SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

Filed by Registrant ☑

Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

☐		Preliminary Proxy Statement				☐		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)).
☑		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Materials Pursuant to Section 240.14a-11(c) or Section 240.14a-12

CMC MATERIALS, INC.
(Exact name of Registrant as Specified in Its Charter)
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		☐		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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		(2)		Aggregate number of securities to which transaction applies:
		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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CMC MATERIALS, INC.

870 NORTH COMMONS DRIVE

AURORA, ILLINOIS 60504

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held March 3, 2021

To our Stockholders:

We are notifying you that the 2021 annual meeting of stockholders of CMC Materials, Inc. (formerly known as Cabot Microelectronics Corporation) will be held on Wednesday, March 3, 2021 at 8:00 a.m., Central Standard Time, via the internet through a virtual web conference at www.virtualshareholdermeeting.com/CCMP2021 for the following purposes:

 

1.

To elect three directors, each for a term of three years;

 

2.

To hold a non-binding stockholder advisory vote to approve our named executive officer compensation;

 

3.

To ratify the selection of PricewaterhouseCoopers LLP, an independent registered public accounting firm, as our independent auditors for fiscal year 2021;

 

4.

To approve the CMC Materials, Inc. 2021 Omnibus Incentive Plan; and

 

5.

To transact other business properly coming before the meeting.

Each of these matters is described in further detail in the accompanying proxy statement. We also have included a copy of our 2020 Annual Report. Only stockholders of record at the close of business on January 7, 2021 are entitled to vote at the meeting or any postponements or adjournments of the meeting. A complete list of these stockholders will be available at our principal executive offices prior to the meeting.

We are delivering our proxy statement and 2020 Annual Report under the United States Securities and Exchange Commission (the “SEC”) rules that allow companies to furnish proxy materials to their stockholders over the internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials to our stockholders, which is designed to reduce our printing and mailing costs and the environmental impact of the proxy materials and our 2020 Annual Report (collectively, the “Proxy Materials”). A paper copy of our Proxy Materials may be requested through one of the methods described in the Notice of Internet Availability of Proxy Materials.

Please use this opportunity to take part in our affairs by voting your shares. You will be able to attend the 2021 annual meeting of stockholders online, vote your shares electronically and submit questions during the meeting by logging in to the website listed above using the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on any additional voting instructions accompanying these proxy materials. We recommend that you log in a few minutes before the meeting to ensure you are logged in when the meeting starts. We have adopted this technology as part of our effort to maintain a safe and healthy environment for our directors, employees, and stockholders who wish to attend the annual meeting. In light of the COVID-19 pandemic (“Pandemic”), we believe that hosting a virtual meeting is in your and our company’s best interests.

Whether or not you plan to participate in the meeting, your vote is important. Please promptly submit your proxy by telephone, internet or mail by following the instructions found on your Notice of Internet Availability of Proxy Materials or proxy card. Your proxy can be withdrawn by you at any time before it is voted.

By order of the Board of Directors,

 

 

William P. Noglows

Chairman of the Board

Aurora, Illinois

This proxy statement is dated January 19, 2021, and is first being made available to stockholders electronically via the internet on or about January 19, 2021.

Table Of Contents

 

		Page
ABOUT THE MEETING			1
What is the purpose of the annual meeting?			1
What is the Notice of Internet Availability of Proxy Materials?			1
How does the board recommend I vote?			2
Who is entitled to vote?			2
What is the difference between holding shares as a record holder and as a beneficial owner?			2
What constitutes a quorum?			2
How do I participate in the meeting?			2
How do I vote, and can I vote by telephone or through the internet?			3
What if I do not specify how my shares are to be voted?			3
Can I revoke my proxy or change my vote after I return my proxy card or after I vote electronically via the internet or by telephone?			4
What vote is required to approve each matter that comes before the meeting?			4
What happens if additional proposals are presented at the meeting?			4
Who will bear the costs of soliciting votes for the meeting?			4
2021 PROXY STATEMENT – SUMMARY			5
STOCK OWNERSHIP			8
Security Ownership of Certain Beneficial Owners and Management			8
ELECTION OF DIRECTORS			11
BOARD STRUCTURE AND COMPENSATION			14
Board of Directors and Board Committees			14
Criteria for Nominating Directors			19
Compensation of Directors			20
Compensation Committee Interlocks and Insider Participation			23
SUSTAINABILITY AND RESPONSIBLE CARE—ENVIRONMENTAL, HEALTH AND SAFETY			23
FEES OF INDEPENDENT AUDITORS AND AUDIT COMMITTEE REPORT			25
Report of the Audit Committee			25
COMPENSATION DISCUSSION AND ANALYSIS			27
Fiscal Year 2020 Executive Compensation Summary			27
Overview			30
Elements of Compensation			33
CEO Compensation			44
Regulatory and Other Factors			46
COMPENSATION AND RISK			46
COMPENSATION COMMITTEE REPORT			47
EXECUTIVE COMPENSATION			48
SUMMARY COMPENSATION TABLE			48
Employment Letter with Mr. Li			50
Standard Employee Benefits			51
2020 GRANTS OF PLAN-BASED AWARDS			52
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END			55
2020 OPTION EXERCISES AND STOCK VESTED			57
PENSION BENEFITS			58
2020 NONQUALIFIED DEFERRED COMPENSATION			58
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL			59
Employment Letter with Mr. Li			61
Change in Control Severance Protection Agreements			62
Treatment of Equity Awards			64

 

		2021 Proxy Statement    i

		Page
CEO PAY RATIO			66
DIRECTOR, EXECUTIVE OFFICER, AND KEY EMPLOYEE HEDGING PROHIBITION			67
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			67
Certain Relationships			67
Related Party Transactions			67
Indemnification			67
NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION			68
RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS			68
APPROVAL OF THE 2021 OMNIBUS INCENTIVE PLAN			69
2022 ANNUAL MEETING OF STOCKHOLDERS			77
“HOUSEHOLDING” OF PROXY MATERIALS			78
VOTING THROUGH THE INTERNET OR BY TELEPHONE			78
APPENDIX A USE OF CERTAIN NON-GAAP FINANCIAL INFORMATION			A-1
APPENDIX B CMC MATERIALS, INC. 2021 OMNIBUS INCENTIVE PLAN			B-1

 

		2021 Proxy Statement    ii

CMC MATERIALS, INC.

870 North Commons Drive

Aurora, Illinois 60504

 

 

 

 

 

PROXY STATEMENT

 

 

The Board of Directors of CMC Materials, Inc. is asking for your proxy for use at the annual meeting of our stockholders to be held on Wednesday, March 3, 2021 at 8:00 a.m., Central Standard Time, via the internet through a virtual web conference at www.virtualshareholdermeeting.com/CCMP2021, and at any postponements or adjournments of the meeting. Online check-in will be available beginning at 7:30 a.m., Central Standard Time. Please allow ample time for the online check-in process. To participate in the annual meeting, you will need your 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on any additional voting instructions accompanying these proxy materials.

In accordance with and pursuant to the rules and regulations adopted by the United States Securities and Exchange Commission (“SEC”), we are providing our stockholders with access to our Proxy Materials over the internet rather than in paper form. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials, rather than a printed copy of the Proxy Materials, to our stockholders of record as of January 7, 2021. We expect to mail the Notice of Internet Availability of Proxy Materials to stockholders entitled to vote at our annual meeting on or about January 19, 2021.

ABOUT THE MEETING

What is the purpose of the annual meeting?

At our annual meeting, stockholders will act upon the matters outlined in the accompanying notice of meeting, including:

 

1.

the election of three directors;

 

2.

the non-binding stockholder advisory vote to approve our named executive officer compensation;

 

3.

the ratification of the selection of our independent auditors;

 

4.

the approval of the CMC Materials, Inc. 2021 Omnibus Incentive Plan (the “2021 OIP”); and

 

5.

any other business properly coming before the meeting.

In addition, our management will report generally on the fiscal year ended September 30, 2020 and respond to questions from stockholders.

What is the Notice of Internet Availability of Proxy Materials?

The Notice of Internet Availability of Proxy Materials will instruct you as to how you may access and review the Proxy Materials and submit your proxy via the internet or phone. If you would like to receive a printed copy of the Proxy Materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials for requesting printed materials.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on March 3, 2021:

 

•

The proxy statement and our 2020 Annual Report are available at www.cmcmaterials.com and www.proxyvote.com.

 

		2021 Proxy Statement    1

How does the board recommend I vote?

Our board of directors unanimously recommends that you vote your shares:

 

1.

“FOR” the election of the nominees named below under “ELECTION OF DIRECTORS”;

 

2.

“FOR” non-binding advisory approval of our named executive officer compensation;

 

3.

“FOR” the ratification of the selection of our independent auditors; and

 

4.

“FOR” the approval of the 2021 OIP.

Who is entitled to vote?

Only stockholders of record at the close of business on the record date, January 7, 2021, are entitled to receive notice and vote at the annual meeting. Each outstanding share of common stock entitles its holder to cast one vote, without cumulation, on each matter to be voted on. As of the record date, we had approximately 29,155,744 shares of common stock outstanding and entitled to vote.

During the annual meeting, a list of stockholders entitled to vote will be available for examination at www.virtualshareholdermeeting.com/CCMP2021. The list will also be available for ten days prior to the annual meeting at our principal executive offices at the address listed above.

What is the difference between holding shares as a record holder and as a beneficial owner?

Record Holder.    You are a record holder of our common stock if at the close of business on the record date your shares were registered directly in your name with Computershare Trust Company, N.A., P.O. Box 43078, Providence, Rhode Island 02940-3078, our stock transfer agent.

Beneficial Owner.    You are a beneficial owner if at the close of business on the record date your shares were held by a broker, bank, custodian, nominee or other record holder of our common stock and not in your name. Being a beneficial owner means that, like most of our stockholders, your shares are held in “street name.” As the beneficial owner, you have the right to direct your broker or nominee how to vote your shares by following the voting instructions your broker or other nominee provides. If you do not provide your broker or nominee with instructions on how to vote your shares, your broker or nominee will be able to vote your shares with respect to some of the proposals, but not all. Please see “What if I did not specify how my shares are to be voted?” for additional information.

What constitutes a quorum?

If a majority of the shares outstanding on the record date are present at the annual meeting, either in person or by proxy, we will have a quorum at the meeting permitting the conduct of business at the meeting. As of the record date, we had approximately 29,155,744 shares of common stock outstanding and entitled to vote. Any shares represented by proxies that are marked to abstain from voting on a proposal will be counted as present for purposes of determining whether we have a quorum. If a broker, bank, custodian, nominee or other record holder of our common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular matter, the shares held by that record holder (referred to as “broker non-votes”) will also be counted as present in determining whether we have a quorum.

