DEF 14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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Lear Corporation

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LOGO

21557 Telegraph Road

Southfield, Michigan 48033

March 31, 2017

Dear Stockholder:

On behalf of the Board of Directors of Lear Corporation, you are cordially invited to attend the 2017 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 18, 2017, at 9:00 a.m. (Eastern Time) at Lear Corporation’s Corporate Headquarters, 21557 Telegraph Road, Southfield, Michigan 48033.

We have included in this letter a proxy statement that provides you with detailed information about the Annual Meeting. We encourage you to read the entire proxy statement carefully. You may also obtain more information about Lear Corporation from documents we have filed with the Securities and Exchange Commission.

We are delivering our proxy statement and annual report pursuant to the Securities and Exchange Commission rules that allow companies to furnish proxy materials to their stockholders over the Internet. We believe that this delivery method expedites stockholders’ receipt of proxy materials and lowers the cost and environmental impact of our Annual Meeting. On or about April 3, 2017, we will mail to our stockholders a notice containing instructions on how to access our proxy materials. In addition, the notice includes instructions on how you can receive a paper copy of our proxy materials.

You are being asked at the Annual Meeting to elect directors named in this proxy statement, to ratify the retention of Ernst & Young LLP as our independent registered public accounting firm, to provide an advisory vote to approve our executive compensation, to provide an advisory vote on the frequency of our advisory vote on executive compensation and to transact any other business properly brought before the meeting.

Whether or not you plan to attend the Annual Meeting, your vote is important, and we encourage you to vote promptly. You may vote your shares through one of the methods described in the enclosed proxy statement. We strongly urge you to read the accompanying proxy statement carefully and to vote FOR the nominees proposed by the Board of Directors and in accordance with the recommendations of the Board of Directors on the other proposals by following the voting instructions contained in the proxy statement.

 

Sincerely,

 

  

 

LOGO

   LOGO
Henry D.G. Wallace    Matthew J. Simoncini
Non-Executive Chairman   

President, Chief Executive

Officer and Director

This proxy statement is dated March 31, 2017 and is first being made available to stockholders via the Internet on or about April 3, 2017.

 


LOGO

21557 Telegraph Road

Southfield, Michigan 48033

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

Time and Date:    Thursday, May 18, 2017 at 9:00 a.m. (Eastern Time)
Place:   

Lear Corporation’s Corporate Headquarters

 

21557 Telegraph Road

 

Southfield, Michigan 48033

Record Date:    March 23, 2017
Items of Business:   

1.    To elect the following ten nominees to the Board of Directors: Richard H. Bott, Thomas P. Capo, Jonathan F. Foster, Mary Lou Jepsen, Kathleen A. Ligocki, Conrad L. Mallett, Jr., Donald L. Runkle, Matthew J. Simoncini, Gregory C. Smith and Henry D.G. Wallace;

2.    To ratify the retention of Ernst & Young LLP as the Company’s registered public accounting firm for 2017;

3.    To approve, in a non-binding advisory vote, executive compensation;

4.    To approve, in a non-binding advisory vote, the frequency of the advisory vote on executive compensation; and

5.    To conduct any other business properly brought before the Annual Meeting or any postponement thereof.

 

Proxy Voting:    YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE VOTE YOUR SHARES OVER THE TELEPHONE, VIA THE INTERNET OR BY COMPLETING, DATING, SIGNING AND RETURNING A PROXY CARD, AS DESCRIBED IN THE PROXY STATEMENT. YOUR PROMPT COOPERATION IS GREATLY APPRECIATED.

 

By Order of the Board of Directors,

 

LOGO
Terrence B. Larkin

Executive Vice President, Business Development,

General Counsel and Corporate Secretary

March 31, 2017

 

Notice of Internet Availability of Proxy Materials

We are making this proxy statement and our annual report available to stockholders electronically via the Internet. On or about April 3, 2017, we will mail to most of our stockholders a notice containing instructions on how to access this proxy statement and our annual report and to vote via the Internet or by telephone. Other stockholders, in accordance with their prior requests, will receive e-mail notification of how to access our proxy materials and vote via the Internet or by telephone, or will be mailed paper copies of our proxy materials and a proxy card on or about April 3, 2017.

 


 

 

Table of Contents

 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

     1  

ELECTION OF DIRECTORS
(PROPOSAL NO. 1)

     6  

DIRECTORS AND CORPORATE GOVERNANCE

     7  

Director Biographical Information and Qualifications

     7  

Criteria for Selection of Directors

     17  

Recommendation of Directors by Stockholders

     18  

Independence of Directors

     18  

Board’s Role in Risk Oversight

     19  

Corporate Governance

     19  

Other Board Information

     20  

Director Compensation

     23  

Summary of 2016 Director Compensation

     23  

Security Ownership of Certain Beneficial Owners, Directors and Management

     25  

Section 16(a) Beneficial Ownership Reporting Compliance

     26  

COMPENSATION DISCUSSION AND ANALYSIS

     27  

Named Executive Officers

     27  

Executive Summary

     27  

Pay-Performance Alignment

     30  

2016 Advisory Vote on Executive Compensation

     30  

Executive Compensation Philosophy and Objectives

     30  

Benchmarking

     30  

Total Compensation Review

     31  

Role of Management in Setting Compensation Levels

     31  

Discretion of Compensation Committee

     32  

Elements of Compensation

     32  

Management Stock Ownership Guidelines

     37  

Equity Award Policy

     37  

Retirement Plan Benefits

     38  

Employment Agreements/Termination/Change in Control Benefits

     38  

Health, Welfare and Certain Other Benefits

     39  

Clawback Policy

     39  

Hedging/Pledging Policy

     39  

Tax Treatment of Executive Compensation

     39  

Impact of Accounting Treatment

     40  

EXECUTIVE COMPENSATION

     41  

2016 Summary Compensation Table

     41  

2016 Grants Of Plan-based Awards

     43  

2016 Outstanding Equity Awards At Fiscal Year-end

     45  

2016 Option Exercises And Stock Vested

     46  

2016 Pension Benefits

     47  

2016 Nonqualified Deferred Compensation

     49  

Potential Payments Upon Termination or Change in Control

     50  

Compensation and Risk

     54  

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     55  
 

 

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TABLE OF CONTENTS

 

COMPENSATION COMMITTEE REPORT

     56  

AUDIT COMMITTEE REPORT

     57  

FEES OF INDEPENDENT ACCOUNTANTS

     59  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     60  

Certain Transactions

     61  

RATIFICATION OF RETENTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PROPOSAL NO. 2)

     62  

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION SET FORTH IN THIS PROXY STATEMENT (PROPOSAL NO. 3)

     63  

ADVISORY VOTE TO APPROVE THE FREQUENCY OF THE ADVISORY VOTE OF EXECUTIVE COMPENSATION
(PROPOSAL NO. 4)

     64  

STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING OF STOCKHOLDERS

     65  

OTHER MATTERS

     66  

APPENDIX A RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES

     A-1  
 

 

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  LEAR CORPORATION  

 


 

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Why did you send me this proxy statement?

 

 

We sent you this proxy statement because the Board of Directors (the “Board”) is soliciting your proxy to vote at the Annual Meeting to be held on May 18, 2017, at 9:00 a.m. (Eastern Time) and at any postponements or adjournments of

the Annual Meeting. This proxy statement summarizes information that is intended to assist you in making an informed vote on the proposals described in this proxy statement.

 

 

Who can vote at the Annual Meeting?

 

 

Only stockholders of record as of the record date are entitled to vote at the Annual Meeting. The record date to determine stockholders entitled to notice of and to vote at the Annual Meeting is the close of business on March 23, 2017. On the record date, there were 68,697,937 shares of our common stock, par value $0.01 per share, outstanding (excluding

10,510,641 shares reserved for the satisfaction of certain claims in connection with our emergence from chapter 11 bankruptcy proceedings, which are not entitled to vote at the Annual Meeting). Our common stock is the only class of voting securities outstanding.

 

 

How many shares must be present to conduct the Annual Meeting?

 

 

We must have a quorum present in person or by proxy to conduct the Annual Meeting. A quorum is established when a majority of shares entitled to vote is present in person or

represented by proxy at the Annual Meeting. Abstentions and broker non-votes (as described below) are counted for purposes of determining whether a quorum is present.

 

 

What matters are to be voted on at the Annual Meeting?

 

 

The agenda for the Annual Meeting is to:

 

1. elect ten directors;

 

2. ratify the retention of Ernst & Young LLP as our independent registered public accounting firm for 2017;

 

3. provide an advisory vote to approve our executive compensation;

 

4. provide an advisory vote on the frequency of the advisory vote on executive compensation; and
5. conduct any other business properly brought before the Annual Meeting or any adjournments or postponements thereof.

As of the date of this proxy statement, we do not know of any other matters to be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, however, the persons named as proxies will be authorized to vote or otherwise act in accordance with their judgment.

 

 

How does the Board recommend that I vote?

 

 

The Board recommends that you vote:

 

1. FOR the election of each of Lear’s director nominees named in this proxy statement;

 

2. FOR the ratification of the retention of Ernst & Young LLP as our independent registered public accounting firm for 2017;
3. FOR the approval, on an advisory basis, of our executive compensation; and

 

4. For future advisory votes on executive compensation to occur EVERY ONE YEAR.
 

 

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

How do I vote at the Annual Meeting?

