Moog Proxy and Notice and Access Letter- FY2019 Filed 12 30 2019 - Flipbook - Page 21
DIRECT COMPENSATION COMPONENTS OF THE EXECUTIVE COMPENSATION PROGRAM
Both the Executive Compensation Committee and the Company use Korn Ferry’s Job Evaluation methodology for professional
roles, including its NEOs. The Korn Ferry’s Job Evaluation methodology is an analytical, factor-based scheme that measures the
relative importance of jobs by assigning them points within an organization. Each NEO has an evaluation score that is used to
benchmark compensation. Korn Ferry provides annual peer-company salary data, as well as data from their wider executive
compensation survey. This information provides the basis for determining a competitive base salary for each position. NEOs’ base
salaries are reviewed annually, and adjustments are based on a comparison with market benchmarks, time in position and individual
Short Term Incentive (STI)
The Company’s senior leadership, both managerial and technical, numbers approximately 380 persons. This entire group,
including the NEOs, participates in the STI plan in which cash and stock bonus payouts each year are a function of the year-overyear percentage growth in the Company’s EPS, and FCF conversion. A simple formula is used to determine the bonus amounts
payable under the STI, which are dependent upon EPS growth and FCF conversion. Any payout depends entirely on these two
elements. The two elements operate independently of each other and there are no individual performance incentives in the formula.
The ratio of cash bonus to the stock bonus award in the form of Class B shares, is 2:1 in favor of cash.
The Company uses these two metrics to underscore the importance of collaboration at all levels of leadership. The Company
supplies products to a diverse array of customers in a variety of global markets. The common thread is that the technology used
in our high-performance precision control and fluid flow systems, and our other key technical resources, are transferable from one
segment to another in response to fluctuating customer demands. Having our senior leadership focus on “what’s good for the
Company” has been an important factor in the Company’s consistent performance. See page 22 for a detailed explanation of the
STI calculation method.
For fiscal 2018, the Board approved a supplemental bonus, paid to all STI participants also in the ratio of 2:1, cash to Class B
shares, to counter the substantial one-time adverse effects of the Tax Cuts and Jobs Act. In determining the final fiscal 2019 STI
payouts, the amount of the supplemental bonus for fiscal 2018 acted as a deduction from the 2019 base STI plan calculation.
Long Term Incentive (LTI)
Moog Inc. 2014 Long Term Incentive Plan
In January 2015, the 2014 LTI Plan was approved by shareholders, providing for the grant of awards covering 2,000,000
Class A or Class B shares of stock. While we believe our prior long-term incentive arrangements have been effective, the 2014 LTI
Plan was implemented to provide a more flexible framework that permits the development and implementation of a variety of stockbased incentives, which enable the Company to base awards on key performance metrics as well as to further align our LTI
compensation with our peers and shareholder interests.
The LTI awards granted in fiscal 2019 continued to consist of SARs, aligning awards to share price increases over the medium
to long term, along with PSUs so as to provide an equity compensation element that is linked to key performance indicators. The
number of PSUs that will vest depend on growth and profitability performance, which will be measured at the end of a three-year
All awards in fiscal 2019 were granted in Class B shares.
The number of annual SARs and PSUs awarded was determined utilizing Korn Ferry peer company survey data as part of the
analysis. Individual performance is not used to determine the number of SAR or PSU awards.
Moog Inc. 2008 Stock Appreciation Rights Plan (“2008 SAR Plan”)
Issuances of new awards under the 2008 SAR Plan terminated on January 7, 2015 following shareholder approval of the 2014
LTI Plan. The 2008 SAR Plan covers outstanding SARs, which confer a benefit based on appreciation in value of Class A shares,
and are settled in the form of Class A shares.
The purpose of the 2008 SAR Plan was to promote the long-term success of the Company and to create shareholder value
by (a) encouraging non-employee directors, officers and key executives performing service for the Company to focus on critical
long-range objectives, (b) encouraging the attraction and retention of eligible participants with exceptional qualifications, and
(c) linking participants directly to shareholder interests through ownership of the Company. Individual performance was not used
to determine the number of SARs awarded under this plan.