How do I participate in the meeting?

We are hosting the annual meeting via the internet through a virtual web conference. You will not be able to attend the meeting in person. You will be able to attend the virtual annual meeting, vote your shares electronically and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/CCMP2021 and entering your 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on any additional voting instructions accompanying these proxy materials. The annual meeting will begin promptly at 8:00 a.m., Central Standard Time. Online check-in will be available beginning at 7:30 a.m., Central Standard Time. Please allow ample time for the online check-in process. Please be assured that you will be afforded the same rights and opportunities to participate in the virtual meeting as you would at an in-person meeting.

 

		2021 Proxy Statement    2

If you are a beneficial owner, who owns shares through a broker, bank, custodian, nominee or other record holder, you may not vote your shares electronically at the virtual annual meeting unless you obtain a “legal proxy” from your broker, bank, custodian, nominee or other record holder who is the stockholder of record with respect to your shares. You may still attend annual meeting even if you do not have a legal proxy. For admission to the annual meeting, visit www.virtualshareholdermeeting.com/CCMP2021 and enter your 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on any additional voting instructions accompanying these proxy materials.

As part of the annual meeting, we will hold a question and answer session, during which we intend to answer questions submitted during the meeting in accordance with the annual meeting procedures which are pertinent to the company and the meeting matters, as time permits. Questions may be submitted during the annual meeting through www.virtualshareholdermeeting.com/CCMP2021. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once.

We will have technical support to assist you with technical difficulties you may have accessing the virtual meeting website. If you encounter difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the annual meeting login page.

How do I vote, and can I vote by telephone or through the internet?

You may vote online during the annual meeting or you may vote by proxy. If your stock is registered in your own name, you may vote online during the annual meeting at www.virtualshareholdermeeting.com/CCMP2021 using the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card or on any additional voting instructions accompanying these proxy materials. If your stock is not registered in your own name and you plan to vote online during the annual meeting, you should contact your broker or agent in whose name your stock is registered to obtain a legal proxy. You may vote by proxy by signing, dating and mailing a proxy card. If you vote by proxy, the individuals named on the proxy card as proxy holders will vote your shares in the manner you indicate.

In addition, you may vote by telephone or through the internet by following the instructions below or those included in the Notice of Internet Availability of Proxy Materials. To vote by telephone, if you are a record holder of our common stock, call toll free 1-800-690-6903 and follow the instructions provided by the recorded message. To vote by telephone if you are a beneficial owner of our common stock, call the toll free number listed in the proxy card or follow the instructions provided by your broker. Before the annual meeting, for all holders of our common stock (whether record or beneficial), to vote through the internet, go to www.proxyvote.com and follow the steps on the secure website. You also may access the proxy vote website (www.proxyvote.com) or view our Proxy Materials by going to our website, www.cmcmaterials.com, selecting “Investor Relations” on our Homepage, and then selecting “Annual Meeting/Proxy” from the drop down menu. Where used in this proxy statement, our website address is included for reference only. The information contained on our website is not incorporated by reference into this proxy statement. Telephone and internet voting facilities for stockholders of record will be available 24 hours a day. Before the annual meeting, you may vote over the telephone or via the internet until 11:59 p.m. ET on March 2, 2021 for shares held directly or 11:59 p.m. ET on February 28, 2021 for shares held in a plan.

What if I do not specify how my shares are to be voted?

Record Holder.    If you are a record holder of our common stock and you sign and return the proxy card without indicating your instructions, your shares will be voted “FOR”:

 

1.

the election of the nominees for director named below under “ELECTION OF DIRECTORS”;

 

2.

the non-binding advisory approval of our named executive officer compensation;

 

3.

the ratification of the selection of our independent auditors; and

 

4.

the approval of the 2021 OIP.

 

		2021 Proxy Statement    3

Beneficial Owners.    If you are a beneficial owner and you do not provide the broker, bank, custodian, nominee or other record holder that holds your shares with voting instructions, such person will determine if it has the discretionary authority to vote on the particular matter. Under applicable rules, such person has the discretion to vote on routine matters such as the ratification of our independent auditors, but does not have discretion to vote on non-routine matters such as the election of a director, the non-binding stockholder advisory vote to approve our named executive officer compensation, and the approval of the 2021 OIP.

Can I revoke my proxy or change my vote after I return my proxy card or after I vote electronically via the internet or by telephone?

Yes. Even after you have submitted your proxy, you may revoke your proxy or change your vote at any time before the proxy is voted at the annual meeting by delivering to our Secretary a written notice of revocation or a properly signed proxy bearing a later date, or by participating the annual meeting and voting via the internet during the meeting. (Participation in the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.) To revoke a proxy previously submitted electronically through the internet or by telephone, you may simply vote again at a later date, using the same procedures, in which case the later submitted vote will be recorded and the earlier vote revoked.

What vote is required to approve each matter that comes before the meeting?

The number of votes required to approve each of the proposals scheduled to be presented at the annual meeting are as follows. Abstentions and broker non-votes will not be counted for purposes of determining whether an item has received the requisite number of votes for approval.

 

Proposal				Required Vote
1.    Election of Directors				For each nominee, a plurality of the votes cast are “FOR” such nominee (i.e., the nominees for director with the most votes will be elected).*
2.   Advisory vote to approve named executive officer compensation				A majority of the votes cast are “FOR” the proposal.
3.    Ratification of the selection of our independent auditors				A majority of the votes cast are “FOR” the ratification.
4.    Approval of the 2021 OIP				A majority of the votes cast are “FOR” the proposal.

 

*

Our Corporate Governance Guidelines provide that in an uncontested election, any director nominee who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall promptly tender his or her resignation to be considered by our nominating and corporate governance committee and our board of directors as outlined in the Corporate Governance Guidelines.

What happens if additional proposals are presented at the meeting?

Other than the matters described in this proxy statement, we do not expect any additional matters to be presented for a vote at the annual meeting. If you vote by proxy, your proxy grants the persons named as proxy holders the discretion to vote your shares on any additional matters properly presented for a vote at the meeting.

Who will bear the costs of soliciting votes for the meeting?

We will bear all costs of solicitation. Certain directors, officers and employees, who will not receive any additional compensation for such activities, may solicit proxies by personal interview, mail, telephone or electronic communication. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to our stockholders. In addition to the mailing of these Proxy Materials, we have hired the firm of D.F. King & Co., Inc. to assist in the solicitation of proxies at an estimated cost of approximately $10,000.

 

		2021 Proxy Statement    4

2021 PROXY STATEMENT – SUMMARY

This summary highlights information contained elsewhere in the proxy statement. This summary does not contain all the information that you should consider, and you should read the entire proxy statement before voting.

 

 

		2021 Proxy Statement    5

 

		2021 Proxy Statement    6

 

		2021 Proxy Statement    7

STOCK OWNERSHIP

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the beneficial ownership of our common stock as of January 7, 2021 (except as indicated below) by:

 

•

all persons known by us to own beneficially 5% or more of our outstanding common stock;

 

•

each of our directors;

 

•

each of the named executive officers in the Compensation Discussion and Analysis Section and the Summary Compensation Table included in this proxy statement; and

 

•

all our directors and executive officers as a group.

Unless otherwise indicated, each stockholder listed below has sole voting and investment power with respect to the shares of common stock beneficially owned by such stockholder.

Stock Ownership Table

 

Name and Address		Number of Shares Beneficially           Owned1				Approximate Percent of Class1
Certain beneficial owners:
1. BlackRock, Inc.      55 East 52nd Street      New York, New York 10055			3,300,7562				11.3%
2. The Vanguard Group, Inc.      P.O. Box 2600      Valley Forge, Pennsylvania 19482			2,717,4463				9.3%
3. EARNEST Partners, LLC      1180 Peachtree Street NE, Suite 2300      Atlanta, Georgia 30309			1,511,5734				5.2%
4. Neuberger Berman Group LLC      1290 Avenue of the Americas      New York, NY 10104			1,461,6555				5.0%
Directors and executive officers:
David H. Li			187,5906				*
William P. Noglows			154,8026 7				*
Richard S. Hill			11,6936				*
Barbara A. Klein			64,2186				*
Paul J. Reilly			18,2396				*
Susan M. Whitney			46,7776				*
Geoffrey Wild			46,7776				*
Scott D. Beamer			33,2416				*
Daniel D. Woodland			55,2826				*
H. Carol Bernstein			58,5946				*
Jeffrey M. Dysard			13,9146				*
All directors and executive officers as a group (14 persons)			707,8036 8				2.4%

 

		2021 Proxy Statement    8

 

*	= less than 1%

1

“Beneficial ownership” generally means any person who, directly or indirectly, has or shares voting or investment power with respect to a security or has the right to acquire such power within 60 days. Shares of common stock subject to options, warrants or rights that are currently exercisable or exercisable within 60 days of January 7, 2021 are deemed outstanding for computing the ownership percentage of the person holding such options, warrants or rights, but are not deemed outstanding for computing the ownership percentage of any other person. The amounts and percentages are based upon 29,155,744 shares of our common stock outstanding as of January 7, 2021, unless otherwise indicated.

2

Of the shares reported as beneficially owned, BlackRock, Inc. exercises (a) sole power to vote 3,254,531 shares, (b) no power to vote 46,225 shares, and (c) sole investment power over 3,300,756 shares. The total number of shares reported as beneficially owned is 3,300,756, as of September 30, 2020. The number of shares indicated is based on information reported in Form 13F Holdings Report filed by BlackRock, Inc. on November 6, 2020.

3

Of the shares reported as beneficially owned, The Vanguard Group, Inc. exercises (a) shared power to vote 66,829 shares, (b) no power to vote 2,650,617 shares, (c) sole investment power over 2,628,785 shares, and (d) shared investment power over 88,661 shares. The total number of shares reported as beneficially owned is 2,717,446, as of September 30, 2020. The number of shares indicated is based on information reported in the Form 13F Holdings Report filed by The Vanguard Group, Inc. on November 16, 2020.

4

Of the shares reported as beneficially owned, EARNEST Partners, LLC exercises (a) sole power to vote 988,751 shares, (b) shared power to vote 1,929 shares, (c) no power to vote 520,893 shares, and (d) sole investment power over 1,511,573 shares. The total number of shares reported as beneficially owned is 1,511,573 shares, as of September 30, 2020. The number of shares indicated is based on the information reported in the Form 13F Holdings Report filed by EARNEST Partners, LLC on November 16, 2020.

