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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
 
 
Filed by the Registrant  ☒
Filed by a Party other than the Registrant  ☐
Check the appropriate box:
 
Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material Pursuant to
§240.14a-12
Lear Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
 
No fee required.
 
Fee paid previously with preliminary materials.
 
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11.
 
 
 
 


Table of Contents

 

LOGO

21557 Telegraph Road

Southfield, Michigan 48033

April 4, 2023

Dear Stockholder:

On behalf of the Board of Directors of Lear Corporation, you are cordially invited to attend the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) to be held through a virtual web conference at www.virtualshareholdermeeting.com/LEA2023 on May 18, 2023, at 9:00 a.m. (Eastern Time). You will be able to attend the Annual Meeting online, vote your shares electronically, and submit questions in advance of and during the meeting by logging in to the website listed above using the 16-digit control number included in your Notice of Internet Availability of Proxy Materials, on your proxy card, or on any additional voting instructions accompanying these proxy materials. We recommend that you log in a few minutes before the meeting to ensure you are admitted when the meeting starts.

To facilitate broad stockholder attendance and participation and provide a consistent experience to all stockholders, regardless of location, the Annual Meeting will once again be virtual. We have included with 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 (the “SEC”).

We are delivering our proxy statement and annual report pursuant to the SEC 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 4, 2023, 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 to approve the frequency of the advisory vote on our executive compensation, to approve the amendment and restatement of the Company’s 2019 Long-Term Stock Incentive Plan and to transact any other business properly brought before the meeting.

As always, we encourage you to vote your shares prior to the Annual Meeting. 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

Gregory C. Smith    Raymond E. Scott
Non-Executive Chairman    President, Chief Executive Officer and Director

This proxy statement is dated April 4, 2023, and is first being made available to stockholders via the Internet on or about April 4, 2023.


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LOGO

21557 Telegraph Road

Southfield, Michigan 48033

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

Time and Date:   

Thursday, May 18, 2023, at 9:00 a.m. (Eastern Time)

 

Online check-in will be available beginning at 8:30 a.m. (Eastern Time). Please allow ample time for the online check-in process.

Place:    The Annual Meeting will be held through a virtual web conference at www.virtualshareholdermeeting.com/LEA2023. To participate in the Annual Meeting, you will need your 16-digit control number included in your Notice of Internet Availability of the Proxy Materials, on your proxy card, or any additional voting instructions accompanying these Proxy Materials.
Record Date:    March 24, 2023
Items of Business:   

1.  To elect the following ten nominees to the Board of Directors (the “Board”): Mei-Wei Cheng, Jonathan F. Foster, Bradley M. Halverson, Mary Lou Jepsen, Roger A. Krone, Patricia L. Lewis, Kathleen A. Ligocki, Conrad L. Mallett, Jr., Raymond E. Scott and Gregory C. Smith;

2.  To ratify the retention of Ernst & Young LLP as the Company’s registered public accounting firm for 2023;

3.  To approve, in a non-binding advisory vote, the Company’s executive compensation;

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

5.  To approve the amendment and restatement of the Company’s 2019 Long-Term Stock Incentive Plan (the “2019 LTSIP,” which once amended, the “Amended Plan”); and

6.  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
Harry A. Kemp

Senior Vice President, Chief Administrative Officer and

General Counsel

April 4, 2023

 

Notice of Internet Availability of Proxy Materials

We are making this proxy statement and our annual report on Form 10-K available to stockholders electronically via the Internet. On or about April 4, 2023, we will mail to most of our stockholders a notice containing instructions on how to access this proxy statement and our annual report on Form 10-K 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 4, 2023.

 


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TABLE OF CONTENTS

 

2023 PROXY STATEMENT SUMMARY

     1  

2023 Annual Meeting of Stockholders

     1  

Items to be Voted on

     1  

Director Nominees

     2  

Executive Compensation Best Practices

     3  

Environmental, Social and Governance Highlights for 2022

     4  

ELECTION OF DIRECTORS
(PROPOSAL NO. 1)

     5  

DIRECTORS AND CORPORATE GOVERNANCE

     6  

Director Biographical Information and Qualifications

     6  

Criteria for Selection of Directors

     16  

Board Composition

     17  

Recommendation of Directors by Stockholders

     18  

Independence of Directors

     18  

Board Retirement Policy

     18  

Board’s Role in Risk Oversight

     19  

Environmental, Social and Governance

     20  

Director Compensation

     27  

Summary of 2022 Director Compensation

     28  

Security Ownership of Certain Beneficial Owners, Directors and Management

     29  

Delinquent Section 16(a) Reports

     31  

COMPENSATION DISCUSSION AND ANALYSIS

     32  

Named Executive Officers

     32  

Executive Summary

     32  

Compensation Governance and Alignment with Stockholders

     37  

2022 Advisory Vote on Executive Compensation

     39  

Engaging with Stockholders to Continue to Enhance our Compensation Program

     39  

Total Compensation Process and Review

     40  

Authority of P&C Committee Under Incentive Plans

     42  

Executive Compensation Objectives and Core Elements

     42  

Management Stock Ownership Guidelines

     51  

Equity Award Policy

     51  

Employment Agreements/Termination/Change in Control Benefits

     51  

Health, Welfare and Certain Other Benefits

     52  

Clawback Policy

     52  

Hedging and Pledging

     52  

Tax Treatment of Executive Compensation

     53  

Impact of Accounting Treatment

     53  

EXECUTIVE COMPENSATION

     54  

Potential Payments Upon Termination or Change in Control

     64  

Compensation and Risk

     68  

CEO Pay Ratio

     68  

Pay Versus Performance Disclosures

     70  

Executive Officer and Director Hedging Policy

     77  

P&C COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     78  

P&C COMMITTEE REPORT

     79  

AUDIT COMMITTEE REPORT

     80  

FEES OF INDEPENDENT ACCOUNTANTS

     82  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     83  

RATIFICATION OF RETENTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2023 (PROPOSAL NO. 2)

     84  

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

     85  

ADVISORY VOTE TO APPROVE THE FREQUENCY OF THE ADVISORY VOTE ON THE COMPANY’S EXECUTIVE COMPENSATION (PROPOSAL NO. 4)

     86  
 

 

    

 

 

 

       

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TABLE OF CONTENTS

 

                                                                                              

 

    

 

VOTE TO APPROVE THE AMENDED PLAN (PROPOSAL NO. 5)

     87  

Key Terms

     87  

Equity Usage

     87  

Summary of Material Terms of Amended Plan

     88  

U.S. Federal Income Tax Considerations

     91  

New Plan Benefits

     92  

Equity Compensation Plan Information

     93  

Updated Share Information

     93  

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

     94  

Why did you send me this proxy statement?

     94  

Who can vote at the Annual Meeting?

     94  

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

     94  

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

     94  

How does the Board recommend that I vote?

     94  

How do I vote at the Annual Meeting?

     95  

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

     95  

May I change my vote?

     95  

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

     96  

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

     96  

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

     96  

How many votes do I have?

     97  

How will the votes be counted at the Annual Meeting?

     97  

How will the Company announce the voting results?

     97  

Who pays for the Company’s solicitation of proxies?

     97  

What is “householding” and how does it work?

     97  

How do I participate in the Annual Meeting?

     97  

STOCKHOLDER PROPOSALS FOR 2024 ANNUAL MEETING OF STOCKHOLDERS

     99  

OTHER MATTERS

     100  

APPENDIX A RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

     A-1  

APPENDIX B THE LTSIP PLAN

     B-1  
 

 

    

 

 

 

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  LEAR CORPORATION  

 

       


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LEAR CORPORATION

2023 PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in the proxy statement by Lear Corporation (the “Company,” “Lear,” “we,” “our” or “us”). This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. For more complete information regarding the Company’s 2022 performance, please review our 2022 Annual Report on Form 10-K.

2023 Annual Meeting of Stockholders

 

 

 

    Date and Time: May 18, 2023, 9:00 a.m. (Eastern Time). Online check-in will be available at 8:30 a.m. (Eastern Time). Please allow ample time for the online check-in process.
    Location: The Annual Meeting will be held through a virtual web conference at www.virtualshareholdermeeting.com/LEA2023. To participate in the Annual Meeting, you will need your 16-digit control number included in your Notice of Internet Availability of the Proxy Materials, on your proxy card, or any additional voting instructions accompanying these proxy materials.
    Record Date: March 24, 2023
    Voting: Stockholders as of the close of business on the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for the other proposals to be voted on.
    Shares of Common Stock Outstanding (as of the record date): 59,060,758
    Stock Symbol: LEA
    Exchange: New York Stock Exchange (“NYSE”)
    Registrar & Transfer Agent: Computershare Trust Company, N.A.
    Principal Executive Office: 21557 Telegraph Road, Southfield, Michigan 48033
    Corporate Website: lear.com
    Investor Relations Website: ir.lear.com

Items to be Voted on

 

 

 

    Proposal    Our Board’s Recommendation

Election of Directors named in this proxy statement (page 5)

   FOR

Ratification of Retention of Independent Registered Public Accounting Firm (page 84)

   FOR

Advisory Vote to Approve the Company’s Executive Compensation (page 85)

   FOR

Advisory Vote to Approve the Frequency of the Advisory Vote on the Company’s Executive Compensation (page 86)

   FOR

Approval of the Amended Plan (page 87)

   FOR

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.

 

    

 

 

 

       

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Table of Contents
PROXY SUMMARY

 

                                                                                              

 

    

 

Director Nominees

 

 

 

  

 

   Committee Membership
  Name and Principal Occupation    Age    Director Since    AC    P&C    G&S

Mei-Wei Cheng IND
Former CEO, Siemens Northeast Asia and Ford Motor (China)

       73        2019                   

 

 

 

Jonathan F. Foster IND
Managing Director of Current Capital Partners LLC

       62        2009            

 

 

 

      

Bradley M. Halverson IND
Former Group President and CFO, Caterpillar Inc.

       62        2020                   

 

 

 

Mary Lou Jepsen IND
CEO, Founder and Chairman of Openwater

       58        2016     

 

 

 

             

Roger A. Krone IND
Chair and CEO, Leidos Holdings, Inc.

       66        2020            

 

 

 

      

Patricia L. Lewis IND
Executive Vice President and Chief Sustainability Officer, UnitedHealth Group Incorporated

       61        2020     

 

 

 

             

Kathleen A. Ligocki IND
Former CEO of Tower Automotive and Agility Fuel Solutions

       66        2012     

 

 

 

             

Conrad L. Mallett, Jr. IND
Corporation Counsel, City of Detroit

       69        2002            

 

 

 

      

Raymond E. Scott
President and CEO

       57        2018     

 

 

 

    

 

 

 

    

 

 

 

Gregory C. Smith IND
Former Vice Chairman of Ford Motor Company

       71        2009        E        E        E

AC Audit Committee

P&C People and Compensation Committee

G&S Governance and Sustainability Committee

IND Independent director under NYSE and SEC rules

  

Chair

• Member

E Ex Officio Member

 

 

Director Term: One Year

Board Meetings in 2022: 6

Standard Board Committee Meetings in 2022: Audit Committee 8, People and Compensation Committee (the “P&C Committee”) 4, Governance and Sustainability Committee (the “G&S Committee”) 4.

 

    

 

 

 

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  LEAR CORPORATION  

 

       


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PROXY SUMMARY

 

 

 

 

    

 

Executive Compensation Best Practices

 

 

WHAT WE DO:

 

   Pay Program Aligned with Business Strategy: Our incentive plan performance measures are well aligned with our business strategy, correlated to total stockholder return and generally consistent with those used by our peer companies.

 

   Robust Stock Ownership Guidelines: We have adopted management stock ownership guidelines that are applicable to all executive officers, including our named executive officers (“NEOs”). The stock ownership guideline for our CEO is six times his annual base salary.

   Balanced Mix of Performance Measures: We use multiple financial performance measures and stock price-based awards (relative Total Shareholder Return (TSR)) assessed over one and three-year periods.

 

   High Percentage of Performance-Based Pay: In 2022, 100% of the annual incentive opportunity and 70% of the long-term incentive opportunity offered to our NEOs were contingent on the achievement of specific performance measures. As a result, 91% of our CEO’s pay and on average 81% of our other NEOs’ 2022 target total direct compensation was at risk.

   Independent Compensation Consultant for P&C Committee: Our P&C Committee has engaged Pay Governance LLC as its independent compensation consultant.

 

   Clawback of Incentive Compensation: Our clawback policy applies to all incentive-based cash and equity compensation granted to current and former executive officers. In the event an accounting restatement is required due to any such executive officer’s intentional misconduct, we will recover from him or her the amount, if any, of incentive compensation in excess of what would have been paid under the accounting restatement. We intend to amend our clawback policy consistent with the requirements of the final NYSE listing standards implementing Rule 10D-1 of the U.S. Securities Exchange Act of 1934 (the “Exchange Act”) within the prescribed time period.

   Annual Market Practices and Compensation Risk Review: On an annual basis, we assess the key elements of our executive compensation programs as compared to market practices and emerging trends, and considering our business strategy and talent needs. We also complete a comprehensive risk assessment of our employee compensation policies and practices on an annual basis.

 

   Robust Stock Ownership Requirements: Until an executive satisfies the applicable stock ownership guidelines, he or she must hold 50% of the net shares acquired upon the distribution of equity awards.

   Holding Period for Career Shares: As part of our long-term incentive and retention package, the CEO and certain executives traditionally receive awards of time-based Career Shares. The shares underlying the Career Shares generally are not distributable until the earlier of age 62 or three years after retirement.

 

   Vary Incentive Compensation Payouts Commensurate with Results. Our incentive compensation payouts increase or decrease, depending upon the Company’s performance.

WHAT WE DON’T DO:

 

   No Single-Trigger Change in Control Vesting of Equity Awards: All equity awards are subject to “double-trigger” vesting upon a change in control, which protects our employees in the event of a change in control transaction and helps ensure an orderly transition of leadership.

 

 No Hedging or Pledging of Company Stock: We maintain a formal policy prohibiting our officers and directors from entering into hedging transactions involving Company stock and pledging Company stock as collateral for loans.

   No Single-Trigger Change in Control Severance Benefits: Our executives are not eligible to receive severance benefits solely upon the occurrence of a change in control. This is intended to ensure that members of senior management are not influenced by their personal situations and are able to be objective in evaluating a potential change in control transaction.

 

 No Excise Tax Gross-Ups: None of the employment agreements with our executive officers contains an excise tax gross-up provision.

   No Repricing of Stock Options: We do not reprice our stock options or provide for cash buyouts of underwater options.

 

   No Guarantee of Regular Incentive Plans: None of our regular incentive plans guarantee awards to our executive officers.