 

 

You may vote in person at the Annual Meeting or by proxy. In addition, if you are a stockholder of record of Lear’s shares, there are three ways to vote by proxy:

 

  By Telephone — You can vote by telephone by following the instructions on your proxy card. You will need to use the control number appearing on your Notice or proxy card to vote by telephone;

 

  By Internet — You can vote via the Internet by following the instructions on your proxy card. You will need to use the control number appearing on your Notice or proxy card to vote via the Internet; or

 

  By Mail — You can vote by completing, dating, signing and returning the proxy card.

If you are a beneficial owner of shares held in street name, you may vote as follows:

 

  By Telephone — If you request printed copies of the proxy materials by mail, you will receive a voting instruction form and you may vote by proxy by calling the toll free number found on the voting instruction form. The availability of telephone voting may depend on the voting process of the organization that holds your shares.

 

  By Internet — You may vote by proxy via the Internet by visiting www.proxyvote.com and entering the control number found in your Notice. The availability of Internet voting may depend on the voting process of the organization that holds your shares.

 

  By Mail — If you request printed copies of the proxy materials by mail, you will receive a voting instruction form and you may vote by proxy by filling out the voting instruction form and returning it in the envelope provided.

If you are a beneficial owner of shares held in street name and wish to vote in person at the Annual Meeting, you must obtain

a “legal proxy” from the organization that holds your shares. A legal proxy is a written document that will authorize you to vote your shares held in street name at the Annual Meeting. Please contact the organization that holds your shares for instructions regarding obtaining a legal proxy. You must bring a copy of the legal proxy to the Annual Meeting and ask for a ballot when you arrive.

Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day. You may vote over the telephone or via the Internet until 11:59 p.m. on May 17, 2017. Even if you plan to attend the Annual Meeting in person, we recommend that you also submit your proxy or voting instructions as described above so that your vote will be counted if you later decide not to attend the Annual Meeting in person.

Your proxy will be voted in accordance with your instructions, so long as, in the case of a proxy card returned by mail, such card has been signed and dated. If you vote your shares via the Internet, by telephone or by executing and returning a proxy card by mail but you do not provide specific instructions with respect to the proposals, your shares will be voted FOR the director nominees named in this proxy statement, FOR the ratification of the retention of our independent registered public accounting firm, FOR the advisory approval of executive compensation described in this proxy statement and for the EVERY ONE YEAR frequency option for the advisory vote on executive compensation.

As of the date of this proxy statement, we do not know of any matters to be presented at the Annual Meeting except those described in this proxy statement. If any other matters properly come before the Annual Meeting, however, the persons named as proxies will be authorized to vote or otherwise act in accordance with their judgment.

 

 

What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials?

 

 

You may receive more than one Notice, more than one e-mail or multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate Notice, a separate e-mail or a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one Notice, more than one e-mail

or more than one proxy card. To vote all of your shares by proxy, you must complete, sign, date and return each proxy card and voting instruction card that you receive and vote over the Internet the shares represented by each Notice that you receive (unless you have requested and received a proxy card or voting instruction card for the shares represented by one or more of those Notices).

 

 

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

May I change my vote?

 

 

Yes. You may revoke your proxy at any time before it is voted at the Annual Meeting. To change your vote, if you are a stockholder of record, you may submit another later dated proxy by telephone, Internet or mail or by voting your shares in person at the Annual Meeting (your attendance at the Annual Meeting will not, by itself, revoke your proxy; you must vote in person at the Annual Meeting to revoke your proxy). If you are

a beneficial owner and your shares are held in street name, you may change your vote by submitting new voting instructions to your bank, broker, trustee or nominee, or if you have obtained a legal proxy from such entity giving you the right to vote your shares, you may change your vote by attending the Annual Meeting and voting in person.

 

 

What vote is required to elect directors and approve the other matters described in this proxy statement?

 

 

Because this is an uncontested election, the director nominees must receive the affirmative vote of a majority of the votes cast to be elected (i.e., the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee) (Proposal No. 1). Abstentions and broker non-votes will have no effect on the outcome of the election of directors.

For the ratification of the retention of Ernst & Young LLP as our independent registered public accounting firm (Proposal No. 2) and the advisory approval of our executive compensation (Proposal No. 3), the affirmative vote of the holders of a majority of the shares represented in person or by

proxy and entitled to vote on the proposal will be required for approval. Abstentions will not be voted but will be counted for purposes of determining whether there is a quorum. Accordingly, abstentions will have the effect of a negative vote on Proposals No. 2 and 3. Broker non-votes will have no effect on Proposal No. 3. The frequency receiving the highest number of votes cast on the advisory vote on the frequency of our advisory approval of executive compensation (Proposal No. 4) will be deemed to be the frequency selected by the stockholders. Abstentions and broker non-votes will have no effect on Proposal No. 4. For additional information about broker non-votes see “How do I vote if my bank or broker holds my shares in ‘street name’?”

 

 

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

 

If your shares are registered in your name on the Company’s books and records or with our transfer agent, you are the “stockholder of record” of those shares, and this proxy statement and accompanying materials have been provided directly to you by the Company. On the other hand, if you purchased your shares through a brokerage or other financial intermediary, the brokerage or other financial intermediary will automatically put your shares into “street name” which means

that the brokerage or other financial intermediary will hold your shares in its name or another nominee’s name and not in your name, but will keep records showing you as the “beneficial owner.” If you hold shares beneficially in street name, this proxy statement and accompanying materials have been forwarded to you by your broker, bank or other holder of record.

 

 

How do I vote if my bank or broker holds my shares in “street name”?

 

 

If you hold your shares in “street name” through a bank, broker or other nominee, such bank, broker or nominee will vote those shares in accordance with your instructions. To so instruct your bank, broker or nominee, you should refer to the information provided to you by such entity. Without instructions from you, a bank, broker or nominee will be permitted to exercise its own voting discretion with respect to so-called routine matters (Proposal No. 2 (ratification of auditors)) but will not be permitted to exercise voting discretion with respect to non-routine matters (Proposals No. 1 (director elections), No. 3 (advisory vote on executive compensation) and No. 4 (advisory vote on the frequency of advisory vote on

executive compensation). Thus, if you do not give your bank, broker or nominee specific instructions with respect to Proposal No. 2, your shares will be voted in such entity’s discretion. If you do not give your bank, broker or nominee specific instructions with respect to the remaining proposals, your shares will not be voted on such proposals. This is called a “broker non-vote.” Shares represented by such broker non-votes will be counted in determining whether there is a quorum and will have no effect on the non-routine proposals. We urge you to promptly provide your bank, broker or nominee with appropriate voting instructions so that all your shares may be voted at the Annual Meeting.

 

 

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

How many votes do I have?

 

 

Each share of common stock that you hold as of the record date entitles you to one vote, without cumulation, on each matter to be voted upon at the Annual Meeting.

 

 

How will the votes be counted at the Annual Meeting?

 

 

The votes will be counted by the inspector of election appointed for the Annual Meeting.

 

 

How will the Company announce the voting results?

 

 

The Company will report the final results of the voting at the Annual Meeting in a filing with the SEC on a Current Report on Form 8-K.

 

 

Who pays for the Company’s solicitation of proxies?

 

 

The Board is soliciting your proxy to vote your shares of common stock at our Annual Meeting. We will bear the cost of soliciting proxies on behalf of the Company, including preparing, printing and mailing this proxy statement. Proxies may be solicited personally, by mail, email or by telephone by certain of our directors, officers, employees or representatives.

Our directors and employees will not be paid any additional compensation for soliciting proxies. We will reimburse brokerage houses, banks, custodians and other nominees and fiduciaries for out-of-pocket expenses incurred in forwarding our proxy solicitation materials.

 

 

What is “householding” and how does it work?

 

 

Under the rules adopted by the SEC, we may deliver a single set of proxy materials to one address shared by two or more of our stockholders. This delivery method is referred to as “householding” and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one set of proxy materials to multiple stockholders who share an address, unless we received contrary instructions from the impacted stockholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the proxy materials, as requested, to any stockholder at the shared address to which a single copy of these documents was delivered. If you prefer to receive separate copies of the Notice, proxy statement or annual report, contact Broadridge Financial Solutions, Inc. by calling 1-800-542-1061 or in

writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.

In addition, if you currently are a stockholder who shares an address with another stockholder and would like to receive only one copy of future notices and proxy materials for your household, you may notify your broker if your shares are held in a brokerage account or you may notify us if you hold registered shares. Registered stockholders may notify us by contacting Broadridge Financial Solutions, Inc. at the above telephone number or address or sending a written request to Lear Corporation, 21557 Telegraph Road, Southfield, Michigan 48033, Attention: Investor Relations.

 

 

What do I need for admission to the Annual Meeting?

 

 

Attendance at the Annual Meeting or any adjournment or postponement thereof will be limited to record and beneficial stockholders as of the record date (March 23, 2017), individuals holding a valid proxy from a record holder and other persons authorized by the Company. If you are a stockholder of record (or a “recordholder”), your name will be verified against the list of stockholders of record prior to your

admittance to the Annual Meeting or any adjournment or postponement thereof. You should be prepared to present photo identification for admission. If you hold your shares in a street name, you will need to provide proof of beneficial ownership on the record date, such as a brokerage account statement showing that you owned stock as of the record date, a copy of a voting instruction form provided by your

 

 

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

 

broker, bank or other nominee, or other similar evidence of ownership as of the record date, as well as your photo identification, for admission. If you do not provide photo identification or comply with the other procedures described

above, you will not be admitted to the Annual Meeting or any adjournment or postponement thereof. For security reasons, you and your bags may be subject to search prior to your admittance to the Annual Meeting.

