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Regal Rexnord Corp. – ‘DEF 14A’ for 4/23/24

On:  Wednesday, 3/13/24, at 4:17pm ET   ·   For:  4/23/24   ·   Accession #:  1308179-24-119   ·   File #:  1-07283

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 3/13/24  Regal Rexnord Corp.               DEF 14A     4/23/24   11:7M                                     Labrador Co./FA

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

Filed by the 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 Material under §240.14a-12

 i REGAL REXNORD CORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):
	No fee required.
	Fee paid previously with preliminary materials.
	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

2024 Proxy Statement  •

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To Be Held April 23, 2024 8:00 a.m. Central Daylight Time Place: 6155 N. River Road Rosemont, Illinois 60018

NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS

 

REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:
	INTERNET Visit the website on your proxy card
	BY TELEPHONE Call the telephone number on your proxy card
	BY MAIL Sign, date and return your proxy card in the enclosed envelope
	IN PERSON Attend the annual meeting in Rosemont, Illinois.
Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you.

 

 

 

To the Shareholders of Regal Rexnord Corporation:

 

You are hereby notified that the 2024 Annual Meeting of Shareholders of Regal Rexnord Corporation will be held in the Rosemont Ballroom at the Chicago Marriott Suites O’Hare, located at 6155 N. River Road, Rosemont, Illinois 60018, on Tuesday, April 23, 2024 at 8:00 a.m., Central Daylight Time, for the following purposes:

 

1.	To elect ten directors for terms expiring at the 2025 Annual Meeting of Shareholders.
2.	To consider a shareholder advisory vote on the compensation of our named executive officers as disclosed in the accompanying proxy statement.
3.	To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2024.
4.	To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

Our Board of Directors has fixed the close of business on March 1, 2024 as the record date for the determination of the shareholders entitled to notice of and to vote at the annual meeting of shareholders.

 

We are furnishing our proxy materials to our shareholders over the Internet. This process expedites the delivery of proxy materials, maintains convenient access to the proxy materials by our shareholders and provides clear instructions for receiving proxy materials and voting your shares. It is also friendly to the environment.

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On March 13, 2024, we mailed to our shareholders the Notice of Internet Availability of Proxy Materials. That Notice contains instructions on how to access our 2024 Proxy Statement and 2023 Annual Report and how to vote online. In addition, the Notice of Internet Availability of Proxy Materials contains instructions on how our shareholders can (i) receive a paper copy of the Proxy Statement and Annual Report, if the shareholder received only a Notice of Internet Availability of Proxy Materials this year, or (ii) elect to receive their Proxy Statement and Annual Report only over the Internet, if the shareholder received them by mail this year.

We hope that you will be able to attend the meeting in person, but if you are unable to do so, it is important that your shares are represented at the annual meeting of shareholders. You may vote your shares over the Internet at the website identified in the Notice of Internet Availability of Proxy Materials or via the toll-free telephone number identified in that Notice. If you received a paper copy of the proxy card by mail, then you may sign and date the proxy card and return it by mail in the envelope provided. The Notice of Internet Availability of Proxy Materials contains instructions for use of all three methods of voting. If, for any reason, you should subsequently change your plans, you may, of course, revoke your proxy at any time before it is actually voted.

By Order of the Board of Directors

REGAL REXNORD CORPORATION

Thomas E. Valentyn

Executive Vice President and Secretary

Milwaukee, Wisconsin

March 13, 2024

2024 Proxy Statement  •

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TABLE OF CONTENTS

2024 Proxy Statement  •

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PROXY SUMMARY

Our proxy statement contains information about the matters that will be voted on at our 2024 Annual Meeting of Shareholders and all adjournments or postponements thereof (the “Annual Meeting”) as well as other helpful information about Regal Rexnord Corporation (“we”, “our” or the “Company”). Below is an executive summary that highlights certain information contained elsewhere in this proxy statement. We encourage you to read the entire proxy statement and all accompanying materials, including our 2023 Annual Report, carefully before voting your shares.

Annual Meeting Information

Time and Date	Location	Record Date
8:00 a.m. CDT  Tuesday, April 23, 2024	Rosemont Ballroom Chicago Marriott Suites O’Hare 6155 N. River Road Rosemont, Illinois 60018	March 1, 2024

Matters to be Voted on at the 2024 Annual Meeting

Proposal		Board Recommendation		For More Detail, See Page:
1.	Election of directors		FOR Each Nominee	13
2.	Non-binding, advisory vote to approve our named executive officers’ compensation		FOR	29
3.	Ratification of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2024		FOR	80

Board and Governance Highlights

	Annual election of all directors
	Majority voting for directors
	All directors are independent except our Chief Executive Officer
	Diverse board, with three female directors and two directors who are racially or ethnically diverse
	All committees are composed entirely of independent directors
	Annual board and committee evaluations, with cyclical individual director evaluations
	Shareholders have right to call special meetings
	Proxy access right granted to shareholders
	No “poison pill”
	Share ownership guidelines for directors and executives
	Strong commitment to sustainability, tracking achievement of net-zero goals announced in 2022 and oversight from our Corporate Governance, Sustainability and Director Affairs Committee

2024 Proxy Statement  •

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Director Nominees

												Committee Memberships
Directors / Occupation		Age		Director Since		Independent		Other Public Directorships		Audit		Compensation and Human Resources		Corporate Governance, Sustainability & Director Affairs
Jan A. Bertsch Former SVP and Chief Financial Officer, Owens-Illinois, Inc.		67		2019				2
Stephen M. Burt Managing Director, Duff & Phelps		59		2010				0
Anesa T. Chaibi Partner and Chief Transformation Officer, Coalesce Capital Management		57		2014				1
Theodore D. Crandall Former SVP and CFO, Rockwell Automation		68		2021				0
Michael P. Doss CEO, Graphic Packaging Holding Company		57		2022				0
Michael F. Hilton Former President and CEO, Nordson Corporation		69		2019				3
Louis V. Pinkham CEO, Regal Rexnord Corporation		52		2019				0
Rakesh Sachdev Former CEO, Platform Specialty Products Corporation (n/k/a Element Solutions Inc.)		68		2007				3
Curtis W. Stoelting Former CEO, Roadrunner Transportation Systems, Inc.		64		2005				0
Robin A. Walker-Lee Former EVP, General Counsel and Secretary, TRW Automotive Holdings Corp.		69		2021				1

Chairman of the Board.

Chair.

2024 Proxy Statement  •

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Director Nominee Highlights

Diversity

*Only categories that received an affirmative response to our diversity questionnaire are reflected here.

Skills and Experience

Range of Director Tenure

The balanced tenure of our Board of Directors provides us with both fresh perspectives and deep Company and industry knowledge.

2024 Proxy Statement  •

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Executive Compensation

The compensation of our named executive officers (our “NEOs”) is structured so that their interests are aligned with the long-term interests of our shareholders. This core pay-for-performance philosophy is embedded in the design of our executive compensation program. Strong shareholder support of our approach was reflected in our 2023 “say on pay” advisory vote, with over 94% of votes cast in favor of our proposal.

Key Components of our NEOs’ 2023 Compensation Program

	Base Salary: Our NEOs’ salaries reflect the scope of their responsibilities, experience and performance.
	Annual Cash Incentive Plan: Short-term cash incentive with payouts ranging from 0% to 200% based on performance against key financial goals at both the total company and segment level.
	Long-Term Incentive Award - 1/4 allocated to RSUs: Our RSUs vest ratably on the first, second and third anniversaries of the grant date.
	Long-Term Incentive Award - 1/4 allocated to SARs: Our SARs vest ratably on the first, second and third anniversaries of the grant date.
	Long-Term Incentive Award - 1/2 allocated to PSUs: Our PSUs have three-year cliff vesting. For 2023-2025 grants, PSUs are based on a total shareholder return metric, relative to our peer group.

The charts below show the approximate mix of base salary, annual cash incentive and equity grants we provided in 2023 to our Chief Executive Officer (our “CEO”) and our other NEOs. The portion of our CEO’s and other NEOs’ compensation that we consider to be at risk is also shown.

