative to the incentive plan goals. At these meetings, the Committee is provided with current financial data and with internal status reports on key performance measures. The Committee uses this information to:

 

 

assess management’s interim progress toward achieving the predetermined performance goals and the potential payouts under the various executive compensation plans; and

 

 

assist in the evaluation of whether the compensation plans continue to support and direct performance as required to achieve the Company’s business goals.

Members of management attend portions of these meetings. The Committee also meets with its outside compensation and other advisors during non-management executive session in order to ensure independent feedback on all compensation related matters.


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4.   2020 EXECUTIVE COMPENSATION PROGRAM

2020 Executive Compensation Program

Our executive compensation program for 2020 consists of the following elements for our NEOs:

 

      Plan    Purpose   

Relevant Performance

Metric and Description

    

ANNUAL/SHORT TERM INCENTIVE

   Base Salary    To provide fair and competitive compensation for individual performance and level of responsibility of position held.    Individual performance  

 

  FIXED  

   2020 Annual Performance Plan    To provide performance-based annual cash awards for ATI and business unit performance to motivate and reward key employees for achieving our short-term business objectives and drive performance.   

Mix of metrics, including:

 

  ATI/ Segment EBITDA

 

  Cash flow

 

  Strategic/Individual goals

 

 

  VARIABLE  

LONG- TERM INCENTIVE

   Long-Term Incentive Plan: Performance Stock Units (“PSUs”) (70%)    To provide performance-based equity compensation in the form of restricted stock units to drive ATI’s earnings and retain key managers.   

Awards vest at the end of a three-year performance period based on achievement of specified goals tied to:

 

  Net Income (50%)

 

  Return on Capital Employed (50%)

 

  20% +/- TSR modifier for Executive Council and other leadership participants.

   Long-Term Incentive Plan: Restricted Stock Units (“RSUs”) (30%)    To enhance the program’s ability to retain participants and drive long-term behavior by allowing for time-based awards.    The RSUs are time-vested awards that generally vest in equal annual installments on the first three anniversaries of the applicable grant date, subject to the award recipient’s continued employment by the Company.

Summary Analysis of 2020 Compensation

While our legacy long-term incentive programs continued to impact the compensation realized by certain of our NEOs in 2020, base salary and incentive award opportunities for 2020 further reflected the underlying approach and goals of our current program, which we substantially redesigned in 2016, the cyclical nature of our business and the unique challenges posed by the COVID-19 pandemic. Specifically, for 2020:

 

 

Base salary rates for Mr. Wetherbee, Ms. Fields and Mr. Kramer increased 12.1%, 10.0% and 5.2%, respectively, compared to 2019, in each case based on market median data for their respective positions and in consultation with our independent compensation consultants, Meridian Partners, and other advisors. Mr. Newman’s base salary was similarly determined based on market data when she joined the Company in January 2020. For each of our NEO’s, base salary was subsequently reduced by 20% from May 1, 2020 to December 1, 2020, when their salaries were restored to pre-reduction 2020 levels.

 

 

Our incentive programs promote our “one ATI” philosophy by placing greater emphasis on financial metrics that measure total ATI performance, rather than segment or individual results, for all participants.

 

 

Our incentive programs are heavily weighted toward performance-contingent awards, particularly for NEOs. Short-term incentive awards to our NEOs for 2020 were 90% contingent on total ATI and (as applicable) segment financial performance, and 70% of each 2020 long-term incentive award is performance-vested.


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Compensation Discussion and Analysis  

 

The pie charts below show the mix of aggregate NEO compensation by type, form and length, at target for 2020:

2020 Target Pay Mix

 

 

 

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Base Salary

The Committee’s approach to compensation is to offer a base salary that is competitive with an identified benchmarking peer group of companies and incentive opportunities that are performance-oriented and linked to the interests of stockholders. Base salary is determined by market median data for their respective positions, individual performance and competitive pay positioning.