 

 

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ELECTION OF DIRECTORS

(PROPOSAL NO. 1)

 

Upon the recommendation of our Nominating and Corporate Governance Committee (the “Nominating Committee”), the Board has nominated the ten individuals listed below to stand for election to the Board for a one-year term ending at the annual meeting of stockholders in 2018 or until their successors, if any, are elected or appointed. Our Amended and Restated Certificate of Incorporation and Bylaws provide for the annual election of directors. Each director nominee must receive the affirmative vote of a majority of the votes cast to be elected (i.e., the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that

nominee). Unless contrary instructions are given, the shares represented by your proxy will be voted FOR the election of all director nominees. In addition, our Corporate Governance Guidelines contain a resignation policy which provides that in the event an incumbent director fails to receive a majority of the votes cast in an uncontested election, such director shall promptly tender his or her resignation to the Board for consideration. The Board has determined that each director nominee, other than Mr. Simoncini, is an independent director, as further described below in “Directors and Corporate Governance — Independence of Directors.”

 

 

All of the director nominees listed below have consented to being named in this proxy statement and to serve if elected. However, if any nominee becomes unable to serve, proxy holders will have discretion and authority to vote for another nominee proposed by our Board. Alternatively, our Board may reduce the number of directors to be elected at the Annual Meeting.

 

Name    Position

Richard H. Bott

   Director

Thomas P. Capo

   Director

Jonathan F. Foster

   Director

Mary Lou Jepsen

   Director

Kathleen A. Ligocki

   Director

Conrad L. Mallett, Jr.

   Director

Donald L. Runkle

   Director

Matthew J. Simoncini

   Director, President and Chief Executive Officer

Gregory C. Smith

   Director

Henry D.G. Wallace

   Director, Non-Executive Chairman

 

 

Biographical information relating to each of the director nominees is set forth below under “Directors and Corporate Governance” and incorporated by reference herein.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF LEAR’S DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT.

PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE ELECTION OF EACH OF LEAR’S DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

Director Biographical Information and Qualifications

 

Set forth below is a description of the business experience of each director, as well as the specific qualifications, skills and experiences considered by the Nominating Committee and the Board in recommending our slate of director nominees. Each director listed below is nominated for re-election to the Board for a term expiring at the annual meeting of stockholders in 2018. See “Election of Directors (Proposal No. 1).”

 

Richard H. Bott

   Age: 70         Lear Committees:
  

 

•  Audit

 

Biography

 

Mr. Bott has been a director of the Company since September 2013. Mr. Bott worked in investment banking for more than 35 years at Morgan Stanley & Co. and Credit Suisse First Boston (now Credit Suisse), where he provided financial structuring and strategic advice to numerous large American and international corporations, with a focus on industrial, automotive and transportation companies. Mr. Bott served as Vice Chairman, Institutional Securities Group of Morgan Stanley & Co. Incorporated from 2003 until his retirement at the end of 2007. Prior to holding this position, Mr. Bott served as Vice Chairman, Investment Banking, Credit Suisse First Boston Corporation from 1998 to 2003; Managing Director, The First Boston Corporation and its successor companies, CS First Boston Corporation and Credit Suisse First Boston Corporation, from 1982 to 1998; and Vice President, Assistant Vice President & Associate, The First Boston Corporation from 1972 to 1982. Mr. Bott is also a director of Genesee & Wyoming Inc., serving on both the Audit and Compensation Committees. Mr. Bott has a bachelor’s degree in Economics from Princeton University and an MBA from Columbia Business School.

 

Skills and Qualifications

 

•  Executive management and leadership experience

 

•  Public company directorship and committee experience

 

•  Extensive experience in global finance, investment banking and capital markets

 

•  Significant experience in structuring and executing financing transactions and mergers and acquisitions

 

•  Independent of management

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Thomas P. Capo

   Age: 66         Lear Committees:
  

 

•  Audit

 

•  Compensation (Chair)

 

Biography

 

Mr. Capo has been a director of the Company since November 2009. Mr. Capo was Chairman of Dollar Thrifty Automotive Group, Inc. from October 2003 until November 2010. Mr. Capo was a Senior Vice President and the Treasurer of DaimlerChrysler Corporation from November 1998 to August 2000, Vice President and Treasurer of Chrysler Corporation from 1993 to 1998 and Treasurer of Chrysler Corporation from 1991 to 1993. Prior to holding these positions, Mr. Capo served as Vice President and Controller of Chrysler Financial Corporation. Mr. Capo also serves as the Non-Executive Chairman of Cooper Tire & Rubber Company. Previously, Mr. Capo served as a director of Dollar Thrifty Automotive Group, Inc. from its initial public offering in 1997 until its sale to Hertz Corporation in 2012, JLG Industries, Inc. until its sale to Oshkosh Corp. in 2006, Sonic Automotive, Inc. and Microheat, Inc. Mr. Capo has a bachelor’s degree in Finance, an MBA and a master’s degree in Economics from the University of Detroit-Mercy.

 

Skills and Qualifications

 

•  Executive management and leadership experience, with extensive knowledge of the automotive industry

 

•  Public company directorship and committee experience, including at board chairman level

 

•  Extensive experience in global finance, treasury, investment management and capital markets

 

•  Core leadership and management experience in mergers, acquisitions and divestitures, strategy development and capital restructuring

 

•  Extensive experience in financial analysis, financial reporting, compliance and internal controls

 

•  Independent of management

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Jonathan F. Foster    Age: 56         Lear Committees:
  

 

•  Audit

 

•  Nominating and Corporate Governance (Chair)

 

Biography

 

Mr. Foster has been a director of the Company since November 2009. Mr. Foster is Managing Director of Current Capital Partners LLC, a private equity investing and management services firm. Previously, from 2007 until 2008, Mr. Foster served as a Managing Director and Co-Head of Diversified Industrials and Services at Wachovia Securities. From 2005 until 2007, he served as Executive Vice President — Finance and Business Development of Revolution LLC. From 2002 until 2004, Mr. Foster was a Managing Director of The Cypress Group, a private equity investment firm and from 2001 until 2002, he served as a Senior Managing Director and Head of Industrial Products and Services Mergers & Acquisitions at Bear Stearns & Co. From 1999 until 2000, Mr. Foster served as the Executive Vice President, Chief Operating Officer and Chief Financial Officer of Toysrus.com, Inc. Previously, Mr. Foster was with Lazard, primarily in mergers and acquisitions, for over ten years, including as a Managing Director. Mr. Foster is also a director of Masonite International Corporation, Berry Plastics, Chemtura Corporation and Dayco Products LLC. He is Non-Executive Chairman of Chassix and a director of Rimstock, both automotive suppliers; he was a director of privately held automotive suppliers TI Automotive and Stackpole. Mr. Foster was previously a member of the board of directors of publicly traded Sabine Oil & Gas and Smurfit-Stone Container Corporation. Mr. Foster has a bachelor’s degree in Accounting from Emory University, a master’s degree in Accounting & Finance from the London School of Economics and has attended the Executive Education Program at Harvard Business School.

 

Skills and Qualifications

 

•  Executive management and leadership experience

 

•  Public company directorship and committee experience, including with global manufacturing companies

 

•  Experience in financial statement preparation and accounting, financial reporting, compliance and internal controls

 

•  Previous experience as a chief financial officer

 

•  Extensive transactional experience in mergers and acquisitions, debt financings and equity offerings

 

•  Extensive experience as an investment banker, private equity investor and director with industrial companies, including those in the automotive sector

 

•  Independent of management

 

  2017 Proxy Statement  

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Mary Lou Jepsen    Age: 52
  

 

Biography

 

Dr. Jepsen was appointed a director of the Company in March 2016. Dr. Jepsen is the founder of Openwater, which is a start-up company focused on replacing the functionality of Magnetic Resonance Imaging (MRI) with a consumer electronic wearable using novel opto-electronics to achieve comparable resolution to a MRI. Previously, Dr. Jepsen was the Executive Director of Engineering at Facebook, Inc. and Head of Display Technologies at Oculus where she led advanced consumer electronics, opto-electronic and display design and manufacturing efforts. From 2012 to 2015, Dr. Jepsen had a similar role at Google, Inc. and Google X. She also co-founded One Laptop per Child, and was the lead architect of the $100 laptop, millions of which were shipped to children in the developing world. She is the principal inventor on approximately 100 patents. Dr. Jepsen has broad advisory experience in Peru, China, Uruguay, Taiwan, Brazil and the United States, as well as at the United Nations. Dr. Jepsen holds a doctorate degree from Brown University in Optical Sciences, a master of science degree from Massachusetts Institute of Technology in Visual Studies and a bachelor’s of science degree in Electrical Engineering from Brown University.

