UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.        )

 

 

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☐	Soliciting Material Pursuant to §240.14a-12

MASCO CORPORATION

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MASCO 2020		A LETTER FROM THE CHAIR OF OUR BOARD

 

		A LETTER FROM THE CHAIR OF OUR BOARD		Masco Corporation   17450 College Parkway   Livonia, MI 48152   313-274-7400   www.masco.com

March 27, 2020

Dear Stockholder:

On behalf of our entire Board of Directors, I am pleased to invite you to attend Masco Corporation’s Annual Meeting of Stockholders. Our meeting will be held at 9:30 a.m. on Wednesday, May 13, 2020 at our corporate office in Livonia, Michigan. Following our formal meeting, management will provide a review of our operations and we will respond to your questions.

Board Oversight of Our Strategy

To optimize the effectiveness of our Board, we engage with management throughout the year to understand and oversee our Company’s strategic objectives, which focus on driving the full potential of our businesses, leveraging opportunities across our portfolio and actively managing our portfolio. Annually, we hold a strategy session with management to discuss the Company’s execution of these objectives and our Company’s plans to drive long-term stockholder value. In 2019, to provide our Board with external perspectives, we supplemented our strategy session with presentations from an investment bank and a housing industry expert. At Board meetings throughout the year, management also provides updates on the progress toward achieving our strategy. The Board also sees our Company’s strategy and corporate culture in action when leaders of our businesses present their specific growth objectives to us at Board meetings and when we visit one business unit each year to engage with its broader leadership team. This past year our directors visited our Hansgrohe business unit facilities in Germany.

Board Composition and Refreshment

Our Board is comprised of eleven directors who bring a diverse set of skills and experience that promote active and engaged discussions which ensures an effective and highly functioning Board. Our Corporate Governance and Nominating Committee regularly reviews our Board’s composition to ensure alignment with our long-term strategy. We also have performed an annual Board self-evaluation for a number of years. In 2019, our Corporate Governance and Nominating Committee reviewed our Board’s self-evaluation process and we determined to enhance the process to include one-on-one discussions between me, as the Chair of our Board, and each individual director. This focus on board composition and self-evaluation has brought a valued balance of director tenure that brings both fresh perspectives and deep historical knowledge of our Company to our Board’s role as stewards of your investment in Masco Corporation. We will continue to focus on maintaining an appropriate balance of tenure, skills, experience and diversity, along with ensuring that our Board continues to conduct itself effectively.

 

A LETTER FROM THE CHAIR OF OUR BOARD			MASCO 2020

 

Commitment to Pay-for-Performance

We believe that our Organization and Compensation Committee has demonstrated a consistent commitment to developing and overseeing executive compensation programs that align our executive management team’s interests with delivering strong financial performance and driving long-term stockholder value. Our efforts to enhance our pay-for-performance practices resulted in 95% of the votes cast last year in favor of the compensation paid to our named executive officers. In 2019, approximately 87% of our CEO’s target compensation consisted of performance-based pay. In addition, as discussed in the Compensation Discussion and Analysis, we have incorporated numerous best practices into our executive compensation programs.

We Value Your Support

On behalf of our entire Board, I thank you for your continued support of Masco Corporation and your confidence in us as Board members. Your vote is very important to us, and I urge you to carefully read this proxy statement. Voting instructions for the proposals to be presented at our Annual Meeting can be found on the enclosed proxy card. Please submit your vote today by internet, telephone or mail.

Sincerely,

 

 

J. Michael Losh

Chair of the Board

 

 

THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD ARE BEING MAILED OR

OTHERWISE MADE AVAILABLE TO STOCKHOLDERS ON OR ABOUT MARCH 27, 2020.

 

MASCO 2020		NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

		MASCO CORPORATION NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Stockholders of record at the close of business on March 16, 2020 are entitled to vote at the Annual Meeting or any adjournment or postponement of the meeting. Due to the public health concerns relating to COVID-19, we are monitoring the advisability of holding our Annual Meeting solely by means of remote communication or adjourning or postponing the meeting. If it is not possible or advisable to hold our Annual Meeting at the time, date or place as originally planned, we will announce any changes, which may include details on how to participate in a remote meeting, in advance via press release. We would file a copy of any such press release with the SEC as additional proxy solicitation materials and post the press release on our website at www.masco.com. Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting by internet or by telephone, or by completing, signing, dating and returning your proxy card in the enclosed postage prepaid envelope. Instructions for each of these methods and the control number that you will need are provided on the proxy card. You may withdraw your proxy before it is exercised by following the directions in the proxy statement. Alternatively, you may vote in person at the meeting.

By Order of the Board of Directors,

 

 

Kenneth G. Cole

Vice President, General Counsel and Secretary

 

		DATE:		May 13, 2020
		PLACE:		Masco Corporation Corporate Office 17450 College Parkway Livonia, Michigan 48152
		TIME:		9:30 a.m. Eastern Time
		WEBSITE:		www.masco.com
		The purposes of the Annual Meeting are:   1. To elect four Class II directors;   2. To consider and act upon a proposal to approve the compensation paid to our named executive officers;   3. To ratify the selection of PricewaterhouseCoopers LLP as our independent auditors for 2020; and   4. To transact such other business as may properly come before the meeting.						The Company recommends that you vote as follows:   •  FOR each Class II director nominee;   •  FOR the approval of the compensation paid to our named executive officers; and   •  FOR the selection of PricewaterhouseCoopers LLP as our independent auditors for 2020.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 13, 2020: THIS PROXY STATEMENT AND THE MASCO CORPORATION 2019 ANNUAL REPORT TO STOCKHOLDERS, WHICH INCLUDES THE COMPANY’S ANNUAL REPORT ON FORM 10-K, ARE AVAILABLE AT:

http://www.ezodproxy.com/masco/2020

THE COMPANY WILL PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM 10-K, WITHOUT CHARGE, UPON A STOCKHOLDER’S WRITTEN REQUEST TO: INVESTOR RELATIONS, MASCO CORPORATION, 17450 COLLEGE PARKWAY, LIVONIA, MICHIGAN 48152.

 

2020 PROXY STATEMENT SUMMARY			MASCO 2020

 

		2020 PROXY STATEMENT SUMMARY

This summary highlights information to assist you in reviewing the proposals you will be voting on at our 2020 Annual Meeting. This summary does not contain all of the information you should consider; you should read the entire proxy statement carefully before voting. The proposals for our Annual Meeting are the election of our Class II Directors, the approval of the compensation paid to our named executive officers (who we generally refer to as our “executive officers” in this proxy statement), and the ratification of the selection of PricewaterhouseCoopers LLP as our independent auditors for 2020.

CORPORATE GOVERNANCE AND OUR BOARD OF DIRECTORS

Our Board of Directors is committed to maintaining our high standards of ethical business conduct and corporate governance principles and practices. Our corporate governance practices include:

 

ü

Robust Stockholder Engagement — We reach out to our largest stockholders each spring and fall to discuss a broad range of executive compensation and governance topics.

 

ü

Board Composition — Three of our directors are racially and/or gender diverse, and we have a balanced range of director tenure.

 

ü

Organization and Talent Review — Our Organization and Compensation Committee performs an annual review of our talent strategy and CEO and senior management succession planning.

 

ü

Board Self-Evaluation — Annually, our directors review and assess the effectiveness of our Board through a robust self-evaluation process, which includes an anonymous survey and one-on-one discussions between each director and the Chair of our Board.

 

ü

Political Contribution Oversight — Our Corporate Governance and Nominating Committee oversees our political contributions in accordance with our Political Contribution Policy.

 

ü

Separation of our CEO and Chair of the Board — The positions of our CEO and the Chair of our Board are currently separated; the Chair of our Board is an independent director.

 

ü

Majority Voting for our Directors — In uncontested elections, our director nominees must receive more than 50% of the votes cast to be elected to our Board.

 

ü

Director Independence — Nine of our eleven directors are independent, and all of the members of our Audit, Organization and Compensation, and Corporate Governance and Nominating Committees are independent.

 

MASCO 2020		2020 PROXY STATEMENT SUMMARY

 

DIRECTOR NOMINEES

The Class II Director Nominees for our Board of Directors are:

 

Keith J. Allman		J. Michael Losh
DIRECTOR SINCE: 2014		DIRECTOR SINCE: 2003
POSITION: Our President and Chief Executive Officer, since 2014		POSITION: Retired Chief Financial Officer and Executive Vice President of General Motors Corporation, a global automotive company
INDEPENDENT: No		INDEPENDENT: Yes
COMMITTEES: None		COMMITTEES: Corporate Governance and Nominating Committee (Chair); Organization and Compensation Committee

 

Christopher A. O’Herlihy		Charles K. Stevens, III
DIRECTOR SINCE: 2013		DIRECTOR SINCE: 2018
POSITION: Vice Chairman of Illinois Tool Works Inc., a global diversified industrial manufacturer of specialized industrial equipment, consumables, and related service businesses, since 2015		POSITION: Retired Executive Vice President and Chief Financial Officer of General Motors Company, a global automotive company
INDEPENDENT: Yes		INDEPENDENT: Yes
COMMITTEES: Audit Committee; Organization and Compensation Committee		COMMITTEES: Audit Committee; Corporate Governance and Nominating Committee

If elected, each would serve for a three-year term concluding at our 2023 Annual Meeting.