 

    

 

 

 

       

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PROXY SUMMARY

 

                                                                                              

 

    

 

Environmental, Social and Governance Highlights for 2022

 

 

Responsible and sustainable environmental, social and governance (“ESG”) practices are integral to Lear’s strategy and operations. We are continuously working to embed ESG into our key processes such as enterprise risk management, facilities management, supplier selection and evaluation, and product innovation. Our ESG efforts demonstrate how we live our core value to Get Results the Right Way. Our key ESG-related actions during 2022 include the following:

 

     
Environmental   Social   Governance

•  Finalized and began implementing our comprehensive renewable energy strategy, which will include on-site renewable energy generation at certain sites, the purchase of energy attribution certificates in certain locations on an ongoing basis, and virtual power purchase agreements to support new renewable energy projects in the United States and Europe

 

•  Joined Climate Group’s RE100, a global renewable electricity initiative comprised of companies committed to sourcing 100% of their operations’ electricity from renewable sources

 

•  Committed to the Science Based Targets Initiative (“SBTi”) and agreed to reduce greenhouse gas (“GHG”) emissions in alignment with the 2015 Paris Agreement regarding climate change

 

•  Completed reference life cycle assessments on seven of our nine major product lines to measure and understand their carbon footprint

 

•  Released internally developed waste generation and water usage playbooks to promote best practices on these topics within our facilities, enabling increased operational efficiency and potentially reducing costs

 

•  Continued to develop and commercialize innovative products that support key sustainable and emerging industry trends, such as battery disconnect units for high voltage applications, FlexAirTM, our 100% recyclable non-foam alternative, and ReNewKnitTM, a sueded alternative material that is fully recyclable and composed of 100% recycled plastic

 

•  Conducted more than 200,000 hours of Diversity, Equity and Inclusion (“DEI”) and anti-harassment training

 

•  The first group of Lear employees completed our Together We Grow program, which was launched in 2021 to assist diverse, high-potential leaders in developing executive skills and a pathway to career advancement

 

•  Continued to expand our global Driving Wellness program, which includes localized initiatives to support the mental health and wellness of employees

 

•  Including 2022 spend, have spent approximately $5.4 billion with diverse suppliers in the past 10 years

 

•  We have published on our website our consolidated EEO-1 summary data as submitted to the U.S. Equal Employment Opportunity Commission for calendar year 2021, and will disclose such data for calendar year 2022 when available

 

•  Since 2021, we have assessed over 2,800 production supplier sites across the globe against ESG criteria, including environmental stewardship and human rights

 

•  Updated our Code of Business Conduct & Ethics to include additional or enhanced sections on topics such as social media and human rights, and expanded our Code of Business Conduct & Ethics training program to include hourly employees

 

•  Our Nominating and Corporate Governance Committee revised its committee charter to further describe its responsibilities with respect to sustainability matters, including the oversight of climate risk, as well as to change its name to the “Governance and Sustainability Committee” in light of these responsibilities

 

•  Continued to enhance transparency and ESG reporting with reference to the Global Reporting Initiative’s (“GRI”) standards, as well as the Sustainability Accounting Standards Board (“SASB”) and Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations

 

•  Increased engagement with current and potential investors, as well as other stakeholders, on ESG topics of interest throughout the year

 

    

 

 

 

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ELECTION OF DIRECTORS

(PROPOSAL NO. 1)

 

Upon the recommendation of our G&S 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 2024 or until their successors, if any, are elected or appointed. Our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws (“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. Scott, if elected, would be an independent director, as further described below in “Directors and Corporate Governance — Independence of Directors.”

Our Corporate Governance Guidelines also includes a mandatory retirement age policy whereby an individual who has reached the age of seventy-five may not stand for election or re-election to the Board.

 

 

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

Mei-Wei Cheng

  

Director

Jonathan F. Foster

  

Director

Bradley M. Halverson

  

Director

Mary Lou Jepsen

  

Director

Roger A. Krone

  

Director

Patricia L. Lewis

  

Director

Kathleen A. Ligocki

  

Director

Conrad L. Mallett, Jr.

  

Director

Raymond E. Scott

  

Director, President and Chief Executive Officer

Gregory C. Smith

  

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 nominee, as well as the specific qualifications, skills and experiences considered by the G&S Committee and the Board in recommending our slate of director nominees. Each director nominee listed below is nominated for election to the Board for a term expiring at the annual meeting of stockholders in 2024. See “Election of Directors (Proposal No. 1).”

 

Mei-Wei Cheng    Age: 73         Lear Committees:
  

 

•  Audit

 

•  P&C

 

Biography

 

Mr. Cheng has been a director of the Company since January 2019. Additionally, Mr. Cheng is a member of the Board of Directors of NIU Technologies (Nasdaq: NIU). He also serves as a member of the Board of Directors and special advisor of Grobest Group Limited, an Asian aquaculture feed company. Mr. Cheng served as the Non-Executive Chairman of both HCP Packaging from August 2018 to January 2022 and Interplex Holdings Pte. Ltd., from September 2019 to January 2022, both Baring Private Equity Asia portfolio companies. Mr. Cheng has served as an Advisory Board member of (i) CareSyntax, a technology and services platform for hospitals from May 2018 to May 2021, and (ii) Lumileds, a privately held leading LED company with an automotive lamps business, since April 2018. Additionally, Mr. Cheng currently serves as a Senior Venture Partner of Fontinalis Capital Partners II, a position he has held since December 2014. He is also a member of the Cornell Engineering College Advisory Council, the Cornell China Advisory Board and the Dartmouth Tuck Asia Advisory Board. From July 2012 to October 2018, Mr. Cheng served as a member of the Audit and Finance Committee of the Board of Directors for Seagate Technology (Nasdaq: STX), a data storage company. From February 2015 to January 2017, Mr. Cheng served as the Chairman of the Board of Directors of Pactera Technology International Ltd., a portfolio company of Blackstone Group. Mr. Cheng also served as a member of the Audit Committee of the Board of Directors of Diebold Nixdorf, Inc. (NYSE: DBD) from 2009 to 2013. Mr. Cheng serves as a Senior Advisor of Iconiq Motors, a new energy vehicle company from September 2017 to the present. From July 2010 to April 2014, Mr. Cheng served as the Chief Executive Officer of Siemens Northeast Asia and as President and Chief Executive Officer of Siemens China. Prior to joining Siemens, Mr. Cheng served as the Chairman and Chief Executive Officer of Ford Motor (China) Ltd. from 1998 to 2008, and as Group Vice President of Ford Motor Company (NYSE: F) from 2009 to 2010. Before joining Ford, Mr. Cheng held various senior executive positions at General Electric Corporation (NYSE: GE) and AT&T (NYSE: T). Mr. Cheng earned a bachelor’s degree in industrial engineering and operations research from Cornell University, a master’s degree in business administration from Rutgers University and is a graduate of both Dartmouth’s Tuck Executive Program and Massachusetts Institute of Technology’s Program for Senior Executives.

 

Skills and Qualifications

 

•  Significant international senior management and leadership experience, with a particular focus on Asian markets, including at board chairman level

 

•  Public company directorship and committee experience

 

•  Extensive international, business development, technological and sales and marketing expertise

 

•  Senior management experience in international automotive operations

 

•  Extensive knowledge of the automotive industry

 

•  Independent of management

 

    

 

 

 

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DIRECTORS AND CORPORATE GOVERNANCE

 

 

 

 

    

 

Jonathan F. Foster    Age: 62         Lear Committees:
  

 

•  Audit (Chair)

 

•  G&S

 

Biography

 

Mr. Foster has been a director of the Company since November 2009. Mr. Foster is Managing Director of Current Capital Partners LLC, a mergers and acquisitions advisory, corporate management services and private equity investing 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 a director of publicly traded Masonite International Corporation (NYSE: DOOR), Berry Global Group, Inc. (NYSE: BERY) and Five Point Holdings LLC (NYSE: FPH). He also has served as a director of Lumileds, a privately held leading LED company with an automotive lamps business, since 2022. Mr. Foster was previously a director of privately held automotive suppliers Aludyne (f/k/a Chassix), TI Automotive, Stackpole, Rimstock Holdings plc, Techniplas, LLC and Dayco Products. In addition, Mr. Foster previously was a director of publicly traded companies Chemtura Corp., Sabine Oil & Gas and Smurfit-Stone Container Corporation, as well as of numerous privately held companies. Mr. Foster has a bachelor’s degree in accounting from Emory University, a master’s degree in accounting and finance from the London School of Economics and has attended the Executive Education Program at Harvard Business School and the University of California, Berkeley, School of Law.

 

Skills and Qualifications

 

•  Senior 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

 

    

 

 

 

       

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Bradley M. Halverson    Age: 62         Lear Committee:
  

 

•  Audit

 

•  P&C

 

Biography

 

Mr. Halverson has been a director of the Company since June 2020. Mr. Halverson served as the Group President and Chief Financial Officer of Caterpillar Inc. (NYSE: CAT), the world’s leading manufacturer of construction and mining equipment, diesel and gas engines, turbines, and locomotives, from 2013 to 2018. He joined Caterpillar in 1988, serving in various roles of increasing responsibility including leading the Caterpillar Financial business unit as well as the human resources, global supply chain and information services functions. Mr. Halverson currently serves on the board of Sysco Corporation (NYSE: SYY), where he is the Audit Committee Chairman, on the board of Satellogic Inc. (Nasdaq: SATL), where he is the Audit Committee Chairman, and on the board of Constellation Energy Corporation (Nasdaq: CEG). He also previously served as a director for the U.S. Chamber of Commerce. Mr. Halverson attended the University of Illinois, where he received a Bachelor of Science degree in Accounting and an Executive Masters of Business Administration. He is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.

 

Skills and Qualifications

 

•  Senior management and leadership experience, including in international operations

 

•  Previous experience as a chief financial officer of a large, publicly-traded global manufacturing company

 

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

 

•  Public company directorship and committee experience, including at committee chairman and lead independent director levels

 

•  Independent of management

 

    

 

 

 

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Mary Lou Jepsen    Age: 58         Lear Committees
  

 

•  G&S

 

•  P&C

 

Biography

 

Dr. Jepsen was appointed a director of the Company in March 2016. Dr. Jepsen is the CEO, Founder and Chairman of the Board of Openwater, a start-up company pioneering advanced diagnostic and therapeutic medical devices as well as brain computer interfaces. Previously, Dr. Jepsen was the Executive Director of Engineering at Meta, Inc. (f/k/a Facebook, Inc.) (Nasdaq: META) and Head of Display Technologies at Oculus where she led advanced consumer electronics, optoelectronic and display design and manufacturing efforts. From 2012 to 2015, Dr. Jepsen had a similar role at Google, Inc. (Nasdaq: GOOGL) 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. Since February 2021, Dr. Jepsen has served on the board of directors of Luminar Technologies, Inc. (Nasdaq: LAZR). She is the principal inventor on approximately 250 patents. She 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 from Massachusetts Institute of Technology in Visual Studies and a Bachelor of Science in electrical engineering from Brown University.

 

Skills and Qualifications

 

•  One of the world’s foremost display and optical 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

 

•  Senior management and executive experience

 

•  Independent of management

 

    

 

 

 

       

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Roger A. Krone    Age: 66         Lear Committee:
  

 

•  Audit

 

•  G&S

 

Biography

 

Mr. Krone has been a director of the Company since November 2020. Mr. Krone has served as the Chief Executive Officer of Leidos Holdings, Inc. (NYSE: LDOS) since July 2014 and as the Chair of its Board since March 2015. Mr. Krone is expected to retire from his positions with Leidos Holdings, Inc. in May 2023. Previously, Mr. Krone served as President of Network and Space Systems for The Boeing Company (NYSE: BA) from 2006 to 2014. Mr. Krone also previously held various senior program management and finance positions at Boeing, McDonnell Douglas Corp. and General Dynamics Corporation (NYSE: GD). Mr. Krone currently serves on the board of the Greater Washington Educational Telecommunications Association, Inc. (d/b/a WETA). From February 2017 to April 2019, Mr. Krone served as a director of BorgWarner Incorporated (NYSE: BWA). Mr. Krone has a bachelor’s degree in aerospace engineering from the Georgia Institute of Technology, a master’s degree in aerospace engineering from the University of Texas at Arlington, and a Master of Business Administration from the Harvard Graduate School of Business.

 

Skills and Qualifications

 

•  Senior management experience, including serving as a chief executive officer, at a publicly-traded company

 

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

 

•  Valuable experience in global operational excellence within the engineering and aviation sectors

 

•  Significant leadership, business and corporate governance experience

 

•  Independent of management

 

    

 

 

 

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Patricia L. Lewis    Age: 61         Lear Committee:
  

 

•  G&S

 

•  P&C

 

Biography

 

Ms. Lewis has been a director of the Company since November 2020. Ms. Lewis currently serves as Executive Vice President and Chief Sustainability Officer at UnitedHealth Group Incorporated (NYSE: UNH), a position she has held since February 2022 in which she is responsible for leading the development and implementation of an enterprise ESG strategy, including establishing and meeting environmental goals, health equity goals, and diversity, equity and inclusion commitments and initiatives. Ms. Lewis previously served as Chief Human Resources Officer at UnitedHealth Group from October 2019 to February 2022. Prior to that, Ms. Lewis served in various senior management roles at Lockheed Martin Corporation (NYSE: LMT), including Senior Vice President and Chief Human Resources Officer from 2014 to October 2019; Vice President, Human Resources, Information Systems and Global Solutions from 2012 to 2014; and Vice President, Human Resources, Electronic Systems from 2011 to 2012. Ms. Lewis previously held various human resources positions at International Business Machines Corporation (NYSE: IBM) and E.I. du Pont de Nemours and Company (NYSE: DD). Prior to that, Ms. Lewis spent 15 years in a variety of operational roles at DuPont and National Semiconductor encompassing manufacturing, logistics and materials management. In 2021, Ms. Lewis was recognized by Savoy magazine as one of the Most Influential Black Corporate Directors and, in 2023, by Sustainability magazine as one of the Top 100 Women in Sustainability. Ms. Lewis has a bachelor’s degree in industrial relations management from the University of Bridgeport.

 

Skills and Qualifications

 

•  Senior management, leadership and operational experience with multiple global companies across several industries, including health care, national security, life sciences and technology

 

•  Over two decades experience in all aspects of human capital management spanning multiple complex and highly regulated industries, including serving as a Chief Human Resources Officer at large manufacturing and technology companies with significant operations throughout the world

 

•  Significant leadership experience in ESG, including responsibility for leading employee and stakeholder engagement; diversity, equity and inclusion; health equity; and environmental strategies.