 

Skills and Qualifications

 

•  One of the world’s foremost display innovators

 

•  Exceptional track record of leadership and innovation

 

•  Significant experience in working with Asia’s largest computer manufacturers

 

•  Experience and leadership in engineering with global technology companies

 

•  Globally recognized with dozens of prestigious awards including TIME magazine’s “Time 100” as one of the 100 most influential people in the world, a CNN top 10 thinker, and by the leading global professional societies in optics, display and electronics

 

•  Executive management experience

 

•  Independent of management

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Kathleen A. Ligocki    Age: 60         Lear Committees:
  

 

•  Compensation

 

•  Nominating and Corporate Governance

 

Biography

 

Ms. Ligocki has been a director of the Company since September 2012. Ms. Ligocki is the Chief Executive Officer of Agility Fuel Solutions, based in Costa Mesa, California. Ms. Ligocki has served as the Chief Executive Officer of Harvest Power, Inc., one of the leading organics management companies in North America from 2014 to 2015. From 2012 to 2014, she served as an Operating Partner at Kleiner Perkins Caufield & Byers, one of Silicon Valley’s top venture capital providers where she worked with the firm’s greentech ventures on strategic challenges, scaling operations and commercialization. Ms. Ligocki also has served as the Chief Executive Officer of two early stage companies: Next Autoworks, an auto company with a unique low-cost business model, from 2010 to 2012, and GS Motors, a Mexico City-based auto retailer owned by Grupo Salinas, a large Mexican conglomerate, from 2008 to 2009. From 2008 to 2010, Ms. Ligocki also served as a Principal in Pine Lake Partners, a consultancy focused on start-ups and turnarounds. From 2003 to 2007, Ms. Ligocki was the Chief Executive Officer of Tower Automotive, a global Fortune 1000 automotive supplier. Previously, Ms. Ligocki held executive positions at Ford Motor Company and at United Technologies Corporation where she led operations in North America, Europe, Africa, the Middle East and Russia. Ms. Ligocki began her career at General Motors Corporation working for 15 years at Delco Electronics Corporation. Ms. Ligocki formerly served as a director of Harvest Power, Inc., Ashland Inc., Next Autoworks, BlueOak Resources and Lehigh Technologies. Ms. Ligocki earned a bachelor’s degree with highest distinction in Liberal Studies from Indiana University Kokomo and holds an MBA from the Wharton School at the University of Pennsylvania. She also has been awarded honorary doctorate degrees from Central Michigan University and Indiana University Kokomo.

 

Skills and Qualifications

 

•  Executive management and leadership experience, including in the automotive industry

 

•  Public company directorship and committee experience, including in the automotive industry

 

•  Extensive experience in financial analysis, financial statement preparation, financial reporting, compliance and internal controls

 

•  Senior management experience in international automotive operations

 

•  Understanding of a wide range of issues through experience with businesses ranging from start-ups to large, global manufacturing operations

 

•  Independent of management

 

  2017 Proxy Statement  

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Conrad L. Mallett, Jr    Age: 63         Lear Committees:
  

 

•  Compensation

 

•  Nominating and Corporate Governance

 

Biography

 

Justice Mallett has been a director of the Company since August 2002. In March 2017, Justice Mallett was named Interim Chief Executive Officer of Detroit Medical Center Huron Valley-Sinai Hospital. He is also Executive Vice President and Chief Administrative Officer of Detroit Medical Center since January 2012, after serving as President and Chief Executive Officer of Detroit Medical Center’s Sinai Grace Hospital from August 2003 until December 2011. Prior to that, Justice Mallett served as the Chief Legal and Administrative Officer of the Detroit Medical Center beginning in March 2003. Previously, he served as President and General Counsel of La-Van Hawkins Food Group LLC from April 2002 to March 2003, and Chief Operating Officer for the City of Detroit from January 2002 to April 2002. From August 1999 to April 2002, Justice Mallett was General Counsel and Chief Administrative Officer of the Detroit Medical Center. Justice Mallett was also a Partner in the law firm of Miller, Canfield, Paddock & Stone from January 1999 to August 1999. Justice Mallett was a Justice of the Michigan Supreme Court from December 1990 to January 1999 and served a two-year term as Chief Justice beginning in 1997. Justice Mallett formerly served as a director of Kelly Services, Inc. He was recognized by Savoy Magazine as one of 2016 Most Influential Black Corporate Directors. Justice Mallett has a bachelor’s degree from the University of California, Los Angeles, a JD and a master of public administration degree from the University of Southern California and an MBA from Oakland University.

 

Skills and Qualifications

 

•  Executive management and leadership experience

 

•  Leadership experience gained as Chief Justice of the Michigan Supreme Court

 

•  Public company directorship and committee experience

 

•  Extensive legal and governmental experience, including significant involvement in state, municipal and community governmental activities

 

•  Independent of management

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Donald L. Runkle    Age: 71         Lear Committees:
  

 

•  Compensation

 

•  Nominating and Corporate Governance

 

Biography

 

Mr. Runkle has been a director of the Company since November 2009. Mr. Runkle currently serves as the Executive Chairman of Ioxus Inc. and is a Director of VIA Motors. He also serves as an Operating Executive Advisor at Tennenbaum Capital Partners, a position he has held since 2005, and is on the Advisory Boards of General Fusion and TULA Technology. Mr. Runkle also serves on the Engineering Advisory Council of the University of Michigan. Recently, Mr. Runkle was Executive Chairman of EcoMotors International and formerly served as its Chief Executive Officer. He was also formerly Chairman of Autocam and Eagle-Picher Corporations, and formerly a director of Envirotest, the Lean Enterprise Institute, Transonic Combustion and WinCup Corporation. From 1999 until 2005, Mr. Runkle held various executive-level positions at Delphi Corporation, including Director, Vice Chairman and Chief Technology Officer from 2003 until 2005, Executive Vice President and President, Delphi Dynamics and Propulsion Sector from 2000 until 2003 and President, Delphi Energy and Engine Management Systems from 1999 to 2000. Prior to Delphi, Mr. Runkle was employed by General Motors Corporation for over 30 years in various executive-level positions, including Vice President & General Manager of Energy & Engine Management Systems from 1996 until 1999, Vice President & General Manager of Saginaw Steering Systems from 1993 until 1996, Vice President of North American Engineering Operations from 1992 to 1993, Vice President of Advanced Engineering from 1988 to 1992, as well as Chief Engineer of Chevrolet and Assistant Chief Engineer of Buick. Mr. Runkle has a bachelor’s and master’s degree in Mechanical Engineering from the University of Michigan and a Master of Science in Management Studies degree, as a Sloan Fellow, from the Massachusetts Institute of Technology.

 

Skills and Qualifications

 

•  Executive management and leadership experience, including in the automotive industry

 

•  Management and consulting experience in technology, including in the automotive industry and as chief technology officer

 

•  Directorship and management experience, including in the automotive industry, at board chairman level and with a public company

 

•  Independent of management

 

  2017 Proxy Statement  

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Matthew J. Simoncini

  

Age: 56        President and Chief Executive Officer

  

 

Biography

 

Mr. Simoncini has served as President, Chief Executive Officer and a director of the Company since September 2011. In this role, Mr. Simoncini is responsible for the strategic direction and operational leadership of the Company. Formerly, Mr. Simoncini was Senior Vice President and Chief Financial Officer of the Company, a role he had held since September 2007. As Senior Vice President and Chief Financial Officer, he was responsible for the Company’s Global Finance operations, including external Financial Reporting, Corporate Business Planning & Analysis, Corporate Strategy and Business Development as well as Information Technology activities worldwide. In August 2006, Mr. Simoncini was named Senior Vice President of Finance and Chief Accounting Officer where he was responsible for the Company’s worldwide operational finance, accounting and financial reporting. Prior to that, he was vice president of Operational Finance, a position he had held since June 2004. Mr. Simoncini also served as the Company’s Vice President of Finance — Europe as well as held the Vice President of Finance position for the Company’s Electrical & Electronics business and DaimlerChrysler division. Mr. Simoncini joined United Technologies Automotive (“UTA”) in April 1996 as director of Finance for the Motors Division with responsibility for the financial activities of the business unit. At the time of the Company’s acquisition of UTA in May 1999, Mr. Simoncini was director of Global Financial Planning & Analysis. Previous to UTA, Mr. Simoncini held financial and manufacturing positions with Varity Kelsey Hayes and Horizon Enterprises including Chief Financial Officer of Kelsey Hayes’ European Operations. Mr. Simoncini began his career at Touche Ross and is a certified public accountant. Born and raised in Detroit, Simoncini earned a bachelor’s degree from Wayne State University. In addition to his responsibilities at Lear, he is a member of the board of directors for the Wayne State University Foundation, Detroit Economic Club, Business Leaders of Michigan, Michigan Opera Theatre, Downtown Detroit Partnership, Bing Youth Institute and the Detroit Mayor’s Workforce Development Board.

