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. )
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Filed by the Registrant |
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Filed by a Party other
than the Registrant |
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CHECK THE APPROPRIATE BOX: |
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Preliminary Proxy Statement |
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Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Under Rule
14a-12 |
BorgWarner Inc.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE
BOX): |
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No fee
required. |
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Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11. |
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Title of each class of securities to which transaction
applies: |
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Aggregate number of securities to which transaction applies: |
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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): |
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Proposed maximum aggregate value of transaction: |
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5) Total fee paid: |
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Fee paid previously with
preliminary materials: |
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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. |
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Amount previously paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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4) Date
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Table of Contents
Notice of 2017
Annual Meeting of Stockholders and Proxy Statement
Table of Contents
The Companys
Objectives |
RELIABLY DELIVERING WHATS NEEDED TODAY
There are few challenges as important today
as creating solutions that support a cleaner,
more energy-efficient world. This requires a
commitment to constantly improve the transportation of people and things.
We, at BorgWarner, made that commitment decades ago and have since been
creating technologies to improve efficiency, emissions and performance in
all types of vehicles.
CONSTANTLY PURSUING WHATS
NEXT
Our proven track record has made us a
product leader in clean, energy-efficient propulsion system solutions for
combustion, hybrid and electric vehicles. We uncover strong trends and use
smart science and technology to address a future based on varying
regulations, consumer demands and automaker requirements.
PRODUCT LEADERSHIP THATS
CHANGING THE WORLD
Our employees have earned trusted partnerships with customers and suppliers around the
world. We leverage these relationships to gain
a deeper understanding of the challenges at hand and then do what it takes
to develop the next solution. Our strong operations and commercialization
expertise result in high volume availability of competitive, efficient
products that truly drive change. |
(1) |
Allows for the impact of the Remy
acquisition and excludes one-time non-operating
items. |
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Combustion |
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Hybrid |
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Electric |
Table of Contents
BorgWarner Inc. Notice of Annual Meeting
of Stockholders |
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Auburn Hills, Michigan
March 17, 2017
Dear Fellow Stockholder:
On behalf of the Board of Directors and
management of BorgWarner Inc. we invite you to attend the 2017 Annual Meeting of
Stockholders at The Townsend Hotel located at 100 Townsend Street, Birmingham,
Michigan, 48009, on Wednesday, April 26, 2017, at 9:00 a.m., local time, for the
following purposes:
Items to be Voted:
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1. |
Elect ten nominees for Directors
to serve for the next year; |
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2. |
Approve, on an advisory basis,
the Company's executive compensation program; |
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3. |
Consider, on an advisory basis,
the frequency of the advisory vote on the Companys executive compensation
program; |
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4. |
Ratify the selection of
PricewaterhouseCoopers LLP as the independent registered public accounting
firm for the Company for 2017; |
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5. |
Vote on a stockholder proposal to
allow certain stockholders to act by written consent; and |
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6. |
Transact such other business as
may properly come before the meeting or any adjournment or postponement
thereof. |
Only stockholders of record at the close
of business on March 1, 2017 are entitled to vote at the meeting or any
adjournment or postponement thereof.
Date and Time:
Wednesday, April 26, 2017
9:00 a.m., local
time
YOUR VOTE IS IMPORTANT! |
You
can submit your proxy by: |
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Telephone: Call us free of charge at
1-800-579-1639 from within the United States or Canada. |
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Internet: Access the internet, go to
www.proxyvote.com and follow the enrollment
instructions. |
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E-mail: Send us an e-mail at
www.proxyvote.com, using the control number on your proxy card as the
subject line, and state whether you wish to receive a paper or e-mail copy
of our proxy materials and whether your request is for this meeting only
or all future meetings. |
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If you attend the meeting, you may
vote in person if you wish to do so, even if you have previously submitted
your proxy. |
Please read the attached proxy statement
carefully as it describes in greater detail the matters to be acted upon and
your voting rights with respect to those matters. The enclosed proxy card is
solicited by the Board of Directors of the Company.
Along with the attached proxy statement,
we are providing you our Annual Report on Form 10-K for our fiscal year ended
December 31, 2016. Stockholders are not to regard our Annual Report on Form
10-K, which includes our audited financial statements, as proxy solicitation
material.
By Order of the Board of
Directors
John J.
Gasparovic |
Secretary |
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR OUR ANNUAL MEETING TO BE HELD ON WEDNESDAY,
APRIL 26, 2017
We have elected to furnish materials for
the Annual Meeting via the internet. Beginning on or about March 17, 2017, we
will mail a notice of internet availability to most of our stockholders
containing instructions on how to access the proxy materials and vote online.
