UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Leggett & Platt, Incorporated
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Leggett & Platt® Incorporated 2018 ANNUAL MEETING PROXY STATEMENT
FROM OUR
CHAIRMAN OF THE BOARD |
Fellow Shareholders:
At Leggett & Platt, our mission is to enhance peoples lives by designing and manufacturing innovative, distinctive products and components for use in bedding, automobiles, furniture, seating, homes, offices, and airplanes. We efficiently turn ordinary materials into extraordinary products through the outstanding efforts of our 22,000 employees around the world.
At the core of our strategy is a commitment to excellence and innovation. The Company grows and prospers as we expand or obtain positions in attractive markets, develop inventive proprietary products, and continuously improve production and distribution efficiency. Through these efforts, we strive to generate Total Shareholder Return for our stockholders that ranks in the top 1/3 of the S&P 500.
We look forward to sharing more about Leggett at our Annual Meeting of Shareholders to be held on Tuesday, May 15, 2018, at our headquarters at the Cornell Campus in Carthage, Missouri. In addition to the business to be transacted at the Annual Meeting, as described in this Notice of Annual Meeting of Shareholders and Proxy Statement, we will discuss developments during the past year, outline the progress weve made on our strategic priorities, and respond to shareholder questions.
Your vote is very important. Whether or not you plan to attend the meeting, please vote as soon as possible, either online at www.proxypush.com/leg or by returning the enclosed proxy or voting instruction card.
On behalf of the Board of Directors, I thank you for your participation and investment in Leggett.
Sincerely,
LEGGETT & PLATT, INCORPORATED
R. Ted Enloe, III
Board Chair
NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 15, 2018 | 10:00 a.m. Central Time
Leggett & Platt Conference Center, 1 Leggett Road, Carthage, Missouri
Dear Shareholders:
The annual meeting of shareholders of Leggett & Platt, Incorporated (the Company) will be held at the Companys Conference Center, 1 Leggett Road, Carthage, Missouri 64836, on Tuesday, May 15, 2018, at 10:00 a.m. Central Time:
1. | To elect nine directors; |
2. | To ratify the selection of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for the year ending December 31, 2018; |
3. | To provide an advisory vote to approve named executive officer compensation; and |
4. | To transact such other business as may properly come before the meeting or any postponement or adjournment thereof. |
You are entitled to vote only if you were a Leggett & Platt shareholder at the close of business on March 6, 2018.
An Annual Report to Shareholders outlining the Companys operations during 2017 accompanies this Notice of Annual Meeting and Proxy Statement.
By Order of the Board of Directors,
Scott S. Douglas
Secretary
Carthage, Missouri
March 28, 2018
Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting to Be Held on May 15, 2018
The enclosed proxy materials and access to the proxy voting site are also available to you on the Internet.
You are encouraged to review all of the information contained in the proxy materials before voting.
The Companys Proxy Statement and Annual Report to Shareholders are available at:
www.leggett.com/proxy/2018
The Companys proxy voting site can be found at:
www.proxypush.com/leg
This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should considerplease read the entire proxy statement before voting. These materials were first sent to our shareholders on March 28, 2018.
2018 Annual Meeting of Shareholders
Date and Time: | Tuesday, May 15, 2018, 10:00 a.m. Central Time | |
Place: | Leggett & Platt Conference Center, 1 Leggett Road, Carthage, Missouri | |
Record Date: | March 6, 2018 |
Voting Matters
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Board Vote Recommendation
|
Page
| ||
Election of nine directors |
FOR each nominee | 10 | ||
Ratification of PwC as Independent Accounting Firm |
FOR | 15 | ||
Advisory vote to approve named executive officer compensation |
FOR | 17 |
Business Highlights
In 2017, sales increased 5% to $3.94 billion from a combination of volume growth, raw material-related price increases and currency impact. Earnings were pressured by commodity inflation, resulting in a lower EBIT margin of 11.9% for 2017. The company generated $444 million of cash from operations in 2017. For detailed results, see the Companys Annual Report on Form 10-K filed February 22, 2018.
We posted EPS from continuing operations of $2.14 in 2017, which included a net $.32 per share charge related to the recently enacted Tax Cuts and Jobs Act and other smaller items. We also raised our dividend for the 46th consecutive year. Over the last ten years we generated total shareholder return (TSR) of 15% per year, which ranked in the top 18% of the S&P 500. For the three years ending December 31, 2017, we generated an average TSR of 7% per year, which placed us just below the midpoint of the S&P 500 and short of our goal of our three-year TSR ranking in the top third of the S&P 500. However, we believe our disciplined growth strategy and priorities for use of capital should support achievement of our top-third goal in future cycles.
Director Nominees (page 10)
All of Leggetts directors are elected for a one-year term by a majority of shares present and entitled to vote at the Annual Meeting. The 2018 director nominees are:
Independent Directors
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Age
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Director Since
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Principal Occupation
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Committee Memberships(1)
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Other Public Company Boards
| |||||
Robert E. Brunner |
60 | 2009 | Retired Executive VP, Illinois Tool Works | A C | 2 | |||||
Robert G. Culp, III |
71 | 2013 | Chairman, Culp, Inc. | A N | 2 | |||||
R. Ted Enloe, III, Board Chair |
79 | 1969 | Managing General Partner, Balquita Partners, Ltd. | A C N | 1 | |||||
Manuel A. Fernandez |
71 | 2014 | Managing Director, SI Ventures | C N | 2 | |||||
Joseph W. McClanathan |
65 | 2005 | Retired President & CEOHousehold Products Division, Energizer Holdings, Inc. |
A C N* | | |||||
Judy C. Odom |
65 | 2002 | Retired Chair & CEO, Software Spectrum, Inc. | A* C N | 2 | |||||
Phoebe A. Wood |
64 | 2005 | Retired Vice Chair & CFO, Brown-Forman Corp. | A C* | 3 | |||||
Management Directors
|
||||||||||
Karl G. Glassman |
59 | 2002 | President & Chief Executive Officer | | ||||||
Matthew C. Flanigan |
56 | 2010 | Executive Vice President & Chief Financial Officer | 1 |
(1) | *Committee Chair, AAudit Committee, CCompensation Committee, NNominating & Corporate Governance Committee |
1 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Executive Compensation Highlights (page 18)
Leggett seeks to align our executives and shareholders interests through pay-for-performance. In 2017, 83% of our CEOs target compensation was performance-based and 62% was delivered in equity-based awards. Our compensation structure strives to strike an appropriate balance between short-term and longer-term compensation that reflects the short- and longer-term interests of the business. We believe this structure helps us attract, retain and motivate high-performing executives who will achieve outstanding results for our shareholders.
Key Components of Our Executive Officers 2017 Compensation Program
Performance Metrics
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Role within Compensation Program
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How Designed and Determined
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% of 2017 CEO Pay at Target
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Base Salary |
N/A | The only non-performance based component of our executives compensation. Target incentive payments and equity awards are set as a percentage of base salary. | Our Compensation Committee reviews executive salaries annually, based on market data, peer benchmarking, individual performance and internal equity. | 17 | % | |||||
Annual Incentive |
Return on Capital Employed (ROCE), Cash Flow, and Individual Performance Goals | Short-term cash incentive that rewards achievement of specific business targets and individual goals within the fiscal year. | The ROCE and cash flow targets are based on the Companys earnings guidance for the year. Payouts range from 0% to 150%, based upon actual performance. | 21 | % | |||||
Profitable Growth Incentive |
Revenue Growth and Profit Margin | Pay-for-performance program that rewards revenue growth while maintaining or improving margins over a two-year period. These are two levers for achieving our long-range TSR goals. | The revenue growth threshold is based on the projected GDP of our primary markets, while margin threshold is based on the Companys past performance. Payouts range from 0% to 250%. | 13 | % | |||||
Performance Stock Units |
Total Shareholder Return (TSR) | Three-year relative TSR performance holds management accountable for creating and sustaining value for shareholders. | Relative TSR is measured against the industrial, materials and consumer discretionary sectors of the S&P 500 and S&P Midcap 400, about 320 companies. Payouts range from 0% to 175%. | 49 | % |
Key Features of Our Executive Officer Compensation Program
What We Do | What We Dont Do | |||||||
✓ |
Pay for Performance A significant majority of our NEOs compensation is at-risk variable compensation. | × |
No Excessive Perquisites Perquisites represent less than 1% of our NEOs compensation. | |||||
✓ |
Multiple Performance Metrics Variable compensation is based on more than one measure to encourage balanced incentives. | × |
No Single-Trigger Change in Control Our CIC-related cash severance and equity incentive awards (other than legacy stock options) have a double trigger. | |||||
✓ |
Awards Caps All of our variable compensation plans have maximum payout limits. | × |
No Dividends on Equity Awards Prior to Vesting | |||||
✓ |
Benchmarking We compare our compensation package to market surveys and a customized peer group, and the Committee engages an independent consultant. | × |
No Hedging or Pledging We do not permit our executive officers to engage in either hedging or pledging activities with respect to Leggett shares. | |||||
✓ |
Tally Sheets The Compensation Committee reviews the NEOs overall compensation packages and potential severance payouts. |
× |
No Employment Agreements All of our NEOs are employed at-will. | |||||
✓ |
Stock Ownership Requirements All NEOs exceed our robust stock ownership requirements. |
× |
No Tax Gross-Ups | |||||
✓ |
Confidentiality & Non-Compete Agreements All NEOs are subject to confidentiality and non-compete agreements. |
× |
No Share Recycling | |||||
✓ |
Clawbacks Our policies exceed the mandates of Sarbanes-Oxley. |
× |
No Repricing of Options or Cash Buyouts |
2 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
CORPORATE GOVERNANCE AND BOARD MATTERS
Leggett & Platt has a long-standing commitment to sound corporate governance principles and practices. The Board of Directors has adopted Corporate Governance Guidelines that establish the roles and responsibilities of the Board and Company management. The Board has also adopted a Code of Business Conduct and Ethics applicable to all Company employees, officers and directors, as well as a separate Financial Code of Ethics applicable to the Companys CEO, CFO, and principal accounting officer. These documents can be found at www.leggett-search.com/governance.
Shareholders and all other interested parties wanting to contact our Board of Directors may e-mail the Board Chair, Mr. Enloe, at boardchair@leggett.com. They can also write to Leggett & Platt Board Chair, P.O. Box 637, Carthage, MO 64836. The Corporate Secretarys office reviews this correspondence and periodically sends Mr. Enloe all communications except items unrelated to Board functions. In his discretion, Mr. Enloe may forward communications to the full Board or to any of the other independent directors for further consideration.
During 2017 and early 2018, we engaged with shareholders on a variety of governance issues, including proxy access, board refreshment and director evaluations, with an independent director participating in those discussions, as appropriate.
3 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Board and Committee Composition and Meetings
The Board held four meetings in 2017, and its committees met the number of times listed in the table below. All directors attended at least 75% of the Board meetings and their respective committee meetings. Directors are expected to attend the Companys annual meeting of shareholders, and all of them attended the 2017 annual meeting.
The Board has a standing Audit Committee, Compensation Committee, and Nominating & Corporate Governance (N&CG) Committee. These committees consist entirely of independent directors, and each operates under a written charter adopted by the Board. The Audit, Compensation, and N&CG Committee charters are posted on our website at www.leggett-search.com/governance.
Audit Committee Judy C. Odom (Chair) Robert E. Brunner Robert G. Culp, III R. Ted Enloe, III Joseph W. McClanathan Phoebe A. Wood
Meetings in 2017: 4 |
The Audit Committee assists the Board in the oversight of: Independent registered public accounting firms qualifications, independence, appointment, compensation, retention and performance. Internal control over financial reporting. Guidelines and policies to govern risk assessment and management. Performance of the Companys internal audit function. Integrity of the financial statements and external financial reporting. Legal and regulatory compliance. Complaints and investigations of any questionable accounting, internal control or auditing matters.
| |
Compensation Committee Phoebe A. Wood (Chair) Robert E. Brunner R. Ted Enloe, III Manuel A. Fernandez Joseph W. McClanathan Judy C. Odom
Meetings in 2017: 6 |
The Compensation Committee assists the Board in the oversight and administration of: Corporate goals and objectives regarding CEO compensation and evaluation of the CEOs performance in light of those goals and objectives. Non-CEO executive officer compensation. Cash and equity-based compensation for directors. Incentive compensation and equity-based plans that are subject to Board approval. Grants of awards under incentive and equity-based plans required to comply with applicable tax laws. Employment agreements and severance benefit agreements with the CEO and executive officers, as applicable. Related person transactions of a compensatory nature.
| |
Nominating & Corporate Governance Committee Joseph W. McClanathan (Chair) Robert G. Culp, III R. Ted Enloe, III Manuel A. Fernandez Judy C. Odom
Meetings in 2017: 3 |
The N&CG Committee assists the Board in the oversight of: Corporate governance principles, policies and procedures. Identifying qualified candidates for Board membership and recommending director nominees. Recommending committee members and Board leadership positions. Director independence and related person transactions. |
Board and Committee Evaluations
The Board and each of its Committees conduct an annual self-evaluation of their practices and charter responsibilities. In addition, the Board periodically conducts director peer reviews of the qualifications and contributions of its individual members. In 2017, one-on-one director evaluations were conducted by the Board Chair. The N&CG Committee oversees these reviews and reports to the Board.
4 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Boards Oversight of Risk Management
Consideration of Director Nominees and Diversity
The Nominating & Corporate Governance Committee is responsible for identifying and evaluating qualified candidates for election to the Board of Directors. The Committees procedure can be found at www.leggett-search.com/governance. Following its evaluation, the N&CG Committee recommends to the full Board a slate of director candidates for inclusion in the Companys proxy statement and proxy card.
5 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
The N&CG Committee seeks to identify and recruit the best available candidates, who should have the following minimum qualifications:
| Character and integrity. |
| A commitment to the long-term growth and profitability of the Company. |
| A willingness and ability to make a sufficient time commitment to the affairs of the Company in order to effectively perform the duties of a director, including regular attendance at Board and committee meetings. |
| Significant business or public experience relevant and beneficial to the Board and the Company. |
Board Diversity. The N&CG Committee recognizes the value of cultivating a Board with a diverse mix of opinions, perspectives, skills, experiences, and backgrounds. A diverse board enables more balanced, wide-ranging discussion in the boardroom, which, we believe, enhances the decision-making processes. Having diverse representation and a variety of viewpoints is also important to our shareholders and other stakeholders.
As such, the N&CG Committee considers director candidates from a wide variety of backgrounds, without discrimination based on race, ethnicity, color, ancestry, national origin, religion, sex, sexual orientation, gender identity, age, disability, or any other status protected by law.
All nominations to the Board will be based upon merit and experience relevant to the Boards current and anticipated needs, as well as Leggetts businesses. Subject to this overarching principle, the N&CG Committee will always have regard for the need to consider director candidates to maintain and strengthen the Boards diversity.
Director Recommendations from Shareholders. The N&CG Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, for candidates recommended by a shareholder. Shareholders who wish to recommend candidates for the N&CG Committees consideration must submit a written recommendation to the Secretary of the Company at 1 Leggett Road, Carthage, MO 64836. Recommendations must be sent by certified or registered mail and received by December 15th for the N&CG Committees consideration for the following years annual meeting of shareholders. Recommendations must include the following:
| Shareholders name, number of shares owned, length of period held and proof of ownership. |
| Candidates name, address, phone number and age. |
| A resume describing, at a minimum, the candidates educational background, occupation, employment history and material outside commitments (memberships on other boards and committees, charitable foundations, etc.). |
| A supporting statement which describes the shareholders and candidates reasons for nomination to the Board of Directors and documents the candidates ability to satisfy the director qualifications described above. |
| The candidates consent to a background investigation. |
| The candidates written consent to stand for election if nominated by the Board and to serve if elected by the shareholders. |
| Any other information that will assist the N&CG Committee in evaluating the candidate in accordance with this procedure. |
Director Nominations for Inclusion in Leggetts Proxy Materials (Proxy Access). In February 2017, the Board approved a proxy access bylaw, which permits a shareholder, or group of up to 20 shareholders, owning at least 3% of our outstanding shares continuously for at least three years, to nominate and include in Leggetts proxy materials up to the greater of two nominees or 20% of the Board, provided the shareholders and nominees satisfy the requirements specified in our bylaws. Notice of proxy access nominees for the 2019 annual meeting must be received no earlier than January 15, 2019 and no later than February 14, 2019.
Notice of Other Director Nominees. For shareholders intending to nominate a director candidate for election at the 2019 annual meeting outside of the Companys nomination process, our bylaws require that the Company receive notice of the nomination no earlier than January 15, 2019 and no later than February 14, 2019. This notice must provide the information specified in Section 2.2 of the bylaws.
6 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Transactions with Related Persons
Each of the following transactions was approved in accordance with our Corporate Governance Guidelines:
| We buy shares of our common stock from our employees from time to time. In 2017 and early 2018, we purchased shares from three of our executive officers: 168,437 shares from Karl Glassman for a total of $8,266,868; 76,917 shares from Matthew Flanigan for a total of $3,761,374; and 8,000 shares from Scott Douglas for a total of $405,650. All employees, including executive officers, pay a $25 administrative fee for each transaction. If the Company agrees to purchase stock before noon, the purchase price is the closing stock price on the prior business day; if the agreement is made after noon, the purchase price is the closing stock price on the day of purchase. |
| The Company employs one relative of its directors and executive officers with total compensation in excess of the $120,000 related person transaction threshold: Bren Flanigan, DirectorCorporate Development, the brother of CFO Matthew Flanigan, had total compensation of $248,824 in 2017 (consisting of salary and annual incentive earned in 2017 and the grant date fair value of equity-based awards issued in 2017). |
Compensation Committee Interlocks and Insider Participation
No Compensation Committee member had an interlocking relationship as described in Item 407(e)(4) of Regulation S-K.