 

•  Independent of management

 

    

 

 

 

       

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Kathleen A. Ligocki    Age: 66         Lear Committees:
  

 

•  G&S

 

•  P&C (Chair)

 

Biography

 

Ms. Ligocki has been a director of the Company since September 2012. She currently serves on the boards of Carpenter Technology (NYSE: CRS), where she chairs the Human Resources Committee and sits on the Nominating & Governance and Strategy Committees; PPG Industries Inc. (NYSE: PPG), where she sits on the Audit and Sustainability/Innovation Committees; Farmers Business Network, where she is the chair of the board and sits on the Audit and Compensation Committees; and the Indiana University Foundation, where she chairs the Audit Committee and sits on the Legal/Governance Committee. Ms. Ligocki also serves on the boards of Aperia Technologies and Lime Rock New Energy. From December 2015 to February 2019, Ms. Ligocki served as the Chief Executive Officer of Agility Fuel Solutions, based in Costa Mesa, California. From 2014 to 2015, Ms. Ligocki served as the Chief Executive Officer of Harvest Power, Inc., one of the leading organics management companies in North America. 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 was a Principal in Pine Lake Partners, a consultancy focused on startups 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 (NYSE: F) 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 (NYSE: GM) working for 15 years at Delco Electronics Corporation. Ms. Ligocki formerly served as a director of Qell Acquisition Corp (Nasdaq: QELL), Agility Fuel Solutions, Harvest Power, Inc., Ashland Inc. (NYSE: ASH), Next Autoworks, BlueOak Resources, Lehigh Technologies, and Tower Automotive. Ms. Ligocki earned a bachelor’s degree with highest distinction in Liberal Studies from Indiana University Kokomo and holds a Master of Business Administration from the Wharton School at the University of Pennsylvania. She also has been awarded honorary doctorate degrees from Oakland University, Central Michigan University and Indiana University Kokomo.

 

Skills and Qualifications

 

•  Senior management and leadership experience, including as chief executive officer, 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

 

    

 

 

 

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Conrad L. Mallett, Jr.    Age: 69         Lear Committees:
  

 

•  Audit

 

•  G&S (Chair)

 

Biography

 

Justice Mallett has been a director of the Company since August 2002. In April 2022, Justice Mallett was named Corporation Counsel of the City of Detroit. Justice Mallett was previously the Deputy Mayor of the City of Detroit from June 2020 to April 2022 and the Chief Administrative Officer of Detroit Medical Center from September 2019 to December 2020. Prior to that, he served as the Chief Executive Officer of Detroit Medical Center’s Sinai-Grace Hospital from August 2017 to September 2019, the Interim Chief Executive Officer of Detroit Medical Center’s Huron Valley Sinai Hospital from March 2017 to August 2017 and the Executive Vice President and Chief Administrative Officer of Detroit Medical Center from January 2012 to August 2017. Previously, he served 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. (Nasdaq KELYA). In 2021 and 2016, Justice Mallett was recognized by Savoy magazine as one of the Most Influential Black Corporate Directors. Justice Mallett has a bachelor’s degree from the University of California, Los Angeles, a Juris Doctorate and a Master of Public Administration from the University of Southern California and a Master of Business Administration from Oakland University.

 

Skills and Qualifications

 

•  Senior management and leadership experience

 

•  Leadership experience gained as Chief Justice of the Michigan Supreme Court and through multiple executive-level roles with Detroit Medical Center

 

•  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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Raymond E. Scott    Age: 57        President and Chief Executive Officer
  

 

Biography

 

Mr. Scott was appointed as President and Chief Executive Officer of the Company on March 1, 2018. Previously, Mr. Scott also served as the Company’s Interim President, E-Systems from January 28, 2019 to September 3, 2019. Prior to that, he served as the Company’s Executive Vice President and President, Seating, a position he had held since November 2011, and prior to that, as the Company’s Senior Vice President and President, E-Systems, a position he had held since February 2008. Previously, he served in other positions at the Company, including Senior Vice President and President, North American Seat Systems Group since August 2006, Senior Vice President and President, North American Customer Group since June 2005, President, European Customer Focused Division since June 2004 and President, General Motors Division since November 2000. Mr. Scott earned a Bachelor of Science in economics from the University of Michigan. He also earned a Master of Business Administration from Michigan State University’s Advanced Management Program.

 

Skills and Qualifications

 

•  Senior management and leadership experience with the Company, with extensive knowledge of the Company’s business, operations and global strategy

 

•  Track record of leadership, achievement, innovation and execution in the Company’s Seating and E-Systems businesses

 

•  More than 30 years of experience in the automotive industry

 

    

 

 

 

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Gregory C. Smith    Age: 71         Non-Executive Chairman
  

 

Biography

 

Mr. Smith has served as the Company’s Non-Executive Chairman since May 2020 and been a director of the Company since November 2009. Mr. Smith, a retired Vice Chairman of Ford Motor Company (NYSE: F), 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. Mr. Smith currently serves as a director of publicly traded Penske Automotive Group (NYSE: PAG), where he serves as the chair of the Audit Committee, and formerly served as a director of the Federal National Mortgage Association (Fannie Mae), Penske Corporation and Solutia Inc. Mr. Smith serves on the Risk Oversight Advisory Council of the National Association of Corporate Directors (NACD). Mr. Smith has a bachelor’s degree in mechanical engineering from Rose-Hulman Institute of Technology and a Master of Business Administration from Eastern Michigan University.

 

Skills and Qualifications

 

•  Senior 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

 

    

 

 

 

       

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Criteria for Selection of Directors

 

 

The following are the general criteria for the selection of our directors that the G&S Committee utilizes in evaluating candidates for Board membership. The G&S 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 Board believes that board diversity is important to serving the long-term interests of Lear and its stockholders. In the event the G&S Committee determines to recruit candidates as potential nominees to join the Board, the candidate pool will include qualified female and racially and/or ethnically diverse candidates and any third-party recruitment utilized in connection with such search will be instructed to include such individuals in the list of candidates they provide the G&S Committee.

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 G&S Committee believes would contribute to the effective functioning of our Board.

Our Corporate Governance Guidelines and G&S Committee charter provide guidelines with respect to the consideration of director candidates. Under these guidelines, the G&S 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 G&S Committee also may recommend to the Board changes to the portfolio of director skills, experience, perspective and background required for

 

 

    

 

 

 

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the effective functioning of the Board, considering the Company’s strategy and its regulatory, geographic and market environments. Any such changes to the director selection criteria must be approved by the Board.

The G&S Committee screens candidates and recommends director nominees to the Board for approval. The G&S Committee considers candidates for Board membership suggested by its members and other Board members, as well as management and stockholders. Additionally, the Board annually conducts an in-depth talent review to discuss

leadership depth and succession. The G&S Committee also may retain a search firm (which may be paid a fee) to identify director candidates. Once a potential candidate has been identified, the G&S 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.

 

 

Board Composition

 

The following matrix provides certain information regarding the members of our Board, including certain types of knowledge, skills experiences and attributes possessed by one or more of our directors which our Board believes are relevant to our business or industry. The matrix does not encompass all of the knowledge, skills, experiences or attributes of our directors, and the fact that a particular knowledge, skill, experience or attribute is not listed does not mean that a director does not possess it. In addition, the absence of a particular type of knowledge, skill, experience, or attribute with respect to any of our directors does not mean the director in question is unable to contribute to the decision-making process in that area. The type and degree of knowledge, skill and experience listed below may vary among members of the Board.

 

                         
  Category     Profile / Skills Mei-Wei
Cheng
Jon
Foster
Brad
Halverson
Mary Lou
Jepsen
Roger
Krone
Patricia
Lewis
Kathleen
Ligocki
Conrad
Mallett

Ray

Scott

Greg
Smith
                       

LOGO

Woman

 

 

 

×

 

×

×

 

 

 

African-American / Black

 

 

 

 

 

×

 

×

 

 

Pan-Asian

×

 

 

 

 

 

 

 

 

 

Non-U.S. Resident

×

 

 

 

 

 

 

 

 

 

LGBTQ

 

 

 

 

 

×

 

 

 

 

    

                       

LOGO

CEO / Large Business Head

×

×

×

×

×

 

×

×

×

×

CFO / Treasurer / Fin. Serv. Exec.

 

×

×

 

×

 

 

 

 

×

Auto Industry

×

×

 

 

×

 

×

 

×

×

Technology

×

 

 

×

×

×

×

 

×

×

Strategy

×

×

×

×

×

×

×

×

×

×

Finance

×

×

×

 

×

 

×

×

 

×

Commercial / Marketing

×

 

 

×

 

 

×

×

×

×

Operations

×

 

 

×

×

×

×

×

×

×

Human Capital Management

×

 

×

×

×

×

×

×

×

×

Legal / Governmental

×

×

 

 

×

 

 

×

 

 

Environmental, Social, Governance

×

×

×

×

×

×

×

×

×

×

International

×

×

×

×

×

×

×

 

×

×

In the table above, an “X” indicates experience in the category gained directly or through active oversight of one responsible for the category.

 

    

 

 

 

       

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Recommendation of Directors by Stockholders

 

 

In accordance with its charter, the G&S 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 G&S Committee evaluates such candidates in the same manner by which it evaluates other director candidates considered by the G&S 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: Harry A. Kemp, Senior Vice President, Chief Administrative Officer and General Counsel. See “Stockholder Proposals for 2024 Annual Meeting of Stockholders.” In addition, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than Lear nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act.

A copy of our Bylaws 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

 

 

A majority of the members of the Board, and each member of the Audit Committee, P&C Committee and G&S Committee, must meet the criteria for independence set forth under applicable law and the 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. In addition to considering the NYSE independence criteria, 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 current directors. Based on the NYSE independence guidelines, the Board has affirmatively determined that (i) Messrs. Cheng, Foster, Halverson, Dr. Jepsen, Mr. Krone, Mses. Lewis and Ligocki and Messrs. Mallett and Smith (A) have no relationships or only immaterial relationships with us, (B) meet the NYSE independence guidelines with respect to any such relationships and (C) are independent; and (ii) Mr. Scott is not independent. Mr. Scott is our President and Chief Executive Officer (the “CEO”).

 

 

Board Retirement Policy

 

 

In 2023, the Board amended the Company’s Corporate Governance Guidelines to increase the mandatory retirement age for Board members. The revised policy states that an individual may not stand for election or re-election to the Board if such individual has reached seventy-five years of age. However, the Board may, in its discretion, waive this policy.

The Board believes that the increase in the mandatory retirement age from seventy-two to seventy-five is consistent with, among other things, prevailing market practice and the Company’s desire to avoid losing the contributions of directors who have unique skill sets or insight into the Company’s industry, business or operations.

 

 

 

    

 

 

 

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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, including risks related to cybersecurity, product quality and safety and other environmental, social and governance issues

 

•  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 chairperson 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 risk exposures related to tax matters, financial instruments, litigation, cybersecurity and information security 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 audit services, 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

 

•  Periodically reviews our Code of Business Conduct & Ethics

 

   
  P&C Committee   

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

 

   
  G&S Committee   

•  Oversees risks associated with our governance structure and processes

 

•  Reviews our organizational documents, Corporate Governance Guidelines and other policies

 

•  Oversees sustainability issues, including as they pertain to environmental (including climate) and corporate social responsibility matters

 

   

 

    

 

 

 

       

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Environmental, Social and Governance

 

Every Day, Striving for Better – Environmental, Social and Governance at Lear

 

Consistent with Lear’s vision, Making Every Drive Better, we work to ensure that our passion for our business is also channeled into creating possibilities for a better world. This means that as part of our ESG initiatives, which we execute under the mantra of Every Day, Striving for Better, we are committed to safety in our workplaces, integrity in the conduct

of our business, advancing sustainability in our operations and products, and supporting the global communities in which we live and work. Furthermore, we expect all of our suppliers of production goods and services to share our commitment to social responsibility and ethical conduct.

 

 

ESG Oversight

The G&S Committee of our Board of Directors has responsibility for oversight of the Company’s ESG strategy, including as it pertains to environmental (including climate), human rights and other corporate social responsibility matters. In this regard the G&S Committee works closely with our other Board Committees, Audit and P&C, that have responsibility for overseeing certain elements of ESG such as compliance and human capital management, respectively. To better integrate sustainability considerations throughout our Company, Lear also has added specific ESG responsibilities to senior management (as shown in the chart below).

Our ESG strategy is realized through, among other things, our comprehensive human capital management initiatives which emphasize leadership development, employee engagement and a culture that values individuals of all backgrounds; innovative product development focused on key sustainability trends like electrification; and policies, procedures and practices that ensure alignment with our core value to Get Results the Right Way. In addition, we value transparency in communication. In 2022, Lear released our annual Sustainability Report that includes disclosures with reference to the GRI standards, as well as reporting with the SASB and TCFD recommendations. Lear is a participant in the United Nations Global Compact (“UNGC”), and we align our sustainability efforts with the ten principles on human rights, labor, environment, and anti-corruption, along with the Sustainable Development Goals (“SDGs”). To learn more, see Lear’s Sustainability Report: www.lear.com/sustainability. The information on our website is not part of this proxy statement and is not deemed to be incorporated by reference herein.