2020 Base Salaries

 

Named Executive Officer    2020 Base Salary ($)  
Wetherbee      802,173  
Newman      510,123  
Fields      478,423  
Sims      486,115  
Kramer      446,915  
DeCourcy      128,846  

For the first two months of 2020, the base salary rates for Messrs. Wetherbee, Sims and Kramer and for Ms. Fields were $825,000, $550,000, $485,000 and $500,000, respectively. Mr. Newman joined the Company on January 6, 2020 with a base salary rate of $590,000. Mr. DeCourcy’s 2020 base salary rate was $500,000 until his April 2020 retirement. Effective in February 2020, base salary rates for Mr. Wetherbee, Mr. Kramer and Ms. Fields increased to $925,000, $510,000 and $550,000, respectively.

Effective May 1, 2020, the company reduced each NEO’s base salary rate by 20%. This reduction remained in effect until December 1, 2020, when NEO base salaries were restored to their pre-reduction levels.

Annual Performance Plan (“APP”)

The APP is a short-term cash incentive plan in which approximately 400 key employees (including the NEOs) participate. For Executive Council members, 90% of the performance goals are based on financial metrics, and 10% on strategic/individual goals, as described below. Mr. DeCourcy did not participate in the 2020 APP.

Financial Metrics for Corporate Participants (including our CEO)

 

 

 

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Financial Metrics for Business Segment NEOs

 

 

 

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Performance Criteria. The performance goals for the 2020 APP were set in early 2020 based on ATI’s business and operations plans for 2020. Corporate-wide goals are established in a bottom-up process through which each business unit’s business plan and business conditions are separately reviewed in setting targets, as are the expectations for other performance factors at each business unit. The performance goals include a mix of financial targets and strategic and/or individual performance goals.

Level of Difficulty. The Committee sets the APP metrics so that the relative difficulty of achieving the target level is consistent from year to year. The objective is to establish target goals in any given year that are challenging yet achievable, with a much higher level of difficulty to achieve performance that generates the maximum payout.

Award Opportunities. The opportunities for the NEOs under the APP are granted at “threshold,” “target” and “maximum” levels expressed as a percentage of base salary and based on predetermined levels of performance. The Committee sets the potential award ranges as percentages of base salary for each NEO using comparative market data provided by our compensation consultant. In general, our short-term incentive program is designed so that the payout associated with achieving threshold performance is equal to 50% of target, while the payout associated with achieving the maximum performance level is capped at 200% of target. No payout with respect to the financial performance component is earned for performance below the threshold level.

Individual NEO Goals. While 90% of each NEO’s annual award opportunity under the APP is determined based on performance criteria relating to the financial and/or operational performance of our business, as described above, the remaining 10% of each NEO’s award is determined based on his or her personal performance relative to specific individual strategic goals. These goals are established early in the year and reviewed and approved by the Committee. Each NEO’s performance relative to his or her individual goals is evaluated at the end of the year, through a process that includes personal self-assessments, input and recommendations from our President and CEO and ultimately, review by the Committee, which performs its own assessment of our President and CEO’s personal performance and determines the amount of each NEO award. For 2020, our NEOs’ goals focused on, among other strategic matters, their respective roles in leading through the COVID-19 pandemic, addressing such matters as: maintaining workplace health and safety; ensuring robust liquidity; achieving cost savings and operational efficiencies and solidifying and expanding key customer relationships.

Under our APP program, the Committee has expressly reserved the broad discretion to reduce or eliminate any APP award that may otherwise be payable to one or more participants, including each NEO, if any facet of ATI’s financial or operational performance, especially in relation to the Committee’s expectations for workplace safety, the environmental impact of our business or other aspects of our annual performance with the potential to affect the sustainability of our business, is sub-standard in the view of the Committee. This discretion, coupled with the 10% personal goal component of our APP program, provides the Committee with flexibility to ensure that short-term incentives, while largely designed to drive achievement of financial performance goals, also reflect our values and other qualitative considerations that are important to our business and our stakeholders.

2020 Award Opportunities for NEOs

 

    

Annual Incentive Opportunities

(percentage of base salary)

 
Named Executive Officer    Below Threshold        Threshold        Target        Maximum  
Wetherbee      0%          62.5%          125%          250%  
Other NEOs      0%          40%          80%          160%  

To calculate a potential award amount, the target percentage of salary for each NEO is multiplied by a formula based on performance.