2024 Proxy Statement  •

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PROXY STATEMENT

This proxy statement relates to the solicitation by the Company, on behalf of its Board of Directors (our “Board”), of your proxy to vote your shares of our Company’s common stock at the Annual Meeting. We mailed our Notice of Internet Availability of Proxy Materials, and we are making available this proxy statement on March 13, 2024. We solicit proxies to give all shareholders of record an opportunity to vote on matters that will be presented at the Annual Meeting. In this proxy statement, you will find information on these matters, which is provided to assist you in voting your shares.

2024 Proxy Statement  •

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COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Q: What am I being asked to vote on?

Q: Who can vote?

Q: How do I vote?

By Proxy—Before the Annual Meeting, you can give a proxy to vote your shares of common stock in one of the following ways:

The telephone and Internet voting procedures are designed to confirm your identity, to allow you to give your voting instructions and to verify that your instructions have been properly recorded. If you wish to vote by telephone or Internet, please follow the instructions that are printed on the Notice of Internet Availability of Proxy Materials.

If you mail your properly completed and signed proxy card to us, and we receive it by 5 p.m., Central Daylight Time, Friday, April 19, 2024, or vote by telephone or the Internet, then your shares of common stock will be voted according to the choices that you specify. 

If you sign and mail your proxy card to us without making any choices, your proxy will be voted:

Other than the election of directors, approval of the compensation of our NEOs and the ratification of the selection of our independent registered public accounting firm, we are not currently aware of any other matters that will be brought before the Annual Meeting. However, by giving your proxy, you appoint the persons named as proxies as your representatives at the Annual Meeting. If a matter comes up for a vote at the Annual Meeting that is not included in the proxy materials, then the proxy holders will vote your shares in accordance with their best judgment.

In Person—You may come to the Annual Meeting and cast your vote there. If your shares are held in the name of your broker, bank or other nominee, and you wish to vote at the Annual Meeting, then your broker, bank or other nominee will provide you with instructions for voting your shares.

2024 Proxy Statement  •

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Q: May I change or revoke my vote?

Q: Will my shares be voted if I do not provide my proxy?

However, if you have not provided directions to your broker, your broker will not be able to vote your shares with respect to the election of directors and the approval of the compensation of our NEOs.

We strongly encourage you to submit your proxy card and exercise your right to vote as a shareholder.

Q: What constitutes a quorum?

2024 Proxy Statement  •

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Q: What vote is needed for these proposals to be adopted?

Q: Who conducts the proxy solicitation and how much will it cost?

Q: Are our Company’s proxy materials available on the Internet?

2024 Proxy Statement  •

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PROPOSAL 1 
ELECTION OF DIRECTORS

Our Board is currently comprised of ten directors with the terms of each director expiring at the Annual Meeting. Our Board has nominated Jan A. Bertsch, Stephen M. Burt, Anesa T. Chaibi, Theodore D. Crandall, Michael P. Doss, Michael F. Hilton, Louis V. Pinkham, Rakesh Sachdev, Curtis W. Stoelting and Robin A. Walker-Lee, each of whom is currently serving as a director, for election at the Annual Meeting. We include background information on all the nominees below.

Upon election, the directors will hold office for a term expiring at the 2025 annual meeting of shareholders and until their successors have been duly elected and qualified. Our Board has established a retirement age of 72 within the Corporate Governance Guidelines and our Company’s Bylaws. Specifically, a director is expected to retire from our Board on the day and hour of the annual shareholders meeting next following his or her 72nd birthday. None of our director nominees has reached the mandatory retirement age of 72 as of the date of the Annual Meeting.

Unless shareholders otherwise specify, the shares represented by the proxies received will be voted in favor of our Board’s nominees for election as directors. Our Board has no reason to believe that any of the listed nominees will be unable or unwilling to serve as a director if elected. However, in the event that any nominee should be unable or unwilling to serve, the shares represented by proxies received will be voted for another nominee selected by our Board.

Our Corporate Governance, Sustainability and Director Affairs Committee periodically reviews and recommends to our Board the qualities, skills and attributes desired in our directors to reflect the unique challenges facing, and business strategies of, our Company. The Corporate Governance, Sustainability and Director Affairs Committee reviews the qualities, skills and attributes of proposed nominees when it makes director nominee recommendations to our Board and compares them against the desired qualities, skills and attributes. Our Board reviews this information when considering proposed nominees.

Some of the business challenges and strategies we have identified, and the corresponding desired qualities, skills and attributes, are described in the following table.

2024 Proxy Statement  •

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Nominees for Election at the Annual Meeting

The following sets forth certain information, as of March 1, 2024, about each of our Board’s nominees for election at the Annual Meeting. Except as otherwise noted, each nominee has engaged in the principal occupation or employment and has held the offices shown for more than the past five years.

2024 Proxy Statement  •

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OUR BOARD RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS DIRECTORS AND URGES EACH SHAREHOLDER TO VOTE “FOR” ALL NOMINEES.

2024 Proxy Statement  •

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BOARD OF DIRECTORS

Corporate Governance Highlights

We believe good governance is one critical element to achieving long-term shareholder value. We are committed to governance policies and practices that serve our and our shareholders’ long-term interests, as well as enable solid risk management and our performance-based focus. The following table summarizes certain highlights of our corporate governance practices and policies:

	Annual election of all directors			Cyclical individual director evaluations
	Majority voting for directors			Right of shareholders to call special meetings
	Three members of our Board are female			No “poison pill”
	Two members of our Board are racially or ethnically diverse			Share ownership guidelines for directors and executives
	All standing committees are composed entirely of independent directors			Commitment to sustainability
	Annual Board and Committee evaluations			Proxy access right granted to shareholders

Corporate Governance and Independent Directors

Our Board has in effect Corporate Governance Guidelines that, in conjunction with our Board committee charters, establish processes and procedures to help ensure effective and responsive governance by our Board. The Corporate Governance Guidelines are available, free of charge, on our website at www.regalrexnord.com. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this proxy statement.

The Corporate Governance Guidelines provide that a majority of the members of our Board must be independent directors under the listing standards of the NYSE. Our Board has adopted certain categorical standards of director independence to assist it in making determinations of director independence and which are contained in the Corporate Governance Guidelines.

Based on these standards, our Board affirmatively determined by resolution that each of Ms. Bertsch, Mr. Burt, Ms. Chaibi, Mr. Crandall, Mr. Doss, Mr. Hilton, Mr. Sachdev, Mr. Stoelting and Ms. Walker-Lee, has no material relationship with our Company, and, therefore, each is independent in accordance with the NYSE listing standards and with the categorical standards of director independence adopted by our Board. Our Board regularly reviews the continuing independence of the directors.

Code of Business Conduct and Ethics

Our Board has adopted the Regal Rexnord Corporation Code of Business Conduct and Ethics (the “Code”), which applies to our directors, officers and associates. The Code is available, free of charge, on our website at www.regalrexnord.com.

2024 Proxy Statement  •

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Board Leadership Structure

Our Board does not maintain a policy on whether the roles of CEO and Chairman of the Board (“Chairman”) should be separate. Our Board reserves the right to vest the responsibilities of the CEO and Chairman in different individuals or in the same individual if, in our Board’s judgment, a combined CEO and Chairman position is in the best interest of our Company. Currently, the two leadership positions are not combined.

Mr. Sachdev has served as the Chairman since the 2019 annual meeting of shareholders. Mr. Pinkham, as CEO, works closely with his fellow directors and the Chairman, while continuing to lead the Company in the CEO role.

In the circumstance where the responsibilities of the CEO and Chairman are vested in the same individual, or where the Chairman is not considered independent, our Board will designate a Presiding Director from among the independent directors. The position of the Presiding Director, when such position is applicable, rotates periodically among the non-employee directors as determined by our Board upon the recommendation of the Corporate Governance, Sustainability and Director Affairs Committee. The Presiding Director is an independent and empowered director who is appointed by the independent directors and who works closely with the Chairman. The Corporate Governance Guidelines outline the role and responsibilities of the Chairman/Presiding Director.

