DEF 14A 1 lspr2021_def14a.htm SPIRIT AEROSYSTEMS HOLDINGS, INC. - DEF 14A SPIRITAEROSYSTEMS-2020ProxyStatement

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (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

 

SPIRIT AEROSYSTEMS HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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The 2021 Annual Meeting of Stockholders (the

“Annual Meeting”) of Spirit AeroSystems

Holdings, Inc. (“Spirit” or the “Company”) will

be held virtually via live audio webcast on:

 

NOTICE

OF 2021 ANNUAL MEETING

OF STOCKHOLDERS

PURPOSE

 

WEDNESDAY, APRIL 28, 2021

 
 

11:00 a.m. Central Time

 
 

 

 
 

REVIEW YOUR PROXY STATEMENT AND VOTE IN THE FOLLOWING WAYS:

 

Items of business include:

1.  Election of 10 nominees as directors;

2.  Advisory vote to approve the compensation of the Company’s named executive officers;

3. Ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021;

4. The stockholder proposal requesting an amendment to the Company’s proxy access bylaw; and

5.  The transaction of any other business that properly comes before the meeting.

 

VIRTUAL MEETING ADMISSION

In order to protect the health and safety of attendees in light of the COVID-19 pandemic, the Annual Meeting will be conducted virtually via live audio webcast. Stockholders can be admitted to and attend the virtual Annual Meeting at www.virtualshareholdermeeting.com/SPR2021 by entering the 16-digit voting control number found on the Notice (as defined below) or proxy card. Stockholders may vote and submit questions during the Annual Meeting by following the instructions available on the website above.

 

RECORD DATE

The record date for the Annual Meeting is March 2, 2021 (the “Record Date”). Only stockholders of record of our Class A Common Stock (the “Common Stock”) as of the close of business on the Record Date are entitled to vote at and virtually attend the Annual Meeting. For detailed information on how to vote, see “General Information.”

 

DOCUMENTS

Pursuant to the rules of the Securities and Exchange Commission (the “SEC”), the Company has elected to primarily furnish its proxy materials over the internet rather than mailing paper copies. On March 17, 2021, we commenced distributing to our stockholders a Notice Regarding the Availability of Proxy Materials (the “Notice”) or, if requested, a paper copy of the proxy materials and our Annual Report, along with a proxy card or voting information form. The Notice contains instructions on how to access and review the proxy materials on the internet and instructions on how to vote, as well as instructions on how to obtain a paper copy of the proxy materials.

 

Your vote is important. Regardless of whether you plan to virtually attend the Annual Meeting, we hope you will vote as soon as possible. Thank you for your ongoing support of Spirit.

 

By order of the Board of Directors.

Sincerely,

 

INTERNET

  Visit www.proxyvote.com prior to the Annual Meeting

  During the Annual Meeting, visit www.virtualshareholdermeeting.com/SPR2021

 

MOBILE DEVICE

  Use your tablet or smartphone to scan the QR code

 
 

PHONE

  Call 1-800-690-6903

 
 

MAIL

  Sign, date, and return your proxy card or voting instruction form

 
 

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.

 
 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL STOCKHOLDER MEETING TO BE HELD ON APRIL 28, 2021:

The Proxy Statement and Annual Report are available at www.proxyvote.com

 

SPIRIT AEROSYSTEMS HOLDINGS, INC.

3801 S. Oliver St., Wichita, KS 67210-2112

 

 

 
   

MINDY MCPHEETERS

Vice President, Interim General Counsel and Corporate Secretary

March 17, 2021


Table of Contents

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PROXY STATEMENT SUMMARY

This summary highlights certain information contained elsewhere in this Proxy Statement. This summary does not contain all the information you should consider before voting your shares. For more complete information regarding the proposals to be voted on at the Annual Meeting and our 2020 performance, please review the entire Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

We use the terms “Spirit,” the “Company,” “we,” “us,” and “our” in this Proxy Statement to refer to Spirit AeroSystems Holdings, Inc. and its consolidated subsidiaries.

Matters to Be Voted On at the Annual Meeting

Casting Your Vote

Stockholders of record of our Common Stock as of the Record Date, March 2, 2021, may vote their shares using any of the following methods:

BY INTERNET

Visit www.proxyvote.com prior to the Annual Meeting; or

During the Annual Meeting, visit
www.virtualshareholdermeeting.com/SPR2021

MOBILE DEVICE

Use your tablet or smartphone to scan the QR code above

 

BY MAIL

Complete
and return the enclosed
proxy card or voting
instruction form

BY PHONE

Call 1-800-690-6903

 

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About Spirit

Quick Spirit Facts

 

 

HEADQUARTERS

Wichita, Kansas

WORLDWIDE EMPLOYEES

Approximately 14,500

LOCATIONS

Kansas, Maine, North Carolina, Oklahoma, and Texas, U.S.; Prestwick and Belfast, U.K.; St. Nazaire, France; Subang, Malaysia; Casablanca, Morocco

MAJOR CUSTOMERS

Airbus, Boeing, Bombardier, Lockheed Martin (Sikorsky), Northrop Grumman, Rolls-Royce

Business Overview

 

Spirit is a leading tier-one global aerostructures manufacturer for commercial airplanes, military platforms, and business/regional jets. Spirit’s core products include fuselages, fully integrated wing structures and wing components, engine nacelles, pylons, fan cowls, thrust reversers, and systems integration for the world’s premier aircraft. Capabilities include metal manufacturing and assembly, precision assembly, and composites manufacturing.

Commercial. Our engineering capabilities and proprietary design tools, combined with our capacity for high-volume production, have positioned us as a leading commercial aerostructures supplier to Airbus, Boeing, and Bombardier. For Boeing, we manufacture the B737 fuselage, the front section of the B787, B777 and B767 fuselages, and other wing and engine components for every Boeing commercial aircraft currently in production. Further, for Airbus, we supply fuselage and/or wing aerostructures content on the A220, A320, A330, and A350 XWB. We recently expanded our capabilities into many business aircraft ranging from the super mid-size to very large aircraft categories, which include the Bombardier Challenger and Global families of aircraft. Spirit also produces aerostructures for various business/regional jet programs for Rolls-Royce and others.

Defense. In addition to producing aerostructures for commercial aircraft, the Company designs, engineers, and manufactures structural components for military programs including the Boeing P-8, C-40, and KC-46 Tanker, all of which are commercial aircraft modified for military use. We develop and manufacture the fuselage and other parts for the Sikorsky CH-53K heavy-lift helicopter and are a proud member of the Northrop Grumman B-21 industry team. Also, Spirit is partnered with Bell on the V-280 Valor rotorcraft as part of the U.S. Army’s Future Vertical Lift program. In 2020, Spirit acquired Fiber Materials Inc. (“FMI”), an industry-leading technology company specializing in multi-directional reinforced carbon-carbon composites that enable high-temperature applications such as thermal protection systems, hypersonic missiles, and re-entry vehicle nose tips, as well as rocket motor throats and nozzles. Spirit’s defense product portfolio is also expanding into Europe with Spirit Belfast leading Project Mosquito for the United Kingdom’s Ministry of Defence.

Aftermarket. Spirit provides a range of maintenance, repair, and overhaul solutions for the commercial and business/regional jet aftermarket. Our global aftermarket presence allows customers to have regional access to our maintenance, repair, and overhaul facilities that provide industry-leading repairs and solutions for a variety of aircraft, including both metallic and composite structures. Additionally, Spirit continues to produce and sell spare parts to our Original Equipment Manufacturer customers.

Other. Spirit is involved with a number of innovative transportation technologies. This includes the Aerion AS2 supersonic business jet program, for which Spirit is contributing to the preliminary design of the forward fuselage section of the AS2. Spirit has also signed a memorandum of agreement with Aerion to produce the forward fuselage section. Also, in collaboration with Virgin Hyperloop, Spirit is leveraging its design, fabrication, supply chain, and certification expertise to support the development of Virgin’s hyperloop technology. In 2020, Spirit entered into a temporary partnership with Vyaire Medical to produce critical care ventilators for the Strategic National Stockpile under a contract with the U.S. Department of Health and Human Services.

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Spirit Values and Fundamental Behaviors

 

Values

 

At Spirit, we believe that culture and values play an important role in the success of corporate strategy. Values are demonstrated in the way we think, act, and ultimately achieve results. The following values guide our ways of working:

 

 

Transparency

I am open, honest, and respectful with my communication. I speak up to share my ideas and build trust by making my intentions clear.

Collaboration

I align my actions with others, so we work together to achieve the best outcome in everything we do.

Inspiration

I encourage the best from others, and I lead by example to ensure innovation is a component of our success.

 

Built on a foundation of trust, speaking out enables us to demonstrate these values. We encourage all of our employees to speak out and listen up to ensure we consider other perspectives in our discussions in order to succeed.

Fundamental Behaviors

 

 

 

 

 

Safety

Our employees are our greatest asset. We are committed to conducting our operations in a manner that prioritizes the safety and health of our employees and other workers. We are committed to continual assessment, training, and investment to execute our safety goals and reduce injuries and incidents.

 

Quality

We are committed to continually improving our product quality and meeting or exceeding our customers’ quality expectations.

 

 

 

 

On-Time Delivery

We are committed to successful on-time delivery. The success of our customers depends on our ability to meet their delivery expectations consistently. 

 

 

 

 

Customer Focused

Being a trusted partner to our customers is essential to our ability to win profitable new business. We focus on our customers by meeting our operating commitments and working collaboratively to develop innovative solutions to their challenges. We are committed to continually investing in new technologies to improve quality, reduce costs, and increase production capabilities, in a mutually beneficial way.

 

 

 

 

 

 

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About Spirit’s Director Nominees and Governance Practices

Director Nominees

 

Name

Age

Director

Since

 

Principal Occupation

Independent

Committee

Memberships

No. of Other

Public

Company

Boards

Stephen A. Cambone

68

2019

 

Associate Vice Chancellor for Cyber Initiatives, Texas A&M University System

Yes

0

Charles L. Chadwell

80

2008

 

Retired VP/GM of Commercial Engine Operations, GE Aircraft Engines

Yes

0

Irene M. Esteves

62

2015

 

Retired EVP and CFO, Time Warner Cable Inc.

Yes

3

Paul E. Fulchino

74

2006

 

Retired Chairman, President and CEO, Aviall, Inc.

Yes

0

Thomas C. Gentile III

56

2016

 

President and CEO, Spirit AeroSystems Holdings, Inc.

No

 

0

Richard A. Gephardt

80

2006

 

President and CEO, Gephardt Group

No

 

1

Robert D. Johnson, Board Chairman

73

2006

 

Retired CEO, Dubai Aerospace Enterprise Ltd.

Yes

2

Ronald T. Kadish

72

2006

 

Retired EVP, Booz Allen Hamilton

Yes

0

John L. Plueger

66

2014

 

President and CEO, Air Lease Corporation

Yes

1

Laura H. Wright

61

2018

 

Retired SVP and CFO, Southwest Airlines

Yes

2

Audit Committee Risk Committee Compensation Committee Corporate Governance and Nominating Committee
(the “Governance Committee”)
  *
(Chair)

 

Director Nominee Experience

 

 

 

Cambone

Chadwell

Esteves

Fulchino

Gentile

Gephardt

Johnson

Kadish

Plueger

Wright

Public Company CEO

 

 

 

 

 

 

 

Public Company CFO

 

 

 

 

 

 

 

 

Aviation Operations Management

 

 

 

Public Company Board

 

Executive Compensation

 

 

 

 

Risk Management

 

 

 

 

M&A

 

 

 

 

 

Senior Government

 

 

 

 

 

 

 

Cyber

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

Defense

 

 

 

 

 

 

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Board Composition

 

 

 

 

Gender/Ethnic Diversity:

Two of our director nominees are women. In addition, one of the women is a member of an underrepresented ethnic group.

Corporate Governance Policies and Practices

 

 

 

 

  8 out of 10 director nominees are independent

  All committees are composed solely of independent directors

  Separate Chairman and CEO

  Regular executive sessions of non-employee directors

  Annual Board and committee evaluations

  Robust stock ownership requirements for directors and executive officers

  Regularly analyze Board and committee composition and succession

  Risk oversight process with separate committee roles

  Overboarding policy

  Three of our four Audit Committee members qualify as audit committee financial experts

  Board regularly reviews executive succession plans

 

  Stockholders have the right to call special meetings

  Director education program

  Active stockholder engagement program

  Annual say-on-pay vote

  Annual director elections

  Majority voting standard in uncontested director elections

  Stockholders have the right to act by written consent

  Market-standard proxy access right

  Insiders are not permitted to short sell, hedge, or pledge Company securities

  Single class of shares with equal voting rights

 

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About Spirit’s Executive Compensation Program

Overview

 

Highlights of our executive compensation program are below. For a full understanding of the compensation we pay to our named executive officers, please review “Compensation Discussion and Analysis” and the related compensation tables in this Proxy Statement.

Our compensation objectives are to:

attract, retain, and motivate highly qualified executive officers;

pay for performance using short-term and long-term incentives;

align the interests of the Company’s executive officers with those of the Company’s stockholders by using compensation performance measures that are meaningful to our stockholders; and

ensure compensation does not encourage inappropriate risk-taking by diversifying performance measures, using payment caps, and maintaining clawback policies, among other things.

The 2020 compensation structure (excluding perquisite, “other” compensation, and changes in pension value) for our Chief Executive Officer (“CEO”) and the other named executive officers (“NEOs”) excluding Mr. Garcia is below. As the charts below demonstrate, 89% of our CEO’s direct compensation was variable based on performance, while 76% of the other NEOs’ direct compensation was variable based on performance.

 

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Executive Officer Compensation Elements

 

 

 

Description

Changes in 2020

Changes in 2021

SALARY

Fixed element of annual compensation

Reduced pay by 20% for all executive officers in April 2020.

Restored pay to full amounts in January 2021.

ANNUAL CASH

INCENTIVE

Annual cash incentive that pays out based on achievement of the following:

Company performance goals (75-80% of award); and

individual performance goals (20-25% of award)

Modified Company performance metrics to Cash from Operating Activities (40%), Indirect Cost (30%), New Revenue Growth (15%), and Quality (15%).

Modified Company performance metrics to Adjusted Net Debt (40%), Operating Cost (30%), New Revenue Growth (15%), and Quality (15%).

LONG-TERM
INCENTIVES

Long-term equity incentive structured as follows:

Time-based restricted stock vesting annually over
three-year period (60% of award); and

Performance-based restricted stock vesting based on actual performance at the end of a three-year performance period (40% of award)

No changes to existing award structure (performance-based restricted stock was tied equally to Free Cash Flow (“FCF”) as a Percentage of Revenue (“FCF Percentage”)* and Total Stockholder Return (“TSR”) vesting as the end of three-year performance period); Minor peer group changes for TSR.

Minor peer group changes for TSR; Reduction in maximum TSR performance goal from 90th percentile to 75th percentile (in line with market);

100% of performance-based award will be tied to TSR (removed metric tied to FCF Percentage*).

*

Please see Appendix A for an explanation and reconciliation of these non-GAAP measures.

 

Compensation Practices

 

 

Best Practices

What the Company Doesn’t Do

  Align pay and performance — substantial portion of pay is delivered through variable, at-risk compensation

  Compensation packages are benchmarked against peer companies and other similarly situated companies

  Payout of annual cash incentive and performance-based restricted stock awards is capped at 200%

  Performance goals are relevant, challenging, and tied to key measures of profitability and performance

  Long-term incentives paid entirely in Common Stock

  Clawback policies

  Robust stock ownership requirements

  Double-trigger change-in-control provisions

  Stockholders cast an annual advisory say-on-pay vote

  No ongoing accruals under defined-benefit Supplemental Executive Retirement Plan

  No share recycling (other than in the context of forfeited shares)

  No short selling, pledging, or hedging stock

  No enhanced health and welfare benefit plans for executives

  No guaranteed payouts on performance-based equity compensation (except for upon death, disability, or qualifying retirement)

  No dividend payments on time- or performance-based restricted stock awards until they vest

  No tax gross-ups related to a change in control

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Sustainability

Guided by our core values of transparency, collaboration, and inspiration, Spirit brings innovation to the products we build, with a focus on the well-being of the environment, our employees, and our communities.