STOCKHOLDER OUTREACH

In determining our executive compensation and corporate governance practices, our Board believes it is important to consider feedback from our stockholders. In 2019, we continued our robust stockholder engagement program and requested the opportunity to engage with stockholders holding approximately 50% of our outstanding shares. Of the shareholders with which we engaged, we discussed our Board’s oversight of our strategy and risk, board composition and refreshment, corporate sustainability and our annual and long-term performance-based compensation programs. We received positive feedback from the stockholders with whom we spoke, particularly regarding our Board’s process for overseeing our Company’s strategy and risk. We provide reports on the feedback we receive to our Organization and Compensation Committee (“Compensation Committee”) and Corporate Governance and Nominating Committee (“Governance Committee”).

 

2020 PROXY STATEMENT SUMMARY			MASCO 2020

 

2019 FINANCIAL PERFORMANCE

Our continuing operations delivered solid financial results in 2019 despite the challenges of higher input costs for many of our products and slower growth in our overall end markets. Our reported sales for the full year increased 1% to $6.7 billion. This sales growth was largely driven by our successful pricing actions as we mitigated the impact of the imposition of tariffs. Operating profit for the full year increased by 1% to $1.1 billion and our earnings per share from continuing operations grew 7% to $2.20 per share.

In addition, we executed and delivered on our strategy to become a more stable, less cyclical and higher return building products company through the divestitures of our windows businesses in November 2019 and our cabinetry business, which closed in February 2020. Lastly, we continued to implement our balanced capital allocation strategy by repurchasing $896 million of our stock, increasing our annual dividend for the sixth year in a row and reducing our debt by $201 million.

2019 EXECUTIVE COMPENSATION

Based on our financial performance in 2019, although we met the threshold, we did not achieve the target for operating profit goal or our working capital as a percent of sales goal.

2019 Annual Performance Program

Under our annual performance program, we pay cash bonuses and grant restricted stock units to our executive officers if we meet our performance goals for operating profit and working capital as a percent of sales. The following tables reflect our 2019 performance relative to our target goals and the compensation we paid to our executive officers under our 2019 annual performance program:

 

Performance Metric		Performance (as adjusted)		Percent of Target Achieved		Weighted Performance Percentage
Operating Profit (in millions)		$1,263		82%		77%
Working Capital as a Percent of Sales		15.8%		60%

 

•

See “Our 2019 Annual Performance Program” in our Compensation Discussion and Analysis for a description of our calculation of operating profit and working capital as a percent of sales performance.

 

Name		Amount of Cash Bonus ($)		Value of Restricted Stock Unit Award ($)		Total 2019 Annual Performance Compensation ($)
Keith J. Allman		1,429,000		1,587,977		3,016,977
John G. Sznewajs		418,600		418,739		837,339
Joseph B. Gross		297,400		297,538		594,938
Richard A. O’Reagan		327,900		327,957		655,857
Jai Shah		303,200		303,241		606,441

 

MASCO 2020		2020 PROXY STATEMENT SUMMARY

 

2017-2019 Long-Term Incentive Program

Under our 2017-2019 Long-Term Incentive Program (“LTIP”), our executive officers had the opportunity to earn an equity-based performance award if we achieved a performance goal over the three-year period. The following tables reflect our target return on invested capital (“ROIC”) goal for the 2017-2019 LTIP performance period, our performance relative to our target goal and the compensation we paid to our executive officers:

 

Performance Metric		Performance   (as adjusted)		Percent of Target   Achieved
Return on Invested Capital		15.7%		134%

 

•

See “Our Long-Term Incentive Program” in our Compensation Discussion and Analysis for a description of our calculation of ROIC performance.

 

Name		2017-2019  LTIP-   Stock Earned ($)
Keith J. Allman		3,390,180
John G. Sznewajs		973,611
Joseph B. Gross		635,123
Richard A. O’Reagan		734,035
Jai Shah		512,338

OUR COMPENSATION PRACTICES

During 2019, our Compensation Committee reviewed our compensation programs and practices to ensure our interests and the objectives for our compensation programs are aligned. At our 2019 Annual Meeting, 95% of the votes cast on our say-on-pay proposal approved the compensation we paid to our executive officers. Although the say-on-pay vote is advisory and non-binding, our Compensation Committee believes this approval percentage indicates strong support for our continued efforts to enhance our pay-for-performance practices.

Our compensation practices include:

 

ü

Long-Term Incentives — Our compensation programs are weighted toward long-term incentives. We give approximately equal weight to restricted stock units, stock options and our three-year incentive program. In 2017, we modified our three-year incentive program by replacing the cash award with performance-based restricted stock units (“PRSUs”).

 

ü

Performance-Based Annual Restricted Stock Units — Our annual grant of restricted stock units is based on our executive officers’ target opportunity and the achievement of our performance goals under our annual performance program.

 

ü

Long-Term Performance Program — A significant portion of our executive officers’ compensation opportunity is based on the achievement of a three-year performance goal.

 

ü

Clawback Policy — If we restate our financial statements, other than as a result of changes to accounting rules or regulations, our clawback policy allows us to recover incentive compensation paid to our executives in the three-year period prior to the restatement, regardless of whether misconduct caused the restatement.

 

ü

Stock Ownership Requirements — We have minimum stock ownership requirements for our executive officers, including requiring our CEO to own stock valued at six times his base salary. As of December 31, 2019, each of our executive officers met his or her stock ownership requirement.

 

ü

Double-Trigger Vesting — We have double-trigger vesting of equity on a change in control.

 

ü

Tally Sheets and Risk Assessment — Our Compensation Committee uses tally sheets, and oversees a risk assessment to evaluate whether our compensation programs present undue risk to us.

 

2020 PROXY STATEMENT SUMMARY			MASCO 2020

 

ü

Competitive Analysis — On an annual basis, our Compensation Committee reviews a market analysis of executive compensation paid by our peer companies and published survey data for comparably-sized companies.

 

ü

Limited Perquisites — We provide limited perquisites to our executive officers.

Our compensation practices do not include:

 

×

Excise Tax Gross-Ups — We eliminated the excise tax gross-up feature on all of the equity grants made since 2012.

 

×

Hedging or Pledging — Our policy prohibits executives and directors from hedging our stock and from making future pledges of our stock.

 

×

Employment Agreements — We have no change in control agreements or employment agreements providing for severance payments with our executive officers.

 

×

Option Repricing — Our equity plan prohibits the repricing of options without stockholder approval.

 

MASCO 2020		TABLE OF CONTENTS

 

TABLE OF CONTENTS

 

PART I—CORPORATE GOVERNANCE
Director and Director Nominees			1
Director Nominees for Class II (Term Expiring at the Annual Meeting in 2023)			2
Class III Directors (Term Expiring at the Annual Meeting in 2021)			4
Class I Directors (Term Expiring at the Annual Meeting in 2022)			6
Board of Directors			8
Structure of our Board of Directors			8
Leadership Structure of our Board of Directors			8
Director Independence			9
Board Refreshment			9
Board Membership and Composition			10
Board Self-Evaluation			11
Risk Oversight			12
Board Meetings and Attendance			13
Communications with our Board of Directors			13
Committees of our Board of Directors			14
Director Compensation Program			17
Related Person Transactions			19
Proposal 1: Election of Class II Directors Nominees			20
PART II—COMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis Summary			21
Compensation Decisions in 2019			24
Our 2019 Financial Performance			24
How We Performed Against our Performance Compensation Goals			24
Our 2019 Annual Performance Program			24
Our Long Term Incentive Program			26
Stock Options Granted in 2019			29
Other Components of our Executive Compensation Program			29
Our Executive Compensation Program Highlights			30
We Provide Long-Term Equity Incentives			30
We Have a Long-Term Performance Program			31
We Can Clawback Incentive Compensation			31
We Require Minimum Levels of Stock Ownership by our Executives			31
Our Equity Awards Have Double-Trigger Change of Control Provisions			31
Our Compensation Committee Oversees an Annual Compensation Risk Evaluation			32
Our Compensation Programs Encourage Executive Retention and Protect Us			32
We Prohibit Excise Tax Gross-Up Payments			32
We Prohibit Hedging and Pledging			32
We Do Not Have Employment Agreements			33
Our Annual Compensation Review Process			33
Annual Management Talent Review and Development Process			33
Compensation Data Considered by our Compensation Committee			33
Our Peer Group			34
Retention of Discretion by our Compensation Committee			34
Outside Compensation Consultant			35
Tax Treatment			35
Conclusion			35
Compensation Committee Report			36
Proposal 2: Advisory Vote to Approve the Compensation of Our Named Executive Officers			37
PART III—COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table			38
Grants of Plan-Based Awards			40
Outstanding Equity Awards at Fiscal Year-End			41
Option Exercises and Stock Vested			43
Retirement Plans			43
Payment Upon Change in Control			46
Payment Upon Retirement, Termination, Disability or Death			47
CEO Pay Ratio			49