Oversight of Risk Management

Our full Board is responsible for the oversight of our Company’s operational and strategic risk management processes. Our Board believes that oversight of risk management belongs at the full Board level rather than with any one particular committee, primarily because of the importance of understanding and mitigating risk to the overall success of our Company. As part of its risk management responsibilities, our full Board provides oversight of the Company’s management and mitigation of cybersecurity risks.

In furtherance of our Board’s risk management oversight goals, the Company convenes a Risk Committee comprised of key functional and business leaders. Among other members, the Risk Committee includes our Chief Information Security Officer, our Director of Global Risk and Property Management, our Vice President, Internal Audit, and our Vice President, Environmental, Health and Safety to ensure a strong focus on cybersecurity, business continuity, and enterprise risks. The Risk Committee’s members are charged with, among other things, identifying and assessing significant risk areas, as well as working with executive leadership and their teams to develop and execute plans, responses or mitigation strategies to address significant risks that could otherwise negatively impact our ability to achieve our objectives.

To gather information about our enterprise risk, the Risk Committee identifies primary areas that generate enterprise risk for our Company, and then distributes a survey to a group of our top leaders. The survey produces a risk priority number (RPN) for each risk area, which is used to generate a heat map that reflects the relative impact and likelihood of each risk area. Based on feedback from our CEO, Audit Committee and Board, the Risk Committee prioritizes developing mitigation strategies to address the highest-risk items identified by the survey and heat map analysis.

The Risk Committee periodically summarizes its activities and findings (including the results of its survey and heat map analysis) directly to our CEO, as well as the Audit Committee and our full Board. The Risk Committee’s work is also used by our management team as part of our disclosure controls and procedures to ensure that information regarding material risks applicable to our Company are appropriately disclosed in our public filings.

While our Board maintains responsibility for oversight of all areas of risk management, it relies on our Audit Committee to address significant financial risk exposures facing our Company and the steps management has taken to monitor, control and report such exposures, with appropriate reporting of these risks to be made to the full Board. Our Board also relies on our Compensation and Human Resources Committee to address significant risk exposures facing our Company with respect to compensation programs and incentives, and on our Corporate Governance, Sustainability and Director Affairs Committee to address any significant risk exposures facing our Company with respect to environmental, social and governance (ESG) matters applicable to the Company, in each case with appropriate reporting of these risks to be made to the full Board. Our Board’s role in our Company’s risk oversight has not affected our leadership structure.

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Executive Sessions

Our Board holds at least four regularly scheduled meetings per year at which the independent directors meet in executive session without members of management or other (non-independent) directors present. The non-employee directors may also meet without management present at such other times as they determine appropriate.

Communications with our Board

Shareholders and other interested parties may communicate with the full Board, the Chairman, non-management directors as a group, or individual directors by delivering a written communication to Regal Rexnord Corporation, Attention: Board of Directors, 111 W. Michigan Street, Milwaukee, Wisconsin 53203, or by sending an e-mail communication to board.inquiry@regalrexnord.com. The communications should be addressed to the specific director or directors whom the shareholder or interested party wishes to contact and should specify the subject matter of the communication. Our Company’s Secretary will deliver appropriate communication directly to the director or directors to whom it is addressed. The Secretary will generally not forward to the director or directors communication that he determines to be primarily commercial in nature or concerns our day-to-day business activities, or that requests general information about our Company.

Concerns about accounting or auditing matters or possible violations of the Code should be reported pursuant to the procedures outlined in the Code, which is available on our website at www.regalrexnord.com.

Committees

We have three standing committees of our Board: Audit Committee, Compensation and Human Resources Committee, and Corporate Governance, Sustainability and Director Affairs Committee. Ad hoc committees are created for specific purposes from time to time. Each committee is appointed by and reports to our Board. Our Board has adopted, and may amend from time to time, a written charter for each of the standing committees. Copies of each of these charters are available free of charge on our website at www.regalrexnord.com.

Audit Committee

The Audit Committee consists of Mr. Crandall (Chairperson), Ms. Bertsch and Mr. Burt. Each of the members of the committee is independent as defined by the NYSE listing standards and the rules of the Securities and Exchange Commission (the “SEC”). Our Board determined that each of Mr. Crandall, Ms. Bertsch and Mr. Burt qualify as an “audit committee financial expert” as defined in SEC rules and meets the expertise requirements for audit committee members under the NYSE listing standards. The principal functions performed by the Audit Committee, which met five times in 2023, are to assist our Board in monitoring:

The Audit Committee has the sole authority to appoint, retain, compensate and terminate our independent registered public accounting firm and to approve the compensation paid to our independent registered public accounting firm. The Audit Committee has presented to shareholders for ratification at the Annual Meeting its selection of our independent registered public accounting firm for 2024. See “Proposal 3: Ratification of Deloitte & Touche LLP as Our Independent Registered Public Accounting Firm for the Year Ending December 31, 2024.”

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Compensation and Human Resources Committee

The Compensation and Human Resources Committee consists of Mr. Hilton (Chairperson), Mr. Doss and Mr. Sachdev. Each of the members of the Compensation and Human Resources Committee is independent as defined by the NYSE listing standards. The principal functions of the Compensation and Human Resources Committee, which met four times in 2023, are to:

A more complete description of our Compensation and Human Resources Committee’s practices can be found in the Compensation Discussion and Analysis section of this proxy statement.

The Compensation and Human Resources Committee from time to time uses independent compensation consultants to assist the committee in the performance of its responsibilities. As part of its evaluation of potential compensation consultants, the committee considers all factors relevant to the consultant’s independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing standards. After selecting an independent compensation consultant, the committee periodically meets with that consultant throughout the year at such times as the committee deems appropriate, and receives reports and advice from the consultant on matters of executive compensation. The committee selected Meridian Compensation Partners to serve as its independent compensation consultant in 2023.

Corporate Governance, Sustainability and Director Affairs Committee

The Corporate Governance, Sustainability and Director Affairs Committee currently consists of Ms. Walker-Lee (Chairperson), Ms. Chaibi and Mr. Stoelting. Each of the members of the Corporate Governance, Sustainability and Director Affairs Committee is independent as defined by the NYSE listing standards. The principal functions of the Corporate Governance, Sustainability and Director Affairs Committee, which met five times in 2023, are to:

In January 2022, the Corporate Governance, Sustainability and Director Affairs Committee assumed responsibility for day-to-day oversight of ESG matters applicable to the Company, as part of the Company’s continued focus on improving its governance and oversight of sustainability matters. As part of the Corporate Governance, Sustainability and Director Affairs Committee’s additional focus on ESG matters, our management team provides a quarterly ESG-focused report to the committee.

Ad Hoc Transaction Committee

In March 2022, our Board formed a Transaction Committee, comprised of Mr. Sachdev (Chairperson), Ms. Bertsch, Mr. Burt, and Mr. Hilton to assist the Board in the significant work of evaluating and making recommendations with respect to our acquisition of Altra Industrial Motion Corp. (“Altra”). In 2023, the Transaction Committee met once and was then dissolved effective April 2023.

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Nominations of Directors

Our Company’s Amended and Restated Bylaws have featured proxy access since 2017. Proxy access is provided to a shareholder, or a group of up to 20 shareholders, owning at least 3% of our Company’s outstanding common stock continuously for at least three years. Eligible shareholders are permitted to nominate up to 20% of the total number of directors, rounded down to the nearest whole number (but not less than two), provided that the shareholders and nominees satisfy the requirements specified in the bylaws. Nominating shareholders are required to satisfy certain informational and procedural requirements, including (i) that such shareholders do not have an intent or objective to influence or change control of our Company and (ii) that their nominees will not have entered into any agreements as to how they will vote or act on different matters. Under the bylaws, we must receive notice of a shareholder’s director nomination for the 2025 annual meeting of shareholders pursuant to the proxy access bylaw provision no sooner than October 14, 2024 and no later than November 13, 2024. If the notice is received outside that time frame, then we are not required to include the nominees in our proxy materials for the 2025 annual meeting of shareholders.

