DEF 14A 1 d220286ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(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
Fortune Brands Home & Security, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
  No fee required.
  Fee paid previously with preliminary materials
  Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 


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LOGO

              520 Lake Cook Road, Deerfield, Illinois 60015

NOTICE OF ANNUAL MEETING

AND PROXY STATEMENT

March 21, 2022

Dear Fellow Stockholders:

We are pleased to invite you to the 2022 Annual Meeting of Stockholders (“Annual Meeting”) of Fortune Brands Home & Security, Inc. on Tuesday, May 3, 2022 at 8:00 a.m. (CDT) at the Renaissance Chicago North Shore Hotel, 933 Skokie Boulevard, Northbrook, Illinois.* The following matters will be considered at the Annual Meeting:

 

Proposal 1:    Election of the three director nominees identified in this Proxy Statement for a three-year term expiring at the 2025 Annual Meeting of Stockholders (see pages 6-11);
Proposal 2:    Ratification of the appointment by the Company’s Audit Committee of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022 (see page 45);
Proposal 3:    Advisory vote to approve the compensation paid to the Company’s named executive officers (see page 46);
Proposal 4:    Approval of the Fortune Brands Home & Security, Inc. 2022 Long-Term Incentive Plan (see pages 47-52); and

such other business as may properly come before the Annual Meeting.

Stockholders of record at the close of business on March 4, 2022, the record date for the Annual Meeting, are entitled to vote. For information about attending our Annual Meeting online and for voting instructions, please see pages 55-59.

YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE. This Notice of Annual Meeting and Proxy Statement and accompanying proxy are first being distributed on or about March 21, 2022.

 

LOGO

Senior Vice President, General Counsel and Secretary

Important Notice Regarding the Availability of Proxy Materials

for the 2022 Annual Meeting of Stockholders to be Held on Tuesday, May 3, 2022.

This Notice of Annual Meeting and Proxy Statement and the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“Form 10-K”) are available at www.proxyvote.com.

 

* 

The Company is actively monitoring COVID-19 developments and related guidance issued by public health authorities. If it is determined that it is advisable or required, the Company may hold a virtual-only annual meeting via live webcast. If this step is taken, the Company will announce the decision to do so in advance and details on how to participate will be posted on the Company’s website and filed with the Securities and Exchange Commission (“SEC”) as additional proxy materials.


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TABLE OF CONTENTS

 

PROXY SUMMARY

     1  

PROPOSAL 1 – ELECTION OF DIRECTORS

     6  

CORPORATE GOVERNANCE

     12  

Corporate Governance Principles

     12  

Director Independence

     12  

Policies with Respect to Transactions with Related Persons

     12  

Certain Relationships and Related Transactions

     13  

Anti-Hedging and Anti-Pledging Policy

     13  

Board Refreshment

     13  

Director Nomination Process

     13  

Board and Committee Evaluation Process

     14  

Communication with the Board

     14  

Board Leadership Structure

     14  

Executive Sessions

     15  

Risk Management

     15  

Compensation Risks

     16  

Meeting Attendance

     16  

Board Committees

     17  

Audit Committee

     17  

Compensation Committee

     17  

Compensation Committee Interlocks and Insider Participation

     17  

Compensation Committee Procedures

     18  

Compensation Committee Consultant

     18  

Executive Committee

     19  

Nominating, Environmental, Social and Governance Committee

     19  

Other Corporate Governance Resources

     19  

DIRECTOR COMPENSATION

     20  

Cash Retainers

     20  

Stock Awards

     20  

Director Stock Ownership Guidelines

     20  

2021 Director Compensation Table

     21  

COMPENSATION DISCUSSION AND ANALYSIS

     22  

Executive Summary

     22  

Business Highlights

     22  

2021 Compensation Highlights

     23  

Results of the 2021 Say on Pay Vote

     24  

Philosophy and Process for Awarding NEO Compensation

     24  

Types and Amounts of NEO Compensation Awarded in 2021

     26  

Compensation Committee Report

     32  

2021 EXECUTIVE COMPENSATION

     33  

2021 Summary Compensation Table

     33  

2021 Grants of Plan-Based Awards

     34  

Outstanding Equity Awards at 2021 Fiscal Year-End

     35  

2021 Option Exercises and Stock Vested

     37  

Retirement and Post-Retirement Benefits

     37  

2021 Nonqualified Deferred Compensation

     38  

2021 Potential Payments Upon Termination or Change in Control

     39  

CEO PAY RATIO

     41  

AUDIT COMMITTEE MATTERS

     43  

Report of the Audit Committee

     43  

Fees of Independent Registered Public Accounting Firm

     44  

Approval of Audit and Non-Audit Services

     44  

PROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     45  

PROPOSAL 3 – ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

     46  

PROPOSAL 4 – APPROVAL OF THE 2022 LONG-TERM INCENTIVE PLAN

     47  

EQUITY COMPENSATION PLAN INFORMATION

     52  

CERTAIN INFORMATION REGARDING SECURITY HOLDINGS

     53  

DELINQUENT SECTION 16(A) REPORTS

     54  

FREQUENTLY ASKED QUESTIONS

     55  

APPENDIX A – RECONCILIATIONS

     A-1  

APPENDIX B – FORTUNE BRANDS HOME  & SECURITY, INC. 2022 LONG-TERM INCENTIVE PLAN

     B-1  


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PROXY SUMMARY

 

 

 

Annual Meeting Information

 

LOGO

   Time and Date   LOGO   

Location*

  LOGO      Record Date  
  

Tuesday, May 3, 2022

at 8:00 a.m. (CDT)

    

Renaissance Chicago North Shore Hotel

933 Skokie Boulevard, Northbrook, Illinois

      
March 4, 2022   
 

 

*

If it is determined that it is advisable or required, the Company may hold a virtual-only annual meeting via live webcast. If this step is taken, the Company will announce the decision to do so in advance and details on how to participate will be posted on the Company’s website and filed with the SEC as additional proxy materials.

Agenda and Voting Recommendations

This Proxy Summary highlights selected information in this Proxy Statement and does not contain all of the information that you should consider in deciding how to vote. Please read the complete Proxy Statement carefully before voting. The following table summarizes the items that will be voted on at our Annual Meeting of Stockholders, along with the Board’s voting recommendations.

 

Proposal    
Number    

 

  Description of Proposal  

Board    

Recommendation    

 

 

Page    
Number    

 

     

1    

 

Election of three Class II Directors

Susan S. Kilsby, Amit Banati and Irial Finan

 

 

FOR    

each Nominee

  6-11
     

2    

 

Ratify the appointment of the independent auditor Pricewaterhouse Coopers

 

  FOR       45
     

3    

 

Advisory vote to approve named executive officer compensation

 

  FOR       46
     

4    

 

 

Approval of the Fortune Brands Home & Security, Inc. 2022 Long-Term Incentive Plan

 

 

FOR    

 

 

47-52

 

 

See pages 55-59 for instructions on how to vote your shares.   

 

LOGO

 

BUSINESS HIGHLIGHTS

Fortune Brands Home & Security, Inc. (“Fortune Brands” or the “Company”) celebrated its 10th year as an independent, publicly-traded company in October 2021. The Company has

grown sales from $2.9 billion in 2011 to $7.7 billion in 2021. We have expanded our product portfolio and consumer reach by growing organically and completing key strategic acquisitions over the last ten years. Our Company has three business segments:

 

 

LOGO

Throughout 2021, the Company saw an increased demand for our products. We believe this increased demand was driven by demographics that support long-term sustainable housing growth, as well as an underbuilt housing supply and an aged housing stock requiring repair and remodel investments. The Company delivered strong 2021 results despite facing numerous external headwinds, including supply chain disruptions, labor and freight constraints and increased inflation. We achieved strong year-over-year sales and earnings per share

 

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PROXY SUMMARY (CONTINUED)

 

 

 

growth, and continued to improve our long-term margin progress, while investing in our leading brands to drive innovation and expand capacity. In addition, we made progress on our Fortune Brands Advantage capabilities, a common set of capabilities in category management, global supply chain excellence and complexity reduction and continued to leverage these capabilities to offset challenges. We believe that our teams’ strong performance was a significant driver of both incremental growth and margin expansion during 2021 and that we are well-positioned to continue outperforming a strong housing market in the future.

 

LOGO

Please refer to the Appendix A for a reconciliation of earnings per share on a before charges/gains basis to GAAP earnings per share.

BOARD OF DIRECTORS

In 2021, Susan Kilsby was appointed as the Company’s first female Chair of the Board of Directors. Ms. Kilsby’s appointment, as well as the additions of Jeffery Perry and Amit Banati to our Board of Directors in 2020 reflects our Board’s commitment to diversity. Since 2019, the Board has added 4 new members, demonstrating our Board’s commitment to refreshment and proactive succession planning. Below are key highlights of our Board composition:

 

LOGO    LOGO

 

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PROXY SUMMARY (CONTINUED)

 

 

 

2021 Director Nominees – Class II – Term Expiring 2025
  Name and Principal Occupation    Age     Director 
Since
   Independent     Board Committees   

Other Public

Company Boards

Susan S. Kilsby

Non-Executive Chair, Fortune Brands; Retired Managing Director of European Mergers and Acquisitions, Credit Suisse

  63   2015     

Compensation

Executive (Chair)

Nominating, Environmental, Social & Governance

  

Diageo plc

Unilever plc

 

Amit Banati

Senior Vice President and Chief Financial Officer, Kellogg Company

  53   2020     

Audit

Compensation

   None
 

Irial Finan

Retired Executive Vice President, The Coca-Cola Company and President, Coca-Cola Bottling Investments Group

  64   2019     

Compensation

Nominating, Environmental, Social & Governance

  

Coca-Cola Bottlers Japan Holdings, Inc.

Smurfit Kappa Group plc

CORPORATE GOVERNANCE HIGHLIGHTS

Our Board is committed to maintaining a strong corporate governance program designed to promote the long-term interests of our stockholders and strengthen Board and management accountability. As a company, we’re committed to core values that reflect a strong culture of integrity and accountability. These practices are reflected in our corporate governance policies, which are described in more detail on pages 12-19 of the Proxy Statement and highlighted below:

 

   
Independent Board (90%), except our CEO   

Independent Chair of the Board

 

 
Two women and two ethnically/racially diverse directors (40% of the Board members are diverse)   

Regular executive sessions of non-management directors

 

 
Majority vote in uncontested director elections, with a resignation policy   

Proxy access bylaw allows for 3% stockholders to nominate the greater of 2 directors or 20% of the board

 

 
The Board has a policy that it generally will not re-nominate a director for election following her or his 72nd birthday   

Four new Board members added since 2019 demonstrating the Board’s commitment to Board refreshment and succession planning

 

 
Active engagement and oversight by Board of Company strategies and risks   

Board oversight of ESG programs and related risks and publication of ESG report

 

 
Robust stock ownership guidelines for directors and prohibition on hedging and pledging of Company stock   

Annual Board and committee evaluations

 

In 2021, the Board adopted a by-law amendment providing stockholders with proxy access. This amendment allows stockholders who own 3% of our shares for at least 3 years to nominate the greater of 2 directors or 20% of the Board after meeting certain requirements. This action demonstrates the Board’s commitment to maintaining a strong corporate governance program.

 

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PROXY SUMMARY (CONTINUED)

 

 

 

ENVIRONMENTAL, SOCIAL AND GOVERNANCE HIGHLIGHTS

Our Board of Directors is committed to overseeing our environmental, social, and governance (“ESG”) initiatives throughout Fortune Brands. We dedicate significant resources toward developing innovative products that positively impact the lives of our consumers, and to produce these products using increasingly sustainable methods. We are committed to being a good corporate citizen by ensuring extremely high safety standards for our associates, fostering inclusive cultures and giving back to our larger communities. We believe that the high standards by which we conduct our business will help us to build on our strengths and continually improve how we measure and monitor our progress on our ESG-related initiatives.

 

Our philosophy is to have a holistic ESG program, integrated throughout our businesses, that focuses on what matters to our Company and its stakeholders, with the goal of continual improvement. Below are some highlights of our 2021 achievements.

 

 

ESG Governance

 

      Environmental Data Collection       ESG Communication

 

  

Re-evaluated and aligned key ESG focus areas with the Sustainability Accounting Standards Board (“SASB”) and Task Force on Climate-Related Financial Disclosures (“TCFD”) frameworks and stakeholder input

 

        ✓      Invested in new software and systems to improve and streamline data collection processes, capture global data, enhance future reporting and evaluate future opportunities       ✓    Published enhanced ESG disclosures, including additional data on emissions, energy, water, waste, safety, fatalities and workforce demographics
      ✓   

Redesigned website includes meaningful ESG content

 

   Established formal ESG Steering Committee that reports directly to the CEO       ✓   

Published SASB, TCFD Indexes and Global Reporting Initiative (“GRI”) grid

 

      ✓    Set carbon and energy reductions goals
  

Nominating, Environmental, Social & Governance (“NESG”) Committee oversees ESG initiatives and progress

 

To build a stronger ESG foundation, we took the following key actions throughout 2021:

ESG Steering Committee A cross-functional management committee was formed in 2021 to support the Company’s on-going ESG commitments. This committee assists the Company’s leadership team in setting our ESG strategy; implementing and monitoring initiatives based on that strategy; and overseeing ESG related communications and reporting. Among other process improvements during 2021, the steering committee developed ways to further incorporate the analysis of climate change risk and opportunities into our business processes and plans in alignment with TCFD. The steering committee also determined ways in which the Company could set and implement carbon and energy reduction goals. The ESG Steering Committee reports directly to the CEO and also provides regular progress updates to the NESG Committee and Board.