 

TABLE OF CONTENTS			MASCO 2020

 

PART IV—AUDIT MATTERS
Audit Committee Report		50
PricewaterhouseCoopers LLP Fees		51
Audit Committee Pre-Approval Policies and Procedures		51
Proposal 3: Ratification of Selection of Independent Auditors		52
PART V—EXECUTIVE OFFICERS AND BENEFICIAL OWNERSHIP
Executive Officers		53
Security Ownership of Management and Certain Beneficial Owners		54
PART VI—GENERAL INFORMATION
2020 Annual Meeting of Stockholders		56
Who is entitled to vote at the Annual Meeting?		56
What is the difference between holding shares as a record holder and as a beneficial owner?		56
What is a broker non-vote?		57
How are abstentions and broker non-votes treated?		57
What constitutes a quorum?		57
How can I submit my vote?		57
How many votes are needed for each proposal to pass?		57
Is my proxy revocable?		58
Who is paying for the expenses involved in preparing and mailing this proxy statement?		58
What happens if additional matters are presented at the Annual Meeting?		58
What is “householding” and how does it affect me?		58
Our Website		58
2021 Annual Meeting of Stockholders		59
Proxy Statement Proposal		59
Matter for Annual Meeting Agenda		59
Director Candidate Nomination		59
Other Matters		60

 

PART I - CORPORATE GOVERNANCE			MASCO 2020

 

		CORPORATE GOVERNANCE

This section of our proxy statement provides information on the qualifications and experience of our director nominees and incumbent directors, the composition of our Board, the structure and responsibilities of our Board committees, and other important corporate governance matters.

DIRECTORS AND DIRECTOR NOMINEES

Our Board is currently composed of eleven directors, including nine independent directors. Our directors possess a wide array of skills and experience that provide a strong source of strategic oversight, advice and guidance to our management team. The following director skills matrix highlights the balanced mix of skills and experience that are most relevant and important to our Company. The skills and experience identified for each of our non-employee directors are those we believe are key and unique to each director’s contribution to our Board. This matrix is not meant to encompass or reflect all of the skills and experience possessed by each director. See the following pages for a full biography of each of our directors.

 

 

Business Operations M&A Risk Management Finance and Accounting Product Innovation International Business Manufacturing Marketing and Brand Management Talent Management

 

1

MASCO 2020		PART I - CORPORATE GOVERNANCE

 

DIRECTOR NOMINEES FOR CLASS II

(Term Expiring at the Annual Meeting in 2023)

 

Keith J. Allman		J. Michael Losh
AGE: 57		AGE: 73
DIRECTOR SINCE: 2014		DIRECTOR SINCE: 2003
POSITION: Our President and Chief Executive Officer, since 2014		POSITION: Retired Chief Financial Officer and Executive Vice President of General Motors Corporation, a global automotive company
RELEVANT SKILLS AND EXPERIENCE:		RELEVANT SKILLS AND EXPERIENCE:
Mr. Allman brings to our Board strong business leadership skills, hands-on operational experience with our businesses and valuable insight into our Company’s culture. He played an integral role in developing our strategies to strengthen our brands and improve our execution, which has helped to provide the foundation for the current direction of our Company. His key leadership positions within our Company have given him deep knowledge of all aspects of our business, and he possesses a significant understanding of, and experience with, complex operations as well as company-specific customer expertise.		Mr. Losh has strong leadership skills gained through significant executive leadership positions and through his service on boards of other publicly-held companies in various industries. His current activities provide him with valuable exposure to developments in board oversight responsibilities, corporate governance, risk management, accounting and financial reporting, which enhances his service to us as the Chair of our Board. In addition, Mr. Losh has experience with and understands complex international financial transactions. He possesses substantial finance and accounting expertise gained through his experience as Chief Financial Officer of a large organization and through his service on other boards and audit committees.
BUSINESS EXPERIENCE:		BUSINESS EXPERIENCE:
• Masco Corporation: • Group President (2011-2014) • President, Delta Faucet (2007-2011) • Executive Vice President, Builder Cabinet Group (2004-2007) • Served in various management positions of increasing responsibility at Merillat Industries (1998-2003) • Director of Oshkosh Corporation		• Director of Aon plc, Cardinal Health, Inc., H.B. Fuller Company (through April 2, 2020), Prologis (through April 29, 2020) and Amesite Inc. • Former director of CareFusion Corporation and TRW Automotive Holdings Corp. • Served for 36 years in various capacities at General Motors Corporation until his retirement in 2000

 

2

PART I - CORPORATE GOVERNANCE			MASCO 2020

 

Christopher A. O’Herlihy		Charles K. Stevens, III
AGE: 56		AGE: 60
DIRECTOR SINCE: 2013		DIRECTOR SINCE: 2018
POSITION: Vice Chairman of Illinois Tool Works Inc., a global diversified industrial manufacturer of specialized industrial equipment, consumables, and related service businesses, since 2015		POSITION: Retired Executive Vice President and Chief Financial Officer of General Motors Company, a global automotive company
RELEVANT SKILLS AND EXPERIENCE:		RELEVANT SKILLS AND EXPERIENCE:
Mr. O’Herlihy joined Illinois Tool Works Inc. in 1989. In his over 30 years with Illinois Tool Works, he has held several executive positions through which he has acquired extensive knowledge and experience in all aspects of business, including business strategy, international business operations, mergers and acquisitions, emerging markets, financial performance and structure, legal matters, human resources and talent management. His current responsibilities include developing and executing that company’s overall corporate growth strategy. He brings to our Board strategic insight and understanding of complex business and manufacturing operations, as well as a valuable perspective on developing innovative products, gained through his experience with a multi-billion dollar diversified global organization.		Mr. Stevens joined General Motors Company in 1983 with the Buick Motor Division. In his over 30 years with General Motors Company, Mr. Stevens acquired significant leadership experience in financial and accounting operations. His extensive background and expertise provide to our management and Board a valuable understanding of finance, financial operations, international financial matters, risk evaluation and management, mergers and acquisitions and consumer goods. His past responsibilities include being a vital contributor to developing and executing business strategies to drive profitable growth, which benefit our Board as it oversees our strategy.
BUSINESS EXPERIENCE:		BUSINESS EXPERIENCE:
• Illinois Tool Works Inc.: • Executive Vice President, with worldwide responsibility for Illinois Tool Works’ Food Equipment Group (2010-2015) • Group President - Food Equipment Group Worldwide (2010) • Group President - Food Equipment Group International (2009-2010) • For over 30 years, served in various positions of increasing responsibility, including as Group President of the Polymers and Fluids Group		• Director of Eastman Chemical Company, Flex, Ltd. and Tenneco Inc. • General Motors Company: • Executive Vice President and Chief Financial Officer (2014-2018) • Chief Financial Officer of GM North America (2010-2014) • Interim Chief Financial Officer of GM South America (2011-2013) • Chief Financial Officer of GM de Mexico (2008-2010) • Chief Financial Officer of GM Canada (2006-2008) • For more than 30 years, served in various positions of increasing responsibility, including several leadership positions with GM’s Asia Pacific region including China, Singapore, Indonesia and Thailand

 

3

MASCO 2020		PART I - CORPORATE GOVERNANCE

 

CLASS III DIRECTORS

(Term Expiring at the Annual Meeting in 2021)

 

Mark R. Alexander		Richard A. Manoogian
AGE: 55		AGE: 83
DIRECTOR SINCE: 2014		DIRECTOR SINCE: 1964
POSITION: Chief Executive Officer, Icelandic Provisions, Inc., an Icelandic dairy products company, since 2019		POSITION: Our Chairman Emeritus, since 2012
RELEVANT SKILLS AND EXPERIENCE:		RELEVANT SKILLS AND EXPERIENCE:
Through his experience as a current CEO and as the former President of Campbell Soup Company’s largest division, Mr. Alexander brings to our Board strong leadership skills and experience in developing and executing business growth strategies, including through innovation and mergers and acquisitions. His past business responsibilities include investing in brand-building, innovation and expanded distribution, which correspond to areas of focus at our business operations. His extensive international experience with consumer branded products and his background in marketing and customer relations also provide our Board with expertise and insight as we leverage our consumer brands in the global market.		Mr. Manoogian was instrumental in the dramatic growth of Masco to become a global leader in the design, manufacture and distribution of branded home improvement and building products. His experience in navigating our Company through various phases of its transformation and diversification provides our Board with unique and extensive knowledge of our Company’s history and strategies. As a long-term leader at Masco, Mr. Manoogian possesses firsthand knowledge of our operations as well as a deep understanding of the residential repair and remodeling and new home construction industries.
BUSINESS EXPERIENCE:		BUSINESS EXPERIENCE:
• Campbell Soup Company: • Senior Vice President (2009-2018) • President of Americas Simple Meals and Beverages (2015-2018) • President of Campbell North America (2012-2015), Campbell International (2010-2012) and Asia Pacific (2006-2009) • Chief Customer Officer and President - North America Baking & Snacking (2009-2010) • Served in various marketing, sales and management roles in the United States, Canada, Europe and Asia since 1989		• Our Chairman of the Board (1985-2012) • Masco Corporation: • Executive Chairman (2007-2009) • Chief Executive Officer (1985-2007) • Elected President in 1968 and Vice President in 1964 • Director of Ford Motor Company (2001-2014)

