DEF 14A 1 cr3817611-def14a.htm DEFINITIVE PROXY STATEMENT

Table of Contents

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 Rule 14a-12

Crane Co.

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
  No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:

 

Table of Contents

 

Table of Contents

 

CRANE CO.

100 FIRST STAMFORD PLACE
STAMFORD, CONNECTICUT 06902

 

Dear Fellow Stockholders:

 

Crane Co. cordially invites you to attend the Annual Meeting of Stockholders of Crane Co., which will be held at 10:00 a.m., Eastern Daylight Time, on Monday, April 26, 2021, at 100 First Stamford Place, Ground Floor Conference Room, Stamford, Connecticut.

 

The Notice of Annual Meeting and Proxy Statement on the following pages describe the matters to be presented at the meeting. Management will report on current operations, and there will be an opportunity to ask questions regarding Crane Co. and its activities.

 

It is important that your shares be represented at the meeting, regardless of the size of your holdings. If you are unable to attend in person, I urge you to participate by voting your shares by proxy. You may do so by using the internet address or the toll-free telephone number set forth in this Proxy Statement, or by requesting a printed copy of the proxy materials and completing and returning by mail the proxy card you receive in response to your request.

 

Sincerely,

 

James L.L. Tullis

Chairman of the Board
March 12, 2021

       
   This Proxy Statement
  and the 2020 Annual Report to Stockholders are available at www.craneco.com/ar
       


2021 Proxy Statement 1
 

Table of Contents

 

This page intentionally left blank.

 

Table of Contents

     
  NOTICE OF ANNUAL MEETING OF STOCKHOLDERS  
  APRIL 26, 2021  
     

 

To the Stockholders of Crane Co.:

 

The 2021 ANNUAL MEETING OF STOCKHOLDERS OF CRANE CO. will be held for the following purposes:

 

WHEN:
April 26, 2021
Monday 10:00 a.m.
Eastern Daylight Time
 
WHERE:
100 First Stamford Place
Ground Floor Conference Rm Stamford, Connecticut
 
HOW TO VOTE:
By Phone
800-652-VOTE (8683)
in the United States,
United States territories, and Canada
 
  By Mail
If you have requested a paper copy of the proxy materials, complete, sign, and return the proxy card.
 
By Internet                
www.envisionreports.com/cr
 
In Person
Stockholders at the close of business on February 26, 2021, are entitled to vote at the meeting in person.
 
By Scanning
You can vote your shares online by scanning the QR code on your proxy card.
 
    Board
Proposal   Recommendation
Item 1 To elect ten directors to serve for one-year terms until the annual meeting of stockholders in 2022

FOR each director

► Page 11

Item 2 To consider and vote on a proposal to ratify the selection of Deloitte & Touche LLP as independent auditors for Crane Co. for 2021

FOR

► Page 31

Item 3 To consider and vote on a proposal to approve, by a non-binding advisory vote, the compensation paid by the Company to certain executive officers

FOR

► Page 34

Item 4 To consider and vote on a proposal to approve the 2018 Amended & Restated Stock Incentive Plan

FOR

► Page 73

In addition, any other business properly presented may be acted upon at the meeting.

In order to assure a quorum at the 2021 Annual General Meeting of Stockholders of Crane Co. (the “Annual Meeting”), it is important that stockholders who do not expect to attend in person use the internet address or the toll-free telephone number listed in this Proxy Statement to vote. If you have requested paper copies of the proxy materials, you can vote by completing and returning the proxy card enclosed in those materials.

Any stockholder of Crane Co., any past or present associate, and other invitees may attend the Annual Meeting. Due to the ongoing COVID-19 pandemic, attendees will be required to comply with various health and safety protocols including wearing a cloth face covering and social distancing. We continue to monitor COVID-19 developments and if we determine that alternative Annual Meeting arrangements are advisable or required, then we will announce any changes in advance in a press release available on our website at www.craneco.com and filed with the Securities and Exchange Commission.

The Board of Directors has fixed the close of business on February 26, 2021, as the record date for the meeting. Stockholders at that date and time are entitled to notice of and to vote at the Annual Meeting or any postponement or adjournment of the Annual Meeting. Each share is entitled to one vote. This Notice of Annual General Meeting of Stockholders and related Proxy Statement are first being distributed or made available to stockholders on or about March 12, 2021.

We previously mailed a Notice of Internet Availability of Proxy Materials to all Crane Co. stockholders as of the record date. The notice advised such stockholders that they could view the Proxy Statement and Annual Report online at www.envisionreports.com/cr, or request in writing a paper or e-mail copy of the proxy materials at no cost. The Company is making its proxy materials available electronically as the primary means of furnishing proxy materials to stockholders in order to reduce the environmental impact and cost of our proxy solicitation.

A complete list of stockholders as of the record date will be open to examination by any stockholder during regular business hours at the offices of Crane Co., 100 First Stamford Place, Stamford, Connecticut 06902, for 10 days before the Annual Meeting, as well as at the Annual Meeting.

By Order of the Board of Directors,

 

Anthony M. D’Iorio

Secretary

March 12, 2021


If you expect to attend the annual meeting in person, please contact the Corporate Secretary, Crane Co., 100 First Stamford Place, Stamford, Connecticut 06902, or by email to corpsec@craneco.com.

2021 Proxy Statement 3
 

Table of Contents

 

     
  Proxy Summary  
     

 

Director Nominees

 

      Director Crane Co. Committees
  Name and Profession Age Since AC NGC EC MOCC
Martin R. Benante
Retired Chairman of the Board and Chief Executive Officer, Curtiss-Wright Corporation
68 2015        
Donald G. Cook
General, United States Air Force (Retired)
74 2005        
Michael Dinkins
Retired Executive Vice President and Chief Financial Officer, Integer Holdings Corporation
66 2019        
Ronald C. Lindsay
Retired Chief Operating Officer, Eastman Chemical Company
62 2013        
Ellen McClain
Chief Financial Officer, Year Up
56 2013        
Charles G. McClure, Jr.
Managing Partner, Michigan Capital Advisors
67 2017        
Max H. Mitchell
President and Chief Executive Officer of Crane Co.
57 2014        
Jennifer M. Pollino
Executive Coach and Consultant, JMPollino LLC
56 2013        
John S. Stroup
Executive Chairman, Belden, Inc.
54 2020        
James L. L. Tullis
Chairman, Tullis Health Investors, Inc.
73 1998        

 

AC Audit Committee NGC     Nominating and Governance Committee    Chair    Member
EC Executive Committee MOCC     Management Organization and Compensation Committee        

 

4 Crane Co.
   
 

Table of Contents

 

Proxy Summary

Corporate Governance Highlights

 

Recent Governance Enhancements

 

As stated in our Corporate Governance Guidelines, the Board is responsible for helping to create a culture of high ethical standards and is committed to continually improving its corporate governance process, practices and procedures. Accordingly, the Board has adopted the following best practices in corporate governance.

 

Board renewal and composition (eight new directors in the last eight years and increased board size in 2020): The Board, specifically through the Nominating and Governance Committee, continually evaluates the skills, expertise, integrity, diversity, and other qualities believed to enhance the Board’s ability to manage and direct the affairs and business of the Company. Since 2013, the Board has added eight new directors and, in 2020, increased its size from nine to ten directors, to accomplish these goals. See additional information beginning on page 13 about our Board nominees.

 

Annual election of directors: Following the recommendation of the Board, stockholders approved amendments to declassify the Board of Directors at our 2017 annual meeting of stockholders. Since the 2017 annual meeting, all directors have been elected to serve one-year terms expiring at the following annual meeting. As of the 2019 Annual Meeting, our transition to annual election of all of our directors was complete. We believe that directors should be re-elected annually, providing more accountability than boards that are staggered and enhancing the ability to promptly evaluate a board’s performance.

 

       
  Ongoing Board Governance Practices
       
 

•  Separate Chairman and CEO roles

•  100% independent Board committees

•  Regular executive sessions of non-management directors

•  Annual Board and committee performance self-evaluations

•  100% Board and committee attendance in 2020

•  Offer of resignation upon significant change in primary job responsibilities

•  Directors are elected annually

•  Majority voting and director resignation policy for directors in uncontested elections

 

 

•  Stringent conflict of interest policies

•  Directors subject to stock ownership guidelines and anti-hedging and pledging policies

•  Director retirement policy

•  Strict over-boarding policy for directors

•  Diverse Board with the appropriate mix of skills, experience and perspective

•  Comprehensive director nomination and Board refreshment process

•  Oversight of sustainability and human capital matters impacting our business

 

 

2020 Performance Highlights

 

In March 2020, the World Health Organization categorized the novel coronavirus (“COVID-19”) as a pandemic. During the remainder of 2020, the COVID-19 pandemic continued to spread throughout the United States and other countries across the world, significantly impacting the health and safety of people around the world and causing wide-spread economic disruptions to the financial markets, the global economy, and to our business.

 

The COVID-19 pandemic had a substantial impact on demand for most of our businesses and related end markets, and that impact was completely beyond the control of management. The pandemic related demand destruction was so severe that comparison of actual 2020 results to our original 2020 plan and financial targets, as developed in late 2019 and approved by the Board in early 2020, is not meaningful.

 

2021 Proxy Statement 5
   
 

Table of Contents

 

Proxy Summary

 

The COVID-19 pandemic and related uncertainty also posed unique and substantial challenges for our normal forecasting and budgeting methodologies throughout 2020. Those challenges were so significant that most U.S. public industrial companies withdrew financial guidance in the spring of 2020. However, consistent with our desire to be fully transparent with our stockholders, we publicly revised and updated all elements of our typical financial guidance with additional details and granularity on April 27, 2020, concurrent with the release of our first quarter 2020 financial results. Furthermore, we continued to update our views and outlook at each of our successive quarterly earnings calls in July and October. While actual financial results for 2020 fell short of our initial pre-pandemic guidance, they compared favorably to our April 27, 2020 revised guidance.

 

Strong Operational Performance Under Challenging Circumstances

 

We are proud of our response to the unprecedented set of circumstances we faced during 2020, particularly related to the actions we took to ensure the safety and well-being of our associates, and where possible, to retain them through the pandemic. Starting in early March, we quickly adopted new safety protocols and procedures worldwide, in most cases more stringent than, and in advance of, government mandates. We also quickly adopted a new Emergency Pandemic Exception Pay (“EPE”) program providing additional paid time off to all Crane associates globally that were directly or indirectly impacted by COVID-19.

 

From a financial perspective, we believe that we were on-track to meet or exceed our 2020 financial targets before the pandemic hit, consistent with our commentary at our February 27, 2020 annual Investor Day event. While final 2020 financial results were below our original financial targets for the year, we believe that the shortfall was entirely related to the impact of COVID-19, and that our operational performance and execution against long-term strategic objectives were excellent considering the unexpected market related challenges arising from the pandemic.

 

Sales in 2020 were $2,937 million, or 11%, below sales in 2019. The decline in sales was comprised of a 17% decline in core sales partially offset by a 6% benefit from acquisitions and slightly favorable foreign exchange rates. Notably, the core sales decline compared to our pre-pandemic expectations was most severe at two of our highest margin businesses: the commercial aircraft portion of Aerospace & Electronics which was significantly impacted by reduced passenger air travel (core sales 38% below prior year), and at Crane Payment Innovations where our products cater to consumer traffic, for example, at various retail stores, casino gaming and mass transit ticketing locations, among others (core sales 37% below prior year). Despite the sharp market-driven declines, we believe that we gained market share across most of our primary businesses during 2020.
Adjusted operating profit in 2020 declined 35% compared to 2019. Excluding the impact of acquisitions, decremental margins (change in adjusted operating profit divided by change in sales) of 35%, were an impressive result given the magnitude of the sales decline and the highly negative business and product mix, reflecting extremely strong operational execution. Adjusted earnings per share (EPS) in 2020 declined 36% compared to 2019, similar to the decline in adjusted operating profit. These results also reflect the impact of our cost reduction initiatives which delivered approximately $105 million of gross savings in 2020.
Free cash flow in 2020 declined 15% compared to 2019, a more muted decline than for adjusted operating profit or adjusted EPS, reflecting strong working capital management and controlled capital expenditures.

 

6 Crane Co.
   
 

Table of Contents

 

Proxy Summary

 

 

See “Non-GAAP Reconciliation” beginning on page 84 for more detail regarding Special Items impacting EPS, free cash flow and operating margins, as well as a reconciliation of the non-GAAP measures used herein.

 

In addition to operational execution during 2020, we continued to execute on all key strategic growth initiatives to ensure that Crane emerges from the pandemic related downturn stronger than competitors and positioned for long-term stockholder value creation. Notable accomplishments included:

 

The integration of Cummins-Allison Corp. (acquired in December 2019) and the integration of Instrumentation & Sampling (acquired in January 2020), as well as continued work to identify additional acquisition opportunities.
   
We introduced new products and solutions at an accelerating pace in 2020, most notably at Fluid Handling and Payment & Merchandising Technologies.
   
We continued to invest in the development of next-generation technologies, most notably at Aerospace & Electronics and Payment & Merchandising Technologies.
   
The combination of new product development and advances in our technology capabilities resulted in share gains across our portfolio despite disruptions related to the pandemic.
   
We continued to execute on repositioning actions in Fluid Handling initiated at the end of 2019 which involved facility consolidations to better geographically align our manufacturing footprint with customer needs, and to improve our cost position.

 

Taken together, we believe all these actions position the Company for years of profitable growth.

 

TSR Lagged Benchmarks Given End Market Headwinds

 

Despite this strong operational performance, total stockholder return (share price appreciation plus reinvested dividends) (TSR) trailed that of the most relevant benchmark indices on a one- and three-year basis. We believe that underperformance is primarily attributable to our exposure to two end markets that were among the most negatively impacted by the COVID-19 pandemic, and for which investors had substantial concerns about the short- and medium-term outlook: commercial aerospace, and the process industries which include oil & gas.

 

Crane Co. TSR for Periods Ending December 31, 2020

 

 

2021 Proxy Statement 7
   
 

Table of Contents

 

Proxy Summary

 

Consistent with the Management Organization and Compensation Committee’s continued focus on aligning pay with performance, and despite the extraordinary circumstances in 2020, all variable elements of management’s compensation declined compared to 2019, reflecting the business performance shortfalls relative to target, and lower three-year relative TSR compared to the prior year. Further, the performance-based restricted share units (PRSUs) granted to our named executive officers (NEOs) for the three-year period 2018-2020 vested at 0% due to below performance threshold resulting in 0 shares payout for 2020, reflecting the negative TSR for that period. PRSUs represent 41% of target pay for our CEO and, 23% of target pay, on average, for our other NEOs. In addition, reflecting the impact that the year’s financial performance had on both stockholders and other stakeholders, including Crane associates, our executive officers, including our NEOs, voluntarily took a temporary reduction in base pay from April through December (20% for the CEO and 10% for all other executive officers).

 

2020 Compensation Highlights

 

Compensation Best Practices

 

The Management Organization and Compensation Committee is firmly committed to implementing an executive compensation program that aligns management and stockholder interests, encourages executives to drive sustainable stockholder value creation, and helps retain key personnel. Moreover, despite the global disruptions and adverse impact to the Company’s business caused by the ongoing pandemic, we remained committed to maintaining our core compensation plan design. Key elements of our pay practices are as follows:

 

         
      WHAT WE DO     WHAT WE DON’T DO  
 

•  Pay for performance, aligning executive pay with Company results and stockholder returns

•  Require significant stock ownership by executives, including a 6x base salary requirement for the CEO

•  Majority of executive variable pay is delivered in long-term equity-based awards

•  Appropriate mix of fixed and variable pay to balance employee retention with Company goals, both annual and long-term

•  Incentive compensation subject to clawback

•  Management Organization and Compensation Committee retains independent compensation consultant

 

•  No excise tax gross-ups upon change in control

•  No multi-year guaranteed incentive awards

•  No fixed-duration employment contracts with executive officers

•  No hedging or pledging of Company stock permitted

•  No excessive perquisites for executives

•  No supplemental executive retirement plan (SERP) benefits, and no further pension benefit accruals for executives

•  No repricing of options

•  No discounted stock options

 

 

8Crane Co.
 

Table of Contents

 

Proxy Summary

 

Pay for Performance Alignment

 

85% of CEO Target Pay is Performance-Based

 

The following table summarizes the major elements of our CEO compensation program, which is designed to link pay and performance.

 

 

 

Totals may not sum due to rounding.

 

Our Philanthropy, Sustainability and Equality Highlights

 

Philanthropy

 

 

Sustainability

 

 

Equality

 

                    

See additional details on the Company’s efforts and performance with respect to philanthropy, sustainability, and equality, at www.craneco.com/pse.

 

2021 Proxy Statement 9
   
 

Table of Contents

     
  Proxy Statement  
     

 

Table of Contents

 

ITEM 1: ELECTION OF DIRECTORS 11
Crane Co. Board Composition 11
Board of Directors Nominees 13
Board’s Role and Responsibilities 21
Board Structure 23
Board Processes 26
Corporate Governance and Sustainability 28
Compensation of Directors 29
   
ITEM 2: RATIFICATION OF THE SELECTION OF AUDITORS 31
Annual Evaluation and Selection of Auditors 31
Principal Accounting Firm Fees 31
Pre-Approval Policy and Procedures 32
Report of the Audit Committee 32
   
ITEM 3: ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS 34
COMPENSATION DISCUSSION AND ANALYSIS 35
Executive Summary 36
Compensation Principles 42
Elements of Compensation and 2020 Decisions 42
Compensation Decision-Making Process 52
Policies and Practices Related to Our Executive Compensation Program 55
Other Arrangements with Our Named Executive Officers 57
Management Organization and Compensation Committee Report 58
   
2020 EXECUTIVE COMPENSATION TABLES 59
Annual Compensation of the Named Executive Officers 59
2020 Summary Compensation Table 60
2020 Grants of Plan-Based Awards 62
2020 Option Exercises and Stock Vested 64
2020 Outstanding Equity Awards at Fiscal Year-End 65
Retirement Benefits 66
Nonqualified Deferred Compensation Benefits 67
Potential Payments Upon Termination or Change in Control 68
Pay Ratio 71
Equity Compensation Plan Table 72
   
ITEM 4: PROPOSAL TO APPROVE THE 2018 AMENDED & RESTATED STOCK INCENTIVE PLAN 73
Introduction 73
Principal Provisions of Crane Co. 2018 Amended & Restated Stock Incentive Plan 73
Federal Income Tax Consequences 79
Information on Equity Compensation Plans as of January 31, 2021 81
   
BENEFICIAL OWNERSHIP OF COMMON STOCK BY DIRECTORS AND MANAGEMENT 82
   
PRINCIPAL STOCKHOLDERS OF CRANE CO. 83
   
NON-GAAP RECONCILIATION 84
   
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND THE ANNUAL MEETING 87
   
APPENDIX A: 2018 AMENDED & RESTATED STOCK INCENTIVE PLAN 90

 

10 Crane Co.
 

Table of Contents

     
  Item 1: Election of Directors  
     

 

PROPOSAL 1

The Board recommends voting FOR each of the Director Nominees

 

Crane Co. Board Composition

 

Our Corporate Governance Guidelines provide that the Board should generally have from nine to twelve directors, a substantial majority of whom must qualify as independent directors under the listing standards of the New York Stock Exchange (“NYSE”).

 

The Board of Directors currently consists of ten members, nine of whom are independent. On December 8, 2020, the Board of Directors voted to increase the size of the Board from a total of nine directors to ten and to appoint John S. Stroup to fill that newly created interim vacancy. Mr. Stroup was also appointed to serve as a member of the Management Organization and Compensation Committee.

 

The ten directors whose terms will expire at the time of the Annual Meeting, but will serve until their successors are duly elected and qualified, are Martin R. Benante, Donald G. Cook, Michael Dinkins, Ronald C. Lindsay, Ellen McClain, Charles G. McClure, Jr., Max H. Mitchell, Jennifer M. Pollino, John S. Stroup, and James L. L. Tullis. The Board of Directors has nominated each of them for re-election by the stockholders for a one-year term to expire at the 2022 annual meeting of stockholders. The Board of Directors has determined that all directors other than Mr. Mitchell are independent directors.

 

The Company believes a board with between nine to twelve directors is appropriate to generate a manageable diversity of thought, perspective and insight in a cost-efficient manner.

 

Director Nominating Procedures

 

The Board believes that a company’s directors should possess and demonstrate, individually and as a group, an effective and diverse combination of skills and experience to guide the management and direction of the Company’s business and affairs and to align with our long-term strategic vision. The Board has charged the Nominating and Governance Committee with responsibility for evaluating the mix of skills, experience and diversity of background of the Company’s directors and director nominees, as well as leading the evaluation process for the Board and its committees.

 

Criteria for Board membership take into account skills, expertise, integrity, diversity, and other qualities which are expected to enhance the Board’s ability to manage and direct Crane Co.’s business and affairs. In general, nominees for director should have an understanding of the workings of large business organizations such as Crane Co., and senior level executive leadership experience. In addition, nominees should have the ability to make independent, analytical judgments, and they should be effective communicators with the ability and willingness to devote the time and effort required to be an effective and contributing member of the Board.

 

A director who serves as a chief executive officer may not serve on more than two public company boards in addition to our Board, and other directors should not sit on more than four public company boards in addition to our Board. The members of the Audit Committee may not serve on more than two other audit committees of public companies. All of the director nominees are in compliance with these requirements.

 

The Nominating and Governance Committee has proposed, and the Board of Directors recommends, that each of the ten nominees be elected to the Board. If, before the meeting, any nominee becomes unavailable for election as a director, the elected directors may make an interim vacancy appointment to the Board after the Annual Meeting, or the Board of Directors may reduce the number of directors to eliminate the vacancy.

 

2021 Proxy Statement 11
 

Table of Contents

Item 1: Election of Directors

 

Board Composition

 

Our Board takes an active and thoughtful approach to board composition and is focused on building and maintaining a diverse board. In conducting its annual review of director skills and Board composition, the Nominating and Governance Committee determined and reported to the Board its judgment that the Board as a whole demonstrates a diversity of organizational and professional experience, education, skills, and other personal qualities and attributes that enables the Board to perform its duties in a highly effective manner. The Company is proud to have such a diverse Board, including with respect to gender and ethnicity.

 

Board Snapshot

 

 

Board Skills and Experience

 

Our individual Board members have a wide range of skills and experience from within and outside our industry, giving them diverse perspectives from which to oversee the Company’s strategy of manufacturing a diverse range of highly engineered industrial products in markets where we have competitive differentiation and scale, and growing the business globally organically and through domestic and international acquisitions. Our Board members possess expertise in, among other things, acquisitions and other business combinations, diversified industrial operations and manufacturing, international business, corporate finance, human capital management, and organizational leadership.

