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UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, DC 20549

 

SCHEDULE 14A

 

PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

 

  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 under §240.14a-12

 

Flowserve 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 all boxes that apply):
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.
 

 

Invitation to 2024 Annual
Meeting of Shareholders

Dear Fellow Shareholder:

 

I am pleased to invite you to Flowserve’s Annual Meeting of Shareholders on May 16, 2024. The attached Notice and Proxy Statement have more information about our meeting topics and agenda.  

 

Our Performance in 2023

 

2023 was a transformational year for Flowserve. We redesigned how we operate to move faster, work more effectively and strengthen the value we provide to our customers and shareholders. As a part of that, we also made progress with our portfolio optimization efforts to stay laser-focused on the products and solutions that can be sustainable drivers of growth well into the future. We were incredibly deliberate with how we deployed these changes across the business – and our efforts successfully enabled us to deliver our best financial performance in several years.

 

We also continue to be encouraged by the results we’re seeing from our Diversification, Decarbonization and Digitization Strategy (the “3D Strategy”). Diversified bookings remained healthy in 2023, with our vacuum pump products especially delivering the outsized growth we would expect. Our customer wins in Decarbonization were successfully driven by growth in Nuclear and liquified natural gas (LNG), which are two key markets served by our 3D Strategy. Finally, we see our Digitization solutions at an inflection point of growth, and we’re energized by the feedback we’ve received from our current installed base and the numerous installation opportunities in front of us.

 

2023 Highlights include:

 

Launched our new operating model to enhance our business processes, work more efficiently and better serve our customers   Delivered significant growth in revenue (up 20%) and gross margins (up 210 bps)
         
Continued to secure new bookings under our 3D Strategy, which accounted for almost one-third of our total bookings for the year   Continued our consistent run of exceeding $1 billion in bookings each quarter, closing out the year with the 8th straight quarter above this target
         
Raised financial guidance three times during 2023 based on our strong performance quarter after quarter   Received ISO 27001 certification for our cybersecurity program, strengthening our risk management and mitigation capabilities

 

Our Business Strategy

 

With the dedication of our associates, strength of our backlog and momentum of our 3D Strategy, we believe we are well-positioned to capitalize on our current strong activity in our end markets and the growing need for energy transition projects around the world.

 

In 2024, we expect to deliver sustainable, year-over-year profitable growth. The effective implementation of our new operating model paired with our sharp focus on operational excellence is designed to enable us to continue executing at a high level as we target new, attractive market opportunities. Flowserve’s Executive Leadership Team and Board of Directors believe in our ability to deliver results to create long-term value for you, our shareholders.

 

Shareholder Feedback

 

Our Board and executive leadership appreciate hearing from you and are continually working to enhance our public disclosures based on your feedback. Maintaining your trust will always be a top priority. Prior to the meeting, I ask that you sign and return your proxy card so your shares will be represented and voted in accordance with your selections. You can also vote via phone or online following the instructions on page 84.

 

Thank you for your continued support of Flowserve.

 

R. Scott Rowe, President and CEO

 

Notice of 2024 Annual
Meeting of Shareholders

 

When:

Thursday, May 16, 2024
at 11:30 a.m. CDT

Where:

Online at https://www.virtualshareholdermeeting.com/
FLS2024

 

We are pleased to invite you to join our Board of Directors and senior leadership at Flowserve’s 2024 Annual Meeting of Shareholders (the “Annual Meeting”). The Annual Meeting will be held online only and will begin at 11:30 a.m. CDT on May 16, 2024. We will hold the Annual Meeting solely by means of remote communications with no in-person location. You can attend the Annual Meeting and vote online at https://www.virtualshareholdermeeting.com/FLS2024.

 

2024 Proposals Board Vote
Recommendation
  Page
Reference
(for more
detail)
1 Elect the 11 directors named in the proxy statement For   Page 16
2 Approve, on an advisory basis, the Company’s executive compensation For   Page 69
3 Ratify the appointment of PricewaterhouseCoopers as our independent auditor for 2024 For   Page 73
4 Approve the Company’s employee stock purchase plan For   Page 76
5 Shareholder Proposal to report the Company’s political spending and policies and procedures regarding political spending Against   Page 80

Shareholders will also transact any other business that is properly brought before the Annual Meeting.

 

Record Date: Shareholders of record of the Company’s common stock, par value $1.25 per share, at the close of business on March 18, 2024 are entitled to notice of and to vote at the Annual Meeting.

 

Attending the Meeting Virtually: To participate in the Annual Meeting, including to vote or to ask questions during the meeting, you must access the meeting website at https://www.virtualshareholdermeeting.com/FLS2024, and log in using the 16-digit control number provided on your proxy card, voting instruction form, or Notice of Internet Availability of Proxy Materials. If your shares are held in street name and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the https://www.proxyvote.com website, then you may access, participate in, and vote at the Annual Meeting with the 16-digit access code indicated on that voting instruction form or Notice of Internet Availability. Otherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least five days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Annual Meeting.

 

For additional related information, please refer to the disclosure beginning on Page 84 in the enclosed proxy statement. The proxy statement and 2023 annual report to shareholders and any other proxy materials are available at https://www.proxyvote.com. The proxy statement and form of proxy are being first made available to shareholders on or about April 2, 2024.  

 

Your vote is very important. Whether or not you plan to attend the Annual Meeting online, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described to the right on this page. Brokers are not permitted to vote on certain proposals and may not vote on any of the proposals unless you provide voting instructions, except the ratification of the appointment of the independent auditor (Proposal 3). Voting your shares will help to ensure that your interests are represented at the meeting. Returning a proxy card or otherwise submitting your proxy does not deprive you of your right to attend the Annual Meeting and vote online at https://www.virtualshareholdermeeting.com/FLS2024.

 

By order of the Board of Directors,

Susan C. Hudson

Senior Vice President, Chief Legal Officer and Corporate Secretary

YOU CAN VOTE BEFORE THE
MEETING BY THE FOLLOWING
METHODS:

 

 

INTERNET

www.proxyvote.com
before May 16, 2024*

 

 

BY TELEPHONE

(1-800-690-6903)
before May 16, 2024*

 

 

BYMAIL

Complete, sign and
return your proxy or voting
instruction card before
May 16, 2024*

 

*Dates presented are for shareholders that hold shares in their own name as a holder of record. If you are a participant in the Flowserve Corporation Retirement Savings Plan, your votes must be cast before May 14, 2024.

 

Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to confirm which voting methods are available to you.

 

PROXY SUMMARY

 

This summary highlights information contained elsewhere in the proxy statement. This summary does not contain all the information that you should consider, and you should read the entire proxy statement carefully before voting. Page references are supplied to help you find additional information in the proxy statement.

 

Board Nominees (Page 16)

 

DAVID E. ROBERTS

Independent Chairman

Age: 63
Director since 2011
Committees: *
Other Public
Company Boards: None

R. SCOTT ROWE

President & CEO, Flowserve

Age: 53
Director since 2017
Committees: None

Other Public
Company Boards: 1

SUJEET CHAND

Independent

Age: 66
Director since 2019
Committees:

Other Public
Company Boards: 2

RUBY R. CHANDY

Independent

Age: 62
Director since 2017
Committees:

Other Public
Company Boards: 2

GAYLA J. DELLY

Independent

Age: 64
Director since 2008
Committees:

Other Public
Company Boards: 2

JOHN L. GARRISON

Independent

Age: 63
Director since 2018
Committees:

Other Public
Company Boards: None

CHERYL H. JOHNSON

Independent

Age: 63
Director since 2023
Committees:

Other Public
Company Boards: None

MICHAEL C. MCMURRAY

Independent

Age: 59
Director since 2018
Committees:

Other Public
Company Boards: None

THOMAS B. OKRAY

Independent

Age: 61
Director since 2023
Committees:

Other Public
Company Boards: 1

   

KENNETH I. SIEGEL

Independent

Age: 67
Director since 2022
Committees:

Other Public
Company Boards: 2

CARLYN R. TAYLOR

Independent

Age: 55
Director since 2020
Committees:

Other Public
Company Boards: 1

           

 

Chair Technology, Risk and Finance Committee Corporate Governance and Nominating Committee
Audit Committee Organization and Compensation Committee Veteran Status

 

* As Chairman of the Board, Mr. Roberts rotates between committee meetings and serves as an alternate committee member for all committees, as needed.

 

2024 PROXY STATEMENT 2
 

Executive Officers (Page 32)

 

  Name and Position Age Since Previous Position
R. Scott Rowe
President, CEO and Director
53 April 2017 President — Cameron Group, Schlumberger Ltd.
Lamar L. Duhon
President, Flowserve Pumps Division
53 February 2023 Flowserve President, Aftermarket Services & Solutions
Susan C. Hudson
Senior VP, Chief Legal Officer and Corporate Secretary
47 May 2022 Flowserve Vice President and Chief Compliance Officer
Amy B. Schwetz
Senior VP, Chief Financial Officer
49 February 2020 EVP and Chief Financial Officer, Peabody
Scott K. Vopni
Vice President, Chief Accounting Officer
55 June 2020 SVP — Finance, Chief Accounting Officer, Dean Foods Co.
Kirk R. Wilson
President, Flow Control Division
57 July 2019 Flowserve President, Aftermarket Services & Solutions

 

2024 PROXY STATEMENT 3
 

Executive Compensation Highlights (Page 34)

 

Compensation Philosophy and Principles

 

ATTRACT & RETAIN Attract and retain high-quality leaders with a passion for driving high performance as well as our Purpose, Values and Behaviors
REINFORCE OUR STRATEGY Align our incentive programs with our vision and business strategy
PROVIDE COMPETITIVE AND MARKET-BASED COMPENSATION Maintain a market-based compensation program that provides a competitive total target compensation opportunity approximating the market median
ALIGN PAY WITH PERFORMANCE Provide incentive programs that reward short- and long-term performance leading to shareholder value without undue risk taking
ALIGN PAY WITH SHAREHOLDERS Ensure a majority of total compensation is tied to performance and/or stock price and thus, is aligned with shareholder interests

 

Pay for Performance Alignment

Our annual incentive program paid out above target for 2023 compared to below target payouts in each of the two prior fiscal years. The 2023 payout was aligned with our robust shareholder return for the year and reflected strong operating income and adjusted primary working capital performance results and slightly below-target total customer bookings.

 

PAYOUT FOR 2023 ANNUAL INCENTIVE PLAN AWARD

 

 

(1) Adjusted Primary Working Capital (PWC) as % of sales incentivizes efficiency; lower percentage values are indicative of a greater performance achievement level.

 

2024 PROXY STATEMENT 4
 

PSUs have paid out below target for the past three performance cycles.

 

PAYOUTS FOR 2021 PERFORMANCE STOCK UNIT AWARD

 

2021 - 2023 PSUs Grant Payout

 

 

2023 Executive Total Compensation Mix

 

The majority of the total target compensation provided to our Named Executive Officers is ‘at risk’ and aligned with our compensation philosophy and principals to drive shareholder value creation.

 

   
CEO Target Compensation Mix Other NEO Average Target Compensation Mix
   
 

 

* At risk compensation is comprised of the target value of all incentive and stock-based awards, as their value is dependent on performance against our financial and strategic objectives and our stock price.

 

2024 PROXY STATEMENT 5
 
 

Table of Contents

 

NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS 1
PROXY SUMMARY 2
THIS IS FLOWSERVE 8
Our Purpose, Values and Behaviors 8
Our 3D Growth Strategy 9
Corporate Social Responsibility 11
PROPOSAL ONE: ELECTION OF DIRECTORS 16
Required Vote and Recommendation 16
Board of Directors — Biographical Information 17
THE BOARD AND COMMITTEES 23
Role of the Board; Corporate Governance Matters 23
Board Operations 23
Board Composition 25
Board Committees 27
Oversight of the Executive Compensation Program 29
Director Compensation 30
EXECUTIVE OFFICERS 32
EXECUTIVE COMPENSATION 34
Compensation Discussion and Analysis 34
Executive Summary 35
Our Guiding Principles 38
2023 Executive Compensation Decisions 42
Other Benefits 51
Compensation Governance Policies 55
Accounting Implications of Executive Compensation 56
Executive Compensation Program Review and Compensation Risk 56
Organization and Compensation Committee Report 56
Summary Compensation Table 57
2023 Grants of Plan-Based Awards 59
Outstanding Equity Awards at Year-End 2023 60
2023 Option Exercises and Stock Vested 61
2023 Pension Benefits 62
Quantification of Potential Payments 63
PAY VERSUS PERFORMANCE 64
CEO PAY RATIO FOR FISCAL YEAR 2023 68
PROPOSAL TWO: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION 69
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 70
SECURITY OWNERSHIP OF DIRECTORS AND CERTAIN EXECUTIVE OFFICERS 71
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 72
PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS OUR INDEPENDENT AUDITOR FOR 2024 73
OTHER AUDIT INFORMATION 74
Relationship with Independent Registered Public Accounting Firm 74
Audit and Non-Audit Fees and Services 74
Audit Committee Approval Policy 74
REPORT OF THE AUDIT COMMITTEE 75
PROPOSAL FOUR: APPROVAL OF EMPLOYEE STOCK PURCHASE PLAN 76
EQUITY COMPENSATION PLAN INFORMATION 79
PROPOSAL FIVE: PROVIDE A SEMIANNUAL REPORT ON POLITICAL SPENDING 80
OTHER MATTERS 83
GENERAL VOTING AND MEETING INFORMATION 84
Frequently Asked Questions About The Annual Meeting & Proxy Materials 84
ANNEX I: RECONCILIATION OF REPORTED RESULTS TO NON-GAAP FINANCIAL MEASURES 90
ANNEX II: 2023-2025 PEER PERFORMANCE GROUP 92
ANNEX III: 2021-2023 PEER PERFORMANCE GROUP 93
ANNEX IV: EMPLOYEE STOCK PURCHASE PLAN 94

 

2024 PROXY STATEMENT 6
 
Back to Contents
 

 

Cautionary Note Regarding Forward-Looking Statements

 

This proxy statement contains forward-looking statements about future events and circumstances. Generally speaking, any statement not based upon historical fact is a forward-looking statement. Forward-looking statements can also be identified by the use of forward-looking or conditional words such as “could,” “should,” “can,” “continue,” “estimate,” “intent,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” “project,” “predict,” “seek,” “confident” and “commit” or similar expressions. In particular, statements regarding our financial position, plans, strategies, objectives, prospects and expectations regarding our business, future operations, industry and market conditions are forward-looking statements. They reflect our current expectations, are subject to materials risks, uncertainties and other factors, many of which are outside of our control, and are not guarantees of performance and we can give no assurance that they will prove to be correct or that any plan, initiative, projection, goal, commitment, or expectation can or will be achieved, and speak only as of the date of this proxy statement. You should not rely unduly on forward-looking statements. Our business results are subject to a variety of risks and uncertainties, including those that are described in our 2023 Annual Report on Form 10-K and elsewhere in our filings with the Securities and Exchange Commission, any of which could cause actual plans or results to differ materially from those included in any forward-looking statements. If any of these considerations or risks materialize or intensify, our expectations (or underlying assumptions) may change and our performance may be adversely affected. Except as required by law, we undertake no obligation, and disclaim any duty, to publicly update or revise any forward-looking statement or disclose any facts, events or circumstances that after the date hereof that may affect the accuracy of any forward-looking statement, whether as a result of new information, future events, changes in our expectations or otherwise.

 

Website References

 

Throughout this proxy statement, we identify certain materials that are available in full on our website and refer the reader to additional information available on our website. The information contained on, or available through our internet website, is not and shall not be deemed to be incorporated by reference in this proxy statement.

 

2024 PROXY STATEMENT 7
 
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THIS IS FLOWSERVE

 

Our Purpose, Values and Behaviors

 

Around the world, Flowserve is striving to fulfill our purpose – to create extraordinary flow control solutions to make the world better for everyone. To help solve the biggest flow-control challenges, customers worldwide rely on the product lines, engineering, project management, and service expertise of Flowserve that dates back more than 230 years. We have developed a strategy on a foundation of six core values and seven key behaviors that are at the root of everything we do as an organization in pursuit of this purpose.

 

     
2024 PROXY STATEMENT 8
 
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THIS IS FLOWSERVE

 

Our 3D Growth Strategy

 

Our strategy of supporting the energy transition, diversifying end markets, and improving customer experience through our efforts to Diversify, Decarbonize, and Digitize – our 3D Growth Strategy – supports and aligns directly with our purpose. 

 

 

Diversify

   

Today, Flowserve is meaningfully connected to the oil and gas industry in each of our divisions, and while we remain committed to supporting our core markets, we are leveraging our more than 230 years of industry experience and expertise to serve customers in diverse markets such as water, specialty chemical and other general industries. We are also focused on supporting all our customers’ energy transition initiatives, regardless of the industry. Effectively managing energy transition requires the development of cleaner, safer, more reliable energy sources and Flowserve products help enable this for our customers. Diversify is focused on creating a more balanced portfolio based on cleaner sources of energy and increasing our exposure to the end markets offering long-term outsized growth potential.

 

One way we are advancing Diversification at Flowserve is through offering pumps to be used in the manufacturing of semiconductors. Flowserve is partnering with an engineering, procurement and construction (EPC) firm for a new semiconductor production facility in Texas. Scheduled for completion in 2024, the chip production plant will manufacture products to be used in developing next-generation technologies such as 5G, artificial intelligence and high-performance computing. Through a diverse offering of pumps, we will help accelerate domestic manufacturing while contributing to the global semiconductor supply chain, thereby enabling innovation in industries and communities around the world.

   
 

Decarbonize

   

We recognize that governments and corporations around the globe are increasingly focused on addressing the effects of climate change and implementing efforts to reduce greenhouse gas emissions. In addition to our own efforts to reduce carbon emissions in our operations, many of our current products and services can be utilized in numerous aspects of our customers’ carbon reduction efforts. We believe that through continued technology investment and new product development, our capture rate of this expanding opportunity will continue to grow. With several technologies already available in LNG, hydrogen, carbon capture, renewables and others, Flowserve’s innovative portfolio of flow control solutions supports our new Energy Advantage program and provides offerings to help customers’ energy transition efforts in three key areas – energy efficiency, carbon reduction, and operational cost mitigation. 