LOGO

 

    

 

 

 

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Environmental Efforts

We are committed to advancing sustainability in our products and operations. Our core value of innovation helps us not only to create and use environmentally friendly materials, but also to develop advanced technologies that facilitate sustainable, longer-term automotive industry megatrends like electrification and shared mobility. At the same time, our core capability of operational excellence drives us to focus continuously on improving energy efficiency and reducing our consumption of natural resources and creation of waste. More specifically:

 

Our innovative technologies enable electrification and use renewable materials

 

  We have included a design directive within our engineering systems that requires sustainability to be considered as a part of all product designs, including as to raw materials sourcing, manufacturing processes, logistics, and recyclability / reusability

 

  Many of our product offerings are aligned with the continuing shift to electrification, such as our electrical distribution and connection systems and battery disconnect units, which control all electrical energy flowing into and out of the high voltage battery on electrified vehicles

 

  Our vertical integration capabilities, together with our lightweight seat recliners, tracks, latches and other components, can facilitate weight reductions and other performance efficiencies in our products, in turn enabling enhanced fuel efficiency, lower emissions and increased battery driving range

 

  We are leveraging available technology to replace certain petroleum-based products with more sustainable alternatives, such as SoyFoamTM and, more recently, FlexAirTM, our 100% recyclable non-foam alternative that is anticipated to reduce both CO2 emissions and mass as compared to traditional foam offerings

 

  We are developing and commercializing a range of fabrics that contain recycled, renewable or recyclable yarns, including our ReNewKnitTM sustainable sueded alternative material, which is a first-to-market automotive textile that is fully recyclable at its end of life and composed of 100% recycled plastic bottles

 

  Lear’s INTU intelligent seating with Thermal Comfort focuses on faster and more efficient heating and ventilation for the occupant, which enables reduced energy consumption and extended battery driving range for electric vehicles

 

  Our ConfigurE+ seating architecture, with electrified tracks and a configurable seating or racking system, supports shared mobility and has potential commercial applications, including for last mile delivery

We have set carbon reduction goals against a 2019 baseline

 

  50% reduction in carbon emissions at our facilities by 2030

 

  100% usage of renewable energy for our electricity consumption by 2030

 

  Net zero emissions at our facilities, and both upstream and downstream where we have influence, by 2050

We are implementing a multifaceted strategy to achieve our carbon reduction goals

 

  In 2022, we finalized and began implementing our comprehensive renewable energy strategy, which includes on-site renewable energy generation at certain sites, the purchase of energy attribution certificates in certain locations on an ongoing basis, and virtual power purchase agreements to support new renewable energy projects in the United States and Europe

 

  On-site solar array installations are providing a portion of the electricity consumed at nine of our facilities worldwide, and in 2022 we completed the installation of our largest array in Europe to date in Valls, Spain

 

  Our renewable energy strategy has resulted in 100% electricity purchased being from renewable sources for all Lear facilities in Germany, Hungary, Poland, and the United Kingdom

 

  We continue to conduct life cycle assessments (“LCAs”) on our major product lines to measure their carbon footprint and identify potential carbon reduction opportunities; as a result of our continued efforts we have now completed reference LCAs on seven of our nine major product lines

 

  In 2022, we joined Climate Group’s RE100, a global renewable electricity initiative comprised of companies committed to sourcing 100% of their operations’ electricity from renewable sources, and formally committed to the SBTi by agreeing to reduce GHG emissions in alignment with the 2015 Paris Agreement regarding climate change
 

 

    

 

 

 

       

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We are reducing emissions, saving energy and conserving natural resources in our operations

 

  Our Energy Efficiency Playbook, first released in 2021, continues to be leveraged at our global manufacturing sites on an ongoing basis to improve energy efficiency and reduce energy usage

 

  In 2022, we released additional playbooks specific to waste generation and water usage which, like the Energy Efficiency Playbook, are focused on promoting sustainable operating practices within our global facilities, while at the same time increasing operational efficiency and potentially reducing costs
  100% of our eligible manufacturing facilities are currently ISO 14001:2015 compliant and new facilities are required to obtain certification as soon as possible after opening

 

  In 2021, we introduced updated facility specifications regarding the use of energy efficient equipment, such as LED lighting and plant-wide ventilation systems or other HVAC initiatives, when practicable at our new and refurbished plants; these specifications continue to be implemented on an ongoing basis
 

 

Social Initiatives

We believe the best way to deliver the highest quality products and services is to maintain a work environment that prioritizes safety and fosters collaboration, inclusion, tolerance and respect. More specifically:

 

We create meaningful employment and development opportunities for our approximately 169,000 team members around the world

 

  Our approximately 148,000 hourly employees receive competitive pay and benefits such as transportation, meals, medical leave, paid holidays and health care

 

  In 2022, we delivered more than five million hours of safety, development, leadership, quality, continuous improvement, lean manufacturing, and ISO and IATF certification training

 

  Our health and safety management system is compliant with the ISO 45001:2015 standard, and we are currently implementing a more comprehensive health and safety program which combines ISO 14001:2015 and 45001:2018 requirements to improve efficiency and performance

 

  Launched in 2017, Lear’s Together We Win program is a global employee engagement program focused on driving cultural change in our operations by providing best practices and a roadmap for our plants to improve in the areas of leadership, work environment, employee involvement and team empowerment

We strive for diversity, equity and inclusion in all we do

 

  Lear’s Together We Belong encompasses Lear’s internal initiatives and education programs for DEI. In 2022, we delivered “Expect Respect” training globally to approximately 56,000 employees. Together We Belong continues to help our employees increase their understanding of their unique differences and the importance of an inclusive culture
  We have an Executive Diversity Council that oversees our DEI strategy, prioritizes activities, and drives accountability and results

 

  In 2022, the first group of Lear employees progressed through Together We Grow, a merit-based leadership development program which was launched in 2021 for our diverse, high-potential leaders; the program is designed to accelerate professional growth and provide a pathway for career advancement

 

  We support six employee-led resource groups (“ERGs”) spanning 15 countries; each group is supported by a senior executive sponsor and is open to all employees. Lear’s ERGs build community, a sense of belonging, and a culture where everyone in our diverse and global workforce feels heard, accepted and valued

 

  Lear spent approximately $5.4 billion with diverse suppliers in the past 10 years

 

  In 2022, our teams completed more than 200,000 hours of DEI and anti-harassment training

 

  In 2022, we completed a pay equity study on 100% of salaried females in addition to ethnic minorities in the U.S. Based on our findings, 0.7% of the salaried employees reviewed were recommended for an adjustment to base salary

 

  We have published on our website our consolidated EEO-1 summary data as submitted to the U.S. Equal Employment Opportunity Commission for calendar year 2021, and will disclose such data for calendar year 2022 when available
 

 

    

 

 

 

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Lear employees dedicate themselves to supporting the global communities where they live and work

 

  Our Michigan-based employees donated almost $1 million to local and global charities during 2022 through our annual Company giving initiative

 

  Our Company and our employees collectively contributed over $100,000, as well as food and supplies, to Ukraine humanitarian relief efforts in 2022, and a number of
   

Ukrainian refugees have become employed at a Lear facility in Moldova

 

  In 2022, we continued to expand our global Driving Wellness program, which includes localized initiatives to support the mental health and wellness of employees

 

  Lear has recommitted to the UNGC every year since first becoming a participant in 2020, and we align our ESG initiatives with the 10 UNGC principles supporting human rights, labor, environment and anti-corruption
 

 

Governance

Governance at Lear is driven by our commitment to Get Results the Right Way. This means not only developing systems and processes to ensure compliance with regulations and company policies, but also creating a culture of ethics and integrity in everything we do. We expect our supply chain partners to share and demonstrate the same commitment, and we work with them to reinforce this expectation.

 

We have an experienced and diverse Board of Directors

 

  50% of our Directors are diverse by ethnicity and/or gender

 

  See page 17 for a description of Director skills and experiences

Our cybersecurity efforts protect our products, our customers and our enterprise

 

  Lear’s inhouse cybersecurity experts design and deploy security into our vehicle components and offer security monitoring throughout the life cycle of the vehicle

 

  We have an experienced enterprise cybersecurity team, many of whom possess industry-leading certifications like those offered by the International Information System Security Consortium and Certified Ethical Hacker

We partner with our suppliers to ensure sustainability throughout the supply chain

 

  We require suppliers to comply with our Supplier Sustainability Policy, which includes commitments to human rights, environmental standards, safe working conditions and responsible sourcing

 

  Leveraging a third-party supply chain management partner, Lear has assessed more than 2,800 global production supplier sites against ESG criteria, including environmental stewardship and human rights, since 2021

 

  Lear’s Supplier Portal provides access to our policies and commitments, along with resources and awareness materials on certain ESG topics, such as human rights, and forced and child labor
  Our No Deforestation Policy requires that all materials supplied to us are from legal sources, that land is not clear-cut or burned for production or development, and that our suppliers comply with governmental laws, regulations and guidelines regarding deforestation

Other key aspects of our corporate governance efforts include:

 

  All of our director nominees are independent, except our President and Chief Executive Officer

 

  We have a non-executive Chairman of the Board

 

  We have a majority voting standard with a director resignation policy for uncontested director elections

 

  We have robust stock ownership guidelines for our directors and management

 

  Risk oversight is conducted by the full Board and committees

 

  All directors are elected annually

 

  Executive sessions of independent directors are held at regularly scheduled Board meetings

 

  Excellent track record of attendance at all Board and committee meetings in 2022

 

  Board and committees complete written self-evaluations and participate in oral evaluations

The Board has approved Corporate Governance Guidelines, which were revised in 2022 to include a succession planning process for directors to the Board’s responsibilities and in 2023 to increase the mandatory retirement age for directors as

 

 

    

 

 

 

       

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mentioned above in “Board Retirement Policy.” The Board has also approved a Code of Business Conduct & Ethics, which was revised in 2022 to include additional or enhanced sections on topics such as social media and human rights. In 2022, all directors completed the same training course on our revised Code of Business Conduct & Ethics as was completed by our employees. Our corporate governance documents, including the Corporate Governance Guidelines, the Code of Business Conduct & 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.

 

 

Other Board Information

 

Leadership Structure of the Board

 

Gregory C. Smith is our Non-Executive Chairman of the Board and has served in that role since May 2020. Our Board has decided to maintain separate non-executive chairperson and CEO roles to allow our CEO to focus on the execution of our business strategy, growth and development, while allowing the non-executive chairperson to lead the Board in its fundamental role of providing advice to, and independent oversight of, management, as well as oversight of Board meetings. 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 non-executive chairperson and CEO positions be separate, the Board believes that having separate positions and having an independent director serve as non-executive chairperson is the appropriate leadership structure for the Company at this time.

 

 

Board Meetings

 

In 2022, our Board held six 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 2022 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 2022, our annual meeting of stockholders was held on May 19, 2022, in virtual format, and all directors attended.

 

 

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. Smith, our Non-Executive Chairman, has presided over these executive sessions through the Annual Meeting.

 

 

Committees of the Board

 

The Board has three standing committees: the Audit Committee, the P&C Committee and the G&S Committee.

The following chart sets forth the directors who currently serve as members of each of the Board committees.

 

 

    

 

 

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Directors    Audit
Committee
   P&C
Committee
  

G&S

Committee

Mei-Wei Cheng

   X    X   

Jonathan F. Foster

   C       X

Bradley M. Halverson

   X    X   

Mary Lou Jepsen

      X    X

Roger A. Krone

   X       X

Patricia L. Lewis

      X    X

Kathleen A. Ligocki

      C    X

Conrad L. Mallett, Jr.

   X       C

Raymond E. Scott

        

Gregory C. Smith*

   E    E    E

 

*

Non-Executive Chairman of the Board

 

“C”

Denotes member and chair of committee

 

“X”

Denotes member

 

“E”

Denotes Ex Officio member

Audit Committee

 

In 2022, the Audit Committee held eight 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.”

A copy of the current charter is available on our website at ir.lear.com or in printed form upon request.

 

 

People and Compensation Committee

 

In 2022, the P&C Committee held four meetings. Each of the members of the P&C Committee is a non-employee director. In addition, the Board has determined that all of the members of the P&C Committee are independent as defined in the listing standards of the NYSE, including the independence standards applicable to compensation committees. The P&C 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 P&C Committee utilizes an independent compensation consultant to assist it in its duties. The P&C Committee operates under a written charter setting forth its functions and responsibilities. Effective May 19, 2022, the P&C Committee revised its charter to include supporting various Company initiatives pertaining to ESG matters that involve human capital management among its responsibilities.

A copy of the current charter is available on our website at ir.lear.com or in printed form upon request.

In consultation with the Company’s management, the P&C 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 P&C Committee in its work. These members of management work with compensation consultants whose engagements have been approved by the P&C Committee, accountants and legal counsel, as necessary, to implement the P&C Committee’s decisions, to monitor evolving competitive practices and to make compensation recommendations to the P&C Committee. Our human resources management develops specific compensation recommendations for senior executives, which are first reviewed by senior management and then presented to the P&C Committee and its independent compensation consultant. The P&C Committee has final authority to approve, modify or reject the recommendations and to make its decisions in executive session. The P&C Committee approves all compensation of our executive officers, including equity awards. Under our equity award policy, an aggregate equity award pool to

 

 

    

 

 

 

       

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non-executive officers may be approved by the P&C Committee and allocated to individuals by the Company’s CEO. The policy also allows the P&C 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 P&C Committee utilizes Pay Governance LLC (“Pay Governance”) as its independent compensation consultant. The consultant reports directly to the P&C Committee, including with respect to management’s recommendations of compensation programs and awards. The P&C 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 Pay Governance is to serve the Company and work with the P&C 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 P&C 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 NEOs (as defined in “Compensation Discussion and Analysis”). As part of this process, the P&C 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 P&C Committee or the Company.

In 2022, the Company retained Frederic W. Cook & Co., Inc. (“Frederic W. Cook”) to provide support on an as-needed basis in the review of various executive compensation programs, including review of the performance measures used by the Company in its long-term incentive program.

The Company and the P&C Committee reviewed the independence of Pay Governance and Frederic W. Cook in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that the work performed by the consultants for the Company and the P&C Committee does not constitute a conflict of interest.

 

 

Governance and Sustainability Committee

 

In 2022, the G&S Committee held four meetings. Each of the members of the G&S Committee is a non-employee director. In addition, the Board has determined that all of the members of the G&S Committee are independent as defined in the listing standards of the NYSE.

The G&S 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; (vi) reviewing potential conflicts of interest involving our executive officers; and (vii) overseeing sustainability issues, including as they pertain to environmental, human rights and other corporate social responsibility matters. The G&S Committee operates under a written charter setting forth its functions and responsibilities. Effective September 22, 2022, the G&S Committee revised its charter to further describe its oversight of sustainability matters, including climate risk, which is further reflected in the committee’s name change from the “Nominating and Corporate Governance Committee” to the “Governance and Sustainability Committee.”

A copy of the current charter is available on our website at ir.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: Harry A. Kemp, Senior Vice President, Chief Administrative Officer and General Counsel. 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

 

 

    

 

 

 

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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 ir.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 ir.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.

 

 

Director Compensation

 

The following table summarizes the annual compensation for our non-employee directors during 2022. A summary of the director compensation program and elements is presented after the table below.

 

2022 Director Compensation  

Name

  

 

Fees Earned or Paid
in Cash(1)

     Stock Awards(3)      Total  

Mei-Wei Cheng(2)

  

$

115,000

 

  

$

174,911

 

  

$

289,911

 

Jonathan F. Foster

  

$

135,000

 

  

$

174,911

 

  

$

309,911

 

Bradley M. Halverson

  

$

115,000

 

  

$

174,911

 

  

$

289,911

 

Mary Lou Jepsen

  

$

115,000

 

  

$

174,911

 

  

$

289,911

 

Roger A. Krone(2)

  

$

115,000

 

  

$

174,911

 

  

$

289,911

 

Patricia L. Lewis

   $ 115,000      $ 174,911      $ 289,911  

Kathleen A. Ligocki

   $ 135,000      $ 174,911      $ 309,911  

Conrad L. Mallett, Jr.

   $ 130,000      $ 174,911      $ 304,911  

Gregory C. Smith

   $ 195,000      $ 294,971      $ 489,971  

 

(1) 

Includes cash retainer and other fees earned for service as directors in 2022. The base annual cash retainer is $115,000 and as described below, there is an additional cash retainer for the Non-Executive Chairman and the Chair of each of the Audit Committee, P&C Committee and G&S Committee.