 

Summary of Board Skills and Experience

 

 
Public company multinational CEO experience          
Public company multinational CFO experience                  
General finance acumen
Corporate governance/board experience
Mergers & acquisitions
Manufacturing operations      
Expertise with one or more of Crane Co.’s end markets        
Intellectual capital development (human capital)
Independent  
Self-Identified Race/Ethnicity                    
African American                
White Caucasian    
Self-Identified Gender                    
Male    
Female                

 

The Board Composition and Board Skills and Experience sections above reflect the Board’s current ten director nominees.

 

12 Crane Co.  
 

Table of Contents

Item 1: Election of Directors

 

Board of Directors Nominees

 

Nominees to be Elected for Terms to Expire in 2022

 

         
  MARTIN R. BENANTE    
 

Age: 68

Director Since: 2015

 

 

Crane Co. Committees: Audit (Chair);

Nominating & Governance

 

 

   
 

Retired Chairman of the Board and Chief Executive Officer of Curtiss-Wright Corporation, Charlotte, NC (supplier of highly engineered products and services to commercial, industrial, defense, and energy markets), having served from 2000 to 2015.

 

Other Directorships:

•    Curtiss-Wright Corporation from 1999 to 2015

 

   
 

Relevant Skills and Experience:

•   Strategic, operational, and managerial expertise gained through a more than 35-year career with a leading industrial manufacturer of highly engineered products in critical service applications, serving markets similar to those of the Company

•   CEO of a publicly traded company with international operations

•   Expertise in domestic and international mergers and acquisitions, and in the global integration of acquired companies

   

 

         
  DONALD G. COOK    
 

Age: 74

Director Since: 2005

 

 

Crane Co. Committees: Nominating and Governance (Chair);

Management Organization and Compensation; Executive

 

 

   
 

General, United States Air Force (Retired); consultant; independent director since 2005.

 

Other Directorships:

•   Texas Pacific Land Corporation since December 2020

•   Cybernance, Inc. since 2016

•   USAA Federal Savings Bank from 2007 to 2018

•   U.S. Security Associates, Inc. from 2011 to 2018

 

   
 

Relevant Skills and Experience:

•   Significant experience with organizational and intellectual capital matters, and leadership and strategy, gained as a highly decorated United States Air Force Four Star General (retired)

•   Commands included Air Education and Training at Randolph Air Force Base, a Flight Training Wing and two Space Wings, and service as a Legislative Liaison in the United States Senate Liaison Office

   

 

Note: Age calculations for all directors are as of the Record Date.

 

2021 Proxy Statement 13
 

Table of Contents

Item 1: Election of Directors

 

         
  MICHAEL DINKINS    
 

Age: 66

Director Since: 2019

 

 

Crane Co. Committees: Audit; Nominating and Governance

 

 

   
 

Retired Executive Vice President and Chief Financial Officer, Integer Holdings Corporation, Plano, TX (leader in advanced medical device outsourcing).

 

Other Directorships:

•   The Shyft Group since 2020

•   Community Health Systems, Inc. since 2017

•   National Council on Compensation Insurance, Inc. since 2015

 

   
 

Relevant Skills and Experience:

•   Sophisticated financial expertise acquired through public company chief financial officer, chief executive officer and financial, IT and internal audit roles

•   Significant experience with complex leveraged refinancing and equity financing (initial public offering and secondary markets) transactions

•   CEO of a publicly traded company with international operations

•   Expertise in the global integration of acquired companies

•   National Association of Corporate Directors – Directorship Certification®

   

 

         
  RONALD C. LINDSAY    
 

Age: 62

Director Since: 2013

 

 

Crane Co. Committees: Audit; Management Organization and Compensation

 

 

   
 

Retired Chief Operating Officer of Eastman Chemical Company, Kingsport, TN (manufacturer of specialty chemicals, plastics, and fibers). Chief Operating Officer from 2013 to 2016, and Executive Vice President, Specialty Fluids and Intermediates, Fibers, Adhesives and Plasticizers Worldwide Engineering, Construction and Manufacturing Support, from 2011 to 2013. Positions of increasing responsibility with Eastman Chemical Company from 1980, including Senior Vice President from 2006 to 2009 and Executive Vice President from 2009 to 2013.

 

 

 

 

 

 

   
 

Relevant Skills and Experience:

•   Corporate strategy, operational, sales, and manufacturing expertise gained by extensive senior executive experience with Eastman Chemical Company, a leading chemical manufacturer served by the Company’s Fluid Handling Group

   

 

14 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

         
  ELLEN McCLAIN    
 

Age: 56

Director Since: 2013

 

 

Crane Co. Committees: Audit; Management Organization and Compensation

 

 

   
 

Chief Financial Officer, Year Up, Boston, MA (not-for-profit provider of job training services) since 2015. Senior management and financial positions with New York Racing Association, Inc., Ozone Park, NY (operator of thoroughbred racetracks), including President from 2012 to 2013. Vice President, Finance of Hearst-Argyle Television, Inc., New York, NY (operator of local television stations) from 2004 to 2009.

 

 

 

 

 

 

   
 

Relevant Skills and Experience:

•   Financial, operational and organizational expertise gained as chief financial officer, chief operating officer, and president of public and private enterprises

•   Broad experience as a senior executive with responsibility for organizational direction and development, financial expertise, and intellectual capital

   

 

         
  CHARLES G. McCLURE, JR.    
 

Age: 67

Director Since: 2017

 

 

Crane Co. Committees: Nominating and Governance; Management Organization and Compensation

 

 

   
 

Managing Partner of Michigan Capital Advisors, Bloomfield, MI (private equity firm investing in Tier 2 and 3 global automotive and transportation suppliers). Prior to co-founding Michigan Capital Advisors in 2014, served from 2004 to 2013 as Chairman of the Board, CEO and President of Meritor, Inc., Troy, MI (leading global supplier of drivetrain, mobility, braking, and aftermarket solutions for commercial vehicle and industrial markets).

 

Other Directorships:

•   3D Systems since 2017; Chairman since 2018

•   Penske Corporation since 2013

•   DTE Energy Company since 2012

 

   
 

Relevant Skills and Experience:

•   More than 35 years of experience in corporate strategy, manufacturing, sales, operational, and intellectual capital expertise in various industries, including transportation

•   Proven leadership skills with over 20 years of experience as chief executive officer, president, and director of major domestic and international corporations, as well as a member of the boards of various industry organizations

   

  

2021 Proxy Statement 15
 

Table of Contents

Item 1: Election of Directors

 

         
  MAX H. MITCHELL    
 

Age: 57

Director Since: 2014

 

 

Crane Co. Committees: Executive

 

 

   
 

President and Chief Executive Officer of the Company since 2014; President and Chief Operating Officer from 2013 to 2014; Executive Vice President and Chief Operating Officer from 2011 to 2013; Group President, Fluid Handling segment of the Company from 2005 to 2012.

 

Other Directorships:

•   Lennox International, Inc. since 2016

•   Manufacturers Alliance for Productivity and Innovation

 

   
 

Relevant Skills and Experience:

•   Comprehensive knowledge of the Company’s culture and operations gained from successive leadership positions of increasing responsibility

•   Demonstrated expertise developing and driving corporate strategy and optimizing portfolio results

•   Extensive knowledge of, and experience with, the global end markets in which the Company trades

•   Broad international and domestic M&A expertise, including successful integration of acquired companies

•   Extensive experience leveraging the Company’s intellectual/human capital management process to drive a performance-based culture

   

 

         
  JENNIFER M. POLLINO    
 

Age: 56

Director Since: 2013

 

 

Crane Co. Committees: Audit; Management Organization and Compensation (Chair)

 

 

   
 

Executive Coach and Consultant, JMPollino LLC, Charlotte, NC since 2012. Executive Vice President, Human Resources and Communications, Goodrich Corporation, Charlotte, NC (aerospace products manufacturer) from 2005 to 2012. Prior positions at Goodrich included President and General Manager of Goodrich Aerospace’s Aircraft Wheels & Brakes Division and of its Turbomachinery Products Division, and Vice President and General Manager of Goodrich Aerospace, Aircraft Seating Products.

 

Other Directorships:

•   Hubbell Incorporated since 2020

•   Kaman Corporation since 2015

•   Wesco Aircraft Holdings, Inc. from 2014 to 2020

 

   
 

Relevant Skills and Experience:

•   Broad experience as an aerospace industry senior executive with responsibility for corporate governance, intellectual capital, and organizational issues, as well as financial and operational expertise, gained in over 20 years as senior executive and general manager with a leading aerospace products company

•   Financial expertise gained as controller of savings and loan association and field accounting officer at Resolution Trust Corporation

•   Certified Public Accountant

   

 

16 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

         
  JOHN S. STROUP    
 

Age: 54

Director Since: 2020

 

 

Crane Co. Committees: Management Organization and Compensation

 

 

   
 

Executive Chairman of Belden, Inc. (global leader in signal transmission and security solutions) since 2020.

 

Other Directorships:

•   Tenneco since 2020

•   Rexnord Corporation since 2012

•   Belden, Inc. since 2005

 

   
 

Relevant Skills and Experience:

•   More than 30 years of experience in industrial manufacturing of highly engineered products and business strategy development

•   Proven leadership skills with over 15 years of experience as president, chief executive officer and director of a global leader in signal transmission and security solutions

   

 

         
  JAMES L. L. TULLIS    
 

Age: 73

Director Since: 1998

 

 

Crane Co. Committees: Executive (Chair)

 

 

   
 

Chairman, Tullis Health Investors, LLC, Palm Beach Gardens, FL (venture capital investments in the health care industry) from 1988 to the present.

 

Other Directorships:

•   ATEC, Inc. since 2018

•   Exagen Diagnostics, Inc. since 2015

•   Lord Abbett & Co. Mutual Funds since 2006; Chairman since 2017

•   electroCore, Inc. from 2018 to 2020

 

   
 

Relevant Skills and Experience:

•   Executive leadership, financial and organizational expertise gained as chief executive officer of venture capital investment group

•   Significant experience and expertise in management, strategy and governance matters gained as director of several public and private companies, including serving as chairman and on the compensation, nominating and governance, audit and executive committees of public companies

   

 

VOTE REQUIRED

 

Our By-laws provide that nominees for director and directors running for re-election to the Board without opposition must receive the affirmative vote of a majority of votes cast. Any director who fails to receive the required number of votes for re-election is required by Crane Co. policy to tender his or her written resignation to the Chairman of the Board for consideration by the Nominating and Governance Committee.

 

2021 Proxy Statement 17
 

Table of Contents

Item 1: Election of Directors

 

Independent Status of Directors

 

Standards for Director Independence

 

The listing standards of the NYSE, as well as Crane Co.’s Corporate Governance Guidelines, require that a majority of the Board be comprised of independent directors. In order for a director to qualify as independent, the Board must affirmatively determine that the director has no material relationship with Crane Co. The Board has adopted the standards set forth below in order to assist the Nominating and Governance Committee and the Board itself in making determinations of director independence. Any of the following relationships would preclude a director from qualifying as an independent director:

 

The director is or was an employee, or the director’s immediate family member is or was an executive officer, of Crane Co. other than as an interim Chairman or interim CEO, unless at least three years have passed since the end of such employment relationship.
   
The director is an employee, or the director’s immediate family member is an executive officer, of an organization (other than a charitable organization) that in any of the last three completed fiscal years made payments to, or received payments from, Crane Co. for property or services, if the amount of such payments exceeded the greater of $1 million or 2% of the other organization’s consolidated gross revenues.
   
The director has received, or the director’s immediate family member has received, direct compensation from Crane Co., if the director is a member of the Audit Committee or the amount of such direct compensation received during any twelve-month period within the preceding three years has exceeded $120,000 per year, excluding (i) director and committee fees and pension and other forms of deferred compensation for prior services (so long as such compensation is not contingent in any way on continued service); (ii) compensation received as interim Chairman or CEO; or (iii) compensation received by an immediate family member for service as a non-executive employee of Crane Co.
   
The director is a current partner of or employed by, or the director’s immediate family member is a current partner of, or an employee who personally works on the audit of Crane Co. at, a firm that is the internal or external auditor of Crane Co., or the director was, or the director’s immediate family member was, within the last three years a partner or employee of such a firm and personally worked on the Crane Co. audit at that time.
   
The director is or was employed, or the director’s immediate family member is or was employed, as an executive officer of another organization, and any of Crane Co.’s present executive officers serves or served on that other organization’s compensation committee, unless at least three years have passed since the end of such service or the employment relationship.
   
The director is a member of a law firm, or a partner or executive officer of any investment banking firm, that has provided services to Crane Co., if the director is a member of the Audit Committee or the fees paid in any of the last three completed fiscal years or anticipated for the current fiscal year exceed the greater of $1 million or 2% of such firm’s consolidated gross revenues.

 

The existence of any relationship of the type referred to above, but at a level lower than the thresholds referred to, does not, if entered into in the ordinary course of business, preclude a director from being independent. The Nominating and Governance Committee and the Board review all relevant facts and circumstances before concluding that a relationship is not material or that a director is independent. Specifically, the Committee’s evaluation process includes the review of (i) direct and indirect relationships between directors and the Company, (ii) a report of transactions with director affiliated entities, (iii) director responses to annual questionnaires, and (iv) Code of Business Conduct and Ethics compliance certifications. In addition, the Nominating and Governance Committee reviews and must approve all charitable contributions in excess of $10,000 made by the Company or through one of the following three independent charitable funds: Crane Fund, Crane Fund for Widows and Children, or Crane Foundation, to any organization for which a director or his or her spouse or other immediate family member serves as a trustee, director, or officer or in any similar capacity. There were no such contributions in 2020.

 

Crane Co.’s Standards for Director Independence, along with its Corporate Governance Guidelines and Code of Business Conduct and Ethics, which apply to Crane Co.’s directors and to all officers and other employees, including our Chief Executive Officer, Chief Financial Officer and Controller, are available on our website at www.craneco.com/governance. See “Code of Business Conduct and Ethics” on page 26.

 

18 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

Independence of Directors

 

The Nominating and Governance Committee has reviewed whether any of the directors other than Mr. Mitchell, who is Chief Executive Officer of Crane Co., has any relationship that, in the opinion of the Committee, (i) is material (either directly or as a partner, stockholder, director, or officer of an organization that has a relationship with Crane Co.) and, as such, would be reasonably likely to interfere with the exercise by such person of independent judgment in carrying out the responsibilities of a director or (ii) would otherwise cause such person not to qualify as an “independent” director under the rules of the NYSE and, in the case of members of the Audit Committee and the Management Organization and Compensation Committee, the additional requirements under Sections 10A and 10C, respectively, of the Securities Exchange Act of 1934 and the associated rules. The Nominating and Governance Committee determined that, other than Mr. Mitchell, all of Crane Co.’s current directors and all persons who served as a director of Crane Co. at any time during 2020 are independent in accordance with the foregoing standards, and the Board of Directors has reviewed and approved the determinations of the Nominating and Governance Committee.

 

In evaluating the independence of all directors, the Board considered all transactions in which the Company and any director had an interest, including all purchases and sales with other companies on which a director served on that company’s board. The Board determined in each case that such purchases and sales were de minimis, comprising less than 0.15% of the Company’s revenues. The Board evaluated these transactions that arose in the ordinary course of business and on the same terms and conditions available to other customers and suppliers. Furthermore, in reaching their determinations regarding the independence of the directors (other than Mr. Mitchell), the Committee and the Board applied the Standards for Director Independence described above and determined that there were no transactions that were likely to affect the independence of any director’s judgment.

 

Board Refreshment

 

At the 2017 annual meeting, our stockholders voted to declassify the Board of Directors, reducing the term of office for directors from three years to one year. In connection with this change, the Corporate Governance Guidelines were amended to increase the retirement age for directors from 72 to 75. Each director who has attained the age of 75 as of the record date for an annual meeting of stockholders is required to tender his or her resignation from the Board. The Corporate Governance Guidelines also require a director to tender his or her resignation from the Board if there is a significant change in his or her primary job responsibilities that could impact the skills or perspectives they bring to the Board. The Nominating and Governance Committee then makes a recommendation to the Board, based on a review of all the circumstances, whether the Board should accept the resignation or ask the director to continue on the Board.

 

The Nominating and Governance Committee will, from time to time, seek to identify potential candidates for director to sustain and enhance the composition of the Board with an appropriate balance of knowledge, experience, skills, expertise, and diversity of thought to enable Crane Co. to formulate and implement its strategic plan. In this process, the Committee will consider potential candidates proposed by other members of the Board, by management, or by stockholders, and the Committee has the sole authority to retain a search firm to assist in this process, at Crane Co.’s expense.

 

Once a person has been identified by the Nominating and Governance Committee as a potential candidate, the Committee, as an initial matter, may collect and review publicly available information regarding the person to assess whether the person should be considered further. Generally, if the person expresses a willingness to be considered and to serve on the Board, and the Committee believes that the person has the potential to be a good candidate, the Committee would seek to gather information from or about the person, review the person’s accomplishments and qualifications in light of any other candidates that the Committee might be considering, and, as appropriate, conduct one or more interviews with the person. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s background, skills and accomplishments. The Committee’s evaluation process does not vary based on whether or not a prospective candidate is recommended by a stockholder.

 

2021 Proxy Statement 19
 

Table of Contents

Item 1: Election of Directors

 

Board Effectiveness

 

Our Board of Directors, led by our Nominating and Governance Committee, evaluates the size and composition of our Board of Directors at least annually, giving consideration to evolving skills, diversity, perspective, and experience needed on our Board of Directors to perform its governance and oversight role as the business grows and evolves and the underlying risks change over time. Below are steps our Board has recently taken to proactively improve our Board effectiveness.

 

 

Nominations by Stockholders

 

In considering candidates submitted by stockholders, the Nominating and Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate. A stockholder proposing to nominate a director must provide certain information about the nominating stockholder and the director nominee, including the following information and must update such information as of the record date for the meeting:

 

the number of shares of Company stock, including details regarding any derivative securities, held by the nominating stockholder and the director nominee and any of their respective affiliates or associates;
   
a description of any agreement regarding how the director nominee would vote, if elected, on a particular matter, including a representation that there are no other understandings, obligations or commitments;
   
a description of any agreement with respect to compensation as a director from any person other than Crane Co., including a representation that there are no other understandings, obligations or commitments;
   
a representation that the director nominee will comply with all publicly disclosed Board policies, including those relating to confidentiality;
   
a completed questionnaire similar to the one required of existing directors, a copy of which the Corporate Secretary will provide upon request;
   
a description of any material interest the nominating stockholder has in any such nomination; and
   
any other information about the proposed candidate that would, under the Securities and Exchange Commission’s proxy rules, be required to be included in our proxy statement if the person were a nominee.

 

20 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

Such notice must also be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director, if elected. A complete description of the requirements relating to a stockholder nomination is set forth in our By-laws.

 

Any stockholder recommendation for next year’s annual general meeting, together with the information described above, must be sent to the Corporate Secretary at 100 First Stamford Place, Stamford, CT 06902 and, in order to allow for timely consideration, must be received by the Corporate Secretary not less than 90 days nor more than 120 days prior to April 26, 2022.

 

Majority Voting for Directors and Resignation Policy

 

Our By-laws provide that nominees for director and directors running for re-election to the Board without opposition must receive a majority of votes cast. Any director who fails to receive the required number of votes for re-election is required by Crane Co. policy to tender his or her written resignation to the Chairman of the Board for consideration by the Nominating and Governance Committee. The Committee will consider such tendered resignation and make a recommendation to the Board concerning the acceptance or rejection of the resignation. In determining its recommendation to the Board, the Committee will consider all factors deemed relevant by the members of the Committee including, without limitation, the stated reason or reasons why stockholders voted against such director’s re-election, the qualifications of the director, and whether the director’s resignation from the Board would be in the best interests of the Company and its stockholders.

 

Board’s Role and Responsibilities

 

The Board is responsible for, and is committed to, overseeing the business and affairs of the Company and providing guidance for sound decision making, accountability and ethical professional conduct. It reviews the performance of our management and establishes guidelines and performance targets for our executive compensation program. The Board has adopted a comprehensive set of Corporate Governance Guidelines that set forth the Company’s governance philosophy, policies, and practices, and provide a framework for the conduct of the Board’s business.

 

Strategic Oversight

 

Our Board takes an active role in overseeing management’s formulation and implementation of its strategic plan. It receives a comprehensive overview of management’s strategic plan for all of the Company’s businesses at least annually, receives regular updates from consultants and other experts on the global capital markets and industrial environment, and receives periodic updates from individual businesses at other regularly scheduled Board meetings throughout the year. The Board provides insight and feedback to senior management, and, if necessary, challenges management on the Company’s strategic direction. The Board also monitors and evaluates, with the assistance of the Chief Executive Officer, the Company’s strategic results, and approves all material capital allocation decisions.

 

Risk Oversight

 

The Board recognizes its duty to assure itself that the Company has effective procedures for assessing and managing risks to the Company’s operations, financial position, and reputation, including compliance with applicable laws and regulations. The Board has charged the Audit Committee with responsibility for monitoring the Company’s processes and procedures for risk assessment, risk management, and compliance, which includes receiving regular reports on environmental remediation activities, and on any violations of law or Company policies and resultant corrective action. The Audit Committee receives presentations regarding these matters from management at each in-person meeting (at least quarterly). The Company’s Director of Compliance and Ethics, as well as the Chief Audit Executive, has regular independent communications with the Audit Committee. The Chair of the Audit Committee reports any significant matters to the Board as part of his reports on the Committee’s meetings and activities.

 

2021 Proxy Statement 21
 

Table of Contents

Item 1: Election of Directors

 

The Board receives an annual presentation by management on the Company’s risk management practices. The Board also receives reports from management at each meeting regarding operating results, the Company’s asbestos liability, pending and proposed acquisition and divestiture transactions (each of which must be approved by the Board before completion), capital expenditures (material capital expenditures require Board approval), and other matters.

 

In addition, the Management Organization and Compensation Committee of the Board has established a process for assessing the potential that the Company’s compensation plans and practices may encourage executives to take risks that are reasonably likely to have a material adverse effect on the Company. The conclusions of this assessment are set forth in the Compensation Discussion and Analysis section under the heading “Compensation Risk Assessment” on page 55.

