UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14-A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule l4a-l2
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STANDARD MOTOR PRODUCTS, INC.
(Name of Registrant as Specified in its Charter)
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N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules l4a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Date Filed:
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2020 Proxy Statement
and
Notice of Annual Meeting of Shareholders
To Be Held on May 19, 2020
STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
April 17, 2020
To Our Shareholders:
We are pleased to invite you to attend the Annual Meeting of Shareholders of Standard Motor Products, Inc. to be held at the Standard Motor Products Building, 37-18 Northern Boulevard, 6th
Floor, Long Island City, New York 11101, on Tuesday, May 19, 2020 at 3:00 p.m. (Eastern Daylight Time). This year, we are also pleased to offer our shareholders the opportunity to participate remotely in our Annual Meeting online at www.virtualshareholdermeeting.com/SMP2020. We hope this will allow our shareholders who are unable to attend our Annual Meeting in person to participate remotely.
At the Annual Meeting, you will be asked to vote on the proposals described in the enclosed Notice of Annual Meeting of Shareholders and Proxy Statement. You will also find enclosed a form of
proxy to facilitate voting your shares and our Annual Report to Shareholders, which includes our Form 10-K for our 2019 fiscal year.
YOUR VOTE IS IMPORTANT! The Board of Directors appreciates and encourages shareholder participation in the Company’s affairs and invites you to attend the Annual Meeting in person. If you
cannot attend in person, we encourage you to participate remotely and ensure that your shares are represented at the Annual Meeting by taking a moment to complete, sign and return the enclosed proxy using the accompanying postage-prepaid
envelope, or to transmit your voting instructions by Internet or telephone by following the instructions on the enclosed proxy.
On behalf of the Board of Directors, thank you for your continued support of the Company. I look forward to seeing you at the Annual Meeting.
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Sincerely,
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Lawrence I. Sills
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Executive Chairman of the Board
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Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 19, 2020—this Proxy Statement and the Annual Report are available at ir.smpcorp.com under “Financial Reports—Proxy Statements” and “—Annual Reports.”
STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
Notice of Annual Meeting of Shareholders
To Be Held on May 19, 2020
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of STANDARD MOTOR PRODUCTS, INC. (the “Company”) will be held at the Standard Motor Products Building, 37-18 Northern Boulevard, 6th
Floor, Long Island City, New York 11101, on Tuesday, May 19, 2020 at 3:00 p.m. (Eastern Daylight Time). The Annual Meeting will be held for the following purposes:
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To elect ten directors of the Company, all of whom shall hold office until the next annual meeting of shareholders and until their successors are duly elected and qualified;
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To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020;
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To consider and vote upon a non-binding, advisory resolution approving the compensation of our named executive officers; and
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To transact such other business as may properly come before the Annual Meeting.
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The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. The Board of Directors has fixed the close of business on April 7, 2020 as the record
date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof. As previously announced, in light of the on-going COVID-19 pandemic and governmental responses thereto, the Board of
Directors has amended our By-Laws to provide it more flexibility to change the place, date and time of our Annual Meetings, if necessary. This year, we are also pleased to offer our shareholders the opportunity to participate remotely in our
Annual Meeting online at www.virtualshareholdermeeting.com/SMP2020.
Whether or not you plan to attend the Annual Meeting in person or remotely, please vote your shares by Internet or telephone by following the instructions on the enclosed proxy, or by completing,
signing and returning the proxy in the enclosed postage-prepaid envelope. The enclosed proxy is solicited by the Board of Directors of the Company.
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By Order of the Board of Directors
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Carmine J. Broccole
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Senior Vice President General Counsel and Secretary
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Long Island City, New York
April 17, 2020
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We intend to hold our Annual Meeting in person at the location indicated in this Notice. However, we are actively monitoring the COVID-19 situation and are sensitive to the public health
and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person at the specified location, we will
promptly inform shareholders of the alternative arrangements for the meeting, which may include holding the meeting in person at a different location, date or time, or by means of remote communication. If you are planning to attend the
Annual Meeting in person, please check our website at ir.smpcorp.com prior to the meeting date.
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STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
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STANDARD MOTOR PRODUCTS, INC.
37-18 Northern Blvd.
Long Island City, New York 11101
To Be Held on May 19, 2020
This Proxy Statement is furnished in connection with the solicitation of proxies by our Board of Directors for use at our Annual Meeting of Shareholders to be held on May 19, 2020 or at any
adjournment thereof. This Proxy Statement is being distributed to shareholders on or about April 17, 2020, along with a proxy and our 2019 Annual Report.
Where and when is the Annual Meeting?
Our Annual Meeting will be held at the Standard Motor Products Building, 37-18 Northern Boulevard, 6th Floor, Long Island City, New York 11101, on Tuesday, May 19, 2020 at 3:00 p.m. (Eastern
Daylight Time). Our shareholders also have the opportunity to participate remotely in our Annual Meeting by visiting www.virtualshareholdermeeting.com/SMP2020. Shareholders who participate remotely
will be able to listen to a broadcast of the meeting, submit questions and vote their shares during the course of the meeting. Please refer to the question “How do I vote my shares?” below for information on how to vote.
Instructions on how to attend and participate remotely in our Annual Meeting are available at www.virtualshareholdermeeting.com/SMP2020. To log into the meeting
website, you will need to enter the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. If you encounter any technical difficulties, please call the technical support numbers
identified on the meeting website.
Could the coronavirus (COVID-19) impact the date, location or format of the Annual Meeting?
We intend to hold our Annual Meeting in person at the location indicated in the Notice of Annual Meeting of Shareholders. However, we are actively monitoring the COVID-19 situation and are sensitive to the
public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold our Annual Meeting in person at the specified
location, we will promptly inform shareholders of the alternative arrangements for the meeting, which may include holding the meeting in person at a different location, date or time, or by means of remote communication. If you are planning
to attend the Annual Meeting in person, please check our website at ir.smpcorp.com prior to the meeting date.
Who can vote at the Annual Meeting?
You may vote your shares of Common Stock either by proxy or in person at our Annual Meeting if you were a shareholder at the close of business on April 7, 2020, the record date for our Annual Meeting.
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The total number of shares of Common Stock outstanding and entitled to vote on April 7, 2020 was 22,969,891. Holders of Common Stock have the right to one vote for each share registered in their names as of the
close of business on the record date.
What is the quorum requirement for the Annual Meeting?
In order to conduct business at our Annual Meeting, our By-Laws require the presence in person or by proxy of shareholders holding a majority of the outstanding shares of Common Stock entitled to vote. If a
quorum is not present, a vote cannot occur, and our Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum. Proxies voted as “withheld,” abstentions and broker non-votes are counted for the purpose of
determining whether a quorum is present.
How do I know whether I am a registered shareholder or a beneficial shareholder?
You are a registered shareholder if your shares of Common Stock are registered directly in your name with our transfer agent, Computershare Investor Services.
You are a beneficial shareholder if your shares are held in an account at a bank, broker or other holder of record (also referred to as holding shares “in street name”).
What is the effect of not casting my vote?
If you are a registered shareholder and you do not vote your shares, your shares will not be taken into consideration in determining the outcome of the matters that are acted upon.
If you are a beneficial shareholder and you do not instruct your bank or broker how to vote your shares, under the rules of the New York Stock Exchange, your bank or broker will only be able to vote your shares
on the ratification of KPMG LLP as our independent registered public accounting firm (Proposal No. 2). Your bank or broker will not be able to vote your shares on the election of directors (Proposal No. 1), or the advisory resolution to
approve the compensation of our named executive officers (Proposal No. 3), resulting in “broker non-votes” on those items.
How do I vote my shares?
Registered shareholders may vote in one of four ways:
Vote by Mail: Complete, sign and return your proxy card in the enclosed postage-paid envelope.
Vote in Person: Attend the Annual Meeting, or send a personal representative with an appropriate proxy, to vote in person by ballot at the meeting.
Vote by Internet: Go to the website listed on your proxy card to vote by Internet. You will need to follow the instructions on your proxy card and the website.
Vote by Telephone: Call the telephone number on your proxy card to vote by telephone. You will need to follow the instructions on your proxy card and the voice prompts.
If you vote by Internet or by telephone, your electronic vote authorizes the named proxies to vote on your behalf in the same manner as if you completed, signed and returned your proxy card. If you vote by Internet or by telephone, you do not need to return your proxy card.
If you are a beneficial shareholder, you will receive instructions from your bank, broker or other holder of record that you must follow in order to have your shares voted. If
you wish to vote in person at the meeting, you must obtain a legal proxy from the bank, broker or other holder of record that holds your shares, and bring it, or other evidence of stock ownership, with you to the meeting.
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Can I change my vote after I have voted?
Proxies are revocable at any time before they are exercised at our Annual Meeting. If you are a registered shareholder and you originally voted by mail, Internet or telephone, you may revoke your proxy by:
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completing and returning a timely and later-dated proxy card, or using the Internet or telephone to timely transmit your later voting instructions;
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voting during the course of the Annual Meeting; or
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contacting Carmine J. Broccole, Secretary of the Company, at the following address to notify him that your proxy is revoked:
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Standard Motor Products, Inc.
37-18 Northern Blvd.
Long Island City, NY 11101
Email: financial@smpcorp.com
Fax: 718-784-3284
If you are a beneficial shareholder, you must follow the directions provided by your bank, broker or other holder of record to change or revoke any prior voting instructions.
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What are my voting options and how does management recommend that I vote?
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Proposal
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Voting Options
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Board of Director’s Recommendation
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1. Election of Directors
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For All, Withhold All or For All
Except Any Individual Nominee
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For All
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2. Ratification of the appointment of KPMG LLP
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For, Against or Abstain
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For
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3. Advisory Vote on the Compensation of our Named Executive Officers
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For, Against or Abstain
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For
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In the absence of instructions, proxies will be voted in accordance with the recommendation of the Board of Directors of the Company with respect to Proposals No. 1 through 3, and in
accordance with the best judgment of the individuals named as proxies with respect to any other matter properly brought before the meeting.
What vote is required to approve of each proposal?
Proposal No. 1: Nominees receiving a plurality of the votes cast will be elected as directors.
Proposals No. 2-3: The number of votes cast FOR (or in favor of the proposal) must exceed the number of votes cast AGAINST the proposal. Only those votes cast FOR or
AGAINST a proposal will be counted to determine the results of the vote. Abstentions and broker non-votes will not count as votes cast.
Your vote on Proposal No. 3 is advisory, meaning it will not be binding on the Board of Directors or the Company; however, the Board will review the voting results and take it into
consideration when making future decisions regarding executive compensation.
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Who will pay the expenses of this proxy solicitation?
The Company will pay all expenses in connection with the solicitation of proxies by our Board of Directors for use at our Annual Meeting. We will also pay banks, brokers or other holders of record their
out-of-pocket and reasonable clerical expenses incurred in sending our proxy materials to beneficial owners for the purpose of obtaining their proxies.
How will the Company solicit proxies?
We will primarily solicit proxies by mail; however, certain of our directors, officers or employees may solicit by telephone, electronically or by other means of communication. Our directors, officers and
employees will receive no additional compensation for any such solicitation. We do not expect to engage any paid solicitors to assist us in the solicitation of proxies.
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Proposal No. 1
Our Board of Directors recommends that you vote “FOR ALL” of our director nominees.
At our Annual Meeting, our shareholders will have the opportunity to vote to elect ten directors to hold office until our next annual meeting of shareholders and until their successors are duly
elected and qualified. All nominees are currently directors of the Company.
The following paragraphs provide information, as of the date of this Proxy Statement, about each nominee. In addition to the information presented below regarding each nominee’s specific
experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high
ethical standards. Each nominee has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment to serve the Company and our Board. Finally, we value their significant experience on other public company
boards of directors and board committees.
Each person listed below has consented to be named as a nominee and agreed to serve if elected. If any of those named are not available for election at the time of the Annual Meeting,
discretionary authority will be exercised to vote for substitutes unless the Board chooses to reduce the number of directors. Management is not aware of any circumstances that would render any nominee listed below unavailable.
You may read more about the process our Nominating and Corporate Governance Committee (“Governance Committee”) undertook to select our director nominees on page 16 under the heading “Nominating
and Corporate Governance Committee.”
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We believe Mr. McClymont’s qualifications to serve as a director include his expertise in financial matters and corporate strategy, as well as his business experience at
public and private institutions in the areas of accounting, tax, treasury, finance, investor relations and risk management. His extensive knowledge in these areas, and his familiarity with the automotive industry, both domestically
and abroad, make him a valuable advisor to our Board.
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Joseph W. McDonnell
Director
Age 68
Director Since 2012
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Mr. McDonnell has served as a director of the Company since October 2012. Mr. McDonnell is also a Professor of Public Policy and Management at the University of Southern Maine’s Edmund S. Muskie School of
Public Service and a Faculty Fellow and member of the board of the University of Southern Maine’s Confucius Institute. Mr. McDonnell previously served at the University of Southern Maine as Provost and Vice President of Academic Affairs
from August 2014 to August 2015, and as Dean of the College of Management and Human Service from July 2011 to August 2015. Prior to his work at the University of Southern Maine, he served as Interim Dean of the College of Business at
Stony Brook University and as the President and Chief Executive Officer of the New York International Commerce Group, Inc., which provides services for companies doing business in China. Mr. McDonnell holds an Executive Program
Certificate from Harvard Business School, a PhD in Communications from the University of Southern California, and an MA and BA from Stony Brook University.
We believe Mr. McDonnell’s qualifications to serve as a director include his significant experience in academics focusing on business administration and the development of management-level
personnel, as well as the various leadership positions he held at foreign and domestic companies prior to becoming an academic administrator. His expertise in doing business in China and in consulting management on various strategic
initiatives provides valuable insight to our Board.
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Alisa C. Norris
Director
Age 50
Director Since 2012
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Ms. Norris has served as a director of the Company since October 2012. Ms. Norris also serves as the Chief Marketing and Communications Officer at JDRF International. Prior to joining JDRF International,
Ms. Norris served as the Chief Marketing Officer of R.R. Donnelley & Sons Company from 2013 to 2015, where she was responsible for all aspects of marketing and communications. Prior to joining R.R. Donnelley, Ms. Norris served as
the Chief People Officer of Opera Solutions, LLC, a leading predictive analytics company, where she was responsible for staff operations and human capital management. Prior to Opera Solutions, Ms. Norris served as a Senior Vice
President and was a founding member of Zeborg, Inc., and as a strategy consultant for A.T. Kearney and Mitchell Madison Group. Ms. Norris holds an MBA from Harvard Business School and a BA from Trinity College, where she was Phi Beta
Kappa.