In 2021, Spirit will launch its first annual Sustainability Report (the “Report”), highlighting the Company’s work to meet its sustainability goals and objectives. The Report will describe Spirit’s efforts to support the United Nations’ Sustainable Development Goals (SDGs), and will include disclosures using the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Task Force for Climate-Related Financial Disclosures (TCFD) frameworks.

Climate Action Plan

 

Spirit is committed to conducting and managing its business in a manner that protects the environment and supports the transition to a low carbon economy. We are transitioning to renewable energy at many of our sites across the globe. Additionally, Spirit has set a goal to reduce our absolute Scope 1 and 2 greenhouse gas emissions by 30% below 2019 levels by 2030. Our strategies and programs consider the nexus between climate, water, waste, and biodiversity.

 

100% Wind Energy in Kansas

By 2022, Spirit’s entire 12 million square foot facility in Wichita will be fully powered by a nearby wind farm. The project is also designed to support local economic development.

 

Water Recycling at Scale

Spirit has one of the largest industrial water reuse systems in the United States – recycling more than two million gallons of process water daily at our Wichita location.

 

Diversity, Equity, and Inclusion

 

At Spirit, we believe our success and the success of our employees depends on a commitment to fostering a diverse and inclusive culture that supports growth and development, along with the diverse skills needed to innovate. We have set a goal to increase representation of women in leadership (senior manager and above globally) to 30% and minorities in leadership (senior manager and above in the U.S.) to 20% by 2025. In 2021, Spirit will launch “The Power of Choice” leadership development program for women, and other underrepresented talent within our organization.

Community Contributions

 

We believe in the power of innovative solutions, partnerships, and programs that bring communities together. In 2020, Spirit and its employees continued to support local communities, and contributed over 15,000 volunteer hours and donated $3.7 million through corporate grants, in-kind contributions, and employee donations.

 

COVID-19 Support

In 2020, Spirit employees around the world mobilized to support COVID-19 relief efforts. We partnered with Vyaire Medical to build 20,000 critical care ventilators that were delivered to 20 countries. In addition, Spirit employees in the U.S. created face shields and special examination booths to distribute to local hospitals, care facilities, and law enforcement, and a team of employees in Malaysia developed hands-free sanitizer stands for local schools.

 

 

For more information, visit www.spiritaero.com/company/sustainability/overview/.

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Overview

The Board of Directors is elected each year at the Company’s annual meeting of stockholders. Spirit currently has 10 directors. Each director elected at the Annual Meeting will serve until the 2022 annual meeting of stockholders and until the election and qualification of his or her respective successor, subject to the director’s earlier death or disability.

Based on the recommendations of the Company’s Corporate Governance and Nominating Committee (the “Governance Committee”), the Board has nominated each of the persons listed below for election as a director. All nominees have served as directors of the Company since the 2020 annual meeting of stockholders.

Each of the nominees has agreed to serve if elected and, as of the date of this Proxy Statement, the Company has no reason to believe that any nominee will be unavailable to serve. If any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxy holders’ intention is to vote the proxies for such other person as may be designated by the present Board to fill such vacancy.

The following information with respect to the 10 nominees is based on information furnished to the Company by each nominee and highlights the specific experience, qualifications, attributes, and skills of the individual nominees that have led the Board to conclude that each should continue to serve on the Board.

Director Nominees

Stephen A. Cambone

Age 68

Director Since 2019

Independent Director

Recent Professional Experience:

Current Public Company Directorships:

Associate Vice Chancellor for Cyber Initiatives,
Texas A&M University System (2017-present)

Trustee, Rumsfeld Foundation (2012-present)

Founder, Adirondack Advisors, LLC (2012-2018)

Senior positions at QinetiQ, Inc. (2007-2012), including Executive Vice President, Strategic Development, and President, Missions Solution Group

Undersecretary of Defense for Intelligence,
U.S. Department of Defense (2003-2006) (served in other roles with the U.S. Department of Defense from 2001-2003)

Spirit AeroSystems Holdings, Inc. (2019-present)

Committee Assignments:

Audit

Risk

 

Qualifications, Experience, Key Attributes, and Skills: Dr. Cambone brings to the Board extensive expertise in governmental affairs, defense, and intelligence, along with executive leadership experience in the defense technology industry. Dr. Cambone has world-class knowledge of cybersecurity matters and invaluable insight into strategic development given his years of experience in the private sector and government.

 

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Charles L. Chadwell

Age 80

Director Since 2008

Independent Director

Pre-Retirement Professional Experience:

Current Public Company Directorships:

Vice President and General Manager of
Commercial Engine Operations, General Electric
Aircraft Engines (“GE Aviation”)(1994-2002)

Vice President, Operations, GE Aviation (1990-1994)

Vice President, Human Resources, GE Aviation (1988-1990)

Spirit AeroSystems Holdings, Inc. (2008-present)

Former Public Company Directorships Held in the Past Ten Years:

B/E Aerospace (2007-2012)

 

Committee Assignments:

 

Governance (Chair)

Compensation

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Chadwell brings to the Board critical supply chain and manufacturing operations expertise, and executive leadership experience, within the commercial and defense aviation industry. Mr. Chadwell provides the Board with compensation, governance, and human resources expertise, and valuable insight and perspective into aviation industry trends, developments, and challenges. Mr. Chadwell also brings to the Board experience as a public company director.

 

Irene M. Esteves

Age 62

Director Since 2015

Independent Director

Pre-Retirement Professional Experience:

Current Public Company Directorships:

Executive Vice President and Chief Financial Officer, Time Warner Cable Inc. (2011-2013)

Executive Vice President and Chief Financial Officer,
XL Group plc (2010-2011)

Senior Vice President and Chief Financial Officer, Regions Financial Corporation (2008-2010)

Spirit AeroSystems Holdings, Inc. (2015-present)

Aramark Holdings Corp. (2015-present)

RR Donnelley & Sons Co. (2017-present)

KKR Real Estate Finance Trust Inc. (2018-present)

Former Public Company Directorships Held in Past Ten Years:

Level 3 Communications (2014-2017)

Time Warner Telecom Inc. (2014)

Committee Assignments:

Audit (Chair)

Risk

 

Qualifications, Experience, Key Attributes, and Skills: Ms. Esteves has experience in global finance, corporate strategy, human resources, treasury, accounting, tax, risk management, mergers and acquisitions, and investor relations across multiple industries. Ms. Esteves also brings to the Board experience as a public company director. In addition, Ms. Esteves qualifies as an audit committee financial expert under SEC rules.

 

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Paul E. Fulchino

Age 74

Director Since 2006

Independent Director

Recent Professional Experience:

Current Public Company Directorships:

Operating Partner, AE Industrial Partners (“AEI”) (2015-present)

Senior Advisor, Boeing (2010-2014)

Chairman, President and Chief Executive Officer, Aviall, Inc. (2000-2010) (Aviall became a wholly-owned subsidiary of Boeing in September 2006)

President and Chief Operating Officer, B/E Aerospace, Inc. (1996-1999)

President and Vice Chairman, Mercer
Management Consulting (1990-1996)

Spirit AeroSystems Holdings, Inc. (2006-present)

Former Public Company Directorships Held in Past Ten Years:

Wesco Aircraft Holdings, Inc. (2008-2020; Wesco filed a securities termination registration notice in January 2020)

 

Committee Assignments:

 

Compensation (Chair)

Governance

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Fulchino provides the Board with executive leadership experience, and extensive knowledge and expertise regarding the commercial aviation industry, the Company’s customers and supply base, compensation and human resource matters, and mergers and acquisitions. Mr. Fulchino also brings to the Board experience as a public company director.

 

Thomas C. Gentile III

Age 56

Director Since 2016

Recent Professional Experience:

Current Public Company Directorships:

President and Chief Executive Officer,
Spirit AeroSystems Holdings, Inc. (2016-present)

Executive Vice President and Chief Operating
Officer, Spirit AeroSystems Holdings, Inc.
(April 2016-August 2016)

President and Chief Operating Officer,
General Electric Capital Corporation (2014-2016)

President and Chief Executive Officer,
General Electric Healthcare Systems (2011-2014)

President and Chief Executive Officer,
General Electric Aviation Services (2008-2011)

Spirit AeroSystems Holdings, Inc. (2016-present)

 

Former Public Company Directorships Held in Past Ten Years:

Synchrony Financial Bank (2015)

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Gentile has demonstrated success in managing large, complex global technology businesses across multiple industries. He brings to the Board a deep understanding of aviation program management, product development, strategy, and business development. Mr. Gentile also brings to the Board experience as a public company director.

 

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Richard A. Gephardt

Age 80

Director Since 2006

Recent Professional Experience:

Current Public Company Directorships:

President and Chief Executive Officer, Gephardt Consulting Group (“GCG”) (2007-present)

President and Chief Executive Officer, Gephardt Governmental Affairs (together with GCG, the “Gephardt Group”) (2005-present)

Member, U.S. House of Representatives
(1977-2005). During this time, he served as the House Minority Leader (1995-2003) and House Majority Leader (1989-1995)

Spirit AeroSystems Holdings, Inc. (2006-present)

Centene Corp. (2006-present)

Former Public Company Directorships Held in Past Ten Years:

Century Link, Inc. (2007-2016)

Ford Motor Company (2009-2015)

U.S. Steel Corporation (2005-2015)

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Gephardt brings governmental affairs and public relations experience to the Board, along with labor management and union expertise. He provides the Board with a valuable perspective on public policy, political affairs, and the regulatory environment. Mr. Gephardt also brings to the Board experience as a public company director.

 

Robert D. Johnson, Chairman

Age 73

Director Since 2006

Independent Director

Pre-Retirement Professional Experience:

Current Public Company Directorships:

Chief Executive Officer, Dubai Aerospace
Enterprise Ltd. (2006-2008)

Chairman, Honeywell Aerospace
(2005-2006)

President and Chief Executive Officer, Honeywell Aerospace (known as Allied Signal Aerospace until 2000) (1999-2005)

President and Chief Executive Officer, Electronic and Avionics Systems, Honeywell Aerospace (known as Allied Signal Aerospace at the time) (1997-1999)

Spirit AeroSystems Holdings, Inc. (2006-present)

Roper Technologies, Inc. (2005-present)

Spirit Airlines, Inc. (2010-present)

Former Public Company Directorships Held in Past Ten Years:

Ariba, Inc. (2003-2012)

Committee Assignments:

Compensation

Governance

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Johnson, Chairman of the Board, has aviation industry executive leadership experience and executive compensation and human resources experience, and provides the Board with valuable insight and perspective resulting from his expertise in marketing, sales, supply chain, and production operations. Mr. Johnson also brings to the Board experience as a public company director.

 

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Ronald T. Kadish

Age 72

Director Since 2006

Independent Director

Pre-Retirement Professional Experience:

Current Public Company Directorships:

Consultant, Raytheon (2018-2019)

Senior Executive Advisor, Booz Allen Hamilton
(“BAH”) (2015-2019)

Executive Vice President, BAH (2005-2015)

Director, U.S. Missile Defense Agency, U.S. Department of Defense (2002-2004)

Director, Ballistic Missile Defense
Organization, U.S. Department of Defense (1999-2001)

Commander, Electronic Systems Center,
Hanscom Air Force Base (1996-1999)

Spirit AeroSystems Holdings, Inc. (2006-present)

Former Public Company Directorships Held in Past Ten Years:

Northrop Grumman Innovation Systems, Inc. (formerly known as Orbital ATK, Inc.) (2015-2019)

Orbital Sciences Corp. (2005-2015)

Committee Assignments:

Risk (Chair)

Governance

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Kadish provides the Board with unique expertise in military, program management, security, international, and governmental matters, including having served three decades in the U.S. Air Force, rising to the rank of Lieutenant General. He delivers critical insight to the Board with respect to enterprise risk management, cybersecurity, global security, and our defense customers’ needs and expectations. Mr. Kadish also brings to the Board experience as a public company director.

 

John L. Plueger

Age 66

Director Since 2014

Independent Director

Recent Professional Experience:

Current Public Company Directorships:

Chief Executive Officer and President,
Air Lease Corporation (“ALC”) (2016-present)

President and Chief Operating Officer, ALC (2010-2016)

President and Chief Executive Officer, International Lease Finance Corporation (“ILFC”) (2010)

President and Chief Operating Officer, ILFC (2002-2010)

Spirit AeroSystems Holdings, Inc. (2014-present)

ALC (2010-present)

Committee Assignments:

Audit

Risk

 

Qualifications, Experience, Key Attributes, and Skills: Mr. Plueger provides the Board with valuable insight into the aviation industry and aviation operations management stemming from his executive leadership roles at ILFC and ALC. In addition, Mr. Plueger has significant experience in finance and accounting matters as a certified public accountant, having received his training as an auditor from PricewaterhouseCoopers. Mr. Plueger qualifies as an audit committee financial expert under SEC rules. Mr. Plueger also brings to the Board experience as a public company director.

 

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Laura H. Wright

Age 61

Director Since 2018

Independent Director

Pre-Retirement Professional Experience:

Current Public Company Directorships:

Senior Vice President and Chief Financial Officer, Southwest Airlines Co. (“SWA”) (2004-2012)

Vice President, Finance, and Treasurer, SWA (2001-2004)

Treasurer, SWA (1998-2001)

Spirit AeroSystems Holdings, Inc. (2018-present)

TE Connectivity Ltd. (2014-present)

CMS Energy Corp. (and its wholly-owned subsidiary, Consumers Energy Company) (2013-present)

Former Public Company Directorships Held in Past Ten Years:

Pebblebrook Hotel Trust (2009-2019)

Committee Assignments:

Audit

Risk

 

Qualifications, Experience, Key Attributes, and Skills: Ms. Wright has experience in corporate finance and accounting, commercial aviation operations, risk management, and mergers and acquisitions as a result of her position as Senior Vice President and Chief Financial Officer of SWA, and various other financial positions held during her 25-year career at SWA. Ms. Wright worked for Arthur Young & Co. from 1982-1988 prior to joining SWA. Ms. Wright is a certified public accountant and qualifies as an audit committee financial expert under SEC rules, and also brings to the Board experience as a public company director.

Voting Standard

The Company’s bylaws provide for simple majority voting in an uncontested election of directors. In order for a director nominee to be elected, the votes that stockholders cast “FOR” the director nominee must exceed the votes that stockholders cast “AGAINST” the director nominee. In the event that an incumbent nominee does not receive the requisite majority of votes cast in this election, the Company will follow the procedure described under “General Information — What happens if an incumbent director nominee is not elected at the Annual Meeting?” Any shares not voted (whether by abstention, broker non-vote, or otherwise) will have no impact on the election of directors. Your broker may not vote your shares on this proposal unless you give voting instructions.

  The Board recommends that you vote FOR each of the director nominees.

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BOARD AND GOVERNANCE MATTERS

The Board’s Role

The Company is governed by its Board of Directors. Other than with respect to matters reserved to stockholders, the Board is the ultimate decision-making body of the Company. The Board is responsible for overseeing the Company’s strategy and performance, and protecting stockholder interests and value. Further, the Board is responsible for selecting and overseeing the Company’s executive officers, who set and execute the Company’s business strategy and handle the Company’s day-to-day operations.

In carrying out its responsibilities, the Board has created and delegated certain responsibilities to four standing committees:

the Audit Committee;

the Compensation Committee;

the Governance Committee; and

the Risk Committee.

Additional information about these committees and their responsibilities is described under “Committees.”

Corporate Governance Guidelines

 

The Board is committed to maintaining corporate governance practices that maximize stockholder value. To further its commitment, the Board has adopted the Company’s Corporate Governance Guidelines (the “Governance Guidelines”) to provide transparency into the roles and responsibilities of the Board and management and the Board’s governance philosophy and practices, promote functioning of the Board and its committees, describe a common set of expectations on how the Board should perform its functions, and promote effective governance. The Board is responsible for overseeing, counseling, and directing management; ensuring that our long-term interests and the long-term interests of our stockholders are being served; reviewing the major risks facing the Company and helping develop strategies to address those risks; assessing adherence to the Company’s standards and policies; and performing the duties and responsibilities assigned to the Board under the Governance Guidelines and our certificate of incorporation, bylaws and applicable law. The Governance Guidelines speak to a number of different matters including Board responsibilities, management succession, director conflicts of interest, director compensation, outside board memberships, the Board’s view on director age and term limits, and director attendance at meetings, among other things. The Governance Guidelines are available at http://investor.spiritaero.com/corporate-governance/govdocs/default.aspx.