The Corporate Governance, Sustainability and Director Affairs Committee will also consider persons recommended by shareholders to become nominees for election as directors in accordance with the criteria set forth in the Corporate Governance Guidelines under the heading “The Corporate Governance, Sustainability and Director Affairs Committee will only review recommendations for director nominees from any shareholder or group of shareholders beneficially owning in the aggregate at least 5% of the issued and outstanding shares of our common stock for at least one year as of the date that the recommendation is made. Recommendations with respect to the 2025 annual meeting of shareholders must be submitted by November 13, 2024 for the recommendation to be considered by the Corporate Governance, Sustainability and Director Affairs Committee.

In identifying and evaluating nominees for director, the Corporate Governance, Sustainability and Director Affairs Committee believes that all directors should be financially literate and must be committed to understanding our Company and its industry, and must also possess the highest personal and professional ethics, integrity and values, and commitment to representing the long-term interest of the shareholders. Directors must also possess a diverse set of skills and experience with a background in areas that are relevant to our activities. Directors should also be inquisitive and have an objective perspective, practical wisdom and mature judgment. Directors must be willing and able to devote whatever time is necessary to carry out their duties and responsibilities effectively. Directors will not be nominated unless they are willing to serve for an extended period of time.

While the Corporate Governance, Sustainability and Director Affairs Committee does not have a formal policy relating specifically to the consideration of diversity in its process to select and evaluate director nominees, the Committee does consider diversity of viewpoint, background, industry knowledge and perspectives, as well as ethnic and gender diversity, as part of its overall evaluation of candidates for director nominees. Specifically, our criteria for director nominees, included as Appendix A to our Corporate Governance Guidelines, provide that directors should be selected so that our Board is composed of qualified individuals who reflect diversity of background, perspective, gender, race and ethnicity.

For a timely recommendation submitted by a shareholder to be considered by the Corporate Governance, Sustainability and Director Affairs Committee, the candidate recommended by a shareholder must be “independent” as defined in the NYSE independence standards and SEC regulations, and meet the minimum expectations for a director set forth in our Company’s Corporate Governance Guidelines. The Corporate Governance, Sustainability and Director Affairs Committee will have sole discretion whether to nominate an individual recommended by a shareholder. As to any candidate identified by the Corporate Governance, Sustainability and Director Affairs Committee to become a nominee, the candidate must possess the requisite qualifications, although the Corporate Governance, Sustainability and Director Affairs Committee need not require such nominee to be independent. Nevertheless, we strive to have all directors, other than those directors who are current or former members of our management, be independent as defined by the NYSE independence standards and SEC regulations.

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Sustainability

We believe that positive ESG-related business practices strengthen our Company, increase our connection with our stakeholders and help us better serve our customers and the communities in which we operate. We are on an exciting ESG journey with tremendous opportunities to create a better tomorrow. In our view, sustainability goes beyond compliance, extending to other areas, including associate health and safety, environmental impact, anti-corruption and trade compliance, responsible sourcing, human rights, labor practices and diversity, engagement and inclusion.

We have committed to setting both science-based near-term emissions reduction targets, and net-zero targets. In 2022, we announced our commitment to achieve Scope 1 and Scope 2 carbon emission neutrality by 2032, and Scope 3 carbon emission neutrality by 2050, and the establishment of science-based targets to reduce carbon emissions from our operations.  Our focus has been on improving our environmental data reporting and accuracy, outlining a strategy to achieve our environmental impact goals, defining the relevant metrics to track our progress, and establishing a robust governance structure to help drive accountability.

Our Sustainability Report is available on our website at sustainability.regalrexnord.com. As discussed above, although our full Board is still ultimately responsible for the oversight of our sustainable business practices and related risks and opportunities, the Corporate Governance, Sustainability and Director Affairs Committee is responsible for oversight of our continuing ESG journey. Our Sustainability Report is not incorporated by reference herein.

Ways we have further demonstrated our commitment to sustainability to include:

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Policies and Procedures Regarding Related Person Transactions

Our Board has adopted written policies and procedures regarding related person transactions. For purposes of these policies and procedures:

The related person, the director, executive officer, nominee or beneficial owner who is an immediate family member of a related person, or a business unit or function/department leader of our Company responsible for a proposed related person transaction must notify our General Counsel of certain information relating to proposed related person transactions. If our General Counsel determines that a proposed transaction is a related person transaction subject to the policy, then he will submit the transaction to the Corporate Governance, Sustainability and Director Affairs Committee for consideration at the next committee meeting or, if expedited consideration is required, to the committee chairperson. The committee or chairperson, as applicable, will consider all the relevant facts and circumstances available regarding the proposed related person transaction and will approve only those related person transactions that are in, or are not inconsistent with, the best interests of our Company and our shareholders. The chairperson is required to report to the committee at the next committee meeting any approval granted under the policy.

The policy also provides for ongoing review by the General Counsel of any amounts paid or payable to, or received or receivable from, any related person. Additionally, at least annually, the Corporate Governance, Sustainability and Director Affairs Committee is required to review any previously approved related person transactions that remain ongoing and have a remaining term of more than six months or remaining amounts payable to or receivable from us of more than $60,000. Based on all relevant facts and circumstances, the committee will determine if it is in the best interests of our Company and our shareholders to continue, modify or terminate the related person transaction.

If any of our CEO, Chief Financial Officer or General Counsel becomes aware of a pending or ongoing related person transaction that has not been previously approved under the policy, then the transaction must be disclosed to the Corporate Governance, Sustainability and Director Affairs Committee or its chairperson. The committee or the chairperson must then determine whether to amend or terminate the related person transaction, or take any other appropriate action. If the related person transaction is complete, then the committee or its chairperson will evaluate the transaction to determine if rescission of the transaction and/or any disciplinary action is appropriate.

In 2023, there were no proposed, pending or ongoing related person transactions subject to review by the Corporate Governance, Sustainability and Director Affairs Committee under the policy.

Meetings and Attendance

Our Board held ten meetings in 2023. Each director attended at least 75% of the aggregate of (a) the total number of meetings of our Board and (b) the total number of meetings held by all committees of our Board on which the director served during 2023, in each case during the period in which the director was serving on our Board or the applicable committee.

Members of our Company’s senior executive management who are not members of our Board participate in Board meetings to present information, make recommendations, and be available for direct interaction with members of our Board. They also support the work of the committees in liaison roles. Other Company leaders are invited to present information and interact directly with the directors as the Board deems necessary or desirable.

Directors are expected to attend our annual meeting of shareholders each year.

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STOCK OWNERSHIP

Management

The following table sets forth information, as of March 1, 2024, regarding beneficial ownership of our common stock by each director and nominee, each of our current NEOs as set forth in the Summary Compensation Table, and all the directors and current executive officers as a group. As of March 1, 2024, no director or executive officer beneficially owned one percent or more of our common stock. On that date, the current directors and executive officers as a group beneficially owned less than one percent of our common stock. Except as otherwise indicated in the footnotes, all the persons listed below have sole voting and investment power over the shares of our common stock identified as beneficially owned.

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Other Beneficial Owners

The following table sets forth information, as of December 31, 2023 or otherwise, as noted, regarding beneficial ownership by the only persons known to us to own more than 5% of our outstanding common stock. The beneficial ownership information set forth below has been reported on filings made on Schedule 13G with the SEC by the beneficial owners.

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PROPOSAL 2
ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

We are seeking an advisory vote of our shareholders on the compensation of our NEOs, as required by Section 14A of the Securities Exchange Act of 1934, as amended. Our Board recommends that you vote in favor of a resolution approving the compensation of our NEOs as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis section and the tables and narrative discussion contained in this proxy statement on pages 53 to 75. Since the vote is advisory in nature, the results will not be binding on our Board or our Compensation and Human Resources Committee. However, if there is a significant vote against our executive compensation policies and procedures, our Board and our Compensation and Human Resources Committee will carefully evaluate whether any actions are necessary to address those concerns. We intend to hold our next advisory vote on the compensation of our NEOs at our annual meeting in 2025. 