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Arthur S. Sills and Peter J. Sills currently serve as emeritus members of the Board of Directors. Emeritus directors are invited to attend Board of Director meetings but do not have any voting
rights. Emeritus directors may receive, at the discretion of the Board of Directors, compensation for their advisory services, reimbursement for meeting travel expenses, and coverage under our medical, dental and vision insurance plans.
Proposal No. 2
Our Board of Directors recommends you vote “FOR” the ratification of KPMG as the Company’s independent registered public accounting firm.
The Audit Committee of our Board of Directors plans to appoint KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm to audit the Company’s
consolidated financial statements for the 2020 fiscal year. Although the Company is not required to seek shareholder approval of this appointment, the Board believes it to be sound corporate governance to do so and is asking shareholders to
ratify the appointment of KPMG. If the appointment is not ratified, the Audit Committee will investigate the reasons for shareholder rejection and will reconsider the appointment. Representatives of KPMG are expected to attend the Annual
Meeting where they will be available to respond to questions and, if they desire, to make a statement.
The following table presents fees for professional services rendered by KPMG in the fiscal years ended December 31, 2019 and 2018.
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2019
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2018
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Audit fees
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$
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1,728,600
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$
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1,635,000
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Audit-related fees(1)
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26,000
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24,500
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Tax fees(2)
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285,800
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319,300
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All other fees
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─
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Total
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$
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$
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1,978,800
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Audit-related fees consist principally of audits of payments related to certain employee benefits.
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Tax fees consist primarily of U.S. and international tax compliance and planning.
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In accordance with its charter, the Audit Committee approves the compensation and terms of engagement of the Company’s independent auditors, including the pre-approval of all audit and
non-audit service fees. All of the fees paid to the Company’s independent auditors described above were for services pre-approved by the Audit Committee.
Proposal No. 3
of Our Named Executive Officers
Our Board of Directors recommends you vote “FOR” the approval of the non-binding, advisory resolution approving the compensation of our named executive
officers.
At our Annual Meeting, our shareholders will have the opportunity to vote, on an advisory (non-binding) basis, to approve the compensation of our named executive officers, as disclosed in this
Proxy Statement (referred to as a “say-on-pay” vote). The say-on-pay vote is being provided pursuant to Section 14A of the Securities Exchange Act of 1934. The say-on-pay vote is an advisory vote that is not binding on the Company or the Board
of Directors; however, the Board values the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions.
Our executive compensation program is designed to attract, motivate and retain individuals with the skills required to formulate and drive the Company’s strategic direction and achieve annual
and long-term performance goals necessary to create shareholder value, while striving to avoid the use of highly leveraged incentives that may encourage overly risky short-term behavior on the part of executives. We believe that our executive
compensation program is reasonable, competitive and focused on pay for performance principles, as described more fully in the “Compensation Discussion and Analysis” section, beginning on page 25 of this Proxy Statement.
Our Compensation and Management Development Committee (“Compensation Committee”) establishes, recommends and governs all of the compensation and benefits policies and actions for the Company’s
named executive officers. We utilize a combination of base pay, annual incentives and long-term incentives. While we have generally targeted base pay to be in the median to 75% range, and each other component of executive compensation to be at
or near the median range of similar-type compensation for our peer group, actual compensation of our named executive officers varies depending upon the achievement of pre-established performance goals. The annual cash incentive award is based
on the achievement of both company-level financial performance and management performance, or management by objective goals (“MBO”). Actual award payouts may range from 0% to 200% of the target award amount, depending upon the level of
achievement. Through stock ownership requirements and equity incentives, we also align the interests of our executives with those of our shareholders and the Company’s long-term interests. Our executive compensation policies have enabled us to
attract and retain talented and experienced executives and have benefited the Company over time. We believe that the fiscal year 2019 compensation of each of our named executive officers was reasonable and appropriate, and aligned with the
Company’s fiscal year 2019 results and achievement of the objectives of our executive compensation program.
The Company also has several governance policies in place to align executive compensation with shareholder interests and mitigate risks in its plans. These programs include stock ownership
guidelines, limited perquisites, use of tally sheets, and a claw back policy.
For the reasons discussed above, the Board of Directors unanimously recommends that shareholders vote in favor of the following non-binding resolution:
“RESOLVED, that the shareholders hereby APPROVE, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant
to Item 402 of Regulation S-K and the other compensation disclosure rules of the Securities and Exchange Commission in the Company’s Proxy Statement for the 2020 Annual Meeting of Shareholders (which disclosure includes the Compensation
Discussion and Analysis, the Summary Compensation Table for 2019 and other related tables and accompanying narrative).”
and Management
The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of April 7, 2020 by:
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each person who is known to the Company to be the beneficial owner of more than five percent of the Company’s Common Stock;
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each director and nominee for director of the Company;
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each of our executive officers named in the Summary Compensation Table below; and
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all directors and executive officers as a group.
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Name and Address
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Amount and
Nature of
Beneficial Ownership (1)
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Percentage
of Class
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BlackRock, Inc.
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3,242,658
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(2)
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14.1%
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55 East 52nd Street
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New York, NY 10055
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Dimensional Fund Advisors LP
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1,562,561
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(3)
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6.8%
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Palisades West, Bldg. One
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6300 Bee Cave Road
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Austin, TX 78746
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Royce & Associates, LP
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1,551,055
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(4)
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6.8%
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745 Fifth Avenue
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New York, NY 10151
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The Vanguard Group
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1,262,041
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(5)
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5.5%
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100 Vanguard Blvd.
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Malvern, PA 19355
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Lawrence I. Sills
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643,278
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(6)
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2.8%
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Eric P. Sills
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172,418
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*
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Richard S. Ward
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78,199
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*
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William H. Turner
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78,026
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*
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Roger M. Widmann
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67,058
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*
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James J. Burke
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65,511
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*
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Carmine J. Broccole
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63,281
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*
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Dale Burks
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54,794
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*
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Pamela Forbes Lieberman
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39,655
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*
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John P. Gethin
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21,171
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*
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Joseph W. McDonnell
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19,196
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*
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|||||
|
Alisa C. Norris
|
19,196
|
*
|
|||||
|
Patrick S. McClymont
|
10,617
|
*
|
|||||
|
Nathan R. Iles
|
4,500
|
*
|
|||||
|
Directors and Officers as a group (18 persons)
|
1,466,561
|
6.4%
|
|
||||
|
*
|
Represents beneficial ownership of less than one percent of the outstanding shares of Common Stock.
|
| (1) |
Applicable percentage of ownership is calculated by dividing (a) the total number of shares beneficially owned by the shareholder by (b) 22,969,891 which is the number shares of Common Stock outstanding as of April 7, 2020.
Beneficial ownership is calculated based on the requirements of the Securities and Exchange Commission (“SEC”). Except as indicated in the footnotes to this table, the shareholder named in the table has sole voting power and sole
investment power with respect to the shares set forth opposite such shareholder’s name. Unless otherwise indicated, the address of each individual listed in the table is c/o Standard Motor Products, Inc., 37-18 Northern Blvd., Long
Island City, New York 11101.
|
| (2) |
The information for BlackRock, Inc. and certain of its affiliates (“BlackRock”) is based solely on an amendment to its Schedule 13G filed with the SEC on February 4, 2020, wherein BlackRock states that it beneficially owns an
aggregate of 3,242,658 shares of our Common Stock; BlackRock states that it has sole voting power for 3,182,258 shares and sole investment power for 3,242,658 shares.
|
| (3) |
The information for Dimensional Fund Advisors LP and certain of its affiliates (“Dimensional”) is based solely on an amendment to its Schedule 13G filed with the SEC on February 12, 2020, wherein Dimensional states that it
beneficially owns an aggregate of 1,562,561 shares of our Common Stock; Dimensional states that it has sole voting power for 1,505,095 shares and sole investment power for 1,562,561 shares.
|
| (4) |
The information for Royce & Associates, LP and certain of its affiliates (“Royce”) is based solely on an amendment to its Schedule 13G filed with the SEC on January 29, 2020.
|
| (5) |
The information for The Vanguard Group and certain of its affiliates (“Vanguard”) is based solely on an amendment to its Schedule 13G filed with the SEC on February 12, 2020, wherein Vanguard states that it beneficially owns an
aggregate of 1,262,041 shares of our Common Stock; Vanguard states that it has sole voting power for 24,778 shares, shared voting power for 4,390 shares, sole investment power for 1,235,081 shares and shared investment power for
26,960 shares.
|
| (6) |
Includes 2,812 shares of Common Stock owned by Mr. Sills’ wife. For shares of stock held by his wife, Lawrence I. Sills disclaims beneficial ownership of the shares so deemed “beneficially
owned” by him within the meaning of Rule 13d-3 of the Exchange Act.
|
The Company’s Board of Directors has adopted policies and procedures that the Board believes are in the best interests of the Company and its shareholders as well as compliant with the
Sarbanes-Oxley Act of 2002, the rules and regulations of the SEC, and the listing standards of the New York Stock Exchange. In particular:
| • |
The Board has adopted Corporate Governance Guidelines;
|
| • |
The Board has appointed a Presiding Independent Director, who is independent under the New York Stock Exchange standards and applicable SEC rules;
|
| • |
A majority of the Board and all members of the Audit Committee, Compensation and Management Development Committee, and Nominating and Corporate Governance Committee are independent under the New York Stock Exchange standards and
applicable SEC rules;
|
| • |
The Board has adopted charters for each of the Committees of the Board and the Presiding Independent Director;
|
| • |
The Company’s Corporate Governance Guidelines provide that the independent directors meet periodically in executive session without management and that the Presiding Independent Director chairs the executive sessions;
|
| • |
Interested parties are able to make their concerns known to non-management directors or the Audit Committee by e-mail or by mail (see “Communications to the Board” section below);
|
| • |
The Company has a Corporate Code of Ethics that applies to all Company employees, officers and directors, and a Whistleblower Policy with a dedicated website and toll-free helpline that is operated by an independent third party
and is available to any employee, supplier, customer, shareholder or other interested third party; and
|
| • |
The Company has established Stock Ownership Guidelines that apply to its independent directors and executive officers.
|
Certain information relating to corporate governance matters can be viewed at ir.smpcorp.com under “Governance Documents.” Copies of the Company’s (1)
Corporate Governance Guidelines, (2) charters for the Audit Committee, Compensation Committee, Governance Committee, Strategic Planning Committee, and the Presiding Independent Director, and (3) Corporate Code of Ethics and Whistleblower Policy
are available on the Company’s website. Copies will also be provided to any shareholder free of charge upon written request to Carmine J. Broccole, Secretary of the Company, at 37-18 Northern Blvd., Long Island City,
NY 11101 or via email at financial@smpcorp.com.
In 2019, the total number of meetings of the Board of Directors, including regularly scheduled and special meetings, was seven. All of our directors attended at least 75% of the total number of
meetings of the Board and the Committees on which they served during 2019. The Company requires all Board members to attend its Annual Meeting of Shareholders. All directors were present at the 2019 Annual Meeting of Shareholders held on May
16, 2019.
The Board currently has four standing committees. The table below lists each committee, its composition and current chair. Each committee is comprised only of our independent directors, except
that Mr. Gethin, a non-independent director, is a member of the Strategic Planning Committee.
|
Name
|
Audit Committee
|
Compensation
and Management
Development
Committee
|
Nominating and
Corporate
Governance
Committee
|
Strategic
Planning
Committee
|
|
Lawrence I. Sills
|
─
|
─
|
─
|
─
|
|
William H. Turner
|
Chair
|
Member
|
Member
|
Member
|
|
John P. Gethin
|
─
|
─
|
─
|
Member
|
|
Pamela Forbes Lieberman
|
Member
|
Member
|
Member
|
Chair
|
|
Patrick S. McClymont
|
Member
|
Member
|
Member
|
Member
|
|
Joseph W. McDonnell
|
Member
|
Member
|
Member
|
Member
|
|
Alisa C. Norris
|
Member
|
Member
|
Member
|
Member
|
|
Eric P. Sills
|
─
|
─
|
─
|
─
|
|
Richard S. Ward
|
Member
|
Member
|
Chair
|
Member
|
|
Roger M. Widmann
|
Member
|
Chair
|
Member
|
Member
|
Audit Committee
The Audit Committee is responsible for: (1) recommending to the Board of Directors the engagement of the independent auditors of the Company; (2) reviewing with the independent
auditors the scope and results of the Company’s audits; (3) pre-approving the professional services furnished by the independent auditors to the Company; (4) reviewing the independent auditors’ management letter with comments on the
Company’s internal accounting control; and (5) reviewing management policies relating to risk assessment and risk management. The Audit Committee held four meetings in 2019.
The Board of Directors has determined that each Audit Committee member is financially literate and independent. In addition, the Board has determined that at least one member of the Audit
Committee meets the New York Stock Exchange standard of having accounting or related financial management expertise. The Board has also determined that William H. Turner (the Audit Committee’s Chair), Pamela Forbes Lieberman, Patrick S.
McClymont and Roger M. Widmann meet the SEC’s criteria for an “audit committee financial expert.”
Compensation and Management Development Committee (“Compensation Committee”)
The Compensation Committee’s functions are to: (1) approve the compensation packages of the Company’s executive officers; (2) administer the Company’s equity incentive
plans and other benefit plans; (3) review the Company’s overall compensation policies and practices, including compensation-related risk assessments; (4) review the performance, training and development of Company management in
achieving corporate goals and objectives; and (5) oversee the Company’s management succession planning. The Compensation Committee held two meetings in 2019.
The Compensation Committee has the exclusive authority and responsibility to determine all aspects of executive compensation packages. The Compensation Committee may, at its discretion, solicit
the input of our Executive Chairman, our Chief Executive Officer, or any independent consultant or advisor in satisfying its responsibilities. The Compensation Committee may also, at its discretion, form and delegate authority to subcommittees,
or it may delegate authority to one or more designated members of the Board or to our executive officers.
Nominating and Corporate Governance Committee (“Governance Committee”)
The Governance Committee’s functions are to assist the Board in discharging and performing the duties and responsibilities of the Board with respect to corporate governance, including:
| • |
the identification and recommendation to the Board of individuals qualified to become or continue as directors, including through succession planning to ensure the desired mix of experience, qualifications, attributes and skills
of the individual members of the Board;
|
| • |
the continuous improvement in corporate governance policies and practices;
|
| • |
the annual assessment of the performance of the Board and each of its committees through questionnaires and one-on-one assessments with individual members of the Board;
|
| • |
the recommendation of members for each committee of the Board; and
|
| • |
the compensation arrangements for members of the Board.
|
The Governance Committee held three meetings in 2019. The Governance Committee has the exclusive authority and responsibility to review and recommend to the Board all aspects of director
compensation. The Governance Committee may solicit, in its discretion, the input of an independent consultant or advisor in satisfying its responsibilities.
