Moog Proxy and Notice and Access Letter- FY2019 Filed 12 30 2019 - Flipbook - Page 24
THE PROCESS USED TO DETERMINE COMPENSATION
The process for setting annual base salaries is one whereby the CEO makes recommendations for all other officers' meritbased salary increases and, occasionally, base salary adjustments needed to position an executive officer appropriately against
market benchmarks. The Executive Compensation Committee approves or adjusts those recommendations for a final determination
and determines the base salary adjustment for the CEO. As part of this process, the CEO prepares a performance appraisal for
each executive officer, including himself, which is reviewed in detail by the Executive Compensation Committee. These performance
appraisals take into consideration:
the outcomes achieved by the business unit or functional area for which the officer is responsible;
the conduct and contribution of the officer and the organization he manages in achieving overall Company results; and
the officer’s achievements in developing organizational strength for the future.
In developing his recommendations for base salary increases and adjustments for the calendar year for the NEOs in 2019,
the CEO was also guided by the pay increase made across other Moog sites worldwide. During fiscal 2019, all NEOs received an
increase to base salary of 4%. Mr. Trabert received an additional mid-year increase of 7.6% reflective of his expanded role.
Short Term Incentive (STI)
Annual bonuses paid to senior executives are developed in accordance with the STI plan introduced in fiscal 2016 in which
there are approximately 380 participants. For this group, payments under the STI plan are paid based on growth in EPS and FCF.
The bonus amount payable to each participant is determined by multiplying the participant’s base salary by the sum of the
following: (i) the product of the percentage growth in EPS for the fiscal year and a multiplier based on the participant’s position;
plus (ii) the product of actual FCF conversion for the fiscal year and a multiplier based on the participant’s position, as expressed
in the following formula:
Base Salary x [(% Increase in EPS x EPS Growth Multiplier) + (Actual % FCF conversion x FCF Multiplier)] = Total Bonus
There are multiple levels used within the plan for each performance multiplier which vary based on a participant’s responsibilities.
During fiscal 2019, there were 7 executive officers, including the NEOs, who were responsible for the overall management and
success of the Company and were eligible to receive a bonus that is equal to the participant’s base salary at year end multiplied
by the sum of (i) the percentage improvement in EPS times a factor of 3.375, and (ii) the FCF conversion achieved multiplied by
0.1125. Payments under the STI Plan are subject to an overall cap of 75% of base salary, inclusive of both cash and stock bonus
awarded. STI payouts were distributed in both cash and stock in a ratio of 2:1 in favor of cash. Stock bonuses were awarded in the
form of Class B shares.
The multipliers are used to achieve bonus payments which, in years of strong earnings growth and FCF conversion, are
somewhat comparable to the bonus plans for executives in other companies in the peer group identified by Korn Ferry. To improve
the competitiveness of the STI plan upon review against Moog’s peer group, the Executive Compensation Committee agreed to
enhance the STI plan by increasing the performance multipliers and incorporating a stock bonus award to the plan. This stock
bonus is reflected in the following tables as part of the total incentive paid.
In fiscal 2018, although business performance was positive, “one-off” adverse factors such as the Tax Cuts and Jobs Act meant
that the STI plan would have paid out very little, due to earnings per share not growing over fiscal 2017, and FCF conversion being
well below target. However, the one-off nature of these factors would have resulted in performance in fiscal 2019 where NEO STI
payments hit the overall STI plan cap of 75% of the base salary.
To provide a competitive bonus for fiscal 2018 and to provide a more balanced approach across fiscal 2018 and 2019, the
Board approved a supplemental bonus for all STI plan participants for fiscal 2018, which was added to the STI paid for fiscal 2018
performance under the existing STI plan rules and acted as a deduction in determining the STI payments for fiscal 2019.
For fiscal 2019, officers received a total STI payment of 44.30% of base salary, split in the ratio 2:1 between cash and Class
B shares. The 44.30% consisted of a total of 75% from the STI plan, adjusted downward by the supplemental bonus paid for fiscal
2018 of 30.70%.
The Company’s EPS increase, FCF conversion and NEO bonus history over the last three years is as follows:
EPS Increase %
(1) Includes amounts paid under the STI plan and the supplemental bonus paid for fiscal 2018.
NEO Bonus %