 

As an example of our Decarbonization strategy, Flowserve is providing valves to support a customer’s offshore wind farm project. On a mission to create an innovative solution for clean energy for communities in the UK, the company will deploy High Voltage Direct Current (HVDC) to connect two of its existing offshore wind farms to the UK’s national grid. By adopting unique applications with HVDC technology, the customer is aiming to minimize negative impacts to the environment while simultaneously keeping electricity costs low for UK communities. Upon the completion of this initiative in the coming years, this project will annually produce an estimated 1.8GW generating capacity – enough fossil-free power to meet the demands of approximately 1.3 million UK households.

     
2024 PROXY STATEMENT 9
 
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Digitize

   

Digitize represents our focus on helping our customers digitize their operations, driven by our RedRaven internet-of-things, or IoT, suite of equipment monitoring and predictive maintenance services. Since the launch of RedRaven in 2021, we have been encouraged by the demonstrated capabilities of this offering and how it has helped us expand our services capabilities and form new relationships with our customers. We now support over 75 customer sites across a diverse set of industry applications, and we have about 2,000 instrumented assets in 25 countries.

 

RedRaven predictive maintenance technology digitizes our customer experience with its ability to predict failures and avoid costly downtime in critical applications. With RedRaven, Flowserve is partnering with a well-known Scotland-based beverage producer to improve reliability on 100 assets – one of the largest contracts we have secured to date. RedRaven will capture performance data to monitor asset health, offering predictive maintenance capabilities and protecting valuable production uptime. With the addition of this customer, we are proudly growing our globally diverse network of over 75 IoT-enabled customer sites – many of which are now renewing and expanding their contracts. Through our RedRaven technology, Flowserve is helping to digitize and optimize customers’ performance with each installation.

     
2024 PROXY STATEMENT 10
 
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THIS IS FLOWSERVE

 

Corporate Social Responsibility

 

Our ESG Programs & Initiatives

Guided by our values, we aim to create extraordinary flow control solutions to make the world better for everyone. Our Purpose informs our Environmental, Social and Governance (ESG) vision as we strive to enable a clean energy future by advancing technologies that reduce climate impact, embed sustainability within our core operations and strengthen our purpose-driven culture. In 2022, we launched a more holistic approach to ESG at Flowserve that honors this vision and more closely aligns with our 3D Growth Strategy. Our ESG program is constructed around three key pillars: Climate, Culture and Core Responsibility. These pillars capture how we are committed to advancing ESG at Flowserve on our journey of making the world better for everyone.

 

 

Climate

   

Climate captures the Environmental pillar of our ESG approach and outlines our commitment to enabling a clean energy future for our operations and our customers.

 

We are dedicated to promoting our customers’ sustainability through product development, stewardship and innovation that support energy efficiency, reduced emissions and digitization of operations. We have partnered with our customers in advancing sustainability in their operations through development of carbon capture technology, concentrated solar power and flare gas recovery. In 2023, we booked more than $200 million in energy transition projects to drive renewable energy and help our customers reduce operations emissions, minimize lifecycle equipment costs, reduce maintenance requirements, and simplify equipment operation.

 

We value our role as key partners to our customers in reaching their carbon reduction goals through energy transition but also remain focused on our own carbon reductions goals. As part of our Climate pillar, Flowserve set a target to reduce Scope 1 and Scope 2 carbon intensity 40% by 2030, using 2015 as a baseline year. Our goal is to reduce combined direct (Scope 1) and indirect (Scope 2) operating emissions of 29.4 Tonne CO2-equivalent (CO2e) per million USD dollars in annual sales revenue in 2015 to 17.4 Tonne CO2e or lower by 2030. In 2023, we are pleased to report that we accomplished 100% of this goal, through energy efficiency improvements, renewable energy project development and other measures to offset our greenhouse gas emissions. Our progress was recognized in 2023 by Newsweek, which named Flowserve one of America’s Greenest Companies, as well as one of America’s Most Responsible Companies. For more information on our ESG programs and initiatives, please see our ESG Report accessible through our website at https://www.flowserve.com under the “ESG” caption, which is not incorporated by reference into this proxy statement. Statements regarding our ESG-related goals are not guarantees or promises that those goals will be met.

     
2024 PROXY STATEMENT 11
 
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Culture

   

Culture refers to the Social pillar of our strategy, rooted in our belief that the collective energy of our People set us apart. It defines our commitment to strengthening our values driven culture and investing in our communities through talent recruitment and engagement, workplace health and safety and employee wellbeing.

 

At Flowserve, our people are at the heart of providing vital flow control products and services to make the world better for everyone. Keeping our associates safe in our facilities and on customer sites is our primary driver in promoting their wellbeing. Our TargetZero program unifies our goals and initiatives to further drive operational excellence and continuous improvement across Flowserve in five key areas: accidents, defects, delays, emissions and waste. It offers a comprehensive approach to enhance the impact of our safety, quality, supply chain and environmental efforts to deliver unmatched value to our customers and supplier partners. In 2023, our TargetZero safety program continued to be an industry leader in total recordable incident rates.

 

Developing and engaging with our employees and communities around the globe is a critical focus of our Culture pillar. We launched Leadership in Motion in 2021 to provide critical leadership skills to Flowserve People Leaders. In 2023, we started a new Leadership in Motion development series and engaged with more than 60% of our people leaders. We also progressed our in-house early career leadership development program, IGNITE. IGNITE is designed to accelerate the development of early career engineering talent through annual geographical and functional rotations. In 2023, 62% of IGNITE engineers represented diverse groups and a variety of engineering disciplines, with a 69% overall retention rate of the participants in the program.

 

In 2019, we formally launched our global community impact program, Flowserve Cares, which empowers associates to request company support for community programs and needs. Flowserve Cares incorporates monetary donations, in-kind contributions and volunteer opportunities to help make meaningful impacts in the communities where our associates and customers live and work. The projects selected for grants reflect the wide range of issues that are important to our associates, including, including at-risk youth, STEM education, disaster recovery and other community-related support opportunities.

 

We have focused on improving diversity across Flowserve from the board of directors and the executive leadership team to the general associate population. We are committed to promoting diversity and inclusivity at all levels and hope to foster an employee culture that drives inclusion, combats bias and positively impacts our communities. We proudly support the empowerment of women and girls, especially women in STEM through the educational tenet of Flowserve Cares.

     
2024 PROXY STATEMENT 12
 
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Core Responsibility

   

Core Responsibility represents Governance and how we conduct business ethically and in accordance with laws and regulations around the world. Based on our Flowserve values, Core Responsibility addresses our duty to reinforce cybersecurity and data privacy, integrity and compliance and transparent reporting.

 

Our governance practices are consistent with our high standards of ethics, integrity and transparency in all our stakeholder relationships, including attracting and retaining world-class talent by investing in their professional development and providing them with challenging and rewarding opportunities for personal growth, promoting high standards of corporate citizenship and working to safeguard the environment and communities where we do business. With executive-level participation and Board oversight of our programs and initiatives, ESG issues have top-down support and are a company-wide priority.

 

During 2022, we launched our Human Rights Policy, and the protection of human rights remains a focus of our operations and those of our partners. In 2023, we trained over 95% of our employees on our Human Rights Policy and our commitment to ensuring Flowserve and its partners are staying vigilant in the protection of human rights. In addition, in an effort to increase transparency for our stakeholders regarding our sustainability program, we publish our ESG Report with the SASB Industrial Machinery and Goods Reporting Standard, the TCFD Reporting Format, and the GRI Reporting Index.

 

A critical component of Core Responsibility is strengthening our cybersecurity practices to protect our data and help promote operational resilience. Through annual security awareness trainings and simulated attacks, we aim to empower our associates to protect the enterprise and recognize and respond to real-life cyberattacks. We leverage a suite of innovative security services and solutions to monitor potential threats across our enterprise, Flowserve.com and our RedRaven predictive maintenance platform to maintain a secure environment for our associates, customers and partners. In 2023, Flowserve’s cybersecurity program achieved ISO 270001 certification.

 

As one of its core values, Flowserve places great emphasis on a high integrity workplace. Flowserve’s Integrity and Compliance program focuses on five pillars: Culture, Speaking Up, Strategy, Accountability and Risk Management. These pillars guide us in enhancing our compliance program, so we continue our commitment to uphold the highest ethical standards. We promote a culture of integrity with our associates through a variety of means, ranging from our local site Integrity Champions, monthly communications and our annual global Integrity & Compliance Day, where we celebrate our culture of integrity and build associate engagement by featuring programming designed to highlight resources, raise awareness, and conduct annual training.

     
2024 PROXY STATEMENT 13
 
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Our Global Community Impact Program

 

 

Supporting our Community

 

At Flowserve, we are inspired by our purpose of making the world better for everyone. We make a difference each day by delivering technologies and services to our customers around the world for the toughest, most critical applications. But our impact is not just limited to our innovations. Our global team has long been committed to bettering the communities in which we live and work through philanthropy and volunteerism. Long before the creation of Flowserve’s purpose, values and behaviors, our people have demonstrated a natural desire to help those who are at-risk, less fortunate and victims of situations beyond their control. Flowserve supports our communities through monetary donations and also by providing our people with time off to volunteer for local organizations and causes that they care about.

 

Our global community impact program, Flowserve Cares, has formalized these efforts since 2019 through monetary donations, in-kind contributions and volunteer opportunities. The projects selected for grants reflect the wide range of issues that are important to our associates, including at-risk youth, STEM education, disaster recovery and other community-related support opportunities. Through Flowserve Cares, associates are empowered to request company support for community programs and needs that make meaningful impact where they live and work. In 2023, Flowserve Cares approved over $700,000 in grants to drive positive change, ranging from environmental clean-up efforts, to serving our veterans, to feeding the underprivileged, to promoting financial literacy with children.

 

To encourage meaningful engagement with our local communities and active participation in our Flowserve Cares program, we grant up to 40 hours of volunteer time off (VTO) to eligible U.S. associates each year. Associates are granted 24 hours of paid VTO each calendar year with an additional opportunity to take 16 hours of unpaid VTO to expand their community impact.

     
2024 PROXY STATEMENT 14
 
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Engagement with Shareholders

Flowserve routinely engages with our shareholders to better understand their views, carefully considering the feedback we receive and taking action when appropriate. We review the results of the annual advisory vote on executive compensation in making determinations about the structure of Flowserve’s pay program, and whether any changes to the program should be considered.

 

In the fall of 2023, we proactively reached out to our top 25 shareholders, representing approximately 80% of our common shares outstanding to offer them the opportunity to discuss our corporate governance practices (including our ESG program) with members of management and to solicit feedback from our shareholders on these topics. The feedback we received was positive and has been and continues to be carefully considered by management and the Board as we further develop our ESG strategy and compensation practices. 

 

Flowserve participated in both in-person meetings and virtual events in 2023. This combination of meeting venues furthered our active engagement with Flowserve shareholders. We anticipate in 2024 that we will continue to have both in-person and virtual opportunities to continue our shareholder outreach, which management finds extremely valuable.

 

In total, our CEO and/or CFO participated in eight investor conferences during the year. We value the views and perspectives that our shareholders and the financial community provide us during these interactions, and we formally communicate the information and feedback that we obtain to the Board and its Committees on a regular basis.

 

     
2024 PROXY STATEMENT 15
 
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PROPOSAL ONE:
ELECTION OF DIRECTORS

 

The Company’s Board currently consists of eleven directors. All the director nominees listed below were previously elected by shareholders at the 2023 Annual Meeting, other than Cheryl H. Johnson, who was appointed to the Board in December 2023. Ms. Johnson was recommended to the Corporate Governance and Nominating (“CG&N”) Committee by a third-party search firm. Accordingly, the Board has nominated eleven directors to serve a one-year term until the 2025 annual meeting of shareholders or until their successors have been elected and qualified. Biographical information for each nominee is provided below under the heading “Board of Directors—Biographical Information—Nominees to Serve an Annual Term Expiring at the 2025 Annual Meeting of Shareholders.”

 

Required Vote and Recommendation:

 

Our By-Laws mandate that each director be elected under a majority voting standard in uncontested elections. A majority voting standard requires that each director receive more votes “for” his or her election than votes “against” to be elected.
In an uncontested election, any incumbent nominee for director who does not receive an affirmative vote of a majority of the votes cast in favor of or against such nominee must promptly offer to resign. The resignation offer is reviewed by the CG&N Committee, who determines whether to accept or reject it, giving due consideration to the best interests of the Company and its shareholders. Plurality voting will apply to contested elections.

 

The table below summarizes the key qualifications and areas of expertise that led our Board to nominate these individuals.

 

  Roberts Rowe Chand Chandy Delly Garrison Johnson McMurray Okray Siegel Taylor
Manufacturing / Operations      
Industry / Product Knowledge            
Multinational Operations
Financial / Accounting      
Product Innovation / R&D                
Energy / Alternative Energy Markets    
Supply Chain        
HR / Talent Development  
Mergers & Acquisitions      
Corporate Strategy / Governance

 

Manufacturing/
Operations
Industry/Product
Knowledge
Multinational
Operations
Financial/Accounting Product
Innovation/R&D
Energy/Alternative
Energy Markets
Supply Chain HR/Talent
Development
Mergers & Acquisitions Corporate Strategy/
Governance

 

         

  The Board recommends that you vote “FOR” the election of all nominees to serve as directors.    
         
     
2024 PROXY STATEMENT 16
 
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Board of Directors — Biographical Information

 

Nominees to Serve an Annual Term Expiring at the 2025 Annual Meeting of Shareholders

 

David E. Roberts

 

 

Independent Chair since:
May 2021

 

Director since:

Nov. 2011

 

Age: 63

 

Board Committees:

•   N/A

 

Current Public Company Directorships:

•   None

 

Past Public Company Directorships:

•   Penn West Exploration

Employment History

Gavilan Resources, LLC, a private company formed in partnership with Blackstone focused on oil and natural gas development and production opportunities in South Texas | Chief Executive Officer (2017 – retirement in 2020). Gavilan filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in May 2020.

Penn West Exploration, a Canadian oil and gas exploration and production company | President and CEO (2013 – 2016)

Marathon Oil Corporation, an independent upstream company with international operations in exploration and production, oil sands mining and integrated gas | Executive Vice President and Chief Operating Officer (2011 – 2012)

Marathon Oil Corporation | other key management positions, including Executive Vice President in charge of Marathon’s worldwide upstream operations and Senior Vice President of business development (2006 – 2011)

BG Group, an integrated natural gas company | various leadership roles (2003 – 2006)

Chevron Corporation | advisor to the Vice Chairman (2001 – 2003)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Mr. Roberts is well qualified to serve as a director due to his executive leadership experience, strong international operations background, business development experience and extensive knowledge of and experience in the energy industry. This provides Mr. Roberts with a unique insight into the Company’s operational challenges and opportunities and its end-markets and customer needs.

 


 

R. Scott Rowe

 

 

Director since:

Apr. 2017

Age: 53

Board Committees:

•   N/A

Current Public Company Directorships:

•   Quanta Services, Inc.

Past Public Company Directorships:

•   None

Employment History

Flowserve Corporation | President, Chief Executive Officer (2017 — Present)

Cameron Group of Schlumberger Ltd., an oilfield services co. | President (2016 — 2017)

Cameron International Corporation, an oilfield services co. | President, Chief Executive Officer (2015 — 2016)

Cameron International Corporation | President, Chief Operating Officer (2014 — 2015)

OneSubsea, a joint venture established by Cameron and Schlumberger | Chief Executive Officer (2014)

Subsea Systems, a division of Cameron | President (2012 — 2014)

Cameron International Corporation | President of the Engineered and Process Valves division (2010 — 2012)

United States Army | Captain (O3) (1993 — 1998)

 Other Current Public Company Directorships 

 

Quanta Services Inc., a leading provider of specialty contracting services | Director (2022 – Present)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Mr. Rowe is well qualified to serve as a director due to his position as the Company’s President and Chief Executive Officer, which enables him to provide the Board with intimate knowledge of the Company’s day to day operations.

 


 

Manufacturing/
Operations
Industry/Product
Knowledge
Multinational
Operations
Financial/Accounting Product
Innovation/R&D
Energy/Alternative
Energy Markets
Supply Chain HR/Talent
Development
Mergers & Acquisitions Corporate Strategy/
Governance
     
2024 PROXY STATEMENT 17
 
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Sujeet Chand

 

 

Director since:

Dec. 2019

Age: 66

Board Committees:

•   Audit

•   Technology, Risk & Finance

Current Public Company Directorships:

•   Proto Labs, Inc.

•   Veeco Instruments Inc.

Past Public Company Directorships:

•   None

Employment History

Rockwell Automation, Inc., industrial automation manufacturer | Senior Vice President and Chief Technology Officer (2005 – retirement in 2021)

Rockwell Automation, Inc. | Other senior leadership roles (2001 – 2005)

XAP Corporation, an education technology company | Chief Operating Officer (2000 – 2001)

Rockwell Scientific Company, a subsidiary of Rockwell International | Head of research and development (1988 – 2000)

 Other Current Public Company Directorships 

 

Proto Labs, Inc., global digital manufacturer | Director (2017 – Present)

Veeco Instruments Inc., manufacturer of semiconductor process equipment | Director (2021 – Present)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Mr. Chand is well qualified to serve as a director due to his technology and innovation experience, including with respect to cybersecurity and information technology systems, as well as his electrical engineering background. Additionally, Mr. Chand has valuable multinational executive leadership and manufacturing experience from Rockwell Automation and XAP Corporation.

 

 

Ruby R. Chandy

 

 

Director since:

May 2017

Age: 62

Board Committees:

•   Organization & Compensation

•   Corporate Governance & Nominating

Current Public Company Directorships:

•   DuPont de Nemours, Inc.

•   Thermo Fisher Scientific Inc.

Past Public Company Directorships:

•   IDEX Corporation

•   AMETEK, Inc.