Board Size

 

Pursuant to our bylaws, the Board of Directors is required to consist of three or more directors and the size of the Board may be increased or decreased at any time by the Board of Directors. Currently, the Board of Directors consists of 10 directors. As stated in its charter, the Governance Committee is responsible for reviewing the size of the Board and recommending to the Board any changes it deems appropriate with respect to Board size.

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Board Leadership

The Company has separated the roles of CEO and Chairman in recognition of the differences between the two roles. The Board believes that role separation is appropriate for the Company as it maximizes the ability of the CEO to focus on managing Company operations, strategy, and performance, while benefiting from the Chairman’s independent perspective and insight.

The Chairman of the Board performs the following duties:

Approves the agenda for Board meetings;

Presides over and manages Board meetings;

Presides over and manages stockholder meetings;

Serves as a liaison between the CEO and the non-employee directors;

Provides feedback to the CEO on behalf of the independent directors regarding business issues and Board management; and

Engages with the CEO weekly to discuss Company performance and matters of significance.

Because Mr. Johnson, the Chairman of the Board, is an independent director, the Board has not deemed it necessary to appoint a lead independent director.

Board Composition

Selecting qualified individuals to serve as directors is key to the Board’s performance. The Governance Committee is responsible for evaluating qualified potential candidates to serve on the Board, and recommending to the Board for its selection nominees to stand for election as directors at the Company’s annual meeting of stockholders. This responsibility is further described in the Governance Committee’s charter, which is available at: http://investor.spiritaero.com/corporate-governance/govdocs/default.aspx.

In evaluating candidates, the Governance Committee and Board consider the qualifications and expertise of director candidates individually and in the broader context of the Board’s overall composition, taking into account any particular needs that the Company may have based on its strategic initiatives, risks, and opportunities. The Company has engaged a third-party international executive search firm to assist the Governance Committee in identifying and evaluating potential director candidates.

In evaluating individual candidates, the Governance Committee considers the personal ethics and values, experience, judgment, and diversity of the candidates, among other things. It is the Board’s policy that the Board should reflect diversity of viewpoint, professional experience, education, skill, expertise, industry knowledge, and such other factors as the Governance Committee and Board believe would enhance Board effectiveness. As stated in our Governance Guidelines, “Spirit is committed to considering candidates for the board regardless of gender, race, ethnicity, and national origin. Any search firm retained to assist the corporate governance and nominating committee in seeking candidates for the board will affirmatively be instructed to seek to present diverse candidates.” Nominees must have high standards of integrity and ethics and convey a commitment to act in the best interest of the Company and its stockholders.

In addition, the Governance Committee considers the candidates’ employment and other commitments, and evaluates whether the candidates have sufficient time available to efficiently and effectively carry out director duties. For additional information, see “Overboarding Policy.”

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Director Selection Process

 

 

Stockholder Candidates

 

It is the Governance Committee’s policy to consider candidates nominated by stockholders in compliance with applicable laws, regulations, and the procedures described in the Company’s bylaws and Proxy Statement. If a stockholder desires to recommend a director candidate for nomination, the stockholder should follow the procedures described under “Stockholder Proposals and Director Nominations for the 2022 Annual Meeting.” Director candidates recommended by stockholders will be considered and evaluated in the same manner as candidates discovered through other sources.

Proxy Access

 

The Company’s bylaws provide the stockholders with a market-standard proxy access right. Specifically, our bylaws permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Company’s Common Stock continuously for at least three years, to nominate and include in the Company’s proxy materials directors constituting up to the greater of two individuals or 20% of the Company’s Board of Directors, provided that the stockholder(s) and the nominee(s) satisfy the applicable requirements in the bylaws.

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Director Tenure and Refreshment

The Company has added five new directors to its Board in the past seven years. The remaining five nominees have served on the Board for more than 10 years. Through its annual evaluation process, the Board has determined that each of the five nominees who have served for more than 10 years provides diversity of experience and perspective, and plays an integral and necessary role in the boardroom.

The Board has periodically evaluated age and term limits, along with retirement policies, and has determined that such limits and policies may arbitrarily restrict valuable Board members from service. Instead, the Board has determined that it will continue evaluating its members on their merits based on the contributions they make in the boardroom and their ability to enhance overall Board effectiveness. The Board is committed to routine Board and director refreshment as needed to enhance Board effectiveness, and primarily uses Board and committee evaluations and composition discussions as its refreshment mechanisms.

Board and Committee Evaluations

 

Each year, the Governance Committee oversees an evaluation of the Board and each committee. The 2020 annual evaluation covered the following topics, among other things:

Composition of the Board and committees and whether the composition is appropriate in light of the Company’s strategic priorities;

Effectiveness of Board and committee leadership;

Strengths of the Board and committees and opportunities for improvement;

Effectiveness of structures and practices; and

Quality of the Board’s relationship with management.

A summary of the evaluation process is below:

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Director Education

Our director education program includes occasional site visits and tours (these did not occur in 2020 due to COVID-19 restrictions and precautions), education seminars on topics of interest conducted by senior management or external advisors, provision of background material on the Company’s operations and strategy, and provision of resources from various educational institutions (including the National Association of Corporate Directors).

Each new Board member receives onboarding training that involves meetings with senior management, business overviews, and presentations on the Code of Conduct, insider trading, and various other policies and procedures. We encourage our directors to attend reputable director education programs sponsored by external advisors and educational institutions.

Director Independence

The Company’s Common Stock is listed on the New York Stock Exchange (the “NYSE”), and the Company uses the NYSE’s listing standards to determine director independence.

Under the NYSE’s listing standards and the Governance Guidelines, the Board must consist of a majority of independent directors, and the Audit, Governance, and Compensation Committees must consist solely of independent directors. For a director to qualify as independent, the Board must determine that the director has no material relationship with the Company (either directly, or as a partner, stockholder, or officer of an organization that has a relationship with the Company). The Board performs an independence assessment of each director annually, with the assistance of the Governance Committee, and as circumstances may otherwise require.

In assessing the existence of a material relationship with the Company, the Board considers all relevant transactions, relationships, and arrangements required by the NYSE’s independence standards, as applicable to non-employee directors generally and as applicable to each committee. The Board examined each director’s involvement through directorships, employment, consulting relationships, or otherwise, with entities the Company does business with. In particular, the Board evaluated the following:

 

Topic

Transaction Evaluated

 

Outcome

 

Paul E. Fulchino

When considering the independence of Mr. Fulchino, the Governance Committee and Board considered his role as an operating partner of AEI, a private equity firm that has ownership interests in several of the Company’s suppliers. In his role at AEI, Mr. Fulchino assists with the acquisition, development, and value creation of portfolio companies. Mr. Fulchino receives a retainer from AEI and does not own any equity in AEI. However, Mr. Fulchino receives a modest carrying interest upon the sale of certain portfolio companies. Mr. Fulchino is not covered under AEI’s benefit plans or programs, receives a Form 1099 from AEI, and is free to be employed by other companies.

 

The Governance Committee and Board affirmatively determined, based on available facts and circumstances, that Mr. Fulchino was not an employee of AEI (for purposes of the independence determination). Further, with respect to the Company’s transactions with all but one of the AEI-owned suppliers, each transaction arose as a result of the entity submitting the most competitive bid out of all bidding suppliers, and, thus, the transactions were not reportable under Item 404 of Regulation S-K. Finally, with respect to the final supplier, the Board determined that Mr. Fulchino’s relationship with AEI did not give rise to a material interest. For these and other reasons, the Governance Committee and Board determined that Mr. Fulchino’s relationship with AEI does not give rise to a material relationship that impacts his independence (nor does it create a related person transaction).

 

Richard A. Gephardt

When considering Mr. Gephardt’s independence, the Governance Committee and Board considered his role as President and Chief Executive Officer of the Gephardt Group, a consulting firm that provides services to the Company in connection with labor matters. Mr. Gephardt holds a 40% equity interest in the Gephardt Group, and Mr. Gephardt’s son, Chief Operating Officer of the Gephardt Group, holds a 10% equity interest. The Company’s transactions with the Gephardt Group in 2020 amounted to $60,000.

 

The Governance Committee and Board affirmatively determined that, in light of Mr. Gephardt’s significant ownership and involvement in the Gephardt Group and the Gephardt Group’s dealings with the Company, Mr. Gephardt has a material relationship with the Company and is, therefore, not independent.

 

 

Based on this analysis, the Board has determined that all the director nominees are independent under the NYSE’s criteria excluding Messrs. Gentile and Gephardt. All the committees of the Board are made up solely of independent directors. Messrs. Gentile and Gephardt are not members of any committee.

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Committees

The Board has adopted written charters for each committee, which are available at http://investor.spiritaero.com/corporate-governance/govdocs/default.aspx. Information on each committee of the Board is set forth in the table below.

Committee

Members

Primary Responsibilities

No. of

Meetings

in 2020

Audit Committee*

Irene M. Esteves (Chair)

Stephen A. Cambone

John L. Plueger

Laura H. Wright

(1)

Oversee the quality and integrity of the Company’s financial reporting.

(2)

Oversee the Company’s compliance with legal and regulatory requirements.

(3)

Engage, compensate, and oversee performance and independence of the independent auditor.

(4)

Oversee performance of the Company’s internal audit function.

(5)

Review and discuss with management and the independent auditors the Company’s earnings releases and quarterly and annual reports on Forms 10-Q and 10-K, and the audit generally.

(6)

Consider the effectiveness of the Company’s internal controls over financial reporting and participate in the resolution of internal control issues, where identified.

(7)

Oversee and participate in the review and resolution of significant deficiencies or material weaknesses, where identified.

(8)

Communicate with the independent auditor on audit control matters and critical audit matters to be described in the independent auditor’s report.

(9)

Oversee financial-related risk exposures and related policies and processes attempting to mitigate such risks.

(10)

Oversee the Company’s Code of Conduct and the Company’s ethics and compliance program.

15

Compensation Committee

Paul E. Fulchino (Chair)

Robert D. Johnson

Charles L. Chadwell

(1)

Review and approve the compensation of the Company’s executive officers.

(2)

Oversee the administration of the Company’s compensation plans, policies, and programs.

(3)

Prepare the Compensation Committee Report in this Proxy Statement.

(4)

Oversee compensation-related risk exposures and related policies and processes attempting to mitigate such risks.

(5)

Review and make recommendations to the Board with respect to non-employee director compensation.

12

Governance Committee

Charles L. Chadwell (Chair)

Robert D. Johnson

Paul E. Fulchino

Ronald T. Kadish

(1)

Assist the Board in identifying qualified individuals to become Board members.

(2)

Determine the composition of the Board and its committees.

(3)

Lead the annual review of the Board’s and the committees’ performance.

(4)

Develop and implement the Governance Guidelines and recommend to the Board any changes thereto.

(5)

Review and approve, deny, or ratify transactions under the Company’s Related Person Transaction Policy.

(6)

Oversee risks related to the Company’s governance structure.

(7)

Review the Company’s practices and reporting with respect to corporate responsibility, environmental, and social matters.

4

Risk Committee

Ronald T. Kadish (Chair)

Stephen A. Cambone

John L. Plueger

Irene M. Esteves

Laura H. Wright

(1)

Provide oversight of management’s guidelines, policies, and processes for assessing, monitoring, and mitigating the Company’s critical enterprise risks, including the major strategic, operating, financial, and compliance risks inherent in the Company’s business and core strategies.

(2)

Oversee the effectiveness of the Company’s cybersecurity programs and its practices for identifying, assessing, and mitigating cybersecurity risks.

(3)

Oversee management’s review and assessment of key risks that have the potential to significantly affect the Company’s ability to execute its strategy, and determine which risks should be included on the Board’s agenda for discussion.

5

*

The Board has determined that Mses. Esteves and Wright and Mr. Plueger are “audit committee financial experts,” as such term is defined in Item 407(d)(5) of Regulation S-K.

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The Board’s Role in Risk Oversight

Management’s Role in Risk Management

 

The Company’s management is responsible for the identification, assessment, mitigation, and management of risks relating to the Company’s strategy and operations. Apart from reporting to the Board, management engages in a robust enterprise risk management process that involves: (i) creating risk-assessment surveys and conducting interviews; (ii) reviewing, repositioning, and prioritizing identified risks by a risk council composed of executive leadership; (iii) assigning risks to risk owners based on responsibilities with respect to the Company’s strategic objectives; (iv) developing and reporting mitigation plans by the risk owners and risk management team to the risk council; and (v) receiving oversight by the Company’s internal audit function. On a quarterly basis, the status of the top risks identified in management’s enterprise risk management process, along with their associated mitigation plans, is presented to the Risk Committee. Risks that the Company focused on in 2020 included matters relating to the B737 MAX grounding, COVID-19 pandemic, financial liquidity, and cybersecurity, among other items.

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Cybersecurity

 

The Risk Committee of the Board is charged with reviewing the Company’s cybersecurity matters. Management reports to the Risk Committee quarterly regarding cyber practices and procedures. The Company requires cybersecurity education and training at all levels of the organization. Spirit works to maintain the confidentiality, integrity, and availability of its information and digital resources through comprehensive and proactive compliance, privacy, and risk programs developed from industry accepted best practices. The framework for our programs is based on the Department of Defense Cybersecurity Maturity Model Certification (CMMC) and National Institute of Security and Technology (NIST) Frameworks, Generally Accepted Privacy Program (GAPP) guiding principles, and ISO 27001/2 standards. These standards reflect well-defined processes and best in class technology.

Communications with the Board

Stockholders and other interested persons may communicate with the Board, the Chairman of the Board, and individual members of the Board and its committees through the following:

BY EMAIL

to CorporateSecretary@spiritaero.com

BY MAIL

to Corporate Secretary

Spirit AeroSystems Holdings, Inc.

3801 S. Oliver St.

Wichita, KS 67210-2112

VIRTUALLY

at the Annual Meeting via www.virtualshareholdermeeting.com/SPR2021

 

 

The Corporate Secretary will forward communications received to the appropriate party. Communications clearly not appropriate for consideration by members of the Board or committees, including unsolicited advertisements, inquiries concerning the Company’s products and services, and harassing communications, are not forwarded to members of the Board or committees.

Commitment to Stockholder Engagement and Responsiveness

We value the feedback and insight we gain from our engagement with stockholders. The Company’s management and subject-matter experts frequently meet with investors. In 2020, members of the Company’s management held more than 565 meetings with investors and analysts. Members from the following Company functions participated in certain of these meetings, depending on the subject matter covered: Investor Relations, Communications, Government Relations, Executive Compensation, and Environmental, Health, and Safety. Key areas of discussion at the meetings included Company performance, governance practices, executive compensation, strategy, operations, sustainability programs, risk management, and other matters of importance to our stockholders.

The Company is committed to maintaining a robust stockholder outreach program in addition to regular participation at investor and community events and meeting with analysts. The Company welcomes feedback from all stockholders. Stockholders can contact the Company’s Investor Relations team by calling 316-523-7040 or emailing investorrelations@spiritaero.com.

2020 Board and Committee Meetings and Attendance

During 2020, there were 27 meetings of the Board. Only one series of Board and committee meetings was held in person due to COVID-19 restrictions and precautions. All of the Company’s directors attended 75% or more of the aggregate of all meetings of the Board and of the committees on which they served in 2020. The Company’s Governance Guidelines provide that director attendance is expected at annual meetings of stockholders. All of the directors attended the 2020 virtual annual meeting of stockholders.

In addition to scheduled Board meetings, the Board receives monthly reports from management detailing financial results, operating highlights and challenges, and updates on strategic initiatives.

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Executive Sessions

As part of each quarterly Board meeting in 2020, the Company’s non-employee directors met without management present in an executive session, with Mr. Johnson as Chairman presiding over each session. During executive sessions, the non-employee directors reviewed management’s performance, compensation, talent development and succession planning, strategic considerations, corporate governance matters, and other matters of importance. The Company’s independent directors (the non-employee directors excluding Mr. Gephardt) met in executive session at least one time in 2020 as required by the Governance Guidelines and NYSE rules.