Formula

 

 

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2020 Target and Earned Amounts for Each NEO

 

     At Target (100%)             Actual  
Named Executive Officer    Target
(% of Base Salary)
       Target Dollar
Amount ($)
            

Actual Weighted

Achievement

(% of Target)

       Earned/Paid
Cash Award ($)
 
Wetherbee      125          1,002,716                 56.5          566,100  
Newman      80          408,099                 56.5          230,400  
Fields      80          382,739                 80.0          306,200  
Sims      80          388,892                 16.0          62,200  
Kramer      80          357,532                 52.5          188,000  


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Compensation Discussion and Analysis  

 

2020 Performance Goals and Achievement Levels for the Named Executive Officers

 

Messrs. Wetherbee, Newman and Kramer:

The 2020 APP awards for Messrs. Wetherbee, Newman and Kramer were determined by (a) total ATI performance relative to the financial metrics and (b) each such executive’s individual performance relative to individual strategic goals. The following tables describe the relative weighting of each metric and the individual goals, as well as ATI’s and each executive’s relative level of achievement for the year:

 

              ($ in millions)           

Financial

Performance Goals

  

Relative Weighting

(% of Total Award)

       Threshold        Target        Maximum       

2020 Actual

Performance(a)

      

2020 Actual

Achievement

(% of Goal Target)

 
ATI EBITDA      60          324          405          486                     0  
ATI Cash Flow      30          104          149          210                     121.5  
Aggregate Financial Performance      90                                                      40.5  

 

(a)

Actual 2020 APP Award performance included certain adjustments to both the EBITDA and Cash Flow metrics, including EBITDA adjustments for goodwill and long-lived asset impairments, debt extinguishment, charges and tariff impacts related to our A&T Stainless joint venture, and other restructuring charges. Cash flow adjustments include U.S. defined benefit pension plan contributions, severance payments to hourly employees, certain capital expenditures and CARES Act deferral of employer social security tax payments.

 

Aggregate Performance   

Financial Performance

Goals (90%)

      

Strategic/Individual

Goals (10%)

      

Total 2020

Achievement (%)

      

Total 2020

Achievement ($)

 
Wetherbee      40.5          200          56.5          566,100  
Newman      40.5          200          56.5          230,400  
Kramer      40.5          160          52.5          188,000  

Ms. Fields:

The 2020 APP award for Ms. Fields was determined by the achievement of goals relevant to both total ATI performance and performance of the AA&S segment, as well as her performance relative to individual strategic goals. Ms. Fields’ 2020 earned award was at 80% of target, resulting in an award of $306,200 as described in the following table:

 

Performance Goals   

Relative

Weighting (%)

      

2020 Actual
Performance(a)

($ in millions
except days-on-hand)

      

2020 Actual

Achievement

(% of Goal Target)

 
ATI EBITDA      30          208          0  
AA&S EBITDA      30          125          0  
AA&S Cash Flow      30          113          200  
Individual/Strategic Goals      10                     200  
       100                     80.0  

 

(a)

Actual 2020 APP Award performance included the adjustments to ATI EBITDA as described above, in addition to AA&S Segment EBITDA adjustments for charges and tariff impacts related to our A&TS joint venture and AA&S Segment cash flow adjustment for CARES Act deferral of employer social security tax payments.


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Mr. Sims:

The 2020 APP award for Mr. Sims was determined by the achievement of goals relevant to both total ATI performance and performance of the HPMC segment, as well as his performance relative to individual strategic goals. Mr. Sims’ 2020 earned award was at 16% of target, resulting in an award of $62,200 as described in the following table:

 

Performance Goals   

Relative

Weighting (%)

       2019 Actual
Performance(a)
($ in millions)
      

2019 Actual

Achievement

(% of Goal Target)

 
ATI EBITDA      30          208          0  
HPMC EBITDA      30          130          0  
HPMC Cash Flow      30          154          0  
Individual/Strategic Goals      10                     160  
       100                     16.0  

 

(a)

Actual 2020 APP Award performance included the adjustments to ATI EBITDA as described above, in HPMC Segment cash flow adjustment for certain capital expenditures, severance payments to hourly employees and CARES Act deferral of employer social security tax payments.

