SEC Filings

DEFR14A
RELIANCE STEEL & ALUMINUM CO filed this Form DEFR14A on 04/08/2019
Entire Document
 

threshold but less than target 2  times, equal to or above target but less than the maximum 3 times, and equal to or exceeding the maximum zero times. Accordingly, the Committee believes these pretax income margin goals are appropriately demanding from the perspectives of both the stockholders and the executives.

 

 

 

 

 

 

 

 

Pretax Income

 

Payout as Percentage

 

 

 

Margin

 

of Base Salary

 

Threshold

 

3

%

20

%

Target

 

5.75

%

150

%

Maximum

 

8.5

%

300

%

 

 

 

 

 

 

 

Awards are calculated on a sliding scale. If the Company achieves a pretax income margin within the range of 3.00% and 8.50%, then mathematical interpolation shall be used to determine the actual incentive award.

When analyzing the actual and potential payouts under the Company’s annual cash incentive plan, especially its maximum incentive awards and resulting cash compensation levels, the Committee found the plan supported its pay-for-performance principles in 2018. Pretax income margin (as calculated per the terms of the plan) for 2018 was 7.5% which was the highest since 2008 and resulted in a payout under the plan equal to 245% of each NEO’s year-end base salary. 

Pretax income of 8.5% would have produced cash compensation levels equal to the executive compensation peer group’s 90th percentile. However, these pay levels are hypothetical and would only have been supported by pretax income margin of at least 8.5%, which would position NEO pay in the peer group’s 90th percentile results for the past year as well as the prior three, five, seven and ten years. Further, the Company has not achieved this level of pretax income margin since 2008. In other words, management could have earned maximum levels of pay only by delivering exceptional results.

Long-Term Equity Incentive Compensation

The Compensation Committee recommends grants of equity awards for NEOs, but the independent directors approve all such grants. The Compensation Committee considers the recommendations of our CEO with respect to any grants of equity awards to the NEOs (other than himself) and other executive officers, as well as to corporate officers and other key employees.

In making its recommendations to the independent directors, the Compensation Committee considers the position of the NEO, his or her importance to the Company’s results and operations, his or her individual performance, the equity awards previously granted to that individual, the terms and market value of the equity grant, the total value of the equity grant and the relative number of such recommended grants among the various individuals then under consideration for grants, as well as the potential dilution and the related expense as a percentage of pretax income. The Committee also considers market data for executives in comparable positions within our executive compensation peer group.

Eighty percent (80%) of our former CEO’s restricted stock unit awards and sixty percent (60%) of the other NEOs’ restricted stock unit awards granted in 2018 will vest if, after a three-year period that expires on December 31, 2020, the Company achieves a ROA result within a specified range. The remaining twenty percent (20%) of the former CEO’s restricted stock unit awards granted in 2018 and forty percent (40%) of the other NEOs’ restricted stock unit awards will vest on December 1, 2020 subject only to the individuals’ continued service through such date. The allocation of performance-based and service-based awards is intended to balance performance and retention objectives. In striking the appropriate balance, the Compensation Committee sought to design a policy that incentivizes strong performance while also strengthening the retention aspects of the long-term equity awards since the Company does not maintain employment agreements with its executive officers. The restricted stock units will be forfeited if the ROA results are not achieved, or the individual voluntarily leaves the Company or is terminated for cause. The award agreements for the restricted stock units provide for prorated vesting if an individual terminates (i) due to a qualifying retirement, death or disability or (ii) without cause following a change in control. 

35