Overboarding Policy

Per our Governance Guidelines, directors are expected to ensure that other commitments, including outside board memberships, do not interfere with their duties and responsibilities as Board members. A director may not serve on the boards of more than four other public companies or, if the director is an active CEO or equivalent of another public company, on the boards of more than two other public companies. In addition, directors must notify the Governance Committee before accepting an invitation to serve on the board of any other for-profit entity. The director must not accept such service until being advised by the Governance Committee chair that the committee has determined that service on such other board would not create regulatory issues or potential conflicts of interest and would not conflict with the Company’s policies. All directors are in compliance with the Company’s overboarding policy as of the date of this Proxy Statement.

Ms. Esteves currently serves on the audit committee for four public companies (including Spirit). On June 8, 2018 (prior to Ms. Esteves joining the fourth audit committee), and in light of her prior roles as a chief financial officer and professional training, the Company’s Board determined that such simultaneous service would not impair her ability to effectively serve on the Company’s Audit Committee, which is also noted under her biography at http://investor.spiritaero.com/corporate-governance/OD/default.aspx.

Code of Conduct

The Company is committed to the highest ethical standards and complying with all laws and regulations applicable to the Company’s business. To support and articulate its commitment and responsibility in this regard, the Company has adopted the Code of Conduct (the “Code”). The Code addresses a number of topics, including the Foreign Corrupt Practices Act, conflicts of interest, safeguarding assets, insider trading, and general adherence to laws and regulations. All directors and employees, including executive officers, must comply with the Code. The Code is available on the Company’s website at http://investor.spiritaero.com/corporate-governance/OD/default.aspx.

Sustainability Reporting and Oversight

In 2021, Spirit will launch the Report outlining our strategy, programs, goals, and objectives. The Report will highlight Spirit’s values and commitments to protecting the environment and human health, supporting a low carbon economy, creating an inclusive culture that supports growth, and uniting communities through innovation, partnerships, and programs. We will publicly disclose information relating to the following topics in the Report: Spirit’s environmental performance, health and safety, diversity and inclusion, community impact, ethics and compliance, and risk management. For additional information, see: https://www.spiritaero.com/company/sustainability/overview/.

As noted in its charter, the Company’s Governance Committee oversees Spirit’s practices and reporting with respect to corporate responsibility, environmental, and social factors that are of significance to the Company and its stakeholders.

Succession Planning

The Board is responsible for overseeing management succession planning. At least twice annually, the Board reviews candidates for succession with respect to the CEO role and other senior management roles. Succession plans have been developed for both ordinary course succession and contingency planning for an unforeseen event.

The Board receives updates on the development of the succession candidates regularly. Directors engage with potential succession candidates during formal presentations at Board and committee meetings and at informal events.

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Response to Material Weakness in Internal Control Over Financial Reporting

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, the Company identified a material weakness in its internal control over financial reporting as of December 31, 2019. The material weakness related to identifying claims and assertions and key judgments of its estimate-at-completion (“EAC”) process.

Our management team worked with the Audit Committee, along with external advisors, to evaluate the circumstances of the material weakness and identify necessary actions required to remediate the material weakness. As previously disclosed, these actions included:

Management changes;

Enhancement of training around the appropriate treatment of claims and assertions and other subjective elements and key judgments of our EAC process to reinforce existing written Company policies. This training focused on control owners within the EAC process, including program, accounting, and executive leadership; and

Reassessment of processes and design of controls to ensure that all customer claims and assertions are identified and evaluated in accordance with established Company policies and procedures. This remediation step included validation and reconciliation of claims data with our key customers and retention of this data in a centralized claims repository to facilitate the completeness of our accounting for claims and assertions.

Management has concluded that the material weakness was fully remediated in accordance with the remediation plan. The Audit Committee and the Board are committed to maintaining a strong internal control environment.

Stockholder Rights Plan

The Company adopted a limited duration stockholder rights agreement (the “rights plan”) on April 22, 2020, and declared a dividend of one right for each outstanding share of Common Stock as of May 1, 2020, the record date. The rights plan expires, without any further action being required to be taken by Board, on April 22, 2021. As of the filing date of this Proxy Statement, the Company does not intend to renew the rights plan when it expires.

Governance Documents Available on Our Website

We maintain governance documents on our website at http://investor.spiritaero.com/corporate-governance/govdocs/default.aspx. These documents include, without limitation, our:

Bylaws;

Governance Guidelines;

Committee Charters;

Code of Conduct;

Finance Code of Professional Conduct;

Supplier Code of Conduct;

Related Person Transaction Policy;

Discrimination and Harassment Policy; and

Anti-Hedging and Pledging Policy.

 

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Compensation of Non-Employee Directors

Overview

 

Non-employee directors receive annual cash and equity compensation as described below. Equity compensation is granted under the Director Stock Program adopted under the 2014 Omnibus Incentive Plan, as amended (the “OIP”).

The Compensation Committee reviews non-employee director compensation amounts and practices annually. As part of their review, the Compensation Committee evaluates non-employee director compensation data from the companies in Spirit’s proxy peer group, including data regarding the size of equity awards. In addition, the Compensation Committee confers with its independent compensation consultant on the magnitude and type of non-employee director compensation, and reviews market data and benchmarking surveys provided by the consultant. Based upon that information, the Compensation Committee makes a recommendation to the Board. The Board approves the form and amount of compensation after considering the Compensation Committee’s recommendation.

In developing its recommendations, the Compensation Committee is guided by the following goals with respect to non-employee director compensation:

Compensation should be market-competitive in relation to similarly-situated companies, including the Company’s proxy peer group;

Compensation should align directors’ interests with the long-term interests of the Company’s stockholders; and

The compensation structure should be simple, transparent, and easy for stockholders to understand.

Compensation Elements

 

The following table describes the elements of the 2020 non-employee director compensation program:

Element

2019-2020 Term

Amounts

2020-2021 Term

Amounts

Annual Board Cash Retainer

$105,000

$89,250

Annual Board Equity Retainer

$125,000

$106,250

Additional Retainer for Chairman of the Board

$100,000

$85,000

Additional Retainer for Chairman of the Audit Committee

$25,000

$21,250

Additional Retainer for Chairman of the Compensation Committee

$18,000

$15,300

Additional Retainer for Chairmen of Other Committees

$12,000

$10,200

 

In 2020, due to liquidity pressures relating to the COVID-19 pandemic and B737 MAX grounding, the Board elected to reduce each element of 2020-2021 term compensation by 15%.

Cash Retainers

Each Board member receives an annual cash retainer. The Chairman of the Board and each committee chairman receives an additional cash retainer. Directors may elect to receive their retainers in shares of restricted stock or restricted stock units (“RSUs”) in lieu of cash, but if any director ceases to serve as a director for any reason during the term, any such elective equity award will be forfeited and the director will receive a pro-rated portion of the annual retainer in cash. Except with respect to elective equity awards in lieu of cash, cash compensation is paid quarterly in arrears.

Equity Retainer

Each Board member receives an annual equity retainer, which may be paid in the form of restricted stock or RSUs. Both types of awards vest if the non-employee director remains continuously in service for the entire term to which the grant relates. If the non-employee director incurs a termination for any reason before the end of the term (before the annual meeting of stockholders following the grant), the awards are forfeited. The Board may, in its discretion, waive this one-year vesting condition (in whole or in part) if it deems it appropriate and in the best interest of the Company to do so. Upon vesting, shares relating to restricted stock awards are delivered to the director free of restriction; however, vested Shares underlying RSUs are not delivered to the director until the date that the director leaves the Board. Restricted stock confers voting and dividend rights; dividends accrue during the restricted period and are paid out upon vesting. RSUs do not confer voting rights, but do confer dividend-equivalents; dividend equivalents accrue during the restricted period and thereafter, and are delivered out upon settlement. If the awards are forfeited, dividends or dividend-equivalents, as applicable, are also forfeited.

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Other Compensation

Directors are reimbursed for out-of-pocket expenses incurred in connection with their Board service. The Company does not provide perquisite allowances to non-employee directors.

Non-Employee Director Stock Ownership Requirements

 

Non-employee directors are required to own stock equal to five times the annual Board cash retainer, which currently amounts to $446,250 with respect to 2020-2021 term compensation. Non-employee directors have four years of Board service before they are required to meet the minimum stockholder requirements. Restricted stock and RSUs held by directors are counted in determining whether the minimum stockholding requirements are satisfied. Information regarding the current stock ownership of the Company’s non-employee directors can be found below under “Stock Ownership — Beneficial Ownership of Directors and Executive Officers.”

As of March 2, 2021, all non-employee directors, other than Ms. Wright and Dr. Cambone, were in compliance with the stock ownership requirements. Ms. Wright, who joined the Board on February 20, 2018, has until February 20, 2022, to meet the requirements. Dr. Cambone, who joined the Board on October 22, 2019, has until October 22, 2023, to meet the requirements. Both Ms. Wright and Dr. Cambone are on track to achieve compliance in the required time frame.

Between March 3, 2020, and May 11, 2020, Mr. Gephardt was not in compliance with the stock ownership requirements because the Company’s Common Stock price dropped below $52.68 per share. On May 11, 2020, Mr. Gephardt became compliant with the stock ownership requirements after receiving the 2020-2021 term equity retainer.

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2020 Director Compensation Table

The following table sets forth non-employee director compensation for the fiscal year ended December 31, 2020 (note that Mr. Gentile’s compensation is set forth in the “Summary Compensation Table” and not included below).

Name

Fees Earned or Paid

in Cash

($)

(1) 

 

Stock

Awards

($)

(2) 

 

All Other

Compensation

($)

(3) 

 

Total

($)

Stephen A. Cambone

93,411

(4)

106,267

 

 

 

199,679

Charles L. Chadwell

104,087

 

106,267

 

 

 

210,354

Irene M. Esteves

115,652

(5) 

106,267

 

 

 

221,920

Paul E. Fulchino

109,425

(6) 

106,267

 

 

 

215,692

Richard A. Gephardt

93,411

 

106,267

 

60,000

 

259,679

Robert D. Johnson

182,375

 

106,267

 

 

 

288,642

Ronald T. Kadish

104,087

 

106,267

 

 

 

210,354

John L. Plueger

93,411

 (7)

106,267

 

 

 

199,679

Laura H. Wright

93,411

 (8)

106,267

 

 

 

199,679

(1)

Includes annual cash retainer and committee chair retainers earned for 2020, including any such retainers that were paid in the form of restricted stock or RSUs in 2019 or 2020 by the director’s election in lieu of cash compensation for 2020. Dr. Cambone, Ms. Esteves, Mr. Fulchino, Mr. Plueger, and Ms. Wright elected to defer all or a portion of their annual cash retainers for 2020 as set forth in footnotes (4) - (8).

(2)

Represents the aggregate grant date fair value of the stock awards computed in accordance with authoritative guidance on stock-based compensation accounting issued by the Financial Accounting Standards Board (the “FASB”). On May 11, 2020, each non-employee director received an annual grant of 5,458 shares of restricted stock or RSUs with an aggregate value of $106,250 based on $19.47 per share, the average of the opening and closing prices of Common Stock on the grant date. As a result of rounding of fractional share amounts, the grants were valued at $106,267. As of December 31, 2020, each non-employee director’s aggregate number of unvested restricted stock or RSUs was as follows: Dr. Cambone: 5,458 shares of restricted stock; Mr. Chadwell: 5,458 shares of restricted stock; Ms. Esteves: 11,133 RSUs (includes 5,675 RSUs received in lieu of 2020-2021 term annual cash and committee chair retainers); Mr. Fulchino: 10,827 shares of restricted stock (includes 5,369 shares of restricted stock received in lieu of 2020-2021 term annual cash and committee chair retainers); Mr. Gephardt: 5,458 shares of restricted stock; Mr. Johnson: 5,458 shares of restricted stock; Mr. Kadish: 5,458 shares of restricted stock; Mr. Plueger: 10,042 shares of restricted stock (includes 4,584 shares of restricted stock received in lieu of 2020-2021 term annual cash retainer); and Ms. Wright: 5,458 shares of restricted stock. Note that any RSUs or shares of restricted stock received in lieu of annual cash and committee chair retainers described in this footnote were granted in 2020 and relate to retainers earned over the director’s 2020-2021 annual term, which covers portions of two calendar years, and that upon any termination of services of the director during the outstanding term, the equity award will be canceled, and a cash payment will be made therein that is equal to the cash amounts earned by the director through the date of such termination of service.

(3)

The amount of perquisites and other personal benefits has been excluded for all non-employee directors other than Mr. Gephardt, as the total value of each other director’s perquisites and other personal benefits was less than $10,000. For Mr. Gephardt, this amount reflects consulting fees paid to the Gephardt Group for labor consulting services rendered in 2020, as further described under “Director Independence.”

(4)

Includes $32,308 in annual cash retainer that was paid in the form of 380 RSUs for Mr. Cambone pursuant to his election. The RSUs were granted to Mr. Cambone on November 4, 2019, but are included in this disclosure because the RSUs were granted in lieu of cash payments earned for service in 2020.

(5)

Includes $115,652 in annual cash retainer and committee chair retainers that were paid in the form of 4,345 RSUs for Ms. Esteves pursuant to her election. The RSUs were granted to Ms. Esteves in part on May 11, 2020, and in part on May 6, 2019, and are included in this disclosure because the RSUs were granted in lieu of cash payments earned for service in 2020.

(6)

Includes $109,425 in annual cash retainer and committee chair retainers that were paid in the form of 4,111 shares of restricted stock for Mr. Fulchino pursuant to his election. The restricted stock was granted to Mr. Fulchino in part on May 11, 2020, and in part on May 6, 2019, and is included in this disclosure because the restricted stock was granted in lieu of cash payments earned for service in 2020.

(7)

Includes $93,411 in annual cash retainer that was paid in the form of 3,510 shares of restricted stock for Mr. Plueger pursuant to his election. The restricted stock was granted to Mr. Plueger in part on May 11, 2020, and in part on May 6, 2019, and is included in this disclosure because the restricted stock was granted in lieu of cash payments earned for service in 2020.

(8)

Includes $6,462 in annual cash retainer that was paid in the form of 75 shares of restricted stock for Ms. Wright pursuant to her election. The restricted stock was granted to Ms. Wright on May 6, 2019, and is included in this disclosure because the restricted stock was granted in lieu of cash payments earned for service in 2020.

 

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Related Person Transactions

Related Person Transaction Policy and Process

 

The Board has adopted a written Related Person Transaction Policy (the “RPT Policy”) that can be found on the Company’s website at http://investor.spiritaero.com/corporate-governance/govdocs/default.aspx. The purpose of the RPT Policy is to ensure the proper evaluation, approval, or ratification, and reporting of related person transactions. Such transactions are only appropriate if they are fair to, and in the best interests of, the Company.

Under the RPT Policy, a related person transaction is any transaction in which the Company was, is, or will be a participant, where the amount involved exceeds $120,000, and in which a Related Person (as defined below) has, had, or will have a direct or indirect material interest. A Related Person is a director, director nominee, officer, or 5% stockholder, or any of their immediate family members. The existence of a direct or indirect material interest depends upon individual facts and circumstances and is determined by our General Counsel or the Governance Committee.

The Governance Committee is responsible for reviewing these transactions and determining whether they are fair to, and in the best interests of, the Company. After review of the relevant facts and circumstances, if the Governance Committee concludes a related person transaction is fair to, and in the best interests of, the Company, it may approve or ratify the transaction.

If the Governance Committee declines to approve or ratify any related person transaction, the Company’s General Counsel, in coordination with the affected business unit or corporate function, will review the transaction, determine whether it should be terminated or amended in a manner that is acceptable to the Governance Committee, and advise the Governance Committee of their recommendation. The Governance Committee will then consider the recommendation at its next meeting. If the General Counsel does not ultimately recommend the transaction to the Governance Committee or if the Governance Committee does not approve the transaction, the proposed transaction will not be pursued; or, if the transaction has already been entered into, the Governance Committee will determine an appropriate course of action with respect to the transaction.

See “Director Independence” for more information.