 

4

PART I - CORPORATE GOVERNANCE			MASCO 2020

 

John C. Plant

AGE: 66

DIRECTOR SINCE: 2012

POSITION: Chairman of the Board and Co-Chief Executive Officer, Howmet Aerospace Inc., a global supplier of engineered metal products, (effective April 1, 2020)

RELEVANT SKILLS AND EXPERIENCE:

Based on his leadership positions with multi-billion dollar diversified global companies, Mr. Plant brings to our Board strategic insight and understanding of complex operations as well as a valuable perspective of international business. He understands how to manage a company through economic cycles and major transactions. He has a strong background in finance and extensive knowledge and experience in all aspects of business, including operations, business development matters, mergers and acquisitions, financial performance and structure, legal matters and human resources.

BUSINESS EXPERIENCE:

• Director of Jabil Circuit, Inc. • Chief Executive Officer (2019-2020) and Chairman of the Board (2017-2020) of Arconic Inc. • TRW Automotive Holdings Corp.: • Chairman of the Board (2011-2015) • President and Chief Executive Officer and Director (2003-2015) • Co-member of the Chief Executive Office of TRW Inc. and the President and Chief Executive Officer of the automotive business of TRW Inc. (2001-2003) • Director Emeritus of the Automotive Safety Council • Director of Gates Industrial Corporation plc (2017-2019)

 

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CLASS I DIRECTORS

(Term Expiring at the Annual Meeting in 2022)

 

Marie A. Ffolkes		Donald R. Parfet
AGE: 47		AGE: 67
DIRECTOR SINCE: 2017		DIRECTOR SINCE: 2012
POSITION: Chief Executive Officer, TriMark USA, LLC, a provider of design services, equipment and supplies to the food service industry, since January 2020		POSITION: Managing Director, Apjohn Group, LLC, a business development company, since 2000 General Partner, Apjohn Ventures Fund, Limited Partnership, a venture capital fund, since 2003
RELEVANT SKILLS AND EXPERIENCE:		RELEVANT SKILLS AND EXPERIENCE:
Through her experience as a current CEO and as the former President, Industrial Gases, Americas for Air Products & Chemicals, Inc., Ms. Ffolkes brings to our Board extensive experience in developing and leading strategy implementation and driving profitability. Ms. Ffolkes’ strong leadership experience allows her to provide valuable contributions and perspectives to our Board in areas important to our performance including operations, finance, international markets, marketing and personnel.		As an executive with responsibilities for numerous global businesses, Mr. Parfet brings extensive financial and operating experience to our Board, particularly in areas of financial and corporate staff management and senior operational practices for multiple global business units. His experience in business development and venture capital firms provides our Board with a valued perspective on growth and strategy. He is also experienced in leading strategic planning, risk assessment, human resource planning and financial planning and controls. His global operating experience, strong financial background and proven leadership capabilities are especially important to our Board’s consideration of product and geographic expansion and business development opportunities.
BUSINESS EXPERIENCE:		BUSINESS EXPERIENCE:
• President, Industrial Gases, Americas of Air Products & Chemicals, Inc. (2015-2020) • Tenneco: • Global Vice President and General Manager, Ride Performance Group (2013-2015) • Vice President and General Manager, Global Elastomers (2011-2013) • Johnson Controls International plc (formerly, Johnson Controls): • Vice President & General Manager South America Region, Automotive Group (2010-2011) • Vice President and General Manager, Hyundai-Kia Customer Business Unit (2008-2010) • Global Vice President, Japan (2006-2008)		• Chairman of the Board of Kelly Services, Inc. and Lead Independent Director of Rockwell Automation, Inc. • Chairman of the Board of Sierra Oncology, Inc. (2017-2019) • Senior Vice President, Pharmacia Corporation, a pharmaceutical company, from which he retired in 2000 • Served as a senior corporate officer of Pharmacia & Upjohn and The Upjohn Company, predecessors of Pharmacia Corporation • Director and trustee of a number of charitable and civic organizations

 

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Lisa A. Payne		Reginald M. Turner
AGE: 61		AGE: 60
DIRECTOR SINCE: 2006		DIRECTOR SINCE: 2015
POSITION: Former Vice Chairman and Chief Financial Officer of Taubman Centers, Inc., a real estate investment trust		POSITION: Attorney and Member, Clark Hill PLC, a Detroit, Michigan-based law firm, since April 2000, and currently serves on its Executive Committee
RELEVANT SKILLS AND EXPERIENCE:		RELEVANT SKILLS AND EXPERIENCE:
Ms. Payne provides leadership and executive management experience to our Board. She also possesses substantial financial, accounting and corporate finance expertise gained through her experience as Chief Financial Officer of Taubman Centers and as an investment banker. Her financial focus and proficiency helped guide Taubman Centers through the economic recession and increase shareholder value. She brings to our Board an understanding of growth strategy. In addition, Ms. Payne’s extensive experience in real estate investment, development and acquisition gives her an informed and thorough understanding of macroeconomic factors that may impact our business.		As an accomplished litigator and legal advisor with expertise in labor and employment law and government relations, Mr. Turner brings to our Board substantial insight in these areas. His background, coupled with his service as a director of a financial institution and a member of its enterprise risk committee, make him a valuable asset to our Board in the areas of risk management and finance. Mr. Turner has numerous and varied experiences in business, civic and charitable leadership roles, and his skills and insight benefit our Board as it considers issues of risk management, corporate governance and legal risk.
BUSINESS EXPERIENCE:		BUSINESS EXPERIENCE:
• Director of J.C. Penney Company, Inc. and Rockwell Automation, Inc. • Chairman of the Board of Soave Enterprises, LLC, a privately held diversified management and investment company (2016-2017) • President of Soave Real Estate Group (2016-2017) • Taubman Centers, Inc.: • Vice Chairman (2005-2016) • Chief Financial Officer (2005-2015) • Executive Vice President and Chief Financial and Administrative Officer (1997-2005) • During the past five years, served as director of Taubman Centers, Inc. • Investment banker, Goldman, Sachs & Co. (1987-1997)		• Director of Comerica Incorporated since 2005, where he currently chairs that board’s Enterprise Risk Committee and serves on its Audit Committee and Qualified Legal Compliance Committee • President-elect nominee of the American Bar Association • Active in public service and with civic and charitable organizations, serving in leadership positions with the Detroit Public Safety Foundation, the Detroit Institute of Arts, and the Community Foundation for Southeast Michigan • Past President of the National Bar Association and past President of the State Bar of Michigan • Past chair of the United Way for Southeastern Michigan

 

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MASCO 2020		PART I - CORPORATE GOVERNANCE

 

BOARD OF DIRECTORS

Our Board of Directors is committed to maintaining our high standards of ethical business conduct and corporate governance principles and practices.

 

Key Facts about our Board

•   Chair of our Board: J. Michael Losh

•   Our current Chair and CEO roles are separate

•   82% of our directors are independent

•   Each member of our Audit Committee, Compensation Committee and Governance Committee is independent

•   8 Board meetings were held in 2019, including one meeting at our Hansgrohe facilities in Germany

•   3 of our directors are racially and/or gender diverse

•   We have a balanced range of director tenure:

 

Service on Board:

0-4 years

5-9 years

10+ years

Number of directors:

2

6

3

Structure of our Board of Directors

Our Board of Directors currently is comprised of eleven members and is divided into three classes. Each class has a term of three years and each year the term of office of one class expires. Each director will hold office for the term to which he or she is elected or until his or her respective successor is elected and qualified.

Leadership Structure of our Board of Directors

Mr. J. Michael Losh was appointed as Chair of our Board on May 4, 2015. At that time, Mr. Losh also became the Chair of our Governance Committee. Mr. Losh has served on our Board since 2003, including as the Chair of our Audit Committee from 2008-2015. Mr. Losh’s long-term service as a director of our Board and now as our Chair has given him extensive Company and industry-specific knowledge.