 

Coordination Among Board Committees Regarding Risk Oversight

 

 

Management Succession Planning and Intellectual Capital

 

We have a comprehensive Intellectual Capital (“IC”) process at Crane Co. that encompasses careful and rigorous talent selection, systematic training and personalized development, and an annual assessment of performance and potential. Our Board of Directors and the Management Organization and Compensation Committee take an important role in our human capital management and the IC process. The Management Organization and Compensation Committee has the primary responsibilities for (i) assuring that the Company’s management development and succession planning policies and procedures are sound and effective, (ii) evaluating the performance of the Chief Executive Officer and other members of senior management, and (iii) regularly reporting its findings and recommendations to the Board of Directors. A key element of the IC process is the identification of management succession needs and opportunities, whether arising from natural career growth and development, voluntary turnover, retirements, or other causes. Such management succession planning forms part of our annual strategy review process for each of our businesses, and the senior management levels are reviewed with the Board annually. The Board’s oversight and involvement in the annual review of senior management level succession needs and opportunities promotes the identification and development of a pipeline of strong performance-focused senior leaders that possess diverse skills and talents.

 

Stockholder Engagement

 

The Company regularly meets with current and potential stockholders, both to provide transparency about its operations and results, and to better understand the investment community’s perception of the Company’s performance and corporate strategy. Crane Co. hosts an annual investor day event in New York City during the first quarter of the year to provide a thorough review of the prior year’s results, to discuss the Company’s outlook for the current year, and to review the Company’s portfolio and capital allocation strategies. During 2020, the Company also participated in meetings, phone

 

22 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

calls and video conference calls with approximately 120 different investors at conferences and during investor roadshows; in light of the global COVID-19 pandemic and related restrictions on travel and in-person gatherings, the substantial majority of these investor interactions during 2020 were virtual.

 

Our Vice President of Investor Relations and/or our Chief Financial Officer provide feedback from the investor and analyst meetings formally to the Board of Directors on a quarterly basis. Additional viewpoints and commentary from investors and analysts are incorporated into our comprehensive strategic review which is presented to the Board of Directors at least annually.

 

Stockholder Communications with Directors

 

The Board has established a process to receive communications from stockholders and other interested parties. Stockholders and other interested parties may contact any member (or all members) of the Board, any Board committee, or any Chair of any such committee by mail or electronically. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any individual director or group or committee of directors by either name or title. All such correspondence should be sent to Crane Co., c/o Corporate Secretary, 100 First Stamford Place, Stamford, CT 06902. To communicate with any of our directors electronically, stockholders should use the following e-mail address: corpsec@craneco.com.

 

All communications received as set forth in the preceding paragraph will be opened by the office of the Corporate Secretary for the sole purpose of determining whether they contain a message to our directors. Any contents will be forwarded promptly to the addressee unless they are in the nature of advertising or promotion of a product or service, or are patently offensive or irrelevant. To the extent that the communication involves a request for information, such as an inquiry about Crane Co. or stock-related matters, the Corporate Secretary’s office may handle the inquiry directly. In the case of communications to the Board or any group or committee of directors, the Corporate Secretary’s office will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the communication is addressed.

 

Board Structure

 

Board Leadership Structure

 

Our Corporate Governance Guidelines do not require that the roles of Chairman of the Board and Chief Executive Officer be held by different individuals, as the Board believes that effective board leadership structure can be highly dependent on the experience, skills, and personal interaction between persons in leadership roles and the needs of the Company at the time. These leadership roles are currently filled separately by our non-employee Chairman of the Board, James L.L. Tullis, who possesses extensive experience with the Company and its operations, and by our Chief Executive Officer, Max H. Mitchell. To assist in defining this leadership structure, the Board adopted a position description for the role of the non-employee Chairman of the Board, which is incorporated into our Corporate Governance Guidelines. The principal duties are as follows:

 

Provide leadership to the Board and ensure that each director is making an appropriate contribution;
   
Guide the Board’s discharge of its duties, including reviewing corporate strategy, monitoring risk management and compliance activities, and evaluating senior management performance and succession planning;
   
Maintain an effective relationship with the Chief Executive Officer and act as a liaison between the Chief Executive Officer and the Board;
   
Chair meetings of the Board of Directors and the Annual Meeting;
   
Organize and approve the agendas for Board meetings based on input from directors and the Chief Executive Officer; and
   
Conduct a performance evaluation of the Board.

 

The Board will continue to monitor and assess its leadership structure to ensure it best serves the needs of the Company and its stockholders.

 

2021 Proxy Statement 23
 

Table of Contents

Item 1: Election of Directors

 

Committees of the Board

 

The Board of Directors has established an Audit Committee, a Management Organization and Compensation Committee, and a Nominating and Governance Committee. The Board of Directors has also established an Executive Committee, which meets when a quorum of the full Board of Directors cannot be readily convened. The memberships of these committees are as follows:

 

Audit Committee

 

 

Chair

M. R. Benante

 

Members

M. Dinkins
R.C. Lindsay
E. McClain
J. M. Pollino

 

Roles and Responsibilities

The Audit Committee is the Board’s principal agent in fulfilling legal and fiduciary obligations with respect to matters involving Crane Co.’s accounting, auditing, financial reporting, internal control, and legal compliance functions. The Audit Committee has the authority and responsibility for the appointment, retention, compensation, and oversight of our independent auditors.

 

Independence

All members of the Audit Committee meet the independence and expertise requirements of the NYSE, and all qualify as “independent” under the provisions of Securities and Exchange Commission Rule 10A-3. In addition, the Board of Directors has determined that each of Mr. Benante, Mr. Dinkins, Ms. McClain, and Ms. Pollino is an “audit committee financial expert” as defined in regulations of the Securities and Exchange Commission. The Audit Committee met five times in 2020. The Audit Committee’s report appears beginning on page 32.

 

 

Management Organization and Compensation Committee

 

 

Chair

J. M. Pollino

 

Members

D. G. Cook
R.C. Lindsay
E. McClain
C.G. McClure, Jr.
John S. Stroup

 

Roles and Responsibilities

The duties of the Management Organization and Compensation Committee include: coordinating the annual evaluation of the Chief Executive Officer; recommending to the Board of Directors all actions regarding compensation of the Chief Executive Officer; approving the compensation of other executive officers and reviewing the compensation of other officers and business unit presidents; reviewing director compensation; administering the annual incentive compensation plans and stock incentive plan; reviewing and approving any significant changes in or additions to compensation policies and practices, including benefit plans; and reviewing management development and succession planning policies.

 

Independence

All members of the Management Organization and Compensation Committee meet the independence requirements of the NYSE. The Management Organization and Compensation Committee met six times in 2020. The Management Organization and Compensation Committee’s report appears on page 58.

 

24 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

Nominating and Governance Committee

 

 

Chair

D. G. Cook

 

Members

M. R. Benante
M. Dinkins
C. G. McClure, Jr.

 

Roles and Responsibilities

The duties of the Nominating and Governance Committee include developing criteria for selection of and identifying potential candidates for service as directors, policies regarding tenure of service and retirement for members of the Board, and responsibility for and oversight of corporate governance matters, including director independence.

 

Independence

All members of the Nominating and Governance Committee meet the independence requirements of the NYSE. The Nominating and Governance Committee met four times in 2020.

 

Executive Committee

 

 

Chair

J.L.L. Tullis

 

Members

D. G. Cook
M. H. Mitchell

 

Roles and Responsibilities

The Board of Directors has also established an Executive Committee, which meets when a quorum of the full Board of Directors cannot be readily convened. The Executive Committee may exercise any of the powers of the Board of Directors, except for approving an amendment of the Certificate of Incorporation or By-laws; adopting an agreement of merger or sale of all or substantially all of Crane Co.’s assets or dissolution of Crane Co.; filling vacancies on the Board or any committee thereof; or electing or removing officers. The Executive Committee did not hold any meetings during 2020.

 

2021 Proxy Statement 25
 

Table of Contents

Item 1: Election of Directors

 

Executive Sessions of Non-Management Directors

 

Eight of the meetings of the Board during 2020 included executive sessions without management present, presided over by James L.L. Tullis, Chairman of the Board. Crane’s Corporate Governance Guidelines require our non-management directors to meet in executive session without management on a regularly scheduled basis, but not less than two times a year. The Chairman of the Board presides at executive sessions, unless he or she is a member of management, in which case the presiding person at executive sessions rotates on an annual basis among the Chairs of the Nominating and Governance Committee, the Audit Committee, and the Management Organization and Compensation Committee. If the designated person is not available to chair an executive session, then the non-management directors select a person to preside.

 

Board Meetings and Attendance

 

The Board of Directors met nine times during 2020, including two special meetings. Each director attended 100% of the Board and Committee meetings held in the period during which he or she was a director and Committee member. In addition, it is Crane Co.’s policy that each of our directors attend our annual meetings either in person or telephonically; all members of the Board were present at the 2020 annual meeting.

 

Board Processes

 

Board and Committee Evaluation Process

 

Board and committee evaluations play a critical role in ensuring the effective functioning of the Board. It is essential to monitor the Board, committee, and individual director performance and consider and act upon the feedback provided by each Board member. The Nominating and Governance Committee, in consultation with the Chairman of the Board, is charged with facilitating an annual self-assessment of the Board’s performance, as well as an annual self-assessment undertaken by each committee of the Board. The multistep evaluation process begins with a questionnaire, and includes discussions with the Chairman and Board members, and discussions between Committee Chairs and the members of their respective committee. The results are provided to the full Board, and the Board’s policies and practices are updated as appropriate to reflect director feedback.

 

Director Education

 

It is important for directors to stay current and informed on developments in corporate governance best practices in order to effectively discharge their duties. Our directors are provided updates on corporate governance developments at regularly scheduled board meetings and are encouraged to participate in programs offered by nationally recognized organizations that specialize in director education. The Company reimburses its directors for their reasonable costs and attendance fees to participate in such programs.

 

Code of Business Conduct and Ethics

 

Crane Co. is committed to conducting its business in compliance with all applicable laws, rules and regulations and in accordance with the highest standards of business ethics. Accordingly, the Directors, officers and all Company employees are required to act in accordance with Crane Co’s Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics covers many areas of professional ethical conduct, including the protection and proper use of Company assets, confidentiality, conflicts of interest, compliance with laws and fair dealing with competitors, employees and other Company stakeholders. A copy of the Code of Business Conduct and Ethics is available on our website at www.craneco.com/governance.

 

26 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

Conflicts of Interest; Transactions with Related Persons

 

Crane Co. has established two Conflict of Interest Policies: CP-103, to which all officers and salaried employees are subject, and CP-103D, to which non-employee Directors are subject. Those who are subject to the policies are required to disclose to the General Counsel in writing each outside relationship, activity, and interest that creates a potential conflict of interest, including prior disclosure of transactions with third parties. The General Counsel will determine whether the matter does or does not constitute an impermissible conflict of interest, or may in his or her discretion refer the question to the Nominating and Governance Committee, which will review the facts and make a recommendation to the Board. All directors, executive officers, and other salaried employees are required to certify in writing each year whether they are personally in compliance with CP-103 or CP-103D, as applicable, and whether they have knowledge of any other person’s failure to comply. In addition, each director and executive officer is required to complete an annual questionnaire which calls for disclosure of any transactions above a stated amount in which the director or officer or any member of his or her family has a direct or indirect material interest. The Board of Directors is of the opinion that these procedures in the aggregate are sufficient to allow for the review, approval, or ratification of any “Transactions with Related Persons” that would be required to be disclosed under applicable Securities and Exchange Commission rules.

 

Company Policy Regarding Hedging Transactions

 

Crane Co.’s Policy on Trading in Company Stock prohibits members of the Board or Directors, executive officers, and certain other employees designated as “Employee Insiders” (generally, employees involved in compiling or having access to monthly operating forecasts or other Company-wide financial information) from engaging in any hedging transactions. The policy applies to any transaction that allows the individual to continue to own the covered securities, but without the full risks and rewards of ownership, such as zero-cost collars and forward sale contracts. The policy applies to any Company stock owned by the individual, whether acquired through equity compensation awards or otherwise.

 

Corporate Governance Documents

 

The Board of Directors has adopted Corporate Governance Guidelines which reflect the Board’s commitment to monitor the effectiveness of policy-making and decision-making at both the Board and management levels, with a view to enhancing long-term stockholder value. The Corporate Governance Guidelines are available on our website at www.craneco.com/investors/corporate-governance.

 

Copies of the charters of the Board committees are available on our website at www.craneco.com/CharterAudit; www.craneco.com/CharterCompensation; and www.craneco.com/CharterNominating, respectively.

 

2021 Proxy Statement 27
 

Table of Contents

Item 1: Election of Directors

 

Corporate Governance and Sustainability

 

We value global diversity, respect human rights and the rule of law, and recognize environmental management among our highest priorities throughout the corporation. In embracing this important topic, we have established a senior management committee and created a management position to identify and track metrics on philanthropy, sustainability and equality. This committee publishes a separate report on the Company’s efforts and performance with respect to philanthropy, sustainability, and equality, which can be found at www.craneco.com/pse. In addition to the details to be found in that report, following are examples of our actions and policies aimed at health and safety, philanthropy, diversity and inclusion, protecting the environment, governance and ethics, and supply chain management.

   

Health &
Safety

  Strongly committed to the health and safety of our associates, and strive to continuously reduce the incidence and severity of job-related injuries

  Utilize safe technologies, training programs, effective risk management practices, and sound science in our operations to minimize risk to our associates

   

Philanthropy

   Embrace philanthropy around the world, providing paid time off to our associates from their work schedules to volunteer and support charitable causes important to our local teams

   Annually facilitate the donation of more than $17 million through three independent charitable funds (the largest of which is also our largest shareholder), to former associates in need, to local organizations in the communities where our businesses operate, and in support of important global relief efforts

   

Diversity &
Inclusion

   Commitment to diversity on our Board of Directors, and across our global workforce, with a focus on developing an inclusive and high-performance culture with trust and respect

   Focused development for our associates leveraging a structured intellectual capital process with constructive reviews and various talent/leadership development initiatives endorsed by the executive management team

   

Protecting the
Environment

   Comply with all applicable environmental laws governing the use, storage, discharge, and disposal of hazardous or toxic material

   Seek to improve the operation of our facilities through the efficient use of energy and sustainable use of renewable resources, and commitment to waste reduction, recycling, reducing water usage and carbon emissions, and implementing responsible waste disposal practices

   

Governance &
Ethics

   Annual review of Corporate Governance Guidelines by the Board of Directors and outside experts

   Code of Business Conduct and Ethics adopted by our Board of Directors, as well as anti-bribery policies, and policies prohibiting the Company from engaging in the political process (associates, however, are encouraged to participate in the political process privately if they wish, on their own time and using their own resources)

   Mandatory annual training for associates on ethics and anti-bribery

   Maintain an actively managed, anonymous ethics hotline

   

Supply Chain
Management

   Regularly audit and assess our supply chain

   Maintain a strict supplier code of conduct that sets expectations about supplier behavior with respect to compensation, hours of labor, coercion and harassment, discrimination, workplace safety, environmental protection, and commercial bribery

 

28 Crane Co.
 

Table of Contents

Item 1: Election of Directors

 

Compensation of Directors

 

Director Compensation Program

 

Our director compensation program is reviewed annually by the Management Organization and Compensation Committee’s independent consultant and all changes are intended to align the program with the peer group median. From April through December 2020, the directors each voluntarily took 20% temporary reductions in the cash component of the annual retainer to assist the Company’s efforts to reduce expenses during the COVID-19 pandemic. The members of the Board of Directors, other than Mr. Mitchell (who does not receive compensation for his services as a director), receive the following compensation, which does not reflect the voluntary temporary reductions in 2020:

 

A retainer of $220,000 per year, payable $85,000 in cash and $135,000 in the form of Deferred Stock Units (“DSUs”) of equivalent value; the terms of DSUs are described immediately below. A director may also elect to receive up to 100% of the cash retainer in DSUs or elect to receive all or a portion of the cash retainer in fully vested shares of Crane Co. stock;

 

A retainer of $25,000 per year for the Chair of the Audit Committee, payable in cash;

 

A retainer of $17,500 per year for each of the Chair of the Management Organization and Compensation Committee and the Chair of the Nominating and Governance Committee, payable in cash; and

 

A retainer of $10,000 per year for each member of the Audit Committee other than the Chair; $7,500 per year for each member of the Management Organization and Compensation Committee or the Nominating and Governance Committee other than the Chair; and $2,000 per year for each member of the Executive Committee other than the Chief Executive Officer, in each case, payable in cash.

 

No meeting fees will be paid unless the total number of meetings exceeds three more than the regularly scheduled meetings of the Board of Directors and the relevant committees. The compensation of Mr. Mitchell, who is Chief Executive Officer in addition to having been a director since January 31, 2014, is shown in the Summary Compensation Table on page 60.

 

Mr. Tullis, the non-employee Chairman of the Board, receives the same annual retainer as a non-employee director plus an incremental retainer of $125,000 per year, payable in cash (or up to 100% in DSUs or fully vested shares, at the election of the Chairman). The Company also has a time-sharing agreement with Mr. Tullis under which he is permitted personal use of the corporate aircraft, for which he reimburses the Company the aggregate incremental cost. See “Other Arrangements with our Named Executive Officers—Use of Company Aircraft” on page 58.

 

The Management Organization and Compensation Committee, which is composed solely of independent directors, has the primary responsibility for reviewing and considering any revisions to our director compensation program. The Management Organization and Compensation Committee undertook its annual review of the type and form of compensation paid to our non-employee directors in connection with their service on the Board and its committees for fiscal year 2020, and considered the results of an independent analysis completed by Frederic W. Cook & Co., Inc. (“FW Cook”). As part of this analysis, FW Cook reviewed non-employee director compensation trends and data from companies comprising the same compensation peer group used by the Management Organization and Compensation Committee in connection with its review of executive compensation. Pursuant to this compensation review process, and after considering FW Cook’s advice on industry best practice regarding the timing of equity grants, the Committee determined that no changes in director compensation were required this year, and approved the current retainers for Board members and Committee Chairpersons and members for 2021, as set forth above. In addition, the Management Organization and Compensation Committee reviewed FW Cook’s advice, including peer group data and the substantive role of the Chairman of the Board, similarly determined that no change was required in the Chairman’s compensation this year, and approved the Chairman’s current compensation of $125,000 for 2021.

 

DSUs are issued each year as of the date of the annual meeting; are forfeitable if the director ceases to remain a director until Crane Co.’s next annual meeting, except in the case of death, disability, or change in control; and entitle the director to receive an equivalent number of shares of Crane Co. stock, plus accumulated dividends, upon the director’s ceasing to be a member of the Board. In April 2020, each non-employee director received DSUs pursuant to this plan as follows: Mr. McClure, Jr., received 3,294 DSUs, Mr. Stroup joined the Board of Directors on December 8, 2020, and received 727 DSUs, and the remaining non-employee directors each received 2,506 DSUs.

 

2021 Proxy Statement 29
 

Table of Contents

 

Item 1: Election of Directors

 

Stock Ownership Guidelines for Directors

 

The Board of Directors has adopted stock ownership guidelines that require each director to hold shares of Crane Co. stock having a fair market value not less than five times the cash portion of the annual retainer for directors (currently $85,000). A director must have attained this ownership level by the fifth anniversary of his or her first election as a director. As of the Record Date, all directors who had attained their fifth anniversary of service were in compliance with this ownership guideline, and each other director is making what the Board of Directors believes to be reasonable progress towards compliance with this ownership guideline.

 

Director Compensation in 2020

 

The following table shows the actual compensation in 2020 of all directors except for Mr. Mitchell, our Chief Executive Officer, whose compensation is shown in the Summary Compensation Table on page 60. As noted above, from April through December 2020, the directors voluntarily took 20% temporary reductions in the cash component of the annual retainer to assist the Company’s efforts to reduce expenses during the COVID-19 pandemic. See “Compensation of Directors” on page 29, for more details on compensation approved for directors in 2020 prior to the voluntary reductions.

 

Name   Fees Earned or
Paid in Cash(1)
($)
  Stock
Awards(2)
($)
  Total
($)
 
M. R. Benante   87,919   135,023   222,942  
D. G. Cook   82,333   135,023   217,356  
M. Dinkins   72,750   135,023   207,773  
R. C. Lindsay   47,750   135,023   182,773  
E. McClain   75,250   135,023   210,273  
C. G. McClure, Jr.   38,581   177,481   216,062  
J. M. Pollino   80,250   135,023   215,273  
J. S. Stroup   0   53,325   53,325  
J. L. L. Tullis   131,667   135,023   266,690  

 

(1) Amounts in this column include the cash value of vested shares of Crane Co. common stock received in lieu of cash retainers at the election of the director. Mr. Stroup earned fees totaling $4,871 in connection with his interim appointment that were paid in cash during the first week of January 2021.
     
(2) Amounts shown in this column reflect the grant date fair value for awards of DSUs made during the indicated year. The grant date fair value of each DSU granted on April 27, 2020, was $53.88 and for each DSU granted on December 8, 2020, was $73.75. The assumptions on which this valuation is based are set forth in Note 8 to the audited financial statements included in Crane Co.’s annual report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2021. Awards of DSUs during 2020, all made pursuant to the 2018 Stock Incentive Plan (together with any predecessor equity compensation plans of the Company, the “Stock Incentive Plan”), were as follows:
   
  2,506 DSUs to each of Messrs. Benante, Cook, Dinkins, Lindsay, and Tullis, Ms. McClain and Ms. Pollino; 3,294 DSUs to Mr. McClure, Jr., on April 27, 2020 in connection with the Annual General Meeting, and 727 DSUs to Mr. Stroup on December 8, 2020 in connection with his interim appointment;
     
  An aggregate of 621 additional DSUs to each of Messrs. Cook and Tullis; 492 additional DSUs to Mr. Lindsay; 378 additional DSUs to Ms. McClain and Ms. Pollino; 284 additional DSUs to Mr. Benante; 201 additional DSUs to Mr. McClure, Jr.; and 93 additional DSUs to Mr. Dinkins, all in connection with the payment of regular quarterly dividends of Crane Co. stock on March 11, June 10, September 9, and December 9.

 

At December 31, 2020, each non-employee director held the following number of vested and unvested DSUs:

 

M. R. Benante   11,445
D. G. Cook   23,969
M. Dinkins   4,102
R. C. Lindsay   19,550
E. McClain   15,135
C. G. McClure, Jr.   8,371
J. M. Pollino   15,135
J. S. Stroup   727
J. L. L. Tullis   23,969

 

30 Crane Co.
 

Table of Contents

     
  ITEM 2: RATIFICATION OF THE SELECTION OF AUDITORS  
     

 

   
 

PROPOSAL 2

The Board recommends voting FOR the Ratification of the Selection of Deloitte & Touche LLP as the Company’s independent auditors for 2021

     

 

The Board of Directors proposes and recommends that the stockholders ratify the Audit Committee’s selection of the firm of Deloitte & Touche LLP as independent auditors for Crane Co. for 2021. Deloitte & Touche LLP has been Crane Co.’s independent auditor since 1979. Although ratification of this selection is not required by law, the Board of Directors believes it is desirable as a matter of corporate governance. If the stockholders do not ratify the selection of Deloitte & Touche LLP, the Audit Committee will reconsider the appointment of Deloitte & Touche LLP as Crane Co.’s independent auditor. We expect that representatives of Deloitte & Touche LLP will attend the Annual Meeting, where they will have an opportunity to make a statement if they wish to do so and to respond to appropriate questions.