 

(2) 

Messrs. Cheng and Krone deferred $115,000 of their 2022 retainer fees.

 

(3) 

As described below under the heading “Equity Compensation,” on May 19, 2022, each of our non-employee directors who were members of the Board on the date of the annual meeting of stockholders received a restricted stock unit (“RSU”) grant that vests on the earlier of the first anniversary of the grant date and the date of the next annual meeting of stockholders that is at least 50 weeks following the immediately preceding year’s annual meeting of stockholders, subject to each director’s continued service on the Board. The amounts reported in this column for each director reflect the aggregate grant date fair value determined in accordance with Accounting Standards Codification (“ASC”) 718, “Compensation-Stock Compensation.” As of December 31, 2022, each of our non-employee directors who were members of the Board on such date held the following outstanding and unvested RSUs: Messrs. Cheng, Foster, Halverson, Krone and Mallett, along with Dr. Jepsen and Mses. Lewis and Ligocki – 1,317; and Mr. Smith – 2,221. Messrs. Cheng and Krone, along with Ms. Ligocki, each elected to defer 100% of their 2022 RSU grants; and Mr. Mallett elected to defer 75% of his 2022 RSU grant (in each case, subject to vesting of the RSUs).

 

    

 

 

       

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Summary of 2022 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 reviewed in August 2021. 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 $115,000. The additional cash retainer for the chairs of the P&C Committee and the Audit Committee is $20,000, the additional cash retainer for the chair of the G&S 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 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, in addition to a cash retainer, each non-employee director receives a portion of his or her annual compensation in the form of equity compensation, which is granted each year on the date of the annual meeting of stockholders at which a director is elected or re-elected to serve on the Board. Such equity compensation is paid in the form of an annual grant of

RSUs with a grant date value of approximately $175,000. The RSU awards will vest on the earlier of the first anniversary of the grant date and the date of the next annual meeting of stockholders that is at least 50 weeks following the immediately preceding year’s annual meeting, subject to forfeiture in the event that a director’s service on the Board ceases for any reason prior to the vesting date.

 

 

Non-Executive Chairman Compensation

 

In 2022, the additional compensation for our Non-Executive Chairman, currently Mr. Smith, was an additional annual cash retainer in the amount of $80,000 and an additional annual grant of RSUs with a grant date value of approximately

$120,000. The payment and vesting 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 RSU grant into a stock account where, subject to and following satisfaction of the applicable vesting requirements, notional stock units are credited until distribution in the form of shares of common stock upon the pre-selected date(s).

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 RSU grants 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.

 

 

    

 

 

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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 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, 2022), all of our

non-employee directors who were directors on the measurement date (other than Mr. Cheng, who joined the Board in January 2019, Mr. Halverson, who joined the Board in June 2020, and Mr. Krone and Ms. Lewis, who joined the Board in November 2020, each of whom is in compliance with the 50% hold requirement) 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.

 

 

Security Ownership of Certain Beneficial Owners, Directors and Management

 

The following table sets forth, as of March 24, 2023 (except as indicated below), beneficial ownership, as defined by SEC rules, of our common stock (including shares of common stock subject to stock options that are currently exercisable or exercisable within 60 days of March 24, 2023) and ownership of restricted stock units (“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 59,060,758 shares of common stock outstanding on March 24, 2023, 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(19)
 

5% Beneficial Owners:

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock, Inc.(1)

    8,565,052       14.5      

Pzena Investment Management, LLC(2)

    6,865,532       11.6      

The Vanguard Group(3)

    5,687,817       9.6      

NEOs and Directors:

 

 

 

 

 

 

 

 

 

 

 

 

Raymond E. Scott(4)(5)(6)

    178,118       *       27,818  

Jason M. Cardew(4)(7)

    36,637       *       35,449  

Carl A. Esposito(4)(7)

    37,616       *       37,931  

Frank Orsini(4)(7)

    45,031       *       43,225  

Thomas A. DiDonato(4)(5)(19)

    54,332       *        

Mei-Wei Cheng(6)(8)

    5,245       *        

Jonathan F. Foster(6)(9)

    10,857       *        

Bradley M. Halverson(6)(10)

    3,556       *        

Mary Lou Jepsen(6)(11)

    8,278       *        

Roger A. Krone(6)(12)

    2,771       *        

Patricia L. Lewis(6)(13)

    2,771       *        

Kathleen A. Ligocki(6)(14)

    17,738       *        

Conrad L. Mallett, Jr.(6)(15)

    11,837       *        

Gregory C. Smith(6)(16)

    16,112       *        

Total Executive Officers and Directors as a Group (18 individuals)(17)

    443,623       *       176,498  

 

 

 

 

       

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*

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 26, 2023, by BlackRock, Inc. (“BlackRock”). BlackRock is the beneficial owner of 8,565,052 shares, with sole dispositive power as to all such shares and sole voting power as to 8,048,349 such 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 January 20, 2023, by Pzena Investment Management, LLC (“Pzena”). Pzena is the beneficial owner of 6,865,532 shares, with sole dispositive power as to all such shares and sole voting power as to 5,945,234 such shares. Pzena’s principal place of business is 320 Park Avenue, 8th Floor, New York, New York 10022.

 

(3) 

Information contained in the table above and this footnote is based on a report on Schedule 13G/A filed with the SEC on February 9, 2023, by The Vanguard Group (“Vanguard”). Vanguard is the beneficial owner of 5,687,817 shares, with sole dispositive power as to 5,557,368 such shares, shared dispositive power as to 130,449 such shares and shared voting power as to 46,047 such shares. Vanguard’s principal place of business is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

 

(4) 

The individual is a NEO (as defined in “Compensation Discussion and Analysis”).

 

(5) 

Messrs. Scott and DiDonato are retirement-eligible and therefore each qualifies for accelerated vesting of all of his time-vesting 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. Scott’s share ownership includes 48,777 time-vesting Career Shares and 25,490 unvested RSUs and Mr. DiDonato’s share ownership includes 7,911 time-

  vesting Career Shares and 5,731 unvested RSUs (all Career Shares and RSUs awarded more than one year prior to the record date). Each of Messrs. Scott and DiDonato’s time-vesting Career Shares and unvested RSUs would be forfeited only if he were terminated for “cause” pursuant to the terms of his employment agreement. Messrs. Scott and DiDonato’s respective share ownership also includes 87,111 and 20,690 shares of common stock, respectively, that each person has the right to acquire pursuant to stock options that are currently exercisable. Mr. DiDonato also has indirect beneficial ownership of 20,000 shares of common stock held by GRAT.

 

(6) 

The individual is a director.

 

(7) 

Messrs. Cardew, Esposito and Orsini are not yet retirement-eligible, and thus, their share ownership does not include any time-vesting Career Shares or unvested RSUs. If they remain employed by the Company, Messrs. Cardew, Esposito and Orsini will become retirement-eligible on June 29, 2025, September 1, 2026, and April 2, 2027, respectively. Messrs. Cardew, Esposito and Orsini’s respective share ownership also includes 20,394, 18,201, and 24,890 shares of common stock, respectively, that each person has the right to acquire pursuant to stock options that are currently exercisable.

 

(8) 

For Mr. Cheng, the information contained in the table above includes 2,916 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. The table also includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date, which will be deferred upon vesting in accordance with the director’s election.

 

(9) 

For Mr. Foster, the information contained in the table above includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date.

 

(10) 

For Mr. Halverson, the information contained in the table above includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date.

 

(11) 

For Dr. Jepsen, the information contained in the table above includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date.

 

(12) 

For Mr. Krone, the information contained in the table above includes 875 deferred stock units, which are fully vested and convert into shares of common stock on a 1-for1 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. The table also includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date, which will be deferred upon vesting in accordance with the director’s election.

 

(13) 

For Ms. Lewis, the information contained in the table above includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date.

 

(14) 

For Ms. Ligocki, the information contained in the table above includes 13,220 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. The table also includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date, which will be deferred upon vesting in accordance with the director’s election.

 

(15) 

For Mr. Mallett, the information contained in the table above includes 10,520 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. The table also includes 1,317 RSUs vesting on May 18, 2023, within 60 days following the record date, a portion of which will be deferred upon vesting in accordance with the director’s election.

 

(16) 

For Mr. Smith, the information contained in the table above includes 2,221 RSUs vesting on May 18, 2023, within 60 days following the record date. The table also includes 13,891 shares of common stock held in Ann Cournoyer Smith Irrev Trust for the benefit of Mr. Smith’s children of which Mr. Smith is the trustee.

 

    

 

 

 

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(17) 

Includes Alicia Davis, Amy Doyle, Harry Kemp and Marianne Vidershain.

 

(18) 

Includes, as of March 30, 2023, time-vesting Career Shares and unvested RSUs owned by our executive officers. These time-vesting 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.

 

(19) 

Mr. DiDonato is retiring in September 2023.

Delinquent Section 16(a) Reports

 

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, executive officers and beneficial owners of more than ten percent of our equity securities complied with the reporting requirements of Section 16(a) of the Exchange Act during 2022, with the exception of a late Form 4 filed on February 10, 2023, for Mr. Foster reporting four transactions for a total of 202 shares of common stock, due to an inadvertent administrative error.

 

    

 

 

 

       

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COMPENSATION DISCUSSION AND ANALYSIS

The following section 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 “2022 Summary Compensation Table” (collectively, our named executive officers, referred to herein as our “NEOs”) during the year ended December 31, 2022. To assist in understanding compensation for 2022, we have included a discussion of our compensation policies and practices for periods before and after 2022 where relevant. To avoid repetition, in the discussion that follows we make cross-references to specific compensation data and terms for our NEOs 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 NEOs.

NEOs

 

 

Our NEOs for 2022 are:

Raymond E. Scott, President and Chief Executive Officer

Jason M. Cardew, Senior Vice President and Chief Financial Officer

Frank C. Orsini, Executive Vice President and President, Seating

Thomas A. DiDonato, Senior Vice President and Chief Administrative Officer

Carl A. Esposito, Senior Vice President and President, E-Systems

 

 

Executive Summary

 

Key highlights of the main sections for our Compensation Discussion and Analysis are as follows:

 

2022 Compensation Discussion and Analysis Roadmap
  Performance   

•  Sales of $20.9 billion, an increase of 8% over 2021 and resulting in sales growth over market of 5 percentage points

 

•  Core operating earnings increase of 5%

 

•  Free cash flow of $383 million compared to $85 million for 2021

 

  Risk and

  Governance

  

•  Appropriate mix of base salary, annual bonus opportunities, and long-term equity compensation, including performance-based equity compensation, with the majority of at-risk compensation tied to performance in our incentive plans

 

•  Rigorous clawback and recovery provisions applicable to all incentive-based cash and equity compensation granted to current and former executive officers

 

•  Stock ownership guidelines that align executive and stockholder interests

 

  NEO

  Compensation

  

•  The 2022 Annual Incentive Plan (“AIP”) resulted in payout at 124% of target based on performance against two financial measures (Adjusted Operating Income and Free Cash Flow)

 

•  The 2020 – 2022 Performance Shares resulted in payout at 111% of target based on performance against one financial measure (Adjusted Annual Pretax Income) and one market measure (Relative TSR)

 

•  2023 Performance Shares have a three-year performance period (2023 – 2025) and will pay out in 2026

 

•  NEO pay levels are commensurate with 2022 performance and overall business results — reinforcing Lear’s pay-for-performance compensation philosophy based on performance against two financial measures (Adjusted Annual Pretax Income and Adjusted Return on Invested Capital Improvement) and one market measure (Relative TSR)

 

 

    

 

 

 

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2022 Compensation Discussion and Analysis Roadmap
  2022 Say-on-Pay   

•  2022 Say-on-Pay vote received 89% support; approval has averaged 96% since 2015

 

•  Investor meetings were held throughout 2022 to discuss Lear’s strategic goals and to receive feedback on various topics, including executive compensation

 

  Pay Aligned with

  Performance

  

•  Compensation programs are designed to be aligned with our business strategy and are correlated to business performance and stockholder return

 

•  Annual incentive plan and long-term incentive plan tied to achievement of key financial measures

 

•  Pay is tied to rigorous risk and governance practices

 

2022 Business Highlights

 

We are a global automotive technology leader in Seating and E-Systems, enabling superior in-vehicle experiences for consumers around the world. We supply seat systems, key seat components, complete electrical distribution and connection systems, battery disconnect units and other electronic products to all of the world’s major automotive manufacturers. At Lear, we are Making every drive better by providing the technology for safer, smarter and more comfortable journeys, while adhering to our values — Be Inclusive. Be Inventive. Get Results the Right Way.

Lear, headquartered in Southfield, Michigan, employs a diverse team of talented employees in 37 countries and is driven by a commitment to innovation, operational excellence and sustainability. We have 253 manufacturing, engineering and administrative locations globally, and continue to restructure our manufacturing footprint to optimize our cost structure with 67% of our manufacturing facilities and 86% of our employees located in low-cost countries. We continue 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 generally market-median based for achievement of targets with the opportunity to earn more (or less) commensurate with the Company’s performance.

Lear is built on a foundation and strong culture of innovation, operational excellence, and engineering and program management capabilities. We use our product, design and technological expertise, as well as our global reach and competitive manufacturing footprint, to achieve the following financial goals and objectives:

 

  Continue to deliver profitable growth, balancing risks and returns;

 

  Invest in innovation to drive business growth and profitability;

 

  Maintain a strong balance sheet with investment grade credit metrics; and

 

  Consistently return capital to our stockholders.
 

 

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

Accelerating Growth and Increasing Stockholder Value

 

  Sales increased 8% to $20.9 billion, resulting in sales growth over market of 5 percentage points *

 

  Core operating earnings increased 5% to $871 million **

 

  Adjusted net income and adjusted earnings per share increased 9% and 10%, respectively, to $523 million and $8.72, respectively **

 

  Generated free cash flow of $383 million in 2022, compared to $85 million for 2021**

 

  Returned $286 million of cash to stockholders through dividends and share repurchases

 

  Maintained a 25% global market share in Seating

 

  2023 to 2025 sales backlog of $2.85 billion, driven by market share gains in Seating and new products in E-Systems that support customer shifts to electric vehicles

 

  Executed strategic acquisitions in Seating:

 

 

Expanding our product capabilities in the area of thermal comfort management and growth potential through vertical integration with the acquisitions of Kongsberg Automotive’s Interior Comfort Systems business unit and I.G. Bauerhin (expected to close in 2023)

 

 

Driving operational excellence through Industry 4.0 technologies with the acquisitions of Thagora Technology SRL and InTouch Automation

 

 

    

 

 

 

       

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Recognition

Received more than 100 awards from global customers, industry organizations and publications for ESG initiatives, operational excellence, innovation, quality and safety, including:

 

Two first-place J.D. Power 2022 U.S. Seat Quality and Satisfaction StudySM awards

 

Automotive News PACEpilot Innovation to Watch award for ConfigurE+ with zonal safety technology. This safety solution is the first wireless and electronics-based system that identifies seat location and status – key to the adoption of reconfigurable seating in vehicles. The smart technology automatically activates safety features in the second and third rows of a vehicle based on the detected location of occupants

 

Being named one of America’s Most Responsible Companies by Newsweek

Being named one of Fortune magazine’s World’s Most Admired Companies for the seventh consecutive year – awarded the highest ranking of any North American-based automotive supplier in the survey

 

Being recognized as a top employer in the Czech Republic, Macedonia, Morocco, Romania, Serbia and Spain, as awarded by the Top Employers Institute in each of these countries

 

*

Sales growth over market excludes the impact of foreign exchange, commodity cost recovery and acquisitions. The change in industry production on a Lear sales-weighted bases is calculated using Lear’s prior year regional sales.