Qualifications for consideration as a director nominee vary according to the particular areas of expertise being sought as a complement to the existing board composition. However, in making
nominations, the Governance Committee seeks candidates who possess: (1) the highest level of integrity and ethical character; (2) a strong personal and professional reputation; (3) sound judgment; (4) financial literacy; (5) independence; (6)
significant experience and proven superior performance in professional endeavors; (7) an appreciation for Board and team performance; (8) the commitment to devote the time necessary for Board activities; (9) skills in areas that will benefit
the Board; and (10) the ability to make a long-term commitment to serve on the Board.
In recommending candidates for election to the Board, the Governance Committee considers nominees recommended by directors, officers, employees, shareholders and others, using the same criteria
to evaluate all candidates. The Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all
prospective nominees. The Governance Committee reviews each candidate’s qualifications to determine whether the candidate possesses any of the specific qualities and skills that are desired in members of the Board, taking into account
diversity in professional experience, skills and background, race, gender, disability, ethnicity, nationality, religion, and sexual orientation. Evaluations of candidates generally involve a review of background materials, internal discussions
and interviews with selected candidates as appropriate. Upon selection of a qualified candidate, the Governance Committee recommends the candidate for consideration by the Board. The Governance Committee may engage consultants or third-party
search firms to assist in identifying and evaluating potential nominees.
Shareholders may propose director candidates for consideration by the Governance Committee. For shareholder candidates to be considered, written notice of such shareholder recommendation (a)
must be provided to the Secretary of the Company not less than 45 days nor more than 75 days prior to the first anniversary of the record date for the preceding year’s annual meeting, and (b) must contain the name of any recommended candidate
for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve, if elected, and evidence of the nominating person’s ownership of Company stock. Both shareholder-proposed candidates and other
candidates identified and evaluated by the Governance Committee must comply with the above procedure and meet the qualifications for directors, as outlined in the charter of the Governance Committee and the By-Laws of the Company. To recommend
a prospective nominee for the Governance Committee’s consideration, a shareholder must submit the candidate’s name and qualifications to Carmine J. Broccole, Secretary of the Company, at 37-18 Northern Blvd., Long Island City, NY 11101.
Strategic Planning Committee
The Strategic Planning Committee’s functions are to assist the Board in discharging and performing its oversight role regarding the Company’s long-term strategic planning and to give guidance
to management in creating the Company’s long-term strategic plans. The Strategic Planning Committee held two meetings in 2019.
In fulfilling its role, the Strategic Planning Committee shall, among other things, (1) assist in the development, adoption, and modification of the Company’s current and future strategy; (2)
review and assess external developments and other factors affecting the automotive aftermarket and their impact on the Company’s strategy; (3) review and assess the Company’s core competencies with regard to expanding their implementation in
attractive markets beyond the automobile aftermarket; and (4) review and advise the Board and management on corporate development and growth initiatives, including acquisitions, joint ventures and strategic alliances.
Board Leadership Structure
The business of the Company is managed under the direction of the Board of Directors of the Company in the interest of the shareholders. The Board delegates its authority to senior management
for managing the everyday affairs of the Company. The Board requires that senior management review major actions and initiatives with the Board prior to implementation.
Lawrence I. Sills serves as our Executive Chairman of the Board. As our Executive Chairman, Lawrence I. Sills provides leadership to the Board, leads discussions of strategic issues for the
Company, and works with the Board to define its structure and activities in fulfillment of its responsibilities.
Eric P. Sills serves as our Chief Executive Officer and President. As our Chief Executive Officer and President, Eric P. Sills focuses on the day-to-day operations of our business and the
implementation of our business strategy to achieve our annual and long-term strategic, financial, organizational and management goals.
William H. Turner serves as our Presiding Independent Director. As our Presiding Independent Director, Mr. Turner serves as the principal liaison between the Executive Chairman and the
independent directors and presides at all meetings of the Board at which the Executive Chairman is not present, including executive sessions of the independent directors. The Presiding Independent Director has the authority to call meetings of
the independent directors and retain outside counsel and other advisors to the extent necessary in the conduct of his duties and responsibilities. The Presiding Independent Director is expected to provide independent oversight of management,
while fostering a cohesive Board that cooperates with the Executive Chairman and Chief Executive Officer towards the ultimate goal of creating shareholder value. The Presiding Independent Director is nominated by the Governance Committee and
approved by the independent directors of the Board every year, but a director may serve for one or more terms as Presiding Independent Director at the discretion of the Governance Committee. A copy of the charter of the Presiding Independent
Director can be viewed at ir.smpcorp.com under “Governance Documents.”
The Board of Directors conducts a self-evaluation on an annual basis that is designed to enhance the overall effectiveness of the Board and each of its committees. The evaluation covers the
processes, structure, culture and performance of the Board and each of its committees, and the experience, qualifications, attributes and skills of the individual members of the Board. Information is gathered for evaluation through the use of a
comprehensive written questionnaire distributed annually, and one-on-one assessments between the Presiding Independent Director and each director periodically over the course of the year. The evaluation
process is overseen by the Presiding Independent Director and the Chair of the Governance Committee, who review the results of the evaluation with our independent directors in executive sessions at meetings of the Board. In addition, the Board may engage an independent consultant in connection with its self-evaluation process; however, the Board did not elect to do so in 2019. We believe that the Board’s annual self-evaluation reflects good
corporate governance, and has strengthened our Board, each of its committees and individual director performance over time.
Our Board oversees an enterprise-wide approach to risk management. The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of senior management
on areas of material risk to the Company. In addition, the Board (or the appropriate Committee in the case of risks that are under the purview of a particular Committee) receives these reports to enable it to understand our risk identification,
risk management and risk mitigation strategies as well as to consider what level of risk is appropriate for the Company.
The involvement of the Board in setting the Company’s business strategy is a key part of its assessment of management’s appetite for risk and also a determination of what constitutes an
appropriate level of risk for the Company. As part of its risk oversight function, the Board reviews risk throughout the business, focusing on financial risk, legal/compliance risk and operational/strategic risk.
While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the Audit
Committee focuses on financial risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditors. In addition to setting compensation, the Compensation Committee strives to create incentives
that encourage a level of risk-taking behavior that is consistent with the Company’s business strategy.
Shareholders and other interested parties may communicate with the Board or individual directors, including the Presiding Independent Director, pursuant to the procedures established by the
Governance Committee from time to time. Correspondence intended for the Board or an individual director should be sent to the attention of the Secretary of the Company at 37-18 Northern Blvd., Long Island City, NY 11101, who will forward it to
the members of the Governance Committee. The Governance Committee will have the discretion to distribute only such correspondence to the Board or individual members of the Board that the Governance Committee determines in good faith has a valid
business purpose or is otherwise appropriate for the Board or individual member thereof to receive.
Our Company was founded in 1919 on the values of ethics, integrity, common decency and respect for others. These values continue to this day and are embodied in our Code of
Ethics, which has been adopted by the Board of Directors of the Company to promote honest and ethical conduct, and propagate a culture of compliance from the top down. Through our Code of Ethics, we reinforce our commitment to our Company, our
employees, our business partners and the communities within which we operate. We believe that these commitments have led to high employee satisfaction resulting in low employee turnover, and high customer satisfaction resulting in decades-long
customer relationships.
We also take environmental and social issues seriously. We believe that our commitment to positive environmental and social related business practices strengthens
our Company, improves our relationship with our shareholders, and better serves our customers, our communities and the broader environment within which we conduct our business. To this end, we have implemented policies that support
internationally recognized human rights standards, and we seek to identify and implement appropriate solutions to reduce our environmental impact while achieving our business goals and creating shareholder value. For example, we are proud of
our remanufacturing initiatives by which previously used automotive products are returned to same-as-new, or better, condition and performance. We remanufacture key product categories within our product portfolio, such as air conditioning
compressors, diesel injectors and diesel pumps, resulting in the production of premium automotive products within these categories through processes that we believe save energy and reduce waste. We also manufacture and distribute
components for the emission control systems of motor vehicles, such as EGR valves and evaporative controls. These components play a critical role in these important systems, which are designed to reduce emissions produced by the operation of
motor vehicles. You may read more about our environmental initiatives by visiting ir.smpcorp.com under “Environmental
& Social Responsibility─Corporate Initiatives”.
We are also proud of the positive impact that the Company and its employees have on our local communities through charitable giving and volunteerism. You may read more about our
social initiatives, and our efforts to engage on a local level in the communities within which we operate, by visiting smpcares.smpcorp.com.
Our Corporate Code of Ethics is available at ir.smpcorp.com under “Governance Documents.”
All directors and employees, including officers, are expressly prohibited from hedging or engaging in any derivative transactions, such as “cashless” collars, forward contracts or equity swaps,
to offset any decrease in the market value of the Company’s Common Stock. All directors and employees, including officers, are also expressly prohibited from pledging their shares of Common Stock.
The Board has affirmatively determined that each member of the Board and its committees, other than Lawrence I. Sills, Eric P. Sills and John P. Gethin, is independent. The Board made such
determination based upon the definitions and criteria established by the New York Stock Exchange and the SEC for independent board members. In that regard, the Board considered whether any director has, or has had in the most recent three
years, any material relationships with the Company, including any affiliation with our independent auditors. In assessing independence, the Board considers all relevant facts and circumstances. In particular, when assessing the materiality of a
director’s relationship with the Company, the Board considers the issue not just from the standpoint of the director, but also from that of the persons or organizations with which the director has an affiliation or family relationship.
The following table sets forth the compensation paid by the Company to our non-employee directors in 2019.
|
Name
|
Fees Earned or
Paid in Cash (1)
|
Stock
Awards (2)
|
All Other
Compensation (3)
|
Total
|
||||||||||||
|
William H. Turner
|
$
|
110,000
|
$
|
95,110
|
$ ─
|
$
|
205,110
|
|||||||||
|
Pamela Forbes Lieberman
|
90,000
|
95,110
|
11,928
|
197,038
|
||||||||||||
|
John P. Gethin4
|
80,000
|
95,110
|
12,203
|
187,313
|
||||||||||||
|
Roger M. Widmann
|
90,000
|
95,110
|
571
|
185,681
|
||||||||||||
|
Richard S. Ward
|
82,000
|
103,110
|
─
|
185,110
|
||||||||||||
|
Patrick S. McClymont
|
80,000
|
95,110
|
─
|
175,110
|
||||||||||||
|
Joseph W. McDonnell
|
80,000
|
95,110
|
─
|
175,110
|
||||||||||||
|
Alisa C. Norris
|
80,000
|
95,110
|
─
|
175,110
|
||||||||||||
| (1) |
Includes (a) the cash portion of the annual retainer paid to non-employee directors, and (b) the annual retainer paid to each Chair of our Board Committees and to our Presiding Independent Director.
|
| (2) |
Represents the grant date fair value of (a) the Company Common Stock awarded to our non-employee directors as part of their annual retainer, and (b) shares of restricted stock granted to each non-employee director.
|
The grant date fair value of stock awards is computed in accordance with ASC Topic 718. For a discussion of the valuation assumptions, see Note 14 to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2019.
The number of shares of Common Stock covered by outstanding (unvested) stock awards held by each non-employee director at December 31, 2019 are set forth below:
|
Name
|
Outstanding (Unvested)
Restricted Stock Awards
|
|
William H. Turner
|
1,000
|
|
Pamela Forbes Lieberman
|
1,000
|
|
Patrick McClymont
|
1,000
|
|
Joseph W. McDonnell
|
1,000
|
|
Alisa C. Norris
|
1,000
|
|
Richard S. Ward
|
1,000
|
|
Roger M. Widmann
|
1,000
|
|
John P. Gethin
|
1,000
|
No directors held option awards outstanding at December 31, 2019.
| (3) |
Represents the applicable COBRA premiums for medical, dental and vision insurance plan coverage provided to any director less contributions paid by such director.
|
| (4) |
The amounts shown in this table do not reflect compensation earned by Mr. Gethin as a consultant of the Company in 2019. Mr. Gethin’s compensation as a consultant is described on page 48 under the heading “Certain Relationships
and Related Person Transactions.”
|
For 2019, each non-employee director received an annual cash retainer of $80,000. Any portion of the cash retainer awarded to our independent directors may be
taken in Company Common Stock at the discretion of the director. In 2019, Mr. Ward elected to receive $8,000 of his cash retainer in Company Common Stock. This amount is included in the “Stock Awards” column in the Director Compensation table
above.
In addition, in 2019, each non-employee director received an award of Common Stock valued at $55,000, based on the fair market
value of the Company’s Common Stock as of the date of issuance, and a restricted stock award under the 2016 Omnibus Incentive Plan covering 1,000 shares of Common Stock with a grant date fair market value of $40.11 per share, for a total of $40,110. These amounts are included in the “Stock Awards” column in the Director Compensation table above. The restricted stock awards granted to our independent directors vest one year after the grant date, so long as the
director remains continuously in office. In the event of a merger of the Company or sale of all or substantially all of the Company’s assets, vesting of all of the shares of restricted stock will accelerate, and such shares will become fully
vested. Independent directors were also eligible to receive other types of awards under our 2016 Omnibus Incentive Plan, but such awards were discretionary.
In 2019, William H. Turner received additional annual retainers of $20,000 and $10,000 for his services as our
Presiding Independent Director and Chair of the Audit Committee, respectively. Pamela Forbes Lieberman (Chair of the Strategic Planning Committee), Richard S. Ward (Chair of the Governance Committee), and Roger M. Widmann (Chair of the
Compensation Committee) each received an additional annual retainer of $10,000 for their services as Chair of their respective Committee. In addition, John P. Gethin, Pamela Forbes Lieberman and Roger M. Widmann were covered under the Company’s
medical, dental or vision plans.
During fiscal year 2019, Lawrence I. Sills, our Executive Chairman, and Eric P. Sills, our Chief Executive Officer and President, received no payment for the fulfillment of their directorial
responsibilities (see the Summary Compensation Table for disclosure regarding Lawrence Sills’ and Eric Sills’ executive officer compensation).
The Company does not have a poison pill and is not presently considering the adoption of such a device. If the Company were ever to adopt a shareholder
rights agreement, the Company would seek prior shareholder approval, unless due to time constraints or other reasons, the Board, in the exercise of its fiduciary responsibilities, determines that it would be in the best interests of
shareholders to adopt a shareholder rights agreement before obtaining shareholder approval. If the Board were ever to adopt a shareholder rights agreement without prior shareholder approval, the Board would submit such agreement to shareholders
for ratification within one year.