7 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Our non-employee directors receive an annual retainer, consisting of a mix of cash and equity, as set forth below. Our employee directors (Mr. Glassman and Mr. Flanigan) do not receive additional compensation for their Board service.
Item | Amount | |||
Cash Compensation |
||||
Director Retainer | $80,000 | |||
Audit Committee Retainer | ||||
Chair |
25,000 | |||
Member |
10,000 | |||
Compensation Committee Retainer | ||||
Chair |
20,000 | |||
Member |
8,000 | |||
N&CG Committee Retainer | ||||
Chair |
15,000 | |||
Member |
7,000 | |||
Equity CompensationRestricted Stock or RSUs |
||||
Board Chair Retainer (including director retainer) | 285,000 | |||
Director Retainer | 135,000 |
8 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Director Compensation in 2017
Our non-employee directors received the following compensation in 2017:
Director | Fees or Paid in Cash(1) |
Awards(2) |
Non-Qualified Deferred Compensation Earnings(3) |
All Other Compensation(4) |
Total |
|||||||||||||||
Robert E. Brunner |
$98,000 | $135,000 | $3,522 | $38,586 | $275,108 | |||||||||||||||
Robert G. Culp, III |
97,000 | 135,000 | | 3,708 | 235,708 | |||||||||||||||
R. Ted Enloe, III |
105,000 | 285,000 | | 9,219 | 399,219 | |||||||||||||||
Manuel A. Fernandez |
95,000 | 135,000 | 4,424 | 41,448 | 275,872 | |||||||||||||||
Joseph W. McClanathan |
113,000 | 135,000 | | 3,708 | 251,708 | |||||||||||||||
Judy C. Odom |
120,000 | 135,000 | 6,882 | 44,345 | 306,228 | |||||||||||||||
Phoebe A. Wood |
110,000 | 135,000 | 9,889 | 67,057 | 321,946 |
(1) | These amounts include cash compensation deferred into stock options or stock units under our Deferred Compensation Program. The following directors deferred cash compensation into stock units: Brunner$98,000, Fernandez$95,000, Odom$60,000, and Wood$110,000. |
(2) | These amounts reflect the grant date fair value of the annual restricted stock or RSU awards, which was $135,000 for each director except Mr. Enloe, who received a restricted stock award of $285,000 for his service as the Board Chair. The grant date fair value of these awards is determined by the stock price on the day of the award. |
(3) | These amounts include the 20% discount on stock unit dividends acquired under our Deferred Compensation Program and RSUs. |
(4) | Items in excess of $10,000 that are reported in this column consist of (i) dividends paid on the annual restricted stock or RSU awards and dividends paid on stock units acquired under our Deferred Compensation Program: Brunner$14,086, Fernandez$17,698, Odom$29,345, and Wood$39,557; and (ii) the 20% discount on stock units purchased with deferred cash compensation: Brunner$24,500, Fernandez$23,750, Odom$15,000, and Wood$27,500. |
Only one director held outstanding stock options as of December 31, 2017: Mr. Enloes 10,174 options granted in 2016 in lieu of cash compensation under our Deferred Compensation Program.
All of our non-employee directors held unvested stock or stock units as of December 31, 2017 as set forth below. These restricted stock shares and RSUs will vest on May 14, 2018.
Director |
Restricted Stock |
Restricted Stock Units |
||||||
Robert E. Brunner |
2,569 | |||||||
Robert G. Culp, III |
2,524 | |||||||
R. Ted Enloe, III |
5,328 | |||||||
Manuel A. Fernandez |
2,569 | |||||||
Joseph W. McClanathan |
2,524 | |||||||
Judy C. Odom |
2,524 | |||||||
Phoebe A. Wood |
2,569 |
9 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL ONE: Election of Directors | ||
At 2018 annual meeting, nine directors are nominated to hold office until the 2019 Annual Meeting of Shareholders, or until their successors are elected and qualified. All nominees have been previously elected by our shareholders. If any nominee named below is unable to serve as a director (an event the Board does not anticipate), the proxy will be voted for a substitute nominee, if any, designated by the Board. | ||
In recommending the slate of director nominees, our Board has chosen individuals of character and integrity, with a commitment to the long-term growth and profitability of the Company. We believe each of the nominees brings significant business or public experience relevant and beneficial to the Board and the Company, as well as a work ethic and disposition that foster the collegiality necessary for the Board and its committees to function efficiently and best represent the interests of our shareholders.
Robert E. Brunner
| ||
Independent Director Director Since: 2009 Age: 60
Committees: Audit Compensation |
Professional Experience:
Mr. Brunner was the Executive Vice President of Illinois Tool Works (ITW), a Fortune 250 global, multi-industrial manufacturer of advanced industrial technology, from 2006 until his retirement in 2012. He previously served ITW as PresidentGlobal Auto beginning in 2005 and PresidentNorth American Auto from 2003.
Education:
Mr. Brunner holds a degree in finance from the University of Illinois and an MBA from Baldwin-Wallace University.
Public Company Boards:
Mr. Brunner currently serves as the non-executive chair of NN, Inc., a global manufacturer of precision bearings and plastic, rubber and metal components, and as a director of Lindsay Corporation, a global manufacturer of irrigation equipment and road safety products.
Director Qualifications:
Mr. Brunners experience and leadership with ITW, a diversified manufacturer with a global footprint, provides valuable insight to our Board on strategy, business development, mergers and acquisitions, operations, and international issues. |
Robert G. Culp, III
|
||
Independent Director Director Since: 2013 Age: 71
Committees: Audit Nominating & Corporate Governance |
Professional Experience:
Mr. Culp is the co-founder of Culp, Inc., an upholstery and bedding fabrics designer and manufacturer, where he has been the Chairman since 1990 and served as CEO from 1988 to 2007.
Education:
Mr. Culp holds a degree in economics from the University of North CarolinaChapel Hill and an MBA from the Wharton School of the University of Pennsylvania.
Public Company Boards:
Mr. Culp is the Chairman of the Board of Culp, Inc., and the lead independent director of Old Dominion Freight Line, Inc., a national motor transportation and logistics company.
Director Qualifications:
Mr. Culps experience in the bedding and furniture industries provides valuable insight into a number of the Companys key markets. Through his leadership of Culp, Inc., a publicly-traded company with an international scope, he understands the complexities of the financial and regulatory requirements facing US companies, as well as the challenges and opportunities of developing global operations. |
10 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
R. Ted Enloe, III
|
||
Independent Director Director Since: 1969 Board Chair Since: 2016 Age: 79
Committees: Audit Compensation Nominating & Corporate Governance |
Professional Experience:
Mr. Enloe has been Managing General Partner of Balquita Partners, Ltd., a family securities and real estate investment partnership, since 1996. His former positions include Vice Chairman of the Board and member of the Office of the Chief Executive for Compaq Computer Corporation and President of Lomas Financial Corporation and Liberte Investors.
Education:
Mr. Enloe holds a degree in petroleum engineering from Louisiana Polytechnic University and a law degree from Southern Methodist University.
Public Company Boards:
Mr. Enloe currently serves as a director of Live Nation, Inc., a venue operator, promoter and producer of live entertainment events, and he was previously a director of Silicon Laboratories Inc., a designer of mixed-signal integrated circuits.
Director Qualifications:
Mr. Enloes professional background and experience, previously held senior-executive level positions, financial expertise and service on other company boards, qualifies him to serve as a member of our Board of Directors. Further, his wide-ranging experience combined with his intimate knowledge of the Company from over 40 years on the Board provides an exceptional mix of familiarity and objectivity. |
Manuel A. Fernandez
|
||
Independent Director Director Since: 2014 Age: 71
Committees: Compensation Nominating & Corporate Governance |
Professional Experience:
Mr. Fernandez co-founded SI Ventures, a venture capital firm focusing on IT and communications infrastructure, and has served as the managing director since 2000. Previously, he served as the Chairman, President and Chief Executive Officer at Gartner, Inc., a research and advisory company, from 1989 to 2000. Prior to Gartner, Mr. Fernandez was President and CEO of three technology-driven companies, including Dataquest, an information services company, Gavilan Computer Corporation, a laptop computer manufacturer, and Zilog Incorporated, a semiconductor manufacturer. Mr. Fernandez was the Executive Chairman of Sysco Corporation, a marketer and distributor of foodservice products, from 2012 until his retirement in 2013, having previously served as Non-executive Chairman since 2009 and as a director since 2006.
Education:
Mr. Fernandez holds a degree in electrical engineering from the University of Florida and completed post-graduate work in solid-state engineering at the University of Florida.
Public Company Boards:
Mr. Fernandez currently serves as lead independent director of Brunswick Corporation, a market leader in the marine, fitness, and billiards industries, and as a director of Performance Food Group Company, a foodservice products distributor. He was previously a director of Flowers Foods, Inc., a national producer and marketer of packaged bakery foods, Tibco, a global leader in infrastructure and business intelligence software, and Time, Inc., a global media company.
Director Qualifications:
Mr. Fernandez venture capital experience, leadership of several technology companies as CEO and service on a number of public company boards offers Leggett outstanding insight into corporate strategy and development, information technology, international growth, and corporate governance. |
11 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Matthew C. Flanigan
|
||
Management Director Director Since: 2010 Age: 56
Committees: None |
Professional Experience:
Mr. Flanigan was appointed Executive Vice President of the Company in 2013 and has served as Chief Financial Officer since 2003. He previously served the Company as Senior Vice President from 2005 to 2013, Vice President from 2003 to 2005, Vice President and President of the Office Furniture Components Group from 1999 to 2003, and in various capacities since 1997.
Education:
Mr. Flanigan holds a degree in finance and business administration from the University of Missouri.
Public Company Boards:
Mr. Flanigan serves as the lead director of Jack Henry & Associates, Inc., the nations leading provider of information processing systems for small-to-medium-sized financial institutions.
Director Qualifications:
As the Companys CFO, Mr. Flanigan adds valuable knowledge of the Companys finance, risk and compliance functions to the Board. In addition, his prior experience as one of the Companys group presidents provides valuable operations insight. |
Karl G. Glassman
|
||
Management Director Director Since: 2002 Age: 59
Committees: None |
Professional Experience:
Mr. Glassman was appointed Chief Executive Officer in 2016 and has served as President since 2013. He previously served the Company as Chief Operating Officer from 2006 to 2015, Executive Vice President from 2002 to 2013, President of the Residential Furnishings Segment from 1999 to 2006, Senior Vice President from 1999 to 2002, and in various capacities since 1982.
Education:
Mr. Glassman holds a degree in business management and finance from California State UniversityLong Beach.
Public Company Boards:
Mr. Glassman previously served as a director of Remy International, Inc., a leading global manufacturer of alternators, starter motors and electric traction motors.
Director Qualifications:
As the Companys CEO, Mr. Glassman provides comprehensive insight to the Board from strategic planning to implementation at all levels of the Company around the world, as well as the Companys relationships with investors, the financial community and other key stakeholders. Mr. Glassman also serves on the Board of Directors of the National Association of Manufacturers. |
12 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Joseph W. McClanathan
|
||
Independent Director Director Since: 2005 Age: 65
Committees: Audit Compensation Nominating & Corporate Governance, Chair |
Professional Experience:
Mr. McClanathan served as President and Chief Executive Officer of the Household Products Division of Energizer Holdings, Inc., a manufacturer of portable power solutions, from 2007 through his retirement in 2012. Previously, he served Energizer as President and Chief Executive Officer of the Energizer Battery Division from 2004 to 2007, as PresidentNorth America from 2002 to 2004, and as Vice PresidentNorth America from 2000 to 2002.
Education:
Mr. McClanathan holds a degree in management from Arizona State University.
Director Qualifications:
Through his leadership experience at Energizer and as a former director of the Retail Industry Leaders Association, Mr. McClanathan offers an exceptional perspective to the Board on manufacturing operations, marketing and development of international capabilities. |
Judy C. Odom
|
||
Independent Director Director Since: 2002 Age: 65
Committees: Audit, Chair Compensation Nominating & Corporate Governance |
Professional Experience:
Until her retirement in 2002, Ms. Odom was Chief Executive Officer and Board Chair at Software Spectrum, Inc., a global business to business software services company, which she co-founded in 1983. Prior to founding Software Spectrum, she was a partner with the international accounting firm, Grant Thornton.
Education:
Ms. Odom is a licensed Certified Public Accountant and holds a degree in business administration from Texas Tech University.
Public Company Boards:
Ms. Odom is a director of Harte-Hanks, a direct marketing service company, and Sabre, Inc., which provides technology solutions for the global travel and tourism industry.
Director Qualifications:
Ms. Odoms director experience with several companies offers a broad leadership perspective on strategic and operating issues. Her experience co-founding Software Spectrum and growing it to a global Fortune 1000 enterprise before selling it to another public company provides the insight of a long-serving CEO with international operating experience. |
13 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Phoebe A. Wood
|
||
Independent Director Director Since: 2005 Age: 64
Committees: Audit Compensation, Chair |
Professional Experience:
Ms. Wood has been a principal in CompaniesWood, a consulting firm specializing in early stage investments, since her 2008 retirement as Vice Chairman and Chief Financial Officer of Brown-Forman Corporation, a diversified consumer products manufacturer, where she had served since 2001. Ms. Wood previously held various positions at Atlantic Richfield Company, an oil and gas company, from 1976 to 2000.
Education:
Ms. Wood holds a degree in psychology from Smith College and an MBA from UCLA.
Public Company Boards:
Ms. Wood is a director of Invesco, Ltd., an independent global investment manager, Pioneer Natural Resources, an independent oil and gas company, and PPL Corporation, a utility and energy services company. She previously served as a director of Coca-Cola Enterprises, Inc., a major bottler and distributor of Coca-Cola products.
Director Qualifications:
From her career in business and various directorships, Ms. Wood provides the Board with a wealth of understanding of the strategic, financial and accounting issues the Board faces in its oversight role. |
The Board recommends that you vote FOR the election of each of the director nominees.
14 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
PROPOSAL TWO: Ratification of Independent Registered Public Accounting Firm
The Audit Committee is directly responsible for the appointment of the Companys independent registered public accounting firm and has selected PricewaterhouseCoopers LLP (PwC) for the fiscal year ending December 31, 2018. PwC (or its predecessor firm) has been our independent registered public accounting firm continuously since 1991. | ||
The Board recommends that you vote FOR the ratification of PwC
as the independent registered public accounting firm.
The Audit Committee is directly responsible for the compensation, retention, performance and oversight of the independent external audit firm, directly involved in the selection of the lead engagement partner, and responsible for the audit fee negotiations associated with retaining PwC. The fees billed or expected to be billed by PwC for professional services rendered in fiscal years 2017 and 2016 are shown below.
Type of Service
|
2017
|
2016
|
||||||||
Audit Fees(1) |
$2,344,181 | $2,056,542 | ||||||||
Audit-Related Fees(2) |
105,028 | 192,715 | ||||||||
Tax Fees(3) |
441,366 | 398,563 | ||||||||
All Other Fees(4) |
2,970 | 2,970 | ||||||||
|
|
|
|
|||||||
Total |
$2,893,545 | $2,650,790 |
(1) | Includes rendering an opinion on the Companys consolidated financial statements and the effectiveness of internal control over financial reporting; quarterly reviews of the Companys financial statements; statutory audits, where appropriate; comfort and debt covenant letters; and services in connection with regulatory filings. |
(2) | Includes assessment of controls; consulting on accounting and financial reporting issues; and audits of employee benefit plans. |
(3) | Includes preparation and review of tax returns and tax filings; tax consulting and advice related to compliance with tax laws; tax planning strategies; and tax due diligence related to acquisitions and joint ventures. Of the tax fees listed above in 2017, $180,926 related to compliance services and $260,440 related to consulting and planning services. |
(4) | Includes use of an internet-based accounting research tool provided by PwC. |
The Audit Committee has determined that the provision of these approved Non-Audit Services by PwC is compatible with maintaining PwCs independence.
Pre-Approval Procedures for Audit and Non-Audit Services
The Audit Committee has established a procedure for pre-approving the services performed by the Companys auditors. All services provided by PwC in 2017 were approved in accordance with the adopted procedures. There were no services provided or fees paid in 2017 for which the pre-approval requirement was waived.
15 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
The procedure provides standing pre-approval for:
Any other audit, audit-related, or tax services provided by the Companys auditors require specific Audit Committee pre-approval. The Audit Committee must also specifically approve in advance all permissible Non-Audit Services to be performed by the Companys auditors. Management provides quarterly reports to the Audit Committee concerning any fees paid to the auditors for all services.
The Audit Committee is composed of six non-management directors who are independent as required by SEC and NYSE rules. The Audit Committee operates under a written charter adopted by the Board which is posted on the Companys website at www.leggett-search.com/governance.
Based on the review and discussions with management and PwC referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Companys 2017 Annual Report on Form 10-K.