 

**

Core operating earnings, adjusted net income, adjusted earnings per share and free cash flow are financial measures that are not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). For more information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures, see Appendix A, “Reconciliation of Non-GAAP Financial Measures.”

 

 

Macroeconomic and Global Operating Environment

 

Considering the significant challenges in 2022, the Lear team delivered solid financial results. In most areas, our results exceeded our 2021 performance, despite industry and economic conditions that, since 2020, have been influenced directly and indirectly by macroeconomic events, including the COVID-19 pandemic and, beginning in the first quarter of 2022, the Russia-Ukraine conflict. These events have resulted in unfavorable operating conditions, such as shortages of semiconductor chips and other components, elevated inflation levels, higher interest rates, and labor and energy shortages in certain markets.

Our leadership position in operational excellence and strong product capabilities drove new business wins in 2022. Our three-year backlog includes more than $1 billion of market share gains in Seating and more than half of our E-Systems backlog is in products supporting the customer shift toward electric vehicles. In addition, our new business launched in 2022 and our leading position in luxury, large sport utility and pick-up trucks resulted in sales growth over market of five percentage points. We continue to invest in innovation and technology to further strengthen our capabilities.

 

 

Executive Compensation Highlights

 

Our overarching objective is to maximize stockholder value by delivering profitable growth while balancing risk and returns, maintaining a strong balance sheet with investment grade credit metrics, and delivering superior stockholder returns over the long term. Critical to achieving this objective is a highly qualified global team that is strongly motivated to execute our

strategy, while navigating uncertainty, through market-competitive pay programs that emphasize at-risk, performance-based pay over annual and multi-year periods and hold employees accountable for delivering our financial, operational and strategic goals.

 

 

Program Design and Performance

 

Since 2020 there has been significant volatility and uncertainty in the markets in which we operate, as described above. During this time, these factors significantly impacted our executive compensation programs as reflected in our incentive plan performance results, corresponding incentive payouts, and incentive plan design, as summarized below.

 

  Commensurate with our results versus preset goals, from 2020 to 2022, annual incentive payouts varied from 60% to
   

124% of target, and the performance share payouts in the long-term incentive plan varied from 22% to 111% of target.

 

  Annual incentive plan awards reflect Adjusted Operating Income and Free Cash Flow results. Weightings for the performance measures in 2022 was 80% Adjusted Operating Income and 20% Free Cash Flow.
 

 

    

 

 

 

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  Long-term incentive award mix is heavily weighted to Performance Shares, requiring multi-year goals be met to earn shares. Our 2022 grant mix was 70% Performance
   

Shares and 30% RSUs. For the 2020 – 2022 period, our Performance Shares were earned based on Adjusted Annual Pretax Income and relative TSR results.

 

 

 

 

For 2023, the incentive plans were modified to adjust the weightings and measures of the performance measures. See pages 38 to 40 for further details. Additionally:

 

  The performance measures in the annual incentive plan will revert to our historical equal weighting of 50% each of Adjusted Operating Income and Free Cash Flow.

 

  Our CEO’s 2023 long-term incentive grant mix reflects increased emphasis on performance-based awards with a weighting of 76% Performance Shares and 24% RSUs.

 

  An Adjusted Return on Invested Capital improvement (“ROIC Improvement”) performance measure has been incorporated into the 2023- 2025 performance period. ROIC had previously been a performance measure, but we temporarily suspended it as a measure from 2020 through 2022 as the Company and the automotive industry managed through the macroeconomic challenges described
   

above. We also recognize that ROIC has a strong correlation to performance and stockholder returns. For the 2023-2025 performance cycle, we have reintroduced ROIC Improvement as a performance measure. The Performance Shares granted in 2023 will be earned based on three financial performance measures – Annual Adjusted Pretax Income, relative TSR, and ROIC Improvement. See further in this discussion for details on changes to incentives for 2023.

The rest of this “Compensation Discussion and Analysis” provides detailed discussion and analysis of the 2022 pay programs, as well as further context for recent and future changes. Later in this proxy, we have included a new Pay Versus Performance section, as mandated by the SEC, which is intended to illustrate how compensation of the CEO and other NEOs is directly aligned with stockholder returns.

 

 

2022 Incentive Payouts

 

Incentive payouts are aligned to and directly commensurate with our financial results. Earned equity awards are also subject to changes in our stock price over a multi-year period. Our strategic, operational and financial performance over time is reflected in our results and returns to stockholders. In 2022, two performance-based incentive cycles, each of which covered different time periods, were completed, as summarized below (detailed discussion follows later in this “Compensation Discussion and Analysis”):

 

  As shown below, the annual incentive was earned at 124% of target, reflecting our performance (including certain
   

adjustments as described on page 46) against 2022 Adjusted Operating Income and Free Cash Flow goals.

 

  As shown below, the 2020-2022 cycle of Performance Shares was earned at 111% of target, reflecting our performance (including certain adjustments as described on page 48) against Cumulative Adjusted Pretax Income and relative TSR three-year goals.

For information regarding changes to the Company’s annual incentive and long-term incentive plans for 2023, see pages 38 to 40.

 

 

    

 

 

 

       

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2022 Annual Incentive Program

    

LOGO

 

2020-2022 Performance Shares

    

LOGO

 

    

 

 

 

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(See “Pay for Performance,” “Annual Incentives” and “Long-Term Incentives” below for more information regarding these financial measures.)

 

  Long-term incentive awards granted in January 2022 to our NEOs were solely in the form of equity to directly link the
   

interests of our executives with those of our stockholders. We awarded Performance Shares (weighted 70%), which require achievement of financial and relative TSR goals over a three-year period and RSUs (weighted 30%).

 

 

Compensation Governance and Alignment with Stockholders

 

As part of a market-based pay program, we maintain many design features and corporate governance practices to ensure a strong link between executive pay, Company performance and stockholder interests:

 

Pay for Performance   More information
on page 74

•  We utilize a high percentage of performance-based pay, with 91% of 2022 total target annual compensation for the CEO at risk and 77% granted in equity, while, on average, 80% of 2022 target annual compensation for the other NEOs is at risk and 61% is granted in equity.

 

•  Our pay program is aligned with our business strategy; earnings is a key driver in the Company achieving its business strategy goals, which we capture for purposes of our incentive-based compensation with the measures of Adjusted Operating Income for our annual cash incentive plan and Annual Pretax Adjusted Income for our Performance Shares.

 

•  We include relative TSR as a market measure for our Performance Shares to align stockholders’ interests with our executives’ pay outcomes.

 

•  We do not provide excise tax gross-ups or any guarantees of regular incentive pay.

 

•  Our plans and awards do not provide for automatic vesting of equity awards in connection with a single-trigger change in control event.

 

 

Compensation Governance   More information
on page 68

•  We conduct annual reviews of our compensation programs to ensure continued alignment to our strategy and market practices.

 

•  We annually evaluate our compensation programs to ensure they are designed to discourage risk and safeguard stockholder value.

 

•  The P&C Committee engages an independent compensation consultant.

 

•  We do not provide single-trigger change in control severance benefits.

 

•  We maintain post-termination restrictive covenants, clawback, anti-hedging and anti-pledging policies.

 

•  We maintain robust stock ownership guidelines for our executives and directors.

 

•  We have a retention requirement as part of our Stock Ownership Guidelines until the ownership guideline is met/maintained.

 

•  We prohibit repricing of stock option awards.

 

Target Pay Mix for CEO and Other NEOs

Base salary and annual and long-term incentive award opportunities (as more fully described below) are the elements of our NEOs’ total direct compensation. To support our compensation philosophy, our NEOs’ total direct compensation opportunity is heavily weighted toward at-risk compensation within our annual incentive and long-term incentive programs. Our annual incentive awards and the performance-based component of our long-term incentive awards are considered performance-based pay, as the payouts are dependent on the achievement of specific financial performance measures. Our long-term incentive program utilizes time-based RSU awards that are subject to 3-year cliff vesting, further aligning the NEOs with our stockholders as the final value realized is based on the Company’s share price after the 3-year period.

 

    

 

 

 

       

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The significant portion of performance-based pay aligns our NEOs with our stockholders’ interests. The compensation mix for our CEO and for our other NEOs on average is shown below for 2022:

 

Target Total Direct Compensation Allocation

(Assuming Performance-Based Components at Target and not including Career Shares)

    

LOGO

 

We continuously monitor our executive compensation programs and consider appropriate modifications that allow us to drive achievement of our business strategy and targeted financial results, meet our talent needs and maintain fully competitive compensation programs and practices to

maximize long-term stockholder value. As part of such review, the Company amended our CEO’s compensation mix to increase the portion of his target total direct compensation that is considered at-risk, performance-based pay from 70% in 2022 to 73% starting in 2023.

 

 

Compensation Alignment with Stockholders

 

The executive compensation program is designed to drive execution of our business strategy by strongly aligning pay opportunities with performance outcomes. The P&C Committee considers multiple perspectives in assessing the achievement of this critical objective, including a multi-year history of incentive payouts as a percentage of target, financial and TSR results, and the NEOs’ pay relative to the Comparator Group (as defined below). These analyses found that relative to the Comparator Group:

 

1.

The NEOs’ target pay levels are in the competitive range of market median, on average, with an emphasis on performance-based pay opportunities.

 

2.

Lear’s incentive plan performance measures are well-aligned to its business strategy, correlative to TSR and are generally consistent with the measures used by the Comparator Group (and the broader industrial market).

 

3.

Lear’s annual incentive and performance share payouts are directionally aligned with performance relative to the Comparator Group.

Consistent with the Company’s pay-for-performance philosophy, challenging goals are set for the annual incentive and performance share award opportunities. As such, in some years, payouts will be above target (when our results exceed the target for the performance period), and in other years, payouts will be below target (when our results are below the target for the performance period). Our last three completed incentive cycles reflect this pay-performance alignment with payouts varying commensurate with results. Due to the challenges during this time, payouts have ranged from 22% to 124% of target.

 

  Annual incentive payouts: 2020, 60% of target; 2021, 100% of target; and 2022, 124% of target

 

  Performance Share payouts: 2018-20, 22% of target; 2019-21, 74% of target; and 2020-22, 111% of target
 

 

    

 

 

 

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Our typical pay administration approach for promoted executives is to move target pay levels to market median over several years while emphasizing at-risk, performance-based incentive award opportunities. For example, our CFO was first promoted into his role in 2019. As he has developed in the role, his target pay has moved closer to market median with the majority of the increase in target pay provided in at-risk performance share award opportunities (with a three-year performance period), as well as stock options prior to 2022.

The actual values realized, if any, from performance share award opportunities (and stock option awards prior to 2022) can vary significantly (due to performance and the Company’s stock price) from the grant amounts shown in the Stock Awards column of the Summary Compensation Table. This is reflected in the CEO’s target pay mix, with 91% of total pay at-risk and 56% of total pay from performance share opportunities.

2022 Advisory Vote on Executive Compensation

 

 

The P&C Committee reviewed the results of the 2021 stockholder advisory vote on NEO compensation and incorporated the results as one of the many factors considered in connection with the discharge of its responsibilities. Our compensation practices have been consistently supported by

stockholders, as evidenced by our Say-on-Pay results. In 2022, we received 89% stockholder support on our Say-on-Pay advisory vote, and our average result has been 96.4% for the period 2015 through 2022.

 

 

Say-on-Pay Stockholder Support

Vote Year

   2022    2021    2020    2019    2018    2017    2016    2015

Stockholder Support (%)

   89.0%    97.0%    97.0%    97.2%    98.3%    96.5%    98.3%    98.2%

Engaging with Stockholders to Continue to Enhance our Compensation Program

 

 

Our directors and management recognize the benefits from robust dialogue with stockholders and we have engaged consistently in broad, direct, governance-focused stockholder outreach. We continue to solicit the perspectives of our investors and share such perspectives with the P&C

Committee. Among other topics, we invite dialogue with our stockholders regarding best practices and policy issues, our compensation programs, the financial measures that drive our business strategy and other issues to inform our compensation program review process.

 

 

Feedback From Our Stockholders Considered as Part of the Actions Taken by the Committee

 

The predominant feedback we have received from investors with respect to our compensation programs and practices was that they were satisfied with them. During October 2022, we talked with nine stockholders whose holdings represent approximately 50% of our shares outstanding related to ESG matters, including our executive compensation programs. Some stockholders asked questions about recent changes made to the financial measures and weightings in our annual and long-term incentive plans, specifically requesting additional narrative in the “Compensation Discussion and Analysis” describing the drivers and decision-making regarding the incentive plan measures and weightings. The P&C Committee and the management team reviewed and discussed the feedback as part of their comprehensive review and discussion of the compensation programs’ alignment to our business strategy, support of our talent needs, market practices and other factors. When the P&C Committee

assessed the incentive plan structure and performance measures, this feedback was one of the factors considered.

In addition to the formal outreach discussed above, members of management continue to have regular and extensive interaction with our investors throughout the year to discuss our business segments, end markets, financial results and operational execution at investor conferences, Company-hosted events, non-deal roadshows and quarterly conference calls. In 2022, Lear met with 104 institutional investors for a total of 218 interactions. We have also shared financial and ESG information relevant to our shareholders through our Sustainability Report, our Investor Relations website, our 2022 Annual Report on Form 10-K and this proxy statement.

 

 

    

 

 

 

       

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2023 Incentive Plans

 

The following changes were made to the 2023 incentive programs:

 

  Annual Incentive Plan (AIP): Lear had historically weighted the financial measures in its AIP at 50% Adjusted Operating Income and 50% Free Cash Flow. Due to the higher levels of volatility caused by the pandemic and ongoing supply chain challenges, the 2022 AIP weightings were set at 80% Adjusted Operating Income and 20% Free Cash Flow. This change was made to manage the ongoing volatility (which tends to have a greater impact on Free Cash Flow) as well as ensure payouts aligned with performance. Although supply chain and other operations pressures persist, the Committee and management team determined that reverting to the historical equal weighting for the two financial measures was appropriate for 2023.