For further information about ATI financial performance, please see ATI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC.

Long-Term Incentive Plan (“LTIP”)

For our NEOs, 70% of the aggregate award under the long-term incentive portion of our redesigned compensation program, the Long-Term Incentive Plan, or “LTIP,” is performance-based and entirely contingent on the achievement of quantitative performance measures, while the remaining 30% of the LTIP award is time-based to provide retention incentives. Specifically, the LTIP consists of two components, including performance stock units (“PSUs”) that cliff vest based on the achievement of quantitative financial performance metrics over a three-year performance period and restricted stock units (“RSUs”) that vest in three equal annual installments, provided that the recipient remains employed by ATI on the applicable vesting date.

 

Vehicle

      Performance   Vesting   Payout Range

 

     

Performance
Stock Units
(70%)

 

 

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  Income (50%)

 

  Return on Capital Employed (50%)

 

  h or i TSR Modifier of 20% for Executive Council members and leadership level participants

  3—Year performance period  

For each Performance Metric*

Threshold = 50% of Target

Target = 100%

Maximum = 200% of Target*

 

* Resulting minimum payout is 25% of the aggregate target award (i.e., when minimum performance is achieved for one Performance Metric, but not the other). At the inception of the award period, the Committee can reduce the threshold and maximum payout levels at their discretion.

 
   

Restricted
Stock Units
(30%)

 

 

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  N/A   3—Year Ratable Vesting
 

Individual opportunities under the LTIP are granted at Threshold, Target and Maximum levels, which are expressed as a percentage of base salary.

Performance Stock Units

PSUs will vest to the extent that cumulative earnings (defined as income from continuing operations attributable to ATI) and ROCE (defined as net operating profit after taxes divided by average net assets) meet or exceed a Threshold, Target or Maximum level of performance set by the Committee at the beginning of the three-year performance measurement period. ROCE performance is averaged over the three-year performance measurement period. Whether the income or ROCE performance goals are met, and the extent to which the PSUs comprising a particular award vest, will be determined by the Personnel and Compensation Committee at the


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end of each three-year performance measurement period. When vested, each PSU will convert into a share of the Company’s common stock. No dividends are accumulated or paid on the PSUs.

Total Shareholder Return Adjustment. If the Committee determines that the income and ROIC goals for the 2019-2021 performance measurement period meet or exceed Threshold, the number of shares earned by NEOs may be increased or decreased by up to an additional 20% based on the Company’s TSR relative to the TSR of a peer group of companies, as follows:

TSR Modifier Structure

 

 

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For 2020 awards, we used a peer group comprised of companies in the S&P Midcap 400 Industrials and Midcap 400 Materials Indices as our TSR peer group.

Restricted Stock Units

RSUs granted under the LTIP vest in equal annual installments on each of the first three anniversaries of their grant date, as long as the award recipient remains an employee of the Company on the relevant vesting date. If and when vested, each RSU converts into a share of Company common stock. No dividends accumulate or are paid on the RSUs.

Legacy Awards

In 2014 and 2015, the Company issued equity awards under certain legacy long-term equity incentive plans, including the Performance/ Restricted Stock Program (“PRSP”) and another separate long-term incentive plan, both of which were discontinued beginning in 2016, when they were replaced with our existing long-term incentive programs, with no new awards being made under either plan. However, because the terms of awards under the PRSP included multi-year performance and/or vesting schedules, legacy PRSP awards continued to impact the compensation realized by certain of our NEOs in 2020.

Under the PRSP, shares of performance-vested restricted stock were awarded to participants at the beginning of a three-year performance measurement period. Under the terms of the award, one-half of the stock-based award would vest, if at all, only upon ATI’s achievement of predetermined performance criteria for the applicable three-year performance period, while the remaining half of the award would vest upon the earlier of (i) five years from the date of grant, if the participant remained employed by the Company on that date (or if the participant had retired, died or become disabled), or (ii) the last day of the applicable three-year performance period, if the performance criteria were attained during the performance period.