OUR BOARD RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

	TABLE OF CONTENTS
	COMPENSATION DISCUSSION AND ANALYSIS	30
	Our Named Executive Officers	30
	Executive Compensation Philosophy	31
	Setting Executive Compensation	35
	The Elements of Total Compensation	38
	Executive Stock Ownership Requirements	50
	Policy Against Hedging and Pledging Transactions	49
	Employment Agreements and Severance and Change in Control Benefits	51
	Tax Considerations	51

 

Our Named Executive Officers

 

This Compensation Discussion and Analysis provides detailed information about our compensation programs for our NEOs for fiscal 2023. Our NEOs for fiscal 2023 were:

 

LOUIS V. PINKHAM Chief Executive Officer		ROBERT J. REHARD Executive Vice President, Chief Financial Officer		JERRALD R. MORTON Executive Vice President & President, Industrial Powertrain Solutions segment		THOMAS E. VALENTYN Executive Vice President and Secretary (retiring in first half of 2024; transitioned General Counsel role on March 11, 2024)		KEVIN J. ZABA Executive Vice President & President, Automation and Motion Control segment

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Executive Compensation Philosophy

Overview

We have designed our executive compensation programs to attract, motivate, and retain a team of highly qualified executives who will execute our overall strategy, achieve our business objectives, and drive innovation. We believe that the compensation of our NEOs should be structured so that their interests are aligned with the long-term interests of our stakeholders. As such, our program encourages executives to achieve our short-term and long-term goals by offering “at risk” compensation, the value of which is ultimately determined by future performance, without creating undue risk-taking behavior nor overly emphasizing short-term performance at the expense of sustained long-term value creation. This core pay-for-performance philosophy is embedded in the design of our executive compensation program.

In order to attract, motivate and retain talented executives, we believe we should offer overall compensation levels that are competitive in the marketplace. As a result, we set total target direct compensation levels that are competitive with a peer group of other global corporations of similar size, value, and complexity.

Consistent with our pay-for-performance philosophy, we believe our NEOs should have the opportunity to earn above-market total target direct compensation if the Company performs well, but that they should earn below-market total target direct compensation if it does not.

Role of “say on pay” in our philosophy and in determining compensation

Each year we and the Compensation and Human Resources Committee of the Board of Directors (for purposes of this Compensation Discussion and Analysis, the “Committee”) evaluate the results of our shareholders’ non-binding vote on our NEOs’ compensation (the “say on pay” vote) and consider other shareholder inputs to determine whether our shareholders believe we need to change our compensation philosophy or practices. Most recently, in April 2023, our shareholders supported our NEOs’ compensation with more than 94% of votes cast in favor. Consistent with this strong vote of shareholder approval, we took care to retain all key elements of our continuing commitment to pay for performance.

Key compensation policies and practices

What We Do			What We Do NOT Do
	Pay for Performance			No Agreements With Gross-Ups for Taxes
	Balance Long-Term and Short-Term Incentives			No “Single Trigger” Severance Agreements
	Use Multiple Performance Metrics, Including a Relative Metric, for Incentive Compensation			No Repricing of Options
	Benchmark Compensation Against an Appropriate Peer Group			No Guaranteed Bonuses or Salary Increases
	Maintain a Compensation Recovery (Clawback) Policy
	Monitor for Risk-Taking Incentives
	Maintain Stock Ownership Requirements
	Prohibit Hedging, Pledging and the Like
	Limit Perquisites
	Engage an Independent Compensation Consultant
	Hold Executive Sessions at Each Committee Meeting

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Alignment of our NEOs’ 2023 compensation with financial performance

We believe our executive compensation in fiscal 2023 aligned well with the objectives of our compensation philosophy and with our corporate performance, taking into account adjustments to accommodate the Altra acquisition as noted below. Despite significant headwinds related to channel destocking, in addition to ongoing supply chain disruptions and inflationary pressures during fiscal 2023, the Company achieved several key financial performance milestones in fiscal 2023, including:

-Revenue: Our reported sales were up 19.8% and, on an organic basis, down 8% — both versus prior year.

-Adjusted EBITDA Margin – 20.9%, down 40 basis points versus prior year.

-Adjusted Free Cash Flow: $683.1 million, above guidance expectations.

-Adjusted Diluted Earnings Per Share: $9.15, down 14.9% versus prior year.

-Capital deployment: We continued our practice of paying a dividend every quarter — something we have done without interruption since January 1961.

These operating results and the other factors described below under “Annual Cash Incentives” led our Committee to approve annual cash incentives under our Incentive Compensation Plan (“ICP”) at 113.5% of target for fiscal 2023 for the portion of our NEOs’ annual cash incentives that is attributable to total Company performance.

Our NEOs who are corporate officers, Mr. Pinkham, Mr. Rehard and Mr. Valentyn, have their annual cash incentives based 90% on total Company performance measures and based 10% on a policy deployment metric that consists of a weighted average of operating segments’ performance against segment-specific policy deployment metrics. Our NEOs who are presidents of our operating segments, Mr. Morton and Mr. Zaba, have their annual cash incentives based 40% on total Company performance, with the remaining 60% based on their respective segment-level measures and results, including policy deployment metrics that are tailored to each operating segments’ key strategic objectives. The ICP performance measures applicable to our NEOs are described further below under “Annual Cash Incentives — ICP Performance Measures for 2023”, and the Committee’s determination of the annual cash incentives is described further below under “Annual Cash Incentives — Targets and Target-Setting Methodology”.

Our Committee approved the payout of shares under our performance share unit (“PSU”) awards that we granted in 2021, with a performance period of 2021-2023, at a level of 81.25% of target for PSUs based on our achievement of total shareholder return over the three-year performance period, and at a level of 177.00% of target for PSUs based on return on invested capital (“ROIC”) over the three-year performance period. Results for our 2021 ROIC PSUs substantially exclude the impact of all acquisitions that occurred during the three-year performance period.

This section includes non-GAAP financial measures which management uses to evaluate our business and make operating decisions. We believe these measures help to demonstrate the close alignment of our NEOs’ compensation with the Company’s financial performance. Descriptions of why we believe these non-GAAP financial measures are useful and reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our quarterly earnings releases during fiscal 2023.

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Percentage of “at risk” compensation

To focus on both our short and long-term success, our NEOs’ target total direct compensation includes a significant portion that is “at risk” because the value of such compensation is determined based on the achievement of specified results or subject to forfeiture. This “at risk” compensation includes compensation elements intended to reward the achievement of both short- and long-term financial goals. If these goals are not achieved, then performance-related compensation will decrease. If these goals are exceeded, then performance-related compensation will increase.

Payments under our ICP are “at risk” because they are dependent on achievement of one-year performance goals. In addition, compensation paid in the form of equity awards, such as restricted stock units (“RSUs”), stock appreciation rights (“SARs”) and PSUs, instead of cash is at-risk because the value of these awards varies with changes in our stock price. By creating a compensation package where a considerable percentage is paid in equity awards that are subject to vesting over multiple years or dependent on achieving multi-year performance goals, our NEOs have a significant stake in our long-term success and gain financially alongside our shareholders.

As shown in the following charts, 90% of the CEO’s target compensation and, on average, 80% of the other NEOs’ target compensation was at risk in fiscal 2023. For purposes of this disclosure, target total direct compensation includes annual base salary as in effect on December 31, 2023, target annual incentive awards for fiscal 2023 and grant date fair value of fiscal 2023 long-term incentive awards. 

Changes to our compensation program in 2023 that impacted our NEOs

The Committee adopted the following changes to our compensation program in 2023 that impacted our NEOs:

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Anticipated changes to our compensation program in 2024 that will impact our NEOs

The Committee has approved, or anticipates approving the following changes to our compensation program that will impact our NEOs beginning in 2024:

Setting Executive Compensation

Our Board’s role in setting NEO compensation

The Board’s primary roles in setting our NEOs’ compensation are:

Our Committee’s role in setting NEO compensation

The Committee consists entirely of independent directors who are “non-employee directors” for purposes of the Securities Exchange Act of 1934. The current members of the Committee are Mr. Hilton (Chairperson), Mr. Doss and Mr. Sachdev. The Committee’s primary roles in setting our NEOs’ compensation are:

The Committee reviews data from market surveys and proxy statements from our established peer group and retains an independent compensation consultant to assess our competitive position with respect to executive compensation.