Safety Safety is integral to Company culture and one of our core values, as reflected in our goal of zero safety incidents and through our efforts to create an injury-free workplace. In 2021, we supplemented our enhanced COVID-19 safety protocols by implementing a mandatory mask mandate when our facilities hit a positivity rate of 1% or more. We also offered over 40 onsite vaccine clinics to employees, implemented flexible leave policies to allow people to get vaccinated and offered educational opportunities on the safety and efficacy of vaccines.

 

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PROXY SUMMARY (CONTINUED)

 

 

 

Diversity, Equity & Inclusion (“DEI”) We continued to advance our DEI strategy and initiatives during 2021. We joined the W.K. Kellogg Foundation Expanding Equity program, a program that has helped the Company to create a comprehensive equity strategy to increase representation of underrepresented associates. Recent additions to the Company’s leadership team shows the Board’s and management’s commitment to increasing representation of professionals of color and women. In addition, we continued unconscious bias learning programs throughout the organization, launched an organization-wide employee engagement survey and expanded our employee resource groups during 2021.

Please see the resources available on our website at https://www.fbhs.com/corporate-responsibility/esg-reporting. Our 2021 ESG Report will be available next quarter and will cover our sustainability, safety and DEI progress. Information provided on the Company’s website is not incorporated by reference into this Proxy Statement.

COMPENSATION HIGHLIGHTS

PAY FOR PERFORMANCE Our executive compensation program is designed to reward named executive officers (“NEOs”) for the achievement of both strategic and operational goals that lead to the creation of long-term stockholder value. The vast majority of each NEO’s annual target compensation is at-risk because most compensation paid to our NEOs is dependent upon Company performance and/or stock price. In 2021:

 

   

87% of the CEO’s total target compensation was pay-at-risk;

 

   

77% of the other NEOs’ (on average) total target compensation was pay-at-risk; and

 

   

50% of the annual equity awards granted to NEOs in 2021 were performance share awards (“PSAs”) with vesting based on three-year performance targets.

 

LOGO   

SAY ON PAY VOTE RESULTS

 

The Compensation Committee and Board value the input of our stockholders. The Compensation Committee recognized that the 93.2% approval of the 2021 Say on Pay vote reflects our stockholders’ support for the Company’s executive compensation program.

 

Over the past five years, our stockholders have overwhelmingly supported our executive compensation program, with an average approval of 93.7% of the votes cast for the Company’s annual say on pay vote.

 

COMPENSATION PRACTICES The Compensation Discussion & Analysis (“CD&A”) section beginning on page 22 includes additional detail on the following compensation highlights:

  LOGO

 

   
Long-term focus and stockholder alignment through equity compensation   

No problematic pay practices and historically strong stockholder support for say on pay (93.7% average over the last 5 years)

 

 
Robust stock ownership guidelines   

Prohibition on hedging and pledging of Company stock

 

 
Executive compensation subject to a clawback policy   

No single trigger change in control severance arrangements

 

 
Limited perquisites   

No excise tax gross ups

 

 

 

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PROPOSAL 1 – ELECTION OF DIRECTORS

 

 

 

Summary of Qualification of Directors

The Board has identified certain qualifications that are required of all directors. Additionally, the Board seeks to maintain a diverse set of skills, knowledge, experiences, backgrounds and viewpoints represented on our Board as a whole, but not necessarily by each individual director.

Qualifications Required of All Directors

 

Experience         Personal Attributes      

•   Considerable amount of education

   

•   Excellent business judgment

 

•   Extensive executive leadership experience or business management experience

   

•   Strong commitment to the Company’s goal of maximizing stockholder value

 

•   Knowledge about issues affecting the Company

   

•   High level of integrity and ethics

 

Specific Qualifications, Expertise and Key Skills Represented on the Board

 

Qualifications, Expertise and Key Skills

•   Consumer products expertise

•   Financial and/or accounting expertise

•   Public company experience as a chief executive, chief operating or chief financial officer

•   Public company board experience

•   Diversity of skill, background and viewpoint

Election of Directors

The Board currently consists of ten members and is divided into three classes, each having three-year terms that expire in successive years. Mr. Banati was appointed by the Board to serve as a Class II Director effective in September 2020, and was first identified as a candidate by Spencer Stuart, a third-party search firm. The term of each director currently serving in Class II (Ms. Susan Kilsby and Messrs. Amit Banati and Irial Finan) expires at the 2022 Annual Meeting of Stockholders. The Board has nominated Ms. Kilsby and Messrs. Banati and Finan for a new term of three years expiring at the 2025 Annual Meeting of Stockholders and until their successors are duly elected and qualified.

Each of the nominees has consented to be named as a nominee and to serve as a director, if elected. If any of them should become unavailable to serve as a director (which is not now expected), the Board may designate a substitute nominee. In that case, the persons named in the enclosed proxy card will vote for the substitute nominee designated by the Board. Shares cannot be voted for more than the number of nominees proposed for re-election.

The names of the nominees and the current Class I and Class III directors, along with their present positions, their principal occupations and employment during the last five years, any directorships held with other public companies or registered investment firms during the past five years, their ages and the year first elected as a director of the Company, are set forth below. Each director’s individual qualifications and experiences that contribute to the Board’s effectiveness as a whole are also described in the following paragraphs.

 

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PROPOSAL 1 – ELECTION OF DIRECTORS (CONTINUED)

 

 

 

 

2022 NOMINEES FOR ELECTION - CLASS II DIRECTORS – TERM EXPIRING 2025

 

  Susan S. Kilsby

 

LOGO

 

  

Director since: 2015

Independent,

Non-Executive Chair

Age: 63

Committees: Compensation; NESG; Executive (Chair)

 

Biography:

Retired since May 2014; Senior Advisor at Credit Suisse AG, an investment banking firm, prior thereto.

 

Current Public Company Boards:

Diageo plc and Unilever plc

 

Former Public Company Boards:

Shire plc, Goldman Sachs International, BBA Aviation plc, BHP Group plc and BHP Limited

Skills & Qualifications

Ms. Kilsby has a distinguished global career in investment banking and brings extensive mergers and acquisitions and international business experience to the Board. In addition to serving as a Senior Advisor, Ms. Kilsby also served as Managing Director of European Mergers and Acquisitions at Credit Suisse. She also held a variety of senior positions with The First Boston Corporation, Bankers Trust and Barclays de Zoete Wedd. Ms. Kilsby also has extensive board experience, including serving as Chair of Shire plc for 5 years.

 

  Amit Banati

 

LOGO

 

  

Director since: 2020

Independent

Age: 53

Committees: Audit; Compensation

 

Biography:

Senior Vice President and Chief Financial Officer of Kellogg Company, a packaged foods manufacturer, from July 2019 to Present; President - Asia Pacific, Middle East, Africa of Kellogg Company from March 2012 to July 2019.

 

Skills & Qualifications

Mr. Banati has extensive executive leadership, operations and financial management experience in leading consumer products companies, both domestically and internationally. He brings to our Board the perspective of a leader with extensive international experience in the consumer products industry. As the Chief Financial Officer of Kellogg Company, he also brings significant financial and accounting expertise to our Board.

 

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PROPOSAL 1 – ELECTION OF DIRECTORS (CONTINUED)

 

 

 

  Irial Finan

 

LOGO

 

  

Director since: 2019

Independent

Age: 64

Committees: Compensation; NESG

 

Biography:

Retired since April 2018; Consultant to the CEO of The Coca-Cola Company, a beverage company, from January 2018 to March 2018; Executive Vice President of The Coca-Cola Company and President of Coca-Cola Bottling Investments Group, a bottling operations company, from August 2004 to December 2017.

 

Current Public Company Boards:

Coca-Cola Bottlers Japan Holdings, Inc. and Smurfit Kappa Group plc

 

Former Public Company Boards:

Coca-Cola FEMSA, Coca-Cola East Japan and Coca-Cola European Partners plc

Skills & Qualifications

Mr. Finan’s experience as an Executive Vice President of The Coca-Cola Company and President of its worldwide bottling operations, as well of his years of international consumer products experience, brings to our Board the perspective of a leader with extensive international experience in the consumer products industry. Mr. Finan has extensive board experience, including serving as Chair of Smurfit Kappa Group plc.

 

 

The Board of Directors recommends that you vote FOR the election of each nominee named above.

 

 

CLASS I DIRECTORS – TERM EXPIRING 2024

 

  Ann Fritz Hackett

 

LOGO

 

  

Director since: 2011

Independent

Age: 68

Committees: Compensation; NESG

 

Biography:

Retired since January 2020. Strategy Consulting Partner and Co-founder of Personal Pathways, LLC, a company providing web-based enterprise collaboration platforms, from 2015 through January 2020. Prior to her role at Personal Pathways, she was President of Horizon Consulting Group, LLC, a strategic and human resource consulting firm founded by Ms. Hackett in 1996.

 

Current Public Company Boards:

Capital One Financial Corporation

Skills & Qualifications:

Ms. Hackett has extensive experience in leading companies that provide strategic, organizational and human resource consulting services to boards of directors and senior management teams. She has experience leading change initiatives, risk management, talent management and succession planning and in creating performance-based compensation programs, as well as significant international experience and technology experience. Ms. Hackett also has extensive board experience and currently serves as the lead independent director of Capital One Financial Corporation.

 

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PROPOSAL 1 – ELECTION OF DIRECTORS (CONTINUED)

 

 

 

  John G. Morikis

 

LOGO

 

  

Director since: 2011

Independent

Age: 58

Committees: Audit; Compensation

 

Biography:

Chairman since January 2017 and Chief Executive Officer since January 2016 of The Sherwin-Williams Company, a manufacturer of paint and coatings products. President and Chief Operating Officer of The Sherwin-Williams Company prior thereto.

 

Current Public Company Boards:

The Sherwin-Williams Company

Skills & Qualifications:

Mr. Morikis’ experience as a Chief Executive Officer and a Chief Operating Officer of The Sherwin-Williams Company, and his more than 30 years of experience with a consumer home products company, brings to our Board the perspective of a leader who faces similar external economic issues that face our Company.

 

  Jeffery S. Perry

 

LOGO

 

  

Director since: 2020

Independent

Age: 56

Committees: Audit; NESG

 

Biography:

Founder and CEO of Lead Mandates LLC, a business and leadership advisory firm; Retired since October 2020 from Ernst & Young LLP, a leading global professional services firm, where he served as EY Global Client Service Partner for major consumer product accounts from April 2014 to October 2020.

 

Current Registered Investment Company Boards:

Equitable Funds

Skills & Qualifications:

Mr. Perry has extensive experience as a strategic, operational and financial advisor helping boards of directors and management teams. He held several senior positions with Ernst & Young and A.T. Kearney Inc. Mr. Perry brings to our Board relevant experience and perspectives in mergers, acquisitions, integrations, divestitures, business transformations and consumer products.

 

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PROPOSAL 1 – ELECTION OF DIRECTORS (CONTINUED)

 

 

 

  Ronald V. Waters, III

 

LOGO

 

  

Director since: 2011

Independent

Age: 70

Committees: Audit (Chair); NESG; Executive

 

Biography:

Retired since May 2010; President and Chief Executive Officer of LoJack Corporation, a provider of tracking and recovery systems, prior thereto.

 

Current Public Company Boards:

HNI Corporation and Paylocity Holding Corporation

Skills & Qualifications:

Mr. Waters has considerable executive leadership and financial management experience. He served as Chief Executive Officer and Chief Operating Officer at LoJack Corporation, a premier technology company, and as Chief Operating Officer and Chief Financial Officer at Wm. Wrigley Jr. Company, a leading confectionary manufacturing company. Mr. Waters also has extensive board experience.

 

 

CLASS III DIRECTORS – TERM EXPIRING 2023

 

  Nicholas I. Fink

 

LOGO

 

  

Director since: 2020

Age: 47

Committees: Executive

 

Biography:

Chief Executive Officer of Fortune Brands Home & Security, Inc. since January 2020; President & Chief Operating Officer of Fortune Brands from March 2019 to January 2020; President of Fortune Brands Global Plumbing Group from August 2016 to March 2019.

 

Current Public Company Boards:

Constellation Brands, Inc.