5

Of the shares reported as beneficially owned, Neuberger Berman Group LLC exercises (a) sole power to vote 1,448,480 shares, (b) no power to vote 13,175 shares, (c) sole investment power over 3,913 shares, and (d) shared investment power over 1,457,742 shares. The total number of shares reported as beneficially owned is 1,461,655 shares, as of September 30, 2020. The number of shares indicated is based on the information reported in the Form 13F Holdings Report filed by Neuberger Berman LLC on November 12, 2020.

6	Includes shares of our common stock that such person has the right to acquire pursuant to stock options granted pursuant to the CMC Materials, Inc. 2012 Omnibus Incentive Plan, as amended March 7, 2017 (“2012 Omnibus Incentive Plan”), exercisable within 60 days of January 7, 2021, as follows:

 

Name		Upon Exercise Shares Issuable
Mr. Li			104,255
Mr. Noglows			90,264
Mr. Hill			4,930
Ms. Klein			40,764
Mr. Reilly			13,126
Ms. Whitney			36,264
Mr. Wild			36,264
Mr. Beamer			12,063
Dr. Woodland			38,497
Ms. Bernstein			15,240
Dr. Dysard			5,437

 

		2021 Proxy Statement    9

Also includes restricted stock units awarded to such executive officer pursuant to the 2012 Omnibus Incentive Plan on December 5, 2017, January 16, 2018, December 6, 2018, December 5, 2019, and December 3, 2020, respectively, that are still subject to restrictions as of January 7, 2021, as set forth in the table below. On December 5, 2017, December 6, 2018, December 5, 2019, and December 3, 2020, as part of our annual equity incentive award program, we awarded restricted stock units to our executive officers with restrictions that lapse in equal increments upon each anniversary over four years. On January 16, 2018, as part of Mr. Beamer’s appointment as our Vice President and Chief Financial Officer, we awarded Mr. Beamer a sign-on award consisting of 13,128 restricted stock units and an annual equity incentive award consisting of 2,104 restricted stock units, in each case, with restrictions that lapse in equal increments upon each anniversary of the award over four years. The outstanding restricted stock unit awards have the same economic value as shares of common stock, are eligible to receive dividend equivalents, and may not be voted, sold or transferred, other than to immediate family members as provided in the 2012 Omnibus Incentive Plan.

 

		Equity Incentive Program Restricted Stock Units
Name		12/05/17				1/16/18				1/16/18				12/6/18				12/5/19				12/3/20
Mr. Li			1,654				—				—				3,432				4,659				6,680
Mr. Beamer			—				6,564				1,052				1,236				1,290				1,903
Dr. Woodland			725				—				—				1,312				1,374				2,004
Ms. Bernstein			575				—				—				1,086				1,140				1,603
Dr. Dysard			469				—				—				750				939				1,703

Also includes restricted stock units awarded to such non-employee director pursuant to the 2012 Omnibus Incentive Plan that are still subject to restrictions as of January 7, 2021, as set forth in the table below. For annual equity awards to non-employee directors, restricted stock units are currently awarded with restrictions that lapse in full upon the first anniversary of the award. Initial equity awards of restricted stock units to non-employee directors are currently made with restrictions that lapse in equal annual increments over four years beginning on the first anniversary of the award. Outstanding restricted stock unit awards have the same economic value as shares of common stock, are eligible to receive dividend equivalents, and may not be voted, sold or transferred, other than to immediate family members as provided in the plan.

 

Name		Non-Employee Director Restricted Stock Units
Mr. Noglows			593
Mr. Hill			593
Ms. Klein			593
Mr. Reilly			931
Ms. Whitney			593
Mr. Wild			593

7	Includes 41,125 shares of our common stock held in trust for the benefit of Mr. Noglows’ spouse, over which Mr. Noglows has no voting or investment power or ownership control.

8

Includes all individuals who were directors and executive officers as of January 7, 2021, and does not include individuals who ceased to be executive officers prior to such date, except for Mr. Noglows, who since January 1, 2016 has been a non-employee director. Includes 406,372 shares of our common stock that our directors and executive officers have the right to acquire pursuant to stock options exercisable within 60 days of January 7, 2021, and 56,873 restricted shares of our common stock or restricted stock units held by our executive officers still subject to restrictions as of January 7, 2021 (which include shares subject to restrictions or conditions pursuant to our Deposit Share Program).

 

		2021 Proxy Statement    10

ELECTION OF DIRECTORS

Our board of directors is currently comprised of seven directors. The board of directors is divided into three classes: Class I, whose terms will expire at the annual meeting of stockholders to be held in 2022; Class II, whose terms will expire at the annual meeting of stockholders to be held in 2023; and Class III, who are nominees for election at this Annual Meeting and whose terms will expire at the annual meeting of stockholders to be held in 2024. Mr. Hill and Ms. Whitney are currently in Class I, Messrs. Reilly and Wild are currently in Class II, and Ms. Klein, and Messrs. Li and Noglows are currently in Class III.

At each annual meeting of stockholders, directors for the class of which term expires at the annual meeting will be elected to serve from the time of election and qualification until the third annual meeting following election. Our certificate of incorporation provides that the authorized number of directors may be changed only by resolution of the board of directors, and that the board of directors may increase or decrease the authorized number of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third the total number of directors. Our certificate of incorporation also provides that our board of directors may fill any vacancy created by the resignation of a director or the increase in the size of our board of directors.

Our board of directors unanimously recommends that you vote “FOR” the election to the board of the nominees named below.

Nominees for Director for a term that expires in 2024:

 

		Barbara A. Klein, 66
Committee Membership: •   Audit (Chair) •   Nominating and Corporate Governance		Ms. Klein was elected a director of our company in April 2008. Ms. Klein also is a director of Ingredion, Inc. She retired in May 2008 as the Senior Vice President and Chief Financial Officer of CDW Corporation. Prior to that, Ms. Klein held a variety of senior finance positions including Vice President and Chief Financial Officer of Dean Foods Company, Vice President and Corporate Controller of Ameritech Corporation, and Vice President and Corporate Controller of Pillsbury Co. Ms. Klein received a B.S. in accounting and finance from Marquette University, and an M.B.A. from Loyola University. Based upon Ms. Klein’s management and director experience and her accounting and finance background discussed above, the board has concluded Ms. Klein should serve as a director of our company.
		David H. Li, 48
Committee Membership: •   None		Mr. Li was elected a director of our company in January 2015, and has served as our President and Chief Executive Officer since then. From June 2008 through December 2014, Mr. Li served as our Vice President of the Asia Pacific Region. Prior to that role, Mr. Li served in various leadership roles throughout our business since joining us in 1998. Mr. Li received a B.S. in chemical engineering from Purdue University and an M.B.A. from Northwestern University. Based upon Mr. Li’s management experience, his knowledge of our company, its operations and customers, his knowledge of the chemical and semiconductor industries, and his Asia-focused, cross-border business experience, the board has concluded Mr. Li should serve as a director of our company.

 

		2021 Proxy Statement    11

		William P. Noglows, 62
Committee Membership: •   None		Mr. Noglows has served as our Chairman since 2003, and was our President and Chief Executive Officer from November 2003 through December 2014. Mr. Noglows also is a director of Aspen Aerogels, Inc. and Littelfuse, Inc. From 1984 through 2003, he served in various leadership positions at Cabot Corporation, culminating in serving as an executive vice president and general manager. Mr. Noglows had previously served as a director of our company from December 1999 until April 2002. Mr. Noglows received his B.S. in chemical engineering from the Georgia Institute of Technology. Based upon Mr. Noglows’ management experience, his knowledge of our company and its operations, and his knowledge of the chemical and semiconductor industries, the board has concluded Mr. Noglows should serve as a director of our company.

Directors whose terms continue until 2022:

 

		Richard S. Hill, 69
Committee Membership: •   Audit •   Nominating and Corporate Governance (Chair)		Mr. Hill was elected a director of our company in June 2012. Mr. Hill retired as the Chairman and Chief Executive Officer of Novellus Systems, Inc. in June 2012 after serving in these positions since 1996, and since 1993 as CEO upon his joining Novellus. Prior to leading Novellus, Mr. Hill held various senior leadership and management positions with Tektronix, Inc., General Electric, Inc., Motorola, Inc., and Hughes Aircraft, Inc. Mr. Hill also serves as a director of Arrow Electronics, Inc. and Marvell Technology Group Ltd. He also previously served as a director of Xperi, Inc. until June 2020, and of Symantec, Inc. from January until December 2019, also having served as Interim Chief Executive Officer there from May to November 2019. He received a B.S. in bioengineering from the University of Illinois and a M.B.A. from Syracuse University. Based upon Mr. Hill’s management and director experience and his technical background discussed above, the board has concluded Mr. Hill should serve as a director of our company.
		Susan M. Whitney, 70
Committee Membership: •   Audit •   Compensation (Chair)		Ms. Whitney was elected a director of our company in April 2015. Ms. Whitney retired from the IBM Corporation in 2007, following a 35-year career in which she held various operational leadership roles throughout the company. Ms. Whitney also serves as a trustee of the College of Mt. St. Vincent, and served as a director of LSI Logic Corporation prior to its acquisition by Avago Technologies, Ltd. in 2014. She received her B.A. in mathematics and economics from the College of Mt. St. Vincent. Based upon Ms. Whitney’s management and director experience and her background in technology companies discussed above, the board has concluded Ms. Whitney should serve as a director of our company.

 

		2021 Proxy Statement    12

Directors whose terms continue until 2023:

 

		Paul J. Reilly, 64
Committee Membership: •   Audit •   Compensation		Mr. Reilly was elected a director of our company in March 2017. Mr. Reilly served as an executive vice president of Arrow Electronics, Inc. through his retirement in January 2017, and had held various leadership roles there, including serving as the executive vice president, finance and operations, and chief financial officer from 2001 through May 2016, and head of global operations from 2009 through May 2016. Prior to joining Arrow in 1991, Mr. Reilly was a certified public accountant at KPMG Peat Marwick. Mr. Reilly also serves as a director of Assurant, Inc., and previously served as a director of comScore, Inc. from September 2017 until August 2019. He has a B.S. in accounting from St. John’s University. Based upon Mr. Reilly’s management and director experience and his accounting and finance background discussed above, the board has concluded Mr. Reilly should serve as a director of our company.
		Geoffrey Wild, 64
Committee Membership: •   Compensation •   Nominating and Corporate Governance		Mr. Wild was elected a director of our company in September 2015. Mr. Wild is the Chief Executive Officer of Atotech since March 2017. He previously had served successively as the Chief Executive Officer of AZ Electronic Materials, Cascade Microtech, Inc. and Nikon Precision, Inc. Mr. Wild previously served as a director of Materion Corporation until December 2019, and Axcelis Technologies, Inc. He received his B.S. in chemistry from the University of Bath, UK. Based upon Mr. Wild’s management and director experience and his technical background discussed above, the board has concluded Mr. Wild should serve as a director of our company.