One-half of each of the 2014-2016 and 2015-2017 awards were forfeited based on the Company’s financial performance during the applicable performance period. The remaining half of the 2014 award vested in February 2019, and the remaining half of the awards granted in 2015, the last year for which awards were made under the PRSP program, vested in February 2020.


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5.   TOTAL REALIZED COMPENSATION

When making determinations and awards under our incentive plans, the Committee looks to the actual dollar value of awards to be delivered to the NEOs in any given year, as illustrated by the Total Realized Compensation figures below. Total realized compensation for our NEOs was significantly challenged in 2020, reflecting the unanticipated and unprecedented consequences of the COVID-19 pandemic and other circumstances that negatively impacted our business, following results for 2019 and 2018 that reflected meaningfully improved results compared to the preceding several years. For example:

 

 

for 2017, Messrs. Wetherbee, DeCourcy, Kramer and Sims received total realized compensation equal to 70.8%, 73.5%, 71.4% and 73.4% of their 2017 target compensation levels, respectively, and

 

 

for 2016, received 42.0%, 66.3%, 80.3% and 82.4% of target, respectively.

In contrast, 2019 total realized compensation for Messrs. Wetherbee, DeCourcy, Kramer and Sims was 84.2,%, 150.3%, 145.2% and 137.5%, respectively, and for 2018 was 122%,120%, 115% and 122% of target, respectively, reflecting improved business results and conditions. As illustrated in the tables below, realized compensation for our NEOs in 2020 was significantly impacted by the COVID-related downturn that we are experiencing. These multi-year trends demonstrate our ongoing commitment to compensating our leadership based on the Company’s performance and placing a significant proportion of senior executive compensation “at risk”:

2016-2020 Total Realized Compensation as % of Target

 

CEO                                                                                             Other NEOs (Average)

 

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2020 Target Compensation Comparison to Total Realized Compensation

 

 

  Named Executive Officer*    2020 Target
Compensation
       2020 Total Realized
Compensation
            % of Target
Realized
 

 

  Wetherbee

  

 

 

 

$6,081,250

 

 

    

 

 

 

$2,437,085

 

 

 

 

 

 

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40%

 

 

 

  Newman

  

 

 

 

$2,242,000

 

 

    

 

 

 

$1,784,722

 

 

 

 

 

 

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80%

 

 

 

  Fields

  

 

 

 

$2,090,000

 

 

    

 

 

 

$1,040,992

 

 

 

 

 

 

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50%

 

 

 

  Sims

  

 

 

 

$2,090,000

 

 

    

 

 

 

$1,474,348

 

 

 

 

 

 

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71%

 

 

 

  Kramer

  

 

 

 

$1,938,000

 

 

    

 

 

 

$1,476,072

 

 

 

 

 

 

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76%

 

 

* Mr. Newman joined the Company on January 6, 2020. Patrick J. DeCourcy, who served as the Company’s Chief Financial Officer for a portion of January 2020 and retired in April 2020, received nominal compensation during 2020. Mr. Sims retired effective February 28, 2021. See Summary Compensation Table for 2020 on page 63 for more information.

Total Realized Compensation is calculated as follows:

 

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Compensation Discussion and Analysis  6. Other Compensation Practices and Policies 2020

 

 

 

 6.

   OTHER COMPENSATION PRACTICES AND POLICIES

Stock Ownership Guidelines

The Company maintains the following robust stock ownership guidelines for its executives, including the NEOs. These guidelines are designed to further link these executives’ interests with the interests of stockholders generally:

 

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Executives are required to retain 100% of the after-tax value of shares issued upon the vesting of equity awards until the ownership requirement is satisfied.

We adopted our current guidelines in 2016, transitioning from using a fixed number of shares as the method of determining ownership to targeting a multiple of base salary, which we believe requires a meaningful level of ownership for all NEOs, even during the cyclicality in our markets and declining stock prices.