Judy C. Odom (Chair)
Robert E. Brunner
Robert G. Culp, III
R. Ted Enloe, III
Joseph W. McClanathan
Phoebe A. Wood
16 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
PROPOSAL THREE: Advisory Vote to Approve Named Executive Officer Compensation
| ||||||
Pursuant to Section 14A of the Securities Exchange Act of 1934, Leggetts shareholders have the opportunity to vote on an advisory resolution on our executive compensation package, commonly known as "Say-on-Pay," to approve the compensation of Leggett's named executive officers, as described in the Executive Compensation section beginning on page 18. | For these reasons, the Board requests our shareholders approve the compensation paid to the Companys named executive officers as described in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related footnotes and narrative accompanying the tables.
Because your vote is advisory, it will not be binding upon the Board; however, the Compensation Committee and the Board has considered and will continue to consider the outcome of the vote when making decisions for future executive compensation arrangements. | |||||
Since Say-on-Pay was implemented in 2011, our shareholders have supported the compensation of our named executive officers with over 90% of the vote (with 93% support in 2017).
Our Compensation Committee is committed to creating an executive compensation program that enables us to attract and retain a superior management team that has targeted incentives to build long-term value for our shareholders. The Companys compensation package uses a mix of cash and equity-based awards to align executive compensation with our annual and long-term performance. These programs reflect the Committees philosophy that executive compensation should provide greater rewards for superior performance, as well as accountability for underperformance. At the same time, we believe our programs do not encourage excessive risk-taking by management. The Board believes that our philosophy and practices have resulted in executive compensation decisions that are appropriate and that have benefited the Company over time. |
The Board recommends that you vote FOR the Companys executive compensation package.
Discretionary Vote on Other Matters
We are not aware of any business to be acted upon at the annual meeting other than the three items described in this proxy statement. Your signed proxy, however, will entitle the persons named as proxy holders to vote in their discretion if another matter is properly presented at the meeting. If one of the director nominees is not available as a candidate for director, the proxy holders will vote your proxy for such other candidate as the Board may nominate.
17 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
EXECUTIVE COMPENSATION AND RELATED MATTERS
Compensation Discussion & Analysis
Our Compensation Committee, consisting of six independent directors, is committed to creating and overseeing an executive compensation program that enables us to attract and retain a superior management team that has targeted incentives to build long-term value for our shareholders. To meet these objectives, the Committee has implemented a compensation package that:
| Emphasizes performance-based equity programs over cash compensation. |
| Sets incentive compensation targets intended to drive performance and shareholder value. |
| Balances rewards between short-term and long-term performance to foster sustained excellence. |
| Motivates our executive officers to take appropriate business risks. |
This Compensation Discussion and Analysis describes our executive compensation program and the decisions affecting the compensation of our Named Executive Officers (the NEOs):
Name
|
Title
| |
Karl G. Glassman |
President and Chief Executive Officer (CEO) | |
Matthew C. Flanigan |
Executive VP and Chief Financial Officer (CFO) | |
Perry E. Davis |
Executive VP, PresidentResidential Products & Industrial Products | |
J. Mitchell Dolloff |
Executive VP, PresidentSpecialized Products & Furniture Products | |
Scott S. Douglas |
Senior VPGeneral Counsel and Secretary |
Executive Summary
This section provides an overview of our NEOs compensation structure, Leggetts pay practices and the Committees compensation risk management. Additional details regarding the NEOs pay packages, the Committees annual review of the executive officers compensation and our equity pay practices are covered in the sections that follow.
The largest component of our executives 2017 compensation package, Performance Stock Units (PSUs), is based on our Total Shareholder Return (TSR)(1) over rolling three-year periods relative to approximately 320 peer companies making up the industrial, materials and consumer discretionary sectors of the S&P 500 and S&P Midcap 400. Leggetts cumulative TSR from 2015-2017 was 21.9%, which placed us in the 43rd percentile of the peer group and resulted in a 61% payout versus target for the three-year PSUs vesting on December 31, 2017.
The Profitable Growth Incentive (PGI) is a two-year, performance-based equity program with payouts determined by revenue growth(2) and EBITDA margin(3)two key levers for achieving our long-range TSR goals. Corporate participants did not receive a payout for the 2016-2017 PGI awards, as the Companys revenue growth over those two years did not reach the threshold 2.8% compound annual growth rate.
Our executives 2017 annual incentive payouts under the Key Officers Incentive Plan tracked the Companys operational results in 2017, in which we generated incentive cash flow of $391.8 million (versus a target of $450 million) and 45.2% return on capital employed (versus a target of 50%).(4)
(1) | TSR = change in stock price plus dividends divided by beginning stock price; assumes dividends are reinvested. |
(2) | Revenue growth is the compound annual growth rate of the Companys (or applicable profit centers) revenue during the performance period compared to the revenue of the immediately preceding year. |
(3) | EBITDA margin is the cumulative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) during the performance period divided by the total revenue during the performance period. |
(4) | The Key Officers Incentive Plan, including the calculations for adjusted cash flow and return on capital employed (ROCE), is described on page 21. |
18 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Structuring the Mix of Compensation
The Committee uses its judgment to determine the appropriate percentage of variable and fixed compensation, the use of short-term and long-term performance periods, and the split between cash and equity-based compensation. The ultimate payment and value of the variable elements depends on actual performance and could result in no payout if those conditions are not met. The following table shows the key attributes of the 2017 compensation programs used to drive performance and build long-term shareholder value:
Compensation Type | Fixed or Variable |
Cash or Equity-Based |
Term | Basis for Payment | ||||
Base Salary |
Fixed | Cash | 1 year | Individual responsibilities, performance and experience
| ||||
Annual Incentive |
Variable | Cash | 1 year | Return on capital employed, cash flow and individual performance goals
| ||||
Profitable Growth Incentive |
Variable |
Equity |
2 years |
Revenue growth and EBITDA margin
| ||||
Performance Stock Units
|
Variable
|
Equity
|
3 years
|
TSR relative to peer group
|
Sound Pay Practices
The Company is committed to executive compensation practices that align the interests of our executives and our shareholders:
What We Do | What We Dont Do | |||||||
✓ |
Pay for Performance A significant majority of our NEOs compensation is at-risk variable compensation. | × |
No Excessive Perquisites Perquisites represent less than 1% of our NEOs compensation. | |||||
✓ |
Multiple Performance Metrics Variable compensation is based on more than one measure to encourage balanced incentives. | × |
No Single-Trigger Change in Control Our CIC-related cash severance and equity incentive awards (other than legacy stock options) have a double trigger. | |||||
✓ |
Awards Caps All of our variable compensation plans have maximum payout limits. | × |
No Dividends on Equity Awards Prior to Vesting | |||||
✓ |
Benchmarking We compare our compensation package to market surveys and a customized peer group, and the Committee engages an independent consultant. | × |
No Hedging or Pledging We do not permit our executive officers to engage in either hedging or pledging activities with respect to Leggett shares. | |||||
✓ |
Tally Sheets The Compensation Committee reviews the NEOs overall compensation packages and potential severance payouts. |
× |
No Employment Agreements All of our NEOs are employed at-will. | |||||
✓ |
Stock Ownership Requirements All NEOs exceed our robust stock ownership requirements. |
× |
No Tax Gross-Ups | |||||
✓ |
Confidentiality & Non-Compete Provisions All NEOs are subject to confidentiality and non-compete provisions. |
×
|
No Share Recycling
| |||||
✓ |
Clawbacks Our compensation recoupment policies exceed the mandates of Sarbanes-Oxley. |
× |
No Repricing of Options or Cash Buyouts |
19 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
CEO 2017 Compensation Mix At Target PGI 13% BASE SALARY 17% ANNUAL INCENTIVE 21% PSUs 49% All Other NEOs 2017 Compensation Mix At Target BASE SALARY 27% ANNUAL INCENTIVE 20% PSUs 37% PGI 16% Performance-based Compensation 83% 73%
Additional Investment in Leggett Stock
In addition to having pay packages that are heavily weighted to Leggett equity-based awards, for many years our NEOs have voluntarily deferred substantial portions of their cash compensation into Company stock through the Executive Stock Unit Program (the ESU Program) and the Deferred Compensation Program. Through participation in these programs, particularly the ESU Program, in which Company equity is held until the executive leaves the Company, our NEOs are further invested in the long-term success of the Company.
Managing Compensation Risk
The Committee regularly reviews whether our executive compensation policies and practices (as well as those that apply to our employees generally) are appropriate and whether they create risks or misalignments that are reasonably likely to have a material adverse effect on the Company.
We believe that our compensation programs align our executives incentives for risk taking with the long-term best interests of our shareholders. We mitigate risk by allocating incentive compensation across multiple components. This structure reduces the incentive to take excessive risk because it:
| Rewards achievement on a balanced array of performance measures, minimizing undue focus on any single target. |
| Stresses long-term performance, discouraging short-term actions that might endanger long-term value. |
| Combines absolute and relative performance measures. |
Additional safeguards against undue compensation risk include stock ownership guidelines, caps on incentive payouts and clawback policies.
Impact of 2017 Say-on-Pay Vote
At our annual meeting of shareholders held on May 9, 2017, 93% of the votes cast on the Say-on-Pay proposal approved the compensation of our NEOs. The Committee believes that this shareholder vote strongly endorses the Companys compensation philosophy and programs. The Committee took this support into account as one of many factors it considered in connection with the discharge of its responsibilities (as described in this Compensation Discussion and Analysis) in exercising its judgment in establishing and overseeing our executive compensation arrangements throughout the year.
Changes for 2018
In order to better align the NEOs compensation package with the Companys long-term strategy, the Committee approved the transition in 2018 to a three-year PSU award with 50% of the award vesting based upon relative TSR and 50% vesting based upon the compound annual growth rate for the Companys earnings before interest and taxes (EBIT), the primary operational driver for increasing our TSR. The granting of PGI awards, which had a two-year performance period, was discontinued in 2018, with that portion of the NEOs pay package being shifted to the new PSU awards.
20 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Our Compensation Components and Programs
Base Salary
Base salary is the only fixed portion of our NEOs compensation package. Salary levels are intended to reflect specific responsibilities, performance and experience, while taking into account market compensation levels for comparable positions. Although base salary makes up less than one-fourth of our NEOs aggregate compensation, its the foundation for the total package with the variable compensation components set as percentages of base salary:
Name | 2017 Base Salary |
Annual Incentive: Target Percentage of Base Salary |
PGI Awards: Target Percentage of Base Salary(2) |
PSU Awards: Target Percentage of Base Salary(2) | ||||||
Karl G. Glassman, CEO |
$ | 1,175,000 | 118.75%(1) | 77% | 275% | |||||
Matthew C. Flanigan, CFO |
550,000 | 80% | 70% | 175% | ||||||
Perry E. Davis, EVP |
500,000 | 75%(1) | 64% | 130% | ||||||
J. Mitchell Dolloff, EVP |
500,000 | 75%(1) | 64% | 130% | ||||||
Scott S. Douglas, SVP |
330,000 | 50% | 51% | 100% |
(1) | Reflects Mr. Glassmans annual incentive adjustment from 115% to 120% following the March executive compensation review, and Mr. Davis and Mr. Dolloffs adjustments from 60% to 80%. |
(2) | The methods for valuing and calculating the PGI and PSU awards are described in the Equity-Based Awards section on page 24. |
The Committee reviews and determines the NEOs base salaries (along with the rest of their compensation packages) during the annual review, which is discussed on page 29.
Annual Incentive
Our NEOs earn their annual incentive, a cash bonus paid under the Key Officers Incentive Plan (the Incentive Plan), based on achieving certain performance targets for the year.
Our executive officers are divided into two groups under the Incentive Plan, depending upon their areas of responsibility: (i) corporate participants (Glassman, Flanigan and Douglas), whose performance criteria and payouts are based on the Companys overall results, and (ii) profit center participants (Davis and Dolloff) whose performance targets are set for the operations under their control. The NEOs also have individual performance goals (IPGs) as part of their annual incentive.
Each NEO has a target incentive amountthe amount he would receive if he achieved exactly 100% of all performance goals. The target incentive amount is the officers base salary multiplied by his target incentive percentage. At the end of the year, the target incentive amount is multiplied by the payout percentages for the various performance metrics (each with its own weighting) to determine the annual incentive payout.
Performance Metrics. The Committee chose ROCE as the primary incentive target (60% weighting) to improve earnings and maximize returns on key assets by carefully managing working capital and fixed asset investments. The annual incentive is also based upon cash flow (20% weighting), which is critical to fund the Companys dividend, capital expenditures and ongoing operations. The 2017 award formula provides that the ROCE and cash flow calculations will be adjusted for all items of gain, loss or expense (i) from non-cash impairments; (ii) related to loss contingencies identified in the Companys 2016 10-K; (iii) that are unusual in nature or infrequent in occurrence; (iv) related to the disposal of a segment of a business; or (v) related to a change in accounting principle. The Incentive Plan also permits adjustments to remove the effects of changes in the tax law. Profit center participants are also subject to an adjustment ranging from a potential 5% increase for exceptional safety performance to a 20% deduction for their operations failure to achieve safety, audit and environmental standards.
21 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Target Incentive Amount Base Salary Target Incentive Percentage Weighted Payout Percentage ROCE(1) Achievement % Cash Flow(2) Achievement % IPG Achievement % Potential adjustment for safety, audit and environmental (profit center participants only) 60% Weighting 20% Weighting 20% Weighting Annual Incentive
The annual incentive payout is calculated as follows, and more fully described below:
(1) | Return on Capital Employed (ROCE) = Earnings Before Interest and Taxes (EBIT) ÷ quarterly average of Net Plant Property and Equipment (PP&E) and Working Capital (excluding cash and current maturities of long-term debt) |
(2) | For corporate participants (Glassman, Flanigan and Douglas): Cash Flow = Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) +/- Change in Working Capital (excluding cash and current maturities of long-term debt) + Non-Cash ImpairmentsCapital Expenditures |
For profit center participants (Davis and Dolloff), the same formula is used, except (i) EBITDA is adjusted for currency effects and (ii) change in working capital excludes balance sheet items not directly related to ongoing activities.
Individual Performance Goals. In addition to the financial metrics described above, the annual incentive includes IPGs (20% weighting) that are tailored to each executives responsibilities and aligned with the Companys strategic goals. The Committee approved the 2017 IPGs covering the following areas of responsibility, with achievement based upon the performance scale detailed in the tables below:
Name | Individual Performance Goals | |
Karl G. Glassman, CEO |
Strategic planning and succession planning | |
Matthew C. Flanigan, CFO |
Strategic planning, information technology projects, succession planning and efficiency initiatives | |
Perry E. Davis, EVP |
Growth initiatives and succession planning | |
J. Mitchell Dolloff, EVP |
Strategic planning, succession planning and efficiency initiatives | |
Scott S. Douglas, SVP |
Strategic planning, succession planning and cost initiatives |
Targets and Payout Schedules. Upon selecting the metrics and IPGs, the Committee established performance achievement targets and payout schedules. In setting the payout schedules, the Committee evaluated various payout scenarios before selecting one that struck a balance between accountability to shareholders and motivation for participants. For corporate participants (Glassman, Flanigan and Douglas), the target for 100% payout on ROCE was increased from 46% in 2016 to 50% under the 2017 award formula, and the target for 100% payout on cash flow remained $450 million with the goal for a maximum payout increasing from $500 million to $525 million. The payout for each portion of the annual incentive is capped at 150%. The NEOs annual incentive ultimately depends upon how well they perform against the targets.
22 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
2017 Corporate Payout Schedule
ROCE(1) | Cash Flow(1) (millions) |
Individual Performance Goals (15 scale) |
||||||||||||||||||||||
Achievement | Payout | Achievement | Payout | Achievement | Payout | |||||||||||||||||||
<43% |
0% | <$375 | 0 | % | 1Did not achieve goal | 0% | ||||||||||||||||||
43% |
50% | 375 | 50 | % | 2Partially achieved goal | 50% | ||||||||||||||||||
46.5% |
75% | 412.5 | 75 | % | 3Substantially achieved goal | 75% | ||||||||||||||||||
50% |
100% | 450 | 100 | % | 4Fully achieved goal | 100% | ||||||||||||||||||
53.5% |
125% | 487.5 | 125 | % | 5Significantly exceeded goal | up to 150% | ||||||||||||||||||
57% |
150% | 525 | 150 | % |
2017 Profit Center Payout Schedule
ROCE and Free Cash Flow (Relative to Target) |
Individual Performance Goals (15 scale) |
|||||||||||
Achievement(2) | Payout | Achievement | Payout | |||||||||
<80% |
0% | 1Did not achieve goal | 0% | |||||||||
80% |
60% | 2Partially achieved goal | 50% | |||||||||
90% |
80% | 3Substantially achieved goal | 75% | |||||||||
100% |
100% | 4Fully achieved goal | 100% | |||||||||
110% |
120% | 5Significantly exceeded goal | up to 150% | |||||||||
120% |
140% | |||||||||||
125% |
150% |
(1) | The 2017 results for corporate participants (Glassman, Flanigan and Douglas) were 45.2% ROCE (resulting in a 65.6% payout) and $391.8 million of cash flow (resulting in a 61.2% payout). |
(2) | As a profit center participant, Mr. Davis target for a 100% payout was 34.2% ROCE (39.3% actual) and $143.6 million free cash flow ($178.0 million actual) for the Residential Products Segment and 37.2% ROCE (23.4% actual) and $46.0 million free cash flow ($12.7 million actual) for the Industrial Products Segment. His annual incentive opportunity was apportioned between Residential Products (79.8%) and Industrial Products (20.2%) based on their relative 2016 EBITDA. |
Mr. Dolloffs target for a 100% payout was 52.5% ROCE (66.2% actual) and $98.8 million free cash flow ($151.0 million actual) for the Specialized Products Segment and 43.3% ROCE (34.7% actual) and $55.7 million free cash flow ($46.3 million actual) for the Furniture Products Segment. His annual incentive opportunity was apportioned between Specialized Products (56.1%) and Furniture Products (43.9%) based on their relative 2016 EBITDA.