Employment History

Pall Corporation, a leading supplier of filtration, separation, and purification technologies | President of the Industrial Division (2012 – retirement in 2015)

The Dow Chemical Company, a multinational chemical corporation | Managing Director, Vice President of Dow Plastics Additives unit (2011 – 2012)

 Other Current Public Company Directorships 

 

Thermo Fisher Scientific Inc., a multinational science and technology corporation | Director (2022 – Present)

DuPont de Nemours, Inc., a multinational chemical corporation | Director (2019 – Present)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Ms. Chandy is well qualified to serve as a director due to her executive management experience, marketing and strategy skills, relevant experience in industrial companies, extensive engineering and management education, broad international business and financial experience and enterprise risk oversight experience.

 

 

Manufacturing/
Operations
Industry/Product
Knowledge
Multinational
Operations
Financial/Accounting Product
Innovation/R&D
Energy/Alternative
Energy Markets
Supply Chain HR/Talent
Development
Mergers & Acquisitions Corporate Strategy/
Governance
     
2024 PROXY STATEMENT 18
 
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Gayla J. Delly

 

 

Director since:

Jan. 2008

Age: 64

Board Committees:

•   Organization & Compensation

•   Corporate Governance & Nominating — Chair

Current Public Company Directorships:

•   Littelfuse, Inc.

•   Broadcom Inc.

Past Public Company Directorships:

•   Power One, Inc.

•   National Instruments, Inc.

•   Benchmark Electronics Inc.

Employment History

Benchmark Electronics Inc., a contract provider of manufacturing, design, engineering, test and distribution to computer, medical device, telecommunications equipment and industrial control manufacturers | President and Chief Executive Officer (2012 – retirement in 2016)

Benchmark Electronics Inc. | President (2006 – 2011)

Benchmark Electronics Inc. | Vice President and Chief Financial Officer (2001 – 2006)

Benchmark Electronics Inc. | Corporate Controller and Treasurer (1995 – 2001)

Ms. Delly is a certified public accountant.

 Other Current Public Company Directorships 

 

Littelfuse, Inc., a diversified manufacturer of industrial technology | Director (2023 – Present)

Broadcom Inc., a designer, developer and global supplier of semiconductor devices | Director (2017 – Present)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Ms. Delly is well qualified to serve as a director due to her international manufacturing experience, with a specific focus on engineering and technology in emerging markets, including Asia and Latin America, which provides valuable insight into the Company’s operations and assists in identifying product portfolio opportunities. In addition to her board experience, Ms. Delly has valuable executive leadership experience and financial expertise gained from her time with Benchmark Electronics Inc.

 

 

Cheryl H. Johnson

 

 

Director since:

Dec. 2023

Age: 63

Board Committees:

•   Technology, Risk & Finance

•   Organization & Compensation

Current Public Company Directorships:

•   None

Past Public Company Directorships:

•   None

Employment History

Caterpillar Inc., a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial turbines and diesel-electric locomotives | Chief Human Resources Officer (2017 – Present)

Textron, an industrial manufacturer of specialized vehilces, turf care and fuel systems | Executive Vice President, Human Resources (2012 – 2017)

Bell Helicopter, a segment of Textron, Inc., and an aerospace manufacturer | Director, Talent and Organization Development (2009 – 2012)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Ms. Johnson is well qualified to serve as a director due to her extensive experience in human resources, with a focus on international manufacturing and operations from her service with Caterpillar Inc. Ms. Johnson’s broad talent development experience provides a valuable perspective into the Company’s human capital management and long-term strategy.

 

 

Manufacturing/
Operations
Industry/Product
Knowledge
Multinational
Operations
Financial/Accounting Product
Innovation/R&D
Energy/Alternative
Energy Markets
Supply Chain HR/Talent
Development
Mergers & Acquisitions Corporate Strategy/
Governance
     
2024 PROXY STATEMENT 19
 
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John L. Garrison

 

 

Director since:

Oct. 2018

Age: 63

Board Committees:

•   Organization & Compensation — Chair

•   Corporate Governance & Nominating

Current Public Company Directorships:

•   None

Past Public Company Directorships:

•   Azurix Corporation

•   Terex Corporation

Employment History

Terex Corporation, a global manufacturer of materials processing machinery and aerial work platforms | President, Chief Executive Officer and Chairman (2015 – retirement in 2024)(1)

Bell Helicopter, a segment of Textron, Inc., and an aerospace manufacturer | President and Chief Executive Officer (2009 – 2015)

United States Army | Captain (1982 —1992)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Mr. Garrison is well qualified to serve as a director due to his strong manufacturing, international operations and leadership experience gained through his various executive and board leadership roles, which provides him with unique insights into the current climate the Company faces as a manufacturer with a large international footprint.

 

 

Michael C. McMurray

 

 

Director since:

Oct. 2018

Age: 59

Board Committees:

•   Technology, Risk & Finance — Chair

•   Organization & Compensation

Current Public Company Directorships:

•   None

Past Public Company Directorships:

•   None

Employment History

LyondellBasell, a global plastics, chemicals and refining company | Executive Vice President and Chief Financial Officer (2019 – Present)

Owens Corning, a global manufacturer of insulation, roofing and fiberglass composites | Senior Vice President and Chief Financial Officer (2012 – 2019)

Owens Corning | Vice President and Finance Leader of Owens Corning’s Building Materials Group (2011 – 2012)

Owens Corning | Vice President, Investor Relations and Treasurer (2008 – 2011)

Royal Dutch Shell | various leadership roles (1987 – 2008)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Mr. McMurray is well qualified to serve as a director due to his extensive knowledge of global industrial manufacturing, the Company’s end markets and the financial markets, which provides valuable insight into the strategic decisions to capitalize on the Company’s growth opportunities. Additionally, Mr. McMurray has valuable multinational executive leadership and financial expertise at LyondellBasell, Owens Corning, and Royal Dutch Shell.

 

 

Manufacturing/
Operations
Industry/Product
Knowledge
Multinational
Operations
Financial/Accounting Product
Innovation/R&D
Energy/Alternative
Energy Markets
Supply Chain HR/Talent
Development
Mergers & Acquisitions Corporate Strategy/
Governance

 

(1) Mr. Garrison retired from his position as President, Chief Executive Officer and Chairman of Terex Corporation effective as of January 1, 2024.
     
2024 PROXY STATEMENT 20
 
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Thomas B. Okray

 

 

Director since:

Apr. 2023

Age: 61

Board Committees:

•   Audit — Chair

•   Corporate Governance & Nominating

Current Public Company Directorships:

•   Monro, Inc.

Past Public Company Directorships:

•   None

Employment History

Nikola Corporation, a global zero-emissions transportation and energy supply and infrastructure solutions company | Chief Financial Officer (2024 – present)

Eaton Corp, a multinational intelligent power management technologies company | Executive Vice President and Chief Financial Officer (2021 – 2024)(2)

Grainger, a worldwide industrial supply distributor | Senior Vice President and Chief Financial Officer (2018 – 2021)

Advance Auto Parts, an aftermarket automobile parts supplier | Executive Vice President and Chief Financial Officer (2016 – 2018)

 Other Current Public Company Directorships 

 

Monro, Inc., a national operator of retail tire and automotive repair stores | Director (Feb. 2024 – Present)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Mr. Okray is well qualified to serve as a director due to his strong background in international operations, manufacturing, and finance and accounting. Additionally, Mr. Okray has valuable strategic and financial expertise gained through his various executive leadership roles in the manufacturing industry.

 

 

Kenneth I. Siegel

 

 

Director since:

Aug. 2022

Age: 67

Board Committees:

•   Audit

•   Technology, Risk & Finance

Current Public Company Directorships:

•   Boardwalk Pipeline Partners, LP

•   CNA Financial Corporation

Past Public Company Directorships:

•   Diamond Offshore Drilling

Employment History

Loews Corporation, a diversified company with businesses in the insurance, energy, hospitality and packaging industries | Senior Vice President (2009 – present)

Barclays Capital, a multinational universal bank | Managing Director of Mergers and Acquisitions (2008 – 2009)

Lehman Brothers, a global financial services firm | Managing Director of Mergers and Acquisitions (2000 – 2008)

Schroders, a multinational investment banking and asset management company | Head of U.S. Investment Banking (1982 – 2000)

 Other Current Public Company Directorships 

 

Boardwalk Pipeline Partners, LP, a provider of transportation and storage of natural gas | Chairman of the Board (2009 – Present)

CNA Financial Corporation, a commercial property and casualty insurance company | Director (2019 – Present)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Mr. Siegel is well qualified to serve as a director due to his extensive knowledge of strategic planning, corporate development and finance and accounting, which provide us valuable insight into our strategic decisions to capitalize on the Company’s growth opportunities. Additionally, Mr. Siegel has valuable executive leadership experience in the manufacturing and energy industries and has leveraged his development and M&A expertise from Loews Corporation and its subsidiaries.

 

 

Manufacturing/
Operations
Industry/Product
Knowledge
Multinational
Operations
Financial/Accounting Product
Innovation/R&D
Energy/Alternative
Energy Markets
Supply Chain HR/Talent
Development
Mergers & Acquisitions Corporate Strategy/
Governance

 

(2) Mr. Okray departed from his position as Executive Vice President and Chief Financial Officer of Eaton Corporation effective as of February 5, 2024.
     
2024 PROXY STATEMENT 21
 
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Carlyn R. Taylor

 

 

Director since:

Aug. 2020

Age: 55

Board Committees:

•   Audit

•   Technology, Risk & Finance

Current Public Company Directorships:

•   The Hain Celestial Group, Inc.

Past Public Company Directorships:

•   None

Employment History

FTI Consulting, Inc., a global business advisory firm | Chief Growth Officer, Corporate Finance Global Co-Leader and global leader of Business Transformations and Transactions practice (2016 – present)

FTI Capital Advisors, an investment banking subsidiary of FTI Consulting | Chairperson (2017 – present)

FTI Consulting, Inc. | various roles of increasing responsibility (2002 – 2016)

PwC, a global accounting firm | various roles, including partner, senior manager and staff consultant (1990 – 2002)

 Other Current Public Company Directorships 

 

The Hain Celestial Group, Inc., a leading organic and natural products company | Director (2022 – Present)

 Specific Experience, Qualifications, Attributes and Skills Relevant to Flowserve 

 

We believe that Ms. Taylor is well qualified to serve as a director due to her extensive background in corporate strategy, finance and accounting, most notably leveraging her expertise in capital allocation strategies and capital markets to help businesses spearhead transformative initiatives, as well as her experience serving on the board of directors of various privately-owned companies and startups.

 

 

Manufacturing/
Operations
Industry/Product
Knowledge
Multinational
Operations
Financial/Accounting Product
Innovation/R&D
Energy/Alternative
Energy Markets
Supply Chain HR/Talent
Development
Mergers & Acquisitions Corporate Strategy/
Governance
     
2024 PROXY STATEMENT 22
 
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THE BOARD AND COMMITTEES

 

Role of the Board; Corporate Governance Matters

 

The Board oversees the CEO and other senior management in the competent and ethical operation of the Company on a day-to-day basis and to help confirm that our shareholders’ best interests are served. In its efforts to satisfy this duty, our Board has adopted Corporate Governance Guidelines (“Guidelines”). Our Guidelines, as well as other corporate governance documents, such as the Company’s Code of Conduct for employees and directors and an additional Code of Ethics for directors, are available on the Company’s website at https://ir.flowserve.com under the “Corporate Governance—Documents & Charters” caption. The table below highlights some of the Company’s investor friendly governance practices.

 

Director Elections   Board Operations   Shareholder Rights

 Annual elections for full Board by majority vote (in uncontested elections)

 Resignation policy if a majority vote is not received (in uncontested elections)

 Director retirement age policy of 72

 

 Stock ownership requirements for directors (5x annual cash retainer)

 Independent board chair

 Annuasl Board and Committee evaluations

 Board committees composed of 100% independent directors

 

 Right to call a special meeting

 Right to act by written consent

 Proxy access right

 No poison pill

 Annual “Say on Pay” vote

 No supermajority voting requirements

 

The Board, through the CG&N Committee, regularly reviews developments in corporate governance and best practices and modifies the Guidelines, committee charters and key practices as necessary. For example, given the increasing importance of ESG matters to our long-term strategy and to our shareholders, we amended the charter of the CG&N Committee to specifically provide for oversight over our ESG programs and initiatives. We also recently added responsibility for innovation, technology and intellectual property development to our Technology, Risk and Finance Committee which was formerly known as the Finance and Risk Committee.

 

The Board also works with management to develop the Company’s long-term strategy. The Board dedicates one full meeting per year solely to our long-term strategy, in which the Board receives updates from management and discusses the progress made, challenges encountered and future plans to continue implementing our strategic priorities. At each quarterly meeting of the Board, management also provides additional updates on our strategic priorities based on particular focus areas, including our business platforms, culture and organizational health, regulatory and legal risk, operations, and climate change and sustainability.

 

Our approximately 16,000 associates around the globe are a critical component of our ability to execute on our strategy. Accordingly, the Board continually monitors and assesses our human capital management, principally in the areas of workplace health and safety, employee engagement, compensation and benefits and training, development and ethics. Each year, our associates complete an annual ethics training on our Code of Conduct and participate in “Integrity and Compliance Day” and “Safety Day” to help further emphasize the ongoing training that our associates receive. We also conduct annual employee engagement surveys to solicit feedback and input directly from our associates and, based on the results of our surveys, management and the Board work together to create additional action plans as appropriate.

 

Board Operations

 

Board Leadership Structure

We have separated the positions of Chairman of the Board and had an independent Board Chairman since 2005. David E. Roberts currently serves as our independent Chairman. He presides over the meetings of the Board, including executive sessions of the Board where only non-employee directors are present. Among the wide range of other duties as Chairman of the Board, he reviews and approves the agendas for Board meetings, presides over meetings and executive sessions of the Board of Directors, briefs the CEO on issues and concerns arising in the executive sessions of the Board, facilitates communication between the independent directors and management, coordinates periodic Board input and review of management’s strategic plan for the Community, and leads the Board’s review of the succession plan for the CEO and other key executives. He also serves as an alternate member for all Board committees, and strives to attend as many committee meetings as possible. More information the duties of our Non-Executive Chairman can be found on the investor relations portion of our website at https://ir.flowserve.com under the heading “Corporate Governance—Documents & Charters—Role and Responsibilities of Non-Executive Chairman of the Board.”

     
2024 PROXY STATEMENT 23
 
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We believe that having an independent Chairman separate from the CEO is appropriate for the Company at this time because it places an independent director in a position of leadership on the Board and allows the Chairman to focus on oversight of corporate governance matters, while enabling our CEO to focus on leading the Company and managing the business on a day-to-day basis. We believe this independent leadership and the independent Chairman’s authority to call meetings of the non-employee directors adds value to our shareholders by facilitating a more efficient exercise of the Board’s fiduciary duties and best enables the Board to effectively manage our businesses, risks, opportunities and affairs in the best interests of our shareholders.

 

We also believe the independent Chairman further enhances independent Board oversight by being responsible for establishing the Board’s annual schedule and collaborating with the CEO on the agendas for all Board meetings. The separation of Chairman and CEO also allows the independent Chairman to provide support and advice to the CEO, reinforcing the reporting relationship and accountability of the CEO to the Board. The independent Chairman also represents the Board in communications with shareholders and other stakeholders of the Company and provides input on the design of the Board. In addition, each of the independent members of the Board actively participate in overseeing management including by actively participating in each Board and Committee meeting held throughout the year.

 

Risk Oversight

The Board and its Committees exercise their risk oversight function by carefully evaluating the reports they receive from management and by making inquiries of management with respect to areas of particular interest to the Board. The Board and its Committees oversee senior management’s policies and procedures in assessing and addressing risk areas that fall within the scope of the Board’s and the Committees’ respective areas of oversight responsibility, as further detailed in the Board Committees section below. The Board and management frequently discuss the long-term strategy of the Company. The Board is regularly informed through Committee reports of each Committee’s activities in overseeing risk management.

 

Meeting Attendance

Board Meetings

 

There were nine meetings of the Board during the year ended December 31, 2023. Executive sessions of non-employee directors are normally held at each regular Board meeting and are presided over by our independent Chairman of the Board, or, in the Chairman’s absence, by the Chairman of the CG&N Committee. During the year ended December 31, 2023, each Director nominee attended at least 89% of the total number of meetings of the Board and at least 75% of the total number of meetings of the Board committees on which he or she served while he or she has been a director or committee member.

 

Shareholder Meetings

 

Board members are expected to attend the Company’s Annual Meetings of shareholders. 10 out of 11 directors then-serving were in attendance at the Company’s 2023 Annual Meeting.

 

Communicating with the Board

Shareholders and other interested parties may communicate with the Board or the independent directors as a group directly by writing to: Non-Executive Chairman of the Board, c/o Flowserve’s Corporate Secretary, Flowserve Corporation, 5215 N. O’Connor Blvd., Suite 700, Irving, Texas 75039. These communications are reviewed by the Corporate Secretary to determine whether they are appropriate for presentation to the Board or such director. The purpose of this screening is to avoid having the Board consider irrelevant or inappropriate communications (such as advertisements, solicitations, and product inquiries). All relevant communications are then delivered to our Chairman.

     
2024 PROXY STATEMENT 24
 
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Board Composition

 

What We Look For in Directors

The identification and evaluation of director candidates begins with the Guidelines, which establish the criteria for Board membership. As a starting point under the Guidelines, all prospective Board members must, for example, adhere to the highest standards of integrity and ethics, exercise diligent and constructive oversight of the Company’s business, risk profile and strategy, demonstrate relevant and successful career experience, display a global business perspective, and possess the time to responsibly perform all director duties and effectively represent the interests of the shareholders. In addition, we believe that Board members should have varied professional expertise in areas relevant to the Company. In this regard, our director nominees bring a wide array of qualifications, skills and attributes to our Board that support its oversight role on behalf of the shareholders. The table on page 16 summarizes the key qualifications and areas of experience that led our Board to nominate these individuals.

 

The Guidelines further articulate the Board’s firm belief that the Board’s members should also have a diversity of backgrounds, which we view holistically. In evaluating diversity of backgrounds, the Board considers individual qualities and attributes, such as educational background, professional skills, business experience and cultural viewpoint, as well as more categorical diversity metrics, such as race, age, gender and nationality. This consideration is implemented through the selection process for director nominees, and the Board assesses its effectiveness in promoting diversity through an annual self-assessment process that solicits feedback concerning the appropriateness of the Board’s diversity, among other critical performance factors.