The Committee takes various factors into account in setting compensation levels and does not use a formulaic approach, but generally seeks to closely align target total direct compensation (i.e., the sum of base salary, target annual cash incentive opportunity and target long-term incentives) with our peer group and the survey median.

Our CEO’s role in setting NEO compensation

In its decision-making process, the Committee receives and considers the recommendations of our CEO with respect to compensation to be paid to our NEOs other than himself. Our CEO makes no recommendation with respect to his own compensation.

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Our independent compensation consultant’s role in setting NEO compensation

The Committee periodically solicits proposals from independent compensation consultants to assist the Committee in the performance of its responsibilities. As part of its evaluation of potential compensation consultants, the Committee considers all factors relevant to the consultant’s independence from management and potential conflicts of interest in accordance with applicable SEC rules and NYSE listing standards. After selecting an independent compensation consultant, the Committee periodically meets with that consultant throughout the year at such times as the Committee deems appropriate and receives reports and advice from the consultant on matters of executive compensation.

Our annual process requires evaluation of our compensation consultant’s independence and the independence of the individual representatives who serve as consultants, including considering factors contained in applicable SEC rules and NYSE listing standards. Meridian Compensation Partners (“Meridian”) served as the Committee’s independent compensation consultant in 2023. 

In setting compensation for 2023, the Committee directed Meridian to assemble compensation data for our NEOs and compare the data against aggregated peer group proxy data and general industry survey data for persons holding similarly situated positions in our peer group. In setting compensation levels for NEOs, we consider compensation within a 15% range above or below the fiftieth (50th) percentile of peer group data to be at approximately the median level.

The Committee’s policy is to review the composition of the peer group we use for this purpose every year for potential changes in light of acquisitions, changes in comparable revenue size, or other factors it deems appropriate.

In reviewing our peer group for potential updates in 2023, the Committee selected companies that it believed to be comparable to our Company by generally using the following criteria:

After completing its review in consultation with Meridian, the Committee decided to revise the peer group for 2023. As a result of the Altra acquisition, the Committee determined it was appropriate to revise the constituents to ensure our peers are appropriate in size, complexity, and business model. We removed five companies that had annual revenues less than ½ of Regal Rexnord’s anticipated post-Altra-acquisition revenue or no longer aligned to Regal Rexnord from a business model or complexity perspective. The Committee approved the addition of five companies that were determined to be appropriate from a business model or complexity perspective and which placed Regal Rexnord’s anticipated post-Altra-acquisition revenue near the median of the group.

For 2023, the 19 companies in our peer group for purposes of NEO benchmarking were:

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Meridian benchmarked our executive compensation opportunities using (i) our 2023 peer group as the primary benchmark for our Chief Executive Officer, Executive Vice President, Chief Financial Officer, Executive Vice President, General Counsel  and segment president positions and (ii) general industry survey data based on appropriate size cuts as an additional benchmark for our CEO, Executive Vice President, Chief Financial Officer and Executive Vice President, General Counsel positions, and as the only benchmark for our NEOs who are presidents of our operating segments.

In reviewing and analyzing this data, Meridian considered information for each NEO position with respect to the following elements of total compensation:

As a result of its 2023 review, the Committee approved increases to target total direct compensation for all of our NEOs. The Committee determined that these increases were consistent with our pay for performance compensation philosophy and aligned the target total direct compensation of our NEOs to market data.

During 2022, the Committee also reviewed market data relating to perquisites provided to our NEOs using the same peer group and general industry survey data provided by Meridian discussed above. Consistent with prior years, we continued to limit the perquisites that we provide our NEOs.

In addition to benchmarking and peer group analysis, Meridian also supported the Committee by advising with respect to the Company’s incentive plans, reviewing the Compensation Discussion & Analysis portion of our proxy statement, and advising on other topics as requested by the Committee.

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The Elements of Total Compensation

We achieve our executive compensation objectives through the following ongoing programs. All of our NEOs participated in these programs unless otherwise noted below.

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Base Salaries

We determine base salaries for our NEOs based upon job responsibilities, level of experience, individual performance and expectations with respect to contributions to our future performance as well as comparisons to the salaries of executives in similar positions as compared to our peer group. Early in 2023, the Committee set the base salaries of our NEOs in accordance with the factors described in the preceding sentence. Effective as of December 31, 2023, the base salaries of our NEOs were as follows:

In setting base salary levels, the Committee compared the NEOs’ base salary levels to the salary levels of the executive officers in our peer group based on proxy statement data as well as general industry data from Meridian’s Executive Compensation Database and made changes accordingly.

As shown in the table above, the base salary for each of our NEOs increased during 2023.  The Committee determined that these increases were appropriate taking into account their respective performance and comparing their base salaries with the median base salaries for their respective positions in our 2023 peer group companies. In the case of Mr. Pinkham and Mr. Rehard, in addition to their merit driven base salary increases, the Committee determined at mid-year to further supplement their base salaries in recognition of their performance in completing the acquisition of Altra.

After taking 2023 changes into effect, the base salary for each of our NEOs were determined to be within an established target range of the median level compared to the median base salaries of similarly situated executive officers in the data reviewed by the Committee. The base salary levels set by the Committee did not affect decisions regarding other compensation elements.

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Annual Cash Incentives

Overview

In fiscal year 2023, we provided annual cash incentive awards through our ICP. Under ICP, annual cash incentive awards are paid out based on the Company’s achievement of performance goals related to certain key financial measures. Early in 2023, the Committee set performance goals (as described below under “ICP performance measures for 2023”) and a targeted level of annual cash incentive compensation for each NEO that could be earned for achievement of target performance. 

In consideration of segment realignment that occurred during the first quarter of 2023, to reflect changes in its management structure and operating model following completion of the Altra acquisition, the Committee determined that it was appropriate to divide ICP calculations into two distinct performance periods, as defined above. The First Performance Period and Second Performance Period allow for ICP calculations to more closely align with our pay for performance philosophy by accommodating the impact of segment realignment, completion of the Altra acquisition, and the Company’s performance objectives in consideration of those events.

Our NEOs who are corporate officers, Mr. Pinkham, Mr. Rehard and Mr. Valentyn, have their ICP payout based 90% on measures related to total Company performance and based 10% on a policy deployment metric that consists of a weighted average of each operating segments’ performance against segment-specific policy deployment metrics.  This allocation, more heavily weighted toward total Company performance than prior year, further serves to emphasize the importance of corporate officers’ focus on total company performance goals critical to stakeholder success.

Our NEOs who are presidents of our operating segments have their ICP payout based 40% on measures related to total Company performance and 60% on measures related to performance for their respective operating segments. The segment-level portion of their ICP includes policy deployment metrics that are tailored to each operating segment’s key strategic objectives.

Targets and Target-Setting Methodology

The Committee, in consultation with Meridian and our CEO (other than with respect to his own compensation), set annual cash incentive targets under the ICP near the median level with respect to each respective position held by our NEOs relative to our peer group. Our NEOs whose annual cash incentive targets under the ICP were set near the median level were given the opportunity to earn above median annual cash incentive awards if the Company-wide financial targets under the ICP plan were exceeded, while being at risk of receiving below median awards (or no awards at all) if our financial performance did not meet the targeted results. For 2023, the target cash incentive amounts for each of our NEOs are set forth in the table below. Effective January 1, 2023, target percentage of base salary for Mr. Rehard was increased from 75% to 80%; Mr. Valentyn’s was increased from 70% to 75%; Mr. Morton’s was increased from 70% to 80%; and Mr. Zaba’s was increased from 75% to 80%. Effective July 1, 2023, Mr. Pinkham’s target percentage of base salary was increased from 125% to 135%, and Mr. Rehard’s target percentage of base salary was increased from 80% to 85%. Accordingly, ICP calculations for Mr. Pinkham and Mr. Rehard were prorated to apply the July 1, 2023 increased target percentage of base salary to the Second Performance Period’s ICP calculations.  These increases were made in recognition of their respective performance achievements and to align each of their compensation opportunities more closely with compensation opportunities of comparable executives in our peer group. 