Certain Related Person Transactions

 

Below are the transactions that occurred since January 1, 2020, and fall within the definition of “related person transaction” in the RPT Policy or under Item 404 of Regulation S-K. The Governance Committee reviewed the transaction in accordance with the RPT Policy and approved it on the basis that it was fair to, and in the best interests of, the Company. Transactions for Messrs. Fulchino and Gephardt were also reviewed under Item 404 and determined not to be related person transactions under the RPT Policy or under Item 404 of Regulation S-K - see “Independence” for more information on such transactions.

Related Person

Facts

John A. Pilla

John A. Pilla, former Senior Vice President and Chief Technology Officer, has two sons employed by the Company, Anthony Pilla, Cyber Protection Specialist (employed by the Company since June 3, 2016), and Nicolas Pilla, Systems Engineer (employed by the Company since May 31, 2013). Combined, Mr. Pilla’s sons received $164,275 in compensation from the Company in 2020. Such compensation was established in accordance with the Company’s compensation practices applicable to employees with equivalent responsibilities, experience, and qualifications. Mr. Pilla’s sons are also eligible to participate in employee benefit programs in the same manner as other eligible employees.

 

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STOCK OWNERSHIP

Beneficial Ownership of Directors and Executive Officers

The following table sets forth, as of March 2, 2021, the shares of Common Stock beneficially owned by each director and named executive officer, individually, and by all the Company’s directors and executive officers as a group. Individually and together, the directors and executive officers beneficially own less than 1.0% of our Common Stock. For purposes of the table, shares are considered to be beneficially owned if the person, directly or indirectly, has sole or shared voting or investment power with respect to the shares. In addition, a person is deemed to beneficially own shares if that person has the right to acquire such shares within 60 days after March 2, 2021.

Name

Common

Stock

Beneficially

Owned

 

Shares Vesting

Within 60

Days of

Record Date

Time-Based and

Performance-

Based Restricted

Stock(1)

 

Total Common

Stock

Beneficially

Owned

RSUs(2)

 

Total Common

Stock Beneficially

Owned Plus

RSUs

DIRECTORS

Stephen A. Cambone

 

 

 

 

5,458

 

5,458

 

1,356

 

 

6,814

Charles L. Chadwell

15,253

 

 

5,458

 

20,711

4,884

 

25,595

Irene M. Esteves

 

 

 

 

 

 

29,519

 

29,519

Paul E. Fulchino

15,075

 

 

10,827

 

25,902

 

 

25,902

Richard A. Gephardt

4,176

 

 

5,458

 

9,634

5,790

 

15,424

Robert D. Johnson

13,167

 

 

5,458

 

18,625

 

 

18,625

Ronald T. Kadish

20,105

 

 

5,458

 

25,563

 

 

25,563

John L. Plueger

11,919

 

 

10,042

 

21,961

13,026

 

34,987

Laura H. Wright

4,860

 

 

5,458

 

10,318

 

 

10,318

EXECUTIVE OFFICERS

Thomas C. Gentile III

 

142,189

 

 

28,089

 

175,642

 

 

345,920

 

100,164

 

 

446,084

Mark J. Suchinski

23,066

 

3,438

20,193

 

46,697

14,710

 

61,407

Jose I. Garcia(3)

12,281

 

 

3,131

 

15,412

 

 

15,412

Samantha J. Marnick

56,250

 

4,646

29,050

 

89,946

20,944

 

110,890

Duane F. Hawkins(4)

73,621

 

 

17,889

 

91,510

 

 

91,510

William E. Brown

27,382

 

3,139

20,242

 

50,763

11,194

 

61,957

John A. Pilla(5)

77,897

 

3,546

24,216

 

105,659

 

 

105,659

Mary M. (“Mindy”) McPheeters

1,605

 

2,878

9,583

 

14,066

2,778

 

16,844

Terry J. George

8,527

 

1,957

11,289

 

21,773

11,647

 

33,420

Kevin Matthies

24,708

 

2,324

13,973

 

41,005

9,807

 

50,812

Scott M. McLarty

12,095

 

1,916

13,290

 

27,301

9,575

 

36,876

All directors and executive officers as a group (20 persons)

544,176

 

51,933

392,115

 

988,224

235,394

 

1,223,618

(1)

For directors: includes unvested time-based restricted stock awards but excludes RSUs. RSUs do not confer voting rights until they are delivered upon the director’s departure, as described in footnote (2) below. For executive officers: includes unvested time-based and performance-based restricted stock awards that are forfeitable until the vesting date or performance certification date, as applicable. Performance-based restricted stock awards are included in the table at target amounts. This column does not include any time-based or performance-based restricted stock units as they do not confer voting rights. However, Mr. Hawkins time-based restricted stock units are included as described in footnote (4) below, does not.

(2)

For directors: RSUs vest after one year of service as a director. However, RSUs are not payable until the director’s termination of service. At such time, the RSUs will be delivered, at the Board’s option, in cash or shares of Common Stock based on the market value of Common Stock upon termination of service. All RSUs reflected are currently vested except for 11,133 RSUs held by Ms. Esteves. For executives: reflects time-based restricted stock units granted on February 26, 2021, that vest in three annual increments beginning on February 26, 2022. Does not include performance-based restricted stock units granted in 2021 as the pricing for the awards was not available at the time this Proxy Statement was finalized.

(3)

Mr. Garcia was appointed to the position of Senior Vice President and Chief Financial Officer on January 9, 2019, and resigned from the position on January 29, 2020. For Mr. Garcia, values shown assume no transactions have taken place after Mr. Garcia’s receipt of severance benefits following his resignation.

(4)

Mr. Hawkins reached retirement eligibility for time-based restricted stock awards and restricted stock units in 2020 and, accordingly, all outstanding time-based restricted stock and restricted stock unit awards are included under the “Common Stock Beneficially Owned” column.

(5)

Excludes 16,023 phantom stock units that Mr. Pilla is entitled to receive upon his retirement from the Company under the frozen Supplement Executive Retirement Plan.

 

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Beneficial Ownership of Major Stockholders

The following table sets forth information with respect to beneficial owners of more than 5% of the Common Stock as of March 2, 2021. The information set forth below is based on ownership statements filed with the SEC pursuant to Section 15(d) or 13(g) of the Exchange Act.

Name

Amount of

Shares

Beneficially

Owned

Percentage of

Common Stock

Sole

Voting

Shares

Shared

Voting

Shares

Sole

Investment

Shares

Shared

Investment

Shares

The Vanguard Group(1)

100 Vanguard Blvd.

Malvern, PA 19355

 

8,985,555

 

8.51%

 

 

 

68,726

 

8,836,800

 

148,755

Blackrock, Inc.(2)

55 E. 52nd St.

New York, NY 10005

5,489,962

5.2%

5,107,504

 

5,489,962

 

Scopia Capital Management LP(3)

Scopia Management, Inc.

Matthew Sirovich

Jeremy Mindich

152 West 57th St., 33rd Floor

New York, NY 10019

5,822,699

5.5%

94,000

5,728,699

94,000

5,728,699

(1)

Information is based on an amended Schedule 13G filed with the SEC on February 10, 2021.

(2)

Information is based on an amended Schedule 13G filed with the SEC on February 1, 2021.

(3)

Information is based on a Schedule 13G filed with the SEC on February 16, 2021.

Delinquent Section 16(a) Reports

To the Company’s knowledge, based solely on a review of reports filed under Section 16(a) of the Exchange Act and certain reporting persons’ written representations, the Company believes that all filings required to be made by reporting persons holding the Common Stock were timely filed in accordance with Section 16(a) of the Exchange Act in 2020 except for Mr. Hawkins’ Form 4 due on March 15, 2020, which was Mr. Hawkins’ 62nd birthday and the date the Company was required to dispose of shares for tax purposes with respect to Mr. Hawkins’ unvested time-based restricted stock awards. The filing was missed due to an administrative error. A Form 5 was filed with the SEC on January 29, 2021, to report the transactions.

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Overview

In accordance with Section 14A of the Exchange Act, stockholders are being asked to approve, on an advisory basis, the compensation of the named executive officers, or NEOs, as set forth under the heading “Compensation Discussion and Analysis.” This vote, which is referred to as the “say-on-pay” vote, is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s NEOs and the objectives, policies, and practices described in this Proxy Statement. We conduct a say-on-pay vote annually. The Board believes that executive compensation, as disclosed in this Proxy Statement, aligns with the Company’s peer group pay practices and furthers the Company’s compensation objectives.

Accordingly, the Board asks the Company’s stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed by the Company pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table, and other related tables and disclosures.”

The Board and Compensation Committee will review the voting results of Proposal 2 and take them into consideration when making future decisions regarding executive compensation.

Voting Standard

The affirmative vote of a majority of stockholders present, in person or by proxy, will constitute the stockholders’ non-binding approval with respect to Proposal 2. With respect to Proposal 2, a stockholder may vote “FOR,” “AGAINST,” or “ABSTAIN.” Abstentions and broker non-votes will be counted as present at the Annual Meeting and, therefore, they will have the effect of votes “AGAINST” Proposal 2.

Under the NYSE rules, brokers are prohibited from giving proxies to vote on executive compensation matters unless the beneficial owner of such shares has given voting instructions on the matter. This means that, if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 2 if you want your broker to vote your shares on the matter.

   The Board recommends you vote FOR the resolution approving the compensation of our named executive officers.

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COMPENSATION DISCUSSION AND ANALYSIS

 

   TABLE OF CONTENTS   
   

Our 2020 Named Executive Officers

The following Compensation Discussion and Analysis describes the 2020 compensation of our NEOs. Our 2020 NEOs were:

 

 

Thomas C. Gentile III

President and CEO

Mark J. Suchinski

Senior Vice President and Chief Financial Officer

Jose I. Garcia*

Former Senior Vice President and Chief Financial Officer (through January 29, 2020)

Samantha J. Marnick

Executive Vice President and Chief Operating Officer

Duane F. Hawkins

Senior Vice President; President, Defense Division

William E. Brown

Senior Vice President, Boeing Programs

John A. Pilla*

Former Senior Vice President and Chief Technology Officer (through August 1, 2020)

*

Mr. Garcia resigned on January 29, 2020, and Mr. Pilla stepped down from his role on August 1, 2020.

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Compensation Overview

Our Compensation Objectives

 

The Company’s executive compensation program is designed to:

Setting Target Pay

 

The Compensation Committee reviews and approves the target pay levels for our NEOs with respect to salary, our annual cash incentive, and our long-term incentives. In setting these levels, the Compensation Committee works with management and external advisors, including our independent compensation consultant, Willis Towers Watson, and reviews the following:

the Company’s compensation objectives;

peer group compensation levels and broad survey data provided by the Compensation Committee’s independent compensation consultant, along with other market data;

the individual responsibilities, goals, and challenges with respect to the position in question; and

the experience, prior performance, and potential of the individual in question.

The Company generally sets total annual direct compensation (consisting of base salary, the annual cash incentive, and long-term incentives) of the NEOs at a target level that is at or around the market median, subject to individual circumstances and exceptions. Additional information about the Company’s peer group and compensation-setting process can be found under “The Compensation Decision-Making Process” and “Benchmarking” sections.

How We Align Pay with Performance

 

 

 

 

   Substantial portion of pay is delivered through variable, at-risk compensation. For either short- or long-term incentives, executive officers have the opportunity to earn in excess of market median levels when performance exceeds expectations. Conversely, if performance falls below expectations, the incentives pay below target levels, if at all.

 

   Use balance of short- and long-term incentives and cash- and non-cash compensation.

 

   Use performance metrics that are relevant to our strategic plan and matter to our stockholders, customers, and other stakeholders. See “Our Pay Metrics” for more information.

 

   Performance goals are relevant, challenging, and tied to key measures of profitability and performance. See “Our Pay Metrics” for more information.

 

 

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Our Pay Metrics

The table below explains the metrics we used to measure performance for determining 2020 compensation. Goals are established with the expectation that, if performance is aligned with our operating plans, target payout should be achieved. To obtain maximum goals, performance would have to exceed our plans significantly. We expect that achievement of both maximum performance and below threshold performance will be infrequent.

 

Program

Metric

Percentage of

Component

How Performance is Calculated

Reason for Using Metric

Annual Cash Incentive - Company Performance Component (75-80% of total ACI)

Cash from Operating Activities

40%

Cash from operating activities in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), measured over a one-year period. Threshold, target, and maximum scores for 2020 were set at ($227 million), ($177 million), and ($127 million), respectively.

This metric measures both profitability and changes in working capital. Due to the impacts from the B737 MAX grounding and COVID-19 pandemic in 2020, managing cash and liquidity were a key focus.

Indirect Cost

30%

This metric measures reduction of indirect costs (which are generally less variable than direct costs) in response to lower production rates over a one-year period. Threshold, target, and maximum scores for 2020 were set at $1.353 billion, $1.303 billion, and $1.245 billion, respectively.

The B737 MAX grounding and COVID-19 pandemic created unprecedented liquidity challenges for the Company. Lowering indirect costs removed from the production line was critical to conserve cash and preserve liquidity in 2020.

New Revenue Growth

15%

Performance is calculated based on new revenue growth from inorganic and organic sources. Threshold, target, and maximum scores for 2020 were set at $927 million, $982 million, and $1,037 million, respectively.

The Company’s strategy is to diversify its program portfolio and expand into new areas, including with respect to commercial programs, defense programs, aftermarket, and other areas. This metric measures the Company’s ability to diversify.

Quality

15%

Spirit’s quality index was developed using established measures our main customers use to evaluate Spirit’s quality performance across programs. Examples of quality measures used are defect count, and scrap, repair, and rework of fabricated parts and/or assemblies.

Quality is the main way our customers measure our compliance with product specifications. The success and growth of our business depends on meeting our customers’ quality standards.

Annual Cash Incentive - Individual Performance Component (20-25% of total ACI)

Individual Performance Goals

100%

Achievement of individual performance goals relevant to each NEO’s assignment.

To further incentivize personal performance and contributions to the Company’s financial and operating results.

Long-Term Incentive Program
(Total Award Opportunity)

Stock Price (Time-Based Restricted Stock)

60%

Calculated using a dollar amount, which results in a number of shares based on the price of the Common Stock. The value received upon vesting is directly related to the change in the stock price between the grant and vesting dates.

This metric ties performance of executives’ restricted stock awards directly to stock price performance, thus aligning the interests of executives and stockholders.

TSR (Performance-
Based Restricted Stock)

20%

Performance is measured based on the ranking of the Company’s TSR, expressed as a percentile, relative to the TSR of the Company’s peer group over a three-year performance period as compared to threshold, target, and maximum performance goals.

This metric ties executive interests to stockholder interests and aligns with market trends.

FCF Percentage* (Performance-
Based Restricted Stock)

20%

Performance is measured based on the Company’s FCF percentage of revenue* over a three-year performance period as compared to threshold, target, and maximum performance goals.

This metric is used to align long-term incentives with a key valuation driver of our business, which is FCF.* A percentage of sales is used to drive sustained FCF* performance consistent with our established long-term goal of 7-9% of sales; hence, the measurement is over a three-year period.

*

Please see Appendix A for an explanation and reconciliation of these non-GAAP measures.

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2020 Compensation Impacts Due to B737 MAX Grounding and COVID-19 Pandemic

The Company took several actions in 2020 to reduce costs, increase liquidity, and strengthen our financial position in light of the significant negative economic impacts of the COVID-19 pandemic and the B737 MAX grounding. Compensation-related actions included reducing pay for all executives (including NEOs) by 20% from April 2020 through January 2021. The reduced salary levels resulted in reduced payouts under the 2020 ACI (defined below).

Further, due to the financial impact of the B737 MAX grounding and COVID-19 pandemic, the performance-based restricted stock awards granted in 2018 that were due to vest on December 31, 2020, subject to the Compensation Committee’s certification of performance, were forfeited in their entirety as performance levels fell below threshold.

Values of vested and unvested equity awards were negatively impacted as well. As of December 2, 2019, the closing stock price of the Company’s Common Stock was $85.78. On May 1, 2020, the closing price of the Company’s Common Stock was $20.47. On December 31, 2020, the closing price of the Company’s Common Stock was $39.09.

2020 Compensation Program Elements

There are three major components to the Company’s compensation program for NEOs, which are described below. Levels for NEOs are set as described under “Compensation Overview - Setting Target Pay.”