 

The Board also periodically reviews the tenure of each Board member, at least on an annual basis. We strive to maintain an appropriate balance of age and tenure on the Board with a mix of directors who have a long and deep understanding of our business and directors who bring new and fresh skills, perspectives and experience to the Board. In line with this philosophy, since 2019 we have added five new directors to our Board.

 

Director Recruitment Process  

The CG&N Committee considers various potential director candidates who may come to the attention of the CG&N Committee through current Board members, professional search firms, shareholders or other persons. The CG&N Committee generally retains a national executive-recruiting firm to research, screen and contact potential candidates regarding their interest in serving on the Board, although the CG&N Committee may also use less formal recruiting methods. All identified candidates, including shareholder-recommended candidates, are evaluated by the CG&N Committee using the same methods and criteria, although those methods and criteria may vary from time to time depending on the CG&N Committee’s assessment of the Company’s needs and current situation.

 

Director Evaluation Process  

We believe that a robust Board evaluation and feedback process helps to promote the effectiveness of our Board and Committees and encourages our Board members, individually and collectively, to continually improve in their roles and responsibilities. Our Board evaluation process is led by an independent member of the Board, the Chair of the CG&N Committee, who engages independent external advisors each year to assist in compiling the results of the evaluations submitted by the members of the Board and to provide additional perspective on effectively responding to the evaluations and feedback received.

 

Our annual evaluation process typically begins with a self-assessment in which each independent member of the Board provides a performance rating for a series of questions in several key categories, including the structure, process and resources of the Board, effectiveness of the Committees of the Board, and management of the Company. The self-evaluation concludes with several open-ended questions in order to encourage directors to freely discuss their own performance, priorities for the upcoming year, and any other comments that the director deems important.

 

The independent directors also complete a peer evaluation of the other independent directors every two to three years (other than the Chairman, who is evaluated separately), which solicits feedback on how each director adds value to the Board and its Committees, what each director could do to increase effectiveness, and any other commentary that is deemed pertinent.

 

The independent directors also complete a Chairman evaluation to provide feedback on the performance and contributions of the Chairman of the Board every year. The Chairman evaluation asks independent director to rate the Chairman’s performance in a dozen key areas and also provides an opportunity to provide open feedback on the performance of the Chairman of the Board.

     
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The independent directors also complete an evaluation of our Chief Executive Officer’s performance every year. While our Chief Executive Officer is a member of the Board, his evaluation is focused on his performance as a member of management and not as a member of the Board. These evaluations are utilized in assessing the CEO’s performance and setting his compensation on a yearly basis.

 

Once the evaluations were complete for 2023, the results were compiled by an independent external advisor, anonymized, and provided to the CG&N Chair, who then discussed the results of the process with the CG&N Committee, and the full Board, at their February meeting and were considered by the CG&N Committee and the Board when setting CEO compensation and engaging in director development, strategy, and governance.

 

Director Independence

The Guidelines provide that all members of the Board (other than our CEO) should be independent under applicable law and the New York Stock Exchange (“NYSE”) listing standards, as well as under the independence standards further established by the Board within the Guidelines. Upon the recommendation of the CG&N Committee, the Board makes an affirmative determination regarding the independence of each director annually after reviewing pertinent facts and circumstances and taking into consideration all applicable laws, regulations, the NYSE listing standards and the categorical independence standards set forth in the Guidelines, which are consistent with the NYSE listing standards. In doing so, the Board considers relationships involving directors and their immediate family members and relies on information derived from the Company’s records, questionnaires, and other inquiries. In addition to meeting the NYSE standards of independence and the categorical standards set forth in the Guidelines, a director qualifies as “independent” under the Guidelines only if the Board affirmatively determines that the director has no direct or indirect material relationship (whether commercial, industrial, banking, consulting, accounting, legal, charitable or familial, excluding their present directorship) with the Company or any of its consolidated subsidiaries, either director, or as a partner, shareholder or officer of an organization that has a relationship with the Company.

 

Based on its review, the Board has determined that each of David E. Roberts, Sujeet Chand, Ruby R. Chandy, Gayla J. Delly, John L. Garrison, Cheryl H. Johnson, Michael C. McMurray, Thomas B. Okray, Kenneth I. Siegel, and Carlyn R. Taylor (all of our current directors other than R. Scott Rowe, who is not independent because of his employment as the Company’s President and Chief Executive Officer) meet the independence standards set forth in the NYSE listing standards and the categorical standards set forth in the Guidelines. In addition, the Board previously determined that John R. Friedery, who served as a director until December 8, 2023, met the independence standards set forth in the NYSE listing standards and the categorical standards set forth in the Guidelines during the time he served on the Board.

 

Our independence standards are included in the Guidelines, which are available on the Company’s website at https://ir.flowserve.com under the “Corporate Governance—Documents & Charters” caption.

 

How Shareholders Can Recommend a Candidate

A shareholder desiring to recommend a candidate for election to the Board should submit a written notice that includes the information required by the Company’s By-Laws, including the candidate’s name and qualifications, to our Corporate Secretary, who will refer the recommendation to the CG&N Committee. The CG&N Committee may require any shareholder-recommended candidate to furnish such other information as may reasonably be required to determine the eligibility of such recommended candidate or to assist in evaluating the recommended candidate, including a Director and Officer Questionnaire.

 

Under the proxy access provisions of our By-Laws, eligible shareholders and/or shareholder groups also are permitted to include shareholder-nominated director candidates in our proxy materials. Additional details about the requirements for including shareholder-nominated director candidates in our proxy materials are set forth under “General Voting and Meeting Information—Shareholder Proposals and Nominations” below.

     
2024 PROXY STATEMENT 26
 
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Board Committees

 

The Board maintains an Audit Committee, a Technology, Risk and Finance Committee (“TR&F Committee”), a Corporate Governance and Nominating Committee, and an Organization and Compensation Committee (“O&C Committee”). Only independent directors are eligible to serve on Board committees. Each committee has authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities and is governed by a written charter, which is available on the investor relations portion of the Company’s website at https://ir.flowserve.com under the “Corporate Governance—Documents & Charters” caption.

 

Audit Committee   Primary Oversight Responsibilities

Committee Chair(1)(2) :
Thomas B. Okray(3)

 

Members(4):
Sujeet Chand(3)
Kenneth I. Siegel(3)
Carlyn R. Taylor(3)

 

7 Meetings in 2023

 

Oversee financial reporting process, including the integrity of Company financial statements and compliance with legal and regulatory requirements

•  

Oversee financial performance and reporting, the Company’s independent auditor and internal audit function, and regulatory activities

•  Oversee the Company’s integrity and compliance program

•  

Review and discuss the process of Board and Board committees oversight of senior management’s risk management responsibilities

•  Appoint independent auditor

•  Prepares Audit Committee report for this proxy statement

 

The Board has determined that all members of the Audit Committee meet the applicable independence standards under the U.S Securities and Exchange Commission (the “SEC”) rules and NYSE listing standards, and that all members are financially literate within the meaning of the NYSE listing standards.
   
(1) Mr. McMurray served as chair of the Audit Committee until May 26, 2023.
(2) Mr. Okray was appointed as chair of the Audit Committee effective as of May 26, 2023.
(3) The Board has determined that each of Mr. Okray, Mr. Chand, Mr. Siegel and Ms. Taylor qualify as an audit committee financial expert under the SEC rules.
(4) Mr. McMurray served on the Audit Committee until May 26, 2023 and the Board determined that he qualified as an audit committee financial expert under the SEC rules.

 

Technology, Risk &
Finance Committee
  Primary Oversight Responsibilities

Committee Chair(1)(2):
Michael C. McMurray

 

Members(3):
Sujeet Chand
Cheryl H. Johnson(4)
Kenneth I. Siegel
Carlyn R. Taylor

 

4 Meetings in 2023

 

 

•  

Oversee the Company’s technology, innovation and intellectual property strategy, goals and priorities

•  Review the Company’s enterprise risk management, including emerging risks

•  

Advise the Board on all corporate financing and related treasury matters including financial plans, liquidity, credit, key financial risks, treasury risk, and related matters

•  

Review effectiveness of the Company’s IT infrastructure and cybersecurity programs and its practices for identifying and mitigating technology risks with the Chief Information Officer

 

The Board has determined that all members of the TR&F Committee meet the independence standards under the NYSE listing standards. This committee was renamed from the Finance & Risk Committee to the Technology, Risk & Finance Committee effective February 8, 2024.
   
(1) Ms. Chandy served as chair of the TR&F Committee until May 26, 2023.
(2) Mr. McMurray was appointed as chair of the TR&F Committee effective as of May 26, 2023.
(3) Ms. Chandy served on the TR&F Committee until May 26, 2023.
(4) Ms. Johnson joined the TR&F Committee upon her appointment to the Board effective as of December 8, 2023.
     
2024 PROXY STATEMENT 27
 
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Corporate Governance &
Nominating Committee
  Primary Oversight Responsibilities

Committee Chair:
Gayla J. Delly

 

Members(1):
Ruby R. Chandy
John L. Garrison
Thomas B. Okray(2)

 

4 Meetings in 2023

 

 

•   Recommend to the Board nominees for Chairman of the Board, President and Chief Executive Officer

•   Determine Board organization

•   Review director compensation recommendations for consideration by the Board

•   Review and recommend director nominees

•   Manage risks associated with Board independence and potential conflicts of interest

•   

Establish corporate governance principles and procedures, including overseeing the Company’s Code of Conduct

•   Prepare effective CEO and Board succession planning

•   Evaluate CEO performance

•   Oversee Board and committee self-assessment process

•   Oversight of ESG Program, including related policies, activities and opportunities

 

The Board has determined that all members of the CG&N Committee meet the independence standards under the NYSE listing standards.
   
(1) John R. Friedery served on the CG&N Committee until December 8, 2023.
(2) Mr. Okray joined the CG&N Committee effective as of May 26, 2023.

 

Organization &
Compensation Committee
  Primary Oversight Responsibilities

Committee Chair:
John L. Garrison

 

Members(1):
Ruby R. Chandy(2)
Gayla J. Delly
Cheryl H. Johnson(3)
Michael C. McMurray

 

4 Meetings in 2023

 

•   Set compensation philosophy

•   Oversee risk management related to executive compensation plans and succession planning

•   Prepare the Compensation Committee Report included in this proxy statement

•   Approve executive officer compensation including incentives and other benefits

•   

Retain and evaluate the advice of the independent compensation consultant, F.W. Cook, in adherence to the philosophies and principles stated under “Executive Compensation—Compensation Discussion and Analysis”

•   

Review the Company’s processes to recruit, retain, and develop senior management, including its executive personnel appraisal, development, and selection processes, with a focus on the Company’s commitment to diversity

 

The Board has determined that all members of the O&C Committee meet the applicable independence standards under the SEC rules and NYSE listing standards.
   
(1) John R. Friedery served on the O&C Committee until December 8, 2023.
(2) Ms. Chandy joined the O&C Committee effective as of May 26, 2023.
(3) Ms. Johnson joined the O&C Committee upon her appointment to the Board effective as of December 8, 2023.
     
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Oversight of the Executive Compensation Program

 

Our executive compensation program is administered by the O&C Committee. Consistent with the NYSE corporate governance listing standards, the O&C Committee is composed entirely of independent, non-employee members of the Board. In addition, the Non-Executive Chairman of the Board generally attends the meetings of the O&C Committee.

 

As reflected in its charter, the O&C Committee has overall responsibility for setting the compensation for our CEO, which is approved by the full Board, and for approving the compensation of our other executive officers, including the other Named Executive Officers. The O&C Committee is also charged with the development and retention of management.

 

The O&C Committee is also responsible for reviewing the management succession plan and for recommending changes in director compensation to the CG&N Committee and to the Board. On matters pertaining to director compensation, the O&C Committee also receives data and advice from F.W. Cook. The O&C Committee periodically reviews the organizational design, management development plans and managerial capabilities of the Company. The O&C Committee also prepares and issues the Organization and Compensation Committee Report included in this proxy statement.

 

The O&C Committee’s process of reviewing the executive compensation program and setting compensation levels for our Named Executive Officers involves several components. During the first quarter of each year, the O&C Committee reviews each Named Executive Officer’s total compensation. The O&C Committee members also meet regularly with the Named Executive Officers at various times during the year, both formally within Board meetings and informally outside of Board meetings, which allows the O&C Committee to assess directly each Named Executive Officer’s performance. The O&C Committee also solicits input from all non-employee members of the Board as to the CEO’s performance during the year.

 

The O&C Committee generally considers the results of the CG&N Committee’s process for reviewing the CEO’s performance with all independent Board members. The CG&N Committee’s process includes the independent Board members individually and collectively presenting their assessment of the CEO’s performance, as well as the CEO presenting his self-assessment of his performance. The O&C Committee uses these results when determining the CEO’s recommended compensation, which is subject to the independent Board members’ approval.

 

In addition, the CEO annually presents an evaluation of each other Named Executive Officer’s performance to the O&C Committee, which includes a review of each officer’s contributions over the past year, and the officer’s strengths, weaknesses, development plans and succession potential. The CEO also presents compensation recommendations for each other Named Executive Officer for the O&C Committee’s consideration. Following this presentation and a benchmarking review for pay, the O&C Committee makes its own assessments and formulates compensation amounts for each Named Executive Officer with respect to each of the elements in the Company’s executive compensation program as described below.

 

Independent Compensation Consultant

The O&C Committee has the authority to retain outside advisors as it deems appropriate. The O&C Committee has engaged F.W. Cook as its independent compensation consultant to provide advice and information. F.W. Cook attends all regularly scheduled O&C Committee meetings and has assisted and advised the O&C Committee on all aspects of our executive and director compensation programs, and they provide no other services to the Company. The services they provide include:

 

providing and analyzing competitive market compensation data;
analyzing the effectiveness of executive compensation programs and making recommendations, as appropriate;
analyzing the appropriateness of the performance peer group (PPG) and compensation peer group (CPG); and
evaluating how well our compensation programs adhere to the philosophies and principles stated below under “Compensation Discussion & Analysis—Compensation Program Philosophy and Principles.”
     
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Director Compensation

 

2023 Director Compensation Program

Program Overview

Our director compensation program is established by the Board after review of data prepared by the O&C Committee’s independent compensation consultant regarding competitive director compensation levels for peer companies and the Company’s CPG, which is discussed under “Compensation Discussion & Analysis—The Decision-Making Process—Our 2023 Compensation Peer Group.” In 2023, our non-employee director compensation program consisted of the following, which was unchanged from 2022:

 

Component   Annual
Amounts
($)
  Form of Payment     
Retainer   $85,000   Cash    
Non-Executive Chairman retainer   $125,000   Cash    
Committee service fee (per committee)   $7,500   Cash    
Committee Chairman fee            
Audit Committee   $20,000   Cash    
O&C Committee   $15,000   Cash    
TR&F Committee   $10,000   Cash    
CG&N Committee   $10,000   Cash    
Equity grant target value   $150,000   Restricted Shares  

 

Additionally, non-employee directors are also eligible to receive special additional compensation when performing certain special services. The Board has set a compensatory rate of $3,500 per day for such services, though no compensation was paid for this purpose in 2023.

 

Compensation Deferral

Directors may elect to defer all or a portion of their annual cash and equity compensation. The annual cash compensation may be deferred in the form of cash or in phantom shares, which reflect an equivalent value of Company common stock. Compensation deferred in the form of cash accrues interest at rates that do not exceed market rates or constitute preferential earnings. If a director elects to defer cash compensation in the form of phantom shares, the director receives a 15% premium on the amount deferred.

 

Equity Compensation

The equity portion of non-employee director compensation is granted on the date of the Annual Meeting of shareholders in the form of restricted stock. The restricted shares have voting rights and fully vest after the earliest of one year from the date of grant, the termination of the director’s service due to death or disability, or a change in control. New non-employee directors receive a pro-rated grant of restricted stock at the time they join the Board. The pro-rated grant of restricted shares fully vests after the earliest of one year from the date of grants to the other incumbent non-employee directors, the termination of the director’s service due to death or disability, or a change in control.

 

Stock Ownership Guidelines

Under our stock ownership guidelines, all non-employee directors must own shares of Company common stock with a value of at least five times his or her annual cash retainer (currently $425,000) by his or her fifth anniversary of Board service. If the stock ownership requirement is not met, the director will receive all future Board compensation in the form of Company common stock until the requirement is satisfied. For 2023, all non-employee directors met their stock ownership requirements.  

 

5×

Annual Cash

Retainer

 

     
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The following table sets forth our non-employee director compensation for 2023. Mr. Rowe did not receive any compensation for his service as a director. His compensation is set forth below under “Executive Compensation—Summary Compensation Table.”