Skills & Qualifications

Mr. Fink’s leadership as Chief Executive Officer of the Company and his significant international and consumer brand and business operating experience, as well as his mergers and acquisitions and strategy expertise provide him with intimate knowledge of our operations, the opportunities for growth and the challenges faced by the Company. He joined the Company as Senior Vice President, Global Growth & Corporate Development in June 2015. Prior to joining Fortune Brands, Mr. Fink held key leadership positions at Beam Suntory, Inc., including President of Asia Pacific/South America of Beam Suntory, Inc., a global spirits company.

 

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PROPOSAL 1 – ELECTION OF DIRECTORS (CONTINUED)

 

 

 

  A.D. David Mackay

 

LOGO

 

  

Director since: 2011

Independent

Age: 66

Committees: Audit, Compensation (Chair); Executive

 

Biography:

Retired since January 2011; President and Chief Executive Officer of Kellogg Company, a packaged foods manufacturer, prior thereto.

 

Current Public Company Boards:

The Clorox Company

Skills & Qualifications

Mr. Mackay held various key executive positions with Kellogg Company including Chief Executive Officer and Chief Operating Officer, bringing to our Board the perspective of a leader who faced a similar set of external economic, social and governance issues to those that face our Company. Mr. Mackay also has significant international business experience, as well as extensive board experience.

 

  David M. Thomas

 

LOGO

 

  

Director since: 2011

Independent

Age: 72

Committees: Audit, NESG (Chair), Executive

 

Biography:

Retired since March 2006; Chairman of the Board and Chief Executive Officer of IMS Health Incorporated, a provider of information services to the pharmaceutical and healthcare industries, prior thereto.

 

Current Public Company and Registered Investment Company Boards:

The Interpublic Group of Companies, Inc. and Fidelity Investments Board of Trustees

Skills & Qualifications

Mr. Thomas’ experience as a Chief Executive Officer of IMS Health Incorporated and his management experience at premier global technology companies, including as Senior Vice President and Group Executive of IBM, helps the Board address the challenges the Company faces due to rapid changes in IT capabilities and communications and global distribution strategies. Mr. Thomas also has extensive board experience, including serving as the Company’s Independent Chairman from 2011 through 2019 and as our Lead Independent Director during 2020.

 

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CORPORATE GOVERNANCE

 

 

 

Fortune Brands is committed to maintaining strong corporate governance practices that are good for our stockholders and our business. We are dedicated to maintaining these practices and upholding high standards of conduct.

Corporate Governance Principles

The Board adopted a set of Corporate Governance Principles which describe our corporate governance practices and address corporate governance issues such as Board composition and responsibilities, Board meeting procedures, the establishment of Board committees, management succession planning process and review of risks. The Corporate Governance Principles are available at https://ir.fbhs.com/governing-high-standards.

Director Independence

 

The Company’s Corporate Governance Principles provide that a majority of the members of the Board shall be independent directors. New York Stock Exchange requirements, as well as the Company’s committee charters, require that each member of the Audit, Compensation and NESG Committees be independent. The Board applies

the definition of independence found in the New York Stock Exchange Listed Company Manual in determining which directors are independent. When determining each director’s independence, the Board also considered charitable contributions made by the Company to organizations with which each director is affiliated.   

 

LOGO

Applying that definition, Messrs. Banati, Finan, Mackay, Morikis, Perry, Thomas, Waters and Mses. Hackett and Kilsby were affirmatively determined by the Board to be independent. Due to Mr. Fink’s employment with the Company, he is not considered independent.

Policies with Respect to Transactions with Related Persons

The Board adopted a Code of Business Conduct and Ethics which sets forth various policies and procedures intended to promote the ethical behavior of all of the Company’s employees, officers and directors (the “Code of Conduct”). The Board has established a Compliance Committee (comprised of management) which is responsible for administering and monitoring compliance with the Code of Conduct (other than monitoring director compliance which is the responsibility of the NESG Committee). The Compliance Committee periodically reports on the Company’s compliance efforts to the Audit Committee and the Board.

The Board has also established a Conflicts of Interest Committee (comprised of management) which is responsible for administering, interpreting and applying the Company’s Conflicts of Interest Policy, which describes the types of relationships that may constitute a conflict of interest with the Company. Under the Conflicts of Interest Policy, directors and executive officers are responsible for reporting any potential related person transaction (as defined in Item 404 of Regulation S-K) to the Conflicts of Interest Committee in advance of commencing a potential transaction. The Conflicts of Interest Committee will present to the Audit Committee any potential related party transaction. The Audit Committee will evaluate the transaction, determine whether the interest of the related person is material and approve or ratify, as the case may be, the transaction. In addition, the Company’s executive officers and directors annually complete a questionnaire on which they are required to disclose any related person transactions and potential conflicts of interest. The General Counsel reviews the responses to the questionnaires, and, if a related person transaction is reported by a director or executive officer, submits the transaction for review by the Audit Committee. The Conflicts of Interest Committee also reviews potential conflicts of interest and reports findings involving any director of the Company to the NESG Committee. The NESG Committee will review any potential conflict of interest involving a member of the Board to determine whether such potential conflict would affect that director’s independence.

 

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Certain Relationships and Related Transactions

Since January 1, 2021, the Company did not participate in any transactions in which any of its directors or executive officers, any immediate family member of any of its directors or executive officers, or any beneficial owner of more than 5% of the Company’s common stock, had a direct or indirect material interest.

Anti-Hedging and Anti-Pledging Policy

The Company has a policy prohibiting directors and executives from hedging or pledging Company stock, including Company stock held indirectly, and from engaging in any derivative transactions designed to offset the decrease or increase in the market value of the Company’s stock.

Board Refreshment

The Board believes that Board refreshment and director succession are important to ensuring that Board composition is aligned with the needs of the Company and the Board. The Board also believes that continuity is critical to the effectiveness of the Board as a group over time and allows directors to develop a deeper understanding of the Company. The NESG Committee assesses the composition of the Board and aims to strike a balance between Board members with longer term service and newer members who bring a fresh perspective. Since 2019, four new directors have been added to the Board.

Director Nomination Process

The NESG Committee is responsible for, among other things, screening potential director candidates, recommending qualified candidates to the Board for nomination and assessing director independence.

When identifying director candidates, the NESG Committee determines whether there are any evolving needs that require an expert in a particular field or other specific skills or experiences. When evaluating director candidates, the NESG Committee first considers a candidate’s management experience and then considers issues of judgment, background, stature, leadership, conflicts of interest, integrity, ethics, original thinking and commitment to the goal of maximizing stockholder value, as well as diversity of background and experiences of the Board as a whole. To align with the Company’s DEI initiatives, the NESG Committee seeks (and instructed its search firm when conducting its last search) to include a diverse slate of candidates by including individuals that are diverse in gender and race when searching for new directors. The Committee also focuses on education, professional experience and differences in viewpoints and skills. In considering candidates for the Board, the NESG Committee considers the entirety of each candidate’s credentials in the context of these standards.

With respect to the nomination of continuing directors for re-election, the individual’s contributions to the Board are considered. The Board generally will not re-nominate a director at the annual meeting of stockholders following his or her 72nd birthday; however, the Board has the discretion to re-nominate a director after reaching age 72 if it believes that nomination is in the best interest of the Company’s stockholders.

In connection with future director elections, or any time there is a vacancy on the Board, the NESG Committee may retain a third-party search firm to assist in identifying qualified candidates who meet the needs of the Board at that time.

It is the NESG Committee’s policy to consider director candidates recommended by stockholders, if such recommendations are properly submitted to the Company. Stockholders that wish to recommend an individual as a director candidate for consideration by the NESG Committee can do so by writing to the Secretary of Fortune Brands at 520 Lake Cook Road, Deerfield, Illinois 60015. Recommendations must include the recommended candidate’s name, biographical data and qualifications, as well as other information that would be required if the stockholder were actually nominating the recommended candidate pursuant to the procedures for such

 

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nominations provided in our Bylaws. The NESG Committee will consider the candidate and the candidate’s qualifications in the same manner in which it evaluates nominees identified by the NESG Committee. The NESG Committee may contact the stockholder making the recommendation to discuss the qualifications of the candidate and the stockholder’s reasons for making the recommendation. Members of the NESG Committee may then interview the candidate if the committee deems the candidate to be appropriate. The NESG Committee may use the services of a third-party search firm to provide additional information about the candidate prior to making a recommendation to the Board. For a stockholder to directly nominate a candidate for director, such stockholder must follow the procedures set forth in the Company’s bylaws.

The nomination process is designed to ensure that the NESG Committee fulfills its responsibility to recommend candidates that are properly qualified to serve the Company for the benefit of all of its stockholders, consistent with the standards established under the Company’s Corporate Governance Principles.

Board and Committee Evaluation Process

To increase the effectiveness and provide an opportunity to improve processes and effectiveness, the NESG and the Chair of the Board facilitate an annual Board evaluation. The evaluation typically includes both an interview of each director and a questionnaire with a range of questions related to topics including oversight, responsibilities and resources. In 2021, the NESG Committee and Chair of the Board led this process, the results of which were discussed with the Board. In addition, each of the Audit, NESG and Compensation committees conducted a performance evaluation.

Communication with the Board

The Board and management encourage communication from the Company’s stockholders. Stockholders who wish to communicate with the Company’s management should direct their communication to the Chief Executive Officer or the Secretary of Fortune Brands at 520 Lake Cook Road, Deerfield, Illinois 60015. Stockholders, or other interested parties, who wish to communicate with the non-management directors or any individual director should direct their communication c/o the Secretary at the address above. The Secretary will forward communications intended for the Board to the Chairman of the Board, or, if intended for an individual director, to that director. If multiple communications are received on a similar topic, the Secretary may, in his or her discretion, forward only representative correspondence. Any communications that are abusive, in bad taste or present safety or security concerns may be handled differently.

Board Leadership Structure

Beginning in 2021, the Board determined that having an independent director serve as Chair of the Board is in the best interests of our stockholders at this time and appointed Susan Kilsby to serve as the Company’s independent, non-executive Chair. This leadership structure aids the Board’s oversight of management and allows our Chief Executive Officer to focus primarily on his management responsibilities. The non-executive Chair has the responsibility of presiding over all meetings of the Board, consulting with the Chief Executive Officer on Board meeting agendas, acting as a liaison between management and the non-management directors, including maintaining frequent contact with the Chief Executive Officer and advising him or her on the efficiency of Board meetings, facilitating teamwork and communication between the non-management directors and management, as well as additional responsibilities that are more fully described in the Company’s Corporate Governance Principles. In addition, the Company’s non-executive Chair facilitates the Board’s annual performance assessment of the Chief Executive Officer.

The Board does not believe that a single leadership structure is right at all times, so the Board periodically reviews its leadership structure to determine, based on the circumstances at the time, whether other leadership structures might be appropriate for the Company. The Board has been and remains committed to maintaining strong corporate governance and appropriate independent oversight of management.

 

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Executive Sessions

Pursuant to the Company’s Corporate Governance Principles, non-management directors of the Board are required to meet on a regularly scheduled basis without the presence of management and are led by the Non-Executive Chair. During 2021, Ms. Kilsby led these sessions. In addition, Board committees also meet in executive session periodically as deemed appropriate by such committee.

Risk Management

The responsibility for the day-to-day management of risks lies with the Company’s management team; however, the Board has an active role, as a whole and also at the committee level, in overseeing the strategy and process for managing the Company’s risks. Management regularly reviews information regarding the Company’s business strategy, resource allocation, credit, liquidity and operations, talent development, succession and DEI, as well as the risks associated with each, with the full Board. The Company’s overall risk management program consists of periodic management discussions analyzing and mitigating risks, an annual review of risks associated with each of the Company’s operating businesses and an annual review of risks related to the Company’s compensation programs and practices.

The Audit Committee oversees management of the Company’s financial and operational risks. In addition, the Audit Committee oversees the enterprise risk management program, which identifies both external risks (i.e., economic) and internal risks (i.e., strategic, operational, financial and compliance), assesses and ranks these risks according to the likelihood of occurrence and the potential monetary impact. It also assesses the Company’s plans to mitigate such risks. Annually, management identifies and assesses the enterprise risk management program, which the Audit Committee reviews. Cybersecurity-related risks and certain climate-related risks, such as physical risk to our operations and supply chains and commodity price volatility resulting from severe weather events caused climate change and new regulations designed to protect the environment, are some of the external risks assessed in the enterprise risk management program. Management also provides the Audit Committee with quarterly updates on the Company’s risks. The Company has a comprehensive enterprise-wide cybersecurity program aligned to the U.S. Department of Commerce National Institute of Standards and Technology Cybersecurity Framework industry standards and maintains security risk insurance coverage to defray the costs of potential information security breaches. The Company conducts automated online training twice a year for its employees and mock phishing campaigns on a regular basis throughout the year. The Company’s cybersecurity team provides regular updates to our senior executives and typically reports twice a year to the Audit Committee on the status of the Company’s security posture and our efforts to identify and mitigate cybersecurity risks. In 2021, the Company’s chief information officer also reported to the full Board on the Company’s cybersecurity programs and risk mitigation efforts.