Base Salary

 

Base salary is a fixed cash amount designed to attract, retain, and motivate executive officers, and recognize responsibilities, experience, and performance. The Company reviews each NEO’s base salary annually in January (and as circumstances or changes in responsibilities may require) and makes appropriate adjustments to account for performance, additional responsibilities, and market movement. Base salary is paid in cash bi-weekly. Due to liquidity pressures relating to the B737 Max grounding and COVID-19 pandemic, each NEO’s salary was reduced by 20% in April 2020. The salary reductions continued until January 4, 2021.

Annual Cash Incentive

 

The Annual Cash Incentive (“ACI”) is an annual cash award granted under the OIP. Each individual receives a total target ACI that is equal to a percentage of his or her total base salary. For 2020, this target amount was equal to 145% of base salary for Mr. Gentile, 100% of base salary for Mr. Suchinski, Ms. Marnick, Mr. Hawkins, and Mr. Pilla, and 85% of base salary for Mr. Brown.

Payout of the ACI depends on the attainment of individual and Company performance goals. Depending on the level of performance achieved, payout can be between 0 and 200% of target. The objectives of the ACI are to support our pay-for-performance philosophy, align the awards with stockholder interests, and motivate executives to achieve the Company’s near-term focus on safety, quality, delivery, and customer focus that drives the Company’s long-term performance.

The performance weightings for the NEOs’ ACIs are as follows:

CEO: 80% Company performance; 20% individual performance; and

For all NEOs other than the CEO (“Other NEOs”): 75% Company performance; 25% individual performance.

With respect to the measurement of the performance components, the Compensation Committee used a scoring scale of 0.0 to 2.0, with 0.0 for unacceptable performance and 2.0 for exceptional performance. Payout of the ACI is in cash and typically occurs in February of each year (after the Compensation Committee certifies performance in January).

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2020 Company Performance

For the 2019 ACI, the Company performance component was based on FCF (50%), earnings before taxes and interest (as adjusted) (“EBIT”) (30%), and revenue (20%), as further disclosed in last year’s proxy statement. In light of impacts of the B737 MAX grounding and COVID-19 pandemic, the Company was unable to create a meaningful outlook for FCF, EBIT, and revenue for 2020 and, accordingly, revised the Company performance component metrics in order to incentivize our employees to perform toward meaningful and calculable goals.

After an intensive review of metrics used by peer companies and companies in our industry, and consultation with our independent compensation consultant, the Compensation Committee modified the Company performance component metrics for 2020 to be based on GAAP Cash from Operating Activities (40%), Indirect Cost (30%), Quality (15%), and New Revenue Growth (15%). The reasons for each of these metrics is described under “Our Pay Metrics.”

In 2020, the Company fell below threshold performance goals for both Cash from Operating Activities and New Revenue Growth. For Quality, the Company scored a 1.85 out of 2.00, and for Indirect Cost, the Company exceeded its maximum performance goal at $1.172 billion. As a result, the Compensation Committee determined a 0.8775 total score had been achieved with respect to Company performance, out of a potential score of 2.00. The following table summarizes the Company’s actual performance relative to the Company’s threshold, target, and maximum performance goals for 2020.

2020 ACI Company Metrics Performance

 

Measure

Weighting

Threshold

Target

Maximum

Actual Result

Assessment

Weighted Score

Cash from Operating Activities

40%

($227 million)

($177 million)

($127 million)

($658 million)

Below Threshold

0.0000

Indirect Cost

30%

$1.353 billion

$1.303 billion

$1.245 billion

$1.172 billion

Exceeded Maximum

0.6000

New Revenue Growth

15%

$927 million

$982 million

$1.037 billion

$927 million

Below Threshold

0.0000

Quality

15%

0.5

1

2

1.85

Between Target and Maximum

0.2775

 

 

Individual Performance

The individual performance component of the ACI is intended to further align executive compensation with performance in the Company’s focus areas in any given year by establishing relevant individual performance metrics that relate to each NEO’s assignments. This component was scored based on the achievement of such individual performance goals. Individual scores were calibrated to the Company’s score.

To determine the score for Mr. Gentile, the Compensation Committee reviewed his annual performance and personal contributions to the Company’s financial and operating results. With respect to the Other NEOs, the Compensation Committee first considered Mr. Gentile’s report and recommendation with respect to each person’s performance and score. Subsequently, the Compensation Committee conducted a review of each NEO’s contributions to the Company during the fiscal year. With respect to 2020 performance, the NEOs received the following individual performance scores out of a potential total score of 2.00: Gentile: 0.8755, Suchinski: 0.9250, Marnick: 0.9600, Hawkins: 0.8775, and Brown: 0.7900. Mr. Pilla’s ACI payment was based solely on the Company performance component per the Pilla Agreement (as defined below).

Descriptions of the NEOs’ 2020 individual performance contributions are set forth in “2020 NEO Performance and Compensation Decisions.”

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2020 ACI Payouts

The formula for determining the 2020 ACIs and the resulting payouts are reflected in the table below.

NEO

Base

Salary ($)

(1) 

×

Target

(Percentage

of Base

Salary)(2)

(%)

=

Target

Award

($)

×

Company

Performance

(80%

weighting for

CEO; 75%

weighting for

Other NEOs)

(3) 

+

Individual

Performance

(20%

weighting for

CEO; 25%

weighting for

Other NEOs)

(4) 

=

2020 Total

Payout

($)

Thomas C. Gentile III

1,108,552

 

 

145

 

1,607,400

 

0.702

 

 

0.176

 

 

1,410,494

Mark J. Suchinski

414,481

 

 

99

 

408,934

 

0.658

 

 

0.231

 

 

363,696

Samantha J. Marnick

493,025

 

 

100

 

493,025

 

0.658

 

 

0.225

 

 

442,799

Duane F. Hawkins

456,212

 

 

100

 

456,212

 

0.658

 

 

0.219

 

 

400,326

William E. Brown

401,683

 

 

85

 

341,431

 

0.657

 

 

0.214

 

 

292,137

John A. Pilla(5)

405,048

 

 

100

 

405,048

 

N/A

 

 

N/A

 

 

355,429

(1)

Represents weighted-average base salary that takes into account salary changes in 2020, including the 20% salary reduction in place from April 2020 through January 2021.

(2)

With respect to Mr. Suchinski, represents a weighted-average target that takes into account his target change in 2020 (actual number was 98.662).

(3)

Reflects a Company score of 0.8775 multiplied by the weighting percentage (scores are rounded) for all except Mr. Pilla.

(4)

Reflects individual performance scores multiplied by the weighting percentage (scores are rounded) for all except Mr. Pilla.

(5)

Mr. Pilla’s ACI was 100% based on the Company performance component per the Pilla Agreement (as defined below).

 

Based on Company and individual performance results, the Compensation Committee believes the 2020 NEO ACIs were appropriate and achieved the objectives of the executive compensation program. While the ACIs were earned based on performance in 2020, they were paid out in February 2021. The ACI payouts are reported as 2020 compensation in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”

Long-Term Incentives

 

Long-term incentives are an important component of compensation, as they help retain, motivate, and reward executives with respect to long-term performance, align executives’ interests with stockholders’ interests, and promote stock ownership. Long-term incentives are delivered under the Company’s Long-Term Incentive Plan (the “LTIP”) under the OIP. In January of each year, the Compensation Committee selects eligible individuals to receive such awards and approves the nature and amount of each award. Awards are granted and priced on the third trading day following the Company’s next earnings release. For 2020, each NEO received an annual target LTIP award equal to the percentage of his or her total base salary on the grant date of the award as provided in the table below:

NEO

Base Salary on Grant Date ($)

x

Target (Percentage of Base

Salary)

(%)

=

Target

Award

($)

Thomas C. Gentile III

1,300,000

 

550

 

7,150,000

Mark J. Suchinski

500,000

 

175

 

875,000

Samantha J. Marnick

550,000

 

215

 

1,182,500

Duane F. Hawkins

535,000

 

230

 

1,230,500

William E. Brown

470,000

 

170

 

799,000

John A. Pilla

475,000

 

190

 

902,500

 

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Time-Based Restricted Stock

In 2020, 60% of the target LTIP award amount was delivered in the form of a time-based restricted stock (“Time-Based Restricted Stock”) award vesting in three equal installments on each of the first, second, and third anniversaries of the grant date, subject to the recipient being employed by the Company on the vesting date (subject to alternative vesting arrangements upon death, disability, retirement eligibility, or a qualifying termination in connection with a change-in-control as described under “Potential Payments Upon Termination or Change-in-Control”). The Compensation Committee grants Time-Based Restricted Stock awards to assist in retaining NEOs and increase their stock ownership, which further aligns our NEOs’ interests with those of stockholders. Dividends on Time-Based Restricted Stock awards accrue from the grant date and are not paid out until the vesting date. If the underlying award is forfeited, the accrued dividends are forfeited as well.

Performance-Based Restricted Stock Tied to Total Stockholder Return

In 2020, 20% of the target LTIP award amount was delivered in the form of a performance-based restricted stock (“Performance-Based Restricted Stock”) award tied to TSR. Payout of the award is based on the ranking of the Company’s TSR, expressed as a percentile, relative to the TSR of a group of the Company’s peers over a three-year performance period, as compared to threshold, target, and maximum performance goals. Participants are initially granted a number of unvested shares equal to the number of shares to which the participant would be entitled upon achievement of the target performance goal. The table below sets forth these performance goals and vesting percentages:

 

 

Threshold(1)

Target

Maximum

Performance Goal

Percentile Ranking in Peer Group

25th

50th

90th

Vesting Percentage

(% of Target Award)

25%

100%

200%

(1)

If performance is below threshold, payout is zero.

For grants made in 2020, the performance period runs from January 1, 2020, to December 31, 2022, and the vesting of the awards is dependent upon the Compensation Committee’s certification of the performance goal being achieved (which typically occurs in January following the end of the performance period). An individual must be continuously performing services (or deemed to be continuously performing services) throughout the entire performance period, or none of the award will be earned (subject to alternative vesting arrangements upon death, disability, retirement eligibility, or a qualifying termination in connection with a change-in-control as described under “Potential Payments Upon Termination or Change-in-Control”).

For grants made in 2020, the TSR for the Company and each member of its peer group for the performance period will be determined by calculating the percentage increase in the dividend-adjusted average closing share price for the 20 trading days ending December 31, 2019, and the 20 trading days ending December 31, 2022. If the Company’s TSR percentile ranking falls between the threshold and the target performance goals or the target and the maximum performance goals, the percentage of the award that a participant will receive is interpolated on a straight-line basis. If the Company’s TSR percentile ranking is below the threshold performance goal, the participant will not be entitled to any vested shares, and if the Company’s TSR percentile ranking is equal to or higher than the maximum performance goal, the participant will be entitled to a number of vested shares equal to 200% of the target award. If the Company’s TSR is negative, payout is capped at 100% regardless of percentile ranking. The Compensation Committee may apply negative discretion to the award payout. Dividends on Performance-Based Restricted Stock awards tied to TSR are not paid until the award vests.

Performance-Based Restricted Stock Tied to FCF Percentage*

In 2020, 20% of the target LTIP award amount was delivered in the form of a Performance-Based Restricted Stock award tied to FCF Percentage.* Payout of the award is based on the Company’s FCF as a percentage of revenue* over a three-year performance period as compared to threshold, target, and maximum performance goals. FCF Percentage* is a measure of long-term cash generation driven by increasing revenue, reducing costs, improving productivity, and efficiently using capital. Participants are initially granted a number of unvested shares equal to the number of shares to which the participant would be entitled on achievement of the target performance goal. The table below sets forth these performance goals and vesting percentages:

 

 

Threshold(1)

Target

Maximum

Performance Goal

FCF Percentage*

7.0%

7.75%

9.0%

Vesting Percentage

(% of Target Award)

25%

100%

200%

(1)

If performance is below threshold, payout is zero.

 

For grants made in 2020, the performance period runs from January 1, 2020, to December 31, 2022, and the vesting of the awards is dependent on the Compensation Committee’s certification of the performance goal being achieved (which typically occurs in January following the end of the performance period). An individual must be continuously performing services (or deemed to be continuously performing services) through the entire performance period, or none of the award will be earned (subject to alternative vesting arrangements upon death, disability, retirement eligibility, or a qualifying termination in connection with a change-in-control as described under “Potential Payments Upon Termination or Change-in-Control”).

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FCF Percentage* will be calculated on a cumulative basis over a three-year period (total FCF* over three years divided by total revenue over three years). If the calculated percentage falls between the threshold and the target performance goals or the target and the maximum performance goals, the percentage of the award that a participant will receive is interpolated on a straight-line basis. If the Company’s percentage is below the threshold performance goal, the participant will not be entitled to any vested shares, and if the Company’s percentage is equal to or greater than the maximum performance goal, the participant will be entitled to a number of vested shares equal to 200% of the target award. The Compensation Committee may apply negative discretion to the award payout. Dividends on Performance-Based Restricted Stock awards tied to FCF Percentage* are not paid until the award vests.

*For an explanation and reconciliation of FCF and Percentage, please see Appendix A.

Changes for 2021 Executive Compensation

A summary of the significant changes approved by the Compensation Committee for the 2021 executive compensation program appears below.

Compensation Element

Change

 

Reason

Salary

Restored 20% salary reductions to full pay effective January 4, 2021.

 

To appropriately compensate executive officers for their roles and performance after working to stabilize liquidity in 2020.

Annual Cash Incentive

Modifying Company performance goals to be based on Adjusted Net Debt (40%), Operating Cost (30%), New Revenue Growth (15%), and Quality (15%).

 

Reducing net debt is a key objective and indicator to improve financial stability, return to investment grade, and reduce borrowing costs; controlling operating costs is key to demonstrating discipline and progress to achieving continuous margin improvement; new revenue growth and quality continue to be a focus for the reasons described under “Pay Metrics” above.

Long-Term Incentives

Reduce maximum TSR performance goal from 90th percentile to 75th percentile.

 

To better align award with market practices.

Performance-based component of award will be 100% based on TSR.

 

More objective and visible measure of performance against peer group, which will incentivize executives to perform.

Minor peer group changes to TSR group.

 

To reflect acquisitions and additional appropriate peer companies.

 

 

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Vested Performance-Based Restricted Stock Awards Granted in 2017

Two types of Performance-Based Restricted Stock awards vested and were delivered in 2020. The first type of award was tied to TSR, and payout of the award was based on the ranking of the Company’s TSR, expressed as a percentile, relative to the TSR of a group of the Company’s peers over a three-year performance period from January 1, 2017, to December 31, 2019, as compared to threshold, target, and maximum performance goals. On January 21, 2020, the Compensation Committee certified performance of the award at a percentile rank of 58th within the peer group. As a result, the award paid out at 120% (entirely in Common Stock), as demonstrated in the table below:

 

 

Threshold

Target

Maximum

2017 PB-TSR

Actual Performance

Performance Goal

(Percentile Ranking in Peer Group)

25th

50th

90th

58th

Vesting Percentage

(% of Target Award)

25%

100%

200%

120%

 

 

The second type of Performance-Based Restricted Stock award that vested in 2020 was tied to FCF Percentage.* Payout of the award was based on the Company’s FCF* as a percentage of revenue over a three-year performance period from January 1, 2017, to December 31, 2019, as compared to threshold, target, and maximum performance goals. On January 21, 2020, the Compensation Committee certified performance of the award at 7.82%, which reflected an adjustment to FCF* for the return of a cash payment of $236 million received from Boeing associated with the B787 interim pricing agreement. While the Company generally intends to base FCF Percentage* on FCF* as opposed to Adjusted FCF,* an adjustment was appropriate in this circumstance as the Company excluded the receipt of the cash payments from Boeing in 2015 ($192 million) and 2016 ($43 million) from its applicable FCF* performance determination. As a result, the award paid out at 200% (entirely in stock), as demonstrated in the table below:

 

 

Threshold

Target

Maximum

2017 PB-FCF

Actual Performance

Performance Goal

FCF Percentage*

6.0%

6.7%

7.4%

7.82%

Vesting Percentage

(% of Target Award)

25%

100%

200%

200%

*

For an explanation and reconciliation of FCF Percentage and other non-GAAP measures, please see Appendix A.