23 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
The following table provides the details of the 2017 annual incentive payouts for our NEOs:
Name
|
Target Incentive Amount
|
Weighted Payout Percentage
|
Annual Incentive Payout
|
|||||||||||||||||||||||||||||||||
Karl G. Glassman, CEO |
$1,395,313 | x | 76.6% | = | $1,068,809 | |||||||||||||||||||||||||||||||
Salary | x | Target % | Metric | Payout % | x | Weight | ||||||||||||||||||||||||||||||
$1,175,000 | 118.75% | ROCE | 65.6% | 60% | ||||||||||||||||||||||||||||||||
Cash Flow | 61.2% | 20% | ||||||||||||||||||||||||||||||||||
IPGs | 125% | 20% | ||||||||||||||||||||||||||||||||||
Matthew C. Flanigan, CFO |
$440,000 | x | 76.1% | = | $334,840 | |||||||||||||||||||||||||||||||
Salary | x | Target % | Metric | Payout % | x | Weight | ||||||||||||||||||||||||||||||
$550,000 | 80% | ROCE | 65.6% | 60% | ||||||||||||||||||||||||||||||||
Cash Flow | 61.2% | 20% | ||||||||||||||||||||||||||||||||||
IPGs | 122.5% | 20% | ||||||||||||||||||||||||||||||||||
Perry E. Davis, EVP |
$375,000 | x | 108.6% | = | $407,250 | |||||||||||||||||||||||||||||||
Salary | x | Target % | Metric | Payout % | x | Weight | ||||||||||||||||||||||||||||||
$500,000 | 75% | ROCE | 103.7% | 60% | ||||||||||||||||||||||||||||||||
FCF | 118.1% | 20% | ||||||||||||||||||||||||||||||||||
IPGs | 110% | 20% | ||||||||||||||||||||||||||||||||||
1% Compliance Adjustment | ||||||||||||||||||||||||||||||||||||
J. Mitchell Dolloff, EVP |
$375,000 | x | 116.7% | = | $437,625 | |||||||||||||||||||||||||||||||
Salary | x | Target % | Metric | Payout % | x | Weight | ||||||||||||||||||||||||||||||
$500,000 | 75% | ROCE | 110.5% | 60% | ||||||||||||||||||||||||||||||||
FCF | 113.1% | 20% | ||||||||||||||||||||||||||||||||||
IPGs | 135% | 20% | ||||||||||||||||||||||||||||||||||
1% Compliance Adjustment | ||||||||||||||||||||||||||||||||||||
Scott S. Douglas, SVP |
$165,000 | x | 73.6% | = | $121,440 | |||||||||||||||||||||||||||||||
Salary | x | Target % | Metric | Payout % | x | Weight | ||||||||||||||||||||||||||||||
$330,000 | 50% | ROCE | 65.6% | 60% | ||||||||||||||||||||||||||||||||
FCF | 61.2% | 20% | ||||||||||||||||||||||||||||||||||
IPGs | 110% | 20% |
Equity-Based Awards
In 2017, we granted performance stock units and Profitable Growth Incentive awards to our NEOs and other senior managers. The PSU and PGI awards tie our executive officers pay to the Companys performance and shareholder returns. The payouts from these equity-based awards reflect our philosophy that executive compensation should provide greater rewards for superior performance, as well as accountability for underperformance.
Performance Stock Units. Leggetts long-term strategic plan emphasizes the Companys TSR performance versus peer companies. The Committee grants PSUs to a small group of senior managers, including the NEOs, to drive and reward those results. The PSU grants are set by multiplying the executives base salary by the PSU award percentage (see the table on page 21.
The 2017 PSUs have a three-year performance period, with the payout based on Leggetts three-year TSR relative to the TSR of all the companies in the industrial, materials and consumer discretionary sectors of the S&P 500 and S&P Midcap 400 (about 320 companies). Although Leggett is a member of the S&P 500, our market capitalization is significantly below that groups median, so the Committee included the S&P Midcap 400 in the group as well. In addition, nearly all of our business units fall into these industry sectors. At the end of the three-year performance period, if the threshold performance level is met, a percentage of each officers PSU base award is payable depending on Leggetts TSR rank within the group.
24 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
PSU Payout Schedule
(based on Peer Group TSR)
Performance Level | Percentile Rank |
Payout % | ||
Threshold |
25th | 25% | ||
Target |
50th | 75% | ||
Maximum |
>75th | 175% |
The PSU awards granted in January 2015 vested on December 31, 2017. Leggetts TSR for that three-year period was in the 43rd percentile of the peer group, resulting in a payout of 61% of the base award. Our TSR ranks in the 28th percentile for the 2016 PSU awards with one year remaining in the performance period, and our TSR for the 2017 PSU awards ranks in the 22nd percentile with two years remaining.
The PSUs are typically paid out 35% in cash and 65% in Company stock; however, as permitted by the PSU terms and conditions, the Compensation Committee directed the Company to settle 100% of the 2015-2017 PSUs in cash in order to realize certain tax benefits in 2017 in connection with the passage of tax reform legislation.
Profitable Growth Incentive. Leggetts strategic plan also focuses on long-term revenue growth, while improving profit margins. The Committee established the Profitable Growth Incentive in 2013 as a performance-based equity program to provide additional incentive to our senior management, including the NEOs, to drive and reward those results. PGI awards are set by multiplying the executives base salary by the PGI award percentage (see table on page 21).
The PGI awards are issued as stock units that vest at the end of a two-year performance period with payouts based on a matrix of revenue growth and EBITDA margin. The threshold achievement for revenue growth is the projected GDP growth of our primary geographic markets, and the EBITDA margin scale is based upon the Companys prior three-year average. When these metrics are taken in combination, the PGI payout scale rewards growth at or above GDP while maintaining or improving historical margins.
For the PGI awards granted in 2017, the payout schedule for our corporate participants (Glassman, Flanigan and Douglas) is:
EBITDA Margin(1)
|
Payout Percentage
|
|||||||||||||||||||||||||||||||
20.8% | 250% | |||||||||||||||||||||||||||||||
19.8% | 213% | 250% | ||||||||||||||||||||||||||||||
18.8% | 175% | 213% | 250% | |||||||||||||||||||||||||||||
17.8% | 138% | 175% | 213% | 250% | ||||||||||||||||||||||||||||
16.8% | 100% | 138% | 175% | 213% | 250% | |||||||||||||||||||||||||||
15.8% | 75% | 100% | 138% | 175% | 213% | 250% | ||||||||||||||||||||||||||
14.8% | 50% | 75% | 100% | 138% | 175% | 213% | 250% | |||||||||||||||||||||||||
13.8% | 25% | 50% | 75% | 100% | 138% | 175% | 213% | 250% | ||||||||||||||||||||||||
2.7% | 3.7% | 4.7% | 5.7% | 6.7% | 7.7% | 8.7% | 9.7% | |||||||||||||||||||||||||
Revenue Growth(2)
|
(1) | EBITDA margin equals the cumulative Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) during the performance period divided by the total revenue during the performance period. |
(2) | Revenue growth is the compound annual growth rate of the Companys (or applicable profit centers) revenue during the performance period compared to the revenue of the immediately preceding year. The Revenue Growth rate is subject to adjustment by the difference (positive or negative) between the forecast GDP growth (set prior to the PGI awards) and the actual GDP growth (determined at the end of the performance period), but such adjustment will be made only if the difference is greater than ±1.0%. The forecast GDP growth for the 2017-2018 performance period is 2.7%, representing the weighted average GDP growth in the primary geographies where the Company does business, using data from the International Monetary Funds January 2017 World Economic Outlook Update. |
25 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Each of the profit center participants has his own payout matrix based upon the operations for which he is responsible:
| Mr. Davis payout matrix is structured in the same manner as shown above, but is based on an EBITDA margin range of 17.3% to 24.3% and a revenue growth range of 2.4% to 9.4% for the Residential Products Segment and an EBITDA margin range of 14.3% to 21.3% and a revenue growth range of 2.5% to 9.5% for the Industrial Products Segment. His 2017 PGI award was apportioned between Residential Products (79.8%) and Industrial Products (20.2%) based on their relative 2016 EBITDA. |
| Mr. Dolloffs payout matrix is based on an EBITDA margin range of 22.6% to 29.6% and a revenue growth range of 3.2% to 10.2% for the Specialized Products Segment and an EBITDA margin range of 15.3% to 22.3% and a revenue growth range of 2.9% to 9.9% for the Furniture Products Segment. His 2017 PGI award was apportioned between Specialized Products (56.1%) and Industrial Products (43.9%) based on their relative 2016 EBITDA. |
The calculation of revenue growth and EBITDA margin include results from businesses acquired during the performance period. Revenue Growth and EBITDA margin exclude results for any businesses divested during the performance period, and the divested businesses revenue is deducted from base revenue used to calculate the growth rate. EBITDA results are adjusted to eliminate gain, loss or expense (i) from non-cash impairments; (ii) related to loss contingencies identified in the Companys 2016 10-K; (iii) that are unusual in nature or infrequent in occurrence; (iv) related to the disposal of a segment of a business; or (v) related to a change in accounting principle.
The PGI awards granted in 2016 vested on December 31, 2017. Corporate participants, including Mr. Glassman, Mr. Flanigan, and Mr. Douglas, did not receive a payout for the 2016-2017 PGI awards, as the Companys revenue growth over those two years did not reach the threshold 2.8% compound annual growth rate. Mr. Davis did not receive a 2016-2017 PGI payout, as the profit centers for which he is responsible also did not reach the revenue growth threshold. Mr. Dolloff received a 250% PGI payout for his profit centers performance.
The PGI is typically paid out 50% in cash and 50% in Company stock; however, as permitted by the PGI terms and conditions, the Compensation Committee directed the Company to settle 100% of the 2016-2017 PGI in cash in order to realize certain tax benefits in 2017 in connection with the passage of tax reform legislation.
As discussed on page 30, the PSU awards were redesigned for 2018, and the PGI awards were discontinued for 2018.
Other Compensation Programs
The NEOs have voluntarily deferred substantial portions of their cash compensation into Leggett equity through the Executive Stock Unit Program and the Deferred Compensation Program for many years, building an additional long-term stake in the Company. The Company also provides a 401(k) and non-qualified excess plan in which some of our executives choose to participate.
Executive Stock Unit Program. All our NEOs have significant holdings in the ESU Program, our primary executive retirement plan. These accounts are held until the executives terminate employment.
The ESU Program is a non-qualified retirement program that allows executives to make pre-tax deferrals of up to 10% of their compensation into diversified investments. We match 50% of the executives contribution in Company stock units, purchased at a 15% discount, which may increase up to a 100% match if the Company meets annual ROCE targets linked to the Incentive Plan. The Company makes an additional 17.6% contribution to the diversified investments acquired with executive contributions. Matching contributions vest once employees have participated in the ESU Program for five years. Leggett stock units held in the ESU Program accrue dividends, which are used to acquire additional stock units at a 15% discount. At distribution, the balance of the diversified investments is paid in cash. Although the Company intends to settle the stock units in shares of the Companys common stock, it reserves the right to distribute the balance in cash.
26 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Deferred Compensation Program. The Deferred Compensation Program allows key managers to defer up to 100% of salary, incentive awards and other cash compensation in exchange for any combination of the following:
| Stock units with dividend equivalents, acquired at a 20% discount to the fair market value of our common stock on the dates the compensation or dividends otherwise would have been paid. |
| At-market stock options with the underlying shares of common stock having an initial market value five times the amount of compensation forgone, with an exercise price equal to the closing market price of our common stock on the last business day of the prior year. |
| Cash deferrals with an interest rate intended to be slightly higher than otherwise available for comparable investments. |
Participants who elect a cash or stock unit deferral can receive distributions in a lump sum or in annual installments. Distribution payouts must begin no more than 10 years from the effective date of the deferral and all amounts subject to the deferral must be distributed within 10 years of the first distribution payout. Although the Company intends to settle the stock units in shares of the Companys common stock, it reserves the right to distribute the balance in cash. Participants who elect at-market stock options, which have a 10-year term, may exercise them approximately 15 months after the start of the year in which the deferral was made.
Retirement K and Excess Plan. The Companys defined benefit Retirement Plan was frozen in 2006 (see description on page 40). Employees who had previously participated in the Retirement Plan were offered a replacement benefit: a tax-qualified defined contribution Section 401(k) Plan (the Retirement K). The Retirement K includes an age-weighted Company matching contribution designed to replicate the benefits lost by the Retirement Plan freeze.
Many of our officers cannot fully participate in the Retirement K due to limitations imposed by the Internal Revenue Code or the Employee Retirement Income Security Act, or as a result of their participation in the Deferred Compensation Program. Consequently, we maintain a non-qualified Retirement K Excess Plan which permits affected executives to receive the full matching benefit they would otherwise have been entitled to under the Retirement K. Amounts earned in the Retirement K Excess Plan are paid out in cash no later than March 15 of the following year and are eligible for the Deferred Compensation Program.
Perquisites and Personal Benefits
The Committee believes perquisites should not be a significant part of our executive compensation program. In 2017, perquisites were less than 1% of each NEOs total compensation and consisted of use of a Company car and executive physicals.
The Committee approved a new policy in 2017 to allow limited personal use of corporate aircraft by our CEO. Following the Committees comprehensive review of Mr. Glassmans compensation package and given the location of the Companys headquarters away from any major metropolitan area, the Committee extended this perquisite to facilitate the CEOs schedule and to enable him to travel more efficiently to attend to Company business. Mr. Glassmans use of corporate aircraft for personal travel by him and his guests, subject to the aircraft not being scheduled for business purposes, is subject to an annual limit of $100,000 in aggregate incremental cost to the Company, including the cost of deadhead flights necessitated by such personal use. The Company will not provide tax reimbursements to Mr. Glassman for any taxes arising from imputed income relating to his use of the corporate aircraft for personal travel by him or his guests.
We believe these benefits are appropriate when viewed in the overall context of our executive compensation program.
27 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
How Compensation Decisions Are Made
The Committee uses its informed judgment to determine the appropriate type and mix of compensation elements; to select performance measures, target levels and payout schedules for incentive compensation; and to determine the level of salary and incentive awards for each executive officer. The Committee may delegate its duties and responsibilities to one or more Committee members or Company officers, as it deems appropriate, but may not delegate authority to non-members for any action involving executive officers. The full Board must review and approve certain actions, including employment and severance benefit agreements and amendments to stock plans.
The Committee has the authority to engage its own external compensation consultant as needed and has engaged Meridian Compensation Partners, LLC as its independent consultant since 2012. The Company conducts an annual conflict of interest assessment, which the Committee reviews in order to verify, in the Committees judgment, Meridians independence and that no conflicts of interest exist. Meridian does not provide any other services to the Company and works with the Companys management only on matters for which the Compensation Committee is responsible.
In 2017, the Committee engaged Meridian to perform a competitive review of the Companys executive pay programs in comparison to market levels. Meridian also advised on selecting a peer group of companies for executive compensation benchmarking, provided comparative data for the annual executive compensation review described below, and assisted with other compensation matters as requested. Representatives from Meridian also attend Committee meetings on request.
The Companys Legal and Human Resources Departments also provide compensation data, research and analysis that the Committee may request, and personnel from those departments, along with Mr. Glassman and Mr. Flanigan, regularly attend Committee meetings. However, the Committee regularly meets in executive session without management present to discuss CEO performance and compensation, as well as any other matters deemed appropriate by the Committee.
The CEO recommends to the Committee compensation levels for the other executive officers, including salary increases, annual incentive targets and equity award values, based on his assessment of each executives performance and level of responsibility. The Committee evaluates those recommendations and accepts or makes adjustments as it deems appropriate.
28 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
The Annual Review and Use of Compensation Data
The Committee conducts an annual review of executive compensation. Historically, the annual review was held in March to set the executive officers compensation for that year; however, in 2017, the Committee transitioned to holding the annual review in November to set the executive officers compensation for the following year. As a result, the Committee conducted a review in March 2017 with respect to the executive officers 2017 compensation and another review in November 2017 with respect to their 2018 compensation. Unless noted otherwise, the description of the annual review below applies to both the March and November reviews conducted during this transition year.
During the annual review, the Committee evaluates the four primary elements of the annual compensation package for executive officers: base salary, annual incentive, performance stock units and the Profitable Growth Incentive. As discussed above, increases to base salary affect all of the other elements of the compensation package, because the variable compensation elements (annual incentive, PSUs and PGI) are each set as a percentage of base salary. The Committee also reviews the secondary compensation elements, such as voluntary equity plans and retirement plans, as well as potential payments upon termination or change in control. Decisions about secondary and post-termination compensation elements are made at various times throughout the year as the plans or agreements giving rise to the compensation are reviewed.