 

Skills and Qualifications

 

•  Executive management and leadership experience with the Company, current President and Chief Executive Officer, former Senior Vice President and Chief Financial Officer

 

•  Record of leadership, achievement and execution of the Company’s business and global strategy

 

•  Extensive understanding of finance, treasury, financial reporting, investment analysis, management, compliance and internal controls

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Gregory C. Smith

  

Age: 65        Lear Committees:

 

•  Audit (Chair)

 

•  Nominating and Corporate Governance

  

 

Biography

 

Mr. Smith has been a director of the Company since November 2009. Mr. Smith, a retired Vice Chairman of Ford Motor Company, currently serves as Principal of Greg C. Smith LLC, a private management consulting firm, a position he has held since 2007. Previously, Mr. Smith was employed by Ford Motor Company for over 30 years until 2006. Mr. Smith held various executive-level management positions at Ford Motor Company, most recently serving as Vice Chairman from 2005 until 2006, Executive Vice President and President — Americas from 2004 until 2005, Group Vice President — Ford Motor Company and Chairman and Chief Executive Officer — Ford Motor Credit Company from 2002 to 2004, Vice President — Ford Motor Company, and President and Chief Operating Officer — Ford Motor Credit Company from 2001 to 2002. As Vice Chairman, Mr. Smith was responsible for Ford’s Corporate Strategy and Staffs, including Human Resources and Labor Affairs, Information Technology, and Automotive Strategy. During his career at Ford, Mr. Smith ran several major business units and had extensive experience in Financial Services, Strategy, Marketing and Sales, Engineering and Product Development. Mr. Smith also was responsible for Hertz when Ford owned it, and, in 2005, Automotive Components Holdings, the portion of Visteon that Ford repurchased. Currently, Mr. Smith serves as a director of Penske Corporation and formerly served as a director of the Federal National Mortgage Association (Fannie Mae) and Solutia Inc. Mr. Smith is a Board Leadership Fellow of the National Association of Corporate Directors and also serves on the Risk Oversight Advisory Council of the National Association of Corporate Directors. Mr. Smith has a bachelor’s degree in Mechanical Engineering from Rose-Hulman Institute of Technology and an MBA from Eastern Michigan University.

 

Skills and Qualifications

 

•  Executive management and leadership experience, including in the automotive industry

 

•  Public company directorship and committee experience

 

•  Served on audit committees of public and private companies

 

•  Experience actively overseeing finance departments and personnel

 

•  Extensive experience and knowledge of automotive industry

 

•  Experience and knowledge of automotive company operations and strategic issues, including engineering, manufacturing, marketing, human resources and finance

 

•  Independent of management

 

  2017 Proxy Statement  

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

Henry D.G. Wallace

  

Age: 71

  

 

Biography

 

Mr. Wallace has served as the Company’s Non-Executive Chairman since August 2010 and has been a director of the Company since February 2005. Mr. Wallace worked for 30 years at Ford Motor Company until his retirement in 2001 and held several executive level operations and financial oversight positions. His most recent positions included Chief Financial Officer and President and CEO of Mazda Motor Corporation. Mr. Wallace serves as Non-Executive Chairman of Diebold, Inc. (formerly Interim Executive Chairman). Mr. Wallace formerly served as a director of Hayes Lemmerz International, Inc. and AMBAC Financial Group, Inc. Mr. Wallace earned a bachelor’s degree with Honours from the University of Leicester, England.

 

Skills and Qualifications

 

•  Experience and leadership with a global manufacturing company

 

•  Leadership experience on boards of several public companies

 

•  Extensive international experience in Asia, Europe and Latin America

 

•  Experience in finance, financial statement preparation and accounting, financial reporting, compliance and internal controls, including as chief financial officer

 

•  Executive management experience, including in the automotive industry

 

•  Independent of management

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

Criteria for Selection of Directors

 

 

The following are the general criteria for the selection of our directors that the Nominating Committee utilizes in evaluating candidates for Board membership. The Nominating Committee considers, without limitation, a director nominee’s independence, skills and other attributes, experience, perspective, background and diversity (which we define broadly to include differences in viewpoints, background, experience, skill, education, national origin, gender, race, age,

culture and current affiliations that may offer the Company exposure to contemporary business issues and is considered in the context of the Board as a whole). These qualifications may vary from year to year, depending on the needs of the Company at the time.

The general criteria set forth below are not listed in any particular order of importance:

 

 

LOGO

 

The above criteria should not be construed as minimum qualifications for director selection nor is it expected that director nominees will possess all of the criteria identified. Rather, they represent the range of complementary talents, backgrounds and experiences that the Nominating Committee believes would contribute to the effective functioning of our Board.

Our Corporate Governance Guidelines and Nominating Committee charter provide guidelines with respect to the consideration of director candidates. Under these guidelines, the Nominating Committee is responsible for, subject to approval by the Board, establishing and periodically reviewing the criteria for Board membership and selection of new directors, including independence

standards. The Nominating Committee also may recommend to the Board changes to the portfolio of director skills, experience, perspective and background required for the effective functioning of the Board considering our strategy and the regulatory, geographic and market environments. Any such changes to the director selection criteria must be approved by the Board.

The Nominating Committee screens candidates and recommends director nominees who are approved by the Board. The Nominating Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and stockholders. The Nominating Committee also may retain a search firm (which may be paid a fee) to identify director candidates.

 

 

  2017 Proxy Statement  

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

Once a potential candidate has been identified, the Nominating Committee evaluates the potential candidate based on the Board’s criteria for selection of directors (described above) and the composition and needs of the Board at the time. All director candidates are evaluated on

the same basis. Candidates also are evaluated in light of Board policies, such as those relating to director independence and service on other boards, as well as considerations relating to the size and structure of the Board.

 

 

Recommendation of Directors by Stockholders

 

 

In accordance with its charter, the Nominating Committee will consider candidates for election as a director of the Company recommended by any Lear stockholder, provided that the recommending stockholder follows the procedures set forth in Section 1.13 of the Company’s Bylaws for nominations by stockholders of persons to serve as directors. The Nominating Committee evaluates such candidates in the same manner by which it evaluates other director candidates considered by the Nominating Committee, as described above.

Pursuant to Section 1.13 of the Bylaws, nominations of persons for election to the Board at a meeting of stockholders may be made by any stockholder of the Company entitled to vote for the election of directors at the meeting who sends a timely notice in writing to our Corporate Secretary. To be timely, a stockholder’s notice must be delivered to, or mailed and received by, our Corporate Secretary at the Company’s principal executive offices not less than 90 nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that if the annual meeting is more than 30 days prior to the anniversary of the preceding year’s annual meeting or more than 70 days after such anniversary date, notice by the stockholder must be delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business

on the later of the 90th day prior to such annual meeting or the 10th day following the day on which “public announcement” of the date of such annual meeting is made by the Company. For purposes of the Bylaws, “public announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by us with the SEC.

The stockholder’s notice or recommendation is required to contain certain prescribed information about each person whom the stockholder proposes to recommend for election as a director, the stockholder giving notice and the beneficial owner, if any, on whose behalf notice is given. The stockholder’s notice must also include the consent of the person proposed to be nominated and to serve as a director if elected. Recommendations or notices relating to director nominations should be sent to Lear Corporation, 21557 Telegraph Road, Southfield, Michigan 48033; Attention: Terrence B. Larkin, Executive Vice President, Business Development, General Counsel and Corporate Secretary.

A copy of our Bylaws, as amended, has been filed as an exhibit to our Current Report on Form 8-K filed with the SEC on November 9, 2009.

 

 

Independence of Directors

 

 

The Company’s Corporate Governance Guidelines provide that a majority of the members of the Board, and each member of the Audit Committee, Compensation Committee and Nominating Committee, must meet the criteria for independence set forth under applicable law and the New York Stock Exchange (“NYSE”) listing standards. No director qualifies as independent unless the Board determines that the director has no direct or indirect material relationship with the Company. These independence guidelines are part of our Corporate Governance Guidelines, available on our website at www.lear.com. In addition to applying these director independence guidelines and the NYSE independence guidelines, the Board will consider all relevant facts and circumstances of which it is aware in making an independence determination with respect to any director.

The Board has made director independence determinations with respect to each of our directors. Based on our director independence guidelines and the NYSE independence guidelines, the Board has affirmatively determined that (i) Messrs. Bott, Capo and Foster, Dr. Jepsen, Ms. Ligocki and Messrs. Mallett, Runkle, Smith and Wallace (A) have no relationships or only immaterial relationships with us, (B) meet our director independence guidelines and the NYSE independence guidelines with respect to any such relationships and (C) are independent; and (ii) Mr. Simoncini is not independent. Mr. Simoncini is our President and Chief Executive Officer (the “CEO”).

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

Board’s Role in Risk Oversight

 

 

The Company’s management continually monitors the material risks facing the Company. Our enterprise risk management process is designed to facilitate the identification, assessment and management of certain key risks the Company may encounter and which may impact our ability to achieve our strategic

objectives. The enterprise risk management process supplements management’s ongoing responsibilities to monitor and address risks by working with risk owners to identify the key mitigating actions for certain risks, which then are discussed with senior management.