Forfeited Performance-Based Restricted Stock Awards Granted in 2018

Two types of Performance-Based Restricted Stock awards were to vest and be delivered in 2021. The first type of award was tied to TSR and calculated consistent with the award granted in 2017 over a three-year performance period from January 1, 2018, to December 31, 2020, as compared to threshold, target, and maximum performance goals. On January 26, 2021, the Compensation Committee certified performance of the award below the threshold goal at the 7th percentile of the peer group. As a result, the award did not pay out and was forfeited, as demonstrated in the table below:

 

 

Threshold

Target

Maximum

2018 PB-TSR

Actual Performance

Performance Goal

(Percentile Ranking in Peer Group)

25th

50th

90th

7th

Vesting Percentage

(% of Target Award)

25%

100%

200%

0%

 

The second type of Performance-Based Restricted Stock award that vested in 2020 was tied to FCF Percentage* over a three-year performance period from January 1, 2018, to December 31, 2020, as compared to threshold, target, and maximum performance goals. On January 26, 2021, the Compensation Committee certified performance of the award below the threshold goal at 1.8%. As a result, the award did not pay out and was forfeited, as demonstrated in the table below:

 

 

Threshold

Target

Maximum

2018 PB-FCF

Actual Performance

Performance Goal

FCF Percentage*

6.0%

6.7%

7.4%

1.8%

Vesting Percentage

(% of Target Award)

25%

100%

200%

0%

*

For an explanation and reconciliation of FCF Percentage and other non-GAAP measures, please see Appendix A.

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2020 NEO Performance and Compensation Decisions

Discussion below excludes Mr. Garcia as he resigned on January 29, 2020.

Mr. Gentile, President and Chief Executive Officer

 

2020 Performance: Mr. Gentile’s 2020 individual performance met expectations for compensation purposes. He continued the Company’s diversification and growth strategy with the FMI acquisition and acquisition of select assets of Bombardier aerostructures and aftermarket business, and by securing new work content from current and new customers. Mr. Gentile also successfully led the Company through important customer negotiations, the B737 MAX grounding, supply chain risks, and safety improvements.

2020 Compensation Decisions:

Salary: Mr. Gentile’s salary remained at $1,300,000. His 2020 salary was affected by a 20% reduction due to impacts from the COVID-19 pandemic and B737 MAX grounding.

Annual Cash Incentive: No changes were made to Mr. Gentile’s target of 145% of base salary during 2020. In January 2021, based on a review of Mr. Gentile’s and the Company’s performance during 2020, the Compensation Committee approved an ACI payout of $1,410,494.

Long-Term Incentives: No changes were made to Mr. Gentile’s target of 550% during 2020. In February 2020, Mr. Gentile was granted awards with an aggregate grant date fair value of $7,150,082. Aggregate grant date fair values were determined as set forth in the “Summary Compensation Table.”

Mr. Suchinski, Senior Vice President and Chief Financial Officer

 

2020 Performance: Mr. Suchinski’s 2020 individual performance exceeded expectations. He led over $3 billion in liquidity actions and over $1 billion in annualized cost reductions compared to 2019, to end the year with a cash balance of $1.873 billion, providing Spirit increased flexibility and liquidity to manage through challenges related to the COVID-19 pandemic.

2020 Compensation Decisions:

Salary: Mr. Suchinski was promoted to the position of Senior Vice President and Chief Financial Officer on January 29, 2020. His base salary was set at $500,000. His 2020 salary was affected by a 20% reduction due to impacts from the COVID-19 pandemic and B737 MAX grounding. On January 26, 2021, Mr. Suchinski’s base salary was increased to $525,000 based on his performance and a review of peer and broad-based compensation for similar positions.

Annual Cash Incentive: After his promotion on January 29, 2020, no changes were made to Mr. Suchinski’s target of 100% of base salary during 2020. In January 2021, based on a review of Mr. Suchinski’s and the Company’s performance during 2020, the Compensation Committee approved an ACI payout of $363,696.

Long-Term Incentives: On January 29, 2020, Mr. Suchinski’s target was set at 175% of his base salary for 2020. In February 2020, Mr. Suchinski was granted awards with an aggregate grant date fair value of $875,064. Aggregate grant date fair values were determined as set forth in the “Summary Compensation Table.” On January 26, 2021, Mr. Suchinski’s target was raised to 200% of his base salary based on his performance and a review of peer and broad-based compensation for similar positions.

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Ms. Marnick, Executive Vice President and Chief Operating Officer

 

2020 Performance: Ms. Marnick’s 2020 individual performance exceeded expectations. She continued to advance the Company’s growth strategy through closing on the acquisitions of FMI and Bombardier’s sites in Texas, Morocco, and Northern Ireland. Ms. Marnick led the successful unification of the previously separate supply chain and fabrication organizations to a unified make/buy organization, enabling improved risk mitigation and value capture throughout the unprecedented challenges of 2020. She reduced spend on indirect costs across the enterprise, delivered new business wins, and achieved significant labor relations results with the early negotiation of the Wichita IAM contract.

2020 Compensation Decisions:

Salary: Ms. Marnick’s salary began 2020 at $550,000. On July 28, 2020, Ms. Marnick was promoted from Executive Vice President and Chief Administration Officer and Strategy, to Executive Vice President and Chief Operating Officer. In connection with the promotion, her base salary was increased to $620,000 effective July 28, 2020. Ms. Marnick’s 2020 salary was affected by a 20% reduction due to impacts from the COVID-19 pandemic and B737 MAX grounding. On January 26, 2021, Ms. Marnick’s base salary was increased to $650,000 based on her performance and a review of peer and broad-based compensation for similar positions.

Annual Cash Incentive: No changes were made to Ms. Marnick’s target of 100% of base salary during 2020. In January 2021, based on a review of Ms. Marnick’s and the Company’s performance during 2020, the Compensation Committee approved an ACI payout of $442,799.

Long-Term Incentives: Ms. Marnick began 2020 with a target of 215% of base salary. In February 2020, Ms. Marnick was granted awards with an aggregate grant date fair value of $1,182,567. Aggregate grant date fair values were determined as set forth in the “Summary Compensation Table.” With Ms. Marnick’s promotion to Executive Vice President and Chief Operating Officer, Ms. Marnick’s target was raised to 230% of her base salary, effective July 28, 2020, which was after the grant date of the 2020 long-term incentives and, accordingly, did not impact the grant amount.

Mr. Hawkins, Senior Vice President; President, Defense Division of Spirit AeroSystems, Inc.

 

2020 Performance: Mr. Hawkins’ 2020 individual performance met expectations. He successfully completed the development and integration of a comprehensive defense and fabrication business while executing superior performance of existing programs. He made significant progress on growing both businesses by expanding work on existing programs, new business wins, and established a healthy new business backlog. He successfully shaped and built strong relationships and increased Spirit’s brand awareness with key strategic customers and stakeholders, including defense primes and Congressional delegation leadership. He led the first defense acquisition and integration of FMI, combining strong material systems and industrialization capability to strategically position Spirit for high priority defense programs.

2020 Compensation Decisions:

Salary: Mr. Hawkins’ salary remained at $535,000. His 2020 salary was affected by a 20% reduction due to impacts from the COVID-19 pandemic and B737 MAX grounding.

Annual Cash Incentive: No changes were made to Mr. Hawkins’ target of 100% of base salary during 2020. In January 2021, based on a review of Mr. Hawkins’ and the Company’s performance during 2020, the Compensation Committee approved an ACI payout of $400,326.

Long-Term Incentives: No changes were made to Mr. Hawkins’ target of 230% of base salary in 2020. In February 2020, Mr. Hawkins was granted awards with an aggregate grant date fair value of $1,230,597. Aggregate grant date fair values were determined as set forth in the “Summary Compensation Table.”

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Mr. Brown, Senior Vice President, Boeing Programs

 

2020 Performance: Mr. Brown’s 2020 individual performance met expectations. The combined impact of the B737 MAX grounding and COVID-19 had an outsized impact on Spirit’s Boeing program performance in 2020. Mr. Brown led Spirit through multiple production rate changes throughout the year on all Boeing programs. Additionally, to facilitate the Company’s overall cash position, Mr. Brown successfully negotiated a cash advance and payment deferments with Boeing. As the Company prepares to emerge stronger in 2021, Mr. Brown also led the initial phases of transforming the B737 production system by advancing critical projects in improved factory flow, automation, digitization, workforce training, and supplier health.

2020 Compensation Decisions:

Salary: Mr. Brown’s salary remained at $470,000. His 2020 salary was affected by a 20% reduction due to impacts from the COVID-19 pandemic and B737 MAX grounding.

Annual Cash Incentive: No changes were made to Mr. Brown’s target of 85% of base salary during 2020. In January 2021, based on a review of Mr. Brown’s and the Company’s performance during 2020, the Compensation Committee approved an ACI payout of $292,137.

Long-Term Incentives: No changes were made to Mr. Brown’s target of 170% of base salary during 2020. In February 2020, Mr. Brown was granted awards with an aggregate grant date fair value of $799,042. Aggregate grant date fair values were determined as set forth in the “Summary Compensation Table.”

 

Mr. Pilla, Former Senior Vice President and Chief Technology Officer

 

2020 Performance and Retirement Agreement: Mr. Pilla’s 2020 individual performance met expectations. While in the Senior Vice President and Chief Technology Officer role, Mr. Pilla executed multiple plans and initiatives for our information technology and research and technology functions, and supported program and mergers and acquisition activity that broadened Spirit’s footprint globally. Mr. Pilla also provided leadership and staffing to build up Spirit’s defense presence. On July 28, 2020, Mr. Pilla announced his retirement as Senior Vice President and Chief Technology Officer, effective August 1, 2020. On July 29, 2020, the Company and Mr. Pilla entered into a Retirement Agreement and General Release (the “Pilla Agreement”). Under the terms of the Pilla Agreement, effective August 1, 2020, Mr. Pilla stepped down from his position and became a Senior Advisor to the Company; such position will continue until July 1, 2021, when he will formally retire from the Company (the “Retirement Date”). For a period of 13 months following the Retirement Date, Mr. Pilla will provide consulting and transition services to the Company. The Pilla Agreement is described further in “Summary Compensation Table - Employment and Separation Agreements.”

2020 Compensation Decisions:

Salary: Mr. Pilla’s salary remained at $475,000 (and will remain at such level until the Retirement Date). His 2020 salary was affected by a 20% reduction due to impacts from the COVID-19 pandemic and B737 MAX grounding.

Annual Cash Incentive: No changes were made to Mr. Pilla’s target of 100% of base salary applicable to 2020. In January 2021, based on the terms of the Pilla Agreement, Mr. Pilla received an ACI payout of $355,429, which was based solely on the Company performance component score of 0.8775.

Long-Term Incentives: No changes were made to Mr. Pilla’s target of 190% during 2020. In February 2020, Mr. Pilla was granted awards with an aggregate grant date fair value of $902,581. Aggregate grant date fair values were determined as set forth in the “Summary Compensation Table.”

 

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The Compensation Decision-Making Process

As set forth in its charter, the Compensation Committee is responsible for overseeing the administration of the Company’s compensation plans, policies, and programs. Further, the Compensation Committee is responsible for setting compensation for, and reviewing performance of, the Company’s executive officers. Pursuant to its charter, the Compensation Committee has the authority to delegate its responsibilities to such subcommittees as it deems appropriate, so long as the subcommittee is solely composed of one or more members of the Compensation Committee. In setting executive officer compensation, the Compensation Committee takes into consideration the following:

The CEO’s self-assessment and performance reviews of the Other NEOs;

The Compensation Committee’s and Board’s views of the NEOs’ performance;

The counsel and recommendations of the COO (who is responsible for the Company’s human resources team);

Results from benchmarking against the Company’s peer group and survey data; and

The analysis and consulting advice of its independent compensation consultant with respect to the amount or form of such compensation.

Generally, the Compensation Committee strives for internal pay equity among the Company’s NEOs and accordingly, the types of compensation and benefits offered to the Company’s NEOs are consistent among the group. However, pay equity must be balanced among a myriad of other factors. See “Consideration of Advisory Stockholder Vote and Stakeholder Feedback on Executive Compensation” for additional information. The Compensation Committee continues to examine existing and new compensation programs and practices to ensure that the Company’s compensation programs remain appropriate and consistent with the Company’s overall objectives and market practice.

The chart below reflects the annual compensation-setting process, though certain items may shift during the year. In addition to the following, the CEO’s performance, along with all Company performance metrics used in the ACI or long-term incentives, are monitored and discussed quarterly.

 

 

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Benchmarking

Each year, the Compensation Committee, with the assistance of management and the independent compensation consultant, reviews external market data in order to determine the competitiveness of our compensation packages, highlight trends and regulatory implications, and develop incentive plan design alternatives. The market data reviewed is from the Company’s peer group and nationally recognized published survey data.

2020 Proxy Peer Group

 

The Company uses its peer group as a reference point for compensation design and award decisions. The Company’s peer group consists of companies similar to Spirit in size and operations (emphasizing aerospace and defense and auto-component manufacturers) and/or companies that compete with Spirit for executive talent. For 2020 compensation decisions, the Company’s peer group is shown below (companies are ranked by 2019 revenue).

Company Name (Ticker Symbol)

2019 Revenue

($ in billions)

Market Cap as of 12/31/2019

($ in billions)

L3 Harris Technologies (LHX)*

18.5

43.7

Tenneco (TEN)

17.5

1.1

Parker-Hannifin (PH)

14.3

26.4

Howmet Aerospace (HWM)**

14.2

13.3

Textron (TXT)

13.6

10.2

Trane Technologies (TT)***

13.1

31.7

Borg Warner (BWA)

10.2

9.0

Huntington Ingalls (HII)

8.9

10.3

Spirit AeroSystems Holdings (SPR)

7.9

7.5

Terex (TEX)

4.4

2.1

Triumph Group (TGI)

3.4

1.3

Teledyne Technologies (TDY)

3.2

12.6

Moog (MOG.A)

2.9

3.0

Curtiss-Wright (CW)

2.5

6.0

Hexcel (HXL)

2.4

6.2

*

Formerly Harris Corp. Changed name following merger with L3.

**

Formerly Arconic. Changed name after spinoff of rolled aluminum products division.

***

Formerly Ingersoll Rand. Changed name after spin-off of new Ingersoll Rand in March 2020.

Proxy Peer Group Changes for 2021

The Company revised its peer group for 2021 compensation decisions in January 2021 due to the impact of the B737 MAX grounding and COVID-19 implications on the size of the business. Specifically, the Company removed L3 Harris Technologies (LHX) and Tenneco (TEN) from its peer group and added Oshkosh (OSK), Dana (DAN), and Parsons Corporation (PSN).

Survey Data

 

In addition to benchmarking using the peer group, the Company also uses a broad survey sample from the independent compensation consultant’s executive compensation survey. The survey analysis considers companies in relevant industries (aerospace and defense, machinery, auto-component, and electrical equipment) as well as companies in other industries, when necessary, to complement data limitations. Survey data was size-adjusted to approximate the Company’s revenue, either through regression or by limiting the survey sample, to comparably sized companies. This information was used by the Compensation Committee in establishing the compensation packages and target goals for the NEOs.

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Independent Compensation Consultant

The Compensation Committee’s charter allows the committee to engage an independent compensation consultant to advise on executive compensation matters. For 2020, the Company engaged Willis Towers Watson directly for the purpose of providing analysis and advice with respect to executive officer compensation to the Compensation Committee. The consultant’s engagement and fees related to work conducted for the Compensation Committee were reviewed and pre-approved by the Compensation Committee.

Willis Towers Watson provided consulting services for the Compensation Committee in the amount of $298,697 in 2020. In addition, Willis Towers Watson provided other services to the Company during 2020 totaling $689,986. Of such amount, $48,750 was for due diligence support for acquisitions, and $641,236 was for various scopes of integration work for the Company’s acquisition of select assets from Bombardier.

The Compensation Committee has determined, after considering and discussing criteria from the SEC and NYSE and Willis Towers Watson’s annual independence letter, that Willis Towers Watson does not have any conflicts of interest that would prevent objectivity.