In connection with the annual review, the Committee evaluates the following data presented by the Company and Meridian to consider each executives compensation package in the context of past decisions, internal pay relationships and the external market:
| Compensation data available from proxy filings of the executive compensation peer group, and two general industry surveys published by national consulting firms (described more fully below). |
| Current annual compensation for each executive officer. |
| The potential value of each executive officers compensation package under three Company performance scenarios (threshold, target and outstanding performance). |
| Comparison of CEO target and realizable pay for the prior five years. |
| The cash-to-equity ratio and fixed-to-variable pay ratio of each executive officers compensation package. |
| Compliance with our stock ownership requirements. |
| A summary of each executives accumulated wealth from outstanding equity awards, including a sensitivity analysis of the impact of changes in our stock price. |
Among the factors the Committee considers when making compensation decisions is the compensation of our NEOs relative to the compensation paid to similarly-situated executives in our markets. We believe, however, that a benchmark should be just thata point of reference for measurement, not the determinative factor for our executives compensation. Because the comparative compensation information is just one of several analytic tools that are used in setting executive compensation, the Committee has discretion in determining the nature and extent of its use.
Benchmarking Against Peer Companies. In 2017, the Committee again used a peer group to provide additional insight into company-specific pay levels and practices. The Committee evaluates market data provided by compensation surveys, and views the use of a peer group as an additional reference point when reviewing the competitiveness of NEO pay levels.
In developing the peer group, the Committee directed Meridian to focus on companies in comparable industries with a similar size and scope of business operations as Leggett. The Committee periodically reviews the composition of the peer group to ensure these companies remain relevant for comparative purposes.
In 2017, the Committee approved the following peer group of 18 U.S. based, publicly-traded manufacturing companies, with Leggett near the groups median revenue and market cap:
Allegion PLC | HNI Corporation | |
American Axle & Manufacturing Holdings, Inc. | Lennox International Inc. | |
A. O. Smith Corporation | Masco Corporation | |
Autoliv, Inc. | Mohawk Industries, Inc. | |
Carlisle Companies, Incorporated | Owens Corning | |
Dana Incorporated | PENTAIR plc | |
Fortune Home Brands & Security, Inc. | Tempur Sealy International, Inc. | |
Harman International Industries, Incorporated(1) | Tenneco Inc. | |
Herman Miller, Inc. | USG Corporation |
(1) | Prior to the November 2017 review, Harman International was removed from the peer group, as it had been acquired by another company. |
29 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Compensation Survey Data. The Committee used broad-based compensation surveys published by Towers Watson (U.S. Compensation Data BankGeneral Industry) and Aon Hewitt (TCM Total Compensation by IndustryExecutive, United States) to develop a balanced picture of the compensation market.
We sought the largest sample size possible from each survey, as we believe the validity of data increases with sample size. The Committee reviewed data from large companies across all industries (median revenue of $4.0 billion) from the Towers Watson survey and large manufacturing companies (median revenue of $3.6 billion) from the Aon Hewitt survey. The Committee used comparator groups that most closely match the NEOs job descriptions; however, the Committee is not made aware of the specific companies in the applicable survey groups.
The Committee used the peer group and compensation surveys to get a general sense of the competitive market. These sources generally showed our executive officers compensation was in line with median total compensation with an above-average percentage of at-risk, performance-based pay. Individual pay levels may vary relative to the market median for a number of reasons, including tenure, responsibilities, performance and the like.
Additional Considerations. Although the Committee views benchmarking data as a useful guide, it gives significant weight to (i) the mix of fixed to variable pay, (ii) the ratio of cash to equity-based compensation, (iii) internal pay equity, and (iv) individual responsibilities, experience and merit when establishing base salaries, annual incentive percentages and equity award percentages. While the Committee monitors these pay relationships, it does not target any specific pay ratios.
The Committee also considers the Companys merit increase budget for all salaried U.S. employees in determining salary increases for executive officers. The 2017 merit increase budget of 3% was based on the Consumer Price Index, other national economic data and our own business climate.
Compensation Adjustments for 2017. In connection with the March 2017 review relating to the executive officers 2017 compensation, the Committee raised Mr. Glassmans base salary by 6.8% and Mr. Flanigans by 5.2%. Mr. Glassmans 2017 annual incentive target percentage was increased from 115% to 120% of base salary. In light of the 2016 changes to the Companys management structure and their increased responsibilities, Mr. Davis and Mr. Dolloff each received a 17.7% increase in their 2017 base salary and their 2017 annual incentive target percentages were increased from 60% to 80% of base salary. Mr. Douglas base salary was increased by 10%.
Compensation Adjustments for 2018. In connection with the November 2017 review relating to the executive officers 2018 compensation, the Committee raised Mr. Glassmans base salary by 4.3%, Mr. Flanigans by 4.0%, and Mr. Davis and Mr. Dolloffs by 2.4% each. Mr. Douglass 2018 base salary was increased by 15.2% as a result of taking on additional responsibilities and benchmarking comparisons. Each of the NEOs annual incentive target percentages remained unchanged for 2018.
The Committee also approved changes to the long-term incentive awards granted in 2018. Previously, the NEOs received a three-year Performance Stock Unit award based upon relative TSR (as described on page 24) and a two-year Profitable Growth Incentive award based upon EBITDA margin and revenue growth (as described on page 25). Each NEO had a separate PSU award percentage and a separate PGI award percentage.
30 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
In order to better align the compensation package with the Companys long-term strategy, the Committee approved the transition to a single, three-year PSU award with 50% of the award vesting based upon relative TSR and 50% vesting based upon EBIT CAGR (the primary operational driver for increasing our TSR) according to the following schedules:
Relative TSR(1) Percentile
|
Relative TSR
|
EBIT CAGR(2) %
|
EBIT CAGR Vesting %
| |||||
25% |
25% | |||||||
30% |
35% | |||||||
35% |
45% | |||||||
40% |
55% | |||||||
45% |
65% | |||||||
50% |
75% | 2% | 75% | |||||
55% |
100% | 4% | 100% | |||||
60% |
125% | 6% | 125% | |||||
65% |
150% | 8% | 150% | |||||
70% |
175% | 10% | 175% | |||||
75% |
200% | 12% | 200% |
(1) | Relative TSR is the Companys Total Shareholder Return compared to a peer group consisting of all the companies in the Industrial, Consumer Discretionary and Materials sectors of the S&P 500 and S&P 400. |
(2) | EBIT CAGR is the Companys (for Glassman, Flanigan and Douglas) or applicable Segments (for Davis and Dolloff) compound annual growth rate of Earnings Before Interest and Taxes (EBIT) in the third fiscal year of the performance period compared to the Companys (or applicable Segments) EBIT in the fiscal year immediately preceding the performance period. The calculation of EBIT CAGR will include results from businesses acquired during the performance period, and will exclude results for any businesses divested during the performance period. EBIT CAGR will also exclude (i) results from non-operating branches, (ii) certain currency and hedging-related gains and losses, (iii) gains and losses from asset disposals, (iv) items that are outside the scope of the Companys core, on-going business activities, and (v) with respect to Segments, all amounts relating to corporate allocations. EBIT CAGR will be adjusted to eliminate gain, loss or expense, as determined in accordance with standards established under Generally Accepted Accounting Principles, (i) from non-cash impairments; (ii) related to loss contingencies identified in footnotes to the financial statements in the Companys 10-K relating to the fiscal year immediately preceding the performance period; (iii) related to the disposal of a segment of a business; or (iv) related to a change in accounting principle. |
For the transition from two long-term incentive awards to a single PSU award, the executive officers 2017 PSU and PGI award percentages were aggregated. The Committee reviewed the combined award percentages in the context of the benchmarking data and the other considerations described above and made the following adjustments to the NEOs: Mr. Glassmans combined PSU award percentage was increased from 352% to 400% of base salary, Mr. Flanigans award percentage was increased from 245% to 250%, Mr. Davis and Mr. Dolloffs award percentages were both increased from 194% to 250%, and Mr. Douglas award percentage was increased from 151% to 155%.
In connection with the decision to move a significant portion of the long-term incentive opportunity from a two-year to a three-year performance period by eliminating PGI awards in 2018, the Committee also granted each executive officer a one-time transition PSU award in 2018 based upon EBIT CAGR only over a two-year performance period. This transition PSU award was set at 50% of the executive officers 2018 PSU award percentages described above.
The base salary adjustments approved at the November 2017 review became effective January 7, 2018, and the 2018 PSU awards were granted on February 20, 2018. As a result, the changes described in this section are not reflected in the Summary Compensation Table at page 34 or the following tables concerning compensation for the year ending December 31, 2017.
31 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Equity Grant Practices
The Committee discussed the 2017 equity-based awards at length at its November 2016 meeting, and then approved the 2017 PSU grants during a telephone meeting on the first business day of the year. The PGI awards were approved at the Committees March 2017 meeting. The Committee does not approve grants of equity-based awards when aware of material inside information.
Performance of Past Equity-Based Awards. The Committee monitors the value of past equity-based awards to gain an overall assessment of how current compensation decisions fit with past practices and to determine the executives accumulated variable compensation. However, the Committee does not increase current-year equity-based awards, or any other aspect of the NEOs compensation, to adjust for below-expected performance of past equity-based awards.
Clawback Provisions. All equity-based awards are subject to a clawback provision included in our Flexible Stock Plan, which allows the Committee to recover any benefits received on the vesting, exercise or payment of any award if the employee violates any confidentiality, non-solicitation or non-compete obligations, or engages in activity adverse to the interests of the Company, including fraud or conduct contributing to any financial restatement. In addition, the award documents for our PSU and PGI programs include clawback provisions triggered if the Company is required to restate previously reported financial results.
Executive Stock Ownership Guidelines. The Committee believes executive officers should maintain a meaningful ownership stake in the Company to align their interests with those of our shareholders. We expect executive officers to attain the following levels of stock ownership within five years of appointment and to maintain those levels throughout their employment.
Position
|
Ownership
| |
CEO |
5X base salary | |
CFO |
3X base salary | |
All Other Executive Officers |
2X base salary |
Shares of the Companys stock owned outright, stock units and net shares acquirable upon the exercise of deferred compensation stock options count toward satisfying the ownership totals. A decline in the stock price can cause an executive officer who previously met the threshold to fall below it temporarily. An executive officer who has not met the ownership requirement or falls below it due to a stock price decline, may not sell Leggett shares and must hold any net shares acquired upon the exercise of stock options or vesting of stock units until he meets the ownership threshold. As of December 31, 2017, all of our NEOs were in compliance with their stock ownership requirements with holdings well in excess of these threshold levels.
32 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Change in Control Agreements
Our NEOs do not have employment agreements and are all considered at-will employees.
In May 2017, the Company entered into severance benefit agreements with Mr. Glassman, Mr. Flanigan, Mr. Davis and Mr. Dolloff. Mr. Douglas also has a severance benefit agreement which was last amended in 2008. These agreements are designed to protect both the executive officers and the Companys interests in the event of a change in control of the Company. The material terms and conditions of these agreements and the Companys potential financial obligations arising from these agreements are described on page 42.
The benefits provided under the severance benefit agreements do not impact the Committees decisions regarding other elements of the executive officers compensation. Because these agreements provide contingent compensation, not regular compensation, they are evaluated separately in view of their intended purpose.
Tax Considerations
For tax years prior to 2018, Section 162(m) of the Internal Revenue Code generally disallows an income tax deduction to public companies for compensation over $1 million paid to certain executive officers; however, qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. The Company takes reasonable and practical steps to minimize compensation that exceeds the $1 million cap, including the decision to pay the PSUs and PGI awards that vested in 2017 entirely in cash (as described on pages 25 and 26). In some circumstances the Committee may determine the best form of compensation for the intended purpose may be one that is not tax-deductible under Section 162(m), such as the inclusion of IPGs in the annual incentive program.
In 2017, the Company paid Mr. Glassman some non-deductible compensation which exceeded the $1 million threshold. Those amounts resulted from base salary, payouts of previously deferred compensation, and the IPG portion of the annual incentive.
On December 22, 2017, the U.S. federal government enacted tax reform legislation, which, among other things, eliminated the performance-based compensation exception under Section 162(m). As a result, the Company currently expects that, with respect to 2018 and beyond, any compensation amounts over $1 million paid to any NEO will no longer be deductible unless grandfathered under the exception for pre-existing contractual arrangements.
The Compensation Committee has reviewed and discussed the Compensation Discussion & Analysis with management and, based on that review and discussion, the Committee has recommended to the Board of Directors that this Compensation Discussion & Analysis be included in this proxy statement.
Phoebe A. Wood (Chair)
Robert E. Brunner
R. Ted Enloe, III
Manuel A. Fernandez
Joseph W. McClanathan
Judy C. Odom
33 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
The following table reports the total 2017 compensation of our Chief Executive Officer, Chief Financial Officer, and our three other most highly compensated executive officers as of December 31, 2017. Collectively, we refer to these five executives as the Named Executive Officers or NEOs.