 

  Long-Term Incentive Plan (LTI): ROIC had been a measure in the Lear LTI until the 2020 performance cycle, when it was removed due to the challenges caused by the
   

global pandemic, significant volume reductions and supply chain constraints. As part of our ongoing discussions with the Board and key stockholders, management engaged Frederic W. Cook as a compensation consultant to perform an analysis of key Lear financial measures and their impact on long-term stockholder value creation. In addition to the financial measures that were already part of the LTI, ROIC was found to be strongly correlated with stockholder value creation, and the Company’s long-term performance. The P&C Committee and management team determined that ROIC is a relevant incentive measure for evaluating the long-term performance of the company and subsequently included an ROIC Improvement measure for the 2023 – 2025 LTI performance cycle.

These changes ensure an ongoing strong tie to stockholders’ interests and investment experience in a challenging market. A detailed depiction of the 2023-2025 performance period measures can be found in “Long-Term Incentives” on page 47.

 

 

Total Compensation Process and Review

 

 

The P&C Committee oversees the executive compensation program design and decision-making process for our NEOs. The P&C Committee is comprised of independent, non-employee members of the Board. The P&C Committee works very closely with its independent consultant and management to review the effectiveness of the Company’s executive compensation program throughout the year. The P&C Committee’s charter which reflects the specific details of its authority and responsibilities may be accessed on our website at https://ir.lear.com/corporate-governance.

The P&C Committee annually reviews key elements of our executive compensation program, including materials setting forth the various components of compensation for our NEOs and a summary of market practices and emerging trends, and discusses potential implications to the Company in the context of our business strategy and talent needs. This includes a specific review of dollar amounts for pay elements and potential payment obligations under our executive employment agreements, including an analysis of the resulting impact created by a change in control of the Company. The

P&C Committee reviews total compensation summaries or tally sheets for our NEOs on an annual basis. Tally sheets provide for an overall assessment of our compensation program while ensuring the proper linkage to financial performance and stockholder interests. In addition, although each component is assessed independently, the total complement of the components must work in harmony to achieve a proper balance, which, in turn, helps manage compensation risk. We also annually complete a comprehensive compensation risk assessment with assistance from our outside legal counsel and Pay Governance.

Compensation decisions are anchored in a clearly articulated compensation philosophy with strong pay-for-performance alignment, recommendations and market data from the independent compensation consultant, stockholder feedback, assessment of NEO performance and achievement of Company goals, and the P&C Committee’s assessment of business climate and industry factors.

 

 

    

 

 

 

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Compensation Considerations

 

The P&C Committee, with the support of the independent compensation consultant and management, considers many factors when making executive compensation decisions including, but not limited to:

 

  Company performance
    Financial and operational performance
    Performance relative to present goals and financial guidance
    Historic absolute and relative performance

 

  Stockholder value
    Long-term stockholder value creation
    Performance relative to peers and competitors

 

  Talent development and retention
    Development, motivation and retention of a diverse team of top talent
    Skills, experience and tenure of executive incumbents
    Market pay levels and practices for comparably situated executives among our peer group and other industrial companies
 

 

Benchmarking Methodology

 

The P&C Committee targets base salaries, annual incentive awards, long-term incentive awards and total direct compensation of our NEOs and other executive officers on average to be within a competitive range (i.e., +/- 10%) of the median of the Company’s comparator group (the “Comparator Group”) and other comparably sized companies in the same general industry. In addition to reviewing annual market pay benchmarking, other factors (including our business strategy, talent needs, executives’ experience levels and cost) are considered in setting target pay which may result in some positions having target pay higher or lower than the

competitive range. Actual compensation relative to target pay opportunities will vary based on performance and, for long-term incentive awards, the value of common stock at payment. The P&C Committee regularly assesses the composition of the Comparator Group.

The 17 peer companies in our Comparator Group are focused on automotive parts and equipment, industrial machinery, heavy trucks and other durable goods manufacturing and have the following characteristics: (i) annual revenues typically ranging from 0.5 times to 2.0 times the Company’s revenues;

 

 

(ii) global companies typically with U.S. headquarters; (iii) market capitalization typically ranging from 0.2 times to 5.0 times the Company’s market capitalization; and (iv) companies that are considered by independent proxy advisors to be the Company’s proxy peers. The Company

supplements its review of the Comparator Group with a broader survey of general industrial companies (not individually selected or identified) for benchmarking of executive compensation levels and, as appropriate, compensation design practices.

 

 

The companies in the Comparator Group for 2022 are shown below. The revenues for this group in their most recently reported fiscal year ranged from $11.0 billion to $52.6 billion, with a median of $17.5 billion. Lear’s revenues for 2022 were $20.9 billion.

 

2022 Comparator Group

Adient plc (ADNT)

 

Eaton Corporation plc (ETN)

 

Magna International Inc. (MGA)

 

Textron Inc. (TXT)

Aptiv PLC (APTV)

 

Emerson Electric Co. (EMR)

 

PACCAR Inc. (PCAR)

 

Whirlpool Corporation

(WHR)

BorgWarner Inc. (BWA)

 

Goodyear Tire & Rubber Company (GT)

 

Parker-Hannifin Corporation (PH)

 

 

Cummins Inc. (CMI)

 

Illinois Tool Works Inc. (ITW)

 

TE Connectivity Ltd. (TEL)

 

 

Deere & Company (DE)

 

L3Harris Technologies, Inc. (LHX)

 

Tenneco Inc. (TEN)

 

 

The above companies were used to inform the NEO base salary changes effective December 1, 2022, and target annual and long-term incentive changes effective January 2023.

 

    

 

 

 

       

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Role of Management in Setting Compensation Levels

Our human resources staff supports the P&C Committee in its work. They also work with compensation consultants, whose engagements have been approved by the P&C Committee, and with accountants, legal counsel and other advisors, as necessary, to implement the P&C Committee’s decisions, to monitor evolving competitive practices and to make compensation recommendations to the P&C Committee. The P&C Committee has engaged Pay Governance as its independent compensation consultant to assist with the ongoing review of our executive and director compensation programs and to ensure that our programs are competitive and appropriate given the Company’s objectives and prevailing market practices. For most compensation topics for which the P&C Committee is responsible, it has directed Pay Governance to work with management to develop recommendations that reflect the P&C Committee’s objectives for the compensation program. Pay Governance performs no other services for the Company. The P&C Committee has final authority to approve, modify or reject these recommendations and to make its decisions in executive session. Our President and CEO provides input with respect to compensation of the executive officers (other than himself) but is otherwise not involved in decisions of the P&C Committee affecting the compensation of our executive officers. While our CFO, General Counsel and Chief Administrative Officer and other members of our human resources management attend such meetings to provide information, present materials to the P&C Committee and answer related questions, they are not involved in decisions of the P&C Committee affecting the compensation of our executive officers. The P&C Committee typically meets in executive session after each of its regularly scheduled meetings to discuss and decide executive compensation matters.

Authority of P&C Committee Under Incentive Plans

 

 

Under the Annual Incentive Plan (“AIP”) and the 2019 Long-Term Stock Incentive Plan (the “LTSIP”), the P&C Committee retains the authority to provide for adjustments to the financial measures utilized for annual and long-term incentive awards, such as excluding the impact of gains or losses on the sale of assets, the effects of changes in accounting principles or the application thereof, or unusual or non-recurring items, including the impact of significant differences from the assumptions contained in the financial budget upon which the applicable performance targets were established. Any such adjustments to financial measures are intended to better reflect the actual performance of approximately 7,500 AIP and over 130 Performance-Vested LTI Award participants, align award payments with decisions that support the Company’s

long-term financial plan and strategies, avoid unintended inflation or deflation of awards due to unusual or non-recurring items during the performance period, and emphasize the Company’s preference for long-term, sustainable growth.

Adjustments are limited in number and, when considered and applied, take into account our overarching objectives of ensuring strong alignment of pay decisions and Company performance results in support of stakeholder value creation and talent attraction, retention and motivation.

In addition, the P&C Committee generally has the discretion to make and, if permissible under the terms of the plans, modify awards under the AIP and the LTSIP to our executive officers, including the NEOs.

 

 

Executive Compensation Objectives and Core Elements

 

 

Our executive compensation programs reflect our pay-for-performance philosophy and encourage executives to make decisions that drive the creation of stockholder value for the short- and long-term.

The P&C Committee utilizes a mix of fixed and variable compensation elements in order to achieve the following objectives of our compensation program:

 

  link executive pay to Company performance;

 

  optimize profitability, cash flow and revenue growth, as well as return on investment;

 

  align the interests of management with those of stockholders;
  utilize multi-year vesting periods and measures aligned to long-term stockholder value creation including stock performance;

 

  align management’s compensation with our business strategy and goals;

 

  promote teamwork within our group of global managers (our “One Lear” concept); and

 

  attract, motivate, reward and retain the best executive talent with market-based competitive compensation opportunities.
 

 

    

 

 

 

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To achieve these objectives, we provide a total compensation program for executive officers that consists of base salary, annual and long-term incentive award opportunities, which are

summarized below for 2022, as well as certain benefits (covered later).

 

 

Element

   Purpose    Performance Measure(s)   

Fixed vs.

Variable

  

Cash vs.

Equity

  

Payout

Range

Base Salary

   Provide a competitive rate of pay to attract, motivate and retain executive officers of the Company    Individual performance, responsibilities, experience, time in position and critical skills    Fixed    Cash    n/a

2022 AIP

   Align a portion of annual pay to performance against key goals and objectives for the year   

Adjusted Operating Income (80%)

 

Free Cash Flow (20%)

   Variable    Cash    0-200% of target

Performance Shares under LTSIP (2022-2024)

   Align executive pay with long-term stockholder interests through equity-based compensation tied to key performance measures of the Company over a three-year period   

Annual Adjusted Pretax Income (66.7%)

 

Relative TSR (33.3%)

   Variable    Equity   

0-200% of target number of

shares; Performance Share value fluctuates with stock price movement

RSUs under LTSIP

   Align executive pay with long-term stockholder interests through equity-based compensation    Stock price alignment    Variable    Equity    Fluctuates with stock price movement

 

The P&C Committee routinely reviews the elements noted above. In general, the P&C Committee monitors compensation levels to ensure that a higher proportion of an executive’s total compensation is awarded in the form of variable and performance-based components (dependent on Company performance) as the executive’s responsibilities increase.

Narrative descriptions of the individual elements of compensation are included below. Design changes made for 2023 are summarized at the end of the annual and long-term incentive sections below.

 

 

Base Salary

 

Base salaries for our NEOs are targeted, on average, around the median level for comparable positions based on market benchmarking, as well as a review of scope, duties and responsibilities, along with performance, experience and internal equity. Merit increases in base salary for our senior executives are also determined by the results of the Board’s annual leadership review. At this review, our CEO assesses the performance of our top executives and presents his perspectives to our Board. Our CEO’s base salary and total compensation are reviewed by the P&C Committee following

the annual CEO performance review. Generally, in February of each year, the CEO and P&C Committee reach agreement on his goals and objectives for the upcoming year, and the P&C Committee evaluates his performance for the prior year against the prior year’s agreed goals and objectives. Our CEO has traditionally received a lower percentage of his total compensation in the form of fixed amounts like base salary relative to our other executives in order to link more closely his compensation to the performance of the Company.

 

 

    

 

 

 

       

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The 2021 and 2022 base salaries of our NEOs are summarized in the table below. The annual base salaries for our NEOs remained unchanged from the May 2021 annual base salary rates until the new base pay was approved effective December 1, 2022.

 

Base Salaries

    

2021 Base Salary Rate

(Effective May 1, 2021)

     2022 Base Salary Rate
(Effective December 1, 2022)
     % Change  

Raymond E. Scott

  

$

1,270,000

 

  

$

1,300,000

 

  

 

2.4

Jason M. Cardew

  

$

824,000

 

  

$

850,000

 

  

 

3.2

Frank C. Orsini

  

$

824,000

 

  

$

850,000

 

  

 

3.2

Thomas A. DiDonato

  

$

721,000

 

  

$

721,000

 

  

 

0

%* 

Carl A. Esposito

  

$

700,000

 

  

$

725,000

 

  

 

3.6

 

*

Mr. DiDonato did not receive a base salary adjustment due to his planned retirement in 2023.

 

    

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

 

    

 

2022 Incentive Programs

Pay for Performance

Our strategic, operational and financial performance over time is reflected in our results and returns to stockholders. All of the annual incentive opportunity and the majority of the long-term incentive opportunity are determined based on specific performance measures that drive achievement of our business strategy while ensuring sharp focus on critical results. In addition, as part of the Company’s long-term strategy for providing competitive retirement benefits, the Company has historically granted time-based Career Shares, including in 2022. In order to drive profitable growth with efficient capital management, we selected complementary performance measures (which assess earnings and capital management over annual or three-year periods, as well as relative TSR) to use in our incentive plans for 2022:

 

Measure   Plan   Weighting    Background, Definition and Rationale
       

Adjusted Operating Income

  AIP   80%   

•  Pretax income before equity income, interest, other income/expense, restructuring costs and certain transactions and non-recurring items.

 

•  Adjusted Operating Income is a well understood operating metric that can be influenced by all levels of employees of the Company.

 

•  Provides motivation to maximize earnings from current operations.

Free Cash Flow

  AIP   20%   

•  Net cash provided by operating activities, less capital expenditures, excluding certain transactions and other non-recurring items.

 

•  Free Cash Flow is a well understood operating metric that can be influenced by all levels of employees of the Company.

 

•  Provides motivation to maximize cash flow through earnings and appropriate management of working capital and investments.

Annual Adjusted

Pretax Income

  LTSIP   66.7% for Performance Shares   

•  Annual net income for each year in the performance period (2022, 2023 and 2024) before provision for income taxes, restructuring costs and certain transactions and non-recurring items.

 

•  Focuses on earnings generated from products sold, encouraging profitable revenue growth and efficient management of costs over time.

 

•  Performance results for each year are independently assessed to calculate an annual payout factor, which is averaged to determine the three-year payout.

Relative TSR

  LTSIP   33.3% for Performance Shares   

•  Relative TSR for the 2022 Performance Share awards for the three-year performance period (2022-2024) based on the three-year TSR achieved by the Company relative to the three-year TSR achieved by a group of auto suppliers and industrial companies over the performance period (starting TSR assessment period in December 2021 compared to ending TSR assessment period in December 2024).

 

•  Focuses on alignment of executive pay with value creation for our stockholders relative to our peers.

 

•  Target award earned for median relative TSR, with maximum award of 200% of target for relative TSR of at least 75th percentile. Award is capped at target if the Company’s TSR is negative for the performance period.