The Compensation Committee is responsible for overseeing the management of risks relating to the compensation paid to the Company’s executives and the Company’s compensation plans. Annually, the Compensation Committee’s independent compensation consultant conducts an assessment of the risks associated with the Company’s executive compensation policies and practices. The compensation consultant conducts a more extensive review of all of the Company’s broad-based compensation incentive arrangements every few years. In 2021, the compensation consultant conducted the broader review of all compensation arrangements. For more information about that assessment see “Compensation Risks” below.

The NESG Committee manages risks associated with the independence of the Board, potential conflicts of interest of Board members and the Company’s corporate governance structure. In addition, the NESG Committee oversees the Company’s ESG programs, initiatives and related risks, which include the Company’s environmental, health and safety, DEI, philanthropy, global citizenship and other social and governance programs and policies. Management reports to the NESG Committee several times a year on the Company’s safety programs and statistics as well as the Company’s DEI strategy and goals.

 

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While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about all of the risks described above. The Board’s assignment of responsibility for the oversight of specific risks to its committees enables the entire Board, under the leadership of the Chair and the Chief Executive Officer, to better monitor the risks of the Company and more effectively develop strategic direction, taking into account the magnitude of the various risks facing the Company.

Compensation Risks

The Compensation Committee’s compensation consultant conducts an annual assessment of the risks associated with the compensation policies and practices used to compensate the Company’s executives and reports on the assessment to the Compensation Committee. In 2021, the Company’s compensation consultant analyzed the elements of executive compensation to determine whether any portion of executive compensation encouraged excessive risk taking and whether incentive designs include appropriate risk-mitigation provisions. In addition, the compensation consultant assessed all of the Company’s incentive programs, including sales incentives and incentive plan awards at all levels. After reviewing the compensation consultant’s analysis, the Compensation Committee concluded that none of the Company’s compensation arrangements encourage excessive risk taking and are consistent with the structure and design of other companies of similar size and industry sector. The Company utilizes the following risk-mitigating design features:

 

   

The Company uses multiple and diverse performance metrics in incentive plans;

 

   

The upside on payout potential is capped for both short-term and long-term incentives;

 

   

The Company utilizes multiple long-term incentive vehicles, with PSA that have overlapping three-year performance cycles;

 

   

The majority of an individual’s total compensation mix is not derived from a single component of compensation; and

 

   

The Company maintains stock ownership guidelines, a policy prohibiting hedging and pledging of Company stock and a formal clawback policy.

As described in our CD&A, compensation decisions are made using a combination of objective and subjective considerations designed to mitigate excessive risk taking by executives.

Meeting Attendance

Each director attended 100% of the total meetings of the Board and committees of the Board of which the director was a member during 2021. The Board and its committees held the following number of meetings during 2021:

 

LOGO

Pursuant to the Company’s Corporate Governance Principles, all directors are encouraged to attend the Annual Meeting of Stockholders. Our 2021 Annual Stockholder Meeting was held virtually and all of the directors attended.

 

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CORPORATE GOVERNANCE (CONTINUED)

 

 

 

Board Committees

The Board has established an Audit Committee, a Compensation Committee, an Executive Committee and a NESG Committee. A list of current Committee memberships may be found on the Company’s website at https://ir.fbhs.com/committees-and-charters. The Committee memberships as of the date of this Proxy Statement are set forth below:

 

   Name          Audit          Compensation

Executive

 

         NESG         

 

 

   Amit Banati

 

X

 

X

 

   Irial Finan

 

X

 

X

 

   Nicholas I. Fink

 

X

 

   Ann F. Hackett

 

X

 

X

 

   Susan S. Kilsby

 

X

 

C

 

X

 

   A. D. David Mackay

 

 

X

 

C

 

X

 

   John G. Morikis

 

X

 

X

 

   Jeffery S. Perry

 

X

 

X

 

   David M. Thomas

 

X

 

X

 

C

 

   Ronald V. Waters, III

 

C

 

X

 

X

 An “X” indicates membership on the committee.

 A “C” indicates that the director serves as the chair of the committee.

Audit Committee

The Audit Committee’s primary function is to assist the Board in overseeing the (i) integrity of the Company’s financial statements, the financial reporting process and the Company’s system of internal controls; (ii) the Company’s compliance with legal and regulatory requirements; (iii) independence and qualifications of the Company’s external auditors; (iv) performance of the Company’s external and internal auditors; and (v) the Company’s enterprise risk management program, which includes oversight of cybersecurity related risks.

Each member of the Audit Committee (Messrs. Banati, Mackay, Morikis, Perry, Thomas and Waters), is financially literate. In addition, Messrs. Banati, Mackay, Perry, Thomas and Waters each have accounting or financial management expertise and is an audit committee financial expert as defined in Item 407(d)(5)(ii) and (iii) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As required by its charter, each Audit Committee member has also been determined by our Board to be independent as such term is defined in the Exchange Act and the New York Stock Exchange Listed Company Manual.

Compensation Committee

The Compensation Committee’s primary function is to assist the Board in attracting and retaining high quality leadership by (i) developing and critically reviewing the Company’s executive compensation program design and pay philosophy; and (ii) setting the compensation of the Company’s executive officers, which includes the presidents of the Company’s principal business segments, in a manner that is consistent with competitive practices and Company, business segment and individual performance.

As required by its charter, each member of the Compensation Committee (Messrs. Banati, Finan, Mackay and Morikis and Mses. Hackett and Kilsby) has been determined by our Board to be independent as such term is defined in the Exchange Act and the New York Stock Exchange Listed Company Manual.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has (i) served as one of the Company’s officers or employees, or (ii) had a relationship requiring disclosure under Item 404 of Regulation S-K.

 

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Compensation Committee Procedures

The Compensation Committee directs management to prepare financial data to be used by the Compensation Committee in determining executive compensation. In addition, members of the Company’s human resources department assist in the preparation of executive compensation tally sheets and historical information describing compensation paid to executives, program design and plan provisions, and the Compensation Committee’s independent consultant provides market data for use in determining executive compensation. The Compensation Committee is presented with recommendations from management and from the Committee’s independent compensation consultant as to the level and type of compensation and related program designs provided to the Company’s executive officers. Members of the Company’s legal department provide the Compensation Committee with general advice on laws applicable to executive compensation.

The Chief Executive Officer attends meetings of the Compensation Committee, except for portions of meetings where his performance or compensation is being discussed. The Chief Executive Officer’s feedback on each officer’s performance is essential in the Compensation Committee’s determination of the officer’s salary, target annual incentive and long-term equity compensation determinations. See pages 22-32 of this Proxy Statement for more information about how the Compensation Committee determined the executive officers’ compensation in 2021.

Compensation Committee Consultant

The Compensation Committee engages an outside compensation consultant. Willis Towers Watson (“WTW”) has served as the Compensation Committee consultant since 2020. In 2021, WTW received fees of approximately $179,000 for executive compensation related services provided to the Compensation Committee. WTW also provided certain human capital, benefits and corporate risk and brokering services to the Company for which WTW received approximately $850,000. The Compensation Committee did not review or approve these additional services provided by WTW to the Company because they are of the type directly secured by management in the ordinary course of business. In their capacity as outside compensation consultant, WTW reported directly to the Compensation Committee and provided the following services and information to the Compensation Committee:

 

   

Made recommendations as to best practices for structuring executive pay arrangements and executive compensation (including the amount and form of compensation) consistent with the Company’s business needs, pay philosophy, market trends and latest legal, regulatory and governance considerations;

 

   

Performed an assessment of the Company’s compensation peers;

 

   

Provided market data (including compiling compensation data and related performance data) as background for decisions regarding the compensation of the Chief Executive Officer and other executive officers;

 

   

Performed an assessment of risks associated with the Company’s compensation structure and design; and

 

   

Attended Compensation Committee meetings (including executive sessions without the presence of management) and summarized alternatives for compensation arrangements that may have been considered in formulating final recommendations, as well as the consultant’s rationale for supporting or opposing management’s proposals.

 

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Executive Committee

The Executive Committee has all the authority of the full Board, except for specific powers that are required by law to be exercised by the full Board. The Executive Committee may not amend the Company’s charter, adopt an agreement of merger, recommend actions for stockholder approval, amend or repeal the Bylaws, elect or appoint any director or remove an officer or director, amend or repeal any resolutions of the Board, fix the Board’s compensation, and unless expressly authorized by the Board, declare a dividend, authorize the issuance of stock or adopt a certificate of merger.

Nominating, Environmental, Social and Governance Committee

The NESG Committee’s primary functions are to (i) provide recommendations to the Board with respect to the organization and function of the Board and its committees; (ii) recruit, identify and recommend potential director candidates and nominees; (iii) review the qualifications and independence of directors and provide recommendations to the Board regarding composition of the committees; (iv) develop and recommend changes to the Company’s corporate governance framework including the Company’s corporate governance principles; (v) oversee the process of the evaluation of the Board and management; and (vi) oversee the Company’s environmental, social and governance programs, policies and related risks. The NESG Committee also makes recommendations to the Board regarding the level and composition of compensation for non-employee directors and grants annual equity awards to non-employee directors.

As required by its charter, each member of the NESG Committee (Messrs. Finan, Perry, Thomas and Waters and Mses. Hackett and Kilsby) has been determined by our Board to be independent as such term is defined in the Exchange Act and the New York Stock Exchange Listed Company Manual.

Other Corporate Governance Resources

 

The Company’s Corporate Governance Principles, the Company’s Code of Business Conduct and Ethics and the Company’s Code of Ethics for Senior Financial

   LOGO
Officers are available on the Company’s website at https://ir.fbhs.com/governing-high-standards. The charters of each committee are also available on the Company’s website at https://ir.fbhs.com/committees-and-charters. A copy of our ESG report and other ESG resources are also available on the Company’s website at https://www.fbhs.com/corporate-responsibility.

 

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DIRECTOR COMPENSATION

 

 

 

Fortune Brands is committed to attracting and retaining qualified and experienced directors to contribute to the Board’s effectiveness and the Company’s goal of maximizing stockholder value. To accomplish this, the Company maintains a non-employee director compensation program that consists of cash retainers and Company stock. Below is a description of the 2021 non-employee director compensation program.

 

 

  Compensation Element*

      

 

Compensation Amount

 

  Cash Retainer

      

 

$100,000

 

  Equity Retainer**

      

 

$145,000 in Company Common stock

 

  Committee Chair Fee

      

 

$15,000 for service as Chair of the Audit Committee, Compensation Committee or the NESG Committee

 

  Committee Membership Fee

      

 

$7,500 for service on the Audit Committee, Compensation Committee or the NESG Committee

 

  Board Chair Fee

      

 

$200,000

 

  Stock Ownership Guidelines***

      

 

Ownership of common stock equivalent to five times the annual cash retainer within five years of joining the Board

 

  *

Cash compensation elements are pro-rated to reflect the portion of the year the director served on the Board or committee, or as Chair of a committee.

 

 

  **

Directors may elect to defer receipt of their annual stock awards until the January following the year in which the individual ceases serving as a director of the Company.

 

 

  ***

All of our directors currently meet the multiple or fall within the five-year time period allowed to meet the multiple under the Stock Ownership Guidelines.

 

Cash Retainers

In February 2021, after analyzing peer company director compensation and receiving input from WTW, the Board approved an annual retainer for the non-executive Chair of $200,000; increased the annual cash retainer from $90,000 to $100,000; and added an annual cash fee for members of the NESG Committee of $7,500. The increase in the annual cash retainer was pro-rated from the effective date of the change.

Stock Awards

In 2021, after analyzing peer company director compensation and receiving input from WTW, the Board approved an increase in the dollar value of the 2021 annual stock grant from $135,000 to $145,000. In May 2021, each non-employee director received an annual stock grant that was determined by dividing the dollar value of the annual stock grant ($145,000) by the closing price of the Company’s stock on the grant date $107.73, rounded to the nearest share. Accordingly, 1,346 shares of Company stock were granted to each of the non-employee directors.

Director Stock Ownership Guidelines

To further align the Board’s interests with those of our stockholders, the Board maintains Stock Ownership Guidelines for non-employee directors. The guidelines encourage non-employee directors to own Company stock with a fair market value equal to five times the annual cash fee ($500,000) and allow directors five years from the date of election to meet the guidelines. Shares owned directly by a director, the director’s spouse, minor children sharing the same home and any trust in which the director is a trustee with voting and investment power, as well

 

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as any shares that have been granted to a director, but receipt has been deferred pursuant to the Company’s Deferred Compensation Plans, are counted towards ownership. For information about the beneficial ownership of the Company’s securities held by directors and executive officers, see “Certain Information Regarding Security Holdings” on pages 53-54.