 

 

The Board, with the assistance of the Board committees, is responsible for overseeing such management actions to ensure that material risks affecting the Company are identified and managed appropriately. The Board and the Board committees oversee risks associated with their principal areas of focus, as summarized below:

Board/Committee Areas of Risk Oversight and Actions

 

Full Board   

• Carefully evaluates the reports received from management and makes inquiries of management on areas of particular interest to the Board

 

• Reviews with management material strategic, operational, financial, compensation and compliance risks

 

• Considers specific risk topics in connection with strategic planning and other matters

 

• Oversees risk oversight and related activities conducted by the Board committees through reports of the committee chairmen to the Board

 

Audit Committee   

• Responsible for ensuring that the Company has an internal audit function to provide management and the Audit Committee with ongoing assessments of the Company’s risk management process and system of internal controls

 

• Discusses with management the Company’s process for assessing and managing risks, including the Company’s major financial risk exposures and the steps necessary to monitor and control such exposures

 

• Central oversight of financial and compliance risks

 

• Meets periodically with senior management, our vice president of internal audit, our chief compliance officer and our independent auditor, Ernst & Young LLP, and reports on its findings at each regularly scheduled meeting of the Board

 

• Periodically assesses reports provided by management on risks addressed in the enterprise risk management process and other risks, and reports to the Board, as appropriate

 

Compensation Committee   

• Oversees the review and evaluation of the risks associated with our compensation policies and practices (see also “Compensation and Risk”)

 

Nominating Committee   

• Oversees risks associated with our governance structure and processes

 

• Reviews our organizational documents, Code of Business Conduct and Ethics, Corporate Governance Guidelines and other policies

 

Corporate Governance

 

 

The Board has approved Corporate Governance Guidelines and a Code of Business Conduct and Ethics. All of our corporate governance documents, including the Corporate Governance Guidelines, the Code of Business Conduct and Ethics and committee charters, are available on our website at www.lear.com or in printed form upon request by contacting Lear Corporation at 21557 Telegraph Road, Southfield,

Michigan 48033, Attention: Investor Relations. The Board regularly reviews corporate governance developments and modifies these documents as warranted. Any modifications will be reflected on our website. The information on our website is not part of this proxy statement and is not deemed to be incorporated by reference herein.

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

Other Board Information

 

Leadership Structure of the Board

 

Henry D.G. Wallace is our Non-Executive Chairman of the Board and has served in that role since August 2010. Our Board has decided to maintain separate Chairman and CEO roles to allow our CEO to focus on the execution of our business strategy, growth and development, while allowing the Non-Executive Chairman to lead the Board in its fundamental role of providing advice to, and independent oversight of, management. The Board recognizes the time, effort and

energy that the CEO is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman. While our Bylaws and Corporate Governance Guidelines do not require that our Chairman and CEO positions be separate, the Board believes that having separate positions and having an independent director serve as Non-Executive Chairman is the appropriate leadership structure for us at this time.

 

 

Board Meetings

 

In 2016, our Board held 9 meetings. In addition to our Board meetings, our directors attend meetings of committees established by our Board. Each of Lear’s director nominees attended at least 75% of the meetings of our Board and the committees on which he or she served during 2016 that were

held when he or she was a director. Our directors are encouraged to attend all annual and special meetings of our stockholders. In 2016, our annual meeting of stockholders was held on May 19, 2016, and all directors attended (either in person or telephonically).

 

 

Meetings of Non-Employee Directors

 

In accordance with our Corporate Governance Guidelines and the listing standards of the NYSE, our non-employee directors meet regularly in executive sessions of the Board without

management present. Mr. Wallace, our Non-Executive Chairman, presides over these executive sessions.

 

 

Committees of the Board

The Board has three standing committees: the Audit Committee, the Compensation Committee and the Nominating Committee. The following chart sets forth the directors who currently serve as members of each of the Board committees.

 

Directors    Audit 
Committee
     Compensation
Committee
    

Nominating

Committee

 

Richard H. Bott

     X        

Thomas P. Capo

     X        C     

Jonathan F. Foster

     X           C  

Mary Lou Jepsen

        

Kathleen A. Ligocki

        X        X  

Conrad L. Mallett, Jr.

        X        X  

Donald L. Runkle

        X        X  

Matthew J. Simoncini

        

Gregory C. Smith

     C           X  

Henry D.G. Wallace*

     E        E        E  

 

* Non-Executive Chairman of the Board

 

“C” Denotes member and chairman of committee

 

“X” Denotes member

 

“E” Denotes Ex Officio member

Audit Committee

 

In 2016, the Audit Committee held 9 meetings. Each of the members of the Audit Committee is a non-employee director. In addition, the Board has determined that all of the members of the Audit Committee are independent, financially literate

and financial experts, as further discussed under “Audit Committee Report.” For a description of the Audit Committee’s responsibilities and findings and additional information about the Audit Committee, see “Audit Committee Report.”

 

 

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Compensation Committee

 

In 2016, the Compensation Committee held 4 meetings. Each of the members of the Compensation Committee is a non-employee director. In addition, the Board has determined that all of the members of the Compensation Committee are independent as defined in the listing standards of the NYSE, including the independence standards applicable to compensation committees. The Compensation Committee has overall responsibility for approving and evaluating director and officer compensation plans, policies and programs of the Company and reviewing the disclosure of such plans, policies and programs to our stockholders in the annual proxy statement. The Compensation Committee utilizes an independent compensation consultant to assist it in its duties. The Compensation Committee operates under a written charter setting forth its functions and responsibilities. A copy of the current charter is available on our website at www.lear.com or in printed form upon request.

In consultation with the Company’s management, the Compensation Committee establishes the general policies relating to senior management compensation and oversees the development and administration of such compensation programs. Our human resources executives and staff support the Compensation Committee in its work. These members of management work with compensation consultants whose engagements have been approved by the Compensation Committee, accountants and legal counsel, as necessary, to implement the Compensation Committee’s decisions, to monitor evolving competitive practices and to make compensation recommendations to the Compensation Committee. Our human resources management develops specific compensation recommendations for senior executives, which are first reviewed by senior management and then presented to the Compensation Committee and its independent compensation consultant. The Compensation Committee has final authority to approve, modify or reject the recommendations and to make its decisions in executive session. The Compensation Committee approves all compensation of our executive officers, including equity awards. Under our equity award policy, an aggregate equity award pool to non-executive officers may be approved by the Compensation Committee and allocated to individuals by the Company’s CEO. The policy also allows the Compensation Committee to delegate to the CEO the ability to grant equity awards to non-executive officer employees who are newly

hired or promoted or deemed to be deserving of special retention or recognition awards.

The Compensation Committee utilizes Pay Governance LLC (“Pay Governance”) as its independent compensation consultant. The consultant reports directly to the Compensation Committee, including with respect to management’s recommendations of compensation programs and awards. The Compensation Committee has the sole authority to approve the scope and terms of the engagement of such compensation consultant and to terminate such engagement. The mandate of the consultant is to serve the Company and work for the Compensation Committee in its review of executive and director compensation practices, including the competitiveness of pay levels, program design, market trends and technical considerations. Pay Governance has assisted the Compensation Committee with the development of competitive market data and a related assessment of the Company’s executive and director compensation levels, evaluation of annual and long-term incentive compensation strategy and compilation and review of total compensation data and tally sheets (including data for certain termination and change in control scenarios) for the Company’s Named Executive Officers (as defined in “Compensation Discussion and Analysis”). As part of this process, the Compensation Committee also reviewed a comprehensive analysis of peer group companies provided by Pay Governance. See, “Compensation Discussion and Analysis — Benchmarking.” Other than with respect to consulting on executive and director compensation matters, Pay Governance has performed no other services for the Compensation Committee or the Company.

The Compensation Committee has reviewed the independence of Pay Governance in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that Pay Governance’s work for the Compensation Committee does not raise any conflict of interest.

In 2016, the Company’s management retained Frederic W. Cook & Co., Inc. to assist in the review of various executive compensation programs. The Company and the Compensation Committee reviewed the engagement of the management consultant under the SEC disclosure rules and found that no conflicts of interest existed with respect to such engagement.

 

 

Nominating Committee

 

In 2016, the Nominating Committee held 5 meetings. Each of the members of the Nominating Committee is a non-employee director. In addition, the Board has determined that all of the

members of the Nominating Committee are independent as defined in the listing standards of the NYSE.

 

 

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The Nominating Committee is responsible for, among other things: (i) identifying individuals qualified to become members of the Board, consistent with criteria approved by the Board; (ii) recommending director nominees to the Board for election at the next annual meeting of the stockholders of the Company; (iii) in the event of a vacancy on or an increase in the size of the Board, recommending director nominees to the Board to fill such vacancy or newly established Board seat; (iv) recommending directors to the Board for membership on

each committee of the Board; (v) establishing and reviewing annually our Corporate Governance Guidelines and Code of Business Conduct and Ethics; and (vi) reviewing potential conflicts of interest involving our executive officers. The Nominating Committee operates under a written charter setting forth its functions and responsibilities. A copy of the current charter is available on our website at www.lear.com or in printed form upon request.

 

 

Communications to the Board

 

Stockholders and interested parties can contact the Board (including the Non-Executive Chairman and non-employee directors) through written communication sent to Lear Corporation, 21557 Telegraph Road, Southfield, Michigan 48033, Attention: Terrence B. Larkin, Executive Vice President, Business Development, General Counsel and Corporate Secretary. Our General Counsel reviews all written communications and forwards to the Board a summary and/or copies of any such correspondence that is directed to the Board or that, in the opinion of the General Counsel, deals with the functions of the Board or Board committees or that he otherwise determines requires the Board’s or any Board committee’s attention. Concerns relating to accounting, internal accounting controls or auditing matters are immediately brought to the attention of our internal audit department and handled in accordance with procedures established by the Audit Committee with respect to such matters. From time to time, the Board may change the process by which stockholders may communicate with the Board. Any such changes will be reflected in our Corporate Governance Guidelines, which are posted on our website at www.lear.com.