Effective Oversight of Our Company

As an independent Chair of our Board, Mr. Losh has a strong working relationship with the other directors and with our management team. Under his leadership, our Board is actively engaged in robust discussions with management regarding oversight of our corporate strategy and risk, our corporate culture and our governance practices. His responsibilities include:

 

•

presiding at Board meetings and at executive sessions of the independent directors;

 

•

providing advice to our CEO;

 

•

discussing with management and approving our Board’s meeting agendas and assuring that there is sufficient time for discussion of all agenda items;

 

•

in preparation for Board meetings, consulting with management on information to be provided to our Board;

 

•

overseeing the Board’s annual review of our strategic plan and its execution; and

 

•

calling meetings of our independent directors, as necessary.

Separation of Our Chair of the Board and CEO Roles

Our Board believes that its leadership structure is in the best interests of the Company and our stockholders at this time; however, our Board has no policy with respect to the separation of the roles of CEO and Chair and believes that

 

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this matter should be discussed and determined by our Board from time to time, based on all of the then-current facts and circumstances. If the roles of Chair and CEO are combined in the future, then a majority of our independent directors will elect a Lead Director, who will be an independent director, for a renewable one-year term.

Communications with the Chair of Our Board

If you are interested in contacting the Chair of our Board, you may send your communication in care of our Secretary to the address specified in “Communications with our Board of Directors” below.

Director Independence

Our Corporate Governance Guidelines require that a majority of our directors qualify as “independent” under the requirements of applicable law and the New York Stock Exchange’s listing standards.

Director Independence Standards

For a director to be considered independent, our Board must determine that the director does not have any direct or indirect material relationship with us. Our Board has adopted standards to assist it in making a determination of independence for directors. These standards are posted on our website at www.masco.com.

Assessment of Our Directors’ Independence

Our Board has determined that nine of our eleven directors, including all of our non-employee directors other than Mr. Manoogian, are independent. As an employee, Mr. Allman, our President and Chief Executive Officer, is not an independent director. Our independent directors are Messrs. Alexander, Losh, O’Herlihy, Parfet, Plant, Stevens and Turner, Ms. Ffolkes and Ms. Payne.

In making its independence determinations, our Board reviewed all transactions, relationships and arrangements for the last three fiscal years involving each non-employee director and the Company.

 

•

In evaluating Mr. O’Herlihy’s independence, our Board considered our purchases of goods from his employer, Illinois Tool Works Inc. and its subsidiaries. The aggregate amount of these purchases was approximately $0.6 million in 2019. Illinois Tool Works has reported revenue of $14.1 billion in 2019. Our Board does not believe that Mr. O’Herlihy has a material interest in these transactions.

 

•

In evaluating Ms. Ffolkes’ independence, our Board considered our purchases of goods from Air Products and Chemicals, Inc. and its subsidiaries, her employer through January 2020. The aggregate amount of these purchases was approximately $0.7 million in 2019. Air Products and Chemicals has reported revenue of $8.9 billion for its fiscal year ended September 30, 2019. Our Board does not believe that Ms. Ffolkes has a material interest in these transactions.

Our Board also determined that we did not make any discretionary charitable contributions exceeding the greater of $1 million or 2% of the revenues of any charitable organization in which any of our directors was actively involved in the day-to-day operations.

Committee Member Independence Assessment

Our Board has determined that each member of our Audit Committee, Compensation Committee and Governance Committee qualifies as independent under the requirements of applicable law and the New York Stock Exchange’s listing standards.

Board Refreshment

Our Governance Committee periodically reviews current director tenure, including whether any vacancies are expected on our Board due to retirement or otherwise, and assesses the composition of our Board by reviewing our directors’

 

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MASCO 2020		PART I - CORPORATE GOVERNANCE

 

skills and expertise. Our Board completes a director skills exercise from time to time to provide our Governance Committee insight into our Board’s composition. The Committee uses this information to evaluate the skills and experience represented on our Board and to identify anticipated skills and experience that would be valuable in the future to best support our Company’s strategic objectives.

Director Refreshment

In 2017, our Governance Committee and Board focused on director candidate recruitment, which resulted in the appointment of two independent directors, Ms. Marie Ffolkes and Mr. Charles Stevens. Ms. Ffolkes and Mr. Stevens have particular strengths in the areas of finance and accounting, risk management, global operations, mergers and acquisitions, talent management and marketing and brand management. We believe the addition of these two directors, combined with our directors who have experience with us, provides a desirable balance of deep, historical understanding of our Company and new perspectives, resulting in strong guidance and oversight to our executive management team.

Board Membership and Composition

Board Membership

Our Governance Committee believes that directors should possess exemplary personal and professional reputations, reflecting high ethical standards and values. The expertise and experience of directors should provide a source of strategic oversight, advice and guidance to our management. A director’s judgment should demonstrate an inquisitive and independent perspective with intelligence and practical wisdom. Directors should be free of any significant business relationships which would result in a potential conflict in judgment between our interests and the interests of those with whom we do business. Each director should be committed to serving on our Board for an extended period of time and to devoting sufficient time to carry out the director’s duties and responsibilities in an effective manner for the benefit of our stockholders. Our Governance Committee also considers additional criteria adopted by our Board for director nominees and the independence, financial literacy and financial expertise standards required by applicable law and by the New York Stock Exchange.

Board Composition

Neither our Board nor our Governance Committee has adopted a formal Board diversity policy. However, as part of its assessment of board composition and evaluation of potential director candidates, our Governance Committee considers whether our directors hold diverse viewpoints, professional experiences, education and other skills and attributes that are necessary to enhance our Board’s effectiveness. In addition, our Governance Committee believes that it is desirable for directors to possess diverse characteristics of gender, race, national origin, ethnicity and age, and considers such factors in its evaluation of candidates for board membership.

Director Candidate Recommendations

The Governance Committee uses a number of sources to identify and evaluate director nominees. It is the Governance Committee’s policy to consider director candidates recommended by stockholders. All Board candidates, including those recommended by stockholders, are evaluated against the criteria described above. Stockholders wishing to have the Governance Committee consider a candidate should submit the candidate’s name and pertinent background information to our Secretary at the address stated below in “Communications with our Board of Directors.” Stockholders who wish to nominate director candidates for election to our Board should follow the procedures set forth in our Certificate of Incorporation and Bylaws. For a summary of these procedures, see “2021 Annual Meeting of Stockholders.”

 

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PART I - CORPORATE GOVERNANCE			MASCO 2020

 

Board Self-Evaluation

Our Governance Committee Chair, who is also the Chair of our Board, is responsible for the oversight of our Board’s annual self-evaluation process, including establishing evaluation criteria and reporting to the Board on the process and results of the evaluation and any recommendations for proposed changes.

Our Board’s self-evaluation process includes the following components:

 

Survey				Each year our Board undertakes an anonymous self-evaluation to assess its performance. The directors provide feedback on:   • the Board’s role and effectiveness; • composition of the Board; • Board meetings and materials; and • the Board’s interaction with management.
Individual Discussions				In 2019, our Governance Committee reviewed our Board’s self-evaluation process and determined to enhance the process to include one-on-one discussions between each individual director and the Chair of our Board.
Board Summary				A summary of the self-evaluation results is provided to the full Board.
Consider Feedback				Director feedback provided through the self-evaluation process is considered and Board policies and practices are updated as appropriate.

 

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MASCO 2020		PART I - CORPORATE GOVERNANCE

 

Risk Oversight

Our Board has a thorough approach to the oversight of our risk management practices, both directly and through its committees. Our Board exercises its risk oversight through review and discussion of comprehensive analyses prepared by management on material risks facing us and related mitigating activities; updates regarding these risks are presented at Board meetings throughout the year, as necessary.

Key risk oversight activities of our Board include:

 

Strategic risk				•   Each year our Board holds a strategy session in which management and our directors engage in a discussion of the execution of our current strategic objectives and the development of our long-term strategy.   •   In 2019, our Board’s strategy session included a presentation from an investment bank and a housing industry expert that provided our directors with an external perspective of our Company and our industry.

Financial and operational risk				•   Each year our Board and management discuss our enterprise risk management profile, including the financial and operational risks material to us, and the activities we are pursuing to mitigate those risks.   •   During the year, our directors discuss with management our financial performance and the opportunities and risks in achieving our annual and long-term operating plans.   •   During the year, our directors discuss with certain of our business unit general managers their business and industry, the strategic objectives of the business unit and the risks that may impact the achievement of those strategic objectives. In 2019, our directors visited our Hansgrohe facilities in Germany to observe operations and meet with Hansgrohe’s management team.   •   In 2019, our directors discussed cybersecurity risks and mitigation initiatives with management.

Legal, regulatory, ethics and compliance risk				•   Each year our Board and management discuss an analysis of material legal, regulatory and ethics and compliance risk areas and the activities we are pursuing to mitigate those risks areas.

Our Board has delegated certain responsibilities for risk oversight to our Audit and Compensation Committees, as follows:

 

Key Risk Oversight Responsibilities of our Audit Committee				Key Risk Oversight Responsibilities of our Compensation Committee
•    Financial reporting   •    Internal controls over financial reporting   •    Legal and regulatory compliance   •    Ethics and compliance program				•    Executive compensation programs and policies   •    CEO and executive management succession planning

For more information on the risk oversight activities of our Audit and Compensation Committees, see the “Committees of our Board of Directors” section.