Name and Principal Position | Year | Salary(1) | Stock Awards(2) |
Option Awards(3) |
Non-Equity Incentive Plan Compensation(1) |
Change in Pension Value; Nonqualified Deferred Compensation Earnings(4) |
All Other Compensation (1)(5) |
Total | ||||||||||||||||||||||||
Karl G. Glassman |
2017 | $1,154,808 | $4,217,693 | $1,068,809 | $79,137 | $496,581 | $7,017,028 | |||||||||||||||||||||||||
President and Chief Executive Officer |
2016 | 1,095,000 | 3,565,927 | $869,276 | 1,863,345 | 84,295 | 577,209 | 8,055,052 | ||||||||||||||||||||||||
2015 | 833,077 | 2,421,092 | 1,049,328 | 50,383 | 519,150 | 4,873,030 | ||||||||||||||||||||||||||
Matthew C. Flanigan |
2017 | 542,731 | 1,388,732 | 334,840 | 28,845 | 367,827 | 2,662,975 | |||||||||||||||||||||||||
Executive VPChief Financial Officer |
2016 | 519,308 | 1,161,499 | 604,588 | 29,665 | 364,699 | 2,679,729 | |||||||||||||||||||||||||
2015 | 503,077 | 1,294,712 | 567,840 | 17,908 | 343,283 | 2,726,820 | ||||||||||||||||||||||||||
Perry E. Davis |
2017 | 479,808 | 891,059 | 407,250 | 20,346 | 133,114 | 1,931,577 | |||||||||||||||||||||||||
Executive VP, President Residential Products & Industrial Products |
2016 | 386,154 | 677,094 | 332,775 | 22,235 | 121,716 | 1,539,974 | |||||||||||||||||||||||||
2015 | 365,846 | 736,177 | 312,576 | 7,406 | 115,594 | 1,537,599 | ||||||||||||||||||||||||||
J. Mitchell Dolloff(6) |
2017 | 479,808 | 891,059 | 437,625 | 17,098 | 200,874 | 2,026,464 | |||||||||||||||||||||||||
Executive VP, President Specialized Products & Furniture Products |
2016 | 344,846 | 613,773 | 329,368 | 14,952 | 154,560 | 1,457,499 | |||||||||||||||||||||||||
Scott S. Douglas(6) |
2017 | 321,923 | 489,753 | 121,440 | 16,591 | 111,575 | 1,061,282 | |||||||||||||||||||||||||
Senior VPGeneral Counsel & Secretary |
(1) | Amounts reported in these columns include cash compensation (base salary, non-equity incentive plan compensation and certain other cash items) that was deferred into the ESU Program (to acquire diversified investments) and/or the Deferred Compensation Program (to acquire, at the NEOs election, an interest-bearing cash deferral or Leggett stock units), as follows: |
Deferred Compensation Program | ||||||||||||||||||||||||
Name
|
Year
|
Total Cash Compensation Deferred
|
ESU ($)
|
Cash ($)
|
Stock (#)
|
Stock (#)
|
||||||||||||||||||
Karl G. Glassman |
2017 | $1,019,455 | $219,455 | 40,917 | 10,311 | |||||||||||||||||||
2016 | 1,092,909 | 292,909 | 47,596 | 10,621 | ||||||||||||||||||||
2015 | 985,382 | 185,382 | 21,862 | |||||||||||||||||||||
Matthew C. Flanigan |
2017 | 900,820 | 24,724 | |||||||||||||||||||||
2016 | 944,230 | 109,527 | 15,448 | 17,971 | ||||||||||||||||||||
2015 | 770,110 | 104,271 | 17,831 | |||||||||||||||||||||
Perry E. Davis |
2017 | 246,294 | 85,904 | $160,390 | ||||||||||||||||||||
2016 | 171,821 | 69,038 | 102,783 | |||||||||||||||||||||
2015 | 114,067 | 65,021 | 49,046 | |||||||||||||||||||||
J. Mitchell Dolloff |
2017 | 482,504 | 88,817 | 11,773 | ||||||||||||||||||||
2016 | 360,863 | 64,546 | 7,486 | |||||||||||||||||||||
Scott S. Douglas |
2017 | 200,314 | 41,430 | 4,370 |
See the Grants of Plan-Based Awards Table on page 37 for further information on Leggett equity-based awards received in lieu of cash compensation in 2017. |
34 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
(2) | Amounts reported in this column reflect the grant date fair value of the PSU awards and Profitable Growth Incentive awards, as detailed in the table below. For a description of the assumptions used in calculating the grant date fair value, see Note K to Consolidated Financial Statements to our Annual Report on Form 10-K for the year ended December 31, 2017. The potential maximum fair value of the PSU awards and the PGI awards on the grant date are also included in the table below. |
Name
|
Year
|
PSU Awards: Grant Date Fair Value
|
PSU Awards: Potential Maximum Value at Grant Date
|
PGI Awards: Grant Date Fair Value
|
PGI Awards: Potential Maximum Value at Grant Date
|
|||||||||||||||
Karl G. Glassman |
2017 | $3,346,963 | $5,857,184 | $870,730 | $2,176,826 | |||||||||||||||
2016 | 2,648,552 | 4,634,966 | 917,375 | 2,293,438 | ||||||||||||||||
2015 | 1,759,519 | 3,079,157 | 661,573 | 1,653,932 | ||||||||||||||||
Matthew C. Flanigan |
2017 | 1,012,463 | 1,771,809 | 376,269 | 940,673 | |||||||||||||||
2016 | 777,096 | 1,359,918 | 384,403 | 961,006 | ||||||||||||||||
2015 | 930,951 | 1,629,164 | 363,761 | 909,402 | ||||||||||||||||
Perry E. Davis |
2017 | 611,538 | 1,070,191 | 279,521 | 698,803 | |||||||||||||||
2016 | 420,676 | 736,183 | 256,418 | 641,044 | ||||||||||||||||
2015 | 497,141 | 869,996 | 239,036 | 597,591 | ||||||||||||||||
J. Mitchell Dolloff |
2017 | 611,538 | 1,070,191 | 279,521 | 698,803 | |||||||||||||||
2016 | 381,520 | 667,660 | 232,253 | 580,631 | ||||||||||||||||
Scott S. Douglas |
2017 | 332,413 | 581,722 | 157,340 | 393,350 |
(3) | Amounts in this column represent the grant date fair value of the stock options calculated using the Black-Scholes option value model. For a description of the assumptions used in calculating the grant date fair value, see Note K to Consolidated Financial Statements to our Annual Report on Form 10-K for the year ended December 31, 2017. |
(4) | Amounts reported in this column for 2017 are set forth below. |
Name
|
Change in Pension Value(a)
|
ESU
|
Deferred Stock Units(c)
|
Cash
|
Total
|
|||||||||||||||
Karl G. Glassman |
$ | 11,904 | $ | 35,337 | $ | 31,896 | $ | 79,137 | ||||||||||||
Matthew C. Flanigan |
5,509 | 15,013 | 8,323 | 28,845 | ||||||||||||||||
Perry E. Davis |
7,025 | 9,698 | $ | 3,623 | 20,346 | |||||||||||||||
J. Mitchell Dolloff |
6,600 | 10,498 | 17,098 | |||||||||||||||||
Scott S. Douglas |
9,100 | 6,064 | 1,427 | 16,591 |
(a) | Change in the present value of the NEOs accumulated benefits under the defined benefit Retirement Plan, as described on page 40. The present value of Retirement Plan benefits was affected by the decrease in the Plans discount rate from 3.75% to 3.5% in 2017. |
(b) | 15% discount on dividend equivalents for stock units held in the ESU Program, as described on page 26. |
(c) | 20% discount on dividend equivalents for stock units held in the Deferred Compensation Program, as described on page 27. |
(d) | Above-market portion of the interest earned on cash deferrals under the Deferred Compensation Program, as described on page 27. |
35 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
(5) | Amounts reported in this column for 2017 are set forth below: |
Name
|
ESU Program(a)
|
Deferred Stock Units(b)
|
Retirement K Matching Contributions (c)
|
Retirement Payments (c)
|
Life and Disability Insurance Benefits
|
Perks(d)
|
Total
|
|||||||||||||||||||||
Karl G. Glassman |
$292,281 | $100,000 | $9,720 | $70,330 | $5,055 | $19,195 | $496,581 | |||||||||||||||||||||
Matthew C. Flanigan |
96,524 | 225,205 | 31,593 | 3,870 | 10,635 | 367,827 | ||||||||||||||||||||||
Perry E. Davis |
97,272 | 9,720 | 22,252 | 3,870 | 133,114 | |||||||||||||||||||||||
J. Mitchell Dolloff |
100,382 | 98,422 | 2,070 | 200,874 | ||||||||||||||||||||||||
Scott S. Douglas |
52,841 | 39,721 | 9,720 | 6,241 | 3,052 | 111,575 |
(a) | This amount represents the Companys matching contributions under the ESU Program, the additional 17.6% contribution for diversified investments acquired with employee contributions and the 15% discount on Leggett stock units acquired with Company matching contributions. |
(b) | This amount represents the 20% discount on stock units acquired with employee contributions to the Deferred Compensation Program. |
(c) | The Retirement K and Retirement K Excess Plan are described on page 27. |
(d) | Only perquisites or other personal benefits with an aggregate value of $10,000 or more are included in the Summary Compensation Table. Perquisites for our executive officers in 2017 consisted of use of a Company car, limited personal use of corporate aircraft by the CEO, and executive physicals. For disclosure purposes, perquisites are valued at the Companys incremental cost. Mr. Glassmans use of corporate aircraft for personal travel by him and his guests, subject to the aircraft not being scheduled for business purposes, is subject to an annual limit of $100,000 in aggregate incremental cost to the Company, including the cost of deadhead flights necessitated by such personal use. |
(6) | Mr. Dolloff became an NEO of the Company for the first time in 2016. Mr. Douglas became an NEO for the first time in 2017. |
36 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Grants of Plan-Based Awards in 2017
The following table sets forth, for the year ended December 31, 2017, information concerning each grant of an award made to the NEOs in 2017 under the Companys Flexible Stock Plan and the Key Officers Incentive Plan.
Award Type (1) |
Estimated Future Payouts Under Non-Equity Incentive |
Estimated Future Payouts Under Equity Incentive |
All Other Stock Awards: Shares of Stock |
All Other Option Awards: Securities Underlying |
Exercise Awards |
Grant Date Fair Value of Stock and Option Awards ($) |
||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date |
Threshold ($) |
Target ($) |
Maximum ($) |
Threshold (#) |
Target (#) |
Maximum (#) |
or Units (#)(4) |
Options (#)(5) |
|||||||||||||||||||||||||||||||||||||||
Karl G. Glassman |
3/22/17 | AI | $697,656 | $1,395,313 | $2,092,969 | |||||||||||||||||||||||||||||||||||||||||||
1/3/17 | PSU | 16,488 | 49,463 | 115,413 | $3,346,963 | |||||||||||||||||||||||||||||||||||||||||||
3/22/17 | PGI | 4,365 | 17,460 | 43,650 | 870,730 | |||||||||||||||||||||||||||||||||||||||||||
| DSU | 10,311 | 500,000 | |||||||||||||||||||||||||||||||||||||||||||||
12/30/16 | DSO | 40,917 | $48.88 | 448,450 | ||||||||||||||||||||||||||||||||||||||||||||
Matthew C. Flanigan |
3/22/17 | AI | 220,000 | 440,000 | 660,000 | |||||||||||||||||||||||||||||||||||||||||||
1/3/17 | PSU | 4,988 | 14,963 | 34,913 | 1,012,463 | |||||||||||||||||||||||||||||||||||||||||||
3/22/17 | PGI | 1,886 | 7,545 | 18,863 | 376,269 | |||||||||||||||||||||||||||||||||||||||||||
| DSU | 24,724 | 1,126,025 | |||||||||||||||||||||||||||||||||||||||||||||
Perry E. Davis |
3/22/17 | AI | 225,000 | 375,000 | 562,500 | |||||||||||||||||||||||||||||||||||||||||||
1/3/17 | PSU | 3,013 | 9,038 | 21,088 | 611,538 | |||||||||||||||||||||||||||||||||||||||||||
3/22/17 | PGI | 1,401 | 5,605 | 14,013 | 279,521 | |||||||||||||||||||||||||||||||||||||||||||
J. Mitchell Dolloff |
3/22/17 | AI | 225,000 | 375,000 | 562,500 | |||||||||||||||||||||||||||||||||||||||||||
1/3/17 | PSU | 3,013 | 9,038 | 21,088 | 611,538 | |||||||||||||||||||||||||||||||||||||||||||
3/22/17 | PGI | 1,401 | 5,605 | 14,013 | 279,521 | |||||||||||||||||||||||||||||||||||||||||||
| DSU | 11,773 | 492,109 | |||||||||||||||||||||||||||||||||||||||||||||
Scott S. Douglas |
3/22/17 | AI | 82,500 | 165,000 | 247,500 | |||||||||||||||||||||||||||||||||||||||||||
1/3/17 | PSU | 1,638 | 4,913 | 11,463 | 332,413 | |||||||||||||||||||||||||||||||||||||||||||
3/22/17 | PGI | 789 | 3,155 | 7,888 | 157,340 | |||||||||||||||||||||||||||||||||||||||||||
| DSU | 4,370 | 198,605 |
(1) | Award Type: |
AIAnnual Incentive |
PSUPerformance Stock Units |
PGIProfitable Growth Incentive |
DSUDeferred Stock Units |
DSODeferred Stock Options |
(2) | The performance metrics, payout schedules and other details of the NEOs annual incentive are described on page 22. |
(3) | PSU awards vest at the end of a three-year performance period based on our TSR as measured relative to a peer group. The PSU awards are described on page 24. PGI awards vest at the end of a two-year performance period based on a combination of revenue growth and EBITDA margin. The PGI awards are described on page 25. |
(4) | DSU amounts (from the Deferred Compensation Program described on page 27) reported in this column represent stock units acquired in lieu of cash compensation. Stock units are purchased on a bi-weekly basis or as compensation otherwise is earned, so there is no grant date for these awards. DSUs are acquired at a 20% discount to the market price of our common stock on the acquisition date. We recognize a compensation expense for this discount, which is reported in the All Other Compensation column of the Summary Compensation Table on page 34. |
(5) | Options issued under the Deferred Compensation Program are described on page 27. |
(6) | The exercise price is the closing market price of the Companys common stock on the grant date. |
37 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Outstanding Equity Awards at 2017 Fiscal Year-End
The following table reports the outstanding stock options, performance stock units, Profitable Growth Incentive awards and restricted stock units held by each NEO as of December 31, 2017.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Securities Underlying Unexercised Options |
Equity Incentive Plan Awards Unearned Shares, Units or Other Unvested Rights |
|||||||||||||||||||||||||||||||
Name |
Grant Date(1) |
Exercisable (#) |
Unexercisable (#) |
Exercise Price ($) |
Expiration Date |
Performance Period(2) |
Number of Units (#)(3) |
Market or Payout Value ($)(4) |
||||||||||||||||||||||||
Karl G. Glassman |
1/4/2010 | 105,300 | $20.51 | 1/3/2020 | PSU Awards | |||||||||||||||||||||||||||
1/3/2011 | 101,675 | 23.14 | 1/2/2021 | 2016-2018 | 49,463 | $2,360,869 | ||||||||||||||||||||||||||
1/3/2012 | 98,675 | 23.14 | 12/31/2021 | 2017-2019 | 16,488 | 786,972 | ||||||||||||||||||||||||||
12/31/2015 | * | 47,596 | 42.02 | 12/30/2025 | PGI Awards | |||||||||||||||||||||||||||
1/4/2016 | 26,816 | 53,633 | 41.02 | 1/3/2026 | 2017-2018 | 43,650 | 2,083,415 | |||||||||||||||||||||||||
Total |
380,062 | 53,633 | 109,601 | $5,231,256 | ||||||||||||||||||||||||||||
Matthew C. Flanigan |
1/3/2011 | 49,575 | 23.14 | 1/2/2021 | PSU Awards | |||||||||||||||||||||||||||
1/3/2012 | 47,975 | 23.14 | 12/31/2021 | 2016-2018 | 14,513 | 692,705 | ||||||||||||||||||||||||||
12/31/2015 | * | 15,448 | 42.02 | 12/30/2025 | 2017-2019 | 4,988 | 238,077 | |||||||||||||||||||||||||
PGI Awards | ||||||||||||||||||||||||||||||||
2017-2018 | 18,863 | 900,331 | ||||||||||||||||||||||||||||||
Total |
112,998 | 38,364 | 1,831,113 | |||||||||||||||||||||||||||||
Perry E. Davis |
1/3/2012 | 30,825 | 23.14 | 12/31/2021 | PSU Awards | |||||||||||||||||||||||||||
2016-2018 | 7,856 | 374,967 | ||||||||||||||||||||||||||||||
2017-2019 | 3,013 | 143,810 | ||||||||||||||||||||||||||||||
PGI Awards | ||||||||||||||||||||||||||||||||
2017-2018 | 14,013 | 668,840 | ||||||||||||||||||||||||||||||
Total |
30,825 | 24,882 | 1,187,617 | |||||||||||||||||||||||||||||
J. Mitchell Dolloff |
PSU Awards | |||||||||||||||||||||||||||||||
2016-2018 | 7,125 | 340,076 | ||||||||||||||||||||||||||||||
2017-2019 | 3,013 | 143,810 | ||||||||||||||||||||||||||||||
PGI Awards | ||||||||||||||||||||||||||||||||
2017-2018 | 14,013 | 668,840 | ||||||||||||||||||||||||||||||
Total |
24,151 | 1,152,726 | ||||||||||||||||||||||||||||||
Scott S. Douglas |
1/3/2011 | 18,450 | 23.14 | 1/2/2021 | PSU Awards | |||||||||||||||||||||||||||
1/3/2012 | 19,175 | 23.14 | 12/31/2021 | 2016-2018 | 4,163 | 198,700 | ||||||||||||||||||||||||||
2017-2019 | 1,638 | 78,182 | ||||||||||||||||||||||||||||||
PGI Awards | ||||||||||||||||||||||||||||||||
2017-2018 | 7,888 | 376,494 | ||||||||||||||||||||||||||||||
Total |
37,625 | 13,689 | 653,376 |
(1) | These option grants were issued subject to our standard vesting terms, become exercisable in one-third increments at 18 months, 30 months and 42 months following the grant date, and have a 10-year term. |
*Denotes an option grant under the Deferred Compensation Programthese options become exercisable on March 15, approximately 15 months following the grant date, and have a 10-year term. |
(2) | PSU awards were granted on the first business day of the year and have a three-year performance period (awards with a 20172019 performance period were granted on January 4, 2017 and vest on December 31, 2019). PGI awards were granted in connection with our Compensation Committees regularly-scheduled February or March meeting and have a two-year performance period (awards with a 20172018 performance period were granted on March 22, 2017 and vest on December 31, 2018). |
(3) | For the 20162018 PSU awards, these amounts reflect the target payout (75% of the base award) because Leggetts TSR ranking as of December 31, 2017 was above the threshold level (performance in the 28th percentile of the peer group versus the 25th percentile threshold). For the 2017-2019 PSU awards, these amounts reflect the threshold payout (25% of the base award) because Leggetts TSR ranking as of December was at the 22nd percentile. The PSUs are described at page 24. |
For the 20172018 PGI awards, these amounts reflect the maximum potential payout (175% of the base award) for all NEOs, as the combined revenue growth and EBITDA margin over the performance period for the Company or the applicable profit centers are projected, as of December 31, 2017, to result in a payout above the target. The PGI awards are described at page 25. |
(4) | Values shown in this column were calculated by multiplying the number of units shown in the prior column by the per share value of $47.73, the closing market price of our common stock on December 31, 2017. |
38 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Option Exercises and Stock Vested in 2017
The following table reports the number of stock options exercised and stock awards vested in 2017, and the value realized by the NEOs upon exercise or vesting of such awards. The stock award amounts represent the payout of the 2015 PSU awards and the 2016 PGI at the end of their respective performance periods on December 31, 2017.
Option Awards | Stock Awards(1) | |||||||||||||||
Name |
Shares Acquired on Exercise (#) |
Value Realized on Exercise ($) |
Shares Acquired on Vesting (#) |
Value Realized on Vesting(2) ($) |
||||||||||||
Karl G. Glassman |
| | 25,422 | $1,213,392 | ||||||||||||
Matthew C. Flanigan |
51,350 | $1,492,745 | 13,451 | 642,016 | ||||||||||||
Perry E. Davis |
| | 7,183 | 342,845 | ||||||||||||
J. Mitchell Dolloff |
20,000 | 561,729 | 17,062 | 814,369 | ||||||||||||
Scott S. Douglas |
14,275 | 369,114 | 3,767 | 179,799 |
(1) | Amounts reported in these columns consist of vested PSU and PGI awards, allocated as follows: |
PSU | PGI | |||||||||||||||
Name |
Shares Acquired on Vesting (#) |
Value Realized on ($) |
Shares Acquired |
Value ($) |
||||||||||||
Karl G. Glassman |
25,422 | $1,213,392 | | | ||||||||||||
Matthew C. Flanigan |
13,451 | 642,016 | | | ||||||||||||
Perry E. Davis |
7,183 | 342,845 | | | ||||||||||||
J. Mitchell Dolloff |
4,087 | 195,073 | 12,975 | $619,297 | ||||||||||||
Scott S. Douglas |
3,767 | 179,799 | | |
(2) | Amounts in this column are calculated based upon the closing price of the Companys stock on the vesting date. |
39 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
We had a voluntary, tax-qualified, defined benefit pension plan (the Retirement Plan), which was frozen December 31, 2006. Benefits accrued under the Retirement Plan were fixed as of that date, and the Retirement Plan was closed to new participants. In 2007, employees who had previously participated in the Retirement Plan were offered a replacement benefit package consisting of the Retirement K and the Retirement K Excess Program discussed at page 27. Although participants no longer accrue additional benefits under the Retirement Plan, the present value of the benefits may increase or decrease each year based on the assumptions used to calculate the benefit for financial reporting purposes.