 

Name        Fees Earned
or Paid in
Cash ($)
  Stock Awards
($)(1)(2)
  Total
($)
Sujeet Chand   100,000             149,977              249,977
Ruby R. Chandy   107,131 (3)(9)      149,977       257,108
Gayla J. Delly   110,000       149,977       259,977
John R. Friedery   93,478 (4)      149,977       243,455
John L. Garrison   115,000       149,977       264,977
Cheryl H. Johnson   6,521 (5)      62,500 (8)      69,021
Michael C. McMurray   114,011 (6)     149,977       263,988
Thomas B. Okray   83,791 (7)      149,977       233,768
David E. Roberts   225,000       149,977       374,977
Kenneth I. Siegel   115,000 (9)      149,977       264,977
Carlyn R. Taylor   115,000 (9)      149,977       264,997
   
(1) Eligible directors received an annual equity grant of 4,453 shares of restricted common stock on May 25, 2023, the date of the Company’s 2023 Annual Meeting of Shareholders (the “2023 Annual Meeting”). The amounts shown in this column reflect the grant date fair value of the awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, “Compensation —Stock Compensation”, and are calculated using a price per share of $33.68, the closing market price of the Company’s common stock as reported by the NYSE on the date of grant. Assumptions used in the valuations are discussed in Note 7 to the Company’s audited consolidated financial statements for the year ended December 31, 2023, in the Annual Report on Form 10-K filed on February 20, 2024.
(2) The non-employee directors elected at the 2023 Annual Meeting each had 4,453 shares of restricted common stock outstanding at December 31, 2023; all other shares held are vested. Ms. Johnson was appointed to the Board effective as of December 8, 2023, and had 1,623 shares of restricted common stock outstanding as of December 31, 2023.
(3) Ms. Chandy was chair of the TR&F Committee until our 2023 Annual Meeting on May 25, 2023 and was therefore paid the full committee chair fee for the first quarter of 2023 and a pro-rated amount for the second quarter of 2023.
(4) Mr. Friedery served as a director until his retirement on December 8, 2023, and was paid a pro-rated portion of the $100,000 cash retainer for his services. 
(5) Ms. Johnson was appointed to the Board effective as of December 8, 2023 and received a pro-rated portion of the $100,000 cash retainer for her services.  
(6) Mr. McMurray was appointed as chair of the TR&F Committee effective at our 2023 Annual Meeting on May 25, 2023 and was therefore paid a pro-rated amount for the committee chair fee for the second quarter and full fee for the third and fourth quarters of 2023.
(7) Mr. Okray was appointed to the Board effective as of April 12, 2023 and received a pro-rated equity portion of the $100,000 cash retainer for his services. Mr. Okray was appointed as chair of the Audit Committee effective at our 2023 Annual Meeting on May 25, 2023 and was therefore paid a pro-rated amount for the committee chair fee for the second quarter and full fee for the third and fourth quarters of 2023.
(8) Ms. Johnson was appointed to the Board effective as of December 8, 2023 and received a pro-rated equity grant with a target grant value of $62,500.00. The grant date fair value of the award was calculated using a price per share of $38.52, the closing market price of the Company’s common stock on the date of grant as reported by the NYSE. The grant will vest on May 25, 2024.
(9) Amount reported includes a 15% premium to actual fees due to the director’s election to defer all or a portion of cash retainer payments in the form of phantom shares under the Company’s director stock deferral plan.
     
2024 PROXY STATEMENT 31
 
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EXECUTIVE OFFICERS

 

R. Scott Rowe

President, CEO and Director
since
: April 2017

Age: 53

 

    Flowserve Corporation | President, Chief Executive Officer, Director (2017 – Present)

    Cameron Group of Schlumberger Ltd, an oilfield services company | President (2016 – 2017)

    Cameron International Corporation, an oilfield services company | President, Chief Executive Officer (2015 – 2016)

    Cameron International Corporation | President, Chief Operating Officer (2014 – 2015)

    OneSubsea, a joint venture established by Cameron and Schlumberger | Chief Executive Officer (2014 – 2014)

    Subsea Systems, a division of Cameron | President (2012 – 2014)

    Cameron International Corporation | President of the Engineered and Process Valves division (2010 – 2012)

    United States Army | Captain (O3) (1993 —1998)

 

Lamar L. Duhon

President, FPD
since: February 2023

Age: 53

 

    Flowserve Corporation | President, Flowserve Pumps Division (2023 – Present)

    Flowserve Corporation | President, Aftermarket Services & Solutions (2022 – 2023)

    Halliburton Company, an energy products and service provider | Vice President, Sperry Drilling (2016 – 2021)

    Halliburton Company | Vice President, Cementing (2015 – 2016)

    Halliburton Company | Vice President, Shell Global Account (2013 – 2015)

    Halliburton Company | Vice President, Business Development – Asia Pacific (2012 – 2013)

    Halliburton Company | Regional Sales Manager, Gulf of Mexico (2010 – 2012)

    Baker Hughes, Inc., a multinational oilfield services company | Various leadership roles of increasing responsibility (1995 – 2010)

    United States Marine Corps | Sergeant (E-5) (1988 – 1994)

 

Susan C. Hudson

SVP, CLO
since: May 2022

Age: 47

 

    Flowserve Corporation | Senior Vice President, Chief Legal Officer and Corporate Secretary  (2022 – Present)

    Flowserve Corporation | Vice President, Associate General Counsel and Chief Compliance Officer (2020 – 2022)

    Flowserve Corporation | Director, Global Employment Law and Corporate Functions (2017 – 2020)

    Flowserve Corporation | Attorney, Global Labor and Employment Law (2016 – 2017)

    Pier 1 Imports, Inc., a merchandise retail company | Senior Corporate Counsel (2012 – 2016)

    Pier 1 Imports, Inc. | Corporate Counsel (2007 – 2012)

 

Amy B. Schwetz

SVP, CFO
since: February 2020

Age: 49

 

    Flowserve Corporation | Senior Vice President and Chief Financial Officer (2020 – Present)

Peabody Energy, a global pure-play coal company serving power and steel customers | Executive Vice President and Chief Financial Officer (2015 – 2020). Peabody filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in April 2016.

    Peabody Energy, Inc. | Senior Vice President, Finance & Administration – Australia (2013 – 2015)

    Peabody Energy, Inc. | Senior Vice President, Finance & Administration – Americas (2012 – 2013)

    Peabody Energy, Inc. | Vice President, Investor Relations (2011 – 2012)

    Peabody Energy, Inc. | Vice President, Capital and Financial Planning (2009 – 2011)

    Peabody Energy, Inc. | Various senior leadership roles (2005 – 2009)

    Ernst & Young LLP, a global accounting firm | Audit Manager (1997 – 2005)

 

2024 PROXY STATEMENT 32
 
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Scott K. Vopni

VP, CAO
since: June 2020

Age: 55

 

    Flowserve Corporation | Vice President, Chief Accounting Officer (2020 – Present)

Dean Foods Co., a food and beverage company | Senior Vice President – Finance, Chief Accounting Officer (2010 – 2019). Dean Foods filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in November 2019.

    Dean Foods Co. | Interim Chief Financial Officer (2017 – 2018)

    Dean Foods Co. | Senior Vice President – Finance (2016 – 2017)

    Dean Foods Co. | Senior Vice President – Investor Relations (2015)

    Dean Foods Co. | Vice President – Controller (2008 – 2010)

 

Kirk R. Wilson

President, FCD
since: July 2019

Age: 57

 

    Flowserve Corporation | President, Flow Control Division (2019 – Present)

    Flowserve Corporation | President, Aftermarket Services & Solutions (2015 – 2019)

    Flowserve Corporation | President, Services & Solutions Operations (2012 – 2015)

    Flowserve Corporation | Vice President and General Manager, Integrated Solutions Group (2008 – 2011)

    Flowserve Corporation | Vice President, Marketing for Pump Division (2004 – 2008)

 

2024 PROXY STATEMENT 33
 
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EXECUTIVE COMPENSATION 

 

Compensation Discussion and Analysis 

 

This Compensation Discussion & Analysis describes the decisions made concerning the 2023 compensation of the Company’s Named Executive Officers or “NEOs”, as shown below. It also describes our executive compensation guiding principles and other attributes related to executive compensation governance policies.

 

Contents

 

 

 Executive Summary Page  35
 Compensation Program Philosophy and Principles Page  38
 2023 Executive Compensation Decisions Page  42
 Compensation Governance Policies Page  55
 Summary Compensation Table Page  57

 

2023 Named Executive Officers 

 

During 2023, our NEOs were:

 

2023 Named Executive Officers
 

 

 

 

R. Scott Rowe

President & Chief Executive Officer (“CEO”)

Amy Schwetz

Senior Vice President, Chief Financial Officer (“CFO”)

Lamar Duhon

President, Flowserve Pumps Division(1)

Kirk Wilson

President, Flowserve Flow Control Division

Susan Hudson

Senior Vice President, Chief Legal Officer and Corporate Secretary (“CLO”)

 

(1)Mr. Duhon assumed the role of President, Flowserve Pumps in February 2023.  He previously held the role of President, After Market Sales and Service (“AMSS”).

 

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Executive Summary

 

Our Company

We are a world leading manufacturer and aftermarket service provider of comprehensive flow control systems. Operating in more than 50 countries, our product portfolio of pumps, valves, seals, automation and aftermarket services supports global infrastructure industries and delivers fluid motion solutions for the world’s toughest, most critical operations. Through our manufacturing platform and global network of quick response centers, we also offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting.

 

2023 Financial and Business Highlights 

In 2023, we delivered strong year-over-year revenue and earnings growth that far exceeded our original expectations, due to significantly improved operational execution. Our 3D Strategy, as well as supportive demand from traditional markets, drove another year of solid bookings. As a result, we have built a near-record backlog, and expect another year of revenue and earnings growth in 2024.

 

In addition to our significant 3D Strategy progress, we also launched a new operating model in 2023 that delivered margin expansion through improved speed and accountability in our operations combined with a lower cost structure. We also built on our commitment to invest in innovation and technology to further position Flowserve as a value-added solutions provider for our customers. 

 

With these strong customer relationships and an industry leading product portfolio, we are extremely well positioned to support our customers’ sustainability and decarbonization efforts as we live our Purpose to create extraordinary flow control solutions to make the world better for everyone, and to drive long-term value for you, our shareholders.

 

2023 Financial Performance At-A-Glance

$4.3B

Revenue

19.5% Year-Over-Year Growth

      

 $412M 

Adjusted Operating Income(1)

84% Year-Over-Year Growth

     

$4.3B

Customer Bookings

Supported by our 3D 
Growth Strategy

         

12.6%

Return On Invested Capital (ROIC)

 

 37%

1-Year Total Shareholder Return

 

$105M 

Capital Returned 
To Shareholders 
via Dividend

 

(1)Non-GAAP financial measure; see Annex I to this Proxy Statement for a reconciliation of such measure against the most directly comparable GAAP financial measure.

 

2023 Incentive Program Enhancements

Updated compensation program features promote alignment with shareholders and support our strategic priorities

 

Annual Incentive Plan

 

Simplified our 2023 AIP design to prioritize metrics aligned with our foundational pillars of execution, growth and efficiency:
Adjusted Operating Income (50% weighting) to incentivize strong execution;
Customer Bookings(2) (30% weighting) to incentivize growth; and
Adjusted Primary Working Capital as a % of Sales (20% weighting) to incentivize efficiency.

 

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Retained our strategic goals AIP payout modifier of +/-15% for members of the executive leadership team to incentivize continued progress against ESG and growth initiatives aligned with our business strategy.

 

Long-Term Incentive Plan

 

Introduced a cap on the +/- 15% relative TSR modifier starting with 2023 PSU awards that provides no positive payout adjustment if our three-year absolute TSR is negative, regardless of our relative performance. 
Updated the performance period for our FCF PSU awards, from a single 3-year performance period to an average of three 1-year performance cycles, which will support the rigor of the program in a volatile end markets environment. 

 

Other Compensation Elements

Adopted a new Dodd-Frank-compliant clawback policy and expanded our existing clawback policy to authorize recoupment of incentive compensation in the event of misconduct outside the context of a financial restatement.
(2)This metric represents Total Customer Bookings for 2023 and incorporates “3D” products and services to continue to incentivize customer bookings in these strategic areas that are critical to our growth.

 

Incentive program payouts are aligned with strong financial performance results and robust total shareholder returns achieved in 2023.

 

Our annual incentive program paid out above target for 2023 compared to below target payouts in each of the two prior fiscal years. The 2023 payout was aligned with our robust shareholder return for the year and reflected strong operating income and adjusted primary working capital performance results and slightly below-target total customer bookings.

 

2023 Annual Incentive Plan Payout

 

 

(1) Adjusted Primary Working Capital (PWC) as % of sales incentivizes efficiency; lower percentage values are indicative of a greater performance achievement level

 

Annual Incentive Payout: 162% of Target

Strategic Goals Modifier: 1.1x for all NEOs

Final Annual Incentive Payout: 178% of Target

 

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PSUs associated with the 2021-2023 performance period paid out significantly below target. This was driven by below-threshold free cash flow as a percentage of adjusted net income performance over the three-year performance period.

 

 

Realized pay for our executives is directionally aligned with our shareholders’ experience. Our CEO’s average realizable pay for 2021-2023 was 3% above the average target value for this period while our total shareholder return was up 20%.  

 

 

(1)“Target Pay” includes base salary, target annual incentive opportunity and grant date fair value of equity awards.
(2)“Realizable Pay” includes actual base salary, actual bonuses paid, and the value of outstanding RSU and PSUs based on our December 31, 2023, share price, with 2021 PSUs shown at actual payout and 2022 and 2023 PSUs shown at target.

 

Say-on-Pay and Shareholder Outreach

After significant shareholder outreach and corresponding enhancements to our compensation program in 2022, we received over 93% shareholder support for our say-on-pay proposal at our 2023 Annual Meeting. The O&C Committee strongly values the opinions of our shareholders as expressed in the say-on-pay vote and believes that our strong support levels in 2023 demonstrate a strong alignment of our compensation program with our shareholders’ interests. No changes to the compensation program resulted from the 2023 say-on-pay vote results.

 

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Good Governance and Compensation Practices Aligned with Shareholder Interests

Our executive compensation policies and governance practices support our pay-for-performance philosophy, align our executives’ interests with those of our shareholders, and reflect best practices without encouraging unnecessary risk taking.

 

 

  What We Do

   

   Target the market median for target total compensation, with payouts above or below market based on performance outcomes

 

   Balance compensation programs and cap incentive plan payouts

 

   Maintain comprehensive clawback policies that cover financial restatements and misconduct and apply to cash and both time- and performance-based equity incentive compensation

 

   Provide a meaningful percentage of long-term incentives in the form of performance-based compensation

 

 

   Maintain robust stock ownership requirements

 

   Fully disclose incentive plan targets and results

 

   O&C Committee engages an independent compensation consultant

 

   Change in control severance plan payments only made in event of a “double-trigger” when executive’s employment is terminated

 

What We Don’t Do
   
No officer or director hedging or pledging of stock
   
No excise tax or income tax gross ups for Executive Officers
   
No employment agreements with Executive Officers
   
No excessive perquisites
   
No stock option repricing without shareholder approval
   
No dividend payments on unvested awards


 

Our Guiding Principles

 

Executive Compensation Philosophy

Our philosophy is designed to achieve the following objectives:

 

 
ATTRACT AND RETAIN     Attract and retain high-quality leaders with a passion for driving high performance as well as our Purpose, Values and Behaviors
REINFORCE OUR
STRATEGY
    Align our incentive programs with our vision and business strategy
PROVIDE COMPETITIVE
AND MARKET-BASED
COMPENSATION
    Maintain a market-based compensation program that provides a competitive total target compensation opportunity approximating the market median
ALIGN PAY WITH
PERFORMANCE
    Provide incentive programs that reward short- and long-term performance leading to shareholder value without undue risk taking
ALIGN PAY WITH
SHAREHOLDERS
    Ensure a majority of total compensation is tied to performance and/or stock price and thus, is aligned with shareholder interests
   

 

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Components of Executive Compensation

 

Component     Objective   Key Features   Performance-Based Aspects
Base Salary     Provide a regular fixed income in recognition of job responsibilities  

    Paid in cash

    Reviewed annually for adjustments

      Individual performance is a key driver of any adjustments approved by the O&C Committee
Short-Term Incentive (AIP)     Motivates executives to achieve/exceed annual Company goals that ultimately drive  long-term shareholder value   

    Paid in cash

    Target award determined as a % of base salary

    Payout range is 0% to 200% of target award

    Strategic goals payout modifier may increase or decrease payout by +/-15%

 

    Payout is fully at risk

    Financial and operational performance metrics

    Focus on strategic goals

    Any earned payout is subject to review and approval by the O&C Committee

Long-Term Incentive (LTI)     Encourage executives to increase shareholder value over a long-term time horizon and retain executives over vesting period       Target value of awards determined as a % of base salary       Value of all LTI awards varies with changes in share price
RSUs: Restricted  Stock Units     RSUs
3-year vesting period
 

    Settled in stock

    Vests ratably

      Focus on stock price and shareholder returns

PSUs: Performance  Stock Units

 

rTSR: relative Total Shareholder Return

    PSUs
3-year performance
period
 

    Settled in stock

    Payout range is 0%to 200% of units granted

    Payout modifier  may increase or  decrease the  payout by +/-15%  based on rTSR  performance, with no positive modifier if absolute TSR is negative

 

    Payout is fully at risk

    Underlying payouts driven by financial performance with the final payout adjusted based on rTSR

    Focus on stock price and shareholder returns

    Any earned payout is subject to review and approval by the O&C Committee

 

 

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Compensation Mix

Our executive compensation program emphasizes performance-based compensation. As shown below, most of our 2023 total target executive compensation was delivered in the form of short- and long-term incentives for which payouts are at risk.

 

 

*At risk compensation is comprised of the target value of all incentive and stock-based awards, as their value is dependent on performance against our financial and strategic objectives and our stock price.

 

The Decision-Making Process

The O&C Committee oversees our executive compensation program working closely with its independent consultant to evaluate the effectiveness of our compensation program. The O&C Committee’s charter, which documents its authority and responsibilities, is available on the investor relations portion of the Company’s website at ir.flowserve.com under the “Corporate Governance-Documents and Charters” caption.

 

The Role of the O&C Committee

The O&C Committee is responsible for determining the compensation of our Executive Officers and designing our executive compensation program. Determining compensation for our Executive Officers includes, among other things, determining each component of executive compensation and any related performance metrics, goals, attainment and payouts as described above in “Components of Executive Compensation.” The O&C Committee also reviews Mr. Rowe’s individual performance, including feedback solicited directly from the Board, and holds executive sessions without Mr. Rowe present to discuss Mr. Rowe’s performance and establish Mr. Rowe’s compensation.

 

The Role of the CEO

Each year, Mr. Rowe presents compensation recommendations to the O&C Committee regarding the target compensation opportunities for each Executive Officer other than himself. Mr. Rowe makes his recommendations based upon an assessment of each executive’s performance, the performance of the executive’s business unit or function, pay relative to the competitive market, tenure, and his assessment of the retention risk for each executive. The O&C Committee annually reviews Mr. Rowe’s recommendations for the other executives when establishing their compensation levels. 

 

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The Role of the Independent Compensation Consultant

The O&C Committee has retained F.W. Cook as its independent compensation consultant to provide advice regarding executive compensation matters. F.W. Cook generally provides:

 

Input on the design of our executive compensation program, evolving market practices and the competitiveness of our program;
Market data; and
Input on proposed compensation decisions.