Communications of a confidential nature can be made directly to our non-employee directors or the Chairman of the Audit Committee regarding any matter, including any accounting, internal accounting control or auditing matter, by submitting such concerns to the Audit Committee or the Non-Executive Chairman. Any submissions to the Audit Committee or the Non-Executive Chairman should be marked confidential and addressed to the Chairman of the Audit Committee or the Non-Executive Chairman, as the case may be, c/o Lear Corporation, P.O. Box 604, Southfield, Michigan 48037. In addition, confidential communications may be submitted in accordance with other procedures set forth from time to time in our Corporate Governance Guidelines, which are posted on our website at www.lear.com. Any submission should contain, to the extent possible, a full and complete description of the matter, the parties involved, the date of the occurrence or, if the matter is ongoing, the date the matter was initiated and any other information that the reporting party believes would assist the Audit Committee or the Non-Executive Chairman in the investigation of such matter.

 

 

Certain Legal Proceedings

 

Mr. Simoncini currently serves as the Company’s President and CEO and has served in other positions at the Company

since 1999, as described above. In 2009, the Company filed for reorganization under chapter 11 of the Bankruptcy Code.

 

 

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Director Compensation

 

The following table summarizes the annual compensation for our non-employee directors during 2016. A summary of the director compensation program and elements is presented after the table below.

 

2016 Director Compensation  
Name    Fees Earned or Paid
in Cash(1)(2)
     Stock Awards(3)(4)      Total  

Richard H. Bott

   $ 110,000      $ 149,930      $ 259,930  

Thomas P. Capo

   $ 130,000      $ 149,930      $ 279,930  

Jonathan F. Foster

   $ 125,000      $ 149,930      $ 274,930  

Mary Lou Jepsen(5)

   $ 91,667      $ 173,255      $ 264,922  

Kathleen A. Ligocki

   $ 110,000      $ 149,930      $ 259,930  

Conrad L. Mallett, Jr.

   $ 110,000      $ 149,930      $ 259,930  

Donald L. Runkle

   $ 110,000      $ 149,930      $ 259,930  

Gregory C. Smith

   $ 130,000      $ 149,930      $ 279,930  

Henry D.G. Wallace

   $ 185,000      $ 259,985      $ 444,985  

 

(1) Includes cash retainer and other fees earned for service as directors in 2016. The base annual cash retainer is $110,000, and as described below, there is an additional cash retainer for the Non-Executive Chairman and the Chairman of each of the Audit Committee, Compensation Committee and the Nominating Committee. Our directors received no non-standing committee meeting fees in 2016.

 

(2) Three of our directors deferred the following amounts from their 2016 retainer fees: Dr. Jepsen – $82,500; Ms. Ligocki – $110,000; and Mr. Wallace – $185,000.

 

(3) For the annual grant of stock, the amounts reported in this column for each director reflect the aggregate grant date fair value determined in accordance with FASB Accounting Standards Codification™ (“ASC”) 718, “Compensation-Stock Compensation.” Messrs. Bott, Capo, Foster, Runkle and Wallace along with Ms. Ligocki deferred 100% of their 2016 annual stock grants into deferred stock units; Mr. Mallett deferred 93% of his 2016 annual stock grant into deferred stock units.

 

(4) Dr. Jepsen received a pro rata stock grant based on the number of months of her service between the 2015 and 2016 annual meetings. In addition, she deferred 100% of her 2016 annual stock grant into deferred stock units.

 

(5) Dr.  Jepsen was appointed to the Board in March 2016.

Summary of 2016 Director Compensation

 

Overview

 

In order to attract and retain highly qualified directors to represent stockholders, our philosophy is to set compensation to be within a competitive range of non-employee director pay at comparable companies. At least every two years, the independent compensation consultant presents an analysis of director pay levels among our Comparator Group (described in “Compensation Discussion and Analysis — Benchmarking” below) and a broader set of large companies. The most recent competitive pay study was completed in November 2015. As

noted below and as previously disclosed, changes, effective for 2016, were made to the director pay program based on consideration of the pay philosophy, results of the recent market pay analysis, recognition that the last time pay was changed was effective for 2014 and other factors. Based on the most recent benchmarking analysis, the director compensation is near the market median level within the Comparator Group.

 

 

Annual Cash Retainer

 

The base annual cash retainer for each non-employee director under the Outside Directors Compensation Plan is $110,000. The additional cash retainer for the chairs of the Compensation Committee and the Audit Committee is

$20,000, the additional cash retainer for the chair of the Nominating Committee is $15,000 and the additional cash retainer for the Presiding Director, if any, is $10,000. The annual cash retainer for each non-employee director is paid in

 

 

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advance in equal installments on the last business day of the month. Because the Company has an independent Non-Executive Chairman, there currently is no Presiding Director.

Non-employee directors generally do not receive Board or standing committee meeting fees; however, each non-employee director is eligible to receive $1,500 for each

Board meeting in excess of twelve that he/she attends in a calendar year. Meeting fees for a special committee of the Board are set by the Board at the time of the formation of the special committee and usually are set at the rate of $1,000 per meeting. Meeting fees, if any, are paid on the last business day of the month (for that month’s meeting fees).

 

 

Equity Compensation

 

Pursuant to the Outside Directors Compensation Plan, each non-employee director received a base annual unrestricted grant of Lear common stock approximately equal in value to $150,000 and subject to the stock ownership guidelines

described below. Stock grants are made on the date of the annual meeting of stockholders at which a director is elected or re-elected to serve on the Board.

 

 

Non-Executive Chairman Compensation

 

The additional compensation for our Non-Executive Chairman, currently Mr. Wallace, in 2016 was an additional annual cash retainer in the amount of $75,000 and an additional annual

grant of Lear common stock equal in value to $110,000. The payment schedule for this additional annual compensation is the same as that described above.

 

 

Deferrals

 

A non-employee director may elect to defer receipt of all or a portion of his or her annual retainer and any meeting fees pursuant to a valid deferral election. To the extent that any such cash payments are deferred, they are credited to a notional account and bear interest at an annual rate equal to the prime rate (as defined in the Outside Directors Compensation Plan). Non-employee directors may also elect to defer all or a portion of their annual stock retainer into deferred stock units.

In general, amounts deferred are paid to a non-employee director as of the earliest of:

 

  the date elected by such director;
  the date the director ceases to be a director; or

 

  the date a change of control (as defined in the Outside Directors Compensation Plan) occurs.

Retainer, meeting fees and restricted cash amounts that are deferred are paid in cash in a single sum payment or, at the director’s election, in installments. Amounts of the stock grant that are deferred are paid in the form of shares of common stock in a lump sum or installments in accordance with the director’s election.

 

 

Stock Ownership Guidelines

 

The Company has a long-standing practice of having stock ownership guidelines for non-employee directors. Each non-employee director must achieve a stock ownership level of a number of shares with a value equal to five times the base annual cash retainer and, beginning in 2014, must hold 50% of the net shares from their annual stock grants received

until they are in compliance with these guidelines. As of our latest measurement date (December 31, 2016), all of our non-employee directors (other than Dr. Jepsen, who joined the Board in March 2016 and is in compliance with the 50% hold requirement) have met the required ownership guideline level.

 

 

General

 

Directors who are also our employees receive no compensation for their services as directors except

reimbursement of expenses incurred in attending meetings of our Board or Board committees.

 

 

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Security Ownership of Certain Beneficial Owners, Directors and Management

 

The following table sets forth, as of March 23, 2017 (except as indicated below), beneficial ownership, as defined by SEC rules, of our common stock and ownership of RSUs by the persons or groups specified. Each of the persons listed below has sole voting and investment power with respect to the beneficially owned shares listed unless otherwise indicated. The percentage calculations set forth in the table are based on 68,697,937 shares of common stock outstanding on March 23, 2017 rather than based on the percentages set forth in stockholders’ Schedules 13G or 13D, as applicable, filed with the SEC.

 

      Number of
Shares of
Common
Stock
Owned
Beneficially
     Percentage of
Common
Stock
Owned
Beneficially
     Number
of
RSUs
Owned(17)
 

5% Beneficial Owners:

        

BlackRock, Inc.(1)

     7,419,830        10.8       

The Vanguard Group(2)

     6,077,526        8.8       

Executive Officers and Directors:

        

Matthew J. Simoncini(3)(4)(5)

     90,824        *        21,739  

Jeffrey H. Vanneste(3)(6)

     26,748        *        6,089  

Raymond E. Scott(3)(7)

     14,133        *        28,231  

Terrence B. Larkin(3)(8)

     18,889        *        6,442  

Frank Orsini(3)(7)

     12,785        *        20,530  

Richard H. Bott(4)(9)

     5,394        *         

Thomas P. Capo(4)(10)

     9,915        *         

Jonathan F. Foster(4)(11)

     11,946        *         

Mary Lou Jepsen(4)(12)

     1,544        *         

Kathleen A. Ligocki(4)(13)

     11,004        *         

Conrad L. Mallett, Jr.(4)(14)

     6,164        *         

Donald L. Runkle(4)(15)

     10,316        *         

Gregory C. Smith(4)

     12,822        *         

Henry D.G. Wallace(4)(16)

     20,144        *         

Total Executive Officers and Directors as a Group (19 individuals)

     336,079        *        128,631  

 

* Less than 1%

 

(1) Information contained in the table above and this footnote is based on a report on Schedule 13G/A filed with the SEC on January 12, 2017 by BlackRock, Inc. (“BlackRock”). BlackRock is the beneficial owner of 7,419,830 shares, with sole dispositive power as to all such shares and sole voting power as to 6,542,819 shares. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from, the sale of the Company’s common stock. No one person’s interest in the Company’s common stock is more than five percent of the total outstanding common stock. BlackRock’s principal place of business is 55 East 52nd Street, New York, New York 10055.