Clawback Policies

The Company’s ACI and LTIP awards are subject to the clawback provisions of the OIP, the Company’s 2017 Clawback Policy (the “2017 Policy”), and applicable law. With respect to executive grants, our grant agreements under the OIP expressly provide that equity awards are subject to the OIP clawback provision, any applicable law, and any Company policies on compensation recovery.

OIP Clawback. The OIP clawback provision provides that the Compensation Committee may take certain actions, including canceling an award or causing the participant to forfeit any gains realized in connection with the award, if the participant, without the consent of the Company, engages in a detrimental activity. Detrimental activities include breaches of restrictive covenants, such as confidentiality, non-solicitation, and non-compete covenants, and any activity contributing to a financial restatement or accounting irregularities that are appropriate to include in the 2017 Policy.

2017 Policy. The 2017 Policy applies to the ACI and Performance-Based Restricted Stock awards (the “Covered Compensation”) held by current and former Section 16 officers of the Company (the “Covered Executives”). Specifically, in the event of a material restatement to the Company’s financial results due to material noncompliance by the Company with financial reporting requirements under applicable securities law (the “Triggering Event”), the result of which being that Covered Compensation would have been lower had it been calculated taking into account the effect of the Triggering Event, the Compensation Committee has the authority (subject to certain procedures and exceptions) to seek to recover excess compensation received by the Covered Executives.

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Consideration of Advisory Stockholder Vote and Stakeholder Feedback on Executive Compensation

The Company believes it is appropriate to seek and reflect the views of its stockholders and other stakeholders on the design and effectiveness of the Company’s executive compensation program. Accordingly, consistent with the Company’s most recent say-on-pay frequency vote in April 2017, the Company holds an annual say-on-pay vote. At the Company’s 2020 annual meeting of stockholders, approximately 74% of stockholders present in person or by proxy voted in favor of the Company’s executive compensation programs. The Compensation Committee takes the annual say-on-pay proposal voting results into consideration when making future decisions regarding executive compensation. For a discussion of stockholder engagement, see “Board and Governance Matters - Commitment to Stockholder Engagement and Responsiveness.”

During 2020, the Company received the following feedback regarding its compensation program:

Stakeholders believed there was a disconnect between pay and performance due to the issuance of one-off awards to select NEOs; and

Stakeholders believed there was internal pay inequity because the CEO’s compensation was much higher than compensation received by the Other NEOs.

In response to the first item noted above, the Company’s Compensation Committee met and discussed its practice of occasionally issuing one-off special equity awards to NEOs due to certain circumstances. Historically, such special equity awards have only been issued when circumstances require action due to a retention risk, pay inequity, or special performance considerations. The Company is not always able to disclose the individual circumstances that lead to the granting of special one-off awards due to privacy concerns. However, going forward, the Company will work to improve its disclosure around the circumstances for these one-off awards and will consider the impact of granting such awards on pay-for-performance alignment. No special one-off awards were granted to any continuing NEOs in 2020.

The Compensation Committee also discussed the second item of feedback. The Committee believes that part of the reason for the inequity is that the Company has not had a chief operating officer since 2016. In 2020, Ms. Marnick was promoted to that role. While the Compensation Committee does consider equity of pay in setting target compensation (and will continue to do so), a number of factors are critical in the compensation-setting process, such as what other companies are paying individuals in similar roles; the experience, performance, and potential of the individual NEO; and other matters discussed under “Compensation Overview — Setting Target Pay,” above. The Compensation Committee seeks to balance these factors appropriately, with the advice of external advisors such as Willis Towers Watson, in setting pay levels.

Policy Prohibiting Short Selling, Hedging, and Pledging

The Company has adopted a policy prohibiting the Company’s insiders from engaging in short selling, hedging, and pledging the Company’s securities. As it relates to hedging, insiders of the Company are prohibited from purchasing or selling, or making any offer to purchase or offer to sell, derivative securities related to the Company’s securities, such as exchange-traded options to purchase or sell the Company’s securities or financial instruments that are designed to hedge or offset any decrease in the market value of the Company’s securities (including but not limited to prepaid variable forwards, equity swaps, collars, and exchange funds). Company insiders include all employees and directors of the Company as well as their spouses, domestic partners, minor children, economic dependents, other persons living in their households, or any corporations, partnerships, trusts, or other entities that they beneficially own, and any person over whom, or trust or other entity over which, they have control. Additionally, Company insiders are prohibited from holding the Company’s securities in a margin account or otherwise pledging the Company’s securities as collateral for a loan.

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Compensation Risk Assessment

Annually (and more frequently as deemed necessary), the Compensation Committee assesses risks presented by our compensation program, policies, and award structures. This assessment is used to determine whether any of our compensation components incentivize executives to take risks that are not in the Company’s or stockholders’ best interests. In 2020, our Compensation Committee reviewed the following risk factors relative to our current compensation programs:

Senior talent acquisition and the ability to recruit and retain talent at market-based compensation levels;

Senior talent loss due to misalignment of strategic decisions and incentives, including balancing long-term incentives with the investment requirement for long-term objectives;

Alignment of compensation to short- and long-term Company performance;

Potential for material restatement of earnings to impact incentive plan calculations;

Clawback policy requirements aligned with market in regard to talent recruitment and retention;

Potential for unforeseen one-time events beyond management’s control that affect incentive plan calculations; and

Potential for unrealized talent investment due to underperforming individuals.

After reviewing our current compensation program and award structures, the Compensation Committee determined that our program does not incentivize executives to take excessive risks in light of the following features:

We diversify the compensation delivered to executives with individual components and performance goals that incentivize different behaviors (short-term focus, long-term focus, etc.) in an attempt to balance our executives’ interests;

We have maximum payouts, or caps, on our performance-based compensation - the highest amount that can be paid with respect to our ACIs or performance-based long-term incentives is 200%;

The Compensation Committee reserves the right to exercise negative discretion over performance-based awards;

We maintain clawback policies that allow recovery of certain compensation when the participant has engaged in misconduct;

Our NEOs and other executives must comply with stringent stock ownership requirements; and

We have engaged an independent compensation consultant to advise us on compensation practices.

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Other Compensation Elements and Information

Benefits and Perquisites

 

In addition to the compensation described above, we provide our NEOs with certain other benefits and perquisites. Benefits and perquisites received by NEOs are included in the “All Other Compensation” column of the “Summary Compensation Table.” These benefits are based on an assessment of benefits offered by our peers and competitors and are important for retaining the Company’s executive officers.

Benefit/Perquisite

Explanation

Retirement and Savings Plan (the “RSP”)

The RSP is a tax-qualified defined contribution plan for certain eligible salaried employees. The Company makes both matching and non-matching contributions under the RSP.

Matching: The Company matches 75% of the employee’s contributions up to a maximum of 6% of the employee’s base pay (provided the employee contributes 8%). The matching contributions are immediately 100% vested.

Non-Matching: The Company makes a non-matching contribution following the end of each calendar year based on an employee’s age and vesting service, provided that the employee is employed by the Company on December 31 of the applicable year and has earned a year of vesting service. If age plus vesting service totals less than 60, employees receive a contribution equal to 1.5% of base salary; if age plus vesting service totals at least 60 but less than 80, employees receive a contribution equal to 3% of base salary; and if age plus vesting service totals 80 or more, employees receive a contribution equal to 4.5% of base salary. These contributions are 25% vested at two years, 50% vested at three years, 75% vested at four years, and 100% vested at five years of vesting service.

Transition Contribution: An additional contribution is available to employees who were previously Boeing employees and meet certain other requirements. Other than Mr. Pilla, none of the NEOs are eligible for this additional contribution. Mr. Pilla receives an annual transition contribution amount of 3.5% of his base salary. All such contributions are vested immediately as Mr. Pilla has met the five-year service requirement. The transition contribution will cease after 2020, with final payment for the first six months of 2020 made in 2021.

Deferred Compensation Plan (the “DCP”)

This nonqualified plan allows eligible Spirit employees, including each of our NEOs, to defer receipt of a portion of their base salary or ACI. In addition, the DCP allows for matching and discretionary contributions by the Company into a separate account in the DCP. Deferred amounts and matching or discretionary Company contributions are credited with a rate of return equal to 120% of the applicable federal long-term rate for October of the prior fiscal year. For 2020, the interest crediting rate is 2.23%.

Perquisite Allowance Plan

Under the Company’s Perquisite Allowance Plan (the “Perquisite Plan”), the CEO receives an annual allowance of $25,000, while the Other NEOs receive an annual allowance of $13,000. Participants may select the perquisite items to be funded from their allowances subject to certain limitations set forth in the Perquisite Plan. Any portion of a participant’s annual allowance not used by the end of the applicable calendar year is forfeited except upon a qualifying termination in connection with a change in control. See “Potential Payments Upon Termination or Change-in-Control.”

Personal Corporate Aircraft Use

For security reasons, the Company’s CEO and COO are authorized to use the corporate aircraft for a limited amount of personal travel. Mr. Gentile is authorized to use the aircraft for 70 personal hours annually and Ms. Marnick is authorized to use the aircraft for 25 personal hours annually (in each case, without regard to deadhead or ferry flights). The Other NEOs do not use the corporate aircraft for personal travel unless approved by the CEO. No tax gross-ups are provided for this benefit.

Relocation Benefits

While we provide relocation assistance to employees including NEOs, no such benefits were provided to NEOs in 2020.

Post-Retirement Medical Coverage

The Company has two programs for post-retirement medical coverage. Under the first program, benefits are available to employees who were previously Boeing employees and who retire from the Company between the ages of 62 and 65 (and who meet certain other requirements). Under the second program, benefits are available to (i) employees who retire from the Company at age 55 or later with 10 years of service, and (ii) employees who retire from the Company at age 60 or later with five years of service. Under either program, benefits cease at age 65. Other than Messrs. Pilla and Hawkins, none of our NEOs are currently eligible for coverage under either program.

Other

Other perquisites provided include an annual physical exam for our CEO, ground transportation services for our CEO for security purposes and efficiency, IT home services, and home security services.

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Discontinued and Frozen Benefit Plans and Arrangements

 

The Company pays certain benefits through discontinued and frozen benefit plans and arrangements, which include the Supplemental Executive Retirement Plan (the “SERP”) and the Pension Value Plan (the “PVP”). A significant portion of Spirit’s operations related to Boeing aerostructures was owned and controlled by Boeing until 2005. In connection with the acquisition of these assets from Boeing, the Company adopted the SERP in order to attract certain employees from Boeing. The SERP provides supplemental, nonqualified retirement benefits to executives who (i) had their benefits transferred from a Boeing nonqualified plan to the SERP, and (ii) did not elect to convert their SERP benefit into phantom stock units as of June 17, 2005. Benefits under this plan were frozen as of the date of the Boeing acquisition. There are no SERP annuity benefits presently payable to any of the NEOs. Mr. Pilla elected to convert his SERP benefit as of June 17, 2005, into 16,023 phantom stock units.

Also in connection with the Boeing acquisition, the Company adopted the PVP for certain eligible employees of Boeing, and allowed for the transfer of pension values from Boeing pension plans. The PVP is a frozen plan: no additional employees may become participants in the PVP, and no current participants are accruing any additional benefits (other than interest credits). The PVP is fully paid for by the Company, and the Company’s employees are vested after reaching five years of service. Other than Mr. Pilla, none of the NEOs received benefits under the PVP or SERP in 2020 or is eligible to participate in such plans. Mr. Pilla’s participation in the PVP is detailed under “Pension Benefits.” Mr. Pilla’s phantom stock units under the SERP are described under “Nonqualified Deferred Compensation.”

Post-Termination Payments and Change-in-Control Compensation

 

The Company believes competitive severance protection is an appropriate incentive in attracting and retaining executive talent. The Company has provided for post-termination severance compensation through certain individual employment agreements and has also agreed to individual severance arrangements at the time of termination of employment, taking into account the specific facts and circumstances of termination. Certain of our employment agreements provide benefits upon a change in control.

Further, certain of the Company’s benefit plans provide for compensation upon termination or in connection with a change in control. The ACI, long-term incentives, and Perquisite Plan are subject to double trigger change-in-control provisions.

You can find additional information regarding the Company’s practices in providing compensation in connection with termination of employment under the heading “Potential Payments Upon Termination or Change in Control.”

Accounting and Tax Treatment of Compensation

 

When evaluating the Company’s compensation programs, the Company takes into account the various accounting, tax, and disclosure rules associated with such matters, including Section 162(m) of the Internal Revenue Code of 1986, as amended (the “IRC”) and Section 409A of the IRC. Section 162(m) generally imposes a $1 million limit on the amount that a public company may deduct for compensation paid to “covered employees” each year. While the tax impact of any compensation arrangement is one factor to be considered, such impact is evaluated in light of the Company’s overall compensation philosophy and objectives. The Compensation Committee believes that maintaining the discretion to evaluate the performance of executive officers is an important part of the Company’s responsibilities and benefits public stockholders, and therefore, the Compensation Committee may award compensation to the named executive officers that is not fully deductible if it is determined that such compensation is consistent with the Company’s compensation philosophy and benefits stockholders.

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Stock Ownership Requirements

 

The Company maintains stock ownership requirements for its NEOs and other senior executives to further promote alignment of management and stockholder interests. The ownership requirements (measured by the value of Common Stock required to be held) are based on a multiple of base salary tied to position, and establish the following target levels for Company stock ownership:

Officer Level

Target Level

(Multiple of Annual Base Salary)

Chief Executive Officer

5x

Executive Vice Presidents/Senior Vice Presidents

3x

Vice Presidents

1x

 

The stock ownership requirements mandate that the CEO and other senior officers accumulate their required positions within the later of: (i) five years after the adoption of the guidelines, or (ii) five years after being hired or promoted into the officer position. The Company believes that five years provides a reasonable goal for executives to accumulate shares through earned incentive awards.

During the five-year accumulation period, all NEOs are expected to continuously accumulate qualifying equity until they meet the applicable stock ownership guideline.

The Company reviews ownership positions on an annual basis. Based on the review conducted in 2020, the Company determined that the NEOs own appropriate amounts of Company stock in light of the minimum stock ownership requirements and the portions of their respective accumulation periods that have passed. The Company may restrict any officer from liquidating any of his or her then-current holdings in Company stock, except for those shares that are sold to meet Company tax-withholding requirements. The Company may modify or waive the requirements of the guidelines at its discretion if it determines that compliance would result in severe hardship for an officer. Note that the Company’s insider trading policy prohibits Company employees from engaging in short sales of the Company’s securities, and hedging and pledging the Company’s securities. For additional information on this policy, see “Policy Prohibiting Short Selling, Hedging, and Pledging.”

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Summary Compensation Table

The following table summarizes the compensation of the NEOs for the last three fiscal years.

Name and

Principal Position

Year

Salary

($)

(2) 

Bonus

($)

(3) 

Stock

Awards

($)

(4) 

Non-Equity

Incentive

Plan

Compensation

($)

(6) 

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)

(7) 

All Other

Compensation

($)

(8) 

Total

($)

Thomas C. Gentile III

President and CEO

2020

1,108,552

 

 

 

7,150,082

 

1,410,494

 

 

 

785,222

 

10,454,350

2019

1,295,753

 

 

 

7,150,017

 

1,873,535

 

 

 

752,844

 

11,072,149

2018

1,241,233

 

 

 

6,250,140

 

1,546,576

 

 

 

861,744

 

9,899,693

Mark J. Suchinski(1)

SVP and CFO

2020

414,481

 

 

 

875,064

 

363,696

 

 

 

42,311

 

1,695,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jose I. Garcia(1)

Former SVP and CFO

2020

50,410

 

500,000

 

1,695,554

(5)

 

 

 

 

1,655,049

 

3,901,013

2019

601,521

 

250,000

 

2,730,292

 

615,000

 

 

 

310,950

 

4,507,763

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Samantha J. Marnick

EVP and COO

2020

493,025

 

 

 

1,182,567

 

442,799

 

 

 

146,949

 

2,265,339

2019

550,000

 

 

 

1,182,704

 

561,000

 

 

 

151,808

 

2,445,512

2018

522,877

 

 

 

1,040,241

 

491,504

 

 

 

149,309

 

2,203,930

Duane F. Hawkins

SVP; President,
Defense Division

2020

456,212

 

 

 

1,230,597

 

400,326

 

 

 

40,904

 

2,128,039

2019

535,000