 

F.W. Cook attends all regularly scheduled O&C Committee meetings and calls. The O&C Committee assessed F.W. Cook’s independence under the factors set forth in the SEC’s rules and concluded that F.W. Cook was independent and that the consultant’s work in 2023 did not raise any conflicts of interest.

 

Competitive Positioning and Our Compensation Peer Group (“CPG”)

Annually, the O&C Committee reviews the base salaries, target bonuses, and the grant date value of long-term incentive awards for each of our Executive Officers as compared to those same data elements for similar positions among our CPG, in addition to the other factors described in this Compensation Discussion & Analysis. The market data reviewed by the O&C Committee includes publicly available financial and compensation information reported by the CPG companies and general industry survey data, which for 2023 compensation decisions was provided by Willis Towers Watson (WTW).

 

The O&C Committee reviews the CPG and survey data to determine the median market compensation level for each executive’s position and then considers this as one factor when setting each executive’s target compensation for the year. Median compensation is used as a reference point for pay recommendations. Target pay varies from the median based on the executive’s industry experience; experience and performance in his or her role and at the Company; value of the role to the Company; internal pay parity among our executives; and any other factors the O&C Committee deems relevant. The CPG is also used more generally when the O&C Committee reviews our compensation program design, including the types of compensation awarded and the terms and conditions of compensation components.

 

Our 2023 Compensation Peer Group 

The O&C Committee conducts an annual review of the CPG to determine if any changes are appropriate. In choosing our peers, the O&C Committee involves management and uses research and advice from its independent compensation consultant. The O&C Committee generally seeks to include companies in similar industries, with applicable revenue and market cap scope, with similar business characteristics (such as margins and asset intensity) and adequate disclosure of executive compensation practices to help ensure no pay anomalies exist which are inconsistent with Flowserve’s pay practices. To better reflect Flowserve’s size and scope, for 2023, the O&C Committee removed two companies, Enovis Corporation (formerly Colfax Corporation) and Rockwell Automation, Inc., and added two companies, ITT Inc. and Kennametal Inc.

 

 

  2023 COMPENSATION PEER GROUP (CPG)  
         
 

Ametek, Inc.

Crane Company

Donaldson Company, Inc.

Dover Corporation

Fortive Corporation

IDEX Corporation

ITT Inc.

Kennametal Inc.

Lincoln Electric Holdings, Inc

       

Nordson Corporation

Pentair plc

Regal Rexnord Corporation

Snap-on Incorporated

Terex Corporation

Trinity Industries, Inc.

Westinghouse Air Brake
Technologies Corporation

Woodward, Inc.

Xylem Inc.

 
     

 

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2023 Executive Compensation Decisions

 

Changes to Total Target Compensation for 2023

After reviewing Company performance, the positioning of each executive versus the market data provided by F.W. Cook, the performance of each executive over the prior year, and any recent changes to the executive’s compensation, the O&C Committee approved the following total target compensation levels and pay components for each NEO for 2023. Following these adjustments, the executive team’s total target compensation continued to be positioned near the median of the market data provided by F.W. Cook. With a majority of compensation performance-based, should the Company fail to meet performance objectives, realized executive compensation could be significantly below the target compensation level.

 

Name/Title  

Annual Base Salary

(as of 12/31/23)

 

2023 AIP Target as a

% of Salary

 

2023 LTI Target

Grant Value

 

2023 Total Target

Compensation

 

% Increase in Total

Target Compensation

R. Scott Rowe, CEO   $1,200,000   125%   $5,850,000   $8,550,000   1.2%
Amy Schwetz, CFO   $746,000   80%   $1,800,000   $3,142,800   7.8%
Lamar Duhon, President FLS Pumps Division   $575,000   70%   $800,000   $1,777,500   52.6%
Kirk Wilson, President FLS Flow Control Division   $464,000   65%   $650,000   $1,415,600   7.8%
Susan Hudson, CLO   $424,000   65%   $650,000   $1,349,600   7.1%

 

Rationale for Total Target Compensation Increases

 

Name   Compensation Adjustments   Rationale for Increase
Mr. Rowe   Increased target LTI by 1.7%   Market adjustment and strong individual performance
Ms. Schwetz   Increased base salary by 6.1% and target LTI by 9.1%   Market adjustment and strong individual performance
Mr. Duhon   Increased base salary by 43.8%, target bonus percentage by 10 percentage points, and target LTI by 52.4%   Reflects the added responsibility of leading the previously stand-alone Pumps division in addition to the AMSS organization in connection with the Company’s early 2023 reorganization
Mr. Wilson   Increased base salary by 4.1%, target bonus percentage by 5 percentage points, and target LTI by 8.3%   Market adjustment and strong individual performance
Ms. Hudson   Increased base salary by 6% and target LTI by 8.3%   Market adjustment and strong individual performance

 

Annual Incentive Plan

Our annual incentive plan is designed to incentivize performance on key annual financial and strategic priorities that are critical to our long-term success. Under this short-term incentive program, the O&C Committee establishes a target incentive award for each executive as a percentage of salary, performance metrics for the year and target performance levels for each metric.

 

2023 Award Structure

 

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Quantitative Performance Metrics

Working with its independent compensation consultant and management, the O&C Committee selects performance metrics that support key strategies to drive sustainable and profitable growth. We simplified our 2023 AIP design to prioritize metrics aligned with our foundational pillars of execution, growth and efficiency. 

 

Performance Metric   Relevance   Weightings
Adjusted Operating Income(1)   Key financial measure that incentivizes margin expansion   50%
Customer Bookings   Leading financial indicator of growth   30%
Adjusted Primary Working Capital (PWC) as a % of Sales(2)   Key financial measure that promotes focus on efficient use of capital   20%
(1) Adjusted Operating Income is determined by adjusting Operating Income as the Company does in our annual earnings release and then further adjusting such result for the difference between actual and target AIP expense. See Annex I: Reconciliation of Reported Results to Non-GAAP Financial Measures.
(2) PWC is defined as accounts receivable, net plus inventories, less accounts payable. Adjusted PWC is defined as PWC plus contract assets, less contract liabilities and other current liabilities associated with revenue contracts with customers. Adjusted PWC as a% of Sales represents the full year four-quarter average Adjusted PWC as a percentage of total year-to-date sales.

 

Strategic Goals Payout Modifier

In 2023, the O&C Committee retained the strategic payout modifier for Mr. Rowe and his direct reports, including each of the NEOs, to incentivize progress in key strategic areas that are pivotal for the Company’s long-term growth and transformation strategy, while retaining focus on our fundamental quantitative financial and operational goals. The modifier allows for adjustment of otherwise earned payouts by up to +/- 15% based on accomplishments relative to key objectives in each of the strategic categories shown on page 45. The O&C Committee reviews performance results against the preset strategic objectives to determine the appropriate payout modifier of up to +/- 15%.

 

Quantitative Performance Metrics Targets & Results

Below is an overview of our performance against the 2023 financial and operational performance metrics. All targets were set in line with our internal business plans and external market guidance and required the same or greater level of effort as in prior years to achieve target performance. Targets represented growth over 2022 actual results except for Bookings, for which the target was set only 2% below 2022 actual. The target was set in this manner to account for large project work in the Pumps division that was awarded in 2022 and did not repeat in 2023.  

 

 

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Strategic Goals Payout Modifier

 

Below are the Company’s 2023 strategic goal categories, key objectives and accomplishments:

 

ESG

Key objectives:

  Progress high-priority ESG roadmap goals

  Drive new ESG vision and strategic pillars internally and externally

  Implement a software solution to track goals and accomplishments (including for future SEC reporting)

Progress against objectives:

  Reached 100% of our 2030 carbon emissions reduction goal by the end of 2023

  Refined ESG roadmap targets to better align with 3D Strategy

  Maintained ESG ratings in middle/top quartile among industrial peer group; named one of America’s Greenest Companies and America’s Most Responsible Companies by Newsweek

  Progress made driving new ESG vision and strategic pillars: Aligned flowserve.com ESG content with 3D Strategy, published 2023 ESG Report, and ESG presentation to investor community at Investor Day

  Implemented Cority ESG software, which enables consistent CO2 emissions tracking across all Flowserve manufacturing sites

  Within our cybersecurity program, obtained ISO/IEC 27001, UK Ministry of Defense Cyber Essentials Plus, and U.S. Department of Energy NIST 800-171 certifications

 

Expand the Flowserve Core

Key objectives:

  Continue to evaluate M&A opportunities

  Close and successfully integrate Velan

  Offer customers new LNG cryogenic pumps from our new product investments

Progress against objectives:

  Developed robust new opportunities in our programmatic funnel

  Terminated the Velan transaction due to rejection by the French Ministry of Economy

  Closed a strategic investment in Clariter, a cleantech company that produces green sustainable petrochemicals upcycled from plastic waste as an alternative to fossil-based products

  Completed product prototyping and testing with commercialization scheduled for 2024 for new product partnerships

 

Reimagine the Flowserve Core

Key objectives:

  Help customers in traditional markets decarbonize their operations

  Expand our business in low-carbon markets

  Develop a differentiated position in emerging energy transition markets

Progress against objectives:

  3D Bookings represented almost one-third of total Bookings for 2023

  2023 Energy Transition Bookings grew 37% year-over-year, to $188M

  Energy Advantage program gained increasing traction with customers, with over 30 customer sites evaluated in 2023 and average energy savings of over 15% per customer

  

Established a nuclear strategy positioning Flowserve for above-market growth in key geographies; also increased our focus in the hydrogen, recycling, CCUS, and biofuel markets

 

The O&C Committee discussed the above accomplishments and determined that the 2023 key objectives for the strategic categories had been exceeded for the ESG and Reimagine the Flowserve Core strategic categories and met for the Expand the Flowserve Core strategic category. As a result, the O&C Committee exercised its judgement and determined the payout modifier to be +10% for each member of the ELT.

 

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2023 Annual Incentive Plan Award Payout

Our alignment of pay and performance is one of the key components of our compensation philosophy. Our 2023 AIP payout is consistent with our strong 2023 performance. Bookings continued to be strong in 2023, but attainment was 2.5% below target. For both Adjusted Operating Income and Adjusted Primary Working Capital as a % of Sales, Flowserve performed strongly and exceeded the targets for both metrics.

 

2023 AIP Payout Summary

 

Named Executive Officer Target Award Quantitative
Performance
Goals Payout %
Strategic Goals
Payout Modifier
Total Payout as a
% of Target Award
Final Award
Mr. Rowe $1,500,000 162%   178% $2,670,000
Ms. Schwetz $596,800 162%   178% $1,062,304
Mr. Duhon $402,500 136% 1.1x 150% $603,750
Mr. Wilson $301,600 154%   169% $509,704
Ms. Hudson $275,600 162%   178% $490,568

 

Long Term Incentives

The Company’s LTI program is structured to:

 

Incentivize participants to achieve the Company’s long-term objectives;
Retain participants to provide continuity of leadership for the benefit of our shareholders; and
Create alignment with long-term interests of the Company’s shareholders.

 

2023 Award Structure

 

 

The number of units granted in 2023 was determined by dividing the target LTI grant value by the average closing price of the Company’s common stock reported on the NYSE during the last twenty trading days prior to the grant date of February 17, 2023, which was $34.68. Except for the CEO, the stock units were awarded as follows:

 

50% of the stock units were granted in the form of PSUs
50% of the stock units were granted in the form of RSUs

 

The O&C Committee increased the CEO’s 2023 LTI target grant value by $100,000 over the prior year to better align with market pay levels. The increase was awarded entirely in PSUs to enhance the award’s performance alignment. As a result, Mr. Rowe’s 2023 target LTI was delivered 51% in the form of PSUs and 49% in the form of RSUs.

 

2023 Performance Stock Unit (PSU) Grant

Aligning with our compensation objectives, performance-based stock awards provide a strong incentive for our executives to achieve specific performance goals over the associated performance period to advance our business strategy, build long-term shareholder value and encourage executive retention.

 

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Performance Metrics

Working with its independent consultant and management, the O&C Committee selected the below performance measures for the 2023 performance period, which support our strategic focus on growth, margin expansion, capital efficiency and shareholder value creation.

 

Performance Metric   Weighting   Relevance   Measurement
ROIC   50%   Incentivize the responsible and efficient allocation of capital to profitable investments   Absolute attainment for each single year 2023, 2024, and 2025 during the 2023 to 2025 performance period with targets established at the beginning of each year. This approach helps address difficulty in goal setting in an industry with volatile end markets and drives strong performance against pre-set annual goals. Earned payout percentages for each year are averaged to determine the payout percentage at the end of the 3-year performance cycle, if any, for the 2023 PSUs tied to the applicable performance metric.
FCF as a % of Adjusted Net Income(1)   50%   Manage the business with a focus on operational efficiency  
rTSR Payout Modifier
+/-15% Potential Adjustment
  Applies to all PSUs   Reward outperformance or penalize underperformance compared to the market in which Flowserve competes for investor monies   Relative 3-year TSR compared to the 2023 Performance Peer Group (“PPG”), with no upward adjustment if Flowserve’s absolute TSR over the 3-year performance period is negative.
(1) FCF as a % of Adjusted Net Income represents net cash flows provided (used) by operating activities less capital expenditures as a percentage of Adjusted Net Earnings (Loss). Adjusted Net Income is definitionally the same as Adjusted Net Earnings (Loss) and the terms are used interchangeably. See Annex I to this Proxy Statement for a reconciliation of Adjusted Net Earnings (Loss) against the most directly comparable GAAP financial measure.

 

2023 ROIC

The O&C Committee sets the ROIC goal for each fiscal year at the beginning of the applicable fiscal year. Following the conclusion of the third year, the payout attributable to the ROIC metric for the PSUs then-vesting is determined by averaging the earned payout for each of the three fiscal years in the applicable performance period. In February 2023, the O&C Committee approved the 2023 ROIC goal and payout levels as presented below to cover one-third of each of the 2021, 2022 and 2023 PSU grants.

 

Payout Level Threshold Target Maximum
Performance Goal 7.5% 9.0% 10.5%
% Attainment 83% 100% 117%
Payout % 50% 100% 200%
Note: Interpolation is used to calculate the payout % for attainment that falls between payout levels shown above.

 

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FCF as a % of Adjusted Net Income

This metric has been in place for 50% of our PSUs since the 2021 grant. For the 2021 and 2022 grants, 3-year targets were utilized; however, the O&C Committee determined it was appropriate beginning with the 2023 PSU grant to set annual targets for this metric (consistent with the ROIC metric) for each fiscal year at the beginning of the applicable fiscal year. The O&C Committee made this decision due to the difficulty in forecasting reliable multi-year goals for this metric, given our volatile end markets and a strong focus on maintaining the rigor of the compensation program. Following the conclusion of the 2023-2025 performance period, the payout attributable to the FCF as a % of Adjusted Net Income metric for the 2023 PSUs will be determined by averaging the earned payout for each of the three fiscal years in the applicable performance period.

 

In February 2023, the O&C Committee approved the 2023 FCF as a % of Adjusted Net Income goal and payout levels as presented below to cover one-third of the 2023 PSU grants. 

 

Payout Level Threshold Target Maximum
Performance Goal 60% 75% 90%
% Attainment 80% 100% 120%
Payout %: 50% 100% 200%
Note: Interpolation is used to calculate the payout % for attainment that falls between payout levels shown above.

 

In setting the 2023 ROIC and FCF as a % of Adjusted Net Income performance targets, the Committee determined that the targets set forth above maintained the same level of rigor as in the prior performance periods. Such targets aligned with our internal operating plan for the year and would require significant effort from the management team to achieve.

 

rTSR Payout Modifier

Any earned PSUs under both performance metrics shown above are subject to adjustment based on the Company’s 3-year (2023 - 2025) TSR performance relative to the 2023 PPG, as follows:

 

If Flowserve’s absolute TSR performance falls: The otherwise earned payout is multiplied by:
At or below the 25th percentile of the PPG 85%
Between the 25th and 75th percentiles of the PPG 100%
At or above the 75th percentile of the PPG 115% (unless Flowserve’s absolute TSR is negative, in which case 100% applies)

 

2023 Performance Peer Group (PPG)

Each of the companies in the S&P 500 Industrials Index as of January 1, 2023 comprise the PPG (see Annex II).

 

2023 RSU Grant

The 2023 RSUs vest ratably over three years on the first, second and third anniversaries of the grant date. RSUs not only provide a retention incentive, but they also align the interests of grant recipients with those of shareholders with a focus on stock price and TSR.  

 

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SETTLEMENT OF 2021 PERFORMANCE STOCK UNITS

 

The PSUs granted in 2021 for the 2021 - 2023 performance period were structured and paid out as follows:

 

2021 PSU Structure

 

Weighting   Performance
Metric
  Measurement
50%   ROIC   Absolute ROIC attainment. Threshold, target and maximum payout levels for each of 2021, 2022, and 2023 were established at the beginning of the respective year. Earned payout percentages for each year were averaged to determine the overall payout percentage for this metric.
50%   FCF as a % of
Adjusted Net
Income
  Absolute FCF as a % of Adjusted Net Income attainment. Threshold, target and maximum payout levels for the 3-year performance period were established at the beginning of the performance period.
+/- 15% Payout Modifier   rTSR   Any earned PSUs under both performance metrics shown above were subject to adjustment based on the Company’s 3-year (2021 - 2023) TSR performance relative to the 2021 Peer Performance Group (see Annex III) based on the payout table established at the beginning of the performance period.

 

2021-2023 ROIC Attainment and Payout %

The O&C Committee approved a payout of 98% of the 2021 PSUs granted that were tied to the ROIC performance metric:

 

   
Performance Achieved
Payout % in
Accordance with
Pre-established
Payout Table
Year ROIC Performance
Goal (Target)
Attainment
% Attainment
of Goal
2021 (Note 1) 9.75% 9.7% 99.5% 95%
2022 11.5% 7.3% 63.4% 0%
2023 (Notes 2 and 3) 9.0% 12.6% 140% 200%
  3-Year Average ROIC Payout % 98%

Note 1: The table above reflects a revised ROIC attainment level for 2021, which was 9.7% but was inadvertently disclosed as 9.9% on page 52 of the Definitive Proxy Statement on Schedule 14A as filed on April 13, 2023. This typographical error did not affect the disclosed or actual payouts.