 

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Board Meetings and Attendance

Board Meetings

Our Board held eight meetings in 2019, one of which focused primarily on reviewing our current strategic objectives and the development of our long-term strategy with management. In addition to the Board meetings at our corporate headquarters, in 2019 our directors visited Hansgrohe’s headquarters and production and research and development facilities to observe operations and meet with Hansgrohe’s management team.

Meeting Attendance

Each director attended at least 75% of our Board meetings and applicable committee meetings that were held in 2019. It is our policy to encourage directors to attend our Annual Meeting of Stockholders, and all of our directors attended our 2019 Annual Meeting.

Executive Sessions

Our non-employee directors frequently meet in executive session without management, and the independent directors meet separately at least once per year. Mr. Losh, as the Chair of our Board, presides over these executive sessions.

Communications with our Board of Directors

If you are interested in contacting the Chair of our Board, an individual director, our Board as a group, our independent directors as a group, or a specific Board committee, you may send a communication, specifying the individual or group you wish to contact, in care of: Kenneth G. Cole, Secretary, Masco Corporation, 17450 College Parkway, Livonia, Michigan 48152.

 

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MASCO 2020		PART I - CORPORATE GOVERNANCE

 

COMMITTEES OF OUR BOARD OF DIRECTORS

The standing committees of our Board are the Audit Committee, the Compensation Committee and the Governance Committee. These committees function pursuant to written charters adopted by our Board. The committee charters, as well as our Corporate Governance Guidelines and our Code of Ethics, are posted on our website at www.masco.com and are available to you in print from our website or upon request.

Audit Committee

 

Lisa A. Payne Chair

Mark R. Alexander

Marie A. Ffolkes

Christopher A. O’Herlihy

Donald R. Parfet

John C. Plant

Charles K. Stevens

Reginald M. Turner

5 meetings in 2019

All members are independent and financially literate

Ms. Payne and Ms. Ffolkes and Messrs. Alexander, O’Herlihy, Parfet, Plant and Stevens qualify as “audit committee financial experts” as defined in Item 407(d)(5)(ii) of Regulation S-K

 

Audit Committee responsibilities include assisting the Board in its oversight of the following:   • the integrity of our financial statements   • the effectiveness of our internal controls over financial reporting   • the qualifications, independence and performance of our independent auditors   • the performance of our internal audit function   • the compliance with legal and regulatory requirements, including our employees’ and directors’ compliance with our Code of Ethics   In addition, our Audit Committee reviews and discusses with management certain key financial and non-financial risks.		Audit Committee key activities in 2019:   •  reviewed and approved our 2018 Form 10-K   •  reviewed our Form 10-Qs filed in 2019   •  discussed with management quarterly updates on our internal controls over financial reporting   •  reviewed the performance of our internal and independent auditors   •  reviewed the results of an external quality assessment of our internal audit department that was performed in accordance with the requirements of the Institute of Internal Auditors   •  reviewed and discussed with PwC the carve-out audits of our windows and cabinetry businesses in connection with our divestitures of those businesses   •  reviewed with management quarterly updates on ethics hotline matters   •  discussed with management certain risk management matters   •  discussed with management an update on our Ethics and Compliance Program   •  reviewed and approved our independent auditor’s 2020 integrated audit plan and service fees   •  reviewed and approved our 2020 internal audit annual operating plan

 

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PART I - CORPORATE GOVERNANCE			MASCO 2020

 

Organization and Compensation Committee

 

Donald R. Parfet     Chair

Marie A. Ffolkes

J. Michael Losh

Christopher A. O’Herlihy

Lisa A. Payne

7 meetings in 2019

All members are independent

 

Our Compensation Committee is responsible for the following:   • the oversight of our executive compensation programs   • determining the goals and objectives applicable to the compensation of our CEO and evaluating our CEO’s performance in light of those goals   • reviewing our executive succession plan, including periodically reviewing our CEO’s evaluation and recommendation of a potential successor   • determining and administering equity awards granted under our stock incentive plan   • reviewing and establishing our peer group   In addition, our Compensation Committee evaluates risks arising from our compensation policies and practices and has determined that such risks are not reasonably likely to have a material adverse effect on us. Our executive officers and other members of management report to the Compensation Committee on executive compensation programs at our business units to assess whether these programs or practices expose us to excessive risk.		Compensation Committee key activities in 2019:   • reviewed and approved the incentive compensation for 2018 paid to our executive officers   • reviewed the alignment of our business strategy with the current incentive compensation structure for our executive officers   • established the 2019 performance metrics and goals for our 2019 Annual Incentive Program and 2019-2021 Long-Term Incentive Plan   • reviewed with management a pay-for-performance analysis of our CEO’s compensation as compared to our peer group   • discussed with management an organization and talent update and our talent strategy, including an update on our diversity and inclusion initiative   • reviewed and approved compensation arrangements related to the divestitures of our windows and cabinetry businesses   • discussed with management our CEO evaluation process   • reviewed with management our 2019 shareholder engagement activities   • reviewed and recommended to our Board updates to our Compensation Committee Charter

 

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MASCO 2020		PART I - CORPORATE GOVERNANCE

 

Corporate Governance and Nominating Committee

 

J. Michael Losh Chair

Mark R. Alexander

John C. Plant

Charles K. Stevens

Reginald M. Turner

3 meetings in 2019

All members are independent

 

Our Governance Committee is responsible for the following:   • advising our Board on the governance structure and conduct of our Board   • developing and recommending to our Board appropriate corporate governance guidelines and policies   • Board succession planning, including reviewing our Board’s structure and composition and the tenure of our directors   • reviewing the independence of our directors   • identifying and recommending qualified individuals for nomination and re-nomination to our Board   • recommending directors for appointment and re-appointment to Board committees   • reviewing and recommending to the Board our director compensation		Governance Committee key activities in 2019:   • reviewed and evaluated the composition of the Board and committees   • reviewed the results of our Board’s skills survey and 2019 self-evaluation   • reviewed and recommended to our Board updates to our Corporate Governance Guidelines and Governance Committee Charter   • reviewed our Board’s self-evaluation process for potential enhancements   • discussed with management significant governance trends   • reviewed with management a report on our 2019 shareholder engagement activities   • reviewed 2019 corporate and political contributions in accordance with our Political Contributions Policy

 

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PART I - CORPORATE GOVERNANCE			MASCO 2020

 

DIRECTOR COMPENSATION PROGRAM

Our non-employee directors receive the following compensation for service on our Board:

 

Compensation Element		Amount
Annual Cash Retainer		$130,000
Annual Equity Retainer (a)		Restricted stock units with a value of $140,000 that vest in three equal installments over three years
Annual Chair of the Board Cash Retainer		$200,000
Annual Committee Chair Cash Retainer (b)		$22,000 for the Audit Committee $20,000 for the Compensation Committee $15,000 for the Governance Committee
Meeting Fee (c)		None
Stock Retention Guideline		Directors must retain at least 50% of the equity they receive from us until their service as a director concludes

Annual Equity Retainer (row a): In 2019, the annual equity retainer was paid in the form of restricted stock granted under our Non-Employee Director Equity Program. Beginning in 2020, the annual equity retainer will be paid in the form of restricted stock units granted under our Non-Employee Directors Equity Program. Our Non-Employee Director Equity Program imposes a limit on the amount of equity a director may receive during a year of the greater of 25,000 restricted stock units or equity with a grant date value of $500,000.

Annual Governance Committee Chair Cash Retainer (row b): The Governance Committee Chair retainer is not paid if the director who chairs that committee also serves as the Chair of our Board. Currently Mr. Losh serves as both the Chair of our Board and our Governance Committee Chair, so he does not receive the Governance Committee Chair retainer.

Meeting Fee (row c): Our Board may approve the payment of meeting fees to directors serving on three or more standing committees or serving as members of a special committee constituted by our Board. No such fees were paid for 2019.

Other Compensation

Our non-employee directors may also receive the following benefits, which are available to all of our employees:

 

•

Matching gifts program under which we will match up to $5,000 of a director’s contributions to eligible 501(c)(3) tax-exempt organizations each year. Non-employee directors may participate in the matching gifts program until December 31 of the year in which their services as a director ends.

 

•

Employee purchase program under which a director may obtain rebates on certain of our products purchased for their personal use.

In addition, if space is available, a director’s spouse is permitted to accompany a director who travels on Company aircraft to attend Board or committee meetings.

Annual Review of our Director Compensation Program

Our Governance Committee reviews our director compensation program annually, including reviewing an analysis of the competitiveness of the program, and recommends any changes to our Board. The Committee determined to make no changes to our director compensation program in 2019.