 

		2021 Proxy Statement    13

BOARD STRUCTURE AND COMPENSATION

Board of Directors and Board Committees

Board Leadership

Our independent directors hold regularly scheduled meetings in executive session, at which only independent directors are present. As provided in our Corporate Governance Guidelines, the Chair of the nominating and governance committee, Mr. Hill, serves as Chair of the meetings of the independent directors in executive session and performs other responsibilities of a lead director such as working with the Chairman of the board of directors to plan and set the agenda for meetings of the board of directors. Mr. Noglows is the independent, non-executive Chairman of the board of directors and prior to January 1, 2015, also was the President and Chief Executive Officer of our company. Effective January 1, 2015, Mr. Li became our President and Chief Executive Officer, and Mr. Noglows continued as Chairman of the board of directors in an Executive capacity through December 2015. Thus, since January 1, 2015 our company has had a separate Chairman of the board of directors (Mr. Noglows) and a separate President and Chief Executive Officer (Mr. Li), an approach that our board believes has worked well for our company.

Board’s Role in Risk Oversight

The board of directors has an oversight role, as a whole and at the committee level, in overseeing management of our risks. Our board focuses on our general risk management strategy, the most significant risks facing us, and oversees the implementation of risk mitigation strategies by management. The board regularly reviews information regarding our credit, liquidity, and operations, including the environmental, health and safety aspects of such, and risks associated with each, and along with the audit committee, compliance matters related to our business. The board’s oversight of risk management matters related to environmental, health and safety and other environmental, social and governance (“ESG”) matters includes consideration of sustainability and climate-related risks, and of diversity and inclusion and other ‘human capital” matters. The compensation committee of the board is responsible for overseeing the management of risks relating to human capital matters, including our diversity and inclusion program, and our employee compensation plans, policies, and programs, as well as our annual report on executive compensation for inclusion in each proxy statement. The audit committee of the board oversees the management of financial risks. The nominating and corporate governance committee of the board is responsible for overseeing the management of risks related to corporate governance matters. While each committee is responsible for evaluating certain risks and overseeing management of such risks, the entire board is regularly informed through the committees about such risks, and reviews and discusses them in the context of our overall risk posture and risk management and mitigation strategies.

Corporate Governance

Our board of directors has adopted the CMC Materials, Inc. Corporate Governance Guidelines, which are available on our website, www.cmcmaterials.com, along with other corporate governance materials, such as board of directors’ committee charters and our Code of Business Conduct. Pursuant to the Corporate Governance Guidelines, committee charters and other corporate governance materials and practices, our board of directors and committees, particularly the audit committee, periodically review and provide oversight of the management of various risk factors that are relevant to our company. Our board of directors also reviews annually the functioning of the board.

 

		2021 Proxy Statement    14

Shareholder Engagement and Communications with Directors

Our company values the perspectives of our stockholders, and has a variety of means by which we engage with them. Also, stockholders and third parties may communicate with our board of directors, the non-employee directors or any individual director (including any committee Chair) through the Chairman of the Board, c/o the Secretary of our company, at our offices at 870 North Commons Drive, Aurora, Illinois 60504. Depending on the nature of the communication and to whom it is directed, the Secretary of our company will: (a) forward any communication to the appropriate director or directors; (b) forward the communication to the relevant department within the company; or (c) attempt to handle the matter directly (for example, a communication dealing with a share ownership matter).

Independent Directors

The board of directors has determined that six of our seven current directors, including Messrs. Hill, Noglows, Reilly and Wild, and Ms. Klein and Ms. Whitney, are “independent” directors as defined in the National Association of Securities Dealers Automated Quotation (“NASDAQ”) Marketplace Rules and as defined in applicable rules by the SEC. In making its determinations of independence, in addition to consideration of the relevant SEC and NASDAQ rules (according to which the definition of “independent director” is set forth in our Corporate Governance Guidelines, a current copy of which is available on our website, www.cmcmaterials.com), the board of directors considered factors for each director such as any other directorships, any employment or consulting arrangements, and any relationship with our company’s customers, suppliers or advisors. In particular, the board of directors determined that, effective January 1, 2019, Mr. Noglows qualified as an independent director under applicable rules considering, among other things, that as of such time it had been more than three years since he was an employee of our company.

Board Composition: Diversity

The below matrix provides information regarding the members of our board of directors, including certain types of knowledge, skills, experiences and attributes possessed by one or more of our directors that our board of directors believes are relevant to our business and the industries in which we participate. The matrix does not encompass all the knowledge, skills, experiences or attributes of our directors, and the fact that a particular knowledge, skill, experience or attribute is not listed does not mean that a director does not possess it. In addition, the absence of a particular type of knowledge, skill, experience, or attribute with respect to any of our directors does not mean the director in question is unable to contribute to the decision-making process in that area. The type and degree of knowledge, skill and experience listed in the table below may vary among members of the board of directors.

Our board of directors comprises diversity in various forms, including with respect to gender and race/ethnicity, and has committed itself to considering diversity when evaluating director candidates, giving strong consideration to candidates who would contribute to the board’s gender and other diversity, along with their skills and experience. At present, our board of directors is approximately 43% diverse, with approximately 29% gender (female) diversity and approximately 14% racial/ethnic diversity.

Our board of directors has been gender-diverse for more than a decade, and since 2015, two directors who are women (Ms. Klein and Ms. Whitney), have served and continue to serve as directors, as well as committee chairs (audit, since 2014, and compensation, since 2016, respectively); thus, women constitute approximately 29% of the board of directors. With respect to race and ethnicity, for approximately 15 years (75% of our history as a public company), the board of directors has included at least one director of Asian background, and at certain times there have been two directors; Mr. Li, who is a director as well as our Chief Executive Officer, is Asian American. In addition, we have and for many years have had the majority of directors (e.g., currently Mr. Hill, Mr. Li, Mr. Noglows, Mr. Wild, Ms. Whitney) who live or have lived and worked in Asia, and/or with Asia-based customers and suppliers, which provides important context and experience given the Asia base and focus of the semiconductor industry, the primary industry in which we participate, as well as a significant amount of our customer, employee and asset base.

 

		2021 Proxy Statement    15

Skills, Qualifications and Experience

David H. Li

William P. Noglows

Richard S. Hill

Barbara A. Klein

Paul J. Reilly

Susan M. Whitney

Geoffrey Wild

Industry Experience

X

X

X

X

X

Technology Experience

X

X

X

X

X

X

X

General Business (e.g., Manufacturing, Marketing and Sales) Experience

X

X

X

X

X

X

X

Finance Experience

X

X

X

X

X

X

X

International Business Experience

X

X

X

X

X

X

X

Public Company Experience

X

X

X

X

X

X

X

Diverse Attributes

X r/e

Xg

Xg

r/e denotes Racial/Ethnicity Diversity (Asian-American)

g denotes Gender Diversity (Female)

Board Refreshment and Succession Planning

Our board of directors regularly reviews its own composition, and considers and plans for an orderly transition of the board, including with respect to planning for potential retirements and with respect to identifying potential candidates for service as new directors. As part of this process, the board of directors routinely evaluates the need for board refreshment and focuses on identifying individuals whose background, skills and experiences will enable them to make meaningful contributions to the shaping of the future of the company. The board of directors believes it has a meaningful record in this regard. Underscoring more recent refreshment efforts, the board of directors has refreshed approximately 73% of its directors since 2015. Mr. Li joined the board of directors in January 2015 in connection with his appointment as the company’s president and chief executive officer. The company also added three new independent directors, Ms. Whitney in April 2015, Mr. Wild in September 2015, and Mr. Reilly in March 2017. The board of directors believes the relevant background, experience and expertise of these individuals have complemented that of our other directors, and vice-versa, further contributing to the board of director’s ongoing guidance of our company. Along with this, since 2015, the board of directors has smoothly transitioned through the retirement of six long-serving directors. Over time, our board of directors expects to continue to focus on board refreshment and this transition process to inject relevant expertise, new skill sets, and diverse backgrounds and perspectives.

Board and Committee Meeting Attendance

During fiscal year 2020, our board of directors held thirteen meetings and took action by written consent five times. Each director attended at least 75% of all the meetings of the board and those committees on which he or she served during fiscal year 2020. We encourage directors to attend our stockholder annual meetings, and all directors except Mr. Hill, who was absent due to illness, attended our 2020 annual meeting of stockholders. Since the end of fiscal year 2020, the board of directors has met five times and has taken action by written consent once. During fiscal year 2020, our independent directors met in executive session twelve times. Since fiscal year end, our independent directors have met in executive session four times. We are especially appreciative of our board of directors’ continued high levels of attendance at meetings during fiscal year 2020 and since its close, despite the challenges presented by the Pandemic since approximately mid-March of 2020.

 

		2021 Proxy Statement    16

Committees of the Board

The board has three standing committees: the audit committee, the compensation committee and the nominating and corporate governance committee. The following chart sets forth the directors who currently serve as members of each of the board committees.

 

Directors		Audit Committee		Compensation Committee		Nominating and Corporate Governance Committee
Richard S. Hill		X				C
Barbara A. Klein		C, F				X
Paul J. Reilly		X, F		X
Susan M. Whitney		X		C
Geoffrey Wild				X		X

 

“C” denotes member and Chair of committee

“X” denotes member of committee

“F” denotes designated “Audit Committee Financial Expert”

Audit Committee.    The members of the audit committee are currently Messrs. Hill and Reilly, Ms. Klein (Chair) and Ms. Whitney. The board has determined that each of these audit committee members during fiscal year 2020 and currently are independent as defined by NASDAQ Marketplace Rules and under the applicable rules adopted by the SEC and that all such members are financially literate.

The functions of the audit committee include:

 

•

selecting, appointing, retaining, compensating and overseeing our independent auditors;

 

•

deciding upon and approving in advance the scope of audit and non-audit assignments and related fees;

 

•

reviewing accounting principles we use in financial reporting;

 

•

reviewing our system of disclosure controls and procedures;

 

•

reviewing the adequacy of our internal control procedures, including the internal audit function;

 

•

reviewing general information technology and cybersecurity matters related to our business; and,

 

•

reviewing general compliance matters and processes related to our operations, including those related to environmental, health and safety matters.