If each of the applicable financial performance goals were achieved at the target level, then the NEO would receive their target amount. However, if one or more of the applicable financial performance goals was achieved above or below the target level, then the NEO’s actual incentive compensation would be higher or lower than the target amount (ranging from zero to two times the target amount).

Our NEOs’ base salaries as of December 31, 2023 were used for purposes of determining the ICP payouts for both the First Performance Period and the Second Performance Period.

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ICP Performance Measures for 2023

As previously disclosed, our NEOs who are corporate officers have their ICP payout based 90% on measures related to total Company performance and based 10% on a policy deployment metric that consists of a weighted average of each operating segment’s performance against segment-specific policy deployment metrics, whereas our NEOs who are presidents of our operating segments have their ICP payout based 40% on total Company performance and 60% on operating segment performance, including policy deployment metrics that are tailored to each operating segment’s key strategic objectives. 

The performance goals for our operating segments were tailored to align with each individual segment’s financial performance and strategic objectives. Examples of the policy deployment metrics selected by our four operating segments include revenue growth targets for specific products, digital/e-commerce-derived revenue growth, cost synergies, gross margin improvement, and net energy footprint reduction. Due to the highly-strategic and confidential nature of these objectives and the likelihood that disclosure would result in competitive harm to the Company, we have elected to disclose only our segments’ performance against their overall policy deployment goals.

In the first quarter of 2023, the Company realigned its operating segments to reflect changes in its management structure and operating model following completion of the acquisition of Altra, more fully described in the Company’s Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 9, 2023. The policy deployment performance goals are tailored to the business of each operating segment, and attainment is expected to occur over the course of the full fiscal year. As a result, the 2023 policy deployment goals remained aligned to and measured against our segment structure prior to this segment realignment, and the policy deployment measures did not include the results of businesses acquired as part of the Altra acquisition.

Consistent with prior years, our ICP as originally established excludes the impact of certain extraordinary or non-recurring events. For the portion of our NEOs’ payout based on total Company and operating segment performance, the ICP performance measures were adjusted to exclude the impact of such extraordinary and non-recurring events, including the Altra acquisition and the anticipated sale of the industrial motors and generators business which comprises a majority of our Industrial Systems operating segment, such as restructuring and related costs, inventory step up adjustment, intangible amortization, share-based compensation expense, gain on sale of assets, impairments and exit-related costs, and tax adjustments as further described in our earnings releases for fiscal 2023. 

Total Company Performance Goals

Our total Company performance measures were adjusted earnings per share, free cash flow, and policy deployment. We selected these measures as representative of the entire Company’s performance under the ICP because we considered them to be fundamental operational metrics of our business for 2023 that, when improved, would increase shareholder value. The total Company policy deployment calculation is a weighted average of each operating segment’s performance against segment-specific policy deployment metrics, and is intended to better align total Company ICP payout with the performance of our businesses and their respective goals. 

We defined these performance measures in the total Company ICP as follows:

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For our total Company performance, the following targets were approved by the Committee for use under the ICP for the First Performance Period:

For our total Company performance, the following targets were approved by the Committee for use under the ICP for the Second Performance Period:

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Operating Segment Performance Goals

The performance goals for all of our operating segments during the First Performance Period were adjusted EBITDA, free cash flow, and policy deployment. The performance goals for all of our operating segments during the Second Performance Period were adjusted EBITDA, DIO, and policy deployment.

For the First Performance Period, we selected adjusted EBITDA and free cash flow, because we considered them to be fundamental operational metrics for all operating segments that, when improved, would improve year-over-year segment-level performance. As noted above, the Committee determined to substitute free cash flow for DIO and defer application of the DIO metric to the Second Performance Period, as DIO goals were established and DIO performance is measured based on year-long inventory reduction efforts. DIO ensures a strong focus on inventory management and reduction across the business however, it was no longer practical to apply this measure where ICP had been split into two distinct performance periods to account for the segment realignment and completion of the Altra acquisition in the first quarter of 2023. 

In support of our pay-for-performance philosophy, our policy deployment metrics align ICP payout with each operating segment’s strategic goals, our Regal Rexnord Business System, and our organization-wide focus on 80/20 and lean processes. We have only included detailed discussion below regarding the policy deployment metrics for segments relative to our NEOs. 

ICP calculations for Mr. Morton and Mr. Zaba during the First Performance Period, were based on their respective roles prior to segment realignment in the first quarter of 2023 and the completion of the Altra acquisition. Evaluation of performance prior to segment realignment during the First Performance Period accommodates the period of integration and leadership role transitions that followed those events. ICP calculations for Mr. Morton and Mr. Zaba during the Second Performance Period, were based on their respective roles after the segment realignment and completion of the Altra acquisition. As noted above, the 2023 policy deployment goals remained aligned to and measured against our segment structure prior to segment realignment, and the policy deployment measures did not include the results of businesses acquired as part of the Altra acquisition. The Committee determined that this approach was prudent in order to reinforce the Company’s pay-for-performance philosophy and to appropriately take into account the impact of the Altra transaction.  

Mr. Morton’s ICP payout for the First Performance Period is based on the performance of what was formerly our Motion Control Solutions operating segment and the Industrial Systems operating segment as he had served as the President of Motion Control Solutions Integration and was providing leadership support for certain elements of the Industrial Systems operating segment prior to segment realignment in the first quarter of 2023. Mr. Morton’s ICP payout for the Second Performance Period is based on the performance of what was formerly our Motion Control Solutions operating segment, and the Industrial Systems and Industrial Powertrain Solutions operating segments as he transitioned to the role of President of Industrial Powertrain Solutions and continued to provide broader leadership support for the Industrial Systems segment after segment realignment.

Mr. Zaba’s ICP payout for the First Performance Period is based on the performance of what was formerly our Motion Control Solutions operating segment as he was serving as the President of Motion Control Solutions prior to segment realignment and the acquisition of Altra in the first quarter of 2023. Mr. Zaba’s ICP payout for the Second Performance Period is based on the performance of what was formerly our Motion Control Solutions operating segment and the Automation and Motion Control operating segments as he transitioned to the role of President of Automation and Motion Control after segment realignment and the acquisition of Altra during the first quarter of 2023.

We defined adjusted EBITDA, free cash flow, and days inventory outstanding in the ICP as follows:

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For the 60% of Mr. Zaba’s ICP payout for the First Performance Period, which depends on the performance of what was formerly our Motion Control Solutions operating segment, the following targets were approved by the Committee:

For the 60% of Mr. Zaba’s ICP payout for the Second Performance Period, which depends on the performance of our Automation and Motion Control operating segment and what was formerly the Motion Control Solutions operating segment’s Policy Deployment initiatives, the following targets were approved by the Committee:

For the 60% of Mr. Morton’s ICP payout for the First Performance Period, which depends on the performance of what was formerly Motion Control Solutions and the Industrial Systems operating segments, the following targets were approved by the Committee:

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For the 60% of Mr. Morton’s ICP payout for the Second Performance Period, which depends on the performance of our Industrial Powertrain Solutions operating segment, the Industrial Systems operating segment, and what was formerly the Motion Control Solutions operating segment’s Policy Deployment initiatives, the following targets were approved by the Committee:

The payout structure for both total Company and our operating segments was designed to reward performance where results are greater than target and reduce the bonus where results are less than target. If the maximums were met for any of the performance metrics, then the NEOs would be eligible to receive 200% of their target amount for that metric. If the targets were met for any of the performance metrics, then the NEOs would be eligible to receive 100% of their target amount for that metric. If only the thresholds were met for any of the performance metrics, then the NEOs would be eligible to receive 0% of their target amount for that metric. If the actual results were to fall between threshold and target, or target and maximum, then the payout percentage would be interpolated on a non-linear basis between threshold and target, or target and maximum, respectively, such that the rate of increase is greater at levels immediately above threshold than for levels closer to target.