All members of the Compensation Committee during 2019 were independent directors, and no member was an employee or former employee of the Company. During
2019, no executive officer of the Company served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officers served on the Company’s Compensation Committee or Board of Directors.
All of our officers are appointed by our Board of Directors. The biographies of Lawrence I. Sills and Eric P. Sills are presented in connection with “Proposal No. 1 – Election of Directors”,
beginning on page 4 of this Proxy Statement. The following table sets forth the biographies of our other officers as of the date of this Proxy Statement:
|
Carmine J. Broccole
Senior Vice President
General Counsel & Secretary
Age 54
|
Mr. Broccole has served as our Senior Vice President General Counsel since March 2016 and as our Secretary since 2006. Mr. Broccole has also served as our Vice President General Counsel from 2006 to March
2016, and as our General Counsel from 2004 to 2006. Prior to such time, Mr. Broccole was a Partner of Kelley Drye & Warren LLP. Mr. Broccole holds a JD from Stanford Law School and a BA from Cornell University, and is a member of
the Bars of New York and California.
|
|
|
Thomas S. Tesoro
Senior Vice President
Human Resources
Age 64
|
Mr. Tesoro has served as our Senior Vice President Human Resources since January 2020. Prior to his current appointment, Mr. Tesoro served as our Vice President Human Resources from 2006 to January 2020.
From 1999 to 2006, Mr. Tesoro served as Senior Vice President of Human Resources for Vertrue Inc. Prior to such time, he served in a variety of senior human resources related positions for a number of Fortune 500 companies. Mr. Tesoro
holds a JD from Fordham University School of Law and a BS from Fordham University, and is a member of the Bar of New York.
|
|
|
Ray Nicholas
Vice President
Information Technology &
Chief Information Officer
Age 56
|
Mr. Nicholas has served as our Vice President Information Technology since 2006 and as our Chief Information Officer since 2013. From 1990 to 2006, Mr. Nicholas served as the Manager and Director of
Information Systems for our Temperature Control Division. Mr. Nicholas completed the Automotive Aftermarket Professional program at University of the Aftermarket, Northwood University, and an Executive Education program at University of
Virginia, Darden School of Business, and holds a BS from Northeast Louisiana University.
|
|
|
William J. Fazio
Chief Accounting Officer
Age 65
|
Mr. Fazio has served as our Chief Accounting Officer since 2008. From 2007 to 2008, Mr. Fazio served as our Director, Corporate Accounting. From 2001 to 2007, he served as the Corporate Controller and
Chief Accounting Officer of Hexcel Corporation. Prior to that time, Mr. Fazio served as Vice President, Controller of Kodak Polychrome Graphics. Mr. Fazio holds an MBA from Hofstra University and a BS from St. John’s University. Mr.
Fazio is also a Certified Public Accountant.
|
|
|
Erin Pawlish
Treasurer
Age 44
|
Ms. Pawlish has served as our Treasurer since November 2015. Prior to her appointment as our Treasurer, Ms. Pawlish served as our Financial Director from 2013 to November 2015, and as a Senior Manager at
KPMG LLP from September 1998 to December 2012. Ms. Pawlish holds a BBA from Pace University. Ms. Pawlish is also a Certified Public Accountant.
|
The Company has established the Office of Chief Executive to strengthen the executive management structure of the Company. The Office of Chief Executive is primarily responsible for the
development of policy, strategy and quality assurance, and the provision of leadership. Its functions also include: (a) supporting and providing timely and quality advice to the Chief Executive Officer; (b) promoting the policies of the
Company; and (c) improving communications between management, customers, the Board, shareholders and other stakeholders. The Office of Chief Executive is comprised of: (1) Eric P. Sills, our Chief Executive Officer and President; (2) James J.
Burke, our Chief Operating Officer; (3) Dale Burks, our Executive Vice President and Chief Commercial Officer; and (4) Nathan R. Iles, our Chief Financial Officer.
Overview
This section of our Proxy Statement describes the material components of our compensation program for our “named executive officers.” Under SEC rules, our named executive officers for fiscal
year 2019 were:
|
Lawrence I. Sills
Executive Chairman of the Board
|
Dale Burks
Executive Vice President and Chief Commercial Officer
|
|
|
Eric P. Sills
Chief Executive Officer & President
|
Nathan R. Iles
Chief Financial Officer
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James J. Burke
Chief Operating Officer
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Carmine J. Broccole
Senior Vice President General Counsel & Secretary
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In this section, we also discuss: (a) our business strategy; (b) our financial and business performance for fiscal year 2019 and its impact on the compensation awarded to our named executive
officers; (c) the primary responsibilities of our Compensation Committee; (d) our executive compensation philosophy and the objectives of our executive compensation program; (e) the process followed by our Compensation Committee in arriving at
specific compensation policies and decisions; (f) the components of our compensation package and the reasons that we provide each component; (g) the factors considered by our Compensation Committee in arriving at its compensation decisions for
2019; and (h) some additional compensation-related topics.
The Compensation Committee is comprised exclusively of independent directors. In performing its duties, the Compensation Committee may, in its discretion, solicit the input of our Executive
Chairman, our Chief Executive Officer, or any independent consultant or advisor.
Our core strategy is to be the best full-line, full-service supplier of premium engine management and temperature control products. We pursue this strategy by focusing our efforts on executing
our value proposition, growing and diversifying our business, and continuously improving upon our past performance.
In establishing the management performance objectives (or MBO goals) of the annual cash incentive awards of our named executive officers, the Compensation Committee selects MBO goals that are
designed to implement this strategy. The MBO goals for fiscal year 2019 covered: (a) operational improvements relating to productivity in our wire and cable business and distribution expenses in our temperature control business; (b) margin
improvement in certain product categories; and (c) the achievement of specific growth and diversification initiatives.
The Compensation Committee considered the successful execution of these initiatives as well as the Company’s financial results in determining the total compensation paid to our named
executive officers in 2019, as compared to 2018. Our consolidated net sales for 2019 were $1,137.9 million, an increase of $45.8 million or 4.2%, compared to $1,092.1 million in the same period of 2018. Earnings from continuing operations for
2019 were $69.1 million or $3.03 per diluted share, compared to $56.9 million or $2.48 per diluted share for 2018.
We believe that the compensation of each of our named executive officers for 2019 was reasonable and appropriate, and aligned with the Company’s financial and business results in 2019.
Our Compensation Committee took into account a number of factors in determining executive compensation for 2019, including our business strategy, financial and business results, management
performance and competitive data. In light of these considerations, the Compensation Committee made the following executive compensation decisions in fiscal year 2019:
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Established management performance, or management by objective (“MBO”), goals for fiscal year 2019 under our annual cash incentive bonus plan that were designed to execute the Company’s business strategy.
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Established a company-level financial performance measure for fiscal year 2019 under our annual cash incentive bonus plan, which is based on the year-over-year improvement in the weighted average of our earnings per share over
a three-year period.
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Awarded base salary pay increases to our named executive officers that reflected the individual performance and responsibilities of our executives.
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Approved annual cash incentive awards in the amount of 114% of target levels under the MBO portion of our annual cash incentive bonus plan, reflecting the achievement of MBO goals in 2019.
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Granted annual awards of restricted stock and performance shares to our named executive officers that were consistent with our compensation philosophy and the Compensation Committee’s assessment of individual performance and
expected future contributions.
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Granted long-term restricted stock to certain of our named executive officers as a long-term retention tool.
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We believe that our executive compensation program is reasonable, competitive and focused on pay for performance principles. In particular, we believe that our compensation program is
designed to reward our executives for their achievement of both short- and long-term performance goals that effectively carry out the Company’s business strategy and result in the creation of shareholder value.
Through equity incentives and stock ownership requirements, we also align the interests of our executives with those of our shareholders and the long-term interests of the Company. We have
not engaged in any of the most frequently criticized pay practices such as re-pricing of stock options or SARs without shareholder approval, excessive perquisites or tax gross-ups, or agreements with change-in-control provisions unreasonably
favorable to our executives. Our executive compensation policies have enabled the Company to attract and retain talented and experienced executives and have benefited the Company over time.
Say-on-Pay Vote
At our 2019 Annual Meeting, our shareholders had the opportunity to vote, on an advisory (non-binding) basis, to approve the compensation paid to our named executive officers in 2018
(referred to as a “say-on-pay” vote). Our say-on-pay proposal was approved by approximately 86% of the votes cast at the 2019 Annual Meeting, demonstrating significant support for our compensation program. The Compensation Committee will
continue to consider shareholder feedback and the results of our say-on-pay votes when making future compensation decisions. Because our shareholders expressed a preference for an annual say-on-pay vote, our shareholders have the opportunity
at our 2020 Annual Meeting to vote on a non-binding, advisory basis, to approve the compensation paid to our named executive officers in 2019.
Our Compensation Committee is responsible for, among other things:
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reviewing the overall goals, policies, objectives and structure of our executive compensation and benefit programs and assessing whether any of the components thereof may present unreasonable risks to the Company;
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approving the compensation packages of the Company’s Chief Executive Officer and our other executive officers; and
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administering our equity incentive plans.
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Philosophy. The Compensation Committee is responsible for establishing and reviewing the overall compensation philosophy of the Company. The
Compensation Committee believes that the compensation paid to executives should be structured to provide our executives with meaningful rewards, while maintaining alignment with shareholder interests, corporate values and management’s
strategic initiatives.
In accordance with this philosophy, the Compensation Committee believes that the executive compensation program should consist of a mix of base salary, annual cash incentive compensation,
long-term incentive compensation (that may include cash or equity components, in the Compensation Committee’s discretion), perquisites and other benefits.
The Compensation Committee uses its judgment and discretion in establishing compensation and strives to avoid the use of highly leveraged incentives that may drive overly risky short-term
behavior on the part of executives. Our equity programs, combined with our executive share ownership requirements, reward long-term stock performance. In particular, our contingent performance share awards, which vest only at the end of a
three-year performance period, reward longer-term financial and operating performance.
Objectives. The Compensation Committee generally considers the following objectives in establishing compensation programs and setting pay
levels:
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providing the Company with the ability to attract, motivate and retain exceptional talent whose abilities and leadership skills are critical to the Company’s long-term success;
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maintaining a significant portion of each executive’s total compensation at risk, tied to achievement of annual and long-term strategic, financial, organizational and management performance goals, that are intended to improve
shareholder return;
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providing variable compensation incentives directly linked to the performance of the Company and improvement in shareholder return so that executives manage from the perspective of owners with an equity stake in the Company;
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ensuring that our executives hold Company Common Stock to align their interests with the interests of our shareholders; and
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ensuring that compensation and benefit programs are both fair and competitive in consideration of each executive’s level of responsibility and contribution to the Company and reflect the size and financial resources of the
Company in order to maintain long-term viability.
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How We Set Compensation. On an annual basis, the Compensation Committee reviews and approves the compensation of our named executive
officers, including the amounts of salary, cash incentive awards and equity-based compensation provided to each executive. In determining total executive compensation packages, the Compensation Committee generally considers various measures
of Company and industry performance including revenue, operating income, gross margin and total shareholder return. The Compensation Committee does not assign these performance measures relative weights. The Compensation Committee considers
these performance measures as good indicators of Company performance and exercises its business judgment in determining compensation after considering all of these measures, collectively, as well as taking into account the market data and
peer group information discussed below.
The Compensation Committee also evaluates the total compensation of each executive, and each element of compensation separately, to ensure that it will be effective in motivating, retaining
and incentivizing the executive. The Compensation Committee’s evaluation takes into consideration, among other factors, each executive’s individual performance, both in general and against specific goals and targets established for the
executive, and the desire to maintain internal pay equity and consistency among our executives.
Our named executive officers generally participate in the same executive compensation plans and arrangements available to our other executive officers; however, the contingent annual cash
incentive awards and performance share awards utilize targets that are based upon the Company’s achievement of short-term and long-term strategic goals.
The Compensation Committee divides executive officers into three separate categories for the purposes of establishing the levels of cash and equity incentive awards. Each category consists of
one or more officers who are grouped together for incentive compensation purposes and receive the same target incentive awards. For example, with respect to our annual restricted stock awards, our Executive Chairman and members of the Office
of Chief Executive are in the first category; our Senior Vice President General Counsel is in the second category; and our other executives are in the third category. One purpose of the categories is to equalize incentive opportunities for
individuals with similar levels of responsibility. This practice is intended to improve internal pay equity among our executives. Considerations of internal pay equity among executives are also factored into the Compensation Committee’s
consideration of the market data and peer group information discussed below with respect to base salary and target bonus compensation.
Benchmarking. In establishing total compensation for our executives, the Compensation Committee generally targets the median of the market, which it considers to be equivalent to the domestic market for executive talent within U.S. industrial companies with gross revenues in the approximate range of $500 million to
$1 billion. Our Senior Vice President Human Resources conducts periodic benchmark reviews within the above-referenced market of the aggregate level of executive compensation, as well as the mix of elements used to compensate executive
officers at such companies, and provides this market data to the Compensation Committee for its consideration. The Compensation Committee believes that compensation targeted at the median of the market
reflects consideration of our shareholders’ interests in paying what is necessary, but not significantly more than necessary, to achieve our corporate goals.
In addition, the Compensation Committee also reviews the practices of specific peer group companies to compare the Company’s compensation programs with other manufacturing companies of
comparable size and stature. Our Executive Chairman, our Chief Executive Officer and other members of management provide input on the selection of the peer group companies, and the Compensation Committee makes
the final determination of which companies to include. Executive compensation information for the market data and peer group companies is compiled by management from proxy statements and other public filings, as well as surveys and other
databases to which we subscribe, such as those from Aon and ADP. The Compensation Committee may, from time to time, engage an independent consultant to establish comparable peer groups to benchmark the
Company’s executive compensation program. However, the Compensation Committee did not engage an independent consultant to review executive compensation in 2019.
Our Compensation Committee believes that benchmarking is a useful tool because it is a reflection of the market in which we compete for talent and provides credibility for our compensation
programs with both our employees and our shareholders. The Compensation Committee also reviews this information for context and a frame of reference for decision-making; but it is not the sole source of
information on which executive compensation is determined. Other factors such as internal equity, individual and business performance, and the perceived degree of alignment between the job duties of our executive with the benchmark
job description to which his or her compensation is being compared are also considered.