 

2021 DIRECTOR COMPENSATION*
   Name   

Fees     

Earned     

or Paid in     

Cash ($)(1)     

  

Stock     

Awards     

($) (2)     

  

Option     

Awards     

($)     

 

Non-Equity     

Incentive     

Plan     

Compensation     

($)     

 

Change in     

Pension     

Value and     

Nonqualified     
Deferred     
Compensation      

Earnings ($)     

 

All Other     

Compensation     

($)(3)     

  

Total     

($)     

   Amit Banati

  

$113,528     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$   936     

  

$259,469     

   Irial Finan

  

$113,528     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$   936     

  

$259,469     

   Ann F. Hackett

  

$118,597     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$   974     

  

$264,576     

   Susan S. Kilsby

  

$313,528     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$   974     

  

$459,507     

   A.D. David Mackay

  

$123,459     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$   936     

  

$269,400     

   John G. Morikis

  

$113,528     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$5,936     

  

$264,469     

   Jeffery S. Perry

  

$111,319     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$5,936     

  

$262,260     

   David M. Thomas

  

$128,528     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$5,974     

  

$279,507     

   Ronald V. Waters

  

$128,528     

  

$145,005     

  

n/a     

 

n/a     

 

n/a     

 

$5,974     

  

$279,507     

* Although Mr. Fink serves as member of the Board, he does not receive any additional compensation for such service.

 

  (1)

Mr. Perry received a pro-rata portion of his committee cash retainer based on his committee service commencement date. Mr. Mackay and Ms. Hackett received a pro-rata portion of the Compensation Committee chair retainer based on service in that position.

 

  (2)

The amounts in this column represent the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“FASB ASC Topic 718”). The grant date fair value was $107.73 per share. As of December 31, 2021, Ms. Hackett and Messrs. Morikis and Thomas had the following number of deferred shares outstanding: 34,815, 5,742, and 2,914, respectively.

 

  (3)

Included in this column are premiums paid for group life insurance coverage and the Company’s match on gifts paid by the director to charitable organizations, both of which are generally available to Company employees, and costs associated with the Company’s concierge health service program and director insurance programs. Under the Company’s matching gift program, the Company makes a 100% match of gifts totaling up to $5,000 annually made by the director to an eligible charitable institution.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

This CD&A describes the Fortune Brands’ executive compensation program and explains how the Compensation Committee made compensation decisions for the following NEOs in 2021*:

 

LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
    Nicholas I. Fink           Patrick D. Hallinan           R. David Banyard, Jr.           Cheri M. Phyfer           Brett E. Finley           Robert K. Biggart    
Chief Executive Officer   Senior Vice President & Chief Financial Officer  

President

Cabinets

 

President

Plumbing

 

President

Outdoors & Security

  Former Senior Vice President, General Counsel & Secretary

 

* 

Pursuant to SEC disclosure rules, we are required to include Mr. Biggart as an additional NEO; however, he retired from the Company on December 31, 2021.

This CD&A is divided into the following sections:

 

Section

  

Page
Number

Executive Summary

   22

Results of the 2021 Say on Pay Vote

   24

Philosophy and Process for Awarding NEO Compensation

   24

Types and Amounts of NEO Compensation Awarded in 2021

   26

EXECUTIVE SUMMARY1

Business Highlights

The Company delivered strong 2021 results growing Net Sales 26% and EPS 41% (or 37% on a before charges/gains basis), despite facing numerous external challenges including supply chain disruptions and inflation. While demand for our products remained strong throughout the year, it was our teams’ efforts that allowed the Company to combat these challenges and deliver above market performance for our stockholders. During 2021, we advanced our Fortune Brands Advantage capabilities, continued investing in our brands to drive innovation and expand capacity and fulfill our service commitments to our customers. Despite the challenging environment, we also continued to advance our ESG initiatives. In addition to continuing to make safety a priority throughout the Company, we are advancing our DEI strategy and our water conservation and recycling efforts and we have set carbon emission reduction and renewable energy goals.

We believe that the actions taken by the leadership team in 2021 have positioned the Company to continue to grow and create long-term value for our stockholders. We also believe that our compensation program and the goals used within our program continue to incentivize and reward performance. The following graphics highlight our three-year growth and performance on key metrics used in our compensation program:

 

 

1 

All references to earnings per share (EPS), operating income (OI), and earnings before interest, taxes, depreciation and amortization (EBITDA) shown in this CD&A are unaudited and on a before charges/gains basis. See Appendix A of this Proxy Statement for definitions and a description of the methodology of these non-GAAP measures, as well as a description of the non-GAAP measures used to determine incentive compensation.

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

LOGO

 

  *

OI, EPS and EBITDA shown above are on a before charges/gains basis. On a GAAP basis, the Company’s 2019 OI was $698.5, 2020 OI was $801.4 and 2021 OI was $1,090.4 resulting in a 56% increase; 2019 EPS was $3.06, 2020 EPS was $3.94 and 2021 EPS was $5.54, resulting in a 81% increase; and 2019 Net Income was $431.3 million, 2020 Net Income was $554.4 million and 2021 Net Income was $772.4 million, resulting in a 79% increase. See Appendix A for a reconciliation of these non-GAAP to GAAP OI, EPS and EBITDA measures.

2021 Compensation Highlights

The Company’s compensation programs and practices are designed to pay for performance and to align management’s interests with those of the Company’s stockholders while attracting, motivating and retaining superior talent to lead our Company. The Compensation Committee believes that our compensation program incentivizes high performance by providing a significant amount of compensation as equity, utilizing both short-term and long-term incentives tied to Company performance and balancing fixed (base salary) and variable (annual cash incentive and equity) compensation. The material components of our executive compensation program are summarized in the following chart:

 

LOGO

LOGO

 

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

2021 NEO Annual Total Target Compensation

The following chart summarizes annual total target compensation awarded to each NEO in 2021:

 

Summary of 2021 NEO Annual Total Target Compensation
  Named Executive Officer

2021 Annual

Base Salary(1)

2021 Annual

Incentive

Target Value

2021 Long-

Term Incentive

Award Target

Value(2)

  2021 Total Target  

Compensation

Nicholas I. Fink

 

$1,160,000

 

$1,450,000

 

$6,150,000

 

$8,760,000

Patrick D. Hallinan

 

$680,000

 

$544,000

 

$1,900,000

 

$3,124,000

R. David Banyard, Jr.

 

$740,000

 

$592,000

 

$2,150,000

 

$3,482,000

Cheri M. Phyfer

 

$630,000

 

$504,000

 

$1,575,000

 

$2,709,000

Brett E. Finley

 

$600,000

 

$480,000

 

$1,375,000

 

$2,455,000

Robert K. Biggart

 

$570,000

 

$427,500

 

$1,200,000

 

$2,197,500

 

  (1)

The amounts listed in this column reflect annual base salary in effect as of December 31, 2021.

 

  (2)

Includes the value of the annual target incentive equity awards, expressed as the aggregate grant date fair value of PSAs (at target), stock options and RSUs, as determined using the assumptions found in note 12 to the consolidated financial statement contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”).

RESULTS OF THE 2021 SAY ON PAY VOTE

 

LOGO   

The Compensation Committee and Board value the input of our stockholders. 93.2% of the votes cast at our 2021 Annual Stockholder Meeting were in support of the Company’s executive compensation program.

 

Over the past five years, our stockholders have overwhelmingly supported our executive compensation program, with an average approval of 93.7% of the votes cast for the Company’s annual say on pay vote. The Compensation Committee interpreted the high level of stockholder

support as endorsement of the Company’s executive compensation program and did not make any changes to the Company’s executive compensation program in response to the 2021 Say on Pay vote.  

 

LOGO

PHILOSOPHY AND PROCESS FOR AWARDING NEO COMPENSATION

Philosophy of the Executive Compensation Program

Our executive compensation program is designed to reward NEOs for the achievement of both short-term and long-term financial, strategic and operational goals that lead to the creation of long-term stockholder value. The executive compensation program is designed to:

 

LOGO

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

Compensation Peer Group and Market Data

The Compensation Committee uses compensation data from a group of similarly sized peer companies to evaluate our compensation arrangements (the “Peer Group”). With the help of the Compensation Committee’s consultant, each year the Committee reviews the Peer Group and decides whether any changes should be made. As recommended by WTW, the Committee’s compensation consultant, the Compensation Committee decided not to change the Peer Group for 2021, other than to replace Ingersoll Rand Plc with Trane Technologies, Inc. following its spin-off. The 2021 Peer Group consisted of the following companies:

 

 
2021 Peer Group

• Allegion plc

   • Lennox International Inc.    • RPM International Inc.

• A.O. Smith Corporation

   • Masco Corporation    • The Sherwin-Williams Company

• Ball Corp.

   • Mohawk Industries, Inc.    Snap-On Inc.

• Borgwarner Inc.

   • Newell Brands Inc.    • Stanley Black & Decker, Inc.

• Dover Corp.

   • Owen Corning Inc.    • Trane Technologies, Inc.

JELD-WEN Holding, Inc.

   • Parker-Hannifin Corp.    • Whirlpool Corporation

• Leggett & Platt, Incorporated

   • Pentair plc     
 
FORTUNE BRANDS vs. PEER GROUP (1)
   
LOGO       LOGO

 

(1)  Reflects 2020 fiscal year-end results, which were used at the time the Peer Group was compiled.

WTW provided the Compensation Committee with market data to use in setting each element of compensation of the NEOs for 2021. This market data primarily consisted of revenue size adjusted general industry data received from WTW, supplemented with peer group proxy data.

The Compensation Committee believes that compensation decisions are complex and require a deliberate review of Company performance, peer compensation levels, experience and impact of individual executives, and individual performance. In determining executive compensation, the Compensation Committee considers all forms of compensation and uses tools – such as tally sheets and market data – to review the value delivered by each component of compensation. When evaluating total target compensation, the Compensation Committee generally strives to set NEO compensation around the 50th percentile of the market data. The Compensation Committee may, however, determine that it is appropriate for total target compensation or any particular element of compensation to exceed or fall below the 50th percentile of the market data for an NEO. The factors that might influence the amount of compensation awarded include market competition for a particular position, the strategic importance of the position, retention considerations, an individual’s performance, possession of a unique skill or knowledge set, proven leadership capabilities and internal pay equity.

Evaluating NEO Performance

All NEOs undergo an annual performance appraisal. For the evaluation of our CEO, the Compensation Committee, in conjunction with the Chair of the Board, conducted a formal evaluation of the CEO’s performance against certain financial, operational, business strategy (including advancing the Company’s ESG and DEI strategies) and personal development goals established at the beginning of the year. Progress against these goals, including those relating to ESG and DEI initiatives, are regularly reviewed throughout the year with the NESG Committee and the Board. At the end of the year, the Board discusses the CEO’s accomplishments and achievement of the goals with the CEO and in executive session without the presence of the CEO. Following the annual

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

performance review, the Compensation Committee utilizes market data provided by the compensation consultant to set the CEO’s annual total target compensation based on the results of the performance assessment. For the other NEOs, the CEO reviews and evaluates each of their performance against strategic, financial and operational goals established at the beginning of the year and then presents his evaluations to the Compensation Committee. The Compensation Committee reviews the CEO’s recommendations and market data from the compensation consultant and then independently sets each of the other NEO’s annual total target compensation.

Maintaining Best Practices

The Compensation Committee maintains policies to protect the interests of our stockholders and follow best practices in corporate governance. The chart below summarizes these policies.

 

 

What We Do

 

 

  Pay for Performance A vast majority of NEO annual total target compensation is tied to Company performance. In 2021, 87% of Mr. Fink’s and 77% (on average) of our other NEOs’ annual total target compensation was pay-at-risk.

 

    

 

  Independent Compensation Consultant advises the Compensation Committee on executive compensation matters.

 

  Maximum Payouts on Incentives Annual cash incentive awards and PSA payouts are capped at 200% of target.

 

      

 

  Tally Sheets Tally sheets and wealth accumulation analyses are reviewed annually before making compensation decisions.

 

 

  Double-Trigger in Change in Control Severance benefits are payable upon a change in control only if there is also a qualifying termination of employment. Our equity award agreements also include double-trigger provisions.

 

    

 

  Robust Stock Ownership Guidelines We maintain rigorous stock ownership guidelines for NEOs. Executives are required to hold 50% of net shares from the vesting of PSAs and RSUs until the ownership requirement is met.

 

 

 

  Clawback Policy The Company may recover all or part of annual cash incentives and equity incentive compensation under certain circumstances.

      

  Executive Sessions The Compensation Committee periodically meets in executive session without the presence of management.

 

 

 

What We Don’t Do

 

 

✘ No Employment Contracts NEOs and other executive officers are employees “at will”. The Company does not have employment contracts with any of its NEOs or other executive officers.

 

    

 

✘ No Hedging or Pledging Directors, NEOs and other executives are prohibited from hedging, pledging or otherwise engaging in derivative transactions designed to offset a decrease or increase in the market value of the Company’s stock.

 

 

✘ No Tax Gross Ups NEOs and other executive officers are not entitled to tax gross ups in the event of a change in control and related termination or for perquisites (other than relocation expenses).

 

      

 

✘ No Backdating or Repricing of Stock Options Stock options are never backdated or issued with below-market prices. Repricing of underwater stock options without stockholder approval is prohibited (except in the event of certain extraordinary corporate events).

 

 

✘ No Excessive Perquisites Perquisites are limited to the executive health program and other benefits generally available to employees, such as company product purchase programs. Certain executives have limited personal use of Company aircraft, subject to reimbursement obligations.