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ICP Results for 2023

Our total Company results which represent 100% of the payout for Mr. Pinkham, Mr. Rehard and Mr. Valentyn, and 40% of the payout for Mr. Morton and Mr. Zaba for the First Performance Period were as follows:

Our total Company results which represent 100% of the payout for Mr. Pinkham, Mr. Rehard and Mr. Valentyn, and 40% of the payout for Mr. Morton and Mr. Zaba for the Second Performance Period were as follows:

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The results of what were formerly our Motion Control Solutions and what is presently our Industrial Systems operating segments, which represent 60% of the payout for the First Performance Period for Mr. Morton and Mr. Zaba, are as follows:

The results of what was formerly our Motion Control Solutions operating segment and what are presently our Automation and Motion Control, Industrial Powertrain Solutions, and the Industrial Systems operating segments, which represent 60% of the payout for the Second Performance Period for Mr. Morton and Mr. Zaba, are as follows:

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NEO Payouts Based on 2023 ICP Results

The NEOs earned payouts for 2023 in the following amounts:

Long-Term Incentives

Overview

We provide long-term incentives to our NEOs in the form of equity-based compensation. Consistent with our compensation philosophy, we believe long-term equity incentives help to ensure that our NEOs have a continuing stake in the long-term success of our Company and allow our NEOs to earn above-median compensation only if our shareholders experience appreciation in their equity holdings.

In 2023, we made determinations concerning long-term equity-based awards in January, at the same time we completed our annual performance reviews. Grants of these awards were effective on February 23, 2023. The Committee granted long-term incentives in the form of SARs, RSUs and PSUs. See “The Elements of Total Compensation” table at the beginning of this section for a summary of each of these award types, and “Long-Term Incentives — Performance Share Units (PSUs)” for a detailed description of our PSUs.

These awards were granted under our 2018 Equity Incentive Plan that was approved by our shareholders at our 2018 annual meeting of shareholders (our “2018 Plan”). The proportion of overall long-term incentive target value represented by each form of award granted to our NEOs in 2023 was 50% PSUs, 25% SARs and 25% RSUs. The Committee granted PSUs, SARs and RSUs to each of our NEOs in 2023 in the amounts indicated below in the “Grants of Plan-Based Awards Table for Fiscal 2023” and the narrative following the table. We value SARs using a Black-Scholes formula and PSUs using fair value. Consistent with our overall compensation philosophy, the Committee, after consultation with Meridian, granted long-term compensation awards at levels approximating the median level of these awards granted by the companies in our peer group. The target long-term incentive levels set by the Committee did not affect decisions regarding other compensation elements. 

Performance Share Units (PSUs)

The PSUs granted in fiscal 2023 used TSR as the sole performance metric.

The TSR performance metric is achieved based on our total shareholder return relative to our peer group over our fiscal years 2023-2025, as follows:

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2021 PSU Results

In 2023, the three-year performance period for the PSUs that we granted to our NEOs in 2021 (the “2021 PSUs”) was completed. The PSUs granted in fiscal 2021 had two performance metrics, TSR and ROIC. Half of the 2021 PSUs were subject to the TSR performance metric and half were subject to the ROIC metric. The ROIC metric related to the PSUs granted in 2021 was established such that the ROIC target for 2021 was established at time of the grant as 9.2%, and the ROIC targets for years two and three of the performance period were established on the first and second anniversaries of the grant as 12.7% and 14.0%, respectively. The payout is based 25% on performance against the cumulative target and 25% each on annual performance against the three annual targets. Results for our 2021 ROIC PSUs substantially exclude the impact of all acquisitions that occurred during the three-year performance period.

Based on our performance for the period ending in 2023, our TSR of 26.14% was at the 43.75^th percentile of our peer group, resulting in 81.25% of the 2021 TSR PSUs being earned.

Based on our performance for the period ending in 2023, our ROIC performance against the cumulative target and against each of the three annual performance targets resulted in 177% of the 2021 ROIC PSUs being earned.

Executive Stock Ownership Requirements

To underscore the importance of linking executive compensation and shareholder interests, we have implemented stock ownership requirements for certain executives, including our NEOs. Executives subject to these stock ownership requirements must own a certain dollar value amount of stock before they are permitted to sell shares (other than shares sold to pay option exercise prices or shares sold or surrendered to cover taxes). Executives who sell shares in violation of these requirements may be ineligible for future long-term incentive awards. The stock ownership policy requires the following levels of ownership:

Each of our currently-serving NEOs are in compliance with this policy either because they own the target value of stock or because they have not sold shares.

Policy Against Hedging and Pledging Transactions

We have adopted a policy prohibiting our employees, including our NEOs and our directors, from trading inputs, calls and other derivative securities relating to our common stock. The prohibition includes the purchase of any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our common stock, regardless of whether such instruments are classified as derivative securities. We also prohibit our employees, including our NEOs and directors, from pledging shares of our common stock that they own as collateral to secure personal loans or other obligations under our Insider Trading Policy.

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Employment Agreements and Severance and Change in Control Benefits

We entered into an employment agreement with Mr. Pinkham when he was hired to be our CEO on April 1, 2019 that provided for severance benefits upon certain terminations of employment. In connection with the adoption of the Executive Severance Policy, effective November 3, 2023, Mr. Pinkham’s employment agreement was amended to eliminate the termination provisions and severance benefits provided thereunder and to instead provide for his participation in the Executive Severance Policy. The purpose of the employment agreement with Mr. Pinkham is to provide clarity concerning the terms and conditions of Mr. Pinkham’s employment as our CEO and to ensure that Mr. Pinkham will be subject to our confidentiality and restrictive covenant agreements. The terms of Mr. Pinkham’s employment agreement, as amended, are described below under the heading “Potential Payments Upon Termination or Change in Control — Employment Agreement.”

Prior to 2023, we had entered into KEESAs with Mr. Pinkham, Mr. Rehard and Mr. Valentyn that provided for certain employment protections and severance benefits in the event of a change in control.  However, in connection with our adoption of the Executive Severance Policy, we entered into an agreement with each to terminate their KEESAs and instead provide for their participation in the Executive Severance Policy. Mr. Morton and Mr. Zaba were never party to a KEESA agreement however they are eligible for the Executive Severance Policy. The purpose of the KEESAs was to focus our NEOs on taking actions in the best interests of our shareholders without regard to whether such action may ultimately have an impact on their job security, and to avoid the loss of key managers that may occur in connection with an anticipated or actual change in control. The terms of the KEESAs are described below under the heading “Potential Payments Upon Termination or Change in Control – KEESAs.”

As referenced above, during 2023, we adopted the Executive Severance Policy. The Committee’s two primary objectives with respect to the policy were to provide severance benefits (both before and after a change in control) that are more internally consistent among our executives and also more competitive with the severance benefits offered by our peer companies. The Executive Severance Policy, like the KEESAs, also is intended to permit our executives to focus on actions in the best interests of our shareholders rather than their own job security in connection with an anticipated or actual change in control by providing certain employment protections and enhanced severance benefits in connection with a change in control. A summary of the terms of the Executive Severance Policy can be found below under the heading “Potential Payments Upon Termination or Change in Control – Executive Severance Policy.”

Tax Considerations

Code Section 162(m) generally disallows a tax deduction to public corporations for compensation in excess of $1 million paid for any fiscal year to covered employees, generally including our NEOs. Because many factors influence a well-rounded, comprehensive and competitive executive compensation program, we reserve the right to award compensation to our NEOs in excess of $1 million regardless of the potential loss of tax deductibility if the Committee believes such compensation is suitable to continue to provide competitive arrangements intended to attract and retain, and provide appropriate incentives to, our NEOs.

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth for each of our NEOs: (1) the dollar value of base salary and annual cash incentive earned during the years indicated; (2) the full grant date fair value of RSUs, SARs and PSUs granted during the years indicated, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718; (3) the dollar value of earnings for services pursuant to awards granted during the indicated year under non-equity incentive plans; (4) the change in pension value and non-qualified deferred compensation earnings during the years indicated; (5) all other compensation for the years indicated; and (6) the dollar value of total compensation for the years indicated. Our NEOs are our CEO, our Vice President, Chief Financial Officer, and each of our three other most highly compensated executive officers as of December 31, 2023, the last day of our most recent fiscal year. In accordance with the rules of the SEC, the table includes information for the fiscal years ended January 2, 2021, January 1, 2023, and December 31, 2023.

Summary compensation table for fiscal years 2021-2023