 

    

 

 

 

       

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Annual Incentives

 

Our NEOs and nearly 7,500 other employees are eligible to participate in the AIP, which provides annual cash incentive award opportunities based upon the achievement of financial performance goals important to the Company’s success. Awards, if earned, are typically paid early in the following year based on our performance achieved in the prior fiscal year.

Target Annual Incentive. Each NEO is assigned an annual target opportunity under the AIP expressed as a percentage of such officer’s base salary. An executive’s target annual incentive percentage generally increases as his or her ability to affect the Company’s performance increases. Consequently, as an executive’s responsibilities increase, his or her variable compensation in the form of an annual incentive, which is dependent on Company performance, generally makes up a larger portion of the executive’s total compensation.

For 2022, the target annual incentive opportunity for each of Messrs. Scott, Orsini, DiDonato, Cardew and Esposito was 150%, 100%, 100%, 100% and 80%, respectively, of their base salaries. For 2023, Mr. Scott’s target annual incentive opportunity has been increased to 160% of his base salary. Mr. DiDonato will not participate in the 2023 AIP due to his retirement from the Company.

Financial Measures. Our 2022 AIP, which was approved in December 2021, utilized Adjusted Operating Income and Free Cash Flow because they are highly visible and important measures of operating performance that are relied upon by investors.

 

  Adjusted Operating Income measures our profit realized from operations. It aligns with how we communicate performance to investors and is a strong indicator of the Company’s financial success.

 

  Free Cash Flow measures our ability to generate cash through earnings and the efficient management of working capital to support our capital allocation priorities which
   

include organic and inorganic investments to facilitate growth and strengthen our business segments, as well as returning cash to stockholders through our quarterly dividends and share repurchase program.

The Company operates in highly cyclical industries with volatility and uncertainty having increased significantly since 2020. Forecasts of industry and macro conditions are part of the Company’s budgeting process that is the basis for the target financial goals which are set each year to have comparable degrees of difficulty based on the challenges and opportunities forecasted at the start of the year. As a result, in many years this yields target goals above the prior year actual (particularly in upward automotive industry cycles) and in other years, the target goals are below the prior year actual; in all years reflecting the intent of having appropriately challenging target goals each year. At the start of 2022 industry and macro conditions, including higher costs forecasted in many areas, resulted in the forecasted performance used to set 2022 target goals being somewhat below 2021 actual results.

Prior to 2022, these two key financial measures have been used in the AIP and historically were weighted equally. For the 2022 AIP, the P&C Committee determined that the measures would be weighted 80% Adjusted Operating Income and 20% Free Cash Flow. The P&C Committee chose to place a larger focus on Adjusted Operating Income since it is a key indicator of business strength and reduced the focus on Free Cash Flow due to fluctuations in working capital that resulted from ongoing macroeconomic uncertainty that may result in misalignment of actual performance and payouts. The goals applicable to the 2022 AIP were set based on the Board-approved budget, with the target goals reflecting a level of performance which at the time was anticipated to be challenging but achievable; the threshold goals reflecting a level of performance at which the P&C Committee believed a portion of the award should be earned; and the maximum goals established well above target, requiring significant achievements and reflecting a level of performance at which the P&C Committee believed a 200% target award was warranted.

 

 

    

 

 

 

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Payouts. Our actual 2022 Adjusted Operating Income and Free Cash Flow (as reflected in the charts above under the heading “Executive Summary — Executive Compensation Highlights — 2022 Annual Incentive Program”) resulted in annual incentive awards being earned at 124% of target, as shown below for each NEO. The P&C Committee excluded the impact of 2022 acquisitions as significant unplanned, unbudgeted items. Factoring in such exclusions, 2022 Adjusted Operating Income was slightly above target and 2022 Free Cash Flow exceeded the maximum. Our 2022 financial results, on a weighted average basis, for these performance measures earned payouts at 124% of target.

 

2022 Annual Incentives

 
     

Target Opportunity

(as % of Base)

     Target Amount(1)      Results     

2022 Incentive

Amount(2)

 

Raymond E. Scott

  

 

150

  

$

1,950,000

 

  

 

124

  

$

2,418,000

 

Jason M. Cardew

  

 

100

  

$

850,000

 

  

 

124

  

$

1,054,000

 

Frank C. Orsini

  

 

100

  

$

850,000

 

  

 

124

  

$

1,054,000

 

Thomas A. DiDonato

  

 

100

  

$

721,000

 

  

 

124

  

$

894,040

 

Carl A. Esposito

  

 

80

  

$

580,000

 

  

 

124

  

$

719,200

 

(1) 

Reflects target opportunity as a percentage of 12/31/22 base salary.

 

(2) 

The 2022 Incentive amount represents the amount actually earned, which is calculated as the Target Amount multiplied by the Actual Performance (124%).

Changes for 2023 Annual Incentive Plan

 

In November 2022, the P&C Committee determined to revert to our historical equal weightings the for the 2023 AIP. Adjusted Operating Income composes 50% of the 2023 AIP (down from 80% in the 2022 AIP), while Free Cash Flow composes 50% of the 2023 AIP (up from 20% in the 2022

AIP). These key financial measures had been weighted differently in 2022 due to the expected ongoing volatility & uncertainty in Lear’s macroeconomic and global operating environment. The 2023 AIP bonus will be paid in early 2024.

 

 

Long-Term Incentives

 

The long-term incentive component of our executive compensation program is designed to provide our senior management with performance-based award opportunities, to drive superior long-term performance and to align the interests of our senior management with those of our stockholders. To achieve these goals, we have adopted a “portfolio” approach that recognizes the strengths and weaknesses that various forms of long-term incentives provide.

2022 Awards. In November 2021, the P&C Committee approved changes to the award mix for the long-term equity incentive compensation program for the January 2022 awards. The 2021 awards consisted of 60% Performance Shares, 20% RSUs and 20% Stock Options. The 2022 awards were granted in a mix of approximately 70% Performance Shares and 30% RSUs. Our weighting on Performance Shares is higher than most of the Comparator Group and many other large industrial companies which often assign Performance Shares a lower weighting (e.g., 50% to 60% of the regular annual equity award mix). The heavy weighting toward Performance Shares increases the sensitivity of the value of our NEOs’ long-term equity incentives to Company performance – not only does the

underlying value of a Performance Share fluctuate generally with changes to the Company’s stock price, but the number of shares earned varies based on the Company’s achievement of financial and relative TSR goals. The Performance Shares granted in 2022 are earned based on two performance measures, the three-year average of Annual Adjusted Pretax Income (66.7% of the award) and the 3-year Relative TSR (33.3% of the award).

 

  Annual Adjusted Pretax Income goals and performance will be set and measured annually, with final award payouts being determined based on the three-year average results. The use of Annual Adjusted Pretax Income goals set at the start of each year, instead of a cumulative goal with each annual component set at the start of each of the three years in the performance period. This was implemented due to the ongoing uncertainty resulting from the COVID-19 pandemic and persistent supply chain challenges that have created extreme volatility in commodity prices and availability of key components used in our products which has significantly impacted our customer production schedules. The long-term nature of the award opportunity is maintained with three-year cliff vesting to further align with stockholder goals.
 

 

    

 

 

 

       

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  Relative TSR performance will be measured based on the Company’s three-year TSR achieved relative to the TSR achieved by the Relative TSR Peer Group, which is a group of approximately 25 auto suppliers and industrial companies (listed below). Unlike the Comparator Group that is selected by comparable revenues, this Peer Group includes companies with a wider range of revenues with a focus on companies with strong historical stock price correlation to Lear’s common stock. Awards are capped at target performance if the Company’s TSR is negative for the performance period.

The specific amounts and terms of the 2022 long-term incentive awards are shown in and following the “2022 Grants of Plan-Based Awards” table below. The target levels of Annual Adjusted Pretax Income and Relative TSR performance for the Performance Shares were set in November 2021 by reference to the Board-approved 2022 Company budget based on the forecast for the period reflecting a level of performance which at the time was anticipated to be challenging, but achievable. The threshold level was set to be reflective of performance at which the P&C Committee believed a portion of the award opportunity should be earned. The maximum level was set significantly above the target, requiring significant achievements and reflecting performance at which the P&C Committee believed a 200% target award was warranted.

 

 

The Relative TSR peer group for these awards is as follows:

 

2022-2024 Performance Shares – Relative TSR Peer Group

Adient plc

 

Cooper-Standard Holdings Inc.

 

Gentherm Incorporated

 

Valeo SA

Allison Transmission Holdings, Inc.

 

Cummins Inc.

 

Goodyear Tire & Rubber Co.

 

Visteon Corporation

American Axle & Mfg. Holdings, Inc.

 

Dana Incorporated

 

LCI Industries

 

Standard Motor Products, Inc.

Aptiv PLC

 

Dorman Products, Inc.

 

Magna International Inc.

 

Tenneco Inc.

Autoliv, Inc.

 

Eaton Corporation plc

 

Meritor, Inc.

 

BorgWarner Inc.

 

Faurecia S.A.

 

Modine Manufacturing Company

 

Continental Aktiengesellschaft

 

Gentex Corporation

 

PACCAR Inc.

 

 

Vesting of 2020 Performance Share Awards. In 2020, each of our NEOs received grants of Performance Shares for the 2020-2022 performance period, with performance vesting terms based on Cumulative Adjusted Pretax Income (66.7% of the award) and relative TSR (33.3% of the award). The RSUs and stock options that were granted at the same time as the 2020 Performance Shares (which each represented 20% of the total equity award value at target) vested in January 2023.

 

The threshold, target, maximum and actual Cumulative Adjusted Pretax Income levels and relative TSR for the 2020-2022 performance period are shown above under the heading “Executive Summary — 2020-2022 Performance Shares.” If the threshold, target or maximum goals for these measures were attained during the performance period, 50%, 100% or 200% of the target Performance Shares for each executive, respectively, would be earned.

 

 

In determining the payouts of the 2020 Performance Shares, consistent with our pay-for-performance philosophy of providing incentive payouts for delivering operating results relative to the three-year goals, the P&C Committee deemed it appropriate to exclude a portion of the estimated impact of the COVID-19 pandemic from our 2020 financial performance results as a significant unplanned, unbudgeted item. Similarly, the P&C Committee excluded the impact of acquisitions made during the three-year period. Factoring in such exclusions, Cumulative Adjusted Pretax Income was achieved at 102% of target and Relative TSR was achieved at 129% of target. Based on the weighting of the performance measures, the overall award was earned at 111% of target (see the charts above under the heading “Executive Summary — Executive Compensation Highlights — 2020-2022 Performance Shares” for our Cumulative Adjusted Pretax Income and Relative TSR results).

 

    

 

 

 

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The resulting share amounts earned by our NEOs are shown in the table below:

 

2020-2022 Performance Shares

 
      Target
Shares (#)
     Result      Actual
Shares
Earned (#)
 

Raymond E. Scott

  

 

35,976

 

  

 

111

  

 

39,933

 

Jason M. Cardew

  

 

8,094

 

  

 

111

  

 

8,984

 

Frank C. Orsini

  

 

10,279

 

  

 

111

  

 

11,409

 

Thomas A. DiDonato

     8,544        111      9,483  

Carl A. Esposito

  

 

7,516

 

  

 

111

  

 

8,343

 

 

Changes for 2023 Equity Awards. In November 2022, the P&C Committee approved certain changes to the long-term equity incentive compensation program for 2023. As described above, an ROIC Improvement financial measure was added. The Performance Shares granted in 2023 will be earned based on three performance measures, Annual Adjusted Pretax Income (50% of the award), relative TSR (25% of the award) and ROIC Improvement (25% of the award). Our NEOs received these awards in January 2023 for

the 2023 – 2025 performance period. For additional information on the changes made to the financial measures and weightings for 2023, see pages 38 – 40.

Effective as of January 1, 2023, the target value award mix of the 2023 long-term incentive opportunity for Mr. Scott changed to 24% RSUs and 76% Performance Shares, further linking his compensation to Company performance and our stockholder returns.

 

 

    

 

 

 

       

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Retirement Benefits

Summary of Retirement Benefits

Our NEOs participate in our retirement savings plan, qualified pension plan, pension equalization plan and supplemental savings plan, as eligible. These benefits provide rewards for long-term service to the Company and an income source in an executive’s post- employment years. The various components of our retirement benefit program (including our frozen defined benefit pension plans) disclosed in this proxy statement are summarized in the table below. The general terms of these plans and formulas for calculating benefits are summarized following the 2022 Summary Compensation Table, 2022 Pension Benefits table and 2022 Nonqualified Deferred Compensation table, respectively, in “Executive Compensation.”

 

Summary of Retirement Benefits

Type   Plan/Program   Component/Feature   Purpose  

Pages for

Further

Details

         

Defined
Contribution

 

Salaried Retirement

Program (Qualified)

 

Deferral

 

Standard 401(k) plan and

matching contribution

  62
 

Company Match

 

 

 

 

 

Pension Savings Plan

 

Company contribution

         
 

 

  Salaried Retirement Restoration Program (Non-Qualified)  

Deferral

 

Excess programs for

amounts above

qualified plan limits

  62-63
 

 

 

Company Match

     

Pension Savings Plan

         

Defined Benefit
(frozen as of 12/31/06)

  Lear Corporation Pension Plan  

Qualified Pension Plan (frozen)

  n/a   61-62
  Pension Equalization Program  

Part of SERP (frozen)

  62
  Salaried Retirement Restoration Program (Pension Makeup)  

Part of SERP (frozen)

  62-63
         

Additional

  Time-Based Career Shares (described below)   Shares not distributed until earlier of age 62 or 3 years after retirement   Intended to facilitate a very long-term stockholder perspective by the NEOs and other senior executives  

50; 57; 67

Career Shares

 

Each November, the P&C Committee grants awards of Career Shares, which are RSUs that generally must be held until after retirement. The annual granting of Career Shares is an integral component of the Company’s strategy to align NEOs and other senior executives with the mindset of a long-term stockholder. The grants are also intended to motivate and retain key talent during industry cycles and support long-term talent initiatives and succession planning. Individual awards are differentiated by position level, performance and other factors.

On November 14, 2022, the P&C Committee approved grants of Career Shares pursuant to the LTSIP for the NEOs, in the amounts reported in “Executive Compensation — Summary Compensation Table” and “— Grants of Plan-Based Awards Table” below (the “Time-Based Career Shares”), and other senior leaders. Career Shares are generally required to be held until retirement, since they are not distributed until the later of age 62 or the vesting date. For purposes of illustration, our NEOs are required to hold the earned Time-Based Career Shares for an average of at least eight years from the grant date (based on number of years until the earliest distribution opportunity), during which time the Time-Based Career Shares will remain subject to forfeiture in the event of a voluntary resignation before