Role of Management. The Compensation Committee seeks and considers input from senior management in many of its decisions. Annually, our Executive
Chairman and our Chief Executive Officer review with the Compensation Committee annual salary, annual incentive plan targets and long-term incentive compensation for each of our executives (excluding our Executive Chairman and our CEO). In
addition, following the end of each fiscal year, our Executive Chairman and our Chief Executive Officer evaluate each executive officer’s performance for the prior fiscal year (other than his own performance) and discuss the results of their
evaluations with the Compensation Committee. Other members of the Office of Chief Executive also assist in the evaluations for those officers reporting to them. In addition to considering an individual’s attainment of the business goals and
objectives established for him or her by the Compensation Committee for the prior year, the Executive Chairman’s and Chief Executive Officer’s evaluations of each executive officer’s performance may be based in part upon subjective factors,
including the Executive Chairman’s and Chief Executive Officer’s evaluations of the contributions made by the executive officer to the Company’s overall results and achievement of its strategic goals. These evaluations include consideration
of the level of responsibility of each executive officer and the percentage of total Company revenue and/or expense that each individual officer is responsible for, where applicable. The Executive Chairman and the Chief Executive Officer then
make specific recommendations to the Compensation Committee for adjustments of base salary and incentive plan targets as part of the compensation package for each executive officer (other than himself) for the next fiscal year.
The Compensation Committee reviews the performance of the Executive Chairman and the Chief Executive Officer and determines the compensation for all executive officers for the next fiscal
year, considering the recommendations from the Executive Chairman and the Chief Executive Officer, as well as the benchmark and peer group information described above and any other information available to it that it considers relevant. The
Compensation Committee discusses the recommendations of the Executive Chairman and the Chief Executive Officer in executive session without any members of management present and may modify the Executive Chairman’s and the Chief Executive
Officer’s recommendations when approving final compensation packages.
Tally Sheets. When reviewing executive compensation, the Compensation Committee has historically reviewed management-provided materials which
highlight the base salary, target cash incentive award, and actual cash incentive award to each of our executive officers for prior fiscal years. The Compensation Committee uses this information to review compensation trends, to compare
increases or decreases year over year, and to ensure that compensation decisions are made with a view to the total compensation package awarded to each executive officer over time. No specific weight is assigned by the Compensation Committee
to the tally sheets or any specific items which may appear on such tally sheets.
Risk Management Considerations. As mentioned earlier, the Compensation Committee strives to avoid the use of highly leveraged incentives that may
drive overly risky short-term behavior on the part of executives. The Compensation Committee structures our cash incentive awards and equity incentive awards as highlighted below to promote the creation of long-term value and discourage
behavior that may lead to excessive risk:
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The Company’s annual cash incentive award (as more fully described under “Elements of Compensation – Annual Cash Incentive Awards” below) is based in part on company-level financial performance, designed to align executive
compensation to year-over-year improvements in corporate performance and increases in shareholder value. This portion of the cash incentive award is structured such that, year-over-year improvements that are favorable for the
Company’s shareholders, are also made favorable for our executives whose compensation is based on the achievement of those improvements. In addition, an executive’s actual award is capped on an annual basis at 200% of the
applicable target, no matter how much financial performance exceeds the range established for the award, thereby limiting the incentive for excessive risk-taking. However, any award in excess of the 200% target may be carried
forward into the following year, subject to the risk of forfeiture depending upon the following year’s performance. In addition, since these awards are based on overall corporate performance, rather than individual performance,
the ability of an individual executive to increase his own compensation through excessive risk taking is constrained.
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The target company-level financial performance award represents 70% of an executive’s total target cash incentive award in any year. Management performance, or MBO bonuses (as more fully described under “Elements of
Compensation – Annual Cash Incentive Awards” below), which are based upon the achievement of management goals and objectives, and thus are more susceptible to individual risk taking, represent only 30% of an executive’s total
target cash incentive award, thus reducing the incentive for any executive to take excessive risks.
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The measures used to determine whether performance share awards vest are based on at least three years of financial performance. The Compensation Committee believes that the longer performance period encourages executives to
attain sustained performance over several years, rather than performance in a single annual period.
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Restricted stock awards generally vest at the end of a three year or longer period and an executive must hold any vested restricted stock (except long-term retention awards) for an additional two-year period following vesting
pursuant to the terms of our Stock Ownership Guidelines, thereby encouraging executives to look to long-term appreciation in equity values.
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Base Salary. The Compensation Committee generally reviews base salaries for executive officers at the beginning of each fiscal year. Annual salary is
based upon an evaluation of each individual’s performance, an executive’s level of pay compared to that for similar positions at peer group companies, the responsibilities of the position, the experience of the individual, internal pay equity
considerations, and Company performance. Base salaries may also be adjusted at the time of a promotion, upon a change in level of responsibilities, or when competitive circumstances may require review.
We believe that our base salaries are an important element of our executive compensation program because they provide our executives with a steady income stream that is not contingent upon
our overall performance or shareholder return. We believe that maintaining base salary amounts generally in the median to 75% range of our peer group minimizes competitive disadvantage, while avoiding paying amounts in excess of what we
believe to be necessary to motivate executives to meet corporate goals.
Annual Cash Incentive Awards. The Compensation Committee utilizes annual cash incentive awards to reward each of our executive officers based on the
executive’s achievement of management performance objectives (or MBO goals), and the Company’s achievement of year-over-year improvement in the weighted average of our earnings per share over a three-year period. Our annual cash incentive
awards are designed to more immediately reward our executives for their performance during the most recent year. We believe that the immediacy of these cash awards, in contrast to our equity awards which vest over a three year or longer
period of time, provide a significant incentive to our executives to achieve their respective management objectives and, thus, our company-level objectives. We believe our cash awards are an important motivating factor for our executives, in
addition to being a significant factor in attracting and retaining our executives.
Our cash incentive awards utilize a target that is a percentage of each executive officer’s total cash compensation for the fiscal year. The target is set at levels that are approximately 32%
- 39% of an executive’s expected total cash compensation for the year. They are set at levels which, assuming achievement of 100% of the applicable target amount, the Compensation Committee believes are likely to result in an annual cash
award at or near the median for target cash awards in the market. Actual awards may be higher or lower, however, based upon the degree of achievement of MBO goals and company-level financial performance.
Management Performance. At the beginning of each year, the Compensation Committee reviews and approves a detailed set of MBO goals for our executives (which are generally aligned with
the Company’s short-term and long-term strategic goals) initially prepared by management. At the beginning of the following year, the Compensation Committee determines, in its discretion, with the input of the Executive Chairman and Chief
Executive Officer, the level of achievement of each MBO goal by our executives during the prior year and the percentage of the target MBO award earned by such executives. The target MBO award represents 30% of an executive’s total target cash
incentive award for the applicable year.
Company-Level Financial Performance. With respect to company-level financial performance, the Company utilizes performance measures to align closely executive compensation to
year-over-year improvements in corporate performance and increases in shareholder value. The target company-level financial performance award represents 70% of an executive’s total target cash incentive award for the applicable year. For
2019, the performance measure selected by the Compensation Committee was based on the year-over-year improvement in the weighted average of our earnings per share over a three-year period, where the most recent year of the three-year period
is weighted more heavily than the prior two years (referred to as “Weighted Average EPS”).
In addition, in order to promote longer-term shareholder improvement and to keep part of an executive’s cash incentive award at risk, the company-level financial performance award is capped
on an annual basis at 200% of the applicable target. To the extent that an executive could have received an award in excess of the cap, the excess amounts are carried forward into the next year’s calculation of an executive’s award. However,
any award that is carried forward is subject to risk of forfeiture depending upon the following year’s performance.
Long-Term Equity Incentive Programs. As part of the Company’s compensation
program, the Compensation Committee grants equity awards to the Company’s executive officers. We believe that equity awards provide our executive officers with a strong link to our long-term performance goals, create an ownership culture, and
closely align the interests of our executive officers and our shareholders. In addition, the vesting feature of our equity awards is designed to aid officer retention because this feature provides an incentive to our executive officers to
remain in our employ throughout the vesting period, which is typically three years or longer. In determining the size and type of equity awards granted to our executive officers in 2019, the Compensation Committee awarded different amounts
to: (a) our Executive Chairman and members of the Office of Chief Executive; (b) our Senior Vice President General Counsel; and (c) our other executives, in recognition of their differing levels of responsibility. The specific amounts awarded
were based on recommendations of management, but the Compensation Committee had discretion to award different amounts. The Compensation Committee may also consider our company-level performance, the applicable executive officer’s performance,
the amount of equity previously awarded to the applicable executive officer, the vesting of such prior awards, and the recommendations of management and any other advisor that the Compensation Committee may choose to consult.
Our primary form of equity compensation consists of restricted stock awards and performance share awards. We believe that these awards provide a motivating form of incentive compensation,
while permitting us to issue fewer shares than stock options. Because shares of restricted stock have a defined value at the time the restricted stock awards are issued, restricted stock awards are often perceived as having more immediate
value than stock options, which have a value less easily determinable when issued. In addition, we provide performance shares to our executive officers because we believe that their contributions to the Company have a direct relationship to
the achievement of the Company’s strategic goals.
We grant our executive officers two types of restricted stock (standard awards and long-term retention awards) and performance shares generally once per year at a regularly scheduled meeting
of the Board. Our 2016 Omnibus Incentive Plan also permits us to grant incentive and nonqualified stock options, stock appreciation rights, restricted stock units, and other stock-based awards to our officers, directors, employees and
consultants. However, our Compensation Committee currently intends to grant only restricted stock and performance shares under the 2016 Omnibus Incentive Plan.
Each standard restricted stock award issued under our 2016 Omnibus Incentive Plan is subject to a three-year vesting period. Each long-term retention restricted stock award issued under our
2016 Omnibus Incentive Plan is subject to an incremental vesting period based upon the participant reaching the age of 60 (25% vests), 63 (25% vests) and 65 (balance vests). If an executive officer ceases employment before the end of any
vesting period, he or she forfeits the entire unvested portion of the restricted stock award. Restricted stock awards may become immediately vested in full in the event of death, retirement at or after age 65, total disability (as determined
by the Compensation Committee in its sole discretion), or upon a “change in control” of the Company. Grants of long-term retention restricted stock awards to participants over the age of 65 are subject to a one-year vesting period.
We also award our executive officers performance shares in amounts comparable to the number of shares of standard restricted stock awards issued to such executives, although the actual number
of performance shares ultimately issued to an executive may be higher or lower, depending upon the level of achievement of the applicable performance goals. In order for the performance shares to vest, the Company must achieve a certain level
of earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three-year performance period covered by the award. A new performance period begins each January 1 and ends three years later on
December 31. As a result, up to three performance periods may overlap in any given year. The level of earnings from continuing operations is tied to financial goals contained in the Company’s three-year strategic plan, which is updated
annually and approved by our Board. The Compensation Committee selected this performance measure because improvement in earnings from continuing operations is a key strategic focus for the Company and is believed to help the Company achieve
higher margins, stronger cash flow and debt reduction.
The performance share awards are subject to a three-year vesting period. If an officer ceases to be an employee of the Company before the end of the vesting period, the entire performance
share award is forfeited. The performance goals are scaled so that the recipient can receive part of an award in the event that acceptable, but not the desired, results are achieved.
It is our policy to ensure that we do not grant equity awards in connection with the release, or the withholding, of material non-public information, and that the grant value of all equity
awards is equal to the fair market value on the date of grant.
Defined Contribution Plan. The Company has established a defined contribution Supplemental Executive Retirement Plan (SERP) for our executive
officers (and other eligible employees). The purpose of this plan is to enable the executive officers to supplement their benefits under the Company’s Profit Sharing 401(K) Capital Accumulation Plan as well as to provide a means whereby
certain amounts payable by the Company to our executive officers may be deferred to some future period. Eligible employees may irrevocably elect to defer receipt of a portion of their annual base salary and annual bonus payments earned in
that plan year up to a maximum of 50% of their annual base salary and 100% of their annual bonus payments. In addition, the Company generally makes an annual cash contribution into the SERP on behalf of each participant.
Defined Benefit Pension Plan. The Company maintains a defined benefit unfunded Supplemental Executive Retirement Plan. The benefits under this plan
are in addition to any benefits payable to participants under the Company’s Profit Sharing 401(K) Capital Accumulation Plan and the defined contribution SERP. As of the date of this Proxy Statement, there are no participants in the defined
benefit Supplement Executive Retirement Plan.
ESOP. Our executive officers are eligible to receive Company Common Stock pursuant to our Employee Stock Ownership Plan, which is available
for all eligible employees. This stock grant plan gives our executives an opportunity to share directly in the growth of the Company through stock ownership. The Company’s stock contributions for a particular calendar year are made in the
first quarter of such year. Under the plan, each participant is subject to a six-year vesting schedule.
After careful analysis, the Compensation Committee determined to use the following companies for peer group comparisons in setting 2019 compensation:
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Altra Industrial Motion Corp.
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EnPro Industries, Inc.
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Modine Manufacturing Co.
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CIRCOR International, Inc.
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Gentherm Inc.
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Stoneridge Inc.
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Columbus McKinnon Corp.
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LCI Industries, Inc.
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SunCoke Energy, Inc.
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Dorman Products, Inc.
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NN, Inc.
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Tennant Company
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In determining executive compensation for 2019, our Compensation Committee evaluated and made its determinations in the context of the Company’s 2019 financial and business performance and
the business conditions of the automotive aftermarket generally. The Compensation Committee also took into consideration each executive’s performance of their respective prior year’s MBO objectives and the Company’s ability to continue to
make changes and introduce strategic initiatives critical to positioning the Company for future long-term growth.
Base Salary. Based on the foregoing, in February 2019 the Compensation Committee approved salary modifications for our executives for 2019.
In addition, in view of the executives contributions to the Company as well as to motivate and assist in the retention of these individuals, in February 2020 the Compensation Committee set the salaries of the following named executive
officers to the levels indicated: Lawrence I. Sills, $425,000, Eric P. Sills, $647,000; James J. Burke, $637,000; Dale Burks, $525,000; Nathan R. Iles, $503,000; and Carmine J. Broccole, $480,000.
Annual Cash Incentive Awards. The Compensation Committee established the following MBO goals for our named executive officers in 2019 for the purpose
of determining the MBO portion of their annual cash incentive award: (a) operational improvements relating to productivity in our wire and cable business and distribution expenses in our temperature control business, (b) margin improvement in
certain product categories, and (c) the achievement of specific growth and diversification initiatives. In February 2020, the Compensation Committee determined that the named executive officers had successfully attained their MBO goals, and
as a result, authorized cash incentive awards at 114% of the target MBO award for 2019.