 

Unless otherwise directed by the stockholders, proxies that are properly executed and returned or submitted electronically will be voted for approval of the ratification of Deloitte & Touche LLP to audit our consolidated financial statements for 2021.

 

Annual Evaluation and Selection of Auditors

 

The Audit Committee is responsible to select, in its sole discretion, the firm of independent auditors to audit Crane Co.’s financial statements for each fiscal year. The Committee is also directly responsible for the appointment, compensation, retention, and oversight of the work of the independent auditors, including resolution of any disagreements that arise between management and the auditor regarding financial reporting or other audit, review or attest services for the Company. The independent auditors report directly to the Audit Committee.

 

The Committee annually reviews and evaluates the performance of the Company’s independent auditors. In evaluating the independent auditors, the Audit Committee considers, among other things, the quality of the independent auditor’s service, the sufficiency of its resources, its independence and objectivity, and the length of time the firm has been engaged as Crane Co.’s independent auditors.

 

Principal Accounting Firm Fees

 

Set forth below is a summary of the fees for the years ended December 31, 2020, and 2019 to Crane Co.’s principal accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates:

 

  2020   2019
  (in thousands)
Audit fees(a) $5,700   $5,756
Audit-related fees(b) 241   215
Tax fees(c) 1,014   1,491
All other fees(d) 7   3
Total $6,962   $7,465

 

(a) Audit services consisted of: (i) audit of Crane Co.’s annual financial statements; (ii) reviews of Crane Co.’s quarterly financial statements; (iii) Sarbanes-Oxley Act, Section 404 attestation matters; and (iv) statutory and regulatory audits, comfort letters, consents, and other services related to Securities and Exchange Commission matters.
   
(b) Audit-related services consisted of: (i) benefit plan audits; (ii) agreed-upon procedures reports; and (iii) financial accounting and reporting consultations.

 

2021 Proxy Statement 31
   

Table of Contents

Item 2: Ratification of the Selection of Auditors

 

(c) Fees for tax compliance services totaled $521 and $804 in 2020 and 2019, respectively. Tax compliance services are services rendered based upon facts already in existence or transactions that have already occurred, to document, compute, and obtain government approval for amounts to be included in tax filings. Fees for tax planning and advice services totaled $493 and $687 in 2020 and 2019, respectively.
   
(d) Fees for all other services billed consisted of fees for software licenses.

 

  2020   2019
Ratio of tax planning and advice fees and all other fees to audit fees, audit-related fees, and tax compliance fees 8%   10%
Percentage of non-audit services approved by the Audit Committee 100%   100%

 

Pre-Approval Policy and Procedures

 

Securities and Exchange Commission rules under the Sarbanes-Oxley Act of 2002 prohibit independent auditors of public companies from providing certain non-audit services, and require that other non-audit services be approved by the Audit Committee. The Company’s policy implementing this requirement has been in place since January 2003. That policy:

 

specifies certain types of services that our independent auditors are prohibited from performing;
requires that management prepare a budget for non-prohibited services at the beginning of each fiscal year, and present the budget to the Audit Committee for their approval; and
requires that any expenditure outside of the budget also be approved by the Audit Committee in advance.

 

VOTE REQUIRED

 

Ratification of the selection of the auditors requires the affirmative vote of a majority of the votes cast on this question at the Annual Meeting by holders of shares of common stock present in person or represented by proxy and entitled to vote at the meeting. (See Questions and Answers About These Proxy Materials and the Annual Meeting, page 87).

 

Report of the Audit Committee

 

In accordance with its written charter adopted by the Board of Directors, the Audit Committee (the “Committee”) assists the Board of Directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, and financial reporting practices of Crane Co. All the members of the Committee qualify as “independent” under the provisions of Section 10A of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder.

 

The members of the Committee are not professionally engaged in the practice of auditing or accounting and are not, and do not represent themselves to be, performing the functions of auditors or accountants. Members of the Committee rely without independent verification on the information provided to them and on the representations made by management and the independent auditors. Accordingly, the Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Committee’s considerations and discussions referred to below do not assure that the audit of Crane Co.’s financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States), that the financial statements are presented in accordance with generally accepted accounting principles, or that Crane Co.’s auditors are in fact “independent.”

 

32 Crane Co.
   

Table of Contents

Item 2: Ratification of the Selection of Auditors

 

In discharging its oversight responsibility as to the audit process, the Committee:

 

received the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Committee concerning independence;
discussed with the independent auditors their independence, and any activities that may impact their objectivity and independence, including fees for non-audit services, and satisfied itself as to the auditors’ independence;
received a report on the quality control procedures of the independent auditors;
received and discussed a report on critical audit matters;
discussed with management, the internal auditors, and the independent auditors the quality and adequacy of Crane Co.’s internal controls, with particular focus on compliance with Section 404 of the Sarbanes-Oxley Act of 2002, as well as the internal audit function’s organization, responsibilities, budget, and staffing;
reviewed with the independent auditors and the internal auditors their respective audit plans and audit scope;
reviewed with management the risk assessment and risk management procedures of Crane Co., including cybersecurity risk, as well as the procedures and findings of Crane Co.’s compliance program;
discussed the results of the internal audit examinations;
discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board; and
discussed and reviewed, both with and without members of management present, the independent auditors’ examination of the financial statements.

 

The Committee reviewed the audited financial statements of Crane Co. as of and for the year ended December 31, 2020, with management and the independent auditors. Management is responsible for the preparation, presentation, and integrity of Crane Co.’s financial statements, Crane Co.’s internal controls and financial reporting process and the procedures designed to assure compliance with accounting standards and applicable laws and regulations. Crane Co.’s independent auditors are responsible for performing an independent audit of Crane Co.’s financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.

 

Based on the above-mentioned review and discussions with the independent auditors, the Committee recommended to the Board of Directors that Crane Co.’s audited financial statements be included in its Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the Securities and Exchange Commission.

 

The Committee approved a policy regarding services by Crane Co.’s independent auditors, effective January 1, 2003. Under this policy, the independent auditors are prohibited from performing certain services in accordance with Section 202 of the Sarbanes-Oxley Act of 2002. With respect to non-prohibited services to be provided by the independent auditors, the policy requires that a budget for such services be prepared by management and approved by the Committee at the beginning of each fiscal year, and any expenditure outside of the budget must also be approved by the Committee in advance. Pursuant to this policy, the Committee reviewed and approved the budget for the audit and other services to be provided by Deloitte & Touche LLP in 2021. The Committee also approved the reappointment of Deloitte & Touche LLP to serve as independent auditors; the Board of Directors concurred in such appointment and directed that this action be presented to stockholders for ratification.

 

Submitted by:

 

The Audit Committee of the
Board of Directors of Crane Co.

 

Martin R. Benante, Chair

Michael Dinkins
Ronald C. Lindsay
Ellen McClain
Jennifer M. Pollino

 

Incorporation by Reference. The Audit Committee Report in this Proxy Statement shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, and shall not be deemed filed under those Acts, except to the extent that Crane Co. specifically incorporates any such matter in a filed document by reference.

 

2021 Proxy Statement 33
   

Table of Contents

     
  ITEM 3: ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS  
     

 

   
 

PROPOSAL 3

The Board recommends voting FOR the Advisory Vote to Approve the Compensation of our Named Executive Officers

     

 

Based on the recommendation of stockholders at the Company’s 2017 annual meeting of stockholders, and the Board’s consideration of that recommendation, the Company has determined that it will hold a non-binding advisory vote to approve the compensation paid by the Company to its named executive officers every year, until the next required stockholder vote to recommend the frequency of such votes in 2023. In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 and the related Securities and Exchange Commission rules, we are asking stockholders to express their opinion on the compensation of the named executive officers in 2020, as described in the pages that follow in this Proxy Statement. This vote is non-binding and advisory, however, the Board will give due consideration to the opinion of the Company’s stockholders as expressed by their vote.

 

We believe that the compensation of our executive officers should be:

 

closely linked to the performance of the Company as a whole, the executive’s business unit (as applicable), and the individual executive;
aligned with the Company’s annual operating plan and long-term strategic plans and objectives;
attractive in the markets in which we compete for executive talent; and
structured so as to reward actions in accordance with the Company’s values and standards and to discourage the taking of inappropriate risks, and thereby to uphold Crane Co.’s high standards of business ethics and corporate governance.

 

The Compensation Discussion and Analysis beginning on page 35 explains in detail the elements of the Company’s executive compensation program with respect to our “named executive officers,” and the steps taken by the Company to ensure that the program, as implemented in 2020, was aligned with these core principles. Balancing annual and long-term compensation elements, the program directly links incentive compensation for executives with increases in stockholder value, principally by means of annual cash bonuses based on achievement of performance goals set by the Management Organization and Compensation Committee at the beginning of the year, performance-based restricted share units that vest in accordance with the Company’s total stockholder return relative to the S&P Midcap 400 Capital Goods Group over a three-year period, and stock options and time-based restricted share units that vest over a four-year period. The Company believes that this system, as put into practice under the supervision of the Management Organization and Compensation Committee, is instrumental in enabling the Company to achieve superior financial performance and investor returns. In light of the impact of the COVID-19 pandemic on the Company’s business and the global economy in general, the Management Organization and Compensation Committee has used these principles to guide its decisions related to executive compensation, with a focus on supporting the business decisions and leadership actions required during this unprecedented time.

 

The Board strongly endorses the Company’s actions in this regard, and recommends that stockholders vote for the following resolution:

 

RESOLVED, that the 2020 compensation of the named executive officers as disclosed in the Proxy Statement is approved by the stockholders on an advisory basis.

 

Unless otherwise directed by the stockholders, proxies that are properly executed and returned will be voted for the resolution. Abstentions and broker non-votes will not count as votes for or against the proposal and will not be included in calculating the number of votes in favor of the proposal.

 

VOTE REQUIRED

 

Approval of the above resolution requires the affirmative vote of a majority of the votes cast on this question at the Annual Meeting by holders of shares of common stock present in person or represented by proxy and entitled to vote at the meeting. (See “Questions and Answers About These Proxy Materials and the Annual Meeting”, beginning on page 87.)

 

34 Crane Co.
   

Table of Contents

     
  COMPENSATION DISCUSSION AND ANALYSIS  
     

 

We believe that compensation should be directly linked to performance and highly correlated to stockholder value. This section of the Proxy Statement explains how, under the guidance of our Management Organization and Compensation Committee (the “Committee” or “Compensation Committee”), our executive compensation program is designed and operated with respect to our “named executive officers” or “NEOs,” whose compensation is set forth in the Summary Compensation Table and other compensation tables contained in this Proxy Statement:

 

Max H. Mitchell President and Chief Executive Officer
Richard A. Maue Senior Vice President and Chief Financial Officer
Kurt F. Gallo Senior Vice President
Anthony M. D’Iorio Senior Vice President, General Counsel and Secretary
Alejandro Alcala Senior Vice President

 

Executive Compensation Index

 

SECTION PAGE
   
EXECUTIVE SUMMARY 36
   
This section details compensation highlights and business activities in the past year that have an impact on compensation, and a high level overview of our compensation practices. We also address the impact of the COVID-19 pandemic on Company performance results for 2020.  
   
COMPENSATION PRINCIPLES 42
   
This section describes our pay for performance philosophy and the principles by which our Compensation Committee has designed the incentive compensation programs.  
   
ELEMENTS OF COMPENSATION AND 2020 DECISIONS 42
   
This section provides a detailed description of the elements that make up our compensation program and the rationale behind the metrics and corresponding performance targets. We also explore the principal conclusions for the Committee’s decisions, including a discussion on the impact of the COVID-19 pandemic.  
 
 
   
COMPENSATION DECISION-MAKING PROCESS 52
   
This section outlines roles, responsibilities, and the process behind compensation decisions, as well as the means by which our peer group is reviewed and selected.    
   
POLICIES AND PRACTICES RELATED TO OUR EXECUTIVE COMPENSATION PROGRAM 55
   
This section details our compensation risk assessment and varying policies in place to reinforce our good compensation governance.    
   
OTHER ARRANGEMENTS WITH OUR NAMED EXECUTIVE OFFICERS 57
   
This section describes other important agreements between Crane Co. and the NEOs.  

 

2021 Proxy Statement 35
   

Table of Contents

Compensation Discussion and Analysis

 

Executive Summary

 

Fiscal year 2020 was a difficult year for the global economy and our business primarily due to the unprecedented impacts and significant disruptions caused by the ongoing COVID-19 pandemic. The pandemic had a substantial impact on demand for most of our businesses and related end markets, and that impact was completely beyond the control of management. The pandemic related demand destruction was so severe that comparison of actual 2020 results to our original 2020 plan and financial targets, as developed in late 2019 and approved by the Board in early 2020, is not meaningful.

 

The COVID-19 pandemic and related uncertainty also posed unique and substantial challenges for our normal forecasting and budgeting methodologies throughout 2020. Those challenges were so significant that most U.S. public industrial companies withdrew financial guidance in the spring of 2020. However, consistent with our desire to be fully transparent with our stockholders, we publicly revised and updated all elements of our typical financial guidance with additional details and granularity on April 27, 2020, concurrent with the release of our first quarter 2020 financial results. Furthermore, we continued to update our views and outlook at each of our successive quarterly earnings calls in July and October. While actual financial results for 2020 fell short of our initial guidance, they compared favorably to our April 27, 2020 revised guidance, and reflected extremely strong execution. Specifically, the reduction in demand related to COVID-19 was unavoidable, but decremental margins (change in adjusted operating profit divided by change in sales) excluding the impact of acquisitions of 35% were impressive given the magnitude of the sales decline and the highly negative business and product mix. Further, free cash flow declined materially less than either adjusted operating profit or adjusted earnings per share (EPS), reflecting effective working capital management and controlled capital expenditures.

 

Despite this strong operational performance, total stockholder return (share price appreciation plus reinvested dividends) (TSR) trailed that of the most relevant benchmark indices on a one- and three-year basis. We believe that underperformance is primarily attributable to our exposure to two end markets that were among the most negatively impacted by the COVID-19 pandemic, and for which investors had substantial concerns about the short- and medium-term outlook: commercial aerospace, and the process industries which include oil & gas.

 

Crane Co. TSR for Periods Ending December 31, 2020

 

 

Consistent with the Committee’s continued focus on aligning pay with performance, and despite the extraordinary circumstances in 2020, all variable elements of management’s compensation declined compared to 2019, reflecting the business performance shortfalls relative to target, and lower three-year relative TSR compared to the prior year.

 

Lower variable compensation for management in 2020 appropriately reflects our recent financial performance. However, we are proud of our response to the unprecedented set of circumstances we faced during 2020, particularly related to the actions we took to ensure the safety and well-being of our associates, and where possible, to retain them through the pandemic. Starting in early March, we quickly adopted new safety protocols and procedures worldwide, in most cases more stringent than, and in advance of, government mandates. We also quickly adopted a new Emergency Pandemic Exception Pay (EPE) program providing two weeks of additional paid time off to all associates globally that were directly or indirectly impacted by the pandemic above and beyond normal vacation and sick pay. The EPE program provided

 

36 Crane Co.
   

Table of Contents

Compensation Discussion and Analysis

 

substantial flexibility for our associates, and it could be used to cover paid time off for associates diagnosed with COVID-19 or required to quarantine, for those who had to stay at home to care for children due to school or day care closure, and to ensure continuity of pay and benefits where Crane manufacturing facilities or offices were required to close because of local health regulations.

 

As the year progressed, we did take some difficult measures to adjust our cost base to lower demand levels, and gross cost savings totaled approximately $105 million. These actions included temporary base pay reductions for all executive officers and directors, discretionary cost reductions where possible, and a reduction-in-force in businesses to align our workforce size with expected demand levels. However, every possible effort was made to protect our remaining associates as much as possible during this challenging period. For example, none of our businesses mandated unpaid furloughs in the United States, we did not implement any salary reductions (except for executive officers and directors), we maintained all benefits including our 401(k) match in the United States, and we continued with our annual merit salary increase process. Further, in recognition of the extraordinary effort shown by our associates around the world, and because the financial impact of COVID-19 was beyond our associates’ control, all associates normally eligible to receive an annual bonus received a minimum payout at 50% of their target. We followed this approach because we believed it was the fair and appropriate way to treat our associates for their efforts in working through the pandemic to satisfy our customers and other Company stakeholders, and to build lasting goodwill and morale which we believe will assist with associate retention in the years ahead.

 

2020 Performance Highlights

 

Executed Well in a Difficult Period

 

From a financial perspective, we believe that we were on-track to meet or exceed our 2020 financial targets before the pandemic hit, consistent with our commentary at our February 27, 2020 annual Investor Day event. While the final 2020 financial results were below our original financial targets for the year, we believe that the shortfall was entirely related to the impact of COVID-19, and that our operational performance and execution against long-term strategic objectives were excellent considering the unexpected market related challenges arising from the pandemic.

 

Sales in 2020 were $2,937 million, or 11%, below sales in 2019. The decline in sales was comprised of a 17% decline in core sales partially offset by a 6% benefit from acquisitions and slightly favorable foreign exchange rates. Notably, the core sales decline compared to our pre-pandemic expectations was most severe at two of our highest margin businesses: the commercial aircraft portion of Aerospace & Electronics which was significantly impacted by reduced passenger air travel (core sales 38% below prior year), and at Crane Payment Innovations where our products cater to consumer traffic, for example, at various retail stores, casino gaming and mass transit ticketing locations, among others (core sales 37% below prior year). Despite the sharp market-driven declines, we believe that we gained market share across most of our primary businesses during 2020.
   
Adjusted operating profit in 2020 declined 35% compared to 2019. Excluding the impact of acquisitions, decremental margins (change in adjusted operating profit divided by change in sales) of 35%, were an impressive result given the magnitude of the sales decline and the highly negative business and product mix, reflecting extremely strong operational execution. Adjusted earnings per share (EPS) in 2020 declined 36% compared to 2019, similar to the decline in adjusted operating profit. These results also reflect the impact of our cost reduction initiatives which delivered approximately $105 million of gross savings.
   
Free cash flow in 2020 declined 15% compared to 2019, a more muted decline than for adjusted operating profit or adjusted EPS, reflecting strong working capital management and controlled capital expenditures.

 

2021 Proxy Statement 37
   

Table of Contents

Compensation Discussion and Analysis

 

 

See “Non-GAAP Reconciliation” beginning on page 84 for more detail regarding Special Items impacting EPS, free cash flow and operating margins, as well as a reconciliation of the non-GAAP measures used herein.

 

Continued to Execute Against Consistent Long-Term Strategy

 

Despite COVID-19 challenges during 2020, our long-term strategy remains unchanged. Crane Co. is a diversified manufacturer of highly engineered industrial products. We choose to compete in markets where we have competitive differentiation and scale. We will continue to leverage our resources as an integrated operating company, and to reinvest in our three large global growth platforms – Fluid Handling, Payment & Merchandising Technologies, and Aerospace & Electronics – both organically and through strategic acquisitions. We believe that this strategy will enable us to deliver above-median, strong free cash flow and EPS growth over time.

 

We will continue to execute this strategy while remaining committed to the values of our founder, R.T. Crane, who resolved to conduct business “in the strictest honesty and fairness; to avoid all deception and trickery; to deal fairly with both customers and competitors; to be liberal and just toward employees; and to put my whole mind upon the business.”

 

With this framework, we continued to position the Company for long-term sustainable growth during 2020 with some significant accomplishments, including the following:

 

ACQUISITION ACTIVITY

 

Cummins-Allison Corp. was acquired on December 31, 2019 for $160 million on a cash-free and debt-free basis, and it is a strategic bolt-on adjacency to our Crane Payment Innovations business with an opportunity for significant synergies. The acquired business is a leading provider of high-speed cash and coin counting and sorting machines, retail cash office solutions, along with a nationwide service network. Approximately half of Cummins-Allison Corp.’s sales are generated from recurring revenue derived from service contracts. Cummins-Allison Corp. and Crane Payment Innovations’ products are based on similar core technologies related to cash and coin sorting, counting and validation, and we expect substantial sharing of technology and R&D across the two businesses. The integration of Cummins-Allison proceeded smoothly during 2020, and Cummins-Allison’s 2020 adjusted operating profit and return on invested capital (ROIC) materially exceeded the targets set at the time of the acquisition
Instrumentation & Sampling was acquired from CIRCOR International, Inc. (“CIRCOR”) in January 2020 for $172 million on a cash-free and debt-free basis, a strategic bolt-on adjacency to our ChemPharma Energy business. The acquired business designs, engineers and manufactures a broad range of mission-critical fluid control instrumentation and sampling solutions with strong brands renowned for quality, performance and reliability. The Company’s products are used primarily in severe service environments, with a substantial portion of its sales driven by recurring replacement demand. COVID-19 materially impacted demand for this business, and consequently, 2020 sales, adjusted operating profit and ROIC fell below targets set at the time of the acquisition. However, the integration is progressing well, and we believe the Instrumentation & Sampling’s financial contribution will improve considerably over the next few years.

 

Our funnel of acquisition targets remains robust, and we continue to actively pursue acquisitions across all three of our global growth platforms, with a priority focus on Fluid Handlings and Aerospace & Electronics.

 

38 Crane Co.
   

Table of Contents

Compensation Discussion and Analysis

 

NEW PRODUCT DEVELOPMENT

 

We successfully introduced a number of new products and solutions across our portfolio during 2019 and 2020. Among others:

 

At Aerospace & Electronics, we are finishing an unprecedented period of engineering development for new, single aisle aircraft such as the Boeing 737MAX, Airbus A320neo, Embraer E2, and COMAC C919. This business continues to direct its engineering efforts from application- and specification-based programs to a focus on emerging technologies that we expect will be necessary to support the next generation of solutions for commercial and military aircraft, radar and space applications. These technologies include wireless sensing, advanced pumps and transmitters, high power management for more electric-based aircraft and ground-based vehicles, directed energy, landing gear monitoring and control, advanced microwave systems.
   