Our board of directors has determined that the audit committee has at least one member who qualifies as an Audit Committee Financial Expert, as defined by relevant SEC rules, and has designated Ms. Klein, the Chair of the audit committee, and Mr. Reilly, a member of the audit committee, as an Audit Committee Financial Expert.

The audit committee operates under a written charter, a current copy of which is available on our website, www.cmcmaterials.com. The audit committee reviews and reassesses the adequacy of the audit committee charter on an annual basis. The audit committee has established procedures for the receipt, retention, and treatment of complaints received regarding accounting, internal accounting controls or auditing matters, as well as for the pre-approval of services provided by our independent auditors, both of which are also available on our website, www.cmcmaterials.com. As set forth in the audit committee charter, the audit committee is also responsible for the review and approval of any related party transaction in advance of the company entering into any such transaction; since April 2002, we have not been engaged in any related party transactions and none have been proposed to the audit committee for consideration.

The audit committee met eight times during fiscal year 2020 and did not take action by written consent, and has met twice since fiscal year end with respect to the audit of our fiscal year 2020 financial statements and

 

		2021 Proxy Statement    17

related and other matters, and has not taken action by written consent. In fulfillment of the audit committee’s responsibilities for fiscal year 2020, Ms. Klein, the audit committee Chair, reviewed our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (as did the other members of the committee and board of directors), and our Quarterly Reports on Form 10-Q before we filed them, and Ms. Klein and other members of the audit committee (and board of directors) also reviewed quarterly earnings announcements and related matters before we released them.

Compensation Committee.    The members of the compensation committee are currently Messrs. Reilly and Wild, and Ms. Whitney (Chair), each of whom the board determined was during fiscal year 2020 and is now an “independent” director as defined by NASDAQ Marketplace Rules and as defined in applicable rules adopted by the SEC. Further, the members of the compensation committee each satisfy the eligibility requirements applicable to compensation committee members of listed companies set forth in NASDAQ listing standards.

The functions of the compensation committee include:

 

•

reviewing and approving the compensation and benefits for our employees;

 

•

evaluating and deciding upon the compensation of our chief executive officer;

 

•

evaluating and deciding upon the compensation of our other executive officers, which is done following consultation with our chief executive officer;

 

•

monitoring the administration of our employee benefit plans;

 

•

authorizing and ratifying stock option grants, restricted stock and restricted stock unit awards, other equity awards (such as performance share unit awards), and other incentive arrangements;

 

•

authorizing employment and related agreements;

 

•

in concert with the nominating and corporate governance committee, reviewing and making recommendations to the board of directors regarding succession planning for our chief executive officer and other executive officers; and

 

•

periodically reviewing human capital matters affecting the company (for example, demographics, diversity and inclusion, talent development and employee retention initiatives).

Our chief executive officer is neither present for voting or deliberation on, nor votes upon decisions relating to, his compensation. In addition, our chief executive officer does not vote upon decisions related to the compensation of our other executive officers. Also, our vice president of human resources and her staff support the compensation committee in its work by providing input and recommendations on the overall mix and forms of executive compensation as directed by the compensation committee. Our vice president of human resources and human resources staff do not make decisions regarding the amount of compensation for our named executive officers or other executive officers.

The compensation committee has engaged the services of an independent compensation consultant, which reports directly to the committee. Since April 2017, the committee has engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent compensation consultant. The consultant has been engaged to advise the compensation committee on executive officer compensation and equity incentive matters and trends, and to perform benchmark comparison analysis of compensation practices of peer companies. As part of the compensation committee’s ongoing and annual reviews of executive officer compensation matters, the consultant recommends specific ranges of compensation for our executive officers, including our named executive officers, based on information provided by the committee regarding different performance scenarios and desired positioning with respect to market compensation ranges. The consultant also advises the nominating and corporate governance committee on non-employee director compensation matters. The consultant does not provide other services to our company. The compensation committee also has reviewed the independence of the consultant in light of SEC rules and NASDAQ listing standards regarding compensation consultants and has concluded that the consultant’s work for the committee and for the nominating and corporate governance committee is independent and does not raise any conflict of interest.

 

		2021 Proxy Statement    18

The compensation committee operates under a written charter that addresses compensation matters, a current copy of which is available on our website, www.cmcmaterials.com. The compensation committee reviews and reassesses the adequacy of the compensation committee charter (including under NASDAQ listing standards) on an annual basis. The compensation committee met six times during fiscal year 2020 and took action by written consent twice, and has met three times since the fiscal year end with respect to 2020 annual cash incentive payouts, salary increases, equity awards (including stock option grants, and restricted stock unit and performance share unit awards), and other matters, and has not taken action by written consent.

Nominating and Corporate Governance Committee.    The members of the nominating and corporate governance committee are currently Messrs. Hill (Chair) and Wild, and Ms. Klein, each of whom was during fiscal year 2020 and is now an “independent” director as defined by NASDAQ Marketplace Rules and as defined in applicable rules adopted by the SEC.

The functions of the nominating and corporate governance committee include:

 

•

reviewing and recommending a slate of nominees for the election of directors;

 

•

recommending changes in the number, classification and term of directors;

 

•

reviewing nominations by stockholders with regard to the nomination process;

 

•

reviewing and recommending compensation and other matters for our non-employee directors;

 

•

reviewing and recommending succession planning for the chief executive officer, and other executive officers, which may be done in concert with the compensation committee; and,

 

•

attending to general corporate governance matters, including Environmental, Social and Governance (ESG), such as sustainability and climate-related, matters and their impact on our stakeholders.

The nominating and corporate governance committee operates under a written charter that addresses the nominations process and such related matters as may be required under the federal securities laws and NASDAQ listing requirements, a current copy of which is available on our website, www.cmcmaterials.com. The nominating and corporate governance committee reviews and reassesses the adequacy of the nominating and corporate governance charter on an annual basis. The nominating and corporate governance committee met three times during fiscal year 2020, did not take action by written consent, and has met once since fiscal year end and has not taken action by written consent. The nominating and corporate governance committee acted unanimously to recommend the nomination of the Class III director nominees to the board of directors, subject to stockholder approval, as discussed in “ELECTION OF DIRECTORS,” above.

Criteria for Nominating Directors

The nominating and corporate governance committee considers candidates to fill new directorships created by expansion and vacancies that may occur and makes recommendations to the board of directors with respect to such candidates. The nominating and corporate governance committee considers suggestions from many sources regarding possible candidates for director and will consider nominees recommended by stockholders. Any such stockholder nominations, together with appropriate biographical information, should be submitted to the Chair of the nominating and corporate governance committee, c/o the Secretary of our company at our offices at 870 North Commons Drive, Aurora, Illinois 60504. To be included in the proxy statement, such nomination must be received by the Secretary of our company not later than the 120th day prior to the first anniversary of the date of the preceding year’s proxy statement.

In fiscal year 2020, we did not pay a fee to any third party to identify or evaluate potential director nominees; however, in the future we may pay a fee to a third party to identify or evaluate potential director nominees if the need arises, given the important role our directors play in guiding our strategic direction and overseeing the management of our company.

Board candidates are selected based upon various criteria including, but not limited to, their:

 

•

character and reputation;

 

		2021 Proxy Statement    19

•

relevant business experience and acumen;

 

•

relevant educational background;

 

•

experience in areas such as technology, manufacturing, marketing, finance, strategy, international business, and academia; and

 

•

geographic, cultural, experiential and other forms of diversity, such as gender and race and ethnicity.

The nominating and corporate governance committee and board of directors review these factors in considering candidates for board membership. Board members are expected to prepare for, attend and participate in all board of directors and applicable committee meetings, and our annual meetings of stockholders. The nominating and corporate governance committee considers a director’s past attendance record, participation and contribution to the board of directors in considering whether to recommend the reelection of such director.

Compensation of Directors

The following table shows information concerning the compensation that the company’s non-employee directors earned during the last completed fiscal year ended September 30, 2020. A director who is also our employee receives no additional compensation for his or her services as a director.

Fiscal Year 2020 Director Compensation

 

Name		Fees Earned or Paid in Cash ($)1				Stock Awards ($)2				Option Awards ($)2				All Other Compensation ($)				Total ($)
William P. Noglows			140,000				87,634				89,938				—				317,572
Richard S. Hill			115,000				87,634				89,938				—				292,572
Barbara A. Klein			115,000				87,634				89,938				—				292,572
Paul J. Reilly			90,000				87,634				89,938				—				267,572
Susan M. Whitney			115,000				87,634				89,938				—				292,572
Geoffrey Wild			90,000				87,634				89,938				—				267,572

 

¹     Includes an annual retainer fee, and, as applicable, a board of directors Chair or committee Chair annual retainer fee, both earned quarterly, each as discussed in more detail below. Dollar amounts are comprised as follows:

 

Name		Annual Retainer Fee ($)				Committee   Chair Fee   ($)				Non- Executive Board  Chair Fee ($)
Mr. Noglows			90,000				—				50,000
Mr. Hill*			90,000				25,000				—
Ms. Klein**			90,000				25,000				—
Mr. Reilly			90,000				—				—
Ms. Whitney***			90,000				25,000				—
Mr. Wild			90,000				—				—

 

*

Nominating and corporate governance committee Chair

 

**

Audit committee Chair

 

***

Compensation committee Chair

²     The amounts in the column headed “Stock Awards” represent the aggregate award date fair value of awards made in fiscal year 2020 computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation (“ASC 718”). For these restricted

 

		2021 Proxy Statement    20

stock unit awards, the fair value is equal to the underlying value of the stock and is calculated using the closing price of our common stock on the award date. The actual value realized by a non-employee director related to restricted stock unit awards will depend on the market value of our common stock on the date the underlying stock is sold following vesting of the awards.

The amounts in the column headed “Option Awards” represent the aggregate grant date fair value of grants in fiscal year 2020 computed in accordance with ASC 718 (see Note 17 of Notes to Consolidated Financial Statements included in Item 8 of Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 for a description of the assumptions used in that computation). The actual value realized by a non-employee director related to option awards will depend on the difference between the market value of our common stock on the date the option is exercised and the exercise price of the option.