The Compensation Committee also approved a year-over-year improvement in our Weighted Average EPS as the performance measure for 2019 for the purpose of determining company-level financial
performance awards. Based on the year-over-year improvement in our Weighted Average EPS, and the payout scale established by the Compensation Committee, our named executive officers were entitled to receive cash incentive awards at 120% of
the target company-level financial performance award for 2019.
The total amount of all cash incentive awards earned in 2019 is reflected in the Summary Compensation Table. For further discussion of this performance measure, see “Elements of Compensation–Annual Cash Incentive
Awards” above.
Restricted Stock Awards. In 2019, the Compensation Committee awarded the following shares of restricted stock (standard awards): (a) 2,000 shares to each of Lawrence I.
Sills, our Executive Chairman, Eric P. Sills, our Chief Executive Officer, James J. Burke, our Chief Operating Officer, Dale Burks, our Chief Commercial Officer, and Nathan R. Iles, our Chief Financial Officer; and (b) 1,500 shares to Carmine
J. Broccole, our Senior Vice President General Counsel. These restricted stock awards vest after three years. The amount of these restricted stock awards was based upon the Compensation Committee’s subjective evaluation of each executive’s
contribution to the Company during 2019, as well as their respective levels of responsibility.
In addition, in 2019 the Compensation Committee awarded the following shares of restricted stock (long-term retention awards): (a) 2,500 shares to Nathan R. Iles, and (b) 2,000 shares to each
of Dale Burks and Carmine Broccole. These awards vest in increments when the executive reaches the ages of 60 (25% vests), 63 (25% vests) and 65 (balance vests), respectively. The Compensation Committee granted these restricted stock awards
as a long-term retention tool and to incentivize executive performance through a long-term capital accumulation award.
Performance Share Awards. In 2019, the Compensation Committee also awarded performance shares to our named executive officers with each receiving a
targeted share amount equal to the number of shares of standard restricted stock awards issued to such executive, although actual award payouts may vary from 0% to 200% of the target award amount, depending upon the level of achievement of
the performance goal for the three-year measurement period. In order for a named executive officer to receive an actual payout of all or a portion of the performance shares awarded in 2019, the Company must achieve earnings from continuing
operations before taxes, excluding special items, on a cumulative basis for the three year period from January 1, 2019 to December 31, 2021, of approximately $244.1 million (i.e., the threshold amount) or more, with a maximum award resulting
from achievement of earnings from continuing operations of approximately $366.1 million or more during the specified period.
In 2016, performance shares were awarded to each of our named executive officers in accordance with the same practices described above. In order for an executive to receive an actual payout
of all or a portion of the 2016 performance shares, the Company needed to achieve earnings from continuing operations before taxes, excluding special items, on a cumulative basis for the three year period from January 1, 2016 to December 31,
2018, of approximately $276.3 million (i.e., the threshold amount) or more, with a maximum award resulting from achievement of earnings from continuing operations of approximately $414.5 million or more during the specified period. At the end
of the three-year period, the Company exceeded the threshold financial goal during the measuring period, resulting in the issuance of performance shares in 2019 at the payout level of 55.4%.
Clawback Policy
In March 2011, the Compensation Committee instituted a “clawback” policy with respect to incentive-based compensation. The clawback policy provides that, in the event of a restatement of the
Company’s financial results due to a material noncompliance with any financial reporting requirements, the Compensation Committee is entitled to recover from current and former executive officers any incentive-based compensation that would
not otherwise have been awarded to such persons under the as-restated financials during the three years preceding the date of the restatement. The Compensation Committee will reevaluate and, if necessary, revise the Company’s clawback policy
to comply with the Dodd-Frank Act once the rules implementing the clawback requirements have been finalized by the SEC.
Stock Ownership Guidelines
To align directly the interests of executive officers with the interests of our shareholders, we established stock ownership guidelines for our executive officers. Our stock ownership
guidelines provide that executive officers are expected to own and hold a number of shares of Company Common Stock with a value that represents: (a) six times the base salary, with respect to our Executive Chairman of the Board and our Chief
Executive Officer, (b) 100 percent of the base salary, with respect to our Chief Operating Officer, Chief Financial Officer and any Executive Vice President, (c) 50 percent of the base salary, with respect to any Senior Vice President, and
(d) 30 percent of their base salary, with respect to each of our other executive officers of the Company. Stock ownership levels are expected to be achieved by each executive officer within a period of time determined at the discretion of the
Compensation Committee.
Our stock ownership guidelines also include a mandatory stock holding period policy which requires our executive officers to hold for a period of two years any stock acquired by them upon the
exercise of stock options or lapse of restrictions on restricted stock or performance shares, net of the funds necessary to pay the exercise price of stock options or for payment of applicable taxes. The mandatory stock holding period does
not apply to long-term retention restricted stock awards.
Termination-Based Compensation
In December 2001, we entered into a change in control or severance agreement with James J. Burke, our Chief Operating Officer. Neither our Chief Executive Officer nor any of our other
executive officers has a change in control or severance agreement. As discussed in more detail under “Severance and Change of Control Arrangements” below, Mr. Burke is entitled to severance payments and continued health and life insurance
coverage for a limited period of time, among other benefits, upon the termination of his employment pursuant to his Severance Compensation Agreement.
The Compensation Committee may adopt and maintain such agreements where it believes the arrangement will protect the interests of senior executives when a potential change of control could
affect their job security. Since the agreements mitigate any concern these executive officers may have in connection with a termination of their employment by us, or a potential loss of employment as a result of a change in control, they
promote the interests of shareholders by assuring that these executive officers focus on evaluating opportunities that are in our best interests, without concentrating on individual personal interests.
In addition, as discussed in more detail under “Severance and Change of Control Arrangements” below, our executive officers are eligible to receive termination-related benefits under the
Company’s Supplemental Executive Retirement Plan. Our 2006 Omnibus Incentive Plan and 2016 Omnibus Incentive Plan also contain provisions that would accelerate the vesting of restricted stock upon certain events, including a change of control
of the Company. We believe these severance and change of control benefits are an essential element of our executive compensation package and assist us in recruiting and retaining talented individuals.
Section 162(m) of the Internal Revenue Code generally limits our ability to claim a tax deduction for individual compensation paid to our executive officers that exceeds $1 million in any
taxable year. In approving the amount and form of compensation for the Company’s executive officers, the Compensation Committee considers the potential impact of Section 162(m), in addition to those factors discussed more fully in our
“Compensation Discussion and Analysis” section above, under the heading “Compensation Philosophy and Primary Objectives”.
We provide our executive officers certain perquisites and other benefits. We provide these benefits as an additional incentive for our executives and to remain competitive in the general
marketplace for executive talent. The primary perquisite for our executive officers is an allowance for leasing an automobile and reimbursement of related expenses. In addition, our executives are also offered broad-based benefits that are
provided to all employees, including health insurance, life and disability insurance, accidental death and dismemberment insurance, Profit Sharing 401(K) Capital Accumulation Plan, and ESOP.
The information appearing in this Compensation Discussion and Analysis, and elsewhere in this Proxy Statement, as to performance metrics, objectives and targets relates only to incentives established
for the purpose of motivating executives to achieve results that will help to enhance shareholder value. This information is not related to the Company’s expectations of future financial performance, and should not be mistaken for or
correlated with any guidance that may be issued by the Company regarding its future earnings, free cash flow or other financial measures.
Management Development Committee
The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis included in this Proxy Statement. Based on this review
and discussion, the Compensation Committee recommended that the Board of Directors include the Compensation Discussion and Analysis in this Proxy Statement and that it be incorporated by reference into our Annual Report on Form 10-K for the
fiscal year ended December 31, 2019.
|
Roger M. Widmann (Chair)
|
Alisa C. Norris
|
|
Pamela Forbes Lieberman
|
Patrick S. McClymont
|
|
William H. Turner
|
Richard S. Ward
|
|
Joseph W. McDonnell
|
The following table sets forth the annual compensation paid by the Company during fiscal years 2019, 2018 and 2017 to our “named executive officers.” Under SEC rules, our named executive
officers were: Lawrence I. Sills, Executive Chairman; Eric P. Sills, Chief Executive Officer and President; James J. Burke, Chief Operating Officer; Dale Burks, Executive Vice President and Chief Commercial Officer; Nathan R. Iles, Chief
Financial Officer; and Carmine J. Broccole, Senior Vice President General Counsel and Secretary.
|
Name
and
Principal
Position
|
Year
|
Salary (1)
|
Bonus (2)
|
Stock
Awards (3)
|
Non-Equity
Incentive Plan
Compensation (4)
|
All
Other
Compensation (5)
|
Total
|
||||||||||||||||||
|
Lawrence I. Sills
|
2019
|
$
|
412,000
|
$ ─
|
$
|
157,520
|
$
|
303,924
|
$
|
45,519
|
$
|
918,963
|
|||||||||||||
|
Executive Chairman of the Board
|
2018
|
400,000
|
─
|
146,520
|
138,025
|
48,706
|
733,251
|
||||||||||||||||||
|
|
2017 |
400,000
|
─
|
158,800
|
169,000
|
75,316
|
803,116
|
||||||||||||||||||
|
Eric P. Sills
|
2019
|
$
|
619,000
|
$ ─
|
$
|
157,520
|
$
|
465,310
|
$
|
82,185
|
$
|
1,324,015
|
|||||||||||||
|
Chief Executive Officer &
|
2018
|
600,000
|
─
|
146,520
|
212,006
|
85,831
|
1,044,357
|
||||||||||||||||||
|
President
|
2017
|
580,000
|
─
|
158,800
|
253,500
|
120,892
|
1,113,192
|
||||||||||||||||||
|
James J. Burke
|
2019
|
$
|
619,000
|
$ ─
|
$
|
157,520
|
$
|
465,310
|
$
|
74,843
|
$
|
1,316,673
|
|||||||||||||
|
Chief Operating Officer &
|
2018
|
590,000
|
963,000
|
146,520
|
207,590
|
77,548
|
1,984,658
|
||||||||||||||||||
|
Former Chief Financial Officer
|
2017
|
573,000
|
─
|
158,800
|
246,740
|
115,772
|
1,094,312
|
||||||||||||||||||
|
Dale Burks
|
2019
|
$
|
510,000
|
$ ─
|
$
|
237,840
|
$
|
380,494
|
$
|
64,684
|
$
|
1,193,018
|
|||||||||||||
|
Executive Vice President &
|
2018
|
495,000
|
─
|
222,560
|
172,807
|
67,825
|
958,192
|
||||||||||||||||||
|
Chief Commercial Officer
|
2017
|
480,000
|
─
|
262,425
|
205,504
|
78,905
|
1,026,834
|
||||||||||||||||||
|
Nathan R. Iles
|
2019
|
$
|
148,333
|
$ ─
|
$
|
257,920
|
$
|
94,240
|
$
|
61,472
|
$
|
561,965
|
|||||||||||||
|
Chief Financial Officer
|
|||||||||||||||||||||||||
|
Carmine J. Broccole
|
2019
|
$
|
465,000
|
$ ─
|
$
|
198,460
|
$
|
253,270
|
$
|
52,615
|
$
|
969,345
|
|||||||||||||
|
Senior Vice President
|
2018
|
452,000
|
─
|
185,930
|
114,837
|
55,988
|
808,755
|
||||||||||||||||||
|
General Counsel & Secretary
|
2017
|
452,000
|
─
|
222,725
|
140,608
|
76,150
|
891,483
|
||||||||||||||||||
| (1) |
With respect to Nathan Iles, the amount in this column represents that portion of his annual base salary of $500,000 that he earned in 2019 following his appointment as Chief Financial Officer in September 2019.
|
| (2) |
The amount in this column represents the retention bonus earned by James Burke pursuant to his Retention Bonus and Insurance Agreement, which expired in 2018. The Company has no further obligations to Mr. Burke under the
agreement.
|
| (3) |
The amounts in this column represent the grant date fair value of stock awards in the applicable year computed in accordance with ASC Topic 718 for restricted stock awards and performance share awards. The fair value of the
performance share awards assumes the achievement of the target level of performance shares as the probable outcome. Assuming the achievement of the maximum level of performance shares, the above amounts for each person would be
increased by the following fair value amounts in each of 2019, 2018 and 2017, respectively: $78,760, $73,260 and $79,400 for Lawrence Sills, Eric Sills, James Burke, Dale Burks and Nathan Iles, and $59,070, $54,945 and $59,550 for
Carmine Broccole. The amounts listed in the table do not reflect whether the named executive officers have actually realized a financial benefit from these awards. For a discussion of the valuation assumptions, see Note 14 to our
consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. See “Grants of Plan-Based Awards” and “Outstanding Equity Awards at Fiscal Year-End” below for more information
regarding our stock awards. In accordance with SEC regulations, the amounts shown exclude the impact of estimated forfeitures related to vesting conditions.
|
| (4) |
The amounts in this column constitute annual cash incentive awards. The annual cash incentive award granted to Nathan Iles was pro-rated for 2019 based on his appointment as Chief Financial Officer in September 2019. See
“Grants of Plan-Based Awards” below for more information regarding annual incentive bonus awards.
|
| (5) |
The amounts in this column represent car allowances for leased automobiles, Company contributions to the Profit Sharing 401(K) Capital Accumulation Plan, ESOP and SERP programs on behalf of the named executive officers, and
relocation benefits paid to Nathan Iles in the amount of $59,692 for establishing a new residence in the New York City area following his appointment as Chief Financial Officer in September 2019. The Company contributions that
were earned in 2019 (but paid in March 2020) into the individual 401(K), ESOP and SERP accounts of our named executive officers are set forth below:
|
|
Name
|
401(K)
|
|
ESOP
|
SERP
|
||||||||
|
Lawrence Sills
|
$
|
18,200
|
$
|
3,840
|
$
|
22,412
|
||||||
|
Eric Sills
|
$
|
18,200
|
$
|
3,840
|
$
|
45,734
|
||||||
|
James Burke
|
$
|
18,200
|
$
|
3,840
|
$
|
45,367
|
||||||
|
Dale Burks
|
$
|
18,200
|
$
|
3,840
|
$
|
33,436
|
||||||
|
Nathan Iles
|
-
|
-
|
-
|
|||||||||
|
Carmine Broccole
|
$
|
18,200
|
$
|
3,840
|
$
|
24,886
|
||||||
Excluding the SERP contributions and the relocation benefits described above, the amount attributable to each perquisite for each named executive officer does not exceed the greater of
$25,000 or 10% of the total amount of perquisites received by such officer.