Payment & Merchandising Technologies has a strong funnel of new products expected to launch over the next year. Key accomplishments in 2020 included the further commercialization of 2019 product launches including our PayTower unattended retail solution and a smart safe product for the Japanese market, and the rollout of MOTION® and RAPID® DETECT machine-readable micro-optic anti-counterfeiting solutions for the banknote market.
   
The process valve business within our Fluid Handling segment continued to expand the breadth of its product portfolio, successfully launching products to broaden its valve portfolio, and continuing to commercialize other products launched over the last few years including new polypropylene-lined large diameter pipe product line, a range of metal seated ball valves, a family of digital pressure transmitters, and a truck cab air suspension valve. Outside of the process business, our Building Services & Utilities business continues to expand its MK3 line of pressure independent control valves, and our Crane Pumps & Systems business continues to expand its portfolio of SITHE chopper and BLADE grinder pump products.

 

PROGRESS ON SHARE GAIN INITIATIVES

 

We gained share across most of our portfolio during 2020. Some notable examples:

 

At Aerospace & Electronics, the commercial side of the business had an extremely challenging 2020 with consumer and business travel dramatically reduced as a result of COVID-19, and aircraft production rates further reduced by the prolonged agency recertification process for the high-volume Boeing 737 MAX. However, the defense business had an outstanding year, delivering high-teens sales growth which was well in excess of market growth rates, driven by continued share gains in our Defense Power and Microwave businesses, as well as continued product shipments to key military programs from our Landing, Fluid and Sensing businesses.
   
At Payment & Merchandising Technologies, we continue to gain notable share in the North American gaming market by leveraging new product introductions including the Easitrax Live suite of connectivity solutions and cashless gaming solutions, and with the benefit of our expanded product offering following Cummins-Allison acquisition. In the unattended retail market, we continued to gain share in North America with our partner OEMs, and in Europe with our Pay Pod solution for small- and mid-sized business payment automation, and in Japan with a range of Paytower solutions. At Crane Currency, we continue to gain share in the international market, both with our micro optic security technology and banknote printing capabilities.
   
At Fluid Handling, we believe that the 2020 core sales decline of 15% was entirely attributable to COVID-19 related market weakness, and that share gains mitigated the sales decline by more than 150 basis points, with notable progress across our process valve, pumps and controls businesses. Share gains were driven primarily by recent new product introductions and a consistent focus on commercial execution including our key account and channel management processes. We also continue to drive share gains through localization in China, India and the Middle East, by improving the speed of product modifications to meet customer needs, and by improving the efficiency of our front-end processes such as order quote times.

 

CONTINUED PROACTIVE REPOSITIONING ACTIONS

 

At the end of 2017, we approved repositioning actions in our Fluid Handling, Payment & Merchandising Technologies, and Aerospace & Electronics businesses. These actions reflect the benefits of our business system, where we drive a relentless pursuit of efficiencies across the Company. These specific actions include consolidating certain facilities that will not only improve our cost position, but enable us to meet higher expected future demand levels and provide a footprint that we believe will best serve our customers. These actions were completed during 2020, with total annual

 

2021 Proxy Statement 39
   

Table of Contents

Compensation Discussion and Analysis

 

  savings exceeding our original expectations and totaling approximately $40 million. During 2018, we also announced the closure of Crane Currency’s banknote printing facility in Tumba, Sweden, with printing activity moving to a recently completed state-of-the-art facility in Malta. The move of banknote printing to Malta has substantially improved the cost position and competitiveness of Crane Currency’s international business.
   
At the end of 2019, we approved additional repositioning actions in our Fluid Handling segment, including additional facility consolidation to better geographically align our manufacturing footprint with customer needs. This opportunity arose as a result of continued operational improvements in certain facilities that are now able to handle higher volumes. These actions were delayed modestly as a result of COVID-19 related construction restrictions in certain regions, but we still expect that these incremental actions will generate approximately $10 million of annual savings by 2022.
   
During 2020, we implemented gross cost reductions of approximately $105 million, approximately 40% of which were structural. The structural cost measures should result in approximately $90 million of annual savings by 2021.

 

Taken together, we believe all these actions position the Company for years of profitable growth, and that the combination of our core, underlying business prospects, along with the recent acquisitions, repositioning initiatives, and capital deployment potential, lay the groundwork for adjusted EPS growth of approximately 10%, on average, over a multi-year period.

 

Compensation Framework

 

The mix of target total direct compensation (base salary, target annual incentive awards, and long-term incentive awards) for 2020 was structured to deliver the following approximate proportions of total compensation to our Chief Executive Officer and the other NEOs (on average) if target levels of performance are achieved.

 

85% of CEO and over 65% of other NEOs Target Pay is Performance-Based

 

Chief Executive Officer

 

 

Totals may not sum due to rounding.

 

Other NEOs

 

 

Totals may not sum due to rounding.

 

40 Crane Co.
   

Table of Contents

Compensation Discussion and Analysis

 

Pay for Performance Alignment

 

Strong Correlation Between Pay and Performance. A substantial majority of the compensation for our Named Executive Officers is performance-based and thus varies with the Company’s actual performance. Based on the Company’s financial performance and TSR in 2020 (which was significantly impacted by the COVID-19 pandemic), the annual cash bonuses for our CEO and other corporate NEOs were substantially lower than in prior years, and the tranche of performance-based restricted share units (PRSUs) tied to the Company’s TSR from 2018-2020 vested at 0% due to below threshold performance resulting in 0 shares payout.

 

Annual Bonus Directly Tied to Crane’s EPS and Free Cash Flow

 

 

(1) See “Named Executive Officers’ Bonuses for 2020”, on page 47, for more details and further discussion on the annual incentive plan awards and adjusted metrics for 2020 due to the impact of the COVID-19 pandemic.

 

PRSU Vesting Directly Tied to Crane’s Relative TSR

 

 

Stockholder Feedback

 

For the annual advisory non-binding vote regarding compensation of our NEOs at the 2020 annual meeting of stockholders more than 94% of the votes cast were in favor of the resolution approving NEO compensation in 2019. The Company believes the level of support from its stockholders reflected by this vote is evidence that the Company’s pay for performance policies are working and are aligned with its stockholders’ interests.

 

 

2021 Proxy Statement 41
   

Table of Contents

Compensation Discussion and Analysis

 

Compensation Best Practices

 

The Committee is firmly committed to implementing a compensation program that aligns management and stockholder interests, encourages executives to drive sustainable stockholder value creation, and helps retain key personnel. Key elements of our pay practices are set forth in the Proxy Summary and explained in more detail in the “Policies and Practices Related to Our Executive Compensation Program” section beginning on page 55. See “Compensation Best Practices” chart on page 8 for a summary of our compensation best practices.

 

Compensation Principles

 

We believe that compensation should be directly linked to performance and highly correlated to stockholder value. The principles that guide us as we make decisions involving executive compensation are that compensation should be:

 

                   
  1

Based on performance:

  overall performance of the Company

 

  performance of the executive’s business unit, as applicable

 

  individual performance of the executive

2 Aligned with the annual operating plan and longer term strategic plans and objectives to build sustainable value for stockholders 3 Competitive given relevant and appropriate market conditions in order to attract and retain highly qualified executives 4 Consistent with high standards of corporate governance and designed to avoid encouraging executives to take risks that are reasonably likely to have a material adverse effect on the Company or to behave in ways that are inconsistent with the Company’s objectives, values, and standards of behavior  
                   

 

We also believe that it is important for our NEOs and other executives to have an ongoing long-term investment in the Company as outlined below under “Stock Ownership Guidelines” on page 56.

 

We design our performance-based incentive compensation so that variation in performance will result in meaningful variation in the earned compensation paid to our NEOs and other key executives. Thus, actual compensation amounts will vary above or below targeted levels depending on performance of the Company and/or business unit and achievement of individual performance goals.

 

Elements of Compensation and 2020 Decisions

 

The following table summarizes the major elements of our executive officer compensation program.

 

Compensation Element   Principal Objectives   Key Characteristics
Base Salary   To provide a fixed amount for performing the duties and responsibilities of the position   •   Determined based on overall performance, level of responsibility, competitive compensation data, and comparison to other Company executives
Annual Incentive Plan   To motivate executive officers to achieve annual financial performance goals   •   Payment based on achievement of business unit and Company-wide performance goals relative to annual pre-established targets
Performance-Based Restricted Share Units (PRSUs)(1)   To motivate executive officers to drive long-term profitable growth  

•   Number of shares actually earned based on relative TSR

•   Earned shares vest upon conclusion of the three-year performance period

Stock Options   To attract and retain executive officers and align their interests with long-term stockholder interests  

•   Grants vest ratably over four years

•   Value realized dependent on Company stock price appreciation

Time-Based Restricted 
Share Units (TRSUs)
  To retain executive officers and drive profitable growth  

•   Grants vest ratably over four years

•   Value realized varies with Company stock price performance

 

(1) PRSUs and TRSUs may be collectively referred to in this Proxy Statement as “RSUs.”

 

42 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

The compensation decisions and metrics made and set by the Committee for fiscal year 2020 were established in January 2020, prior to and long before we could anticipate the global disruption and impact of the COVID-19 pandemic. These decisions included base salary increases, annual incentive plan target setting, and long-term incentive plan awards, all of which were impacted by the pandemic.

 

Base Salary

 

Base salary is fixed compensation paid to each executive for performing normal duties and responsibilities. We determine the amount at the date of hire based on competitive market data, current salary levels within the Company, and the salary level needed to attract the particular executive. We review and determine the amount annually based on the executive’s overall performance, competitive compensation data, level of responsibility, and comparison to other Company executives.

 

Base salaries for certain executive officers were increased effective January 27, 2020 in connection with annual merit increases. After giving effect to such increases, the base salaries for most of our named executive officers were all within the competitive range of +/- 15% in relation to the 50th percentile of competitive market data per the Committee’s independent compensation consultant, FW Cook.

 

All NEOs and certain other members of the Company’s senior management team took a voluntary temporary reduction in their base salaries from April through December 2020 (20% for the CEO and 10% for all other executive officers, which reductions are reflected in the chart below), reflecting the impact on the year’s financial performance during the pandemic on both stockholders and other stakeholders, including Crane associates. See “2020 Summary Compensation Table” on page 60, for more details on total compensation paid to NEOs in 2020.

 

 

 

Note: For comparison, base salaries approved by the Committee for 2019 were $1,004,250 for Mr. Mitchell, $640,000 for Mr. Maue, $470,000 for Mr. Gallo, and $430,000 for Mr. D’Iorio. Mr. Alcala was not an NEO for proxy reporting in 2020.

 

2021 Proxy Statement 43
 

Table of Contents

Compensation Discussion and Analysis

 

Annual Incentive Compensation

 

We pay our executive officers cash bonuses based on the attainment of Company and business unit performance goals established in January and an assessment of individual performance conducted at the end of the year. For 2020, these performance goals were set prior to the time when we could have anticipated or known the impact of the impending COVID-19 pandemic.

 

Early in the year, the Committee establishes and approves the annual target bonus objectives and award opportunities for each of our named executive officers, subject to review and approval by the Board in the case of the Chief Executive Officer.

 

In making determinations about performance targets, the Committee considers a variety of factors including financial elements of the annual operating plan, comparison to prior year results, the general business outlook for the coming year, the opinions of analysts who follow the Company, and our diversified industrial manufacturing peers.

 

Our Chief Executive Officer and other officers participate in the discussions regarding annual incentive objectives so they can provide their input and understand the expectations of each incentive plan component. Each participating executive receives a confirmation of his or her annual bonus objectives and payout range after it has been approved by the Committee (the Board in the case of the Chief Executive Officer). Annual incentive plan objectives are not modified during the year, although the Committee may determine to exclude certain special items impacting EPS or free cash flow, either known at the beginning of the year or occurring during the year.

 

The Committee reviews the performance results for the Annual Incentive Plan, including Company and business unit results and individual performance, at its regularly scheduled January meeting, which is generally the first meeting following the end of the Company’s fiscal year in order that full-year performance may be considered. Based on this review, the Committee determines and approves the annual cash bonuses for each of our executive officers.

 

     
  Competitive Positioning of Incentive Awards  
     
  For annual bonus and long-term stock-based compensation, the Committee calibrates award values for targeted performance by reference to the 50th percentile of the market data for similarly sized companies, recognizing that the competitive range of the median is +/- 15% of the benchmarking data. Within that range, the competitive positioning for individual executives may vary above or below the median based on factors such as tenure, experience, proficiency in role, and criticality to the organization. As noted above, the Committee may determine to increase or decrease long-term stock-based compensation based on Company and/or individual performance during the previous year, the Company’s stock price relative to historical stock price trends, availability of shares in the Company’s Stock Incentive Plan, and other factors.  
     

 

44 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

Annual Incentive Objectives for 2020—CEO and Other Corporate NEOs

 

Performance metrics for 2020 consisted of EPS and free cash flow (each as adjusted by the Committee), weighted 75% / 25% respectively, for the Chief Executive Officer and other corporate NEOs. In addition to the targeted performance goals, for each performance metric, the Committee set minimum threshold and maximum cap values, so that actual payouts could range from 0% to 200% of the target award amounts.

 

In January 2020, prior to the beginning of the COVID-19 pandemic, the Committee established an EPS target of $6.48. The Committee also established a payout range for EPS from $5.18 (0% payout) to $7.78 (200% payout). For free cash flow, the Committee established a target of $347 million with a payout range from $243 million (0% payout) to $451 million (200% payout). As previously noted, these performance metrics were established by the Committee prior to and long before we could have anticipated the global disruption and impact of the COVID-19 pandemic. Actual performance compared to annual incentive objectives for this group were as follows:

 

Corporate Objectives  Target
($)
   Actual
($)
   Performance
relative to
Target
   Weight   Calculated
Payout(1)
(%)
 
Adjusted EPS   6.48    3.84    0%   75%   0%
Adjusted free cash flow   347M   297M   51.7%   25%   13%
Calculated weighted payout %                       13%

 

(1) See “Named Executive Officers’ Bonuses for 2020”, on page 47, for more details and further discussion on the annual incentive plan awards and adjusted metrics for 2020 due to the impact of the COVID-19 pandemic.

 

The graphs below show the performance targets and related ranges set by the Committee in January 2020 and the actual performance in 2020. These corporate financial metrics are adjusted for special items by the Committee for bonus calculation purposes under the Annual Incentive Plan, which adjustments may in some cases differ from the adjustments made for reporting purposes.

 

Crane Co. 2020 Adjusted Earnings per
Share Performance was 0% of Target
  Crane Co. 2020 Adjusted Free Cash Flow ($M)
Performance was 51.7% of Target
     
     

 

2021 Proxy Statement 45
 

Table of Contents

Compensation Discussion and Analysis

 

Performance Targets and Bonuses for Operations NEOs in 2020

 

For Messrs. Gallo and Alcala, Senior Vice Presidents with responsibility for certain business operations (Payment & Merchandising Technologies and Engineered Materials in the case of Mr. Gallo, and Fluid Handling and operations in China, India and the Middle East & Africa in the case of Mr. Alcala), performance metrics for 2020 were operating profit (70% of target bonus) and free cash flow (30% of target bonus) based on results of the businesses for which they were responsible. While Mr. Maue has operational responsibility for the Aerospace & Electronics segment, his bonus is based solely on his performance as Chief Financial Officer and not his operational responsibilities.

 

The performance metrics for Messrs. Gallo and Alcala were established by the Committee prior to and long before we could have anticipated the global disruption and impact of the COVID-19 pandemic.

 

Kurt Gallo, Senior Vice President
The performance metrics approved by the Committee for Mr. Gallo were aggregate operating profit of the Payment & Merchandising Technologies and Engineered Materials businesses, with a target of $250.1 million (100% payout) and a payout range from $199.2 million (0% payout) to $300.9 million (200% payout), and aggregate free cash flow from such businesses, with a target of $228.9 million (100% payout) and a payout range from $183.3 million (0% payout) to $274.6 million (200% payout). Actual performance for Mr. Gallo’s businesses compared to these annual incentive objectives are set forth in the tables immediately below.

 

Throughout 2020 and during the unanticipated COVID-19 pandemic, Mr. Gallo undertook additional responsibilities that merited consideration by the Compensation Committee. While leading the Payment & Merchandising Technologies segment and assuming responsibility for Engineered Materials, Mr. Gallo also acted as President of Crane Currency for seven months, guiding Crane Currency to substantially over-deliver on its 2020 plan, achieving a 200% payout. Mr. Gallo also led the consolidation of Merchandising Systems into Crane Payment Innovations and led the integration of the recently acquired Cummins-Allison business.

 

Based on the performance targets described above, the impact of the COVID-19 pandemic on the actual results achieved in 2020 for Mr. Gallo’s businesses, and in recognition of Mr. Gallo’s leadership actions during the pandemic and the additional responsibilities undertaken by Mr. Gallo, the Committee approved a 100% payout for Mr. Gallo.

 

Operations Objectives—K.F. Gallo
(Payment & Merchandising Technologies and
Engineered Materials)
  Target
($)
   Actual
(adjusted)
($)
   Performance
relative to
Target
   Weight   Calculated
Payout
(%)
   Actual
Adjusted
Payout (%)
 
Operating profit   250.1M    160.5M    0.0%    70%    0.0%      
Free cash flow   228.9M    202.6M    42.3%    30%    12.69%      
Weighted payout %                       12.69%    100% 

 

Alejandro Alcala, Senior Vice President

The performance metrics approved by the Committee for Mr. Alcala were aggregate operating profit target of the Fluid Handling business, with a target of $167 million (100% payout) and a payout range from $133.4 million (0% payout) to $200.5 million (200% payout), and aggregate free cash flow from such business, with a target of $91.7 million (100% payout) and a payout range from $72.5 million (0% payout) to $111 million (200% payout). Actual performance for Mr. Alcala’s businesses compared to these annual incentive objectives are set forth in the tables immediately below.

 

In March 2020, Mr. Alcala was elevated to the position of Senior Vice President and in April assumed responsibility for the entirety of our Fluid Handling businesses and operations in China, India and the Middle East & Africa, prior to which he had been President of Crane ChemPharma & Energy (“CPE”) business. Mr. Alcala, for a period of six months, continued to serve as Acting President of CPE until a successor was appointed and simultaneously led the integration of Instrumentation & Sampling and fulfilling his segment leader responsibilities.

 

46 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

Based on the performance targets described above, the impact of the COVID-19 pandemic on the actual results achieved in 2020 for Mr. Alcala’s businesses, and in recognition of Mr. Alcala’s leadership actions during the pandemic and the additional responsibilities undertaken by Mr. Alcala during 2020, the Committee approved a 50% positive adjustment and also awarded Mr. Alcala a cash bonus of $50,000, in recognition of his additional duties as Acting President of CPE. The discretionary adjustment to 50%, plus the additional cash bonus in recognition of Mr. Alcala’s dual role, resulted in a total adjusted payout of 65.9%.

 

Operations Objectives—A. Alcala (Fluid Handling)  Target
($)
   Actual
(adjusted)
($)
   Performance
relative to
Target
   Weight   Calculated
Payout
(%)
   Actual
Adjusted
Payout (%)
 
Operating profit   167.0M    116.2M    0%    70%    0.0%      
Free cash flow   91.7M    80.0M    38.8%    30%    11.63%      
Weighted payout %                       11.63%    65.9% 

 

Named Executive Officers’ Bonuses for 2020

 

In January 2021, the Committee reviewed management’s reports on the performance of the Company, the relevant business units, and the individual named executive officers in 2020 against the relevant bonus objectives. In order to provide linkage between incentive plan payouts and the quality of management’s performance, the Compensation Committee has discretion to adjust incentive awards for the NEOs. The Committee chose not to make mid-year adjustments due to the continuing uncertainties in the markets caused by the ongoing COVID-19 pandemic. Instead, the Committee considered the Company’s overall performance, performance against the revised guidance issued on April 27, 2020, the impact of the unforeseen COVID-19 pandemic on the Company’s business and, consistent with prior years, the Committee excluded certain items as reported from earnings per share and free cash flow. Specifically, the unprecedented COVID-19 pandemic had a substantial impact on demand for most of the Company’s businesses and related end markets. The pandemic related demand destruction was so severe that original performance targets for most of the Company’s businesses were impossible to achieve. Additionally, the Committee recognized that the Company was on track to deliver above plan performance in 2020 prior to the COVID-19 pandemic, and, in the wake of the sustained downturn, considered the quick and decisive actions undertaken by senior management to preserve and protect the Company and Crane associates.

 

During the sustained downturn, Crane’s executive leaders implemented health and safety protocols across all our offices, manufacturing and distribution facilities, well in advance of CDC guidance, to protect Crane associates. These protocols included proper hygiene, social distancing, mask use and temperature screenings. In addition, we provided emergency pandemic compensation to Crane associates affected by the pandemic. The newly adopted Emergency Pandemic Exception Pay (EPE) program provides two weeks of additional paid time off to all associates globally that were directly or indirectly impacted by the pandemic above and beyond normal vacation and sick pay. The EPE program provides substantial flexibility for our associates, and it can be used to cover paid time off for associates diagnosed with COVID-19 or required to quarantine, for those who had to stay at home to care for children due to school or day care closure, and to ensure continuity of pay and benefits where Crane manufacturing facilities or offices were required to close because of local health regulations. The Crane associates’ employee benefit programs, including our 401(k) match in the United States, and our annual merit salary increases that were approved and awarded in January 2020 were not rolled back during the pandemic. In addition to the implementation of health and safety measures, senior management also quickly accessed the capital markets to reinforce the Company’s balance sheet, ahead of a predicted tightening of credit markets, thereby increasing the capacity of our credit facilities and lowering our overall cost of debt. Our senior leaders worked diligently, undertaking company-wide measures to reduce our expenses. These measures included voluntary base pay reductions at the executive officer level (20% for the CEO and 10% for all other executive officers), and 20% voluntary reductions in the cash component of the annual retainer for each of our non-employee Directors, all from April through December. The foregoing, among various other actions implemented by senior management during the sustained downturn, enabled the Company to emerge from the pandemic in a position of strength.