The award date fair market value of each “Stock Award” and the grant date fair market value of each “Option Award” awarded or granted to our non-employee directors during fiscal year 2020, computed in accordance with ASC 718 (excluding the impact of estimated forfeitures for service-based vesting conditions), is as follows:

 

Name		Award or   Grant Date				Number of   Restricted Stock               Units				Award Date Fair           Value ($)				Number of       Options				Grant Date   Fair Value ($)
Mr. Noglows			3/4/20				593				87,634				1,958				89,938
Mr. Hill			3/4/20				593				87,634				1,958				89,938
Ms. Klein			3/4/20				593				87,634				1,958				89,938
Mr. Reilly			3/4/20				593				87,643				1,958				89,938
Ms. Whitney			3/4/20				593				87,634				1,958				89,938
Mr. Wild			3/4/20				593				87,634				1,958				89,938

During fiscal year 2020, no stock awards held by any of our non-employee or other directors were modified or cancelled (forfeited).

The aggregate number of stock awards and the aggregate number of stock option awards held by each non-employee director that were outstanding as of the end of fiscal year 2020 are as follows:

 

		Aggregate Number of Awards   Outstanding as of September 30,                                2020
Name		Stock Awards*				Option Awards
Mr. Noglows			593				90,264
Mr. Hill			593				4,930
Ms. Klein			593				46,764
Mr. Reilly			931				13,126
Ms. Whitney			593				36,264
Mr. Wild			593				36,264

 

*

Restricted Stock Units.

Our non-employee directors received an aggregate of 11,748 stock options and 3,558 restricted stock units in fiscal year 2020.

As provided in our Corporate Governance Guidelines and the nominating and corporate governance committee charter, the nominating and corporate governance committee is responsible for reviewing and recommending to the board of directors compensation (cash and equity) for non-employee directors. The committee does this through review of director compensation benchmark information and analysis and

 

		2021 Proxy Statement    21

recommendation provided by the independent non-employee director compensation consultant to the committee, which since April 2017 is Meridian.

As previously disclosed, the board of directors approved our current non-employee director compensation program effective at the time of our annual meeting in March 2016, with the objective of continuing our company’s ability to attract high caliber and experienced individuals to serve as directors. Our non-employee director compensation program consists of the following elements:

 

Description of Director Compensation, Effective March 2016		Amount/Value ($)
Annual Retainer Fee1			90,000
Committee Chair Annual Retainer Fees1:
Audit committee Chair			25,000
Compensation committee Chair			25,000
Nominating and corporate governance committee Chair			25,000
No Standing Committee or Board Meeting Fees2			—
Non-Executive Board Chair Fee3			50,000
Annual Non-qualified Stock Option Grant4			90,000
Annual Restricted Stock Unit Award4			90,000
Initial Restricted Stock Unit Award5			90,000

 

1	Paid quarterly beginning with the quarter end following the effective date of appointment, and subsequently, beginning with the quarter end following our annual meeting. Directors do not receive additional compensation for serving as committee members.

 

2	To the extent a special committee is established by board of directors to address a unique matter, a committee meeting fee of $1,500 will be provided.

 

3	If a non-executive serves as Chair of the board of directors, he or she will receive a retainer amount in addition to the annual retainer fee.

 

4

Made at the time of our annual meeting (or initial appointment to the board of directors, on a pro-rata basis according to the number of days left until the subsequent annual meeting from the initial date of election) based on a fixed dollar value, with 100% vesting occurring on the first anniversary of the grant/award date. Number of units are calculated consistent with methodology used to calculate employee awards, using multiple-day average stock price in advance of award date (annual meeting), and Black-Scholes value of option grants, as applicable.

 

5	New directors receive initial restricted stock unit awards, based on a fixed dollar value. Each award vests 25% per year on the first four anniversaries of the award date.

Upon a non-employee director’s termination of service as a director of the company for reason of Death, Disability or a Change in Control, as defined in the 2012 Omnibus Incentive Plan and/or an award agreement, each grant or award of non-qualified stock options and restricted stock units held by the director will vest in full. In addition, if at the time of termination of service for any reason other than by reason of Cause, Death, Disability or a Change in Control, as defined in the 2012 Omnibus Incentive Plan and/or an award agreement, the non-employee director has completed at least two full terms as a director, as defined in our bylaws, each grant or award of non-qualified stock options and restricted stock units held by the director will vest in full.

Under our Directors’ Cash Compensation Umbrella Program, which only applies to non-employee directors and was first filed as an exhibit to our Annual Report on Form 10-K filed with the SEC on December 10, 2003, each non-employee director may choose to receive his or her cash compensation either in cash, in fully vested restricted stock under our 2012 Omnibus Incentive Plan (as of the date the fees are earned, the fees would be converted into the equivalent number of fully vested restricted shares, which would be beneficially owned and

 

		2021 Proxy Statement    22

reported on Form 4 filings), or as deferred compensation under our Directors’ Deferred Compensation Plan, as amended September 23, 2008, which first became effective in March 2001, and was first filed as an exhibit to our Annual Report on Form 10-K filed with the SEC on November 25, 2008. Under the Directors’ Deferred Compensation Plan, deferred amounts are payable only in the form of our common shares. A participating director is required to elect a date on which deferred compensation will begin to be distributed, which date generally must be at least two years after the end of the year deferrals are made and no later than the date of termination. As of the date the compensation is earned, the fees are converted into the right to acquire the equivalent number of shares of common stock at the end of the deferral period. These rights to acquire shares under the Directors’ Deferred Compensation Plan are reported as beneficially owned on Form 4 filings for each participating director; however, no non-employee directors currently participate in, and no amounts are deferred under, the Directors’ Deferred Compensation Plan. At present, non-employee directors receive their annual retainer and committee Chair fees on a quarterly basis. Non-employee directors also are eligible for reimbursement of travel and other out-of-pocket costs incurred in attending meetings. Non-employee directors are not eligible for any other compensation arrangement.

Compensation Committee Interlocks and Insider Participation

None of the current or former members of the compensation committee are or have been our employees.

SUSTAINABILITY AND RESPONSIBLE CARE—ENVIRONMENTAL, HEALTH AND  SAFETY

It is our policy to operate worldwide in a safe, responsible manner that respects the environment and protects the health and safety of our employees, our customers and the communities where we operate. We are committed to conducting our business operations in a manner that preserves the environment, which includes minimizing waste, conserving energy and preventing pollution. Our commitment goes beyond regulatory compliance and ISO certifications. Some of our key environmental, health and safety (EHS) initiatives include:

 

•

Our Environmental, Health & Safety Management Systems meet International Organization of Standardization (ISO) 14001 and Responsible Care 14001 for Environmental Management and Occupational Health & Safety Assessment Series 18001 and ISO 45001 for Health and Safety Management.

 

•

We adhere to the principles of responsible manufacturing as contained in the Responsible Business Alliance Code of Conduct and the Restriction of Hazardous Substances Directive 2002/95/EC.

 

•

We have adopted updated Environmental, Health and Safety and Human Rights Policies reviewed, endorsed and signed by management.

 

•

We have committed to reporting our EHS and Sustainability accomplishments according to frameworks established by the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures, as well as in our inaugural Corporate Sustainability Report.

 

•

We participate broadly in trade organizations, advocacy groups and local community organizations around the globe.

 

•

We provide transparency through the publication of our Corporate Sustainability Report, and EHS Performance Report, which are available on our website, www.cmcmaterials.com.

 

•

We strive to reduce electricity and water consumption and solid waste by establishing goals and reporting our progress on our website.

 

•

We work to identify, evaluate, control and mitigate hazards in support of our global health and safety program

 

•

We focus on a ‘Caring Culture’ for employee health & safety, and stewardship of the environment.

 

		2021 Proxy Statement    23

For fiscal year 2020, we achieved:

 

•

Proactive implementation of enhanced health and safety protocols, including a focus on mental health assistance, at our global locations to protect and maintain employee health and well-being, and to prevent the spread of COVID-19 within our facilities and in our communities.

 

•

A global recordable injury rate of 0.56, which is less than half the Semiconductor industry average of 1.20 and more than 70 percent lower than the Chemical industry average of 1.90.

 

•

More than 30% of our solid waste generated either was re-used or recycled rather than going to a landfill.

 

•

Drove sustainability through global reduction in electricity use (7.3% reduction annually) and solid waste generation (6.4% reduction annually) compared to fiscal year 2019.

 

•

More than 52% of the hazardous waste that we generated globally was recycled.

 

•

Completion of 80 ergonomic improvement projects to improve employee safety.

 

•

Multiple site locations have been recognized for excellence in EHS performance by government bodies and customers.

We are focused on employee health and safety and a shared culture of results, caring, candor, and learning, which are foundations of our Company’s values and are expressed in our Code of Business Conduct, to which all employees certify, and related policies and procedures in the countries in which we do business. With respect to employee health and safety measures, we focus on ongoing education with respect to EHS matters, and injury prevention and reduction across all our operations. We track injury rates on an ongoing basis and compare them to the average injury rates for chemical manufacturers as well as to semiconductor industry manufacturers; we believe we have been significantly below each of these industry averages for the past five years. In fiscal 2020, we urgently focused our EHS efforts around the world, including education and enhanced health and safety protocols, on employee well-being and prevention of the spread of COVID-19 at our facilities and in our communities.

For additional information on our EHS initiatives, including our Corporate Sustainability Report, please visit our website at www.cmcmaterials.com and navigate to the “EHS” and “Sustainability” tabs. The information contained on our website is not incorporated by reference into this proxy statement.

 

		2021 Proxy Statement    24

FEES OF INDEPENDENT AUDITORS AND AUDIT COMMITTEE REPORT

Fees Billed by Independent Auditors

During fiscal years 2020 and 2019, the audit committee pre-approved 100% of all audit and non-audit services provided by our independent auditors, PricewaterhouseCoopers LLP (“PWC”), an independent registered public accounting firm. For such pre-approval of services, the audit committee follows its policy for the pre-approval of services provided by our independent auditors, a current copy of which is available on our website, www.cmcmaterials.com. The policy requires advance approval of all audit, audit-related, tax and other services performed by the independent auditor. This policy provides for pre-approval by the audit committee of permitted services before the independent auditor is engaged to perform them. The audit committee has delegated to the Chair of the audit committee authority to approve permitted services. The following table presents fees for audit services rendered by PWC for the audit of our annual financial statements for the fiscal year ended September 30, 2020, and September 30, 2019, and fees billed for other services rendered by PWC during those periods.