 

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MASCO 2020		PART I - CORPORATE GOVERNANCE

 

DIRECTOR COMPENSATION TABLE

The following table reflects 2019 compensation paid to our directors, other than Mr. Allman, who is also a Company employee and receives no additional compensation for his service as a director.

2019 Director Compensation

 

Name		Cash Fees     Earned ($)					Restricted Stock Awards ($) (a)					All Other Compensation ($) (b)					Total ($)
Mark R. Alexander		130,000					139,999					—					269,999
Marie A. Ffolkes		130,000					139,999					—					269,999
J. Michael Losh		330,000					139,999					5,000					474,999
Richard A. Manoogian		130,000					139,999					—					269,999
Christopher A. O’Herlihy		130,000					139,999					5,000					274,999
Donald R. Parfet		150,000					139,999					5,000					294,999
Lisa A. Payne		152,000					139,999					5,000					296,999
John C. Plant		130,000					139,999					—					269,999
Charles K. Stevens		130,000					139,999					—					269,999
Reginald M. Turner		130,000					139,999					—					269,999

Restricted Stock Awards (column a): In May 2019, we granted 3,690 shares of restricted stock to each non-employee director. The amounts reported in this column reflect the aggregate grant date fair value of the shares, calculated in accordance with accounting guidance. Directors realize the value of restricted stock awards over time because the vesting of awards occurs pro rata over three years, and one-half of these shares must be retained until completion of their service on our Board.

All Other Compensation (column b): The amounts reported in this column reflect our contributions in 2019 to eligible tax-exempt organizations under our matching gifts program, as described above, for which directors receive no direct financial benefit.

Unvested Restricted Stock: The following table reports the aggregate number of shares of unvested restricted stock held on December 31, 2019 by each non-employee director who was serving on that date.

 

Director		Unvested Restricted Stock (#)
Mark R. Alexander		7,333
Marie A. Ffolkes		7,603
J. Michael Losh		7,333
Richard A. Manoogian		7,333
Christopher A. O’Herlihy		7,333
Donald R. Parfet		7,333
Lisa A. Payne		7,333
John C. Plant		7,333
Charles K. Stevens		6,656
Reginald M. Turner		7,333

 

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RELATED PERSON TRANSACTIONS

Our Board of Directors has adopted a Related Person Transaction Policy that requires our Board or a committee of independent directors to approve or ratify any transaction involving us in which any director, director nominee, executive officer, 5% beneficial owner or any of his or her immediate family members has a direct or indirect material interest.

Related Persons Transaction Policy

Our policy covers:

 

•

financial transactions and arrangements, or any series of similar transactions;

 

•

indebtedness and guarantees of indebtedness; and

 

•

transactions involving employment.

Our policy excludes transactions determined by our Board not to involve a material interest of the related person, such as:

 

•

ordinary course of business transactions of $120,000 or less;

 

•

transactions in which the related person’s interest is derived from service as a director of another entity or ownership of less than 10% of another entity’s stock; and

 

•

transactions in which the related person’s interest is derived from service as a director, trustee or officer of a not-for-profit organization or charity that receives donations from us, which are made in accordance with our matching gifts program.

Assessing Related Person Transactions

Our policy requires directors, director nominees and executive officers to provide prompt written notice to our Secretary of any related transaction so it can be reviewed by our Governance Committee. If our Governance Committee determines that the related person has a direct or indirect material interest in the transaction, it will consider all relevant information to assess whether the transaction is in, or not inconsistent with, our best interests and the best interests of our stockholders. Our Governance Committee annually reviews previously-approved ongoing related transactions to determine whether the transactions should continue.

Related Persons Transactions for 2019

There have been no new transactions since January 1, 2019 required to be described in this proxy statement.

On-Going Related Person Transactions

Our Governance Committee previously approved the on-going related transaction described below.

Transactions with Mr. Richard A. Manoogian in 2019

In accordance with the terms of our 2009 agreement with Mr. Manoogian, who transitioned to Chairman Emeritus in 2012, in 2019 we provided him with an administrative assistant for his personal use and a subscription allowance, which together aggregated approximately $152,000. We also charged Mr. Manoogian the incremental cost for his use of our aircraft (with prior approval from our CEO), which was approximately $32,350.

 

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MASCO 2020		PART I - CORPORATE GOVERNANCE

 

PROPOSAL 1: ELECTION OF CLASS II DIRECTOR NOMINEES

The term of office of our Class II Directors, who are Keith J. Allman, J. Michael Losh, Christopher A. O’Herlihy and Charles K. Stevens, III, expires at this meeting.

Our Board proposes the re-election of Messrs. Allman, Losh, O’Herlihy and Stevens to serve as Class II Directors. The term of the Class II Directors elected at this Annual Meeting will expire at the Annual Meeting of Stockholders in 2023, or when their respective successors are elected and qualified.

Our Board expects that the persons named as proxy holders on the proxy card will vote the shares represented by each proxy for the election of each director nominee unless a contrary direction is given. If, prior to the meeting, a nominee is unable or unwilling to serve as a director, which our Board does not expect, the proxy holders may vote for an alternate nominee recommended by our Board, or our Board may reduce its size.

Information regarding each of our director nominees can be found above in “Director Nominees for Class II.”

Our Board recommends a vote FOR the election to our Board of Directors of each of the following Class II Director nominees:

 

Name		Age					Director Since					Occupation
Keith J. Allman		57					2014					Our President and Chief Executive Officer, since 2014
J. Michael Losh		73					2003					Retired Chief Financial Officer and Executive Vice President of General Motors Corporation, a global automotive company
Christopher A. O’Herlihy		56					2013					Vice Chairman of Illinois Tool Works Inc., a global diversified industrial manufacturer of specialized industrial equipment, consumables, and related service businesses, since 2015
Charles K. Stevens, III		60					2018					Retired Executive Vice President and Chief Financial Officer of General Motors Company, a global automotive company

The affirmative vote of a majority of the votes cast by shares is required for the election of directors. Abstentions and broker non-votes are not counted as votes cast, and therefore do not affect the outcome of the election.

 

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PART II - COMPENSATION DISCUSSION AND ANALYSIS			MASCO 2020

 

		COMPENSATION DISCUSSION AND ANALYSIS SUMMARY

Our executive compensation programs are designed to promote the long-term interests of our stockholders by attracting and retaining talented executives and motivating them to achieve our strategic business objectives and drive stockholder value. We believe that our financial performance and the creation of long-term stockholder value should impact a significant portion of our executive officers’ compensation. Our Compensation Committee oversees our compensation programs and the compensation paid to our executive officers.

OUR 2019 FINANCIAL PERFORMANCE AND PERFORMANCE COMPENSATION PROGRAMS

Our continuing operations delivered sales and operating profit growth in 2019. Our reported annual sales increased 1% to $6.7 billion and our annual operating profit increased 1% to $1.1 billion, despite the challenges of higher input costs for many of our products and slower growth in our overall end markets. Based on our financial performance in 2019, our executive officers earned incentive compensation under our performance-based compensation programs, which include:

 

•

An annual performance program under which we pay cash bonuses and grant restricted stock units to our executive officers if we meet annual performance goals; and

 

•

A Long-Term Incentive Program (“LTIP”) under which our executive officers earn a stock award if we meet performance goals over a three-year period.

OUR EXECUTIVE OFFICERS’ PERFORMANCE-BASED TARGET COMPENSATION

Our target compensation mix for our CEO and our other executive officers reflects our emphasis on long-term, performance-based compensation that incentivizes our executive officers to make strategic decisions that will strengthen our business and create long-term value for our stockholders. In 2019, 87% of our CEO’s target compensation and 75% of our other executive officers’ target compensation was performance-based, as shown in the graphs below.

 

 

 

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MASCO 2020		PART II - COMPENSATION DISCUSSION AND ANALYSIS

 

PERFORMANCE COMPENSATION WE PAID IN 2019

 

2019 ANNUAL PERFORMANCE PROGRAM

2017-2019 LTIP

Performance Metric

Target

Performance   (as adjusted)

Weighted   Performance   Percentage

Performance Metric

Target

Performance   (as adjusted)

Performance Percentage

Operating Profit (in millions)

$1,281

$1,263

Return on Invested Capital

14.0%

15.7%

134%

Working Capital as a Percent of Sales

15.6%

15.8%

77%

 

•

See “Our 2019 Annual Performance Program” and “Our Long-Term Incentive Program” below for a description of our calculation of operating profit, working capital as a percent of sales and ROIC performance.