 

2021 Proxy Statement 47
 

Table of Contents

Compensation Discussion and Analysis

 

As in prior years, the Compensation Committee relied on adherence to our core compensation principles and plan design to guide its decisions related to 2020 incentive plan bonuses, with a focus on supporting the business decisions and leadership required during this unprecedented time while still taking into account the impact of the COVID-19 pandemic on our stockholders. In lieu of making mid-year plan adjustments during the ongoing pandemic, the Committee instead chose to exercise its discretion at the low end of target range. The formulaic calculations resulted in an adjusted corporate payout percentage of 13%. The Committee considered the factors listed above, and exercised its discretion to award a payout at the low end of target range, totaling 50% (other than for our CEO) (for Messrs. Alcala and Gallo, see “Performance Targets and Bonuses for Operations NEOs” on page 46). The recommended percentages are intended to reconcile the low formulaic payout based on actual, pandemic-impacted financial performance with the quick and decisive actions taken by management to protect the Company’s associates, stabilize the Company finances, meet customer demand in a difficult operating environment, and position the Company to emerge stronger in 2021, all of which the Committee deemed reasonable in light of the stockholder experience for the year. The approved adjusted payout percentages and adjusted cash bonuses for our corporate and operations NEOs for 2020 are as follows:

 

Named Executive Officer  Bonus
Target
(% of Salary)
  Bonus
Target
($)
  Adjusted
Payout
(%)
  Adjusted
Bonus Paid
($)
M. H. Mitchell  120%  1,205,100  13%  156,663
R. A. Maue  75%  494,400  50%  247,200
K. F. Gallo  70%  342,160  100%  342,160
A. M. D’Iorio  70%  316,050  50%  158,025
A. Alcala  70%  315,400  65.9%  207,700

 

Long-Term Equity Incentive Compensation

 

The Stock Incentive Plan is used to provide long-term incentive compensation through stock options and PRSUs, as well as retention of employees through TRSUs. We believe that employees approach their responsibilities more like owners as their holdings of, and potential to own, stock increase.

 

The Committee determined an overall target dollar value for long-term equity incentive awards for each of the named executive officers. In determining these amounts, the Committee considered the competitive market data compiled by FW Cook, Company and individual performance in 2020, and our historical grant practices including the number of shares and the fair market value of the stock. The Committee then allocated the total target dollar amount among the applicable award types, as follows: for our Chief Executive Officer, 60% as PRSUs and 40% as stock options; and for each of the other named executive officers, 50% as PRSUs, 35% as stock options, and 15% as TRSUs. To determine the target number of PRSUs and the number of stock options and TRSUs, the Committee divided the applicable dollar amount by the closing price of our common stock for the PRSUs and TRSUs and by the Black-Scholes accounting value for the stock options (rounded in each case to the nearest whole share) on the date the awards were approved.

 

Despite the fact that the Company was on track to deliver above plan performance in 2020 prior to the COVID-19 pandemic, and notwithstanding the quick and decisive actions undertaken by management to preserve and protect the Company and its associates, during the sustained economic downturn caused by the pandemic, the Committee chose not to exercise its discretion to modify the previously granted long-term incentive compensation awards, and maintained the awards and the metrics as they had been granted.

 

48 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

The table below sets forth, for each of our named executive officers, the dollar value used by the Committee and resulting number of shares for the awards.

 

   Long-Term Incentive
   Stock Options  PRSUs*  TRSUs  LTI Total
Named Executive Officer  $  #  $  #  $  #  ($)
M. H. Mitchell  1,890,000  118,273  2,835,000  33,920      4,725,000
R. A. Maue  420,000  26,283  600,000  7,179  180,000  2,154  1,200,000
K. F. Gallo  227,500  14,237  325,000  3,888  97,500  1,167  650,000
A. M. D’Iorio  227,500  14,237  325,000  3,888  97,500  1,167  650,000
A. Alcala  210,000  13,141  300,000  3,589  90,000  1,077  600,000

 

* As noted above, the Committee determined the target number of PRSUs using the dollar amount shown above divided by $83.58, the closing price of our common stock on the date the awards were approved. In contrast, the amounts included in the Summary Compensation Table and 2020 Grants of Plan-Based Awards table are based on the grant date fair value of the PRSUs determined using financial accounting assumptions as required to be disclosed by SEC rules, determined to be $93.05 per share. As a result, the value of the PRSUs included in those tables differs from the values shown above. See footnote 1 to the “Summary Compensation Table” on page 60 and footnote 5 to the “Grants of Plan-Based Awards” table on page 63 for additional information on the grant date fair value of the PRSUs.

 

     
  Selection of Performance Measures for Incentive Awards  
     
  For our PRSUs, the performance measure is Crane’s TSR over a three-year period relative to the TSR of the constituent companies in the S&P Midcap 400 Capital Goods Group, a meaningful measure of stockholder value. As discussed further below, the principal performance measures selected by the Committee to drive annual incentive compensation are, for the Chief Executive Officer and other corporate executives including Messrs. Maue and D’Iorio in 2020, adjusted EPS and free cash flow for the Company as a whole and, for certain executives with direct or supervisory operating unit responsibility including Messrs. Alcala and Gallo in 2020, adjusted operating profit and free cash flow for their respective business units. These performance criteria were chosen because they are aligned with the Company’s long-term strategic goal of driving profitable growth, both organically and through acquisition, which we believe will increase shareholder value. The relative weighting of these metrics was designed to ensure an appropriate balance between profit achievement and maintaining a strong and efficient balance sheet.  
     

 

2021 Proxy Statement 49
 

Table of Contents

Compensation Discussion and Analysis

 

PRSU Awards – 3-Year Performance Period Based on Relative TSR

 

The Committee grants to NEOs and other senior executives PRSUs with three-year performance vesting conditions based on relative total stockholder return as described below, thus directly linking this form of stock-based compensation to returns received by our stockholders relative to comparator industrial companies. See “Pay for Performance Alignment” in the Executive Summary of this discussion regarding actual payout results for recent PRSU awards, including the award covering the 2018-2020 performance period.

 

   PRSU Grants
Performance Level  CR Relative TSR  Shares Earned
% of Target
 
Below Threshold  <25th percentile   0%
Threshold  25th percentile   25%
Target  50th percentile   100%
Maximum  75th percentile   200%

 

 

 

The vesting of PRSUs awarded to members of the senior leadership team in January 2020 will be based on a relative measurement of TSR for Crane Co. over the three-year period January 1, 2020, through December 31, 2022 (with the share price for such purpose being defined as the percentage return of the 20-day trading average closing price on the last trading day of the three-year period, versus the 20-day trading average closing price prior to the first trading day of the period), compared to TSRs of the other companies in the S&P Midcap 400 Capital Goods Group. Vesting of the PRSUs as shares of Crane Co. common stock will be determined by the formula indicated above for new grants.

 

For TSR between the 25th and 50th percentiles and between the 50th and 75th percentiles, the vesting is interpolated on a straight-line basis. If Crane Co.’s TSR for the three-year period is negative, the maximum vesting is capped at 100% regardless of performance relative to peers. In addition, the maximum value that can be earned under the PRSUs (total shares earned multiplied by the final share price) is capped at four times the original grant value. Holders of PRSUs are not entitled to receive dividends or dividend equivalent payments during the performance period, nor do dividends accrue, prior to vesting.

 

50 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

Stock Option Awards – Vest 25% Per Year Over Four Years

 

Under the Stock Incentive Plan, stock options must be granted with a per-share exercise price at no less than fair market value on the date of grant and are subject to vesting terms as established by the Committee (currently 25% per year over four years). Stock option awards comprise 35% (transitioning to 25% beginning in 2021) of the annual LTI grant value for each NEO (40% for the CEO, transitioning to 25% beginning in 2021), vest ratably over four years and have 10-year terms. Accordingly, employees can realize a gain only if the share price increases from the date of grant, directly linking this incentive compensation to increases in stockholder value. Although broad market dynamics can strongly influence our share price, the Committee believes that with stock options our senior level management employees are motivated to take actions that improve the share price, such as profitable sales growth through organic growth as well as acquisitions, improvement in operating margins to generate increased operating profit and drive higher multiple valuations, and prudent use of free cash flow through capital expenditures, dividends, acquisitions, and stock repurchases.

 

TRSU Awards – Vest 25% Per Year Over Four Years

 

The Stock Incentive Plan also authorizes the Committee to grant time-based restricted share units, or TRSUs, subject to such terms and conditions as the Committee may deem appropriate. Like the stock options, the TRSUs granted to our NEOs vest ratably over four years, and dividends are paid on TRSUs prior to vesting.

 

Retirement Benefits

 

Messrs. Mitchell and D’Iorio have accrued retirement benefits under the Company’s defined benefit pension plan, which was closed to employees hired after 2005 and then frozen with no further benefit accruals effective December 31, 2012. Messrs. Maue, Alcala and Gallo, and the other NEOs beginning in 2014, participate in a defined contribution retirement plan under which the Company contributes 3% of salary and bonus annually (the contribution rate was 2% prior to 2014), subject to the limitations on contributions to tax-qualified retirement plans under applicable federal tax regulations.

 

The NEOs also participate in our Benefit Equalization Plan, which is designed only to restore retirement benefits under the Company’s regular defined benefit pension plan that are limited by the tax code; there is no supplemental benefit based on deemed service or enhanced compensation formulas. Benefits accrued under this plan are not funded or set aside in any manner. In the event of retirement at age 62 with 10 years of service, a participating executive would be eligible to receive benefits under that plan without the reduction factor set forth in the Company’s tax-qualified pension plan of three percent per year prior to age 65. The only NEO with a defined benefit account in this plan is Mr. Mitchell. This plan was also frozen as to defined benefit accruals effective December 31, 2012. Effective January 1, 2014, the Benefit Equalization Plan was amended to cover participants’ benefits under the defined contribution retirement plan referenced above, and the Committee extended the participation in this plan to certain senior leadership executives, including all of the NEOs.

 

Other Compensation

 

The “All Other Compensation” and “Change in Pension Value and Nonqualified Deferred Compensation Earnings” columns of the Summary Compensation Table and the accompanying footnotes set forth the details of other compensation received by the named executive officers. In certain cases, such as the Crane Co. contributions to defined contribution plans and the increase in actuarial value of the defined benefit pension, such compensation is determined on the same basis as that used for all other employees. In other cases, such as automobile allowances, executive health exams, cybersecurity protection in the executive’s home network environment, and other personal benefits, the compensation is only provided to certain key employees (including the named executive officers), and we have determined it to be reasonable and competitive compensation for the named executive officers in relation to general industry practices. For example, our named executive officers are eligible for reimbursement for the cost of their executive physicals bi-annually, subject to an expense cap of $2,500. This benefit provides our named executive officers with additional flexibility to proactively manage their health and wellness. Our executives bear all taxes associated with such benefits.

 

2021 Proxy Statement 51
 

Table of Contents

Compensation Discussion and Analysis

 

In the case of personal use of the corporate aircraft, this benefit is restricted to the Chief Executive Officer and the Chairman of the Board. Our Chief Executive Officer, Mr. Mitchell, has an agreement with Crane Co. pursuant to which he is not required to reimburse the Company for personal use until the aggregate incremental cost reaches $100,000, and thereafter he is required to reimburse the Company for all incremental cost incurred above that amount. The net incremental cost to Crane Co. above the reimbursed amount is included in the “All Other Compensation” column of the Summary Compensation Table. The Board of Directors has approved this personal use of the aircraft for Mr. Mitchell because the Board believes that such personal use of the aircraft permits the most efficient use of time by Mr. Mitchell and thereby benefits Crane Co. For more information regarding the use of the Company aircraft, see “Use of Company Aircraft” on page 58.

 

Compensation Decision-Making Process

 

Committee’s Role

 

The Committee is responsible for oversight of our executive compensation program. With respect to the compensation of our Chief Executive Officer, the Committee determines his compensation, subject to review and approval by the Board of Directors. With respect to our other executive officers, the Committee determines their compensation after reviewing the recommendations of the Chief Executive Officer. The Committee administers the Annual Incentive Plan, reviewing and setting the performance targets for the Chief Executive Officer and other corporate officers subject to review by the Board of Directors, setting performance targets for all other participants after reviewing the recommendations of the Chief Executive Officer, and reviewing and approving the annual bonuses based upon actual performance. The annual bonus calculations are also reviewed by our independent auditors. The Committee also administers the Stock Incentive Plan and approves all grants of stock options and RSUs.

 

The Committee is assisted in these responsibilities by its independent compensation consultant, FW Cook. Although Crane Co. pays the fees and expenses of FW Cook, the firm is retained by the Committee. FW Cook does not perform any other compensation related services for Crane Co. The Committee reviews the independence of FW Cook each year and has concluded that its work for the Committee has not raised any conflict of interest.

 

Role of CEO and Management

 

The Chief Executive Officer and certain other senior corporate officers play an important role in supporting the Committee in the discharge of its responsibilities. Management maintains records and provides historical compensation data to the Committee and FW Cook, as well as the annual operating plan and the actual performance results from which annual bonuses are determined. The Chief Executive Officer, together with other senior corporate officers, presents recommendations to the Committee regarding performance targets under the Annual Incentive Plan and long-term equity incentives under the Stock Incentive Plan. The Chief Executive Officer and other officers participate in the discussions regarding annual and long-term incentive objectives so they can provide their input and understand the expectations for each incentive plan component.

 

52 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

Compensation Consultant and Market Data

 

Each year, FW Cook reviews the Company’s compensation peer group against certain size-related metrics and alignment with the Company’s business segments and complexity of operations. When and as appropriate, FW Cook proposes the addition of other companies to the compensation peer group to replace companies that have been acquired or made substantial changes to their business portfolio, or when the Company’s profile has materially changed due to mergers or acquisitions. The 20-company peer group below was used by FW Cook in 2019 to develop comparative compensation data for the Committee in setting 2020 compensation targets. Notably, at the time the Company’s peer group was approved, their trailing fourth quarter revenues ranged from $2.7billion to $7.1billion with a median of $3.1billion, which compared to the Company’s revenue of $3.4billion. In addition, the peer group’s 12-month average market cap ranged from $1.6billion to $17.7billion, with a median of $6.2billion compared with $5.0billion for the Company. No changes were made to the peer group for 2020 (note, however, that previous references to SPX Corporation was an inadvertent error, which should have presented as SPX Flow as noted below). In July 2020, following the Committee’s 2020 compensation actions, the Committee approved the addition of Kennametal, Inc. to replace Esterline Technologies Incorporation, which had been acquired and was no longer a stand-alone publicly traded company.

 

       
  Compensation Peer Group for 2020    
       
Ametek, Inc. Flowserve Corporation Snap-On Incorporated
Carlisle Companies Incorporated Hubbell Incorporated SPX Flow
Colfax Corporation IDEX Corporation Teledyne Technologies Incorporated
Curtiss-Wright Corporation ITT Inc. The Timken Company
Donaldson Company, Inc. Pentair, plc Woodward, Inc.
Dover Corporation Regal Beloit Corporation Xylem Inc.
Esterline Technologies Incorporated Rexnord Corporation  

 

FW Cook provides the Committee with comparative compensation data on the peer companies from publicly available sources and, in addition, comparative compensation data compiled from general industry surveys with revenues ranging from $1.0 billion to $5.0 billion, appropriately size-adjusted to determine market values for companies of comparable size to the Company or business unit, as applicable. This data includes base salary, target bonus opportunity, and long-term incentive compensation for the named executive officers. The Committee uses this comparative data during its review of salaries, annual target cash incentive compensation, and aggregate stock option and RSU grant values for Mr. Mitchell and the other NEOs, with the view that all elements of target total direct compensation should be calibrated by reference to the 50th percentile of competitive market data for targeted performance, with significant upside potential for performance that exceeds target and lesser (or zero) payouts if performance is below target. The Committee may use its judgment and discretion to vary the award values, based on Company and individual performance during the previous year, historical stock price trends, the impact of unforeseen events beyond Management’s control, and other factors.

 

The Company’s comparator group for PRSUs granted in January of 2020 is the S&P Midcap 400 Capital Goods Group, consisting of approximately 40 companies, with roughly a quarter of those companies in our compensation peer group. The Committee selected the larger comparator group for PRSU purposes based on the view (with which FW Cook concurs) that a larger group is appropriate for measuring relative TSR over a three-year period because (1) company size is less relevant for TSR comparisons than benchmarking target pay levels, (2) the larger group best represents the universe of companies with which Crane competes for investor capital and (3) it is less likely to be meaningfully affected by the loss of constituent companies during the period. In addition, the S&P Midcap 400 Capital Goods Group is a regularly published listing with all the necessary data to make the required calculations.

 

2021 Proxy Statement 53
 

Table of Contents

Compensation Discussion and Analysis

 

CEO Assessment Process and Principal Conclusions

 

Each year, the Chief Executive Officer proposes a set of goals and objectives for himself, which are reviewed and approved by the Board as part of an annual self-assessment and review process managed by the Committee. The goals and objectives include quantitative goals based on the annual operating plan and related metrics, as well as certain qualitative objectives relating to business strategy, organization, and intellectual capital development. At the end of each year, our Chief Executive Officer prepares and delivers to the Committee a self-assessment of his performance during that year, with reference to the goals and objectives established at the beginning of the year as well as challenges and opportunities that arose during the year. This self-assessment is shared with the other members of the Board of Directors, and their responses and other observations are compiled by the Chair of the Committee and discussed with our Chief Executive Officer, who then responds to the full Board.

 

         
  Max H. Mitchell

Age: 57

President and Chief Executive Officer  
     
     
   

 

Principal Conclusions

Outcomes for 2020, which shaped the Committee’s compensation decisions in January 2021:

(1)   Mr. Mitchell led the Company through an extraordinary period, with demand in most of the Company’s global markets significantly and negatively impacted by the COVID-19 pandemic, and took decisive actions to address the safety of the Company’s associates, fortified and protected the Company’s balance sheet, and positioned the Company to emerge from the pandemic situated to outgrow the market in 2021 and beyond.

(2)   Mr. Mitchell delivered EPS and Free Cash Flow results in line with revised guidance issued in April 2020 (after the impacts of the pandemic were being felt across the global economy), in a period when most companies chose not to offer guidance on expected results during the period of heightened uncertainty.

(3)   Mr. Mitchell successfully integrated two acquisitions - Cummins Allison Corporation, which closed in December 2019, and the Instrumentation and Sampling business that was acquired from CIRCOR, which closed in January 2020, delivering additional profit and cash flow to Crane’s overall financial results.

(4)   Mr. Mitchell made prudent capital allocation decisions, investing in new product development and other growth initiatives to maintain a solid foundation for continued profitable growth.

(5)   Mr. Mitchell led with integrity and compassion, communicating frequently and effectively to the Company’s workforce during a period marked by fear and uncertainty, and provided extraordinary support and flexibility for associates impacted by the COVID-19 pandemic.

 

Outcomes for 2019, which shaped the Committee’s compensation decisions in January 2020:

(1)   Mr. Mitchell led the Company to achieve adjusted EPS of $6.02, and record free cash flow of $325 million, despite challenging year-over-year comparisons, coupled with weakness in orders from the U.S. Government in the Crane Currency business, and continued headwinds in the Engineered Materials business;

(2)   Mr. Mitchell materially increased the Company’s M&A capabilities, attempting to acquire a large competitor in the Fluid Handling space, which signaled the Company’s continued confidence in acquiring and successfully integrating businesses that add scale and profitability to the Company’s portfolio;

(3)   In 2019, the Company successfully completed its acquisition of Cummins-Allison Corp., a well-known manufacturer of high-speed coin and banknote counting equipment, which will complement and expand the Company’s high-margin Payment Innovations business;

(4)   The Company also announced its agreement to acquire the Instrumentation and Sampling business from CIRCOR, expanding the Company’s product line in high margin fluid handling diagnostic equipment;

(5)   Mr. Mitchell continued to drive new product development and innovative technology enhancements through a disciplined process across the Company’s businesses;

(6)   Mr. Mitchell continued to maintain a strong balance sheet by driving cost efficiency and increasing productivity while maintaining an appropriate debt to equity ratio; and

(7)   Mr. Mitchell continued to maintain the high ethical standards expected of all the Company’s associates, leading by example and over-communicating his expectation of ethics, integrity and transparency.

 

 
   

 

54 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

The Committee took these observations into account, along with the competitive data supplied by FW Cook, in approving Mr. Mitchell’s bonuses for 2019 and 2020 under the Annual Incentive Plan and in determining Mr. Mitchell’s stock-based incentive compensation grants in January 2020 and January 2021. The CEO does not participate in any deliberations regarding his own compensation.

 

A similar process is followed for each of the Company’s other NEOs except that it is the Chief Executive Officer who reviews the self-assessment by such executive officer and provides the conclusions and findings that help guide the compensation decisions affecting such officer; for the other NEOs, annual incentive compensation, though largely formula-based, is subject to adjustment by the CEO, and subject to review and approval by the Committee, based on assessment of individual performance.

 

Say-on-Pay Vote in 2020

 

In accordance with the Dodd-Frank Act and related rules adopted by the Securities and Exchange Commission, we presented a “Say-on-Pay” item to stockholders in 2020, which called for an advisory, non-binding vote regarding the compensation of our named executive officers in 2019 as described in the proxy statement. On this item, over 94% of the votes cast were in favor of the resolution. In light of strong stockholder support, the Committee concluded that no revisions were necessary to our executive officer compensation program in direct response to the vote.

 

Changes to 2021 Incentive Program Design

 

On December 8, 2020, the Compensation Committee approved an adjustment to the 2021 composition of long-term incentive compensation for the CEO and other executive officers (including the NEOs), to more closely align with the Company’s Peer Group median compensation design based on data supplied by FW Cook, the Compensation Committee’s independent consultant. For 2021, the CEO’s long-term incentive mix will be comprised of 55% PRSUs, 25% stock options and 20% TRSUs. The other NEO’s and executive officers’ adjusted long-term incentive mix will be comprised of 50% PRSUs, 25% stock options and 25% TRSUs.

 

Policies and Practices Related to Our Executive Compensation Program

 

Compensation Risk Assessment

 

The Committee has established a process for assessing the potential that our compensation plans and practices may encourage our executives to take risks that are reasonably likely to have a material adverse effect on the Company. A senior management team led by the Vice President, People and Performance conducts a review of the operation and effect of our compensation plans and practices which is presented to the Committee for discussion at its February meeting. With the assistance of FW Cook, the Committee concluded that our compensation plans and practices do not encourage excessive or unnecessary risk-taking for the following reasons:

 

Our incentive plans have a mix of performance measures, including Company-wide and business unit financial measures, operational measures, and individual objectives.
Our compensation programs contain a balance of annual and long-term incentive opportunities.
We cap incentive plan payouts within a reasonable range.
The range of payouts from threshold to maximum payout (performance slope) under our annual incentive plan and PRSUs is calibrated for an appropriate risk profile.
Our stock ownership guidelines link the interests of our executive officers to those of our stockholders.
Our clawback policy provides a means for the Company to recover the value of incentive awards in the event any of our executive officers engage in misconduct resulting in a financial restatement.
The mix of PRSUs and stock options in our long-term incentive program provides a blend of relative and absolute performance measures for our senior executives.