All of our other stockholders will be sent a copy of our proxy materials by mail
or e-mail on or about March 17, 2017. See above and your proxy card for more
information on how you can elect to receive your proxy materials over the
internet or by e-mail if you received them by mail this year.
Table of Contents
This summary of voting items provides
information that you should consider before voting on the items presented at
this years Annual Meeting of Stockholders. This summary does not contain all of
the information that you should consider, and you should read the entire Proxy
Statement carefully before voting.
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Proposal 1 |
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TO
ELECT TEN DIRECTORS TO THE BOARD OF DIRECTORS |
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Our Board
unanimously recommends that you vote FOR the
election of all director nominees. |
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DIRECTOR NOMINEE
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Jan Carlson President and
Chief Executive Officer, Autoliv, Inc. |
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Dennis C.
Cuneo Partner, Fisher &
Phillips LLP |
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Michael S.
Hanley Global Automotive Leader,
Retired Ernst & Young LLP |
Age: 56 Director Since: 2010 Other
Current Directorships: Autoliv, Inc., Trelleborg AB BorgWarner Committees: Compensation,
Governance |
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Age: 67 Director Since: 2009 Other
Current Directorships: AK Steel Holding Corporation BorgWarner Committees: Audit |
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Age: 61 Director Since: 2016 Other
Current Directorships: Shiloh Industries, Inc. BorgWarner Committees: Audit |
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Roger A.
Krone Chairman and Chief
Executive, Leidos Holdings, Inc. |
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John R. McKernan,
Jr. Senior Advisor to the U.S.
Chamber of Commerce |
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Alexis P. Michas,
Non-Executive
Chairman Managing Partner,
Juniper Investment Company, LLC |
Age: 60 Director Since: 2017 Other
Current Directorships: Leidos Holdings, Inc. |
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Age: 68 Director Since: 2009 Other
Current Directorships: HMH Holdings, Inc. BorgWarner Committees: Audit |
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Age: 59 Director Since: 1993 Other
Current Directorships: PerkinElmer, Inc., Allied Motion Technologies
BorgWarner Committees: Executive |
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BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
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Vicki L. Sato,
Ph.D. Professor of Management Practice, Harvard Business
School |
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Richard O.
Schaum General Manager,
3rd Horizon Associates LLC |
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Thomas T.
Stallkamp Principal of
Collaborative Management LLC |
Age: 68 Director Since: 2014 Other
Current Directorships: Bristol-Myers Squibb Company, PerkinElmer, Inc.,
Syros Pharmaceuticals, Inc. BorgWarner
Committees: Compensation
Chair, Governance |
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Age: 70 Director Since: 2005 Other
Current Directorships: Gentex Corporation, Sterling Construction Co.
BorgWarner Committees: Governance
Chair |
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Age: 70 Director Since: 2006 Other
Current Directorships: Baxter International, Inc. BorgWarner Committees: Compensation,
Audit |
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James R.
Verrier President and Chief
Executive Officer, BorgWarner
Inc. |
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Age: 54 Director Since: 2013 Other
Current Directorships: Parker Hannifan Corporation BorgWarner
Committees: Executive |
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Table of Contents
CORPORATE GOVERNANCE HIGHLIGHTS
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Annual election of Directors |
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Majority voting standard for election of
Directors |
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Stockholder right to call a special meeting
(20%) |
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No supermajority voting provisions for
common stockholders |
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Robust stockholder engagement |
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Independent Board chair |
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Corporate Sustainability Report |
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Proxy access stockholder right |
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Limit on number of public company
directorships Board members may hold (4) |
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Director retirement policy (age
72) |
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Clawback and recoupment
policies |
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Share ownership policies |
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Prohibition of speculative and hedging
transactions by all employees and directors |
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No stockholder rights plan |
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Use of skills matrix to align board
selection with business strategy |
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Proposal 2 |
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APPROVAL, BY ADVISORY VOTE, OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS |
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Our Board
unanimously recommends that you vote FOR this
proposal. |
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Why should you vote in favor of our 2017
Say-on-Pay Proposal? |
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WE HAVE STRENGTHENED THE LINK BETWEEN PAY AND
PERFORMANCE
STOCKHOLDER ENGAGEMENT
Management and the Board conducted
extensive outreach with our stockholders leading up to and following our 2016
Annual Meeting. Outreach meetings were conducted in April 2016 and follow-up
meetings were held in October through December 2016. In total, we reached out to
stockholders representing 66% of our outstanding shares and held in person
meetings or calls with holders of 55% in April and 50% in October (in many
instances we met with a stockholder more than
once). Two of our directors, including the independent Chair of our Board,
participated in many of these meetings, and feedback was shared and discussed
with the full Board. Topics discussed with investors included executive
compensation, proxy access, board composition and refreshment, and
sustainability.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
What We
Learned |
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How We
Responded |
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CEO
Compensation Concern:
Stockholders expressed concern with the alignment of our CEO's
compensation with financial and stock performance. |
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■The Committee and the CEO
agreed to reduce his earned 2016 annual
incentive plan award by $2.43 million (71%) from $3.38 million to $0.95
million. While overall performance was strong,
the Committee deemed this approach appropriate given stockholder returns
for the year and believes that this decision supports our
pay-for-performance philosophy.