Based on this performance, our executive officers earned the following compensation under our 2019 annual performance program and 2017-2019 LTIP:

 

Name		Cash Bonus ($)		Restricted Stock Unit Award ($)		2017-2019 LTIP-Stock Earned ($)		Total ($)
Keith J. Allman		1,429,000		1,587,977		3,390,180		6,407,157
John G. Sznewajs		418,600		418,739		973,611		1,810,950
Joseph B. Gross		297,400		297,538		635,123		1,230,061
Richard A. O’Reagan		327,900		327,957		734,035		1,389,892
Jai Shah		303,200		303,241		512,338		1,118,779

OTHER PERFORMANCE COMPENSATION WE PAID IN 2019

We grant stock options annually to our executive officers to align their long-term interests with those of our stockholders by reinforcing the goal of long-term share price appreciation. These stock options will provide value to our executive officers only if the price of our common stock increases above the option exercise price. In 2019, our Compensation Committee awarded to our executive officers the following stock options that vest ratably over five years:

 

Name		Stock Options Awarded (#)		Option Exercise Price ($ per share)		Value of Stock Options Awarded ($)
Keith J. Allman		227,240		35.52		2,001,507
John G. Sznewajs		62,430		35.52		549,877
Joseph B. Gross		42,570		35.52		374,952
Richard A. O’Reagan		46,940		35.52		413,443
Jai Shah		44,700		35.52		393,713

 

•

The value of the stock options awarded is the aggregate grant date fair value of stock options, calculated in accordance with accounting guidance.

OUR COMPENSATION PROGRAM HIGHLIGHTS

Our compensation practices include:

 

ü

Long-Term Incentives—Our compensation programs are weighted toward long-term incentives. We give approximately equal weight to restricted stock units, stock options and our three-year incentive program. In 2017, we modified our three-year incentive program by replacing the cash award with performance-based restricted stock units (“PRSUs”).

 

ü

Performance-Based Annual Restricted Stock Units—Our annual grant of restricted stock units is based on our executive officers’ target opportunity and the achievement of our performance goals under our annual performance program.

 

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PART II - COMPENSATION DISCUSSION AND ANALYSIS			MASCO 2020

 

ü

Long-Term Performance Program—A significant portion of our executive officers’ compensation opportunity is based on the achievement of a three-year performance goal.

 

ü

Clawback Policy—If we restate our financial statements, other than as a result of changes to accounting rules or regulations, our clawback policy allows us to recover incentive compensation paid to our executives in the three-year period prior to the restatement, regardless of whether misconduct caused the restatement.

 

ü

Stock Ownership Requirements—We have minimum stock ownership requirements for our executive officers, including requiring our CEO to own stock valued at six times his base salary. As of December 31, 2019, each of our executive officers met his or her stock ownership requirement.

 

ü

Double-Trigger Vesting—We have double-trigger vesting of equity on a change in control.

 

ü

Tally Sheets and Risk Analysis—Our Compensation Committee uses tally sheets, and oversees a risk assessment to evaluate whether our compensation programs present undue risk to us.

 

ü

Competitive Analysis—On an annual basis, our Compensation Committee reviews a market analysis of executive compensation paid by our peer companies and published survey data for comparably-sized companies.

 

ü

Limited Perquisites—We provide limited perquisites to our executive officers.

Our compensation practices do not include:

 

×

Excise Tax Gross-Ups—We eliminated the excise tax gross-up feature on all of the equity grants made since 2012.

 

×

Hedging or Pledging—Our policy prohibits executives and directors from hedging our stock and from making future pledges of our stock.

 

×

Employment Agreements—We have no change in control agreements or employment agreements providing for severance payments with our executive officers.

 

×

Option Repricing—Our equity plan prohibits the repricing of options without stockholder approval.

STOCKHOLDER ENGAGEMENT

At our 2019 Annual Meeting, 95% of the votes cast on our say-on-pay proposal approved the compensation we paid to our executive officers. Although the say-on-pay vote is advisory and non-binding, our Compensation Committee believes this approval percentage indicates strong support for our continued efforts to enhance our pay-for-performance practices, and our Compensation Committee concluded that our stockholders endorse our current executive compensation programs and policies.

In 2019, we continued our robust stockholder engagement program and requested the opportunity to engage with stockholders holding approximately 50% of our outstanding shares. We provide reports on the stockholder feedback we receive to our Compensation Committee and Governance Committee.

 

23

MASCO 2020		PART II - COMPENSATION DISCUSSION AND ANALYSIS

 

COMPENSATION DECISIONS IN 2019

Our 2019 Financial Performance

Our continuing operations delivered solid financial results in 2019 despite the challenges of higher input costs for many of our products and slower growth in our overall end markets. Our reported sales for the full year increased 1% to $6.7 billion. This sales growth was largely driven by our successful pricing actions as we mitigated the impact of the imposition of tariffs. Operating profit for the full year increased by 1% to $1.1 billion and our earnings per share from continuing operations grew 7% to $2.20 per share.

In addition, we executed and delivered on our strategy to become a more stable, less cyclical and higher return building products company through the divestitures of our windows businesses in November 2019 and our cabinetry business, which closed in February 2020. Lastly, we continued to implement our balanced capital allocation strategy by repurchasing $896 million of our stock, increasing our annual dividend for the sixth year in a row and reducing our debt by $201 million.

How We Performed Against our Performance Compensation Goals

Our 2019 annual performance program was based on operating profit and working capital as a percent of sales metrics. We did not achieve our target for either metric, which resulted in an overall performance percentage of 77%. Consistent with our commitment to pay for performance, our executive officers earned cash bonuses and awards of restricted stock units based on this achievement (see “Our 2019 Annual Performance Program” below).

Our LTIP for the three-year performance period of 2017 to 2019 was based on a return on invested capital (“ROIC”) metric, and we steadily improved our ROIC year-over-year during that period. Our adjusted ROIC in 2017, 2018 and 2019 was 15.3%, 15.6% and 16.2% respectively, for an average adjusted ROIC of 15.7% over the three-year performance period. This level of performance exceeded the target ROIC goal for this program, and we achieved a performance percentage of 134% (see “Our Long-Term Incentive Program” below).

Our 2019 Annual Performance Program

Program Opportunities

We provide annual performance-based cash bonus and restricted stock unit opportunities to our executive officers to incentivize them to achieve rigorous annual performance goals, our strategic business objectives and to align our executive officers’ interests with those of our stockholders.

Our Compensation Committee establishes the cash bonus and restricted stock unit opportunities available to each executive officer as a percentage of the officer’s annual base salary. Under our annual performance program, if the threshold goal is not achieved, our executive officers do not earn a payout. If the maximum goal is exceeded, the payout percentage is capped at 200% of the target opportunity.

Our executive officers had the following target opportunities in 2019 under our annual performance program:

 

		Target Opportunity for Cash Bonus as a % of     Annual Base Salary					Target Opportunity for     Restricted Stock Units as     a % of Annual Base Salary
Keith J. Allman		150%					167%
John G. Sznewajs		75%					75%
Joseph B. Gross		75%					75%
Richard A. O’Reagan		75%					75%
Jai Shah		75%					75%

 

24

PART II - COMPENSATION DISCUSSION AND ANALYSIS			MASCO 2020

 

Performance Metrics

Our Compensation Committee selected operating profit and working capital as a percent of sales metrics for our 2019 annual performance program because it believed that improvement in these metrics would continue to reinforce our executive officers’ focus on long-term growth and capital efficiency and drive stockholder value. These metrics are easily derived from our audited financial statements, which our Compensation Committee believes provides transparency both for our stockholders (as requested from stockholders when we sought feedback) and our executive officers. Our Compensation Committee gave a 75% weighting to the operating profit metric and a 25% weighting to the working capital as a percent of sales metric.

Program Targets and Achievement

In setting our performance targets, our Compensation Committee reviews our operating profit forecast for the year, taking into account general economic and industry conditions. In establishing the 2019 performance targets, it was expected we would experience slower consumer demand, as well as higher input costs for many of our products due to increasing tariffs and general commodity inflation.

In 2019, we achieved 82% of our operating profit target and 60% of our working capital as a percent of sales target. After weighting the operating profit metric at 75% and the working capital as a percent of sales metric at 25%, our performance percentage for the 2019 annual performance program was 77% of target.

 

Performance Metric		Threshold     (40% Payout)		Target (100% Payout)		Maximum     (200% Payout)		Percentage     Attained				Weighting				Performance     Percentage
Operating Profit (in millions)		$1,221		$1,281		$1,381		82%		×		75%		=		62%
Working Capital as a Percent of Sales		15.9%		15.6%		15.1%		60%		×		25%		=		15%
Performance Percentage																77%

To calculate achievement of our operating profit performance target, we adjusted our 2019 reported operating profit from continuing operations of $1,088 million to include the operating profit of our windows and cabinetry businesses which we reported as discontinued operations ($130 million) and to exclude the effects of expense recognized due to restructuring and rationalization charges ($19 million), intangible asset impairment charges ($16 million) and other unusual non-recurring net gains and losses ($10 million). Our operating profit for purposes of the annual performance program was $1,263 million.

To determine achievement of our working capital as a percent of sales performance target, we define working capital as a percent of sales as a twelve-month average of our reported accounts receivable and inventories, less accounts payable, divided by our reported sales for the year. For 2019, the inputs to our calculation included amounts related to our divested businesses for the months which we owned those businesses. Our working capital as a percent of sales was 15.8%.

 

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