 

2021 Proxy Statement 55
 

Table of Contents

Compensation Discussion and Analysis

 

Stock Ownership Guidelines

 

The Company’s stock ownership guidelines for executive officers are expressed as a multiple of base salary:

 

Executive Level  Minimum
Ownership Level
CEO  6 x Base Salary
CFO  5 x Base Salary
Executive Officers-CEO Direct Reports  4 x Base Salary
Other Executive Officers  3 x Base Salary

 

Shares that count toward the satisfaction of the guidelines are (i) shares owned by the executive, (ii) shares held in the executive’s 401(k) account, and (iii) the after-tax value (65%) of TRSUs held by the executive. Neither unearned or unvested PRSUs nor unexercised stock options count for purposes of the guideline. The policy permits executives to sell up to 50% of the net shares realized upon an option exercise or vesting of RSUs (i.e., the total shares covered by the option exercised or the RSU grant vesting less the number of shares surrendered to pay the exercise price and satisfy tax withholding obligations), while retaining at least 50% of such net shares in order to meet the stock ownership guidelines. Once such guidelines are met, the policy permits executives to sell any shares held above the required ownership guidelines.

 

  As of February 26, 2021, all of the NEOs either held the requisite number of shares or were complying with the above-referenced retention ratio in accordance with the guidelines.

 

Policies with Respect to Timing of Stock-Based Awards and Exercise Price of Stock Options

 

Annual grants of stock options and RSUs to executive officers are made at the Committee’s regular January meeting, in order that full-year performance may be considered. The Committee also grants stock options and RSUs at other dates to newly hired or promoted executives. The exercise price of stock options under the Stock Incentive Plan is equal to the fair market value at the date of grant, determined on the basis of the closing price on the date of grant.

 

Policy with Respect to Hedging and Pledging of Company Stock

 

Certain forms of hedging or monetization transactions allow an individual to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock, allowing the benefit of continued ownership of the stock without the full risks and rewards of ownership. When that occurs, the individual may no longer have the same objectives as the Company’s other shareholders. For this reason, the Board has maintained a longstanding policy prohibiting any director, executive officer, or any other designated employee who qualifies as an insider from (1) entering into any hedging or other transaction to limit the risk of ownership of Company stock or (2) pledging Company stock to secure any loan or advance of credit. During 2020, none of our directors and executive officers engaged in any such transactions.

 

Clawback Policy

 

The Company’s Compensation “Clawback” Policy provides a means for the recovery of certain incentive compensation awards if the Company’s financial statements are restated due to fraud or similar misconduct by any executive officers. Under the clawback policy, the Company may recoup from the Chief Executive Officer, the Chief Financial Officer, the General Counsel, Controller, Treasurer and any other executive officers (including the named executive officers), who are determined to have participated in the misconduct: (1) the annual incentive compensation awards and other bonus compensation, and (2) all proceeds from stock option exercises or sales of RSUs within one year after the filing of the financial statement that is later restated. Under this policy, the Committee is authorized by the Board of Directors to pursue a financial recovery against the offending officers when the Board determines that a triggering event has occurred.

 

56 Crane Co.
 

Table of Contents

Compensation Discussion and Analysis

 

Impact of Internal Revenue Code Section 162(m)

 

Internal Revenue Code Section 162(m) limits the deductibility of compensation in excess of $1 million paid to any one NEO in any calendar year. Under the tax rules in effect before 2018, compensation that qualified as “performance-based” under Section 162(m) was deductible without regard to this $1 million limit. In 2017 and prior years, the Committee designed awards under the Annual Incentive Plan, as well as PRSUs and stock options granted under equity incentive plans, that were intended to qualify for this performance-based compensation exception. However, the Tax Cuts and Jobs Act (TCJA), which was signed into law December 22, 2017, eliminated this performance-based compensation exception effective January 1, 2018, subject to a special rule that “grandfathers” certain awards and arrangements that were in effect on or before November 2, 2017. As a result, compensation that the Committee structured in 2017 and prior years with the intent of qualifying as performance-based compensation under Section 162(m) that is paid on or after January 1, 2018, may not be fully deductible, depending on the application of the special grandfather rules. Moreover, from and after January 1, 2018, compensation awarded in excess of $1 million to our NEOs generally will not be deductible. While the TCJA will limit the deductibility of compensation paid to the NEOs, the Committee will — consistent with its past practice — design compensation programs that are in the best long-term interests of Crane Co. and our stockholders, with deductibility of compensation being one of a variety of considerations taken into account.

 

Other Arrangements with Our Named Executive Officers

 

Change in Control Provisions

 

Each of the Company’s executive officers has an agreement that, in the event of a change in control of Crane Co., provides for continued employment for a period of three years or until normal retirement following the change in control. Upon termination within such employment period after a change in control, either by the employer without cause or by the executive with “Good Reason” for constructive termination, the executive is entitled to receive a multiple of base salary and average annual bonus payments based on the number of years in the employment period, and certain other benefits. The annual incentive plans, stock options, and RSUs contain similar features which accelerate vesting in the event of termination following a change in control. The change in control agreements do not provide for any tax gross-ups, and instead cap the payments to the employee to the extent that such payments, together with accelerated vesting of stock options and RSUs, would trigger any excise tax under Section 4999 of the Internal Revenue Code resulting from such payments (and if capping the payments provides the employee with a larger after-tax payment).

 

As set forth below under “Potential Payments upon Termination or Change in Control,” the aggregate payments to the named executive officers under the change in control agreements, including the estimated value of continuation for three years (or until normal retirement age) of the individual’s medical coverage and other benefits, had a change of control taken place on December 31, 2020, and had employment been terminated immediately thereafter, would range from $10,052,119 for Mr. Mitchell to $2,709,990 for Mr. Alcala. The Board of Directors has approved these agreements and other provisions to assure the continuity of management in the event of a change in control and considers these agreements and provisions to be competitive with terms offered by other companies with which we compete for executive talent.

 

Indemnification Agreements

 

Crane Co. has entered into indemnification agreements with Mr. Mitchell, each other director, Messrs. Maue, Gallo, D’Iorio, and Alcala, and four other executive officers of Crane Co., the form of which was approved by stockholders at the 1987 annual meeting. The indemnification agreements require Crane Co. to indemnify the officers or directors to the full extent permitted by law against any and all expenses (including advances of expenses), judgments, fines, penalties, and amounts paid in settlement incurred in connection with any claim against the indemnified person arising out of services as a director, officer, employee, trustee, agent, or fiduciary of Crane Co. or for another entity at the request of Crane Co., and either to maintain directors and officers liability insurance coverage or to the full extent permitted by law to indemnify such person for the lack of such insurance.

 

2021 Proxy Statement 57
 

Table of Contents

Compensation Discussion and Analysis

 

Use of Company Aircraft

 

Crane Co. has entered into time share agreements with Messrs. Tullis and Mitchell regarding personal use of the corporate aircraft, including aircraft leased by Crane Co. from a third-party operator. Under the agreements, Crane Co. agrees to lease the aircraft to the executive pursuant to federal aviation regulations and to provide a qualified flight crew, and the executive agrees to pay Crane Co. for each flight. The agreement with Mr. Tullis provides that he pay the aggregate incremental cost of aircraft operation. Such incremental costs include fuel, landing fees, parking fees, temporary hangar charges, flight crew meals and lodging, and, for chartered aircraft, the entire charter fee. The agreement with Mr. Mitchell provides that he is not required to reimburse the Company for personal use until the aggregate incremental cost reaches $100,000, and thereafter is required to reimburse the Company for all incremental cost incurred above that amount. During 2020, the aggregate incremental cost to Crane Co. for personal use of the aircraft by Messrs. Tullis and Mitchell, less amounts paid by them under the time share agreements, was $0 and $34,156, respectively.

 

Management Organization and Compensation Committee Report

 

The Management Organization and Compensation Committee of the Board of Directors has submitted the following report for inclusion in this Proxy Statement:

 

The Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth in this Proxy Statement. Based on our review and discussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement, and incorporated by reference in Crane Co.’s Annual Report on Form 10-K for the year ended December 31, 2020.

 

Submitted by:

 

The Management Organization and Compensation
Committee of the Board of Directors of Crane Co.

 

Donald G. Cook
Ronald C. Lindsay
Ellen McClain
Charles G. McClure, Jr.
Jennifer M. Pollino, Chair
John S. Stroup

 

58 Crane Co.
 

Table of Contents

    2020 EXECUTIVE COMPENSATION TABLES    

 

Annual Compensation of the Named Executive Officers

 

This discussion should be read together with the 2020 Summary Compensation Table and the 2020 Grants of Plan-Based Awards table below.

 

Base Salary — The annual base salary of the Chief Executive Officer, Mr. Mitchell, is determined by the Compensation Committee and approved by the Board of Directors. The base salary of each of the other NEOs is recommended by the Chief Executive Officer and approved by the Compensation Committee. Base salary accounted for approximately 22% of the aggregate total compensation of the NEOs. All NEOs took a voluntary temporary reduction in their base salaries from April through December 2020 (20% for the CEO and 10% for all other executive officers), reflecting the impact on the year’s financial performance during the pandemic on both stockholders and other stakeholders, including Crane associates. The amounts included in the Summary Compensation Table under “Base Salary” reflect these voluntary temporary reductions in 2020. See “Base Salary” on page 43 for more details.

 

Stock Awards (PRSUs and TRSUs) — In January 2020 the Compensation Committee made grants of PRSUs to certain key executives, including the named executive officers. The PRSUs will vest, if at all, at the end of 2022, as determined with reference to the percentile ranking of the TSR of Crane Co. common stock for the period from January 1, 2020, through December 31, 2022, as compared to the TSRs of the other companies in the S&P Midcap 400 Capital Goods Group. The Committee also made grants of TRSUs to certain key executives, including the named executive officers, other than Mr. Mitchell, which will vest ratably on the first, second, third, and fourth anniversaries of the date of grant.

 

The grants were made pursuant to the 2018 Stock Incentive Plan. See “Potential Payments Upon Termination or Change in Control” on page 68 for a description of treatment of the PRSUs upon termination of employment.

 

Option Awards — In January 2020, consistent with previous practice, Crane Co. made annual grants of stock options to executives and other key employees including the named executive officers pursuant to the 2018 Stock Incentive Plan. Options become exercisable 25% per year over four years, and expire, unless exercised, 10 years after grant. The exercise price of the options granted on January 27, 2020, was $83.58, which was the fair market value of Crane Co. stock on the date of grant, calculated in accordance with the terms of the 2018 Stock Incentive Plan by taking the closing price on the grant date. See “Potential Payments Upon Termination or Change in Control” on page 68 for a description of treatment of the options upon termination of employment.

 

Non-Equity Incentive Plan Compensation — In January 2020, the Compensation Committee made target bonus awards pursuant to the Annual Incentive Plan to each of the Company’s executive officers (including the named executive officers). The awards became payable in cash in the first quarter of 2021 to the extent that certain performance targets were met during 2020. The target awards are shown in the 2020 Grants of Plan-Based Awards table beginning on page 62; the amounts shown in the Summary Compensation Table under “Non-Equity Incentive Plan Compensation” for 2020 are the actual amounts paid.

 

Other Compensation — The amounts appearing in the Summary Compensation Table under the caption “All Other Compensation” are disaggregated in footnote 5 to the table.

 

2021 Proxy Statement 59
 

Table of Contents

2020 Executive Compensation Tables

 

2020 Summary Compensation Table

 

The table below summarizes the compensation for 2020, 2019, and 2018 earned by Crane Co.’s Chief Executive Officer, its Chief Financial Officer, and each of the three other most highly paid executive officers (as determined pursuant to Securities and Exchange Commission rules) who were serving as executive officers on December 31, 2020.

 

Name and
Principal Position
  Year   Salary
($)
  Stock
Awards
($)(1)
  Option
Awards
($)(2)
  Non-Equity
Incentive Plan
Compensation
($)(3)
  Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($)(4)
  All Other
Compensation
($)(5)
  Total
($)
Max H. Mitchell   2020   857,475   3,156,256   1,890,003   156,663   185,206   116,063   6,361,666
President and Chief
Executive Officer
  2019   1,004,250   3,085,723   1,836,266   837,372   228,861   198,340   7,190,812
  2018   1,002,000   2,644,064   1,480,003   1,212,478     192,576   6,531,121
Richard A. Maue   2020   609,551   848,037   420,002   247,200       65,759   2,190,549
Senior Vice President and
Chief Financial Officer
  2019   622,898   952,205   419,998   333,531     68,859   2,397,491
  2018   559,938   820,130   384,993   462,304     60,627   2,287,992
Kurt F. Gallo   2020   451,634   459,316   227,507   342,160       42,786   1,523,403
Senior Vice President   2019   457,735   519,608   157,505   114,953     48,751   1,298,552
    2018                            
Anthony M. D’Iorio   2020   416,852   459,316   227,507   158,025   50,818   47,604   1,360,122
Senior Vice President,
General Counsel and Secretary
  2019   427,692   426,092   210,007   209,152   62,062   49,672   1,384,677
  2018   393,846   372,790   175,000   307,325     36,293   1,285,254
Alejandro Alcala(6)   2020   415,684   423,972   209,993   207,700     48,610   1,305,959
Senior Vice President                                
(1) Amounts shown in this column reflect the grant date fair value computed in accordance with FASB ASC Topic 718, with respect to awards of TRSUs and PRSUs made during 2020, 2019, and 2018. For details of individual grants of TRSUs and PRSUs during 2020 see the Grants of Plan-Based Awards table below. There were no forfeitures of TRSUs by any of the named executive officers during the fiscal year. PRSUs, however, for the three-year period 2018-2020 vested at 0% due to below threshold performance resulting in 0 shares payout for 2020. The assumptions on which these valuations are based are set forth in Note 8 to the audited financial statements included in Crane Co.’s annual report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2021.
(2) Amounts shown in this column reflect the grant date fair value computed in accordance with FASB ASC Topic 718, with respect to awards of options to purchase Crane Co. stock made during the indicated year. For details of individual grants of stock options during 2020 see the Grants of Plan-Based Awards table below. There were no forfeitures of Crane Co. stock options by any of the named executive officers during the fiscal year. The assumptions on which these valuations are based are set forth in Note 8 to the audited financial statements included in Crane Co.’s annual report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2021.
(3) Amounts shown in this column for all named executive officers represent amounts determined on the basis of the indicated year’s performance and paid early in the following year under the Annual Incentive Plan. For details of the 2020 grants, including the minimum, target and maximum amounts that were potentially payable, see 2020 Grants of Plan-Based Awards Table below.
(4) For 2020, 2019, and 2018, the amount shown in this column for Mr. Mitchell, and for 2020, 2019 and 2018 for Mr. D’Iorio is the change in the actuarial present value of the accumulated benefit under all defined benefit plans (which include the Crane Co. Pension Plan for Eligible Employees and the Crane Co. Benefit Equalization Plan) from December 31, 2019, 2018, and 2017 (the pension plan measurement dates used for financial statement reporting purposes with respect to Crane’s audited financial statements for 2019, 2018, and 2017 respectively) to December 31, 2020, 2019, and 2018 (the pension plan measurement dates with respect to Crane’s audited financial statements for 2020, 2019, and 2018 respectively). For additional information regarding these plans, see “Retirement Benefits” on page 66. For 2020 for Messrs. Mitchell and D’Iorio, the changes in the actuarial present value of the accumulated benefit under all defined benefit plans (which include the Crane Co. Pension Plan for Eligible Employees and the Crane Co. Benefit Equalization Plan) were as follows:
   
       Pension Plan   Benefit 
       for Eligible   Equalization 
   Year Ended   Employees   Plan 
   December 31,   ($)   ($) 
M. H. Mitchell   2020    58,264    126,942 
A. M. D’Iorio   2020    50,818     
   
60 Crane Co.
 

Table of Contents

2020 Executive Compensation Tables

 

(5) Amounts in this column for 2020 include the following:
   
               Company             
               Contribution   Company         
   Dividends Paid   Personal Use   Personal Use   to Benefit   Contribution         
   on Restricted   of Company   of Company-   Equalization   to 401(k)   Insurance     
   Stock/RSUs*   Aircraft**   Provided Car   Plan***   Plan   Premiums   Total**** 
   ($)   ($)   ($)   ($)   ($)   ($)   ($) 
M. H. Mitchell       34,156    20,353    42,295    17,100    2,159    116,063 
R. A. Maue   10,686        16,241    19,742    17,100    1,375    65,759 
K. F. Gallo   7,361        8,868    8,448    17,100    1,009    42,786 
A. M. D’Iorio   5,040        15,073    10,230    16,338    924    47,604 
A. Alcala   4,078        13,648    12,869    17,100    915    48,610 
* Dividends are paid on shares of restricted stock and TRSUs at the same rate as on all other shares of Common Stock. Dividends are not accrued or paid on PRSUs until the awards are earned and shares of Common Stock are issued.
** The method of computing the cost of personal use of the Crane Co. aircraft is described under the caption “Use of Company Aircraft” on page 58.
*** Includes the Company contribution to the defined contribution benefit under the Benefit Equalization Plan; see “Nonqualified Deferred Compensation Benefits” below.
**** Includes amounts reimbursed to Mr. Maue for cybersecurity protection in his home network environment.
   
(6) As previously noted, Mr. Alcala was elevated to the position of Senior Vice President with responsibility for the entirety of our Fluid Handling businesses and operations in China, India and the Middle East & Africa shortly after the departure of one of the Company’s Senior Vice Presidents in late first quarter 2020, prior to which he had been President of the Crane ChemPharma & Energy business. The amounts included for 2020 under “Salary” and “Non-Equity Incentive Plan Compensation” reflect the amounts he earned for the full year while in these two respective roles.
   
2021 Proxy Statement 61
 

Table of Contents

2020 Executive Compensation Tables

 

2020 Grants of Plan-Based Awards

 

The following table gives further details of 2020 compensation as disclosed in the “Stock Awards,” “Option Awards” and “Non-Equity Incentive Plan Compensation” columns of the Summary Compensation Table.

 

In the table below, the rows labeled “Annual Incentive Plan” disclose target bonuses set in February 2020, at which time business performance targets were also fixed. The column headings in relation to the Annual Incentive Plan are as follows:

 

Threshold” is the amount that would have been payable if actual performance compared to each target was at a predetermined minimum level (for example, if adjusted EPS had been at $5.18, or 80% of the target performance goal), and below which no amount would have been payable;
   
Target” is the amount that would have been payable if actual performance had been exactly equal to each of the targets (for example, if adjusted EPS had been $6.48); and
   
Maximum” is the amount that would have been payable if actual performance had been a predetermined percentage above the target (for example, if adjusted EPS per share had been $7.78, or 120% of the target performance goal, or greater).

 

Note that the amount shown in the Summary Compensation Table for 2020 under the heading “Non-Equity Incentive Plan Compensation” is the cash bonus actually paid, which was determined entirely by the performance of the business as compared to the targets set at the beginning of 2020.

 

The rows labeled “Performance RSU” disclose the target numbers of shares that may vest at the end of 2022 in respect of grants made in January 2020. Vesting will be based on the TSR of Crane Co. stock relative to the other companies in the S&P Midcap 400 Capital Goods Group over the three-year period 2020 – 2022. The column headings in relation to the Performance RSUs are as follows:

 

Threshold” is the number of shares that will vest if Crane Co.’s TSR is at the 25th percentile of comparator group performance, and below which no shares will vest;
   
Target” is the number of shares that will vest if Crane Co.’s TSR is at the 50th percentile (median) of the comparator group; and
   
Maximum” is the number of shares that will vest if Crane Co.’s TSR is at the 75th percentile of the comparator group or higher (however, if Crane Co.’s TSR is negative, the number of shares will not be higher than 100% of target).

 

In no event will the aggregate value of the shares earned exceed four times the value of the target number of shares determined at the beginning of the performance period.

 

The column headed “Grant Date Fair Value” shows the grant date fair value of the Performance RSUs, calculated using a formula based on the probability of various outcomes. This amount also appears in the Summary Compensation Table under the heading “Stock Awards”; see footnote 1 to the 2020 Summary Compensation Table on page 60. The value of the shares that actually vest at the end of 2022, if any, may be higher or lower than the grant date fair value.

 

62 Crane Co.
 

Table of Contents

2020 Executive Compensation Tables

 

The rows labeled “Stock Option” disclose the number of shares underlying stock options granted in January 2020, in respect of the executive’s performance during the previous year and as an incentive for performance during future years. The amount under the heading “Grant Date Fair Value,” calculated using the Black-Scholes formula, also appears in the Summary Compensation Table under the heading “Option Awards”; see footnote 2 to the Summary Compensation Table.

 

                 All Other
Stock
   All other
option
         
         Estimated possible
payouts under non-equity
   Estimated future
payouts under equity
   Awards:
Number
of shares
   awards:
Number of
securities
   Exercise or
base price
   Grant date
fair value
of stock
 
   Type of  Grant  incentive plan awards(2)
($)
   incentive plan awards(3)
(#)
   of stock
or units
   underlying
options
   of option
awards
   and option
awards
 
Name  Award  Date(1)  Threshold   Target   Max.   Threshold   Target   Max.   (#)   (#)   ($/sh)(4)   ($)(5) 
M. H. Mitchell  AIP  1/27/20       1,205,100    2,410,200                                    
   PRSU  1/27/20                  8,480    33,920    67,840                   3,156,256 
   Options  1/27/20                                      118,273    83.58    1,890,003 
R. A. Maue  AIP  1/27/20       494,400    988,800                                    
   PRSU  1/27/20                  1,795    7,179    14,358                   668,006 
   TRSU  1/27/20                                 2,154              180,031 
   Options  1/27/20                                      26,283    83.58    420,002 
K. F. Gallo  AIP  1/27/20       342,160    684,320                                    
   PRSU  1/27/20                  972    3,888    7,776                   361,778 
   TRSU  1/27/20                                 1,167              97,538 
   Options  1/27/20                                      14,237    83.58    227,507 
A. M. D’Iorio  AIP  1/27/20       316,050    632,100                                    
   PRSU  1/27/20                  972    3,888    7,776                   361,778 
   TRSU  1/27/20                                 1,167              97,538 
   Options  1/27/20                                      14,237    83.58    227,507 
A. Alcala  AIP  1/27/20       315,400    630,800                                    
   PRSU  1/27/20                  897    3,589    7,178                   333,956 
   TRSU  1/27/20                                 1,077              90,016 
   Options  1/27/20                                      13,141    83.58    209,993 

 

(1) All grants of PRSUs, TRSUs and stock options were effective as of the date on which the Compensation Committee voted to approve them.
   