 

(2) Information contained in the table above and this footnote is based on a report on Schedule 13G/A filed with the SEC on February 10, 2017 by The Vanguard Group (“Vanguard”). Vanguard is the beneficial owner 6,077,526 shares, with sole voting power as to 58,669 such shares, sole dispositive power as to 6,008,000 such shares, shared voting power as to 13,532 such shares and shared dispositive power as to 69,516 such shares. Vanguard’s principal place of business is 100 Vanguard Blvd., Malvern, PA 19355.

 

(3) The individual is a Named Executive Officer.

 

(4) The individual is a director.

 

(5) Mr. Simoncini is retirement-eligible and therefore qualifies for accelerated vesting of all of his Career Shares and RSUs that would have vested if the date of retirement had been 24 months later than it actually occurred. As a result, Mr. Simoncini’s share ownership includes 29,212 Career Shares and 35,461 unvested RSUs (all RSUs awarded more than one year prior to the record date). Such Career Shares and unvested RSUs would be forfeited only if Mr. Simoncini were terminated for “cause” pursuant to the terms of his employment agreement.

 

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(6) Mr. Vanneste is retirement-eligible and therefore qualifies for accelerated vesting of all of his Career Shares and RSUs that would have vested if the date of retirement had been 24 months later than it actually occurred. As a result, Mr. Vanneste’s share ownership includes 10,562 Career Shares and 8,714 unvested RSUs (all RSUs awarded more than one year prior to the record date). Such Career Shares and unvested RSUs would be forfeited only if Mr. Vanneste were terminated for “cause” pursuant to the terms of his employment agreement.

 

(7) Messrs. Scott and Orsini are not yet retirement-eligible, and thus, their share ownership does not include any unvested Career Shares or RSUs. If they remain employed by the Company, Messrs. Scott and Orsini will become retirement-eligible on August 2, 2020 and April 2, 2027, respectively.

 

(8) Mr. Larkin is retirement-eligible and therefore qualifies for accelerated vesting of all of his Career Shares and RSUs that would have vested if the date of retirement had been 24 months later than it actually occurred. As a result, Mr. Larkin’s share ownership includes 4,331 Career Shares and 9,760 unvested RSUs (all RSUs awarded more than one year prior to the record date). Such Career Shares and unvested RSUs would be forfeited only if Mr. Larkin were terminated for “cause” pursuant to the terms of his employment agreement.

 

(9) Includes 5,394 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(10) Includes 9,570 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(11) Includes 7,921 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(12) Includes 1,331 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(13) Includes 8,504 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(14) Includes 6,161 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(15) Includes 6,372 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(16) Includes 16,005 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for-1 basis upon the earliest of the director’s departure from the Board, a change in control or the pre-established date elected by the director.

 

(17) Includes, as of March 23, 2017, (i) Career Shares and unvested RSUs owned by our retirement-eligible executive officers that have been outstanding for less than one year, and (ii) Career Shares and unvested RSUs owned by our non-retirement-eligible executive officers. These Career Shares and unvested RSUs are subject to all of the economic risks of stock ownership but may not be voted or sold and are subject to vesting provisions as set forth in the respective grant agreements.

Section 16(a) Beneficial Ownership Reporting Compliance

 

 

Based upon our review of reports filed with the SEC and written representations that no other reports were required, we believe that all of our directors and executive officers complied with the reporting requirements of Section 16(a) of the Exchange Act during 2016, except that on March 16, 2017,

Mr. Mallett filed a Form 4 disclosing the disposition of an aggregate of 4,236 shares of our common stock in a series of transactions from November 9, 2009 through October 28, 2014 previously unreported on Form 4.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

The following discusses the material elements of the compensation for our Chief Executive Officer (CEO), Chief Financial Officer (CFO) and each of the other executive officers listed in the “2016 Summary Compensation Table” (collectively, the “Named Executive Officers”) during the year ended December 31, 2016. To assist in understanding compensation for 2016, we have included a discussion of our compensation policies and practices for periods before and after 2016 where relevant. To avoid repetition, in the discussion that follows we make cross-references to specific compensation data and terms for our Named Executive Officers contained in “Executive Compensation.” In addition, because we have a global team of managers in 37 countries, our compensation program is designed to provide some common standards throughout the Company and, therefore, much of what is discussed below applies to executives in general and is not limited specifically to our Named Executive Officers.

Named Executive Officers

 

 

Our Named Executive Officers for 2016 are:

Matthew J. Simoncini, President and Chief Executive Officer

Jeffrey H. Vanneste, Senior Vice President and Chief Financial Officer

Raymond E. Scott, Executive Vice President and President, Seating

Terrence B. Larkin, Executive Vice President, Business Development, General Counsel and Corporate Secretary

Frank C. Orsini, Senior Vice President and President, E-Systems

 

 

Executive Summary

 

 

We are a leading Tier 1 supplier to the global automotive industry that operates in two business segments: Seating and E-Systems. We supply seating, electrical distribution systems and electronic modules, as well as related sub-systems, components and software, to virtually every major automotive manufacturer in the world. Our manufacturing, engineering and administrative footprint covers 37 countries and 243 locations with approximately 148,400 employees worldwide. We are continuing to grow our business in all automotive producing regions of the world, both organically and through complementary acquisitions. We have an executive compensation program that is, on average, market-median based, and which is closely linked to our Company’s performance.

Our overarching objective is to maximize shareholder value by delivering profitable sales growth while balancing risk and returns, maintaining a strong balance sheet with investment grade credit metrics and consistently returning cash to our shareholders.

Highlights of our 2016 performance and recent significant events include the following:

 

  We delivered record sales of $18.6 billion, up 5% excluding the impact of foreign exchange and commodity prices.

 

  We achieved record core operating earnings of $1.5 billion, an increase of 17% (see discussion of Adjusted Operating Income below).*

 

  We achieved record adjusted earnings per share of $14.03, an increase of 29%.*

 

  We delivered improved operating margins compared to 2015 in both business segments.

 

  We achieved a 7th consecutive year of increased sales and adjusted earnings per share.*

 

  We generated record free cash flow of $1.1 billion in 2016.*

 

  In 2016, we continued to invest in our business by entering into a strategic partnership with Tempronics for seat heating and cooling and acquiring AccuMED, a specialty fabric business.
 

 

 

* Core operating earnings, adjusted earnings per share and free cash flow are non-GAAP financial measures, and we are including our 2016 results for these measures to show an aspect of our performance. Appendix A to this proxy statement contains reconciliations of these measures to the most directly comparable GAAP financial measures.

 

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  Over the past five years, we have invested nearly three-quarters of a billion dollars in our manufacturing footprint, significantly expanding our component capabilities to 143 facilities in 22 low-cost countries.

 

  We continued to win new business in both product segments and diversify our sales, with a 2017 to 2019 sales backlog of $2.8 billion, which is 40% higher than last year’s backlog.

 

  The Company returned $748 million to stockholders in 2016 through its share repurchase and dividend programs. Since these programs were initiated in 2011, the Company has returned $3.5 billion to stockholders, including the repurchase of 39% of total shares outstanding. In February 2017, the Company’s share repurchase authorization was
 

increased to $1 billion and the authorization period was extended to December 31, 2019.

 

  In February 2017, our quarterly cash dividend was increased by 67%, representing the 6th consecutive annual increase since the dividend program was initiated.

 

  The Company’s total return to stockholders in 2016 was 9%. The Company’s total return to stockholders for the five-year period ended December 31, 2016 was 250%, compared with 98% for the S&P 500.

 

  Commensurate with our above target performance on the four incentive plan financial measures, incentive awards for the periods ending in 2016 were earned at above target levels, as illustrated below:
 

 

2016 Annual Incentive Program

LOGO

 

2014-2016 Performance Shares

LOGO

 

(see “— 2016 Incentive Programs — Pay for Performance,” “— 2016 Incentive Programs — Annual Incentives” and “—2016 Incentive Programs — Long-Term Incentives” below for more information regarding these financial measures).

The highlights of our 2016 executive compensation program resulting from our 2016 Company financial performance were as follows:

 

 

Incentive payouts were commensurate with our financial results. Annual incentive awards were earned at 189% of

 

 

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the targeted level and the 2014-2016 cycle of long-term Performance Shares was earned at 193% of the targeted level based on achievement of the financial goals outlined above.

 

  For 2016, long-term incentive awards granted in January 2016 to our Named Executive Officers were solely in the form of equity to further link the interests of our executives with
 

those of our stockholders. We awarded Performance Shares to represent 75% of the value of these long-term incentive awards and service-based restricted stock units (“RSUs”) to represent 25%. We place the greatest weighting on Performance Shares in order to directly link our executives’ interests with those of our stockholders while also rewarding executives based on our three-year financial performance.

 

 

We maintain several compensation program features and corporate governance practices to ensure a strong link between executive pay, Company performance and stockholder interests and to ensure that we have a fully competitive executive compensation program:

 

WHAT WE DO    WHAT WE DO