Each executive subject to the guidelines had until the later of February 25, 2021 or five years from the date of his or her promotion to one of the designated positions, as the case may be, to meet the guideline applicable to his/ her position. Accordingly, our CEO and each other NEO currently meets his or her ownership obligations under the guidelines, by either meeting the prescribed ownership target or proceeding reasonably toward meeting the requirement within the five-year grace period.

2020 NEO Stock Ownership Guidelines Compliance

 

 

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*

Mr. Wetherbee’s ownership target through December 31, 2018 was 3x base salary, which his current ownership exceeds. When he became the Company’s President and Chief Executive Officer on January 1, 2019, his base salary was increased and his target increased to 6x base. Ms. Fields joined the Company in 2019 and Mr. Newman joined the Company in 2020. Each has five years to achieve his or her ownership guideline. Reflects December 31, 2020 closing price for ATI common stock on the NYSE of $16.77 per share.

No Hedging or Pledging of Stock

ATI policy prohibits directors, officers and key employees from engaging in publicly traded options and hedging transactions with regard to ATI securities. ATI policies also prohibit our officers and directors from pledging ATI stock to secure personal loans.

Adherence to Ethical Standard; Clawback Policy

Incentive awards (paid in cash or equity) are conditioned on adherence to the Company’s Corporate Guidelines for Business Conduct and Ethics, which are published on our website ATImetals.com. We have clawback provisions that provide for the return of compensation to the extent that information used to calculate achievement of earnings or other performance measures is subsequently determined to be materially incorrect (including but not limited to circumstances under which any such inaccuracy results in a financial restatement).


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Employment Agreements; Change in Control Agreements

ATI does not have any employment agreements with its NEOs.

The Company has change in control agreements with each NEO and certain other executives that provide for severance payments to each such executive in the event he or she is terminated from his or her position in connection with a change in control, as defined in and provided by the agreements. These change in control agreements do not include an excise tax gross-up provision. The change in control agreements are intended to better enable ATI to retain the NEOs in the event that it is the subject of a potential change in control transaction. Based on past advice from its compensation consultant, the Committee believes that the potential payments under these agreements are, individually and in the aggregate, in line with competitive practices.

For a more detailed discussion of these agreements, see the “Employment and Change in Control Agreements” section of this Proxy Statement.

Pension and Retirement Plans

ATI maintains qualified defined benefit pension plans, which have a number of benefit formulas that apply separately to various groups of employees and retirees. Effective December 31, 2014, the Company froze future benefit accruals in the ATI Pension Plan for all participating employees other than those in collectively bargained employment arrangements. Also, effective December 31, 2014, the Company froze the defined benefit-type non-qualified deferred compensation plans in which salaried employees participate, which includes the defined benefit portion of the ATI Benefit Restoration Plan in which Messrs. Wetherbee, DeCourcy, and Sims participate. The Company continues to sponsor a qualified defined contribution plan and a non-qualified defined contribution restoration plan aimed at restoring the effects of limitations on defined contribution accruals imposed by the Code. For more information regarding the pension plans of the NEOs, see the Pension Benefits table and accompanying narrative.

Perquisites

ATI does not generally provide our executives with perquisites, such as the personal use of corporate aircraft without reimbursement to the Company, payment of club membership dues or tax reimbursement arrangements. ATI does provide a parking benefit to the NEOs who work at corporate headquarters on the same terms as provided to a broader group of corporate employees.

Tax Deductibility of Compensation Expense

In evaluating compensation program alternatives, the Committee considers, among other factors, the potential impact on the Company of Section 162(m) of the U.S. Internal Revenue Code, which generally places a $1 million limit on the amount of compensation paid to certain executive officers that a company can deduct in any one year. At the time that the Committee made some of the compensation decisions that impacted the 2020 realized compensation paid to our NEOs, and prior to 2018 changes to Section 162(m), compensation that was performance-based and provided under a stockholder-approved plan generally was exempt from the calculation of the $1 million deduction limit and was therefore deductible. Consequently, certain pre-2018 incentive opportunities established by the Committee for our executive officers were designed in a manner intended to be exempt from Section 162(m)’s deduction limitation, because they are paid based on achievement of pre-determined performance goals established by the Committee under our stockholder-approved equity incentive plan.