        

TYPES AND AMOUNTS OF NEO COMPENSATION AWARDED IN 2021

Pay-at-Risk Compensation2

As part of 2021 annual target compensation, the Company provided both fixed (base salary) and variable (annual bonus, PSAs, RSUs and stock options) compensation to the NEOs. The vast majority of annual target compensation is at risk because the compensation that is actually paid is dependent upon the Company’s performance or stock price. As a result, the amount of compensation actually paid to an NEO may significantly vary from the NEO’s target compensation.

 

 

2 

Mr. Biggart retired from the Company on December 31, 2021. In anticipation of his retirement, Mr. Biggart’s 2021 annual equity grant was comprised entirely of RSUs. Due to this difference in the equity mix compared to the other NEOs, his compensation has been eliminated in the compensation pay mix shown in the chart, however, his total compensation is included in the percentage of pay-at-risk.

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

The following charts show each element of 2021 annual target compensation, including the mix of short-term and long-term incentives, as well as the amount of pay-at-risk for the CEO and the average for the other NEOs. These charts illustrate annual target compensation.

 

LOGO

As shown in the charts above, a significant portion of the compensation granted to our NEOs was equity and pay-at-risk. Equity grants represented 70% of Mr. Fink’s annual total target compensation and 60% (on average) of the other NEOs’ annual total target compensation. 87% of Mr. Fink’s annual total target compensation was pay-at-risk and 77% (on average) of the other NEOs’ annual total target compensation was pay-at-risk.

2021 Compensation

Base Salary

Base salaries provide a fixed level of cash compensation and are paid in order to attract and retain our NEOs. The Compensation Committee sets each NEO’s base salary to be appropriate and commensurate with the NEO’s position, experience and performance.

For 2021, the Compensation Committee increased the annual base salaries for each NEO to better align with competitive market data and in recognition of each individual’s prior year performance. Below are the 2021 and 2020 annual base salaries for each NEO:

 

Named Executive Officer

 

2021

   

2020

 

Nicholas I. Fink

 

 

$1,160,000

 

 

 

$1,100,000

 

Patrick D. Hallinan

 

 

$680,000

 

 

 

$635,000

 

R. David Banyard, Jr.

 

 

$740,000

 

 

 

$720,000

 

Cheri M. Phyfer

 

 

$630,000

 

 

 

$590,000

 

Brett E. Finley

 

 

$600,000

 

 

 

$587,000

 

Robert K. Biggart

 

 

$570,000

 

 

 

$552,000

 

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

Annual Cash Incentive

The Compensation Committee believes that annual cash incentive awards (“bonus”) reinforce a pay for performance culture because the payment is based on the Company’s financial and operational results. Each year, the Compensation Committee sets a percentage of base salary to determine each NEO’s bonus payout at 100% of target.

The Compensation Committee adjusted the percentage of base salary to determine the 2021 bonus awards for Ms. Phyfer and Mr. Finley. The percentage of their base salary was increased from 75% to 80% to better align with market data and for internal pay equity purposes. The Committee did not make adjustment to any other NEO’s percentage of base salary. The percentages in 2021 for each NEO were:

 

Named Executive Officer  

Percentage of

Base Salary 2021

Nicholas I. Fink

 

125%

Patrick D. Hallinan

 

80%

R. David Banyard, Jr.

 

80%

Cheri M. Phyfer

 

80%

Brett E. Finley

 

80%

Robert K. Biggart

 

75%

The bonus payouts are based on the achievement of the performance goals and can range from 0% to 200% of target. To establish challenging performance goals under the annual incentive program, the Compensation Committee reviewed the target performance goals and actual results for awards paid in 2020, and the 2021 expected growth rate in the home products market, the Company’s three year operating plan and key assumptions relating to share gains, pricing, material inflation and productivity. For 2021, the Compensation Committee approved the following performance metrics and weighting for bonus awards:

 

LOGO

 

*

For Messrs. Banyard and Finley, this metric was OM for their respective business segments, Cabinets and Outdoors & Security. For Ms. Phyfer, this metric was Sales Growth Above Market for GPG.

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

The Compensation Committee believes that the performance measures chosen for the 2021 bonus awards focus executives on maximizing sales and profitability for the Company. The following table sets forth the minimum (0% payout), target (100% payout) and maximum (200% payout) financial performance measures, the actual performance results, the percentage payout and the amount paid to each NEO for the 2021 annual cash incentive awards:

 

2021 Annual Cash Incentive Performance Goals and Results

 

   
    

 

Performance and Goals(1)

  Results and Awards
             

    Named Executive

    Officer

 

    Performance    
    and Weighting     

    Metric    

 

Minimum     

Performance     

Measure     

 

Target    

Performance    

Measure    

 

  Maximum  

  Performance  

  Measure  

 

Actual    

Performance(2)    

  % of Payout      

    Amount    

    Paid(3)    

               

    Nicholas I. Fink

  EPS(60%)

RONTA(20%)

WCE(20%)

 

  $4.27

45.4%

17.4%

 

  $4.95

52.0%
16.0%

 

  $5.63

58.6%
14.8%

 

  $5.74

57.0%
15.7%

 

  174.8%   $2,534,600
               

    Patrick D. Hallinan

  EPS(60%)

RONTA(20%)

WCE(20%)

 

  $4.27

45.4%
17.4%

 

  $4.95

52.0%
16.0%

 

  $5.63

58.6%
14.8%

 

  $5.74

57.0%
15.7%

 

  174.8%   $950,912
               

    R. David Banyard, Jr.

  OI(60%)

OM(20%)

WCE(20%)

 

  $260.7

10.9%
14.9%

 

  $308.5

11.8%
13.7%

 

  $356.3

12.6%
12.7%

 

  $292.3

10.2%
13.1%

 

  77.8%   $460,576
               

    Cheri M. Phyfer

  OI(60%)

SALES(20%)

WCE(20%)

 

  $462.9

1.1%

17.4%

 

  $521.9

3.1%

16.0%

 

  $580.9

5.1%

14.8%

 

  $626.4
12.1%
15.6%

 

  183.3%   $923,832
               

    Brett E. Finley

  OI(60%)

OM(20%)

WCE(20%)

 

  $255.7
14.3%
20.6%

 

  $301.3
15.5%
18.9%

 

  $346.9
16.5%
17.5%

 

  $305.4
15.0%
19.7%

 

  92.1%   $442,080
               

    Robert K. Biggart

  EPS(60%)

RONTA(20%)
WCE(20%)

 

  $4.27

45.4%

17.4%

 

  $4.95

52.0%
16.0%

 

  $5.63

58.6%
14.8%

 

  $5.74

57.0%
15.7%

 

  174.8%   $747,270
  (1)

OI minimum, target and maximum performance measures and actual performance results are shown in millions. Goals for Messrs. Fink, Hallinan and Biggart were based on Fortune Brands’ results, while goals for Messrs. Banyard and Finley and Ms. Phyfer were based on their respective business segments. For Ms. Phyfer, Sales Growth Above Market was determined by calculating the percentage change in GPG’s annual sales in excess of the percentage change in the Plumbing market’s prior year sales.

 

  (2)

EPS, OI and OM actual performance were adjusted to exclude the effect of currency fluctuations. See “Use of Non-GAAP Financial Information in Connection with Incentive Compensation” included in Appendix A for a description of all adjustments.

Long-Term Equity Awards

The Compensation Committee believes that equity compensation reinforces a pay for performance culture and aligns the interests of management with those of our stockholders. Annually, the Compensation Committee sets a target equity award value and determines the types of equity to award.

The 2021 annual equity award for NEOs consisted of 50% performance share awards (“PSAs”), 25% restricted stock units (“RSUs”) and 25% stock options. In setting 2021 target long-term equity award values, the Compensation Committee considered competitive market data and the individual performance of each NEO. The Compensation Committee adjusted the target long-term equity award values granted to all NEOs in recognition of prior year performance. In addition, the award values for Messrs. Fink and Hallinan and Ms. Phyfer were increased to better align with market data for similar positions. Below are the target equity award values for 2021 and 2020 for each NEO:

 

Named Executive Officer   

2021 Target

Equity Award Value

  

2020 Target

Equity Award Value

Nicholas I. Fink

  

$6,150,000

  

$5,525,000

Patrick D. Hallinan

  

$1,900,000

  

$1,700,000

R. David Banyard, Jr.

  

$2,150,000

  

$2,000,000

Cheri M. Phyfer

  

$1,575,000

  

$1,350,000

Brett E. Finley

  

$1,375,000

  

$1,300,000

Robert K. Biggart

  

$1,200,000

  

$1,150,000

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

In anticipation of Mr. Biggart’s retirement, his equity award was granted solely in RSUs that were scheduled to vest on December 27, 2021, subject to his continued employment through such date.

Performance Share Awards: PSAs awarded to the NEOs in 2021 will be settled in shares of the Company’s common stock based on earnings before interest, taxes, depreciation and amortization (“EBITDA”) (weighted 75%) and return on invested capital (“ROIC”) (weighted 25%) for the three year performance period from January 1, 2021 to December 31, 2023. Payouts may range from 0% to 200% of the target award based on performance. If the Company fails to achieve the minimum performance threshold, none of the PSAs will vest. PSAs will be settled following completion of the performance period and certification of the performance results by the Compensation Committee (in early 2024).

The Compensation Committee based the performance goals on EBITDA and ROIC because it believes that these metrics incentivize management to grow earnings and aligns the interests of management with our stockholders. The Compensation Committee believes that awarding PSAs with a cumulative three year performance goal drives long-term sustained growth and, as a result, management is rewarded if the long-term growth goals are exceeded. In establishing performance goals for PSAs, the Compensation Committee considered the Company’s strategic operating plan, the expected three year compound market growth rate, as well as key assumptions relating to share gains, pricing, material inflation and productivity.

RSUs and Stock Options: The Compensation Committee believes that both RSUs and stock options incent NEOs to increase stockholder returns and align the interests of NEOs with stockholders. RSUs granted to the NEOs generally vest in three equal annual installments, assuming the NEO remains employed through each annual vesting date. RSUs serve as a long-term retention tool in a cyclical business because the NEO must remain employed with the Company through each of the three annual vesting dates to receive all of the shares. As noted above, Mr. Biggart’s 2021 RSU grant vested on December 27, 2021, subject to his continued employment through such date. The Compensation Committee believes that RSUs represent at-risk compensation since their value is linked directly to share price.

Stock options allow an NEO to purchase a specific number of shares of Company stock at a fixed price (i.e., the share price set on the grant date). The 2021 stock options vest in three equal annual installments, assuming the NEO remains employed through each vesting date, and expire ten years from the grant date. The Compensation Committee believes that stock options are performance-based and at-risk because the NEO only realizes value to the extent the Company’s stock price increases after the grant date.

2019-2021 Performance Share Awards Payout

In 2019, the Compensation Committee awarded NEOs with PSAs to be settled in early 2022 if the Company achieved certain EBITDA and ROIC goals during the cumulative performance period from January 1, 2019 through December 31, 2021, with EBITDA weighted 75% and ROIC weighted 25%. The Compensation Committee certified a payout level of 200% of target. The threshold, target and maximum goals and the Company’s actual results were as follows:

 

2019-2021 PSA

Target EBITDA and ROIC Goals and Results

         
Metric   Threshold     Target     Maximum     Actual
Performance  
  % of Payout  

EBITDA (75%)(1)

  $2,700   $2,850   $3,000   $3,245.8   200.0%

ROIC (25%)

  12.6%   13.5%   14.3%   14.6%

 

  (1)

Dollar amounts in this row are reported in millions. See Use of Non-GAAP Financial Information in Connection with Incentive Compensation” included in Appendix A for a description of all adjustments.

 

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

Based on the achievement of these results, the NEOs received the following number of shares of Company stock pursuant to the terms of the 2019-2021 PSAs:

 

Named Executive Officer

   Shares Earned

Nicholas I. Fink

  

62,966

Patrick D. Hallinan

  

33,480

Cheri M. Phyfer

  

20,988

Brett E. Finley

  

25,110

Robert K. Biggart

   22,494

Benefits

Retirement

All of the NEOs are eligible for retirement benefits through the Fortune Brands Home & Security Retirement Savings Plan (the “Qualified Savings Plan”), a tax-qualified defined contribution 401(k) plan. The Compensation Committee believes that the Qualified Savings Plan benefits are consistent with competitive pay practices and are an important element in attracting and retaining talent in a competitive market.

In addition to the Qualified Savings Plan, the Company provides non-qualified retirement benefits for contributions that would have been made under the tax-qualified plan but for limitations imposed by the Internal Revenue Code (the “Code”). Please see the narratives and the “2021 Nonqualified Deferred Compensation” table on page 38 of this Proxy Statement for further information regarding these retirement benefits.

The Company froze pension plan benefit accruals in 2016 and as a result none of the NEOs are entitled to a benefit under these plans, with the exception of Mr. Hallinan who retains a retirement benefit that accrued while he was an employee of MasterBrand Cabinets from 2005 through 2008.