The Retirement Plan required a contribution from participating employees of 2% of base salary. Normal monthly retirement benefits are the sum of 1% of the employees average monthly salary for each year of participation in the Retirement Plan. Benefits are calculated based on actual years of participation in the Retirement Plan, and benefits become payable when a participant reaches age 65 (normal retirement age). Mr. Glassman, Mr. Flanigan, Mr. Davis, and Mr. Douglas are eligible for early retirement benefits under the Retirement Plan (minimum age 55 and at least 15 years of service), under which they would receive a monthly benefit reduced by 1/180th for the first 60 months and a monthly benefit reduced by 1/360th for any additional months before reaching normal retirement age. Mr. Dolloff is not a Retirement Plan participant.
The following table lists the present value of accumulated benefits payable to the NEOs under the Retirement Plan:
Name |
Number of Years Credited Service (#) |
Present Value of Accumulated Benefit ($) |
Payments During Last Fiscal Year ($) |
|||||||||
Karl G. Glassman |
36 | $310,680 | | |||||||||
Matthew C. Flanigan |
21 | 120,320 | | |||||||||
Perry E. Davis |
37 | 177,512 | | |||||||||
J. Mitchell Dolloff |
| | | |||||||||
Scott S. Douglas |
30 | 227,187 | |
To calculate the present value of the accumulated Retirement Plan benefit, we took the annual accrued benefit through December 31, 2017 that would be payable at normal retirement age, assuming no future contributions. We converted that amount to a lump sum using an annuity factor from the RP2014 mortality table and discounted that amount back to December 31, 2017 using a 3.5% discount rate for US plans. The discount rate, measurement date and mortality assumptions are the same as those used for financial reporting purposes found in Note L to Consolidated Financial Statements to our Annual Report on Form 10-K for the year ended December 31, 2017, except those are reported on a weighted average basis for all plans.
40 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Non-Qualified Deferred Compensation in 2017
The following table provides the aggregate 2017 contributions, earnings, withdrawals, and ending balances for each NEOs deferred compensation accounts. The year-end balances are based on the $47.73 closing market price of our common stock on December 31, 2017.
Name
|
Deferral Type or Program (1)
|
Executive Contributions in 2017 (2)
|
Company Contributions in 2017 (2)
|
Aggregate Earnings in 2017 (3)
|
Aggregate Withdrawals/ Distributions
|
Aggregate Balance at 12/31/2017 (4)
|
||||||||||||||||||
Karl G. Glassman |
ESU | $219,455 | $292,281 | $164,700 | $9,054,871 | |||||||||||||||||||
DSU | 400,000 | 100,000 | 29,909 | $635,068 | 4,704,985 | |||||||||||||||||||
EDSP | 2,216 | 514,625 | ||||||||||||||||||||||
Total |
619,455 | 392,281 | 196,825 | $635,068 | 14,274,481 | |||||||||||||||||||
Matthew C. Flanigan |
ESU | 96,524 | 156,979 | 3,943,474 | ||||||||||||||||||||
DSU | 900,820 | 225,205 | 44,062 | 882,301 | 2,062,079 | |||||||||||||||||||
Total |
900,820 | 321,729 | 201,041 | 882,301 | 6,005,553 | |||||||||||||||||||
Perry E. Davis |
ESU | 85,904 | 97,272 | 45,879 | 2,566,090 | |||||||||||||||||||
DCC | 160,390 | 4,500 | 159,586 | 321,539 | ||||||||||||||||||||
Total |
246,294 | 97,272 | 50,379 | 159,586 | 2,887,629 | |||||||||||||||||||
J. Mitchell Dolloff |
ESU | 88,817 | 100,382 | 36,215 | 1,856,754 | |||||||||||||||||||
DSU | 393,687 | 98,422 | 81,255 | 214,981 | 2,155,725 | |||||||||||||||||||
Total |
482,504 | 198,804 | 117,470 | 214,981 | 4,012,479 | |||||||||||||||||||
Scott S. Douglas |
ESU | 41,430 | 52,841 | 73,538 | 1,696,194 | |||||||||||||||||||
DSU | 158,884 | 39,721 | 9,107 | 109,113 | 372,724 | |||||||||||||||||||
Total |
200,314 | 92,562 | 82,645 | 109,113 | 2,068,918 |
(1) | Deferral Type or Program: |
ESU = Executive Stock Unit Program (see description at page 26). |
DCC = Deferred Compensation ProgramCash Deferral (see description at page 27). |
DSU = Deferred Compensation ProgramStock Units (see description at page 27). |
EDSP = Executive Deferred Stock Program. This is a frozen program under which executives deferred the gain from their stock option exercises from 1 to 15 years. Upon deferral, the participant was credited with stock units representing the net option shares deferred, and the units accumulate dividend equivalents during the deferral period. |
(2) | Amounts reported in these columns are also included in the totals reported in the Summary Compensation Table. |
(3) | Aggregate earnings include interest, dividends and the appreciation (or depreciation) of the investments in which the accounts are held. The following amounts, representing preferential earnings relating to interest and dividends paid in 2017 on the ESU and Deferred Compensation Programs, are reported in the Change in Pension Value and Non-Qualified Deferred Compensation Earnings column of the Summary Compensation Table: Glassman$67,233; Flanigan$23,336; Davis$13,321; Dolloff$17,098; and Douglas$7,491. |
(4) | Of the balances reported in this column (which are net of distributions from prior years deferrals), the following aggregate amounts were included in the totals reported in the Summary Compensation Table in 2015, 2016 and 2017: Glassman$3,762,680; Flanigan$3,492,817; Davis$838,459; Dolloff$1,227,073 (for 2016 and 2017 only); and Douglas$300,367(for 2017 only). |
41 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Potential Payments upon Termination or Change in Control
This section describes the payments and benefits that may be received by our NEOs upon termination of employment, in excess of the amounts generally paid to our salaried employees upon termination of employment. None of the NEOs have employment agreements and are all considered at-will employees.
Severance Benefit Agreements. In May 2017, the Company entered into new severance benefit agreements with Mr. Glassman, Mr. Flanigan, Mr. Davis, and Mr. Dolloff, which provide for specific payments and benefits upon certain termination events or a change in control of the Company. Upon a change in control of the Company, the severance agreements provide for severance payments and benefits during a 24 month period (the Protected Period) following the change in control.
In general, a change in control is deemed to occur when: (i) a shareholder acquires shares giving it ownership of 40% or more of our common stock, (ii) the current directors or their successors no longer constitute a majority of the Board of Directors, (iii) after a merger or consolidation with another corporation, less than 65% of the voting securities of the surviving corporation are owned by our former shareholders, (iv) the Company is liquidated or sells substantially all of its assets to an unrelated third party, or (v) the Company enters into an agreement or publicly announces an intent to take actions which would result in a change in control.
The payments and benefits payable under the severance agreements are subject to a double trigger; that is, they become payable only after both (i) a change in control of the Company and (ii) the executive officers employment is terminated by the Company (except for cause or upon disability) or the executive officer terminates his employment for good reason. In general, the executive officer would have good reason to terminate his employment if he were required to relocate or experienced a reduction in job responsibilities, compensation or benefits, or if the successor company did not assume the obligations under the agreement. The Company may cure the good reason for termination within 30 days of receiving notice of such from the executive.
If Company terminates the executive for cause, the severance benefits do not become payable. Events triggering a termination for cause include (i) conviction of a felony or any crime involving Company property, (ii) willful breach of the Code of Conduct or Financial Code of Ethics that causes significant injury to the Company, (iii) willful act or omission of fraud, misappropriation or dishonesty that causes significant injury to the Company or results in material enrichment of the executive at the Companys expense, (iv) willful violation of specific written directions of the Board following notice of such violation, or (v) continuing, repeated, willful failure to substantially perform duties after written notice from the Board.
Once the double trigger conditions are satisfied, the executive becomes entitled to receive the following payments and benefits:
| Base salary through the date of termination. |
| Pro-rata annual incentive award based upon the actual results under the Key Officers Incentive Plan for the year of termination. |
| Severance payments equal to 200% of base salary and target annual incentive paid in bi-weekly installments over 24 months following the date of termination. |
| Continuation of health insurance, life insurance and fringe benefits for 24 months following the date of termination, as permitted by the Internal Revenue Code, or an equivalent bi-weekly cash payment. |
| Lump sum additional retirement benefit based upon the actuarial equivalent of an additional 24 months of continuous service following the date of termination. |
The executive is not required to mitigate the amount of any termination payment or benefit provided under his severance benefit agreement, but any health insurance or fringe benefits he may receive from a new job will reduce any benefits provided under the agreement.
Mr. Douglas also has a severance benefit agreement, last amended in 2008, the terms of which are substantially similar to those described above, with the following exceptions: (i) the Protected Period is 12 months, (ii) the pro-rata annual incentive for the year of termination is based upon the maximum payout under the Key Officers Incentive Plan, (iii) severance payments are equal to 100% of base salary and target annual incentive over a 12 month period, (iv) health insurance and fringe benefits continued for 12 months following the date of termination, and (v) the lump sum additional retirement benefit is based upon 12 months of additional service. This agreement also provides that, prior to a change in control, the Company must provide three months prior notice to terminate his employment.
42 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Accelerated Vesting of PSUs, PGI and Options. The terms and conditions of the PSU awards provide for double trigger vesting (a change in control of the Company that leads to a termination of employment), such that all outstanding PSUs will become vested with the payout percentage set at the 175% maximum. The Profitable Growth Incentive awards also have double trigger vesting, such that all outstanding PGI awards will become vested at the 250% maximum payout percentage. Stock option awards from previous years provide for immediate, single trigger vesting in the event of a change in control of the Company. The acceleration of equity-based award vesting upon a change in control is designed to ensure that ongoing employees receive the benefit of the transaction by having the opportunity to realize value from their equity-based awards at the time of the transaction.
The tables below provide the estimated potential payments and benefits that the NEOs would receive in the event of any termination of employment. We have used the following assumptions and methodology to calculate these amounts:
| Each termination of employment is deemed to have occurred on December 31, 2017. Potential payments reflect the benefits and arrangements in effect on that date. |
| The tables reflect only the additional payments and benefits the NEOs would be entitled to receive as a result of the termination of employment. Fully vested benefits described elsewhere in this proxy statement (such as deferred compensation accounts and pension benefits) and payments generally available to U.S. employees upon termination of employment (such as accrued vacation) are not included in the tables. |
| To project the value of stock plan benefits, we used the December 29, 2017 closing market price of our common stock of $47.73 per share and a dividend yield of 2.93%. |
The potential payments and benefits presented in the following tables are only estimates provided solely for disclosure purposes and may vary from the amounts that are ultimately paid in connection with an actual termination of employment.
Potential Payments upon Termination Following a Change in Control
Name
|
Severance
|
Vesting of PSU
|
Vesting of
|
Retirement
|
Health and Life
|
Total
|
||||||||||||||||||
Karl G. Glassman |
$5,170,000 | $6,550,346 | $359,887 | $1,315,674 | $37,245 | $13,433,142 | ||||||||||||||||||
Matthew C. Flanigan |
1,980,000 | 2,099,989 | 521,903 | 49,150 | 4,651,042 | |||||||||||||||||||
Perry E. Davis |
1,800,000 | 1,297,501 | 424,906 | 37,310 | 3,559,717 | |||||||||||||||||||
J. Mitchell Dolloff |
1,800,000 | 1,270,626 | 317,782 | 27,718 | 3,416,126 | |||||||||||||||||||
Scott S. Douglas |
624,360 | 707,776 | 221,379 | 15,979 | 1,569,494 |
(1) | This amount represents the bi-weekly cash severance payments made during the Protected Period pursuant to the severance agreements. The severance agreements for Mr. Glassman, Mr. Flanigan, Mr. Davis, and Mr. Dolloff also provide for a pro-rata annual incentive payment for the year in which the termination occurs; however, this amount vests under the Key Officers Incentive Plan on December 31 of each year, so no incremental compensation would have been payable as of December 31, 2017. Mr. Douglas severance agreement provides for a pro-rata annual incentive payment at the maximum payout level, so his severance payment also includes the difference between his actual 2017 KIOP payout and the maximum payout. |
(2) | Upon a termination of employment following a change in control, the PSU awards provide for payout at the 175% maximum, and the PGI awards provide for payout at the 250% maximum. These amounts represent the incremental portion of the award attributable to the additional vesting beyond December 31, 2017: 33% of the total 2016-2018 PSU awards, 67% of the 2017-2019 PSU awards, and 50% of the 2017-2018 PGI. |
(3) | This amount represents that portion of Mr. Glassmans January 4, 2016 stock option grant that was unvested as of December 31, 2017. Under the terms of the option award, vesting continues for three and a half years after a termination following a change in control. |
(4) | This amount represents the additional retirement benefit due under the severance agreements based upon additional Company contributions under the Executive Stock Unit Program, the Retirement K, and the Retirement K Excess Plan for the length of the Protected Period. |
(5) | This amount represents the value of continuation of health insurance and life insurance premiums which continue through the Protected Period under the severance agreements. |
43 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Potential Payments upon Termination Following a Disability
Name |
Vesting of PSU and PGI Awards(1) |
Vesting of Stock Options(2) |
Total | |||||||||
Karl G. Glassman |
$392,130 | $359,877 | $752,007 | |||||||||
Matthew C. Flanigan |
154,561 | 154,561 | ||||||||||
Perry E. Davis |
82,160 | 82,160 | ||||||||||
J. Mitchell Dolloff |
77,898 | 77,898 | ||||||||||
Scott S. Douglas |
60,494 | 60,494 |
(1) | The PSU and PGI awards provide for continued vesting for 18 months after the onset of the disability leading to the executives termination. These amounts represent the value of the awards additional vesting following termination and are based on the projected payouts as of December 31, 2017. |
(2) | This amount represents that portion of Mr. Glassmans January 4, 2016 stock option grant that was unvested as of December 31, 2017. Under the terms of the option award, vesting continues for three and a half years after a termination following a disability. |
In the event of a termination of employment due to a NEOs death, the standard salaried employees life insurance benefit is payable at two times base salary (up to a maximum $800,000), which doubles in the event of death due to an accident.
The following pay ratio disclosure is the Companys reasonable, good faith estimate based upon the methodology described below, pursuant to the SECs guidance under Item 402(u) of Regulation S-K.
The annual compensation of Leggetts Chief Executive Officer for 2017 (as set forth in the Summary Compensation Table on page 34) was $7,017,028, and the annual compensation for our median employee was $16,403 resulting in a ratio of 428 to one. As a multi-national manufacturing company, a majority of Leggetts workforce is employed outside the United States. In addition, approximately three-fourths of Leggetts employees are hourly-paid production workers. Leggett operates over 120 manufacturing facilities in 18 countries, and we offer competitive compensation and benefits in line with local labor markets and in accordance with applicable laws.
As of October 1, 2017, we had a total of 22,163 U.S. and non-U.S. employees. In establishing the population from which to identify our median employee, we excluded all employees located in France (199), India (218) and the United Kingdom (627) under the 5% de minimis exception of Item 402(u), based upon the 22,163 total. We gathered compensation data for a statistically relevant, randomized sample of 400 employees from across our entire, world-wide employee base (less the de minimis exclusion described above and excluding the CEO). We used cash compensation paid during fiscal year 2017 as the consistently applied compensation measure to identify the median employee, which consisted of wages, overtime, salary and bonuses. Compensation of non-U.S. employees was converted from local currency to U.S. dollars using exchange rates in effect on December 31, 2017.
44 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
SECURITY OWNERSHIP
Security Ownership of Directors and Executive Officers
The table below sets forth the beneficial ownership of our common stock on March 6, 2018, by the Companys directors, the Named Executive Officers, as well as all directors and executive officers as a group.