The following table sets forth certain information with respect to plan-based awards granted to the named executive officers during 2019.
|
Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards (1)
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards (2)
|
All Other Stock
Awards: Number of
|
|||||||||||||||||||||||||||||||
|
Name
|
Grant
Date |
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Shares of Stock or
Units (#) (3)
|
Grant Date
Fair Value (4)
|
||||||||||||||||||||||||
|
Lawrence I. Sills
|
9/24/19
|
─
|
─
|
─
|
1,000
|
2,000
|
4,000
|
─
|
$
|
78,760
|
|||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,000
|
78,760
|
||||||||||||||||||||||||
|
$
|
0
|
$
|
258,000
|
$
|
516,000
|
─
|
─
|
─
|
─
|
─
|
|||||||||||||||||||||||
|
Eric P. Sills
|
9/24/19
|
─
|
─
|
─
|
1,000
|
2,000
|
4,000
|
─
|
$
|
78,760
|
|||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,000
|
78,760
|
||||||||||||||||||||||||
|
$
|
0
|
$
|
395,000
|
$
|
790,000
|
─
|
─
|
─
|
─
|
─
|
|||||||||||||||||||||||
|
James J. Burke
|
9/24/19
|
─
|
─
|
─
|
1,000
|
2,000
|
4,000
|
─
|
$
|
78,760
|
|||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,000
|
78,760
|
||||||||||||||||||||||||
|
$
|
0
|
$
|
395,000
|
$
|
790,000
|
─
|
─
|
─
|
─
|
─
|
|||||||||||||||||||||||
|
Dale Burks
|
9/24/19
|
─
|
─
|
─
|
1,000
|
2,000
|
4,000
|
─
|
$
|
78,760
|
|||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,000
|
78,760
|
||||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,000
|
80,320
|
||||||||||||||||||||||||
|
$
|
0
|
$
|
323,000
|
$
|
646,000
|
─
|
─
|
─
|
─
|
─
|
|||||||||||||||||||||||
|
Nathan R. Iles
|
9/24/19
|
─
|
─
|
─
|
1,000
|
2,000
|
4,000
|
─
|
$
|
78,760
|
|||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,000
|
78,760
|
||||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,500
|
100,400
|
||||||||||||||||||||||||
|
$
|
0
|
$
|
320,000
|
$
|
640,000
|
─
|
─
|
─
|
─
|
─
|
|||||||||||||||||||||||
|
Carmine J. Broccole
|
9/24/19
|
─
|
─
|
─
|
750
|
1,500
|
3,000
|
─
|
$
|
59,070
|
|||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
1,500
|
59,070
|
||||||||||||||||||||||||
|
|
9/24/19
|
─
|
─
|
─
|
─
|
─
|
─
|
2,000
|
80,320
|
||||||||||||||||||||||||
|
$
|
0
|
$
|
215,000
|
$
|
430,000
|
─
|
─
|
─
|
─
|
─
|
|||||||||||||||||||||||
| (1) |
Represents possible threshold, target and maximum payout levels for fiscal year 2019 under our cash incentive bonus programs. Bonuses paid to the named executive officers are dependent on the level of achievement of certain
management and company performance objectives. The actual bonuses paid to each named executive officer for 2019 are reported in the Summary Compensation Table for 2019 above. Additional information regarding our cash incentive
bonus program is included in “Compensation Discussion and Analysis” above.
|
| (2) |
These columns reflect threshold, target and maximum payout levels for performance share awards granted under our 2016 Omnibus Incentive Plan. The performance share awards have a three-year vesting period and performance target
goals relating to the Company’s earnings from continuing operations before taxes, excluding special items, measured at the end of a three-year period. To the extent that the Company does not achieve the threshold level of earnings
before taxes at the end of the measuring period, these performance shares will not be issued. Performance shares were issued to the named executive officers in 2019 at a 55.4% payout level with respect to the performance share
awards granted in 2016, because the Company achieved the applicable financial goals for the 2016-2019 measuring period. Holders of performance share awards are not entitled to shareholder rights, including voting rights or
dividends. To the extent that an officer ceases to be an employee of the Company before the end of the vesting period, the entire performance share award will be forfeited. Additional information regarding our 2016 Omnibus
Incentive Plan is included in the “Compensation Discussion and Analysis” section above.
|
| (3) |
This column reflects the number of shares of both standard and long-term retention restricted stock awards issued under our 2016 Omnibus Incentive Plan. Shares of restricted stock have a three-year or longer vesting period and
are not entitled to dividends; however, holders of restricted stock are entitled to voting rights. To the extent that an officer ceases to be an employee of the Company before the end of the vesting period, the entire unvested
portion of the restricted stock award will be forfeited. See related discussion in “Compensation Discussion and Analysis” above. These awards are also described in “Outstanding Equity Awards at Fiscal Year-End” below.
|
| (4) |
The ASC Topic 718 per share value of the standard restricted stock and long-term retention restricted stock awards granted on September 24, 2019 is $39.38 per share and $40.16 per share, respectively.
|
The following table summarizes the equity awards that we have made to our named executive officers, which awards were outstanding as of December 31, 2019.
|
Stock Awards
|
|||||||||||||||||
|
Name
|
Grant Date
|
Number of
Shares or Units
of Stock that
Have Not Vested
|
Market Value of
Shares or Units
of Stock That
Have Not Vested (1)
|
Equity Incentive Plan
Awards: Number of
Unearned Shares, Units
or Other Rights That
Have Not Vested (2)
|
Equity Incentive Plan
Awards: Market or Payout
Value of Unearned Shares,
Units or Other Rights That
Have Not Vested (1)
|
||||||||||||
|
Lawrence I. Sills
|
10/20/2017
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
10/11/2018
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
9/24/2019
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
Eric P. Sills
|
12/1/2010
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
9/20/2011
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/9/2012
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/8/2013
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/7/2014
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/13/2015
|
4,000
|
(4)
|
$
|
212,880
|
—
|
$
|
—
|
|||||||||
|
|
10/20/2017
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
10/11/2018
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
9/24/2019
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
James J. Burke
|
10/20/2017
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
10/11/2018
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
9/24/2019
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
Dale Burks
|
12/1/2010
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
9/20/2011
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/9/2012
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/8/2013
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/7/2014
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/13/2015
|
4,000
|
(4)
|
$
|
212,880
|
—
|
$
|
—
|
|||||||||
|
|
10/20/2016
|
4,000
|
(4)
|
$
|
212,880
|
—
|
$
|
—
|
|||||||||
|
|
10/20/2017
|
2,500
|
(4)
|
$
|
133,050
|
—
|
$
|
—
|
|||||||||
|
|
10/20/2017
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
10/11/2018
|
2,000
|
(4)
|
$
|
106,440
|
—
|
$
|
—
|
|||||||||
|
|
10/11/2018
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
|
9/24/2019
|
2,000
|
(4)
|
$
|
106,440
|
—
|
$
|
—
|
|||||||||
|
|
9/24/2019
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
Nathan R. Iles
|
9/24/2019
|
2,500
|
(4)
|
$
|
133,050
|
—
|
$
|
—
|
|||||||||
|
|
9/24/2019
|
2,000
|
(3)
|
$
|
106,440
|
2,000
|
$
|
106,440
|
|||||||||
|
Carmine J. Broccole
|
12/1/2010
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
9/20/2011
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/9/2012
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/8/2013
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/7/2014
|
5,000
|
(4)
|
$
|
266,100
|
—
|
$
|
—
|
|||||||||
|
|
10/13/2015
|
4,000
|
(4)
|
$
|
212,880
|
—
|
$
|
—
|
|||||||||
|
|
10/20/2016
|
4,000
|
(4)
|
$
|
212,880
|
—
|
$
|
—
|
|||||||||
|
|
10/20/2017
|
2,500
|
(4)
|
$
|
133,050
|
—
|
$
|
—
|
|||||||||
|
|
10/20/2017
|
1,500
|
(3)
|
$
|
79,830
|
1,500
|
$
|
79,830
|
|||||||||
|
|
10/11/2018
|
2,000
|
(4)
|
$
|
106,440
|
—
|
$
|
—
|
|||||||||
|
|
10/11/2018
|
1,500
|
(3)
|
$
|
79,830
|
1,500
|
$
|
79,830
|
|||||||||
|
|
9/24/2019
|
2,000
|
(4)
|
$
|
106,440
|
—
|
$
|
—
|
|||||||||
|
|
9/24/2019
|
1,500
|
(3)
|
$
|
79,830
|
1,500
|
$
|
79,830
|
|||||||||
| (1) |
The market value is based on the closing price of the Company’s Common Stock of $53.22 per share as of December 31, 2019.
|
| (2) |
Performance share awards vest on the third anniversary of the date of grant, provided that certain performance goals have been met at the end of the three-year measuring period. Please refer to “Compensation Discussion and
Analysis” above for additional information regarding equity awards granted under our 2016 Omnibus Incentive Plan.
|
| (3) |
This standard restricted stock award vests on the third anniversary of the date of grant.
|
| (4) |
This long-term retention restricted stock award vests in increments upon the executive reaching 60 (25% vests), 63 (25% vests) and 65 (balance vests) years of age.
|
The following table provides additional information relating to the vesting of standard restricted stock and performance shares previously granted to the named executive officers during the
year ended December 31, 2019. None of the named executive officers has outstanding options to purchase shares of Company Common Stock.
|
Stock Awards
|
||||||||
|
Name (1)
|
Number of Shares
Acquired on Vesting
|
Value Realized
on Vesting (2)
|
||||||
|
Lawrence I. Sills
|
3,108
|
$
|
153,193
|
|||||
|
Eric P. Sills
|
3,108
|
$
|
153,193
|
|||||
|
James J. Burke
|
3,108
|
$
|
153,193
|
|||||
|
Dale Burks
|
3,108
|
$
|
153,193
|
|||||
|
Nathan R. Iles
|
-
|
-
|
||||||
|
Carmine J. Broccole
|
2,331
|
$
|
114,895
|
|||||
| (1) |
Nathan R. Iles did not have restricted stock or performance shares vest in 2019.
|
| (2) |
The market value of the restricted stock and the performance shares is based on the closing price of the Company’s Common Stock of $49.29 per share on October 18, 2019, the last trading day before the vesting date of such stock
awards.
|
The following table shows the aggregate earnings and balances for each of our named executive officers under our Supplemental Executive Retirement Plan as of December 31, 2019.
|
Name
|
Executive
Contributions
in Last FY (1)
|
Registrant
Contributions
in Last FY (1)
|
Aggregate
Earnings
in Last FY (2)
|
Aggregate
Withdrawals/
Distribution
|
Aggregate
Balance
at Last FYE
|
|||||||||||||||
|
Lawrence I. Sills
|
$
|
120,666
|
$
|
24,402
|
$
|
1,009,974
|
$
|
—
|
$
|
8,723,915
|
||||||||||
|
Eric P. Sills
|
45,620
|
48,016
|
94,273
|
—
|
549,532
|
|||||||||||||||
|
James J. Burke
|
—
|
46,624
|
315,472
|
—
|
1,473,372
|
|||||||||||||||
|
Dale Burks
|
—
|
35,320
|
144,994
|
—
|
647,923
|
|||||||||||||||
|
Nathan R. Iles
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Carmine J. Broccole
|
—
|
26,361
|
98,046
|
—
|
472,826
|
|||||||||||||||
| (1) |
The amounts shown in this column reflect amounts contributed in 2019.
|
| (2) |
Earnings are not above market and therefore are not reportable in the Summary Compensation Table. See “Severance and Change of Control Arrangements—Defined Contribution Plan” below for further information.
|
The following table presents information on our existing equity plans as of December 31, 2019, under which shares of the Company’s Common Stock are authorized for issuance.
|
Plan Category
|
Number of Securities
to be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
|
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
|
Number of Securities
Remaining Available
for Future Issuance
under Equity
Compensation Plans
|
|||||||||
|
Equity compensation plans approved by security holders
|
852,540
|
(1)
|
$
|
35.26
|
321,929
|
(2)
|
||||||
|
Equity compensation plans not approved by security holders
|
─
|
─
|
─
|
|||||||||
|
All plans
|
852,540
|
(1)
|
$
|
35.26
|
321,929
|
(2)
|
||||||
| (1) |
Represents shares covered by outstanding unvested long-term retention restricted stock awards issued under our 2006 Omnibus Incentive Plan, and outstanding unvested awards of restricted stock (standard awards and long-term
retention awards) and performance shares issuable under our 2016 Omnibus Incentive Plan.
|
| (2) |
Represents shares of the Company’s Common Stock issuable under our 2016 Omnibus Incentive Plan.
|
The median of the annual compensation paid by the Company during fiscal year 2019 to all employees (excluding our Chief Executive Officer) is estimated to be approximately $28,141 (referred
to as the “2019 Median Compensation”). The ratio of the 2019 Median Compensation to the annual compensation of Eric P. Sills, our Chief Executive Officer and President, for fiscal year 2019, which is described in the Summary Compensation
Table for 2019 above, is estimated to be one to forty-seven.
We identified our median employee as of December 31, 2019, using payroll records that reflected total wages and other compensation paid to our employees during fiscal year 2019, as reported
to the U.S. Internal Revenue Service on Form W-2 and the equivalent for our non-U.S. employees. Adjustments were made to annualize the compensation of all permanent employees (full-time or part-time) who were employed for less than the full
fiscal year, and to convert to U.S. dollars any compensation paid to our employees in currencies other than U.S. dollars using the relevant exchange rate at year-end. We believe the resulting ratio is a reasonable estimate calculated in a
manner consistent with the compensation disclosure rules of the SEC.
Severance Compensation Agreement
In December 2001, we entered into a Severance Compensation Agreement with James J. Burke. Mr. Burke’s Severance Compensation Agreement provides that if a change in control of the Company
occurs and, within 12 months thereafter, Mr. Burke’s employment is terminated by the Company without cause or by Mr. Burke for certain specific reasons, then he will receive severance payments and certain other benefits. The specific reasons
which allow Mr. Burke to resign and receive the benefits are: (1) a reduction in status, position or reporting responsibility; (2) a reduction in his annual rate of base salary; and (3) relocation of more than 15 miles from the Company’s
current office.
If Mr. Burke resigns for one of the specific reasons, or is terminated without cause, he will be entitled to receive: (1) a severance payment equal to three times his base salary plus
standard bonus, payable over a two year period on a pro rata, semi-monthly basis; (2) continued participation for a period of 36 months in group medical, dental and/or life insurance plans; (3) exclusive use of a company automobile for the
duration of the lease then in effect; and (4) outplacement services.
For purposes of the agreement, a change in control of the Company means the occurrence of any of the following events: (1) a sale of all or substantially all of the assets of the Company to
any person or group other than certain designated individuals; or (2) any person or group, other than certain designated individuals, become the beneficial owner or owners of more than 50% of the total voting stock of the Company, including
by way of merger, consolidation or otherwise.