Severance

The Company has Agreements for the Payment of Benefits Following Termination of Employment (the “Severance Agreements”) with each NEO. Under the terms of the Severance Agreements, each NEO is entitled to severance benefits upon a “qualifying termination of employment” (i.e., termination by the Company without “cause” or by the NEO for “good reason”) or in the event of a qualifying termination of employment following a change in control. See the “2021 Potential Payments Upon Termination or Change in Control” table on page 39 below.

The Compensation Committee believes that it is appropriate to provide NEOs with the protections afforded under these Severance Agreements and that doing so helps the Company remain competitive with market practices and attract and retain superior talent. The Compensation Committee also believes that these Severance Agreements promote management independence and keep management focused on the Company’s business in the face of any potential change in control events.

All of the Severance Agreements contain “double-trigger” change in control provisions, which means that there must be both a change in control of the Company (or applicable business) and a qualifying termination of employment (i.e., termination by the Company without “cause” or by the NEO for “good reason”) before any enhanced benefits can be paid following a change in control. The NEOs are not entitled to any tax gross ups under the Severance Agreements, including those related to the change-in-control related excise taxes imposed under the Code.

 

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COMPENSATION DISCUSSION AND ANALYSIS (CONTINUED)

 

 

 

Perquisites

All NEOs were provided with an executive health program that provides all NEOs with annual medical examinations. The Company also provides broad-based plans, which are generally available to employees such as matching on charitable contributions and company product purchase programs. In 2021, the Company provided a limited number of perquisites to the NEOs, which included limited use of Company aircraft by Messrs. Fink, Hallinan and Biggart (the costs of which were reimbursed to the Company based on the cost of a first class airplane ticket for each passenger on a personal flight).

Policies

Clawback Policy

The Company has a policy that allows it to recoup all or part of annual cash incentives or PSAs if there is: (1) a significant or material restatement of the Company’s financial statements covering any of the three fiscal years preceding the grant or payment; or (2) a restatement of the Company’s financial statements for any year which results from fraud or willful misconduct committed by an award holder. An executive’s unvested RSUs and PSAs and both unvested and vested but unexercised stock options are forfeited and cancelled in the event an executive’s employment is terminated for cause under the terms and conditions of these awards.

Stock Ownership Guidelines

The Company maintains stock ownership guidelines for NEOs and other Company executives, which require them to hold a number of shares equal to a multiple of their annual base salary. The ownership guidelines are as follows:

 

Position

   Stock Ownership Level as a Multiple
of Base Salary

Chief Executive Officer

  

6

Chief Financial Officer

  

3

Division Presidents

  

3

Senior Vice Presidents

  

3

Vice Presidents

  

1

Executives have five years from the date of hire or date of promotion to acquire the requisite amount of stock and are required to hold 50% of net shares acquired from the vesting of PSAs and RSUs until the ownership guidelines are met. All of the NEOs currently meet the multiple or fall within the time period allowed to meet the multiple under the stock ownership guidelines.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Company’s Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Compensation Committee

A.D. David Mackay, Chair

Amit Banati

Irial Finan

Ann F. Hackett

Susan S. Kilsby

John G. Morikis

 

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2021 EXECUTIVE COMPENSATION

 

 

 

 

2021 SUMMARY COMPENSATION TABLE

 

 
                   

Name and Principal

Position

   Year    

Salary

($)(1)

   

Bonus

($)

   

Stock

Awards

($)(2)

   

Option

Awards

($)(3)

   

Non-
Equity

Incentive

Plan

Compen-
sation

($)(4)

   

Change in

Pension

Value &

Nonqualified

Deferred

Compen-
sation

Earnings

($)(5)

   

All
Other

Compen-
sation

($)(6)

   

Total

($)

 
    

A

   

B

   

C

   

D

   

E

   

F

   

G

   

H

   

I

 

Nicholas I. Fink

  

 

2021

 

 

 

1,148,462

 

 

 

0

 

 

 

4,612,510

 

 

 

1,537,493

 

 

 

2,534,600

 

 

 

0

 

 

 

337,316

 

 

 

10,170,381

 

Chief Executive Officer

  

 

2020

 

 

 

1,097,138

 

 

 

0

 

 

 

4,643,703

 

 

 

1,881,263

 

 

 

1,765,088

 

 

 

0

 

 

 

228,782

 

 

 

9,615,974

 

    

 

2019

 

 

 

804,569

 

 

 

0

 

 

 

2,249,988

 

 

 

749,997

 

 

 

717,440

 

 

 

0

 

 

 

143,684

 

 

 

4,665,678

 

Patrick D. Hallinan

  

 

2021

 

 

 

671,346

 

 

 

0

 

 

 

1,424,973

 

 

 

474,993

 

 

 

950,912

 

 

 

0

 

 

 

128,554

 

 

 

3,650,778

 

Senior Vice President and

  

 

2020

 

 

 

630,897

 

 

 

0

 

 

 

1,525,010

 

 

 

675,011

 

 

 

655,828

 

 

 

18,000

 

 

 

116,932

 

 

 

3,621,678

 

Chief Financial Officer

  

 

2019

 

 

 

605,000

 

 

 

0

 

 

 

1,200,007

 

 

 

400,005

 

 

 

427,763

 

 

 

24,000

 

 

 

81,060

 

 

 

2,737,835

 

R. David Banyard, Jr.

  

 

2021

 

 

 

736,154

 

 

 

0

 

 

 

1,612,465

 

 

 

537,498

 

 

 

460,576

 

 

 

0

 

 

 

19,700

 

 

 

3,366,393

 

President, Cabinets

  

 

2020

 

 

 

720,000

 

 

 

0

 

 

 

1,724,968

 

 

 

725,011

 

 

 

471,744

 

 

 

0

 

 

 

17,142

 

 

 

3,658,865

 

    

 

2019

 

 

 

69,231

 

 

 

725,000

 

 

 

2,749,989

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

124

 

 

 

3,544,344

 

Cheri M. Phyfer

  

 

2021

 

 

 

623,077

 

 

 

0

 

 

 

1,181,260

 

 

 

393,757

 

 

 

923,832

 

 

 

0

 

 

 

69,466

 

 

 

3,191,392

 

President, Plumbing

  

 

2020

 

 

 

575,229

 

 

 

0

 

 

 

1,512,464

 

 

 

537,486

 

 

 

673,485

 

 

 

0

 

 

 

53,862

 

 

 

3,352,526

 

Brett E. Finley

  

 

2021

 

 

 

597,750

 

 

 

0

 

 

 

1,031,249

 

 

 

343,749

 

 

 

442,080

 

 

 

0

 

 

 

148,002

 

 

 

2,562,830

 

President, Outdoors & Security

  

 

2020

 

 

 

555,856

 

 

 

0

 

 

 

1,125,017

 

 

 

474,995

 

 

 

561,759

 

 

 

0

 

 

 

68,663

 

 

 

2,786,290

 

    

 

2019

 

 

 

566,154

 

 

 

0

 

 

 

1,399,960

 

 

 

300,001

 

 

 

338,153

 

 

 

0

 

 

 

29,740

 

 

 

2,634,008

 

Robert K. Biggart

  

 

2021

 

 

 

566,539

 

 

 

0

 

 

 

1,200,001

 

 

 

0

 

 

 

747,270

 

 

 

0

 

 

 

107,362

 

 

 

2,621,172

 

Former Senior Vice President, General Counsel & Secretary

                                                                        
(1)

Salary: Base salaries shown for all NEOs represent the actual amount paid during the year.

 

(2)

Stock Awards: The amounts listed in column D for 2021 represent the aggregate grant date fair values calculated in accordance with FASB ASC Topic 718 for RSUs and PSAs granted in 2021. For assumptions used in determining these values, see note 12 to the consolidated financial statements contained in the Company’s Form 10-K.

 

    

The amounts included in this column for the PSAs granted during 2021 are calculated based on the probable outcome that the target performance level will be achieved. Assuming the highest level of performance is achieved, the maximum grant date fair value for the PSAs granted during 2021 would be: $6,150,014 for Mr. Fink; $1,900,022 for Mr. Hallinan; $2,150,012 for Mr. Banyard; $1,575,072 for Ms. Phyfer and $1,374,940 for Mr. Finley.

 

(3)

Option Awards: The amounts listed in column E for 2021 reflect the aggregate grant date fair values calculated in accordance with FASB ASC Topic 718 for stock options granted in 2021. For assumptions used in determining these values, see note 12 to the consolidated financial statements contained in the Company’s Form 10-K.

 

(4)

Non-Equity Incentive Plans: Column F lists amounts earned under the annual cash incentive plan.

 

(5)

Change in Actuarial Value of Pension Benefits: Column G includes the change in actuarial value of the tax-qualified and non-qualified defined benefit pension plan benefits previously accrued by Mr. Hallinan from 2005 through 2008. In 2021, the change in Mr. Hallinan’s actuarial value was negative in the amount of ($3,000). Messrs. Fink, Banyard, Phyfer, Biggart and Finley are not eligible to participate in any of the Company’s defined benefit pension plans. The narrative and 2021 Pension Benefits table on pages 37-38 provide additional detail about the pension plan.

 

(6)

Perquisites and All Other Compensation: The amounts in column H include the following:

 

  (a)

Matching Contributions and Qualified Non-Elective Contributions to the Savings Plan. Matching contributions for 2021 to the Savings Plan were made by Fortune Brands in the amount of $13,050 for Messrs. Fink, Hallinan and Biggart and by MasterBrand Cabinets for Mr. Banyard in the amount of $14,500. A Qualified Non-Elective contribution was made by Therma-Tru in the amount of $8,700 for Mr. Finley.

 

  (b)

Profit Sharing Contributions to the Savings Plan. Profit sharing contributions for 2021 to the Savings Plan were made by Fortune Brands in the amount of $19,608 for Messrs. Fink, Hallinan and Biggart, by Global Plumbing Group in the amount of $14,500 for Ms. Phyfer and by Therma-Tru in the amount of $8,700 for Mr. Finley.

 

  (c)

Profit Sharing Contributions to Supplemental Plans. The following contributions were made to the Fortune Brands Home & Security, Inc. Supplemental Retirement Plan for 2021: $196,766 for Mr. Fink; $77,788 for Mr. Hallinan and $60,826 for Mr. Biggart. A contribution was made to the Global Plumbing Group Supplemental Retirement Plan for Ms. Phyfer in the amount of $50,328. A contribution was made to the Therma-Tru Supplemental Executive Retirement Plan for Mr. Finley in the amount of $52,171. These contributions would have been made under the Qualified Savings Plan but for the limitations on compensation imposed by the Code. These amounts were credited to the executives’ Supplemental Plan accounts in early 2022.

 

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2021 EXECUTIVE COMPENSATION (CONTINUED)

 

 

 

  (d)

Other: Included in column H for each NEO are costs associated with the Company’s executive health program. In 2021, limited use of the Company’s aircraft was provided to Messrs. Fink, Hallinan and Biggart, who each reimbursed the Company for his personal use in an amount equivalent to the cost of a first class ticket for each passenger on these flights. The calculation of incremental cost of personal aircraft usage is based on estimated variable costs to the Company, including fuel costs, crew expenses, landing fees and other miscellaneous variable costs. In 2021, the Company’s incremental cost for personal use of Company aircraft not reimbursed by Mr. Fink was $93,523, by Mr. Hallinan was $8,174, and by Mr. Biggart was $4,119, which is reflected in column H.

 

   

In connection with Mr. Finley’s relocation of his personal residence, column H includes relocation expenses (principally, costs associated with the sale of his home and moving expenses) in the amount of $53,894. This column also includes reimbursement for taxes which were made to make Mr. Finley whole for expenses incurred in connection with his relocation in the amount of $22,335. If Mr. Finley voluntarily terminates his employment within two years of relocation, he will be required to reimburse a portion of the amount.