Number of Shares or Units Beneficially Owned | ||||||||||||||||||||
Directors and Executive Officers |
Common Stock |
Stock Units(1) |
Options Exercisable within 60 Days |
Total | % of Class(2) |
|||||||||||||||
Robert E. Brunner, Director |
21,863 | 13,765 | 35,628 | |||||||||||||||||
Robert G. Culp, III, Director |
18,123 | 18,123 | ||||||||||||||||||
Perry E. Davis, Executive VP, PresidentResidential Products & Industrial Products |
81,197 | 42,612 | 30,825 | 154,634 | 0.12 | % | ||||||||||||||
J. Mitchell Dolloff, Executive VP, PresidentSpecialized Products & Furniture Products |
23,365 | 70,456 | 93,821 | |||||||||||||||||
Scott S. Douglas, Senior VPGeneral Counsel & Secretary |
1,317 | 30,992 | 37,625 | 69,934 | ||||||||||||||||
R. Ted Enloe, III, Board Chair |
40,855 | 10,174 | 51,029 | |||||||||||||||||
Manuel A. Fernandez, Director |
6,295 | 14,181 | 20,476 | |||||||||||||||||
Matthew C. Flanigan, Executive VP and Chief Financial Officer, Director |
188,781 | 93,130 | 112,998 | 394,908 | 0.30 | % | ||||||||||||||
Karl G. Glassman, President and Chief Executive Officer, Director |
125,287 | 252,148 | 420,979 | 798,414 | 0.60 | % | ||||||||||||||
Joseph W. McClanathan, Director |
32,933 | 32,933 | ||||||||||||||||||
Judy C. Odom, Director |
38,540 | 15,925 | 54,465 | |||||||||||||||||
Phoebe A. Wood, Director |
35,384 | 27,717 | 63,101 | |||||||||||||||||
All executive officers and directors as a group (15 persons) |
657,371 | 662,392 | 699,597 | 2,019,360 | 1.52 | % |
(1) | Stock units include shares under the Companys Executive Deferred Stock, Executive Stock Unit, and Deferred Compensation Programs and restricted stock unit grants. Participants have no voting rights with respect to stock units. In each program, stock units are converted to shares of common stock upon distribution (although the Company intends to settle all stock units with shares of common stock, it has reserved the right to settle all or a portion of the distributions under the ESU and Deferred Compensation Programs in cash), which occurs at a specified date or upon termination of employment. None of the stock units listed are scheduled for distribution within 60 days. |
(2) | Beneficial ownership of less than .1% of the class is not shown. Stock units and options exercisable within 60 days are considered as stock outstanding for the purpose of calculating the ownership percentages. |
45 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Security Ownership of Certain Beneficial Owners
The Company knows of no beneficial owner of more than 5% of its common stock as of February 14, 2018, except as set out below.
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial Ownership
|
Percent of Common Stock Outstanding
|
||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355 |
14,571,846 | 11.05 | % | |||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055 |
12,462,751 | 9.5 | % | |||||
State Street Corporation One Lincoln Street Boston, MA 02111 |
10,941,869 | 8.3 | % |
(1) | The Vanguard Group (Vanguard) is deemed to have sole voting power with respect to 183,799 shares, shared voting power with respect to 37,776 shares, shared dispositive power with respect to 220,105 shares, and sole dispositive power with respect to 14,351,741 shares. This information is based on Schedule 13G/A of Vanguard filed February 9, 2018, which reported beneficial ownership as of December 31, 2017. |
(2) | BlackRock, Inc. (BlackRock) is deemed to have sole voting power with respect to 10,931,103 shares and sole dispositive power with respect to 12,462,751 shares. This information is based on Schedule 13G/A of BlackRock filed January 25, 2018, which reported beneficial ownership as of December 31, 2017. |
(3) | State Street Corporation (SSC) is deemed to have shared voting and shared dispositive power with respect to 10,941,869 shares. This information is based on Schedule 13G of SSC filed February 14, 2018, which reported beneficial ownership as of December 31, 2017. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys executive officers and directors to file reports of ownership and changes in ownership of common stock with the SEC. We must identify in this proxy statement those persons for whom reports were not filed on a timely basis. Based solely on a review of the forms that have been filed and written representations from the reporting persons, we believe that all Section 16 filing requirements applicable to such persons were complied with during 2017, except as previously disclosed in the Companys proxy statement filed March 30, 2017.
46 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
EQUITY COMPENSATION PLAN INFORMATION
The following table shows the number of outstanding options and shares available for future issuance under all the Companys equity compensation plans as of December 31, 2017. All of our current equity compensation plans have been approved by our shareholders.
Plan Category |
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) |
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) |
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) |
|||||||||
Equity compensation plans approved by shareholders |
6,278,053 | (1) | $ | 24.08 | 12,512,980 | (2)(3) | ||||||
Equity compensation plans not approved by shareholders |
N/A | N/A | N/A | |||||||||
Total |
6,278,053 | $ | 24.08 | 12,512,980 |
(1) | This number represents the stock issuable under the following plans: |
Director Stock Option Plan |
1,103 | |||
Flexible Stock PlanOptions |
1,900,058 | |||
Flexible Stock PlanVested Stock Units |
3,731,331 | |||
Flexible Stock PlanUnvested Stock Units |
645,561 |
Director Stock Option Plan. This is a frozen plan, and no future awards will be granted under it; however, 1,103 options remain outstanding under the plan, which are held by a former director. |
Flexible Stock Plan. This includes 1,900,058 options outstanding and 4,376,892 stock units convertible to common stock. The stock units include grants of RSUs, PGIs, and PSUs covering 627,993 shares that are still subject to forfeiture if vesting conditions are not satisfied. The remaining stock units are held in our ESU, Deferred Compensation and Executive Deferred Stock Programs, and only 17,568 of those stock units are unvested. See pages 26, 27 and 41 for descriptions of these programs. |
(2) | Shares available for future issuance include: 8,506,582 shares under the Flexible Stock Plan and 4,006,398 shares under the Discount Stock Plan, a Section 423 employee stock purchase plan. Columns (a) and (b) are not applicable to stock purchase plans. |
(3) | Of the 8,506,582 shares available under the Flexible Stock Plan as of December 31, 2017, shares issued as options or stock appreciation rights count as one share against the Plan, and shares issued as all other types of awards count as three shares against the Plan. |
47 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
QUESTIONS AND ANSWERS ABOUT PROXY MATERIALS
AND ANNUAL MEETING
Why did I receive these materials?
The Board of Directors is providing these materials to you in connection with its solicitation of proxies for the Companys annual meeting of shareholders on May 15, 2018. As a Leggett shareholder, you are entitled and encouraged to vote on the proposals presented in these proxy materials. We invite you to attend the annual meeting, but you do not have to attend to be able to vote.
Where can I obtain financial information about Leggett?
Our Annual Report to Shareholders, including our Form 10-K with financial statements for 2017, is enclosed in the same mailing with this proxy statement. The Companys Proxy Statement and Annual Report to Shareholders (including Form 10-K) are also available at www.leggett.com/proxy/2018. Information on our website does not constitute part of this proxy statement.
What shares can I vote?
The only class of outstanding voting securities is the Companys common stock. Each share of common stock issued and outstanding at the close of business on March 6, 2018 (the Record Date) is entitled to one vote on each matter submitted to a vote at the annual meeting. On the Record Date, we had 131,696,382 shares of common stock issued and outstanding.
You may vote all shares of Leggett common stock you owned on the Record Date. This includes shares held directly in your name as the shareholder of record and shares held for you as the beneficial owner through a broker, trustee or other nominee, sometimes referred to as shares held in street name.
How do I submit my vote?
You may vote your shares (i) online at www.proxypush.com/leg, (ii) by signing and returning the proxy or voting instruction card, or (iii) in person at the meeting. If you vote online, you do not need to return your proxy or voting instruction card, but you will need to have it in hand when you access the voting website. Specific voting instructions are found on the proxy card or voting instruction card included with this proxy statement.
The Board recommends you vote FOR each of the director nominees in Proposal 1, the ratification of PwC in Proposal 2, and the approval of named executive officer compensation in Proposal 3. All shares for which proxies have been properly submitted and not revoked will be voted at the annual meeting in accordance with your instructions. If you returned a signed proxy card without marking one or more proposals, your proxy will be voted in accordance with the Boards recommendations.
48 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Can I change my vote?
How many votes are needed to conduct business at the annual meeting?
A majority of the outstanding shares of common stock entitled to vote must be present at the annual meeting, or represented by proxy, in order to meet the quorum requirement to transact business. Both abstentions and broker non-votes (described below) are counted in determining a quorum. If a quorum is not present, the annual meeting will be adjourned for no more than 90 days to reach a quorum.
What vote is required to elect a director?
A director nominee must receive the affirmative vote of a majority of those shares present (either in person or by proxy) and entitled to vote.
As required by our Corporate Governance Guidelines, each nominee has submitted a contingent resignation to the Nominating & Corporate Governance Committee in order to be nominated for election as a director. If a nominee fails to receive a majority of the votes cast in the director election, the N&CG Committee will make a recommendation to the Board of Directors whether to accept or reject the directors resignation and whether any other action should be taken. If a directors resignation is not accepted, that director will continue to serve until the Companys next annual meeting or until his or her successor is duly elected and qualified. If the Board accepts the resignation, it may, in its sole discretion, either fill the resulting vacancy or decrease the size of the Board to eliminate the vacancy.
What vote is required to approve the other proposals?
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote is required for ratification of PwC as Leggetts independent registered public accounting firm. Since the vote on named executive officer compensation is advisory, the Board will give due consideration to the outcome; however, the proposal is not approved as such.
What is the effect of an abstention vote on the election of directors and other proposals?
A share voted abstain with respect to any proposal is considered present and entitled to vote with respect to that proposal. For the proposals requiring a majority vote in order to pass, an abstention will have the effect of a vote against the proposal.
What is the effect of a broker non-vote?
If you are the beneficial owner of shares held through a broker or other nominee and do not vote your shares or provide voting instructions, your broker may vote for you on routine proposals but not on non-routine proposals. Therefore, if you do not vote on the non-routine proposals or provide voting instructions, your broker will not be allowed to vote your sharesthis will result in a broker non-vote. Broker non-votes are not counted as shares present and entitled to vote, so they will not affect the outcome of the vote. All proposals on the agenda are non-routine, other than the ratification of PwC as the Companys auditor.
49 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Who pays the cost of soliciting votes at the annual meeting?
Leggett is making this solicitation and will pay the full cost of preparing, printing, assembling and mailing these proxy materials. Upon request, we will also reimburse brokers and other nominees for forwarding proxy and solicitation materials to shareholders.
We have hired Alliance Advisors, LLC to assist in the solicitation of proxies by mail, telephone, in person or otherwise. Alliances solicitation fees are expected to be $10,000 plus expenses. If necessary to ensure sufficient representation at the meeting, Company employees, at no additional compensation, may request the return of proxies.
Where can I find the voting results of the annual meeting?
We will announce preliminary voting results at the annual meeting and plan to issue a press release promptly after the meeting. Within four business days after the annual meeting, we will file a Form 8-K reporting the vote count.
What should I do if I receive more than one set of proxy materials?
You may receive multiple sets of proxy materials if you hold shares in more than one brokerage account or if you are a shareholder of record and have shares registered in more than one name. Please vote the shares on each proxy card or voting instruction card you receive.
We have adopted householding which allows us, unless a shareholder withholds consent, to send one set of proxy materials to multiple shareholders sharing the same address. Each shareholder at a given address will receive a separate proxy card. If you currently receive multiple sets of proxy materials and wish to have your accounts householded, or if you want to opt out of householding, call EQ Shareowner Services (formerly Wells Fargo Shareowner Services) at 800-468-9716 or send written instructions to EQ Shareowner Services, Attn: Leggett & Platt, Incorporated, P.O. Box 64854, St. Paul, MN 55164-0854. You will need to provide your Equiniti account number, which can be found on your proxy card.
Many brokerage firms practice householding as well. If you have a householding request for your brokerage account, please contact your broker.
How may I obtain another set of proxy materials?
If you received only one set of proxy materials for multiple shareholders of record and would like us to send you another set this year, please call 800-888-4569 or write to Leggett & Platt, Incorporated, Attn: Investor Relations, 1 Leggett Road, Carthage, MO 64836, and we will deliver these documents to you promptly upon your request. You can also access a complete set of proxy materials (the Notice of Meeting, Proxy Statement, and Annual Report to Shareholders including Form 10-K) online at www.leggett.com/proxy/2018. To ensure that you receive multiple copies in the future, please contact your broker or Equiniti at the number or address in the preceding answer to withhold your consent for householding.
What is the deadline to propose actions for next years annual meeting?
Shareholders may propose actions for consideration at future annual meetings either by presenting them for inclusion in the Companys proxy statement or by soliciting votes independent of our proxy statement. To be properly brought before the meeting, all shareholder actions must comply with our bylaws, as well as SEC requirements under Regulation 14A. Leggetts bylaws are posted on our website at www.leggett-search.com/governance. Notices specified for the types of shareholder actions set forth below must be addressed to Leggett & Platt, Incorporated, Attn: Corporate Secretary, 1 Leggett Road, Carthage, MO 64836.
50 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Shareholder Proposal Included in Proxy Statement: If you intend to present a proposal at the 2019 annual meeting, SEC rules require that the Corporate Secretary receive the proposal at the address given above by November 28, 2018 for possible inclusion in the proxy statement. We will decide whether to include a proposal in the proxy statement in accordance with SEC rules governing the solicitation of proxies.
Shareholder Proposal Not Included in Proxy Statement: If you intend to present a proposal at the 2019 annual meeting by soliciting votes independent of the Companys proxy statement, Section 1.2 of our bylaws requires that the Company receive timely notice of the proposalno earlier than January 15, 2019 and no later than February 14, 2019. This notice must include a description of the proposed business, your name and address, the number of shares you hold, any of your material interests in the proposal, and other matters specified in the bylaws. The nature of the business also must be appropriate for shareholder action under applicable law. The bylaw requirements also apply in determining whether notice is timely under SEC rules relating to the exercise of discretionary voting authority.
Director Nominees: If you wish to recommend a director candidate for the N&CG Committees consideration, submit a proxy access director nominee, or nominate a director candidate outside of the Companys nomination process, see the requirements described under Consideration of Director Nominees and Diversity on page 5.
51 LEGGETT & PLATT, INCORPORATED 2018 Proxy Statement
Driving Directions to the Conference Center
1 Leggett Road, Carthage, Missouri
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 15, 2018
10:00 a.m. Central Time
LEGGETT & PLATT, INCORPORATED
CORPORATE CONFERENCE CENTER
1 Leggett Road
Carthage, Missouri 64836
LEGGETT & PLATT, INCORPORATED 1 Leggett Road Carthage, Missouri 64836
|
proxy
|
This proxy is solicited on behalf of the Board of Directors.
The undersigned shareholder of Leggett & Platt, Incorporated, a Missouri corporation (the Company), hereby acknowledges receipt of the Notice of 2018 Annual Meeting of Shareholders, the accompanying Proxy Statement and the Annual Report for the fiscal year ended December 31, 2017, and hereby appoints Karl G. Glassman and Scott S. Douglas as proxies and attorneys-in-fact, with full power of substitution to represent the undersigned at the 2018 Annual Meeting of Shareholders of the Company to be held on May 15, 2018 at 10:00 a.m. Central Time at the Companys Corporate Conference Center, located at 1 Leggett Road, Carthage, Missouri 64836, and at any adjournment thereof, and to vote all shares that the undersigned would be entitled to vote if personally present.
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR ALL NOMINEES TO THE BOARD OF DIRECTORS, FOR THE RATIFICATION OF PRICEWATER-HOUSECOOPERS LLP AS THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AND FOR APPROVAL OF NAMED EXECUTIVE OFFICER COMPENSATION AS DESCRIBED IN THE COMPANYS PROXY STATEMENT. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof.
PLEASE VOTE BY INTERNET OR MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
See reverse for voting instructions.
Shareowner Services P.O. Box 64945 St. Paul, MN 55164-0945 |
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proxies | ||||
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INTERNET www.proxypush.com/leg Use the Internet to vote your proxy until 5:00 p.m. (CT) on May 14, 2018. | |||
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Mail Mark, sign and date your proxy card and return it in the postage-paid envelope provided. | |||
If you vote your proxy by Internet, you do NOT need to mail back your Voting Instruction Card. |
TO VOTE BY MAIL AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL ITEMS BELOW, SIMPLY SIGN, DATE, AND RETURN THIS PROXY CARD.
The Board of Directors Recommends a Vote FOR Proposals 1, 2, and 3.
1. Election of directors: | ||||||||||||||||||||||
FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | |||||||||||||||||
a. | Robert E. Brunner | ☐ | ☐ | ☐ | f. | Karl G. Glassman | ☐ | ☐ | ☐ | |||||||||||||
b. | Robert G. Culp, III | ☐ | ☐ | ☐ | g. | Joseph W. McClanathan | ☐ | ☐ | ☐ | |||||||||||||
Please fold here Do not separate | ||||||||||||||||||||||
c. | R. Ted Enloe, III | ☐ | ☐ | ☐ | h. | Judy C. Odom | ☐ | ☐ | ☐ | |||||||||||||
d. | Manuel A. Fernandez | ☐ | ☐ | ☐ | i. | Phoebe A. Wood | ☐ | ☐ | ☐ | |||||||||||||
e. | Matthew C. Flanigan | ☐ | ☐ | ☐ |
2. Ratification of the Audit Committees selection of PricewaterhouseCoopers LLP as the Companys independent registered public accounting firm for the year ending December 31, 2018. |
☐ | For | ☐ | Against | ☐ | Abstain | ||||||||||
3. An advisory vote to approve named executive officer compensation as described in the Companys proxy statement. |
☐ | For | ☐ | Against | ☐ | Abstain | ||||||||||
4. To transact such other business as may properly come before the meeting or any postponement or adjournment thereof. |
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IN THEIR DISCRETION, the proxy holders are authorized to vote upon such other business as may properly come before the meeting or any adjournments or postponements thereof. |
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN,
WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.
Date
Signature(s) in Box |
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Please sign exactly as your name appears on this card. If stock is jointly owned, all parties must sign. Attorneys-in-fact, executors, administrators, trustees, guardians or corporation officers should indicate the capacity in which they are signing. |