 

Note 2: The 2023 goal represented a 170 bps improvement over 2022 actual results and maintained the same level of rigor as in the prior performance periods. In 2023, we launched a new operating model to increase speed-to-market and accountability, while driving cost savings. Our improved operating model helped us reduce adjusted primary working capital as a percentage of sales to its lowest level since the onset of the COVID-19 pandemic and to deliver 12.6% ROIC in 2023.

 

Note 3: In determining performance achievement, the O&C Committee determined Net Operating Profit After Taxes by adjusting the following financial statement items consistent with the methodology used for determining all adjusted financials, so that attainment reflects 2023 business results excluding the following one-time events:

 

Consolidated Operating Income - See Annex I: Reconciliation of Reported Results to Non-GAAP Financial Measures; and
Certain one-time tax expenses.

 

2024 PROXY STATEMENT 49
 
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2021-2023 FCF as a % of Adjusted Net Income Attainment and Payout %

 

The O&C Committee determined that no portion of the 2021 PSUs granted that were tied to the FCF as a % of Adjusted Net Income performance metric would pay out:

 

 
Performance Achieved
Payout % in Accordance
with Pre-established
Payout Table
FCF as a % of Adjusted Net Income
Performance Goal (Target)
Attainment % Attainment of Goal
90% 51% 57% 0%

 

rTSR Payout Modifier

 

Flowserve’s 3-year TSR of 13.7% fell in the 3rd quartile of the 2021 PPG, resulting in no adjustment to the ROIC and FCF conversion payouts shown above.

 

As a result of our strong pay-for-performance culture, our final 2021 PSU payout was as follows:

 

2021 PSU Payout Summary

 

Metric Weighting Payout % Weighted Payout
ROIC 50% 98% 49%
FCF as a % of Adjusted Net Income 50% 0% 0%
  Payout % (Sum of Weighed Payouts for Each Metric) 49%
  rTSR Payout Modifier 1.0x
  Total Payout Including rTSR Payout Modifier 49%

 

No discretionary adjustments were considered or made to the formulaic payouts shown above.

 

2024 PROXY STATEMENT 50
 
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Other Benefits

 

Other benefits provided to the NEOs are generally consistent with those provided to other employees of the Company, including health and retirement benefits. These elements of our compensation program are outlined in the chart below and discussed in more detail in the narrative following the chart.

 

In 2023, the O&C Committee approved changes to Flowserve’s retirement program that are reflected in italicized text in the chart below. 

 

    Plan   Description   Eligible Employees
Retirement Benefits      Qualified Pension Plan      Tax-qualified pension plan     

All salaried U.S. employees

 

Frozen to new participants effective January 1, 2024 and frozen to future accruals as of January 1, 2025

    Senior Management Pension Plan   Non-qualified defined benefit plan to restore pension benefits that cannot be provided in a qualified plan due to certain employees’ compensation levels  

Executive Officers and U.S. employees that earn eligible compensation in excess of the Internal Revenue Code (“IRC”) 401(a) (17) limit, which was $330,000 for 2023

 

Frozen to new participants effective January 1, 2024 and contribution credits frozen as of January 1, 2025

    Supplemental Executive Pension Plan   Non-qualified supplemental defined benefit plan to maintain competitive benefits  

Senior Executives

 

Frozen to new participants effective September 1, 2023

    401(k) Plan  

Tax-qualified plan in which Flowserve matches 75% of pre-tax contributions up to 6%

 

In connection with the Qualified Pension Plan and Senior Management Pension Plan freeze, effective as of January 1, 2024 for new employees and January 1, 2025 for existing employees, we will (1) increase the matching contributions under our 401(k) plan to 100% of the first 5% of eligible compensation contributed to the plan, (2) add a discretionary employer contribution of 1.5% of eligible compensation for all eligible employees, and (3) reduce the vesting schedule applicable to employer contributions to run over a three-year rather than a five-year schedule

  All U.S. Employees
    Supplemental
Retirement Savings Plan (“SRSP”)
  Non-qualified supplemental defined contribution plan to maintain competitive benefits commencing in 2024 for new hires and 2025 for all participants; Provides a discretionary employer contribution of 6.5% of each participant’s eligible compensation in excess of applicable IRS limits   Executive Officers and U.S. employees that earn compensation in excess of the Internal Revenue Code (“IRC”) 401(a)(17) limit, which was $330,000 for 2023
Other Benefits   Executive Officer Severance Plan   Provides severance benefits in the event of a qualifying termination   Executive Officers
    Change in Control Severance Plan   Provides severance benefits upon a qualifying termination in connection with a change in control of the Company   Senior Executives including Executive Officers
    Limited personal benefits   Executive physical exam, enhanced vacation, financial counseling with a dedicated advisor   Senior Executives
     
2024 PROXY STATEMENT 51
 
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Retirement Benefits

We provide pension benefits to certain U.S. salaried employees, including the NEOs, under the Flowserve Corporation Pension Plan (the “Qualified Plan”), which is a tax-qualified defined benefit pension plan. Because the IRC limits the pension benefits that can be accrued under a tax-qualified pension plan (based on an annual compensation limit), we also maintain a separate non-qualified defined benefit restoration pension plan, the Senior Management Retirement Plan (the “SMRP”). The SMRP compensates participants, including the NEOs, for the reduction in their pension benefit resulting from this IRC limitation. The SMRP is designed to provide a comparable level of retirement benefits to those provided to other U.S. employees under the Qualified Plan based on a comparable benefit formula. Both the Qualified Plan and the SMRP were frozen to new participants effective January 1, 2024 and will be frozen to further benefit accruals effective January 1, 2025. In addition, we also maintain a second non-qualified supplemental defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”), for our eligible U.S. executives, including the NEOs, in order to attract and incentivize the retention of senior leaders. The SERP was frozen to new participants effective September 1, 2023. These three programs are designed to provide eligible U.S. executives with income following retirement and to help ensure that we can attract and retain executive talent by providing comprehensive retirement benefits.

 

Participants in the Qualified Plan and the SMRP currently accrue contribution credits based on age and years of service at the rate of 3% to 7% for eligible earnings up to the Social Security wage base, and at the rate of 6% to 12% for eligible earnings in excess of the Social Security wage base. Participants in the SERP currently accrue contribution credits at the rate of 5% of all eligible earnings. Eligible earnings generally include base salary and annual incentive awards. SERP participants also earn interest on the accrued contributions based on the rate of return on 10-year Treasury bills. As noted above, further benefit accruals under the Qualified Plan and the SMRP will cease as of January 1, 2025. 

 

We also maintain a 401(k) plan to enable all U.S. salaried employees, including the NEOs, to contribute a portion of their eligible compensation for wealth accumulation. The Company currently provides a 75% match on the first 6% of eligible compensation that an employee contributes to the plan. Commencing in 2024 for new hires and 2025 for all participants, (i) the matching contribution is increasing to 100% of participant contributions up to 5% of covered compensation and (ii) the company will provide an employer contribution of 1.5% of eligible compensation for all participants. 

 

In connection with the Qualified Plan and SMRP plan freezes, we have also implemented a new non-qualified Supplemental Retirement Savings Plan (“SRSP”) for eligible U.S. executives, including the NEOs, which provides a discretionary employer contribution of 6.5% of each participant’s eligible compensation in excess of applicable IRS limits. The SRSP was made available to new hires effective January 1, 2024 and will be available to all eligible executives effective January 1, 2025. 

     
2024 PROXY STATEMENT 52
 
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Executive Officer Severance Plan

Each of the NEOs participates in the Company’s Amended and Restated Executive Officer Severance Plan (the “Officer Severance Plan”). Under this plan, the Company’s officers are provided benefits upon a termination due to a reduction in force or by the Company without cause. No benefits are payable under the Officer Severance Plan to any officer who receives benefits under the Company’s Change in Control Severance Plan (the “CIC Plan”). The Officer Severance Plan does not provide for any additional payments or benefits upon a termination of employment by the Company for cause, upon the executive’s resignation for any reason (including “good reason” or “constructive termination”) or upon the executive’s death or disability.

 

Plan Provision   Treatment Under Plan
Cash Severance    

  24 months’ base salary continuation

  Payment equivalent to target AIP award, provided the Company actually achieves at least threshold performance under the terms of the program for the award year in which termination occurs

PSUs   A pro-rated payout of the PSUs, if any, that have a performance cycle that would otherwise end in the year that contains the termination date based on the number of months the executive was employed during the performance period
RSUs  

For RSUs granted prior to February 15, 2022, a cash payment in lieu of any RSUs that would otherwise vest within 90 calendar days following the termination date based on the Company’s average closing stock price over the twenty trading days in the month preceding the officer’s termination date

Note: For RSUs granted on or after February 15, 2022, award agreements govern and generally provide for continued vesting of those RSUs that would have otherwise vested within 90 calendar days following termination

 

     
2024 PROXY STATEMENT 53
 
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Change in Control Severance Plan

Each of the NEOs participates in the Company’s CIC Plan. Benefits under the CIC Plan are triggered if, within two years following a change in control the NEO is terminated without cause (and not on account of death or disability) or resigns for reasons constituting a “constructive termination.” Benefits are also triggered if a NEO is terminated within the 90-day period immediately prior to a change in control if such termination (i) occurs after the initiation of discussions leading to such change in control and (ii) can be demonstrated to have occurred at the request or initiation of parties to such change in control. The severance benefits provided upon a termination of employment covered under the CIC Plan include:

 

Plan Provision   CEO   Other Participants Including
Other NEOs
Cash Severance(1)   A lump sum payment equal to 3x the sum of the executive’s annual base salary and target annual incentive  

A lump sum payment equal to a multiple of the executive’s annual base salary and target annual incentive as follows:

  2.5x for executive vice presidents(2);

  2.0x for senior vice presidents and presidents; and

  1.5x for vice presidents

Annual Incentive Plan Award   Payment of pro-rata annual incentive plan target award
Long-Term Incentive Awards   Full vesting at target of each cash (if any) or stock-based long-term incentive award. NEOs have 90 days following the date of employment termination to exercise any vested stock options
Life, Medical, Health and Accident Benefits   Company provided coverage for the executive and his or her dependents for a number of months following termination equal to annual severance multiplier used to calculate the cash payment, multiplied by 12 months
Supplemental Pension Benefits   Supplemental pension benefits equal to the difference between the amounts the executive would have been entitled to had he or she remained employed through the end of the benefits continuation period and the amounts actually received
(1) For purposes of this calculation, the base salary is the highest of: (i) the highest-annualized monthly base salary during the twelve months preceding the termination; (ii) the base salary in effect on the date of termination; and (iii) the base salary in effect on the date of the change in control.
(2) The Company does not currently have any Executive Vice Presidents.

 

Limited Personal Benefits

The O&C Committee strives to make our executive compensation program primarily performance-based and, as such, only provides limited benefits to Executive Officers that are not provided to other employees. These benefits are prevalent in the marketplace and increase the overall effectiveness of the Executive Officers in the performance of their roles:

 

Executive Physical – other employees receive a standard physical
Enhanced Vacation – a minimum of 4 weeks compared to 3 weeks for other employees
Financial Counseling – a dedicated financial counselor compared to a financial wellness benefit for other employees (same service provider for both employee populations)
     
2024 PROXY STATEMENT 54
 
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Compensation Governance Policies

 

Stock Ownership Requirements

To further align executive and shareholder interests, each of our NEOs is required to own a minimum amount of Company common stock equal in value to a specified multiple of their annual base salary.

 

Employee Level   Ownership
Requirement
 
Chief Executive Officer   6x annual base salary  
Presidents and Senior Vice Presidents   3x annual base salary  
Vice Presidents   1x annual base salary  

 

Our guidelines are administered as follows:

  Shares held directly by an executive and unvested RSUs count toward satisfying the stock ownership requirements. Unvested PSUs do not count toward satisfying the stock ownership requirements.
  The required stock ownership levels are expected to be achieved within five years from the date the guidelines were first applicable or within five years of the executive joining the Company.
  Executives who do not meet the ownership requirement must show that they have retained at least 60% of the net shares received from vested RSUs and PSUs from the time the ownership guidelines became applicable.
  As of December 31, 2023, all NEOs met their stock ownership requirement.

 

Anti-Hedging and Pledging Policies

Under the Company’s Insider Trading Policy all directors and employees (including the NEOs) are prohibited from pledging stock and engaging in any transactions (such as trading in options) that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s common stock.

 

Clawback Policies

In the fall of 2023, the O&C Committee adopted a new Dodd-Frank Clawback Policy (the “Dodd-Frank Clawback Policy”) designed to comply with final listing standards adopted by the NYSE to implement Exchange Act Rule 10D-1. Under the Dodd-Frank Clawback Policy, Flowserve will recoup any excess incentive-based compensation earned by an executive officer (including each of our NEOs), on or after October 2, 2023 and during a three fiscal year lookback period, in the event of a financial restatement if a lesser amount of incentive-based compensation would have been earned had such incentive-based compensation been determined based on the restated results. For purposes of the Dodd-Frank Clawback Policy, incentive-based compensation includes any compensation granted, earned or vested based in whole or in part on the Company’s attainment of a financial reporting measure, and includes our 2023 AIP award payouts as well as our 2021 through 2023 PSUs.

 

The O&C Committee simultaneously expanded the Company’s existing Recoupment of Incentive Compensation Policy (the “Misconduct Clawback Policy”), which applies to officers holding a title of Vice President or higher (including all NEOs). The Misconduct Clawback Policy authorizes the O&C Committee to, in its discretion, seek recoupment: (1) of any excess amounts earned under the AIP or any performance-based LTIP (including PSUs) by a covered officer during a three fiscal year lookback period in the event of a financial restatement if it is determined that a lesser amount would have been earned had such compensation been determined based on the restated results, and (2) of any amounts earned under the AIP or any of our equity incentive programs (including both PSUs and time-based RSUs) during the three-year period preceding the discovery of an event the covered officer engages in that constitutes misconduct, including a willful and material violation of our Code of Conduct.

 

These clawback policies reinforce our commitment to integrity and the highest standards of ethical conduct through our compensation program.

     
2024 PROXY STATEMENT 55
 
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Accounting Implications of Executive Compensation

 

The Company recognizes compensation expense in our financial statements for all equity-based awards pursuant to the principles set forth in FASB ASC 718, “Compensation—Stock Compensation.” The O&C Committee considered the GAAP accounting implications of the awards in setting the long-term incentive mix and further determined that the mix of RSUs and PSUs was appropriate for 2023.

 

Executive Compensation Program Review and Compensation Risk

 

The O&C Committee regularly monitors and annually reviews our compensation programs to determine, in consultation with its compensation consultant, whether the elements of the program are consistent with our executive compensation objectives and principles. As part of this, the O&C Committee evaluates whether the Company’s risk management objectives are being met with respect to the executive compensation program and our compensation programs in aggregate. If the elements of the program are determined to be inconsistent with our objectives and principles, or if any incentives are determined to encourage risks that are reasonably likely to have a material adverse effect on us, the elements are adjusted as necessary.

 

The O&C Committee has concluded that no risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company. In reaching this conclusion, the O&C Committee considered the following:

 

Attribute Risk-Mitigating Effect
Emphasis on long-term, equity-based compensation subject to our rigorous Clawback Policies Discourages risk-taking that produces short-term results at the expense of building long-term shareholder value

Long vesting requirements:

  3-year ratable vesting for RSUs

  3-year performance period for PSUs

AIP and PSU payouts are capped
The O&C Committee can exercise discretion in determining AIP payouts
Robust stock ownership guidelines Helps ensure alignment with shareholder interests
No derivative transactions allowed
Independent compensation consultant retained by the O&C Committee Incentive programs are balanced to reward the accomplishment of appropriate short-term goals that facilitate long-term sustainability and growth for shareholders

 

Organization and Compensation Committee Report

 

The O&C Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above in this proxy statement with Management. Based on this review and discussion, the O&C Committee recommended to the Board of Directors that this Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended December 31, 2023.

 

John L. Garrison, Chairman
Ruby R. Chandy
Gayla J. Delly
Cheryl H. Johnson
Michael C. McMurray

     
2024 PROXY STATEMENT 56
 
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Summary Compensation Table

 

The following table sets forth compensation information for 2023, 2022 and 2021 for our Named Executive Officers.  

 

Name and
Principal Position
Year       Salary
($)
      Bonus
($)
      Stock
Awards
($)(1)
      Option
Awards
($)
      Non-Equity
Incentive
Plan
Compen-
sation
($)(2)
      Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings
($)
      All Other
Compen-
 sation
($)(3)
      Total
($)

R. Scott Rowe

President and Chief Executive Officer

  2023     1,200,000         6,270,244         2,670,000     422,246     20,996     10,583,487
  2022     1,181,962         5,942,446         1,179,210     377,658     21,617     8,702,893
  2021     1,133,000         10,007,824         1,016,981     300,060     20,240     12,478,105

Amy B. Schwetz

Senior Vice President and Chief Financial Officer

  2023     734,416         1,928,159         1,062,304     163,055     37,707     3,925,641
  2022     693,963         1,705,192         442,109     143,165     30,244     3,014,673
  2021     664,250         2,427,731         375,590     121,896     26,524     3,615,991

Lamar L. Duhon

President, Flowserve Pumps Division

  2023     527,885         856,976         603,750     82,771     31,589     2,102,970
                                 
                                 

Kirk R. Wilson

President, Flow Control Division

  2023     459,109         696,265         509,704     147,453     12,936     1,825,467
                                 
                                   

Susan C. Hudson

Senior Vice President, Chief Legal Officer and Corporate Secretary

  2023     417,538         696,265         490,568     80,944     30,516     1,715,832
                                 
                                 
(1) Represents the grant date fair value of long-term equity incentive awards under the Company’s long-term incentive program computed in accordance with FASB ASC 718 “Compensation—Stock Compensation”, excluding the impact of forfeitures. Stock awards include the annual incentive awards granted in the form of restricted stock units that vest ratably over a three-year period and contingent performance share units. The performance criteria for the performance share units are described in further detail under the caption “2023 Executive Compensation Decisions—Long Term Incentives” above. The reported value of the performance share units is computed based on the grant date estimate of compensation cost to be recognized over the three-year period, which was 100%, or “target”. Payout for the contingent performance awards can range from 0 shares to a maximum of 230% of target (assuming maximum performance and application of the +15% rTSR modifier). Assumptions used in the valuations are discussed in Note 7 to the Company’s audited consolidated financial statements for the year ended December 31, 2023 in the Annual Report.
  The value of the 2023 stock awards are calculated using a price per share of $35.89, the closing market price of the Company’s common stock as reported by the NYSE on February 17, 2023, the date of the grant. The table below sets forth each NEO’s long-term equity incentive awards granted in 2023. 
   