■The Committee did not
reduce the CEOs base salary or target annual incentive plan award. The
Committee believes the CEOs structural pay is within 20% of the market
median today. However, the Committee has taken steps to ensure that
financial performance goals (Economic Value in the annual incentive plan
and relative revenue growth under the long-term incentive program) reflect
stockholder expectations, such that pay and performance better align in
the future. |
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Performance-Based
Compensation Concern: Annual Performance based compensation
set at the 65th percentile. |
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■Reduced target award level
to the peer group median range (50th percentile) plus or minus
20% of the median based on the executive's experience, performance and
responsibilities
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Economic Value
("EV") |
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■Provided additional clarity
on EV calculation and detailed the formula (see pages
38-40)
■Eliminated carryover
feature for the Senior Executive Team (CEO, Executive Vice Presidents and
Business Presidents) |
EV is the way in which we convert investment
into stockholder value and the single metric under our annual incentive
plan. |
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Concern: |
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■Stockholders could not
calculate the EV measurement used to determine payouts under the annual
incentive plan.
■Stockholders did not like
the carryover feature of the annual incentive
plan |
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Performance Shares
Represent two-thirds of long-term incentive
award Concern: |
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■Reduced target award level
to the peer group median (50th percentile) plus or minus 20% of
the median based on the executives experience, performance and
responsibilities |
■Performance shares awards
were set at the 65th percentile |
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Restricted Shares
Represent one-third of long-term incentive
award Concern: |
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■Limit one-time equity
grants (except in cases of newly hired executives and
retention)
■Add double trigger change
in control provision for future equity grants |
■Restricted shares were
awarded off-cycle
■The vesting of restricted
shares was not subject to a double trigger in the event of a Change of
Control |
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Table of Contents
Our Executive Compensation Goals and Guiding
Principles |
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Our objective is to maintain executive
compensation programs that:
■attract and retain the best
possible global executive talent
■motivate our executives to
achieve goals that support the Companys business strategy and goals (including
growth and the creation of long-term value) while not encouraging excessive risk
taking
■link executives and
stockholders interests through equity-based incentive plans,
and
■provide a compensation package
that reflects individual performance as well as overall business
results
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88% of CEOs compensation is at-risk (Annual
Incentive + Long-Term Incentive) |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
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Proposal 3 |
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ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES ON THE
COMPANY'S EXECUTIVE COMPENSATION PROGRAM |
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Our Board
unanimously recommends that you vote for one year
frequency. |
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Proposal 4 |
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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM |
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Our Board
unanimously recommends that you vote FOR this
proposal. |
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Proposal 5 |
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VOTE ON STOCKHOLDER PROPOSAL TO ALLOW CERTAIN STOCKHOLDERS
TO ACT BY WRITTEN CONSENT |
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Our Board
unanimously recommends that you vote AGAINST this
proposal. |
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We will also take action upon any other
business as may properly come before the 2017 Annual Meeting and any
adjournments or postponements of that meeting.
The Board of Directors or proxy holders
will use their discretion on other matters that may arise at the 2017 Annual
Meeting.
Table of Contents
Table
of
Contents
Table of Contents
Table of Contents
3850 Hamlin Road
Auburn Hills,
Michigan 48326
Proxy
Statement
March
17, 2017
This proxy statement is furnished in
connection with the solicitation of proxies by the Board of Directors of
BorgWarner Inc. (BorgWarner or the Company) for the Companys 2017 Annual
Meeting of Stockholders to be held at The Townsend Hotel located at 100 Townsend Street, Birmingham, Michigan 48009 on
Wednesday, April 26, 2017 at 9:00 a.m., local time, or at any adjournment or
postponement thereof.