The exemption from Section 162(m)’s deduction limit for performance-based compensation was repealed, effective for tax years beginning after December 31, 2017. As a result, despite the Committee’s efforts to structure annual cash incentives and PSUs in a manner intended to be exempt from Section 162(m) and therefore deductible, no assurance can be given that performance-based compensation that was intended to be deductible will in fact be deductible for federal tax purposes because of ambiguities and uncertainties as to the future application and interpretation of Section 162(m), including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exemption of performance based compensation from the deduction limit.

While the Committee considers the deductibility of awards as one factor in determining executive compensation, the Committee also looks at other factors in making its decisions and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by the Company for tax purposes. ATI’s pay for performance philosophy is a key tenant of our executive compensation programs, and performance based compensation is therefore likely to remain a central component of our overall executive compensation structure, irrespective of the extent to which such compensation may continue to be deductible for federal income tax purposes.


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ATI 2021 Proxy Statement

  

 

Compensation Discussion and Analysis  

 

COMPENSATION COMMITTEE REPORT

The Personnel and Compensation Committee (referred to in this Report as the “Committee”) has reviewed and discussed the preceding Compensation Discussion and Analysis with Company management. Based on this review and discussion, the Committee recommends to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s 2021 Proxy Statement. The Committee furnishes this Report for inclusion in the 2021 Proxy Statement and recommends its inclusion in ATI’s Annual Report on Form 10-K.

Submitted by:

PERSONNEL AND COMPENSATION COMMITTEE,

Members:

James E. Rohr, Chairman

Leroy M. Ball, Jr.

Carolyn Corvi

Diane C. Creel

J. Brett Harvey

David P. Hess


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Compensation Discussion and Analysis  Summary Compensation Table for 2020

 

 

ATI 2021 Proxy Statement

     

 

63 

 

SUMMARY COMPENSATION TABLE FOR 2020

The following Summary Compensation Table sets forth information about the compensation paid by the Company to the Chief Executive Officer, the Chief Financial Officer, and each of the other three most highly compensated executives who were serving as executive officers as of December 31, 2020, as well as for a former executive officer who previously served as the Company’s Chief Financial Officer for a portion of 2020.

 

Name and Principal Position    Year      Salary
($)(4)
     Bonus
($)(5)
     Stock
Awards
($)(6)
    Non-Equity
Incentive Plan
Compensation
($)(7)
    Change in
Pension Value and
Non-Qualified Deferred
Compensation Earnings
($)(8)
    All Other
Compensation
($)(9)
     Total
($)
 
Robert S. Wetherbee      2020        802,173               4,128,163       566,100       45,679       168,536        5,710,651  
President and      2019        823,846               3,171,011       1,352,755       56,428       151,266        5,555,306  
Chief Executive Officer      2018        522,981               1,104,837       751,419             90,703        2,469,940  
Donald P. Newman(1)      2020        510,123        1,016,668        2,217,599       230,400             27,531        4,002,321  
Senior Vice President, Finance and Chief Financial Officer                                                                     
Kimberly A. Fields(2)      2020        478,423               1,135,245       306,200             74,372        1,994,240  
Executive Vice President, AA&S and HPMC      2019        375,000        100,000        1,877,190       522,300             115,372        2,989,862  
John D. Sims      2020        486,115               1,135,245       62,200       597,995       75,106        2,356,661  
Former Executive Vice President,      2019        545,962               2,034,740       517,877       441,659       105,465        3,645,703  
HPMC      2018        522,981               1,104,837       564,987             90,364        2,283,169  
Kevin B. Kramer      2020        446,915               1,052,666       188,000             82,170        1,769,751  
Senior Vice President, Chief      2019        480,962               1,537,930       610,629             103,692        2,733,213  
Commercial & Marketing Officer      2018        458,654               968,033       577,134             80,587        2,084,408  
Patrick J. DeCourcy(3)      2020        128,846                           210,709