Defined Contribution Plan
The Company has established a defined contribution Supplemental Executive Retirement Plan (SERP) for our executive officers and other eligible employees. The purpose of this plan is to enable
the Company to supplement the benefits under the Company’s Profit Sharing 401(K) Capital Accumulation Plan as well as to provide a means whereby certain amounts payable by the Company to our executive officers may be deferred to some future
period. To the extent that an eligible employee retires or is terminated, their accounts in the SERP shall be paid either in a lump sum or over a period of time, at the election of the employee. In the event of a change of control of the
Company, the Company shall, as soon as possible, but in no event longer than 60 days following the change of control event, make an irrevocable contribution to a rabbi trust established under the plan in an amount that is sufficient to pay
each SERP participant or beneficiary the benefits to which SERP participants or their beneficiaries would be entitled pursuant to the terms of the SERP as of the date on which the change of control event occurred. Upon a change of control
event, each participant’s account shall be fully vested.
Defined Benefit Pension Plan
The Company maintains a defined benefit unfunded Supplemental Executive Retirement Plan. The benefits under this plan are in addition to any benefits payable to participants under the
Company’s Profit Sharing 401(K) Capital Accumulation Plan and the defined contribution SERP. As of the date of this Proxy Statement, there are no participants in the defined benefit Supplemental Executive Retirement Plan.
2016 Omnibus Incentive Plan
As previously discussed under “Compensation Discussion and Analysis” above, we grant our named executive officers shares of restricted stock. Under the terms of the 2016 Omnibus Incentive
Plan, any unvested shares of restricted stock will immediately vest upon death, retirement at or after the age of 65, total disability, or upon a change in control of the Company. For purposes of the Incentive Plan, a “change of control”
means any of the following events:
| (a) |
Any person, other than certain designated persons, becomes the beneficial owner of 30% or more of the total voting stock of the Company;
|
| (b) |
Individuals who constituted the Board as of May 19, 2016 cease for any reason to constitute at least a majority of the Board, other than in certain circumstances;
|
| (c) |
Consummation of a reorganization, merger, or consolidation of the Company, in each case unless, all or substantially all of the beneficial owners of the Company before such event hold more than 50% of the voting stock after
such event; or
|
| (d) |
Any person, other than certain designated persons, acquires assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company.
|
The following table shows the estimated benefits payable to our named executive officers following both a change in control of the Company and a hypothetical termination of employment as of
December 31, 2019 under the severance and change in control arrangements discussed immediately above.
|
Name
|
Severance
Compensation
Agreement
Amount (1)
|
SERP
Amount (2)
|
Early
Vesting of
Restricted
Stock (3)
|
Other (4)
|
Total
|
|||||||||||||||
|
Lawrence I. Sills
|
$ ─
|
$
|
8,723,915
|
$
|
319,320
|
$ ─
|
$
|
9,043,235
|
||||||||||||
|
Eric P. Sills
|
─
|
549,532
|
1,862,700
|
─
|
2,412,232
|
|||||||||||||||
|
James J. Burke
|
3,042,000
|
1,473,372
|
319,320
|
130,845
|
4,965,545
|
|||||||||||||||
|
Dale Burks
|
─
|
647,923
|
2,421,510
|
─
|
3,069,433
|
|||||||||||||||
|
Nathan R. Iles
|
─
|
─
|
239,490
|
─
|
239,490
|
|||||||||||||||
|
Carmine J. Broccole
|
─
|
472,826
|
2,341,680
|
─
|
2,814,506
|
|||||||||||||||
| (1) |
This amount represents three times the sum of the executive officer’s 2019 base salary and standard bonus and would be payable over a two year period on a semi-monthly basis.
|
| (2) |
This amount represents contributions under the SERP that would be made upon a change of control. Absent a change of control, if the executive officer retired or was terminated at December 31, 2019, this amount would be paid
either in a lump sum or over a period of time, at the election of the officer.
|
| (3) |
This amount represents the closing price of our Common Stock on December 31, 2019 of $53.22 per share multiplied by the outstanding number of shares of restricted stock for each executive as follows: Lawrence Sills – 6,000
shares; Eric Sills – 35,000 shares; James Burke – 6,000 shares; Dale Burks – 45,500 shares; Nathan Iles – 4,500; and Carmine Broccole – 44,000 shares. Absent a change of control, if Lawrence I. Sills resigned or retired at
December 31, 2019, his restricted stock award would immediately vest under the terms of the award because the executive officer has reached the age of 65.
|
| (4) |
For James J. Burke, this amount represents Company payments for (a) group medical, dental and/or life insurance plans for a 36 month period, (b) use of a company automobile for the duration of the lease then in effect, and (c)
the cost of outplacement services, pursuant to the terms of the Severance Compensation Agreement.
|
Our Compensation Committee has analyzed the concept of risk as it relates to our compensation program for all employees. The Compensation Committee does not
believe our compensation program encourages excessive or inappropriate risk taking because the Company does not use highly leveraged incentives that drive risky short-term behavior. As we discussed previously with respect to our
named executive officers in the Compensation Discussion and Analysis, we structure our incentive bonus programs and equity award programs to promote the creation of long-term value and discourage behavior that leads to excessive risk:
| • |
We structure our pay to consist of both fixed and variable compensation. The fixed (or salary) portion of compensation is designed to provide a steady income regardless of the Company’s stock price so that employees do not feel
pressured to focus exclusively on stock price performance to the detriment of other important business goals. The variable (cash bonus and equity) portions of compensation are designed to reward both short-term and long-term
corporate performance. For short-term performance, our cash bonus is awarded based on the achievement of both company-level financial objectives and management performance goals. For long-term performance, our restricted stock and
performance share awards vest over three years or a longer period of time.
|
| • |
We cap our annual cash incentive awards at 200% of the applicable target, which we believe also mitigates excessive risk taking by limiting payouts. Moreover, any awards in excess of the
200% target may be carried into the following year but is subject to the risk of forfeiture depending upon the following year’s performance. With respect to company-level financial performance awards,
since bonuses are based on overall corporate performance, rather than individual performance, the ability of an individual executive to increase his or her own bonus compensation through excessive risk taking is
constrained.
|
Our Board has adopted a written policy relating to the review, approval or ratification of transactions between the Company or its subsidiaries and related persons. Under SEC rules, a related
person is a director, officer, nominee for director, or five percent or greater shareholder of the Company since the beginning of the last fiscal year and their immediate family members. The Company’s policies and procedures apply to any
transaction or series of transactions in which the Company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person has a direct or indirect material interest.
Our policy requires that all related person transactions be disclosed to the Governance Committee (with respect to directors) or the Audit Committee (with respect to executive officers). The
applicable committee then reviews the material facts of such related person transactions and either approves or disapproves of the entry into or ratifies the related person transaction. In determining whether to approve or ratify a related
person transaction, the applicable committee will take into account, among other factors it deems appropriate, whether the related person transaction is on terms no less favorable than terms generally available to an unaffiliated third party
under the same or similar circumstances and the extent of the related person’s interest in the transaction. In addition, our policy provides that any related person transaction may be consummated or continue if (1) the transaction is approved
by the disinterested members of the Board or (2) the transaction involves compensation approved by the Company’s Compensation Committee. No director shall participate in the approval of a transaction for which he or she is the related person
but may participate in any discussion regarding such transaction if requested by the Chair of the applicable committee.
The Governance Committee approved of the Company’s entry into a consulting agreement in April 2018 with John P. Gethin, a director of the Company, and our former Chief Operating Officer.
Pursuant to the terms of the agreement, Mr. Gethin advises our senior management, primarily in the development of customer relationships and corporate strategy. In consideration for such services, Mr. Gethin receives a quarterly consulting
fee of $25,000, the reimbursement of reasonable and customary out-of-pocket expenses incurred in performing such services, and a monthly allowance for leasing an automobile and reimbursement of related expenses. The term of the agreement
renews in April each year for successive one-year periods, subject to termination by either the Company or Mr. Gethin at any time, with or without cause, on ninety days’ advance written notice.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. The Audit Committee is currently comprised of seven directors who are “independent”
as defined under the listing standards of the New York Stock Exchange. The Audit Committee met four times in 2019 and operates under a written charter adopted by the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process, including the Company’s systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed with management the audited financial statements in the Annual
Report on Form 10-K for the fiscal year ended December 31, 2019, including a discussion of the quality and the acceptability of the Company’s financial reporting and controls.
The Audit Committee also reviewed with KPMG LLP, the Company’s independent registered public accounting firm, that is responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their judgments as to the quality and the acceptability of the Company’s financial reporting, and such other matters as are required to be discussed with the Audit Committee
under the applicable requirements of the Public Company Accounting Oversight Board and the SEC, including the scope of the auditor’s responsibilities and whether there are any significant accounting adjustments or any disagreements with
management. In addition, the Audit Committee discussed with KPMG LLP the auditors’ independence from management and the Company, including the matters in the auditors’ written disclosures required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence.
The Audit Committee also discussed with the Company’s internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee meets periodically with
the internal and the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report
on Form 10-K for the fiscal year ended December 31, 2019 for filing with the SEC.
|
Audit Committee
|
|
|
William H. Turner (Chair)
|
Alisa C. Norris
|
|
Pamela Forbes Lieberman
|
Richard S. Ward
|
|
Patrick S. McClymont
|
Roger M. Widmann
|
|
Joseph W. McDonnell
|
To be considered for inclusion in next year’s Proxy Statement pursuant to the provisions of Rule 14a-8 of the Exchange Act, shareholder proposals must be received at the Company’s offices no
later than the close of business on December 18, 2020. Proposals should be addressed to Carmine J. Broccole, Secretary, Standard Motor Products, Inc., 37-18 Northern Blvd., Long Island City, New York 11101.
For any shareholder proposal that is not submitted for inclusion in the next year’s Proxy Statement, but is instead sought to be presented directly at the 2021 annual meeting, rules of the
SEC permit management to vote proxies in its discretion if the Company: (1) receives notice of the proposal before close of business on March 1, 2021, and advises shareholders in the 2021 Proxy Statement about the nature of the matter and how
management intends to vote on such matter; or (2) does not receive notice of the proposal prior to the close of business on March 1, 2021. Notice of intention to present proposals at the 2021 annual meeting should be addressed to Carmine J.
Broccole, Secretary, Standard Motor Products, Inc., 37-18 Northern Blvd., Long Island City, New York 11101.
The Company’s 2019 Annual Report has been mailed to shareholders. A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 is included
in the 2019 Annual Report and will also be furnished to any shareholder who requests the same free of charge (except for exhibits thereto for which a nominal fee covering reproduction and mailing expenses will be charged). Requests should be
addressed to the Secretary of the Company at 37-18 Northern Blvd., Long Island City, NY 11101. The 2019 Annual Report is also available at our website at ir.smpcorp.com under “Financial Reports—Annual
Reports.”
and Annual Reports for Record Owners
The SEC rules permit us, with your permission, to deliver a single proxy statement and annual report to any household at which two or more shareholders of record reside at the same address.
Each shareholder will continue to receive a separate proxy. This procedure, known as “householding,” reduces the volume of duplicate information you receive and helps to reduce our expenses and our environmental footprint. Shareholders of
record voting by mail can choose this option by marking the appropriate box on the proxy included with this Proxy Statement and shareholders of record voting by telephone or over the Internet can choose this option by following the
instructions provided by telephone or over the Internet, as applicable. Once given, a shareholder’s consent will remain in effect until such shareholder revokes it by notifying our Secretary as described above. If you revoke your consent, we
will begin sending you individual copies of future mailings of these documents within 30 days after we receive your revocation notice. Shareholders of record who elect to participate in householding may also request a separate copy of future
proxy statements and annual reports by contacting the Secretary of the Company as described above.
On the date this Proxy Statement went to press, management knew of no other business that will be presented for action at the Annual Meeting. In the event that any other business should come
before the Annual Meeting, it is the intention of the proxy holders named by proxy to take such action as shall be in accordance with their best judgment.
|
By Order of the Board of Directors
|
|
|
Carmine J. Broccole
|
|
|
Senior Vice President
|
|
|
General Counsel and Secretary
|
|
|
Dated: April 17, 2020
|
STANDARD MOTOR PRODUCTS, INC. 37-18 NORTHERN BOULEVARD LONG ISLAND CITY, NY 11101 VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. Eastern Time on May 18, 2020 for shares held directly and by 11:59 P.M. Eastern Time
on May 16, 2020 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During
The Meeting - Go to www.virtualshareholdermeeting.com/SMP2020 You may attend the meeting via the Internet and vote during the meeting. Have the
information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions.
Vote by 11:59 P.M. Eastern Time on May 18, 2020 for shares held directly and by 11:59 P.M. Eastern Time on May 16, 2020 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D12977-P37731KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY STANDARD MOTOR PRODUCTS, INC. For All Withhold All For All Except To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line
below. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: 01) John P. Gethin 02) Pamela Forbes Lieberman 03)
Patrick S. McClymont 04) Joseph W. McDonnell 05) Alisa C. Norris 06) Eric P. Sills 07) Lawrence I. Sills 08) William H. Turner 09) Richard S. Ward 10) Roger M. Widmann The Board of Directors recommends you
vote FOR proposals 2 and 3. 2. Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020. 3. Approval of non-binding, advisory
resolution on the compensation of our named executive officers. NOTE: In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any
adjournment or postponement thereto. For Against Abstain For address changes and/or comments, please check this box and write them on the back where indicated. Please sign exactly as your name(s)
appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full
corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Proxy
Statement and Annual Report are available at www.proxyvote.com. D12978-P37731 STANDARD MOTOR PRODUCTS, INC. Annual Meeting of Shareholders May 19, 2020 at 3:00 p.m. This proxy is solicited by the Board of
Directors The undersigned shareholder(s) of STANDARD MOTOR PRODUCTS, INC. (the “Company”) hereby appoint(s) ERIC P. SILLS, JAMES J. BURKE and NATHAN R. ILES as Proxies, each with the power to appoint his substitute, and hereby
authorize(s) them to represent and vote, as designated on this Proxy, all of the shares of the Company’s Common Stock held of record by the undersigned on April 7, 2020 at the Annual Meeting of Shareholders of the Company, to be held at the
Standard Motor Products Building, 37-18 Northern Boulevard, 6th Floor, Long Island City, New York 11101, and online at www.virtualshareholdermeeting.com/SMP2020, on May 19, 2020, or at any adjournment or postponement thereof. THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED “FOR ALL” OF THE NOMINEES LISTED IN PROPOSAL NO. 1 AND “FOR” PROPOSALS NO. 2 AND 3. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING. Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side