 

Fees		Fiscal Year Ended September 30, 2020 ($)				Fiscal Year Ended September 30, 2019 ($)
Audit Fees1			3,622,542				5,112,583
Audit-Related Fees2			—				207,000
Tax Fees3			825,206				343,209
All Other Fees4			4,500				4,500
Total			4,452,248				5,667,292

 

1

Audit Fees include fees for professional services rendered by PWC for the audit of our annual financial statements and internal control over financial reporting and review of financial statements included in our Form 10-Q and for services that normally would be provided by PWC in connection with statutory and regulatory filings or engagements. In addition to including fees for services necessary to perform an audit or review in accordance with generally accepted auditing standards, this category also may include services that generally only PWC reasonably can provide, such as comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the SEC.

 

2

Audit-Related Fees include assurance and related services traditionally performed by PWC that are reasonably related to the performance of the audit or review of our financial statements and not reported under the “Audit Fee” heading. For fiscal year 2019, PWC provided certain accounting consultation services and services in connection with our acquisition of KMG Chemicals, Inc. (the “Acquisition”), which occurred in fiscal year 2019.

 

3	Tax Fees include fees billed for professional services related to tax compliance and other tax services. For fiscal years 2020 and 2019, $169,707 and $146,375, respectively, of total Tax Fees was for tax compliance services.

 

4	All Other Fees for fiscal years 2020 and 2019 primarily related to access to on-line software tools.

Report of the Audit Committee

The following report of the audit committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate this report by reference therein.

The audit committee of the board of directors is responsible for providing independent, objective oversight of our accounting and system of internal controls, the quality and integrity of our financial reports, and the independence and the selection, appointment, retention, compensation and oversight of the performance of our independent auditors. The audit committee is composed of independent directors and operates under a written charter, a current copy of which is available on our website, www.cmcmaterials.com. The audit committee reviews

 

		2021 Proxy Statement    25

and reassesses the adequacy of the audit committee charter on an annual basis. Our board of directors has determined that the audit committee has at least one member who qualifies as an Audit Committee Financial Expert, as defined by relevant SEC rules, and has designated Ms. Klein, the Chair of the committee, and Mr. Reilly, a member of the committee, as Audit Committee Financial Experts.

Management is responsible for our internal controls and the financial reporting process. The independent auditors are responsible for performing an independent audit of our financial statements in accordance with generally accepted auditing standards and issuing a report on those financial statements. The audit committee monitors and oversees these processes.

In this context, the audit committee reviewed and discussed the audited financial statements for fiscal year 2020 with management and with the independent auditors. Specifically, the audit committee has discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC, and which include, among other things: methods used to account for any significant and unusual transactions; the effect of any significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus; the process used by management in formulating any particularly sensitive accounting estimates and the basis for the independent auditors’ conclusions regarding the reasonableness of those estimates; and, any disagreements with management over the application of accounting principles, the basis for management’s accounting estimates, and the disclosures in the financial statements.

The audit committee believes strongly in the principles underlying the requirement that independent auditors maintain their independence in strict compliance with applicable independence rules. The audit committee has received the written disclosures and the letter from the independent auditors required by the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the audit committee concerning independence, and has discussed with the independent auditors the issue of the independent auditors’ independence from the company and management. In addition, in accordance with the SEC’s auditor independence requirements, the audit committee has considered whether the independent auditors’ provision of non-audit services to the company is compatible with maintaining the independence of the independent auditors and has concluded that it is.

Based on its review of the audited financial statements and the various discussions noted above, the audit committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.

Respectfully submitted by the audit committee,

Richard S. Hill

Barbara A. Klein, Chair

Paul J. Reilly

Susan M. Whitney

 

		2021 Proxy Statement    26

COMPENSATION DISCUSSION AND ANALYSIS

In this section, we discuss and analyze our executive officer compensation program and how we compensated each of our named executive officers identified in the following table in fiscal year 2020. The individuals listed below include our chief executive officer, chief financial officer, and our three other most highly compensated executive officers based on total compensation.

 

Name		Title
David H. Li		President and Chief Executive Officer
Scott D. Beamer		Vice President and Chief Financial Officer
Daniel D. Woodland		Vice President and President, Electronic Materials
H. Carol Bernstein		Vice President, Secretary and General Counsel
Jeffrey M. Dysard		Vice President and President, Performance Materials

Fiscal Year 2020 Executive Compensation Summary

Our executive compensation program is structured to align our named executive officers’ interests with those of our stockholders, by linking compensation to business objectives and performance, and to attract and retain talented executives. In general, our executive officers, including David H. Li, our President and Chief Executive Officer, and our other named executive officers, are eligible for, and participate in, our compensation and benefits programs according to the same terms as those available to all our employees. Our executive compensation program is administered by the compensation committee of our board of directors, which is composed solely of independent directors. The key elements of our executive compensation program are base salary, annual cash incentives pursuant to our Short-Term Incentive Program (“STIP”), and long-term equity incentives. The compensation committee is responsible for determining the level of compensation awarded to our named executive officers and our other executive officers. The compensation committee targets compensation levels that take into account current market practices and believes that offering market-comparable pay opportunities allows our company to maintain a successful and stable executive team.

Fiscal year 2020 was notable in that our company achieved another year of record financial results, driven by the remarkable efforts of our worldwide team of employees who tirelessly and safely delivered on commitments to our customers, with a paramount focus on employee health and workplace safety occasioned by the relentless challenges of the Pandemic. All our businesses, whether serving the semiconductor industry and other technology sectors, or the energy industry, are deemed essential under various government requirements, and we have continued in full operation around the world since the onset of the Pandemic. Throughout, we have reviewed and refined our global business continuity plans to help mitigate any potential impact on our operations and supply chain, and our teams have worked continuously to provide an uninterrupted supply of critical materials to our customers, such that through the Pandemic we have not missed a customer obligation to date. We took proactive steps to develop and implement health and safety protocols early in the Pandemic in all our locations, even in advance of government guidelines and regulations, to prevent and contain the spread of COVID-19. As part of this, we have operated under work-from-home and split shift schedules, with enhanced social distancing and hygiene practices at all our facilities, such as contact tracing and self-isolation requirements, temperature screenings, and use of additional personal protective equipment. We continue our operations with vigilance as the Pandemic has continued through the end of fiscal year 2020 and through our first quarter of fiscal year 2021. During these challenging times, we have also made efforts to give back and help the communities in which we operate. As one example, our sites have donated personal protective equipment, including N95 respirators and surgical masks, to local hospitals and first responders.

For fiscal year 2020, our leadership team, composed of our executive officers, including our named executive officers, achieved record revenue for the fifth consecutive year, driven primarily by our continued integration of the KMG businesses for the first full fiscal year since the Acquisition. Our electronic materials business, which is the majority of our business and serves the semiconductor industry, contributed to this growth

 

		2021 Proxy Statement    27

and maintained stability throughout the year as the industry showed resilience and some strengthening as the Pandemic drove technology demand through work from home, e-learning, and healthcare-related needs. Despite the Pandemic’s significant adverse impact on the pipeline industry, on which our performance materials business is primarily based, we also reached a record revenue milestone in this area of our business. Along with this, due to our leadership’s and employees’ efforts to manage our operations efficiently, we also delivered record earnings for the fiscal year.

We also are proud that in honor of our 20^th year as a publicly traded company, we began fiscal year 2021 with a comprehensive rebranding of our company into CMC Materials, Inc.

Our fiscal year 2020 results reflect the efforts of our global workforce, led by Mr. Li and our other executive officers, including our named executive officers. The key aspects and highlights of fiscal year 2020 include:*

 

•

Record Revenue of $1,116.3 million (increase of $78.6 million, or 8%, over fiscal year 2019);

 

•

Record Net Income of $142.8 million ($103.6 million, or 264.2%, higher than fiscal year 2019);

 

•

Record Adjusted EBITDA1 of $357.8 million ($24.4 million, or 7%, higher than fiscal year 2019);

 

•

Adjusted EBITDA Margin1 of 32.1% (essentially flat to 32.1% for fiscal year 2019);

 

•

Record Diluted Earnings Per Share of $4.83 per share (increase from $1.35 per share, or 257.8% higher than fiscal year 2019);

 

•

Operating Cash Flow of $287 million ($112 million, or 64%, higher than fiscal year 2019);

 

•

Cash Dividends distributed to our stockholders of $50.4 million ($4.1 million, or 8.8% higher than fiscal year 2019);

 

•

Accelerated Deleveraging of our balance sheet by achieving net debt equal to less than two times Adjusted EBITDA1 as of the end of the fiscal year;

 

•

Responsible Stewardship of our company through the ongoing Pandemic, including protecting the health of our employees and maintaining the continuity of our global operations;

 

•

Comprehensive Global Rebrand to CMC Materials, Inc., reflecting the high-quality, critical materials that enable superior performance for our customers; and,

 

•

Diversity Within Our Executive Officer Team, with women comprising 50% of our executive officers as of fiscal year 2020, and approximately 13% of our executive officers being racially and/or ethnically diverse.

*Data represent rounded values.

The highlights of our fiscal year 2020 executive compensation program resulting from our fiscal year 2020 company financial performance were:

 

•

Prior to the onset of the Pandemic, the compensation committee of our board of directors had established challenging performance goals for our company and for our STIP for fiscal year 2020 to help drive our efforts to achieve our strategic initiatives both for the year and as part of the achievement of our long-range strategy, which included enhanced performance from that of the prior year, and continued successful integration following the Acquisition. Although these goals were difficult, especially in light of the Pandemic, which was unprecedented in terms of adverse worldwide economic impact and operational challenges for our business and that of our customers in the semiconductor and pipeline industries, the company’s fiscal year 2020 performance for revenue exceeded the “threshold” level, and for adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) (adjusted EBITDA, expressed as a percentage of revenue) exceeded the “target” level.

 

•

As described in greater detail below, based on the methodology for determining awards under our STIP, our executive officers, including Mr. Li and our other named executive officers, earned annual

 

		2021 Proxy Statement    28

cash incentive payouts under the STIP that exceeded the “target” level overall, at an achievement level of 112.2%.

 

•

Long-term incentive awards for fiscal year 2020 (granted in December 2019) to our named executive officers and other executive officers under our 2012 Omnibus Incentive Plan were solely in the form of equity—performance share units (spanning a three-year performance period), non-qualified stock options and restricted stock units—to further link the interests of our executive officers with those of our stockholders. Fiscal year 2020 award values were again aligned with the target range for comparable benchmark positions. The performance share units, non-qualified stock options and restricted stock unit awards reflected a methodology and terms and conditions generally consistent with annual award cycles of the past few years, as described more fully below. For these fiscal year 2020 awards granted in December 2019, to reflect market practices, executive officers (other than Mr. Li), received 40% of the value of their long-term equity incentive awards as performance share units, 30% as time-based restricted stock units, and 30% as non-qualified stock options; the value received by Mr. Li was comprised of 50% performance share units, 25% time-based restricted stock units and 25% non-qualified stock options.