(2) On January 25, 2021, the Committee approved bonus payouts for 2020 at 50% of target for the corporate NEOs other than the CEO, 100% of target for Mr. Gallo , and 65.9% of target for Mr. Alcala, based on 2020 results as adjusted for certain Special Items and COVID-19 considerations. See the Compensation Discussion and Analysis under “Elements of Compensation – Annual Incentive Compensation – Named Executive Officers’ Bonuses for 2020” above. Those amounts were paid in February 2021 and are shown in the Summary Compensation Table under “Non-Equity Incentive Plan Compensation” for 2020.
   
(3) Amounts shown are the estimated number of shares that will vest in respect of grants of PRSUs made on January 27, 2020, under the 2018 Stock Incentive Plan. The actual number of shares that will vest will be determined at year-end 2022 with reference to the ranking of Crane Co.’s TSR among the TSR of the other companies in the S&P Midcap 400 Capital Goods Group over the period from January 1, 2021, through December 31, 2022. See “Elements of Compensation and 2020 Decisions – Long-Term Equity Incentive Compensation” in the Compensation Discussion and Analysis beginning on page 35.
   
(4) The exercise price of options is the fair market value of Crane Co. stock on the date of grant, determined in accordance with the terms of the 2018 Stock Incentive Plan as the closing market price on the date of grant.
   
(5) The grant date fair values of PRSUs, TRSUs, and stock options are as follows, calculated in each case in accordance with FASB ASC Topic 718:
   
   Value    
Type of Equity Award  ($)   Method of Valuation
PRSUs   93.05   Monte Carlo pricing model
TRSUs (1/27/2020)   83.58   Closing trading price on grant date
Stock Options   15.98   Black-Scholes pricing model
   
2021 Proxy Statement 63
 

Table of Contents

2020 Executive Compensation Tables

 

2020 Option Exercises and Stock Vested

 

The following table provides information on all exercises of stock options, and all vestings of RSUs, for each of the named executive officers during 2020.

 

The value realized on exercise of options is computed by multiplying the number of shares acquired upon exercise by the difference between the market price of the shares on the applicable exercise date (calculated as the closing price on that date, or, if the shares received were concurrently sold, as the price actually obtained), and the exercise price of the options. The value realized on vesting of TRSUs and PRSUs is computed by multiplying the number of shares by the closing price on the applicable vesting date.

 

   Option Awards   Stock Awards 
   Number       Number of     
   of Shares   Value   Shares/Units   Value 
   Acquired on   Realized on   Acquired on   Realized on 
   Exercise   Exercise   Vesting   Vesting 
Name  (#)   ($)   (#)   ($) 
M. H. Mitchell   0    0    17,471    1,460,226 
R. A. Maue   0    0    6,418    530,447 
K. F. Gallo   0    0    3,157    245,388 
A. M. D’Iorio   0    0    1,474    126,025 
A. Alcala   0    0    2,754    231,905 
   
64 Crane Co.
 

Table of Contents

2020 Executive Compensation Tables

 

2020 Outstanding Equity Awards at Fiscal Year-End

 

The following table shows for each named executive officer, as of December 31, 2020: (i) under the heading “Option Awards,” the number of unexercised options, whether exercisable or unexercisable, with the exercise price and expiration date of each grant; (ii) in the first and second columns under the heading “Stock Awards,” the number and market value of unvested shares of restricted stock, unvested TRSUs and unvested retirement shares; and (iii) in the third and fourth columns under the heading “Stock Awards,” the number and market value of unearned PRSUs. No such awards have been transferred by any of the named executive officers.

 

   Option Awards   Stock Awards
                               Equity 
                           Equity   Incentive 
                           Incentive   Plan Awards: 
                       Market   Plan Awards:   Market or 
                       Value of   Number of   Payout Value 
                   Number of   Shares or   Unearned   of Unearned 
   Number of   Number of           Shares or   Units of   Shares, Units   Shares, Units 
   Securities   Securities           Units of   Stock   or Other   or Other 
   Underlying   Underlying   Option       Stock That   That   Rights That   Rights That 
   Unexercised   Unexercised   Exercise   Option   Have Not   Have Not   Have Not   Have Not 
   Options (#)   Options (#)   Price   Expiration   Vested   Vested   Vested   Vested 
Name  Exercisable   Unexercisable(1)   ($)   Date   (#)(2)   ($)(3)   (#)(4)   ($)(3) 
M. H. Mitchell   92,283        64.78    1/27/2024              17,181    1,334,276 
    135,903        58.47    1/26/2025                     
    217,791        43.57    1/25/2026                     
    87,827    29,276(5)   73.90    1/30/2027                     
    41,596    41,597(6)   93.40    1/29/2028                     
    29,073    87,220(7)   79.14    1/28/2029                     
        118,273(8)   83.58    1/27/2030                     
R. A. Maue   18,099        64.78    1/27/2024    6,139    476,755    3,690    286,585 
    28,398        58.47    1/26/2025                     
    48,313        43.57    1/25/2026                     
    20,223    6,742(5)   73.90    1/30/2027                     
    10,820    10,821(6)   93.40    1/29/2028                     
    6,649    19,950(7)   79.14    1/28/2029                     
        26,283(8)   83.58    1/27/2030                     
K. F. Gallo   14,909        58.47    1/26/2025    4,132    320,891    1,683    130,682 
    22,546        43.57    1/25/2026                     
    8,493    2,832(5)   73.90    1/30/2027                     
    4,131    4,132(6)   93.40    1/29/2028                     
    2,493    7,482(7)   79.14    1/28/2029                     
        14,237(8)   83.58    1/27/2030                     
A. M. D’Iorio   6,205        64.78    1/27/2024    2,930    227,544    1,920    149,088 
    5,680        58.47    1/26/2025                     
    8,589        43.57    1/25/2026                     
    5,778    1,926(5)   73.90    1/30/2027                     
    4,918    4,919(6)   93.40    1/29/2028                     
    3,325    9,975(7)   79.14    1/28/2029                     
        14,237(8)   83.58    1/27/2030                     
A. Alcala   10,740        64.78    1/27/2024    2,371    184,132    1,687    131,012 
    14,909        58.47    1/26/2025                     
    24,156        43.57    1/25/2026                     
    9,100    3,034(5)   73.90    1/30/2027                     
    4,328    4,329(6)   93.40    1/29/2028                     
    2,770    8,313(7)   79.14    1/28/2029                     
        13,141(8)   83.58    1/27/2030                     
   
2021 Proxy Statement 65
 

Table of Contents

2020 Executive Compensation Tables

 

(1) Options vest on the dates indicated in the corresponding footnote; options also vest (or continue to vest per schedule in case of retirement for certain awards) upon death, disability, retirement, or termination after a change in control. Retirement for this purpose generally means termination of employment after age 65.
   
(2) Figures in this column include time-based RSUs which will vest according to the following schedule:
   
Vesting Date  Mitchell   Maue   Gallo   D’Iorio   Alcala 
January 27, 2021       538    291    291    269 
January 28, 2021       569    213    284    237 
January 29, 2021       442    169    201    177 
January 30, 2021       508    214    508    229 
March 29, 2021       296    591         
January 27, 2022       539    292    292    269 
January 28, 2022       568    213    284    237 
January 29, 2022       442    169    201    177 
March 29, 2022       295    591         
January 27, 2023       538    292    292    269 
January 28, 2023       569    214    285    237 
March 29, 2023       296    591         
January 27, 2024       539    292    292    270 
   
  For all grants, vesting also occurs (or continues to occur per schedule in case of retirement for certain awards) upon death, disability, or retirement, or upon a change in control. Retirement for this purpose generally means termination of employment after age 65, or after age 62 with at least 10 years of service.
   
(3) Computed using a price of $77.66 per share, which was the closing market price of Crane Co. stock on the last trading day of 2020.
   
(4) The PRSUs granted in 2019 and 2020 will vest, if at all, on December 31, 2021, and December 31, 2022, respectively, as determined with reference to the percentile ranking of the total stockholder return (share price appreciation plus reinvested dividends), or TSR, of Crane Co. common stock for the three-year period ending on that date, as compared to the TSRs of the other companies in the S&P Midcap 400 Capital Goods Group. Pursuant to Securities and Exchange Commission rules, the hypothetical amounts shown in the table include the PRSUs granted in 2019 at threshold level (25%), and the PRSUs granted in 2020 at threshold level (25%), based on Crane Co.’s TSR performance as of December 31, 2020. There can be no assurance, however, that the Company’s TSR for a full vesting period will be sufficient for the PRSUs to vest, if at all, at any particular level. The PRSUs granted in 2018 became vested in early 2021, after performance results through December 31, 2020, were certified, at 0% of target, and are reflected in the table at that level. See “Elements of Compensation—Long-Term Equity Incentive Compensation” on page 48.
   
(5) This option grant will be 100% vested on January 30, 2021.
   
(6) This option grant will be 75% vested on January 29, 2021, and 100% on January 29, 2022.
   
(7) This option grant will be 50% vested on January 28, 2021; 75% on January 28, 2022; and 100% on January 28, 2023.
   
(8) This option grant will be 25% vested on January 27, 2021; 50% on January 27, 2022; 75% on January 27, 2023; and 100% on January 27, 2024.

 

Retirement Benefits

 

Employees Hired Prior to 2006 (defined benefit) — All employees of Crane Co. hired before January 1, 2006, including Messrs. Mitchell and D’Iorio, have accrued retirement benefits under the Company’s defined benefit pension plan, which was closed to employees hired after 2005 and then frozen with no further benefit accruals effective December 31, 2012. For all eligible salaried employees, including all of the executive officers, Crane Co. provides a retirement benefit equal to three percent of covered compensation, subject to Internal Revenue Code limits as described below, which amount is invested in the Crane Co. Savings and Investment Plan (401(k) plan), a defined contribution retirement plan, at the direction of the employee.

 

Effective January 1, 2013, all executive officers and other employees who were participants in the pension plan receive annual pension benefits payable under the pension plan equal to 1-2/3% per year of service of the participant’s average annual compensation during the five highest compensated consecutive years (prior to 2013) of the 10 years of service immediately preceding retirement less 1-2/3% per year of service of the participant’s Social Security benefit, up to a maximum deduction of 50% of the Social Security benefit. Compensation for purposes of the pension plan is defined as total W-2 compensation plus employee contributions made under salary reduction plans less: (i) reimbursements or

 

66 Crane Co.
 

Table of Contents

2020 Executive Compensation Tables

 

other expense allowances; (ii) cash and noncash fringe benefits (including automobile allowances); (iii) moving expenses (including “home allowances”); (iv) deferred compensation; (v) welfare benefits; (vi) severance pay; (vii) amounts realized from the exercise of a non-qualified stock option or the sale, exchange or other disposition of stock acquired under a qualified stock option; and (viii) amounts realized when restricted stock (or property) held by the employee is recognized in the employee’s taxable income under Section 83 of the Internal Revenue Code. However, the tax code limits the total compensation taken into account for any participant under the pension plan. That limit was $285,000 for 2020 and is subject to adjustment in future years.

 

Benefit Equalization Plan — The NEOs also participate in the Benefit Equalization Plan, a non-qualified, non-elective deferred compensation plan. Under the Benefit Equalization Plan, participating executives receive a benefit intended to restore retirement benefits under the Company’s regular pension plan that are limited by the Internal Revenue Code cap on the amount of compensation that can be considered in determining benefits under tax-qualified pension plans. There is no supplemental benefit based on deemed service or enhanced compensation formulas. Benefits accrued under this plan are not funded or set aside in any manner. The NEOs with defined benefit accounts in this plan are Mr. Mitchell. This plan was also frozen as to defined benefit accruals effective December 31, 2012. Effective January 1, 2014, the Benefit Equalization Plan was amended to cover participants’ benefits under the defined contribution retirement plan referenced above, and the Committee extended the participation in this plan to 21 senior leadership executives, including all of the NEOs.

 

See “Nonqualified Deferred Compensation Benefits” below, regarding certain employer contributions to the Benefit Equalization Plan for the year 2014 and after.

 

The table below sets forth the number of years of credited service and the present value at December 31, 2020, of the accumulated benefit under the pension plan and the Benefit Equalization Plan for each of the named executive officers covered by those plans.

 

          Present Value of     
      Number of Years   Accumulated   Payments During 
      Credited Service   Benefit   Last Fiscal Year 
Name  Plan Name  (#)   ($)(1)   ($) 
M. H. Mitchell  Crane Co. Pension Plan for Eligible Employees   9    414,604     
   Crane Co. Benefit Equalization Plan   5    985,097     
A. M. D’Iorio  Crane Co. Pension Plan for Eligible Employees   8    356,910     
   
(1) The actuarial present value of each participant’s accumulated pension benefit is determined using the same assumptions and pension plan measurement date used for financial statement reporting purposes. The actual retirement benefit at normal retirement date payable under the pension plan for eligible employees is subject to an additional limit under the tax code which, for 2020, does not permit annual retirement benefit payments to exceed the lesser of $225,000 or the participant’s average compensation for the participant’s three consecutive calendar years of highest compensation, subject to adjustment for future years. The dollar limit is subject to further reduction to the extent that a participant has fewer than 10 years of service with Crane Co. or 10 years of participation in the defined benefit plan.

 

Nonqualified Deferred Compensation Benefits

 

The Benefit Equalization Plan was amended effective January 1, 2014, to add a defined contribution component that restores the tax-limited portion of the non-matching company contribution under the Company’s 401(k) plan. That benefit is currently three percent of a participant’s annual salary plus bonus in excess of the Internal Revenue Code compensation limit that applies under the 401(k) plan. Contributions earn interest during a plan year at a rate equal to the average 10-year Treasury Constant Maturities for the month of December immediately preceding such plan year. The contributions become vested based on the participant’s years of service at the rate of 20% per year over five years. Vested contributions, as adjusted for interest, are payable in a lump sum cash payment six months after termination of employment.

 

The following table shows information about the participation by each named executive officer in the Benefit Equalization Plan with respect to this employer contribution. The named executive officers do not participate in any other defined contribution nonqualified deferred compensation plans.

 

2021 Proxy Statement 67
 

Table of Contents

2020 Executive Compensation Tables

 

2020 Nonqualified Deferred Compensation

 

                   Aggregate 
   Executive   Employer   Aggregate   Aggregate   Balance at 
   Contributions   Contributions   Earnings in   Withdrawals/   December 31, 
   in 2020   in 2020(1)   2020   Distributions   2020 
Name  ($)   ($)   ($)   ($)   ($) 
M. H. Mitchell       42,295    5,858        363,110 
R. A. Maue       19,742    2,523        157,915 
K. F. Gallo       8,448    1,980        116,859 
A. M. D’Iorio       10,230    414        32,897 
A. Alcala       12,869    1,039        69,757 
   
(1) Amounts in this column are included in “All Other Compensation” in the Summary Compensation Table.

 

Potential Payments Upon Termination or Change in Control

 

The named executive officers would have received certain payments or other benefits in the following circumstances, assuming that each had taken place on December 31, 2020:

 

the executive resigns voluntarily;
   
the executive is involuntarily terminated, either directly or constructively;
   
the executive retires;
   
the executive dies or becomes permanently disabled while employed; or
   
a change in control of Crane Co. takes place and the executive is terminated under certain circumstances within up to three years.

 

Such payments or other benefits would be due to the named executive officers under the following plans and agreements:

 

Severance Pay

 

Our stated severance policy is to pay salaried employees one week per year of service upon termination of employment by Crane Co. for the convenience of Crane Co.; however, our prevailing practice on severance in the case of executive officers is to pay the executive an amount equal to one year’s base salary, either in a lump sum or by continuation of biweekly payroll distributions, at the election of the executive, with medical, dental, and other welfare benefits and retirement benefits continuing during such period. Under this practice, if each of the named executive officers had been terminated by Crane Co. for the convenience of Crane Co. as of December 31, 2020, the severance to which they would have been entitled (including the estimated value of continuation of welfare benefits) would have been as follows:

 

M. H. Mitchell  $1,027,730 
R. A. Maue  $681,896 
K. F. Gallo  $505,771 
A. M. D’Iorio  $452,424 
A. Alcala  $468,309 
   
68 Crane Co.
 

Table of Contents

2020 Executive Compensation Tables

 

Stock Options

 

Voluntary Resignation   Unvested options cancelled; vested options remain exercisable for a period following termination of employment, as stated in the applicable award agreement, generally ranging from 90 days to the full option term (depending on the reason for termination and the year of grant)
Involuntary Termination   Unvested options cancelled; vested options remain exercisable for a period following termination of employment, as stated in the applicable award agreement, generally ranging from 90 days to the full option term (depending on the reason for termination and the year of grant)
Retirement   Options continue to become vested and exercisable in accordance with the regular schedule, subject to compliance with a covenant not to compete with the Company
Death or Permanent Disability While Employed   Unvested options become immediately exercisable
Change in Control   No change
Termination After Change in Control   Vesting is accelerated only if employment is terminated, involuntarily or for Good Reason, within two years after the change in control

 

If the then unvested stock options of each of the named executive officers had become exercisable as of December 31, 2020, and assuming the value of Crane Co. stock to be $77.66 per share, the closing price on the last trading day of 2020, the aggregate value to each of the named executive officers of exercising the unvested options on that date would have been as follows:

 

M. H. Mitchell  $110,078 
R. A. Maue  $25,350 
K. F. Gallo  $10,648 
A. M. D’Iorio  $7,242 
A. Alcala  $11,408 

 

Restricted Share Units and Performance Restricted Share Units

 

Voluntary Resignation   Forfeited
Involuntary Termination   Forfeited
Retirement(1)   Continue to vest in accordance with the regular schedule, subject to compliance with a covenant not to compete with the Company
Death or Permanent Disability While Employed   Immediate vesting(2)
Change in Control   No change
Termination After Change in Control   Accelerated vesting only if employment is terminated, involuntarily or for Good Reason, within two years after the change in control(3)
   
(1) Retirement for this purpose generally means termination of employment after age 65, or after age 62 with at least 10 years of service. Vesting of PRSUs is not determined until after the applicable performance period based on the actual performance results. Amounts in the table immediately below assume 0% for each of the 2018, 2019, and 2020 grants (based on performance through the end of the last fiscal year).
   
(2) Vesting of PRSUs is not determined until after the applicable performance period based on the actual performance results. Amounts in the table immediately below assume 0% for each of the 2018, 2019, and 2020 grants (based on performance through the end of the last fiscal year).
   
(3) For PRSUs vesting in connection with a change in control, the number of shares vesting is generally based on performance results determined through the date immediately before the change in control, except that if the change in control occurs during the first half of the performance period, the number of PRSUs vesting is based on target performance. Amounts in the table immediately below assume 0% for each of the 2018 and 2019 grants (based on performance through the end of the last fiscal year), and target for the 2020 grant.
   
2021 Proxy Statement 69
 

Table of Contents

2020 Executive Compensation Tables

 

If the then unvested RSUs (including PRSUs) owned by each of the named executive officers had become vested as of December 31, 2020, and assuming the value of Crane Co. stock to be $77.66 per share, the closing price on the last trading day of 2020, the aggregate value to each of the named executive officers would have been as follows:

 

   Retirement,   Change in Control/ 
   Death or Disability   Termination 
   ($)   ($) 
M. H. Mitchell   0    2,634,227 
R. A. Maue   476,755    1,034,276 
K. F. Gallo   320,891    622,833 
A. M. D’Iorio   227,544    529,486 
A. Alcala   184,132    462,854 

 

Benefit Equalization Plan

 

Each of the named executive officers participates in the Benefit Equalization Plan described under the caption “Retirement Benefits” on page 66. Assuming their separation from service as of December 31, 2020, they would have become entitled to the following benefits under the defined benefit and defined contribution portions of the Benefit Equalization Plan, respectively. In the event of a participant’s death, one-half of the benefit would be payable to the participant’s beneficiary.

 

   Defined Benefit   Defined Contribution 
   ($)   ($) 
M. H. Mitchell   985,097    363,110 
R. A. Maue        157,915 
K. F. Gallo        116,859 
A. M. D’Iorio        32,897 
A. Alcala        69,757 

 

Change in Control Agreements

 

Each of the named executive officers has an agreement that, in the event of a change in control of Crane Co., provides for the continuation of the employee’s then current base salary, bonus plan, and benefits for the three-year period following the change in control. The agreements are for a three-year period, but are automatically extended annually by an additional year unless Crane Co. gives notice that the period shall not be extended.

 

Upon termination within three years after a change in control, by Crane Co. without “Cause” or by the employee with “Good Reason” (as defined in the agreement), the employee is immediately entitled to a proportionate amount of the greater of the last year’s bonus or the average bonus paid in the three prior years, plus three times the sum of his or her annual salary and the greater of the last year’s bonus or the average of the previous three years’ bonuses. All accrued deferred compensation and vacation pay, employee benefits, medical coverage, and other benefits also continue for three years (or until normal retirement) after termination.

 

“Cause” under the change in control agreements generally includes, among other things, personal dishonesty or certain breaches of fiduciary duty; repeated, willful, and deliberate failure to perform the executive’s specified duties; the commission of a criminal act related to the performance of duties; distributing proprietary confidential information about the Company; habitual intoxication by alcohol or other drugs during work hours; or conviction of a felony.

 

“Good Reason” under the change in control agreements includes, among other things, any action by Crane Co. that results in a diminution in the position, authority, duties, or responsibilities of the employee.

 

70 Crane Co.
 

Table of Contents

2020 Executive Compensation Tables

 

If a change in control had taken place on December 31, 2020, and employment had terminated immediately thereafter, each of the named executive officers would have become entitled to the following benefits under this provision:

 

       Estimated value of continuation 
       for three years (or until normal 
   Cash   retirement) of medical coverage 
   Payment   and other benefits 
   ($)   ($) 
M. H. Mitchell   7,237,374    70,440 
R. A. Maue   3,601,933    68,088 
K. F. Gallo   2,835,040    50,912 
A. M. D’Iorio   2,256,469    2,771 
A. Alcala   2,182,516    53,212 

 

Aggregate Benefit Amounts

 

The table below reflects the estimated aggregate compensation that each of the named executive officers would receive in the event of his voluntary resignation, involuntary termination, normal retirement at age 65, death or disability, change in control, and termination following a change in control. The amounts shown assume that such termination was effective as of December 31, 2020, and include amounts earned through that date. They are therefore not equivalent to the amount that would be paid out to the executive upon termination at another time.

 

   Voluntary   Involuntary       Death or   Change   Change in Control 
   Resignation   Termination   Retirement   Disability   in Control   and Termination 
Name  ($)   ($)   ($)   ($)   ($)   ($) 
M. H. Mitchell       1,027,730    110,078    110,078        10,052,119 
R. A. Maue       681,896    502,105    502,105        4,729,647 
K. F. Gallo       505,771    331,539    331,539        3,519,433 
A. M. D’Iorio       452,424    234,786    234,786        2,795,968 
A. Alcala