Name   Restricted
Stock Units
(#)
      Value of
Restricted
Stock Units
($)
      Performance
Share Units
Target
(#)
      Performance
Share Units –
Target
($)(A)
      Performance
Share Units –
Maximum
(#)
      Performance
Share Units –
Maximum
($)(B)
R. Scott Rowe   82,900     2,975,281     85,784     3,294,963     197,303     7,081,205
Amy B. Schwetz   25,951     931,381     25,951     996,778     59,687     2,142,166
Lamar L. Duhon   11,534     413,955     11,534     443,021     26,528     952,090
Kirk R. Wilson   9,371     336,325     9,371     359,940     21,553     773,537
Susan C. Hudson   9,371     336,325     9,371     359,940     21,553     773,537
  (A) The contingent performance share units vest based on the achievement of ROIC, Free Cash Flow and relative TSR metrics. The amounts disclosed in this column have a fair value of $38.41 per share calculated using the Monte Carlo simulation. 
  (B) The maximum potential value of the contingent share units assumes a 230% payout after application of the rTSR payout modifier and is based on the $35.89 per share closing market price as reported by the NYSE on February 17, 2023, the date of the grant. 
     
(2) The amounts in this column represent the earned annual cash incentive awards under the Company’s Annual Incentive Plan for the applicable year.
     
2024 PROXY STATEMENT 57
 
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(3) This column includes the following components for the Named Executive Officers for 2023, calculated at the aggregate incremental cost to the Company:
   
Name   Defined
Contribution
Retirement Plan
Contributions
($)
      Insurance
Premiums(A)
($)
      Other
($)
      Total
($)
R. Scott Rowe   14,850     2,034     4,112(B)     20,996
Amy B. Schwetz   14,850     962     21,895(C)     37,707
Lamar L. Duhon   14,850     814     15,925(D)     31,589
Kirk R. Wilson   11,186     1,750         12,936
Susan C. Hudson   14,044     547     15,925(D)     30,516
   
(A) Reflects annual premiums for group term life insurance.
(B) Reflects amounts attributable to an annual physical exam.
(C) Reflects amounts attributable to annual physical exam ($5,970) and annual financial counseling ($15,925).
(D) Reflects amounts attributable to annual financial counseling.  
     
2024 PROXY STATEMENT 58
 
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2023 Grants of Plan-Based Awards

 

The following table sets forth certain information with respect to 2023 plan-based awards granted to the Named Executive Officers during the year ended December 31, 2023.

 

        Estimated Future Payouts
Under Non-Equity Incentive Plan
Awards(1)
  Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)
  All Other
Stock
Awards:
Number of
Shares of
  Grant Date
Fair Value
of Stock
Name     Grant
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
  Stock or
Units
(#)
  and Option
Awards
($)(3)
R. Scott Rowe       637,500   1,500,000   3,450,000          
    2/17/2023         36,458   85,784   197,303     3,294,963(4)
    2/17/2023               82,900(5)   2,975,281
Amy B. Schwetz       253,640   596,800   1,372,640            
    2/17/2023         11,029   25,951   59,687     996,778(4)
    2/17/2023               25,951(5)   931,381
Lamar L. Duhon       171,063   402,500   925,750          
    2/17/2023         4,902   11,534   26,528     443,021(4)
    2/17/2023               11,534(5)   413,955
Kirk R. Wilson       128,180   301,600   693,680          
    2/17/2023         3,983   9,371   21,553     359,940(4)
    2/17/2023               9,371(5)   336,325
Susan C. Hudson       117,130   275,600   633,880          
    2/17/2023         3,983   9,371   21,553     359,940(4)
    2/17/2023               9,371(5)   336,325
(1) Under the Annual Incentive Plan, the primary performance measures are internally defined metrics set by the O&C Committee. In February 2023, the O&C Committee approved metrics based on adjusted operating income, adjusted primary working capital as a percentage of sales and customer bookings. Actual amounts payable under the Annual Incentive Plan, if any, can range from 50% (Threshold) to 200% (Maximum) of the target amounts for the Named Executive Officers based upon the extent to which performance under the foregoing criteria meets, exceeds or is below the target. In addition, the payment is subject to a strategic goals payout modifier which may increase or decrease the payout by +/-15%. These amounts represent amounts payable if the Named Executive Officer is employed for the full calendar year. Actual payout for 2023 was 178% of the target amount for Mr. Rowe and Mses. Schwetz and Hudson, 150% of the target amount for Mr. Duhon and 169% for Mr. Wilson. 
(2) The number of shares listed represents long-term equity incentive awards in the form of PSUs under the Company’s long-term incentive program. The performance criteria for these awards are discussed in “2023 Executive Compensation Decisions—Long Term Incentives” above.
(3) These amounts represent the fair value, as determined under FASB ASC Topic 718, of the stock awards based on the grant date fair value estimated by the Company for financial reporting purposes.
(4) Represents the fair value on the date of grant, as described in footnote (2), of the “target” award for the contingent performance share units. During the performance period, earned and unearned compensation expense is adjusted based on changes in the expected achievement of the performance targets.
(5) The amounts shown reflect the number of annual RSUs granted to each Named Executive Officer under the Company’s long-term incentive plan.
     
2024 PROXY STATEMENT 59
 
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Outstanding Equity Awards at Year-End 2023

 

The following table sets forth information with respect to outstanding equity awards held as of December 31, 2023, by the Named Executive Officers.

 

    Option Awards   Stock Awards
Name      Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   Option
Exercise
Price
($)
   Option
Expiration
Date
   Number of
Shares or
Units of
Stock that
Have Not
Vested
(#)
   Market Value
of Shares or
Units of Stock
that Have Not
Vested(1)
($)
   Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights that Have
Not Vested
(#)
   Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights that
Have Not Vested(1)
($)
R. Scott Rowe   114,943(2)   48.63   5/4/2027   247,218(3)   10,190,345    
              38,222(4)   1,575,515
              91,869(5)   3,786,844
              200,695(6)   8,272,646
Amy B. Schwetz         65,481(7)   2,699,115    
              10,770(4)   443,950
              26,362(5)   1,086,639
              60,713(6)   2,502,605
Lamar L. Duhon         17,324(8)   714,098    
              8,388(5)   345,755
              26,984(6)   1,112,291
Kirk R. Wilson         23,862(9)   983,612    
              4,168(4)   171,796
              9,586(5)   395,130
                      21,924(6)   903,700
Susan C. Hudson         14,742(10)   607,652    
                   
              5,923(5)   244,147
                        21,924(6)   903,700
   
(1) Calculated using a price per share of $41.22 the closing market price of the Company’s common stock as reported by the NYSE on December 29, 2023, the last trading date of the Company’s last completed fiscal year. The RSU and contingent performance share unit amounts include dividend equivalents accrued on the “target” award, which will vest only to the same extent as the underlying award, if at all. 
(2) All stock options vested on April 1, 2020.
(3) 30,771 RSUs vested on February 15, 2024, 102,142 RSUs vested on February 16, 2024, and 28,245 RSUs vested on February 17, 2024, in each case including accrued dividend equivalents. Mr. Rowe’s remaining RSUs vest as follows: 30,772 shares of RSUs on February 15, 2025; 28,245 RSUs on February 17, 2025; and 28,244 RSUs on February 17, 2026.
(4) These represent contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The targets set for the 2021 plan were based on: 1) ROIC improvement goals compared to the Company’s long-term ROIC targets and 2) Free Cash Flow as a percent of net income, including a secondary measure of relative TSR which could increase or decrease the award 15% compared to that of the PPG for the same period. Payouts could range from 0 shares to a maximum of 230% of the target. In February of 2024, these awards were certified based on performance through December 31, 2023 and paid out at 49% of target and are reflected at such level in the table above.
(5) These represent contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The targets set for the 2022 plan are based on: 1) ROIC improvement goals compared to the Company’s long-term ROIC targets and 2) Free Cash Flow as a percent of net income, including a secondary measure of relative TSR which can increase or decrease the award 15% compared to that of the PPG for the same period. Payouts can range from 0 shares to a maximum of 230% of the target. In accordance with SEC requirements, these contingent performance share units are shown at target in this table.
(6) These represent contingent performance share units under the Company’s long-term incentive program, plus accrued dividend equivalents. The targets set for the 2023 plan are based on: 1) ROIC improvement goals compared to the Company’s long-term ROIC targets and 2) Free Cash Flow as a percent of net income. Payouts can range from 0 shares to a maximum of 230% of the target. In accordance with SEC requirements, these contingent performance share units are shown at maximum in this table. 
     
2024 PROXY STATEMENT 60
 
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(7) 8,830 RSUs vested on February 15, 2024, 21,614 RSUs vested on February 16, 2024, and 8,842 RSUs vested on February 17, 2024, including accrued dividend equivalents. Ms. Schwetz’s remaining RSUs vest as follows: 8,830 RSUs on February 15, 2025; 8,932 RSUs on February 17, 2025, and 8,931 on February 17, 2026.
(8) 2,809 RSUs vested on February 15, 2024 and 3,930 RSUs vested on February 17, 2024, including accrued dividend equivalents. Mr. Duhon’s remaining RSUs vest as follows: 2,810 RSUs on February 15, 2025; 3,930 RSUs on February 17, 2025, and 3,929 on February 17, 2026.
(9) 3,114 RSUs vested on February 15, 2024, 8,463 RSUs vested on February 16, 2024, and 3,096 RSUs vested on February 17, 2024, including accrued dividend equivalents. Mr. Wilson’s remaining RSUs vest as follows: 3,114 RSUs on February 15, 2025; 3,097 RSUs on February 17, 2025, and 3,096 on February 17, 2026.
(10) 1,348 RSUs vested on February 15, 2024, 1,071 RSUs vested on February 16, 2024, and 3,193 RSUs vested on February 17, 2024, in each case including accrued dividend equivalents. Ms. Hudson’s remaining RSUs vest as follows: 734 RSUs on May 23, 2024; 1,349 RSUs on February 15, 2025; 734 RSUs on May 23, 2025; 3,193 RSUs on February 17, 2025, and 3,192 RSUs on February 17, 2026.

 

2023 Option Exercises and Stock Vested

 

The following table sets forth certain information with respect to restricted stock unit vesting during the fiscal year ended December 31, 2023, with respect to the Named Executive Officers. No Named Executive Officers exercised any stock options during 2023. 

 

    Stock Awards
Name   Number of Shares
Acquired on
Vesting
(#)(1)
  Value
Realized on
Vesting ($)
R. Scott Rowe   125,097   4,528,799
Amy B. Schwetz   37,188   1,345,166
Lamar L. Duhon   2,749   101,026
Kirk R. Wilson   12,393   448,413
Susan C. Hudson   3,602   129,522
   
(1) The number of shares reported includes shares that were surrendered during the fiscal year ended December 31, 2023, to pay for taxes upon the vesting of restricted stock units and performance share units. 
     
2024 PROXY STATEMENT 61
 
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2023 Pension Benefits

 

The following table sets forth certain information as of December 31, 2023, with respect to potential payments under our pension plans for each Named Executive Officer. Please refer to “Executive Compensation—Other Benefits” above for a narrative description of the material factors necessary to an understanding of our pension plans.

 

Name      Plan Name      Number of Years
Credited Service (#)
     Present Value of
Accumulated Benefit ($)
     Payments During
Last Fiscal Year ($)
R. Scott Rowe   Qualified — Cash Balance(1)   6.8   153,082  
    Non-Qualified — SMRP   6.8   1,132,392  
    Non-Qualified — SERP   6.8   774,005  
Amy B. Schwetz   Qualified — Cash Balance(1)   3.8   79,614  
    Non-Qualified — SMRP   3.8   216,218  
    Non-Qualified — SERP   3.8   200,946  
Lamar L. Duhon   Qualified — Cash Balance(1)   2.0   40,173  
    Non-Qualified — SMRP   2.0   32,780  
    Non-Qualified — SERP   2.0   53,663  
Kirk R. Wilson   Qualified — Cash Balance(1)   36.6   398,022  
    Non-Qualified — SMRP   36.6   529,682  
    Non-Qualified — SERP   36.6   265,595  
Susan C. Hudson   Qualified — Cash Balance(1)   7.7   120,927  
    Non-Qualified — SMRP   7.7   38,666  
    Non-Qualified — SERP   7.7   44,623  
   
(1) The Company sponsors cash balance designed pension plans for eligible employees. Each executive accumulates a notional amount derived from the plan provisions; each Named Executive Officer’s account balances as of December 31, 2023, are presented above. We believe that this is the best estimate of the present value of accumulated benefits.
     
2024 PROXY STATEMENT 62
 
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Quantification of Potential Payments

 

The following table sets forth the estimated value of the potential payments to each of the Named Executive Officers, assuming the executive’s employment had terminated on December 31, 2023, under the scenarios outlined below.

 

For the events of termination involving a change in control, we assumed that the change in control also occurred on December 31, 2023. In addition to the payments set forth in the following tables, the Named Executive Officers may receive certain payments upon their termination or a change in control pursuant to our Qualified Pension Plan, SERP and SMRP. Previously vested amounts and contributions made to such plans by each Named Executive Officer are disclosed in the “2023 Pension Benefits” table.

 

        Payout ($)
Triggering Event   Compensation Component   R. Scott
Rowe
  Amy B.
Schwetz
  Lamar L.
Duhon
  Kirk R.
Wilson
  Susan C.
Hudson
Death   Life Insurance (1.5x base salary; third party payment, max $1.5)   1,500,000   1,119,000   862,500   696,000   636,000
    Immediate vesting of outstanding equity awards(2)   17,659,261   4,897,492   1,550,947   1,780,251   1,250,752
    Total   19,159,261   6,016,492   2,413,447   2,476,251   1,886,752
Disability   Short-term and long-term disability benefit to age 65  (third party payment)   3,280,000   3,918,400   3,070,000   2,225,600   4,609,600
    Immediate vesting of outstanding equity awards(2)   17,659,261   4,897,492   1,550,947   1,780,251   1,250,752
    Total   20,939,261   8,815,892   4,620,947   4,005,851   5,860,352
Retirement(1)   Vesting of outstanding equity awards(3)         1,545,368  
    Total         1,545,368  
Termination Without Cause by the Company Not in Connection with Change in Control   Termination payment (2x base salary)   2,400,000   1,492,000   1,150,000   928,000   848,000
  Target annual incentive award   1,500,000   596,800   402,500   301,600   275,600
  Vesting of outstanding equity(4)   2,432,644   363,966   277,789   255,981   217,443
  Cash payment in lieu of vesting of RSU   4,210,252   303,450     348,793   44,107
  Total   10,542,896   2,756,216   1,830,289   1,834,374   1,385,151
Change in Control — Termination Without Cause by the Company or Constructive Termination   Termination payment (base salary times applicable multiplier)   3,600,000   1,492,000   1,150,000   928,000   848,000
  Termination payment (target annual incentive award times applicable multiplier)   4,500,000   1,193,600   805,000   603,200   551,200
  Immediate vesting of outstanding equity awards(2)   17,659,261   4,897,492   1,550,947   1,780,251   1,250,752
  Supplemental pension benefit   1,010,440   293,969   192,318   272,713   259,584
  Health & welfare benefit   92,318   79,670   63,933   74,620   12,170
  Total   26,862,019   7,956,731   3,762,198   3,658,784   2,921,706

 

(1) Mr. Wilson was the only Named Executive Officer eligible to retire on December 31, 2023.
(2) For equity awards, these amounts are calculated assuming that the market price per share of the Company’s common stock on the date of event was equal to the closing price of the Company’s common stock on December 29, 2023 ($41.22).
(3) Mr. Wilson’s special, one-time outstanding restricted stock award from 2021 would not vest upon his retirement from the Company which accounts for the difference between the retirement and disability payouts for Mr. Wilson.
(4) For equity awards, these amounts were calculated using the treatment set forth under the Officer Severance Plan and using the market price per share of the Company’s common stock on December 29, 2023 ($41.22). The treatment of outstanding equity awards upon a termination of employment without cause not in connection with a change in control is discussed in “2023 Executive Compensation Decisions—Other Benefits” above.
     
2024 PROXY STATEMENT 63
 
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PAY VERSUS PERFORMANCE

 

As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive “compensation actually paid” (as calculated under SEC regulations) and certain financial performance of the Company. For further information concerning the Company’s pay for performance philosophy and how the Company aligns executive compensation with Company performance, refer to “Executive Compensation – Compensation Discussion and Analysis.”

 

                                                                 
PEO = Principal Executive Officer
NEO = Named Executive Officer
           Value of Initial Fixed $100
Investment Based on:
        
Year  Summary
Compensation
Table (SCT)
Total for PEO1
  Compensation
Actually Paid
(CAP) to PEO2
  Average SCT
Total for Non-
PEO NEOs3
  Average CAP
to Non-PEO
NEOs4
  Total
Shareholder
Return (TSR)5
  Peer Group
TSR6
  Net Income
($M)7
  Adjusted
Operating
Income8
2023       $10,583,487           $15,439,806          $2,392,478          $2,962,426              $91.48              $150.04              $187               $463      
2022  $8,702,893   $6,339,788   $2,028,865   $1,628,059   $66.62   $127.07   $189   $200 
2021  $12,478,106   $8,468,743   $2,420,811   $1,933,079   $64.63   $134.48   $126   $284 
2020  $8,332,455   $691,731   $1,782,163   $1,322,337   $76.13   $111.05   $130