 

•

As described in greater detail below, the performance share units granted to our named executive officers with respect to the performance period beginning on October 1, 2017 and ending on September 30, 2020, were earned, based on performance, at 134.4% of target, with performance goals based on revenue growth (expressed as a percentage) and cumulative earnings per share (EPS) growth, with a total shareholder return (TSR) multiplier applied based on the S&P Small Cap 600 Index.

 

•

Despite the unprecedented and unanticipated nature of the Pandemic and its macroeconomic impact, as well as its related effect on certain aspects of our business, such as our Performance Materials segment, the compensation committee did not adjust performance-based goals, measures or results thereunder to reflect the Pandemic’s impact on our business (i.e., revenue, adjusted diluted EPS) in the compensation elements described above (i.e., STIP, fiscal year 2018 through fiscal year 2020 performance share unit award, or subsequent fiscal year performance share unit awards).

 

1

Adjusted EBITDA and Adjusted EBITDA margin are considered non-GAAP financial measures. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of revenue. Adjusted EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, adjusted for certain items that affect comparability from period to period. These adjustments include items related to the Acquisition, such as expenses incurred to complete the Acquisition and integration related expenses, costs of restructuring and asset impairment related to the wood treatment business and related adjustments, costs related to the KMG-Bernuth warehouse fire net of insurance recovery, costs related to the Pandemic net of grants received, and impact of fair value adjustments to inventory acquired from KMG. See Appendix A below for more information about this non-GAAP financial measure and for a reconciliation from the most comparable GAAP financial measure.

 

		2021 Proxy Statement    29

We maintain several compensation program features and corporate governance practices to provide both a strong link between executive pay, company performance and stockholder interests, and a competitive executive compensation program:

 

WHAT WE DO

✓ Independent Compensation Committee Makes All Decisions Related to Executive Compensation (see pages 18, 30 and 31)   ✓ Pay Program Aligned with Performance and with Business Strategy (see page 31)   ✓ Link of Substantial Portion of Total Compensation to Company Performance   ✓ Performance-Based Equity Awards (see pages 33, 40)   ✓ Balanced Mix of Performance Measures in Short-Term and Long-Term Incentive Programs (see pages 36 through 40)   ✓ Caps on Short-Term Incentive Payouts as a Percentage of Target (see pages 38 and 39)   ✓ Annual Caps on Long-Term Incentive Awards (see page 40)   ✓ Market-Based Compensation (see pages 32 and 33)   ✓ Annual Compensation Risk Review (see page 46)   ✓ Cash and Equity Clawback Policy for Executive Officers (see pages 34, 39, 43)   ✓ Limited Perquisites and Personal Benefits   ✓ Annual Say on Pay Vote (see page 31)   ✓ Independent Compensation Consultant for Compensation Committee (see pages 18 and 32)

WHAT WE DON’T DO

X  No Hedging or Pledging of Company Stock (see page 43)   X  No Repricing or Backdating of Stock Options (see page 40)   X  No Loans to Executive Officers   X  No Individual Benefit Plans for Executive Officers, Including Supplemental Executive Retirement Plans (see page 44)   X  No Payout of Dividend Equivalents on Unvested Equity Awards   X  No Defined Benefit Pension Plan (see page 58)   X  No Single-Trigger Change in Control Severance Benefits (see pages 59 through 61)   X  No Gross-Ups for 280G Excise Taxes Pursuant to Post-2008 Change in Control Severance Protection Agreements (see pages 62 and 63)

Overview

General.    Our executive compensation program is administered by the compensation committee of our board of directors, which is composed solely of independent directors. The compensation committee is responsible for determining the level of compensation paid to our named executive officers and our other executive officers, including determining awards under and administering the 2012 Omnibus Incentive Plan. The compensation committee is also responsible for reviewing and establishing all other executive officer compensation programs and plans that we may adopt from time to time. During, and for, fiscal year 2020, the

 

		2021 Proxy Statement    30

compensation committee made all decisions pertaining to the compensation of our named executive officers and our other executive officers. The compensation committee also reviewed and approved the methodology used for compensation of our general employee population. Our chief executive officer is neither present for voting or deliberation on, nor votes upon decisions relating to, his compensation. In addition, our chief executive officer does not vote upon decisions related to the compensation of our other executive officers. Our chief executive officer evaluates the performance of our other executive officers, including the named executive officers, discusses the compensation and mix and forms of compensation of the other executive officers with the compensation committee’s independent compensation consultant and with the committee, and makes recommendations to the committee with respect to the compensation of the other executive officers. However, the committee makes all final decisions regarding the executive officers’ compensation. Also, our vice president of human resources and her human resources staff support the compensation committee in its work by providing input and recommendations on the overall mix and forms of executive officer compensation, and discuss such matters with the committee’s independent compensation consultant, as directed by the compensation committee. Our vice president of human resources and her human resources staff do not make decisions regarding the amount of compensation for our named executive officers or other executive officers, and are not present for voting on any such matters.

As part of its responsibilities pursuant to its charter, the compensation committee also authorizes and reviews the non-binding stockholder advisory vote to approve our named executive officer compensation, as described in our proxy statement. At our 2020 annual meeting of stockholders, our stockholders approved the company’s named executive officer compensation, as described in our 2020 proxy statement, with approximately 94% of the votes cast in favor of the matter. Our compensation committee and our board of directors met following the 2020 annual meeting to consider the results of such non-binding stockholder advisory vote and made no changes to the company’s executive compensation program as a result of such vote. The compensation committee has determined that the non-binding stockholder advisory vote to approve our named executive officer compensation should be submitted to our stockholders for approval annually, which our stockholders support, and has authorized and reviewed the 2020 non-binding stockholder advisory vote on such frequency.

Compensation Policy and Overall Objectives.

In determining the amount and composition of executive officer compensation, the committee’s goal is to provide compensation that will enable us to:

 

•

link the interests of our executive officers to the interests of our stockholders,

 

•

align compensation with business objectives and performance, and

 

•

attract and retain talented executives.

In general, executive officers, including our President and Chief Executive Officer and our other named executive officers, are eligible for, and participate in, our compensation and benefits programs according to the same terms as those available to all our employees. For example, the terms and conditions of our annual non-qualified stock option and restricted stock unit awards under the 2012 Omnibus Incentive Plan are the same for our executive officers as they are for our other employees. Similarly, the health and welfare benefit programs in the countries in which we operate are generally the same for all our employees, including our named executive officers and other executive officers; our executive officers participate in the same Employee Stock Purchase Plan, tax-qualified savings plan (the “401(k) Plan”) and non-qualified supplemental savings plan (the “Supplemental Plan”), according to the same terms, as our other employees. Aside from the change-in-control severance protection agreements with our named executive officers and other executive officers, and an employment agreement with Mr. Li, all of which are described in greater detail in the “Executive Compensation” section below, we do not have general post-termination of service agreements with our executive officers. Our executive officers are eligible to participate in our Executive Officer Deposit Share Program, as described in greater detail below in the section entitled “Executive Compensation.” Since December 2017, the mix of annual equity awards granted to Mr. Li and our other named executive officers has been weighted in favor of performance-based awards, which helps to more closely link long term incentives with company performance and the interests of our stockholders. Such awards are more fully described below.

 

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Competitive Compensation and Benchmarking.

The compensation committee believes that each element of the compensation program should target compensation levels that take into account current market practices. Offering market-comparable pay opportunities allows us to maintain a successful and stable management team. Historically our direct competitors in our core business of developing, manufacturing, and selling CMP slurries and pads, and semiconductor consumables overall, are generally not stand-alone publicly-traded entities; therefore, our market for compensation comparison purposes is comprised of a group of companies that develop, manufacture, supply or use a variety of semiconductor products, equipment and processes, including companies that have similar levels of revenue, market capitalization, and employment, as well as comparable geographic presence. As a result of the Acquisition in fiscal year 2019, we broadened our portfolio of specialty materials and strengthened our position as a premier materials supplier to the semiconductor industry by adding KMG’s electronic chemicals business to our portfolio, and also adding the performance materials businesses of KMG, which serve customers in several industries and generally relate to the broader specialty chemicals sector. The compensation committee considers changes to the composition of our peer group from time to time based on changes in our or others’ business, and last reviewed the group during fiscal year 2020 with analysis from the independent compensation consultant to the compensation committee, who as of April 2017 is Meridian. The compensation committee first used the current group for comparison purposes at the end of fiscal year 2019, and confirmed the use of such group (but for any changes due to prior peers no longer being independent entities due to acquisitions in the prior year) in fiscal year 2020 to consider benchmarks for fiscal year 2020 annual cash incentives under our STIP, and to assist in its review and consideration of fiscal year 2021 base salaries, annual cash incentive targets, and long-term equity incentive awards. The peer group is comprised of the following companies:

 

Advanced Energy Industries		II-VI, Inc.
Brooks Automation, Inc.		Ingevity Corp.
Cognex Corporation		Innospec Inc.
Coherent, Inc.		Macom Technology Solutions
Element Solutions, Inc.		Rogers Corporation
Entegris, Inc.		Semtech Corporation
FormFactor, Inc.		W.R. Grace & Co.

In evaluating the comparison group for compensation purposes, the compensation committee, in consultation with Meridian, the independent compensation consultant hired by the committee, exercises its discretion and makes its judgment regarding executive officer compensation matters after considering all relevant factors. In general, the compensation committee targets total compensation for our named executive officers and our other executive officers at approximately the 50^th percentile for comparable positions within the comparison group, with performance-based elements such as annual cash incentives under our STIP and long-term equity incentives affording a higher-level opportunity depending on the company’s and individual’s performance. A direct correlation may not always exist between the roles, responsibilities, experience and performance of each of our executive officers and those of the position that appears to best correspond to such individual at companies within the comparison group, and in these situations, the compensation committee also may use a comparison to another index, such as those for similarly-sized technology companies (collectively, “comparison group”). In addition, a direct correlation may not always exist between the relevant time period of evaluation given that the fiscal year end of companies within the comparison group is in most cases different from the company’s fiscal year end of September 30, thereby making direct or any comparison difficult, especially when significant macro-economic (i.e., the Pandemic) or other changes occur that materially affect business performance and therefore, compensation differently and in different reporting periods, for each the company and the companies within the comparison group.

 

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