 

2021 GRANTS OF PLAN-BASED AWARDS

 

   

 

Estimated Future Payouts Under
Non-Equity Incentive Plan Awards

    Estimated Future Payouts
Under Equity Incentive Plan
Awards
   

All Other

Stock

Awards:

Number

of Shares

of Stock

or Units

(#)

   

All Other

Option

Awards:

Number of

Securities

Underlying

Options

(#)

   

Exercise

or Base

Price of

Option

Awards

($/Sh)

   

Grant

Date

Value of

Stock and

Option

Awards

($)(1)

 

    Name and

    Grant Date

 

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

 

Nicholas I. Fink

                                                                               

2/22/21(2)

  $ 0     $ 1,450,000     $ 2,900,000                                                          

2/22/21(3)

                                                            62,627     $ 86.94     $ 1,537,493  

2/22/21(4)

                                                    17,639                     $ 1,537,503  

2/22/21(5)

                            0       35,278       70,556                             $ 3,075,007  

Patrick D. Hallinan

                                                                               

2/22/21(2)

 

$

0

 

 

$

544,000

 

 

$

1,088,000

 

                                                       

2/22/21(3)

                                                         

 

19,348

 

 

$

86.94

 

 

$

474,993

 

2/22/21(4)

                                                 

 

5,449

 

                 

$

474,962

 

2/22/21(5)

                         

 

0

 

 

 

10,899

 

 

 

21,798

 

                         

$

950,011

 

R. David Banyard, Jr.

                                                                               

2/22/21(2)

  $ 0     $ 592,000     $ 1,184,000                                                          

2/22/21(3)

                                                            21,894     $ 86.94     $ 537,498  

2/22/21(4)

                                                    6,166                     $ 537,459  

2/22/21(5)

                            0       12,333       24,666                             $ 1,075,006  

Cheri M. Phyfer

                                                                               

2/22/21(2)

 

$

0

 

 

$

504,000

 

 

$

1,008,000

 

                                                       

2/22/21(3)

                                                         

 

16,039

 

 

$

86.94

 

 

$

393,757

 

2/22/21(4)

                                                 

 

4,517

 

                 

$

393,724

 

2/22/21(5)

                         

 

0

 

 

 

9,035

 

 

 

18,070

 

                         

$

787,536

 

Brett E. Finley

                                                                               

2/22/21(2)

  $ 0     $ 480,000     $ 960,000                                                          

2/22/21(3)

                                                            14,002     $ 86.94     $ 343,749  

2/22/21(4)

                                                    3,944                     $ 343,779  

2/22/21(5)

                            0       7,887       15,774                             $ 687,470  

Robert K. Biggart

                                                                               

2/22/21(2)

 

$

0

 

 

$

427,500

 

 

$

855,000

 

                                                       

2/22/21(4)

                                                 

 

13,767

 

                 

$

1,200,001

 

 

(1)

For stock options, the grant date fair value is based on the Black-Scholes value of $24.55. The grant date fair value of PSAs and RSUs was determined based upon the average of the high and low prices of the Company’s common stock on the grant date: $87.165. Grant date fair values of PSAs and RSUs are computed in accordance with FASB ASC Topic 718. For assumptions used in determining these values, see note 12 to the consolidated financial statements contained in the Company’s Form 10-K.

 

(2)

Amounts in this row reflect the range of potential payments under the Fortune Brands Home & Security, Inc. Annual Executive Incentive Compensation Plan (the “AIP”). The target payout for Messrs. Fink, Hallinan, Banyard, Phyfer, Biggart and Finley is based on 125%, 80%, 80%, 80%, 75% and 80%, respectively, of base salary as of December 31, 2021. See pages 28-29 of the CD&A for further information regarding Annual Cash Incentives.

 

(3)

This row reflects the number of stock options granted under the Company’s 2013 Long-Term Incentive Plan (the “LTIP”) and the grant date fair value of the stock options on the grant date. The 2021 stock options vest ratably in three equal annual installments, subject to continued employment through the applicable vesting dates.

 

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2021 EXECUTIVE COMPENSATION (CONTINUED)

 

 

 

(4)

The amounts in this row reflect the number of RSUs that were granted under the LTIP and the grant date fair value of the RSUs on the grant date. The 2021 RSUs vest in three equal annual installments, subject to continued employment through the applicable vesting dates, except with respect to Mr. Biggart’s award which vested on December 27, 2021.

 

(5)

The amounts in this row reflect the range of potential payouts for PSAs that were granted under the LTIP for the 2021-2023 performance period. The performance goals for the 2021-2023 PSAs are EBITDA (weighted 75%) and average ROIC (weighted 25%).

 

OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR-END

 

     
     Option Awards   Stock Awards  
Name  

Number of

Securities

Underlying

Unexercised

Options (#)

Exercisable

(1)

   

Number of

Securities

Underlying

Unexercised

Options (#)

Unexercisable

(2)

   

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options (#)

   

Option

Exercise

Price ($)

   

Option  

Expiration  

Date  

 

Number

of Shares

or Units
of
Stock

Held

that

Have
Not

Vested

(#)(3)

   

Market

Value of

Shares or

Units of

Stock

Held that

Have Not

Vested

($)(4)

   

Equity

Incentive

Plan

Awards:

Number

of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

Vested

(#)(5)

 

Equity

Incentive

Plan

Awards:

Market

or Payout

Value of

Unearned

Shares,

Units or

Other

Rights That

Have Not

Vested

(#)(6)

 

Nicholas I. Fink

 

 

0

 

 

 

62,627

 

         

 

$86.94

 

 

2/22/31  

 

 

42,287

 

 

 

$4,520,480

 

 

75,288

 

 

$8,048,287

 

   

 

0

 

 

 

21,844

 

         

 

$83.07

 

 

12/7/30  

                           
   

 

32,747

 

 

 

65,493

 

         

 

$69.34

 

 

2/24/30  

                           
   

 

44,643

 

 

 

22,321

 

         

 

$46.99

 

 

  3/5/29  

                           
   

 

28,269

 

 

 

0

 

         

 

$63.51

 

 

2/26/28  

                           
   

 

27,261

 

 

 

0

 

         

 

$58.21

 

 

2/27/27  

                           
   

 

27,600

 

 

 

0

 

         

 

$50.22

 

 

2/28/26  

                           

Patrick D. Hallinan

 

 

0

 

 

 

19,348

 

         

 

$86.94

 

 

2/22/31  

 

 

15,375

 

 

 

$1,643,588

 

 

23,210

 

 

$2,481,149

 

   

 

0

 

 

 

10,922

 

         

 

$83.07

 

 

12/7/30  

                           
   

 

10,076

 

 

 

20,152

 

         

 

$69.34

 

 

2/24/30  

                           
   

 

23,413

 

 

 

11,706

 

         

 

$47.99

 

 

2/21/29  

                           
   

 

31,802

 

 

 

0

 

         

 

$63.51

 

 

2/26/28  

                           
   

 

5,165

 

 

 

0

 

         

 

$65.41

 

 

  7/3/27  

                           
   

 

16,109

 

 

 

0

 

         

 

$58.21

 

 

2/27/27  

                           
   

 

8,500

 

 

 

0

 

         

 

$50.22

 

 

2/28/26  

                           
   

 

7,850

 

 

 

0

 

         

 

$47.87

 

 

2/23/25  

                           

R. David Banyard, Jr.

 

 

0

 

 

 

21,894

 

         

 

$86.94

 

 

2/22/31  

 

 

28,222

 

 

 

$3,016,932

 

 

26,816

 

 

$2,866,630

 

   

 

0

 

 

 

9,830

 

         

 

$83.07

 

 

12/7/30  

                           
   

 

11,854

 

 

 

23,708

 

         

 

$69.34

 

 

2/24/30  

                           

Cheri M. Phyfer

 

 

0

 

 

 

16,039

 

         

 

$86.94

 

 

2/22/31  

 

 

16,295

 

 

 

$1,741,936

 

 

18,811

 

 

$2,010,896

 

   

 

0

 

 

 

8,737

 

         

 

$83.07

 

 

12/7/30  

                           
   

 

8,002

 

 

 

16,002

 

         

 

$69.34

 

 

2/24/30  

                           
   

 

0

 

 

 

7,440

 

         

 

$46.99

 

 

  3/5/29  

                           

Brett E. Finley

 

 

0

 

 

 

14,002

 

         

 

$86.94

 

 

2/22/31  

 

 

10,994

 

 

 

$1,175,259

 

 

17,301

 

 

$1,849,477

 

   

 

0

 

 

 

6,553

 

         

 

$83.07

 

 

12/7/30  

                           
   

 

7,705

 

 

 

15,410

 

         

 

$69.34

 

 

2/24/30  

                           
   

 

17,559

 

 

 

8,780

 

         

 

$47.99

 

 

2/21/29  

                           
   

 

22,379

 

 

 

0

 

         

 

$63.51

 

 

2/26/28  

                           

Robert K. Biggart

 

 

20,448

 

 

 

0

 

         

 

$69.34

 

 

2/24/30  

 

 

0

 

 

 

$0

 

 

8,328

 

 

$890,263

 

   

 

23,595

 

 

 

0

 

         

 

$47.99

 

 

2/21/29  

                           
   

 

23,557

 

 

 

0

 

         

 

$63.51

 

 

2/26/28  

                           
   

 

23,544

 

 

 

0

 

         

 

$58.21

 

 

2/27/27  

                           
   

 

23,600

 

 

 

0

 

         

 

$50.22

 

 

2/28/26  

                           
   

 

24,400

 

 

 

0

 

         

 

$47.87

 

 

2/23/25  

                           

 

  (1)

Each outstanding stock option that was exercisable on December 31, 2021 is listed in this column.

 

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2021 EXECUTIVE COMPENSATION (CONTINUED)

 

 

 

  (2)

Each outstanding stock option that was not yet exercisable on December 31, 2021 is listed in this column. Generally, stock options vest in three equal annual installments, subject to continued employment through the applicable vesting dates. Stock option granted in December 2020, will vest 50% in 2022 and 50% in 2023, subject to continued employment through the applicable vesting dates. Due to his retirement, all of Mr. Biggart’s outstanding stock options vested in December 2021. The chart below reflects the number of outstanding stock options that will vest during each of 2022, 2023 and 2024 (assuming each NEO’s continued employment through the applicable vesting date):

 

     

Number of Options Vesting by Year

 
Name          2022                  2023                  2024      

Nicholas I. Fink

  

 

86,864    

 

  

 

64,544    

 

  

 

20,877    

 

Patrick D. Hallinan

  

 

33,692    

 

  

 

21,986    

 

  

 

6,450    

 

R. David Banyard, Jr.

  

 

24,066    

 

  

 

24,067    

 

  

 

7,299    

 

Cheri M. Phyfer

  

 

25,155    

 

  

 

17,716    

 

  

 

5,347    

 

Brett E. Finley

  

 

24,428    

 

  

 

15,649    

 

  

 

4,668    

 

 

  (3)

Each outstanding RSU that had not yet vested as of December 31, 2021 is listed in this column. Generally, RSUs vest in three equal annual installments subject to continued employment through the applicable vesting dates. RSUs granted in December 2020, vest 50% in 2022 and 50% in 2023, subject to continued employment through the applicable vesting dates. Due to his retirement, all of Mr. Biggart’s outstanding RSUs vested in December 2021. The chart below reflects the number of outstanding RSUs that will vest during 2022, 2023 and 2024 (assuming each NEO’s continued employment through the applicable vesting date):

 

     

Number of RSUs Vesting by Year

 
Name          2022                  2023                  2024        

Nicholas I. Fink

  

 

20,826    

 

  

 

15,581    

 

  

 

5,880    

 

Patrick D. Hallinan

  

 

8,173    

 

  

 

5,385    

 

  

 

1,817    

 

R. David Banyard, Jr.

  

 

20,332    

 

  

 

5,834    

 

  

 

2,056    

 

Cheri M. Phyfer

  

 

10,441    

 

  

 

4,348    

 

  

 

1,506    

 

Brett E. Finley

  

 

5,885    

 

  

 

3,794    

 

  

 

1,315    

 

 

  (4)

This column reflects the value of the outstanding RSUs that have not yet vested using the December 31, 2021 closing price of the Company’s common stock of $106.90.

 

  (5)

The amounts reported in this column are based on achieving target performance goals for PSAs granted in 2020 and 2021, as the performance for each performance period is measured on a cumulative basis and is not determinable until the end of the three year performance period. The PSAs vest based on the Company’s performance over the three year performance period and are subject to the executive’s continued employment through the end of the performance period. The description on page 30 and the footnotes to the table titled “2021 Grants of Plan-Based Awards” on pages 34 and 35 provide additional detail on the PSAs granted in 2021. The chart below reflects the number of PSAs outstanding as of December 31, 2021 (assuming target and each NEO’s continued employment):

 

   
     

Number of PSA Outstanding By Performance Period

 

 
Name   

2020-2022

    

2021-2023

 

Nicholas I. Fink

     40,010                    35,278              

Patrick D. Hallinan

     12,311                    10,899              

R. David Banyard, Jr.

     14,483                    12,333              

Cheri M. Phyfer

     9,776                    9,035              

Brett E. Finley

     9,414                    7,887              

Robert K Biggart

     8,328                    0              

 

  (6)

This column reflects the value of the PSAs using the December 31, 2021 closing price of the Company’s common stock of $106.90.

 

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Table of Contents

 

 

2021 EXECUTIVE COMPENSATION (CONTINUED)

 

 

 

2021 OPTION EXERCISES AND STOCK VESTED  
     

Option Awards

 

    

Stock Awards

 

 
Name   

Number of Shares

Acquired on

Exercise (#)(1)

    

Value

Realized Upon

Exercise ($)(2)

    

Number of Shares

Acquired on

Vesting (#)(3)

    

Value

Realized Upon

Vesting ($)(4)

 

Nicholas I. Fink

  

 

0

 

  

 

$              0

 

  

 

76,981

 

  

 

$7,939,299

 

Patrick D. Hallinan

  

 

0

 

  

 

$              0

 

  

 

40,683

 

  

 

$4,199,983

 

R. David Banyard, Jr.

  

 

0