Internet Availability of Proxy
Materials
As permitted by rules adopted by the
Securities & Exchange Commission (SEC), we are providing our proxy
statement, the form of proxy and our Annual Report on Form 10-K for the fiscal
year ended December 31, 2016 to stockholders electronically via the internet.
(Our Annual Report on Form 10-K for our fiscal year ended December 31, 2016,
which includes our audited financial statements, is not to be regarded as proxy
solicitation material.) Our proxy statement
and our 2016 annual report to stockholders are available at
http://www.proxyvote.com.
On or about March 17, 2017, we will
initiate delivery of proxy materials to our stockholders of record as of the
close of business on March 1, 2017 via (1) a notice containing instructions on
how to access materials online, (2) a paper copy mailing or (3) e-mail
distribution. If you received a notice by mail, you will not receive a printed
copy of the proxy materials in the mail. Instead, the notice we sent provides
instructions on how to access and review all of the important information
contained in the proxy materials. The notice also provides instructions on how
you can submit your proxy over the internet or by telephone. If you received a
notice by mail and would like to receive a printed copy of our proxy materials
or elect to receive the materials via e-mail in the future, please follow the
instructions included in the notice. If you received a printed copy of proxy
materials by mail and would like to register to receive a notice of internet
availability of proxy materials in the future, you can do so by any of the
methods that follow:
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Internet: |
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Access the
internet, go to www.proxyvote. com and follow the enrollment
instructions. |
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Telephone: |
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Call us free
of charge at 1-800-579-1639 from within the United States or
Canada. |
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E-mail: |
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Send us an e-mail at www.proxyvote.com,
using the control number on your proxy card as the subject line, and state
whether you wish to receive a paper or e-mail copy of our proxy materials
and whether your request is for this meeting only or all future
meetings. |
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BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
Record Date and Shares
Outstanding |
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Only stockholders of record at the close
of business on March 1, 2017 are entitled to vote at the meeting. As of such
date, there were 212,856,243 outstanding shares of common stock. A list of all
record holders of our stock will be available for examination by stockholders
during normal business hours at 3850 Hamlin Road,
Auburn Hills, Michigan 48326 at least ten days prior to the Annual Meeting and
will also be available for examination at the Annual Meeting. On each matter
considered at our Annual Meeting, you are entitled to one vote for each of your
shares of common stock.
You have a choice of voting over the
internet, by telephone or by using a traditional proxy card.
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To vote by internet, go to
www.proxyvote.com and follow the instructions there. You will need the number
included on your proxy card, voter instruction form or
notice. |
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To vote by telephone, stockholders
of record should dial 1-800-690-6903 and follow the instructions.
Beneficial holders should dial the phone number listed on your voter
instruction form. You will need the number included on your proxy card,
voter instruction form or notice. |
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If you received a paper copy of a
proxy card or voter instruction form, you can mark, sign and date the
proxy card and return it in the envelope that was provided to
you. |
The deadline for voting by telephone or
internet is 11:59 p.m. Eastern Time on April 25, 2017.
If you properly sign and return your
signed proxy card or vote by telephone or by the internet before the Annual
Meeting, we will vote your shares as you direct. Any proxy returned without specification as to any matter will be voted as to
each proposal in accordance with the recommendation of the Board of
Directors.
If you hold your stock in street name,
you may change or revoke your voting instructions by following the specific
directions provided to you by your bank or broker. If you are a stockholder of
record, you may change or revoke your vote at any time before the vote is taken
by delivering a written notice of revocation to the Secretary of the Company or
by submitting another vote on or before April 25, 2017 (including a vote in
person at the Annual Meeting). For all methods of voting, your last vote cast
will supersede all of your previous votes.
The election inspectors will tabulate the
votes cast prior to the meeting and at the meeting to determine whether a quorum
is present. The presence in person or by proxy of the holders of a majority of
common stock will constitute a quorum. A quorum is necessary to transact
business at the Annual Meeting. Shares of common stock represented by proxies
that reflect abstentions or broker non-votes (i.e., shares held by a broker or
nominee that are represented at the Annual Meeting, but with respect to which
such broker or nominee is not empowered to vote on a particular proposal) will
be counted as present and entitled to vote for purposes of determining the
presence of a quorum.
With respect to Proposal 1, our By-laws
require that a director nominee will be elected only if he or she receives a
majority of the votes cast with respect to his or her election in an uncontested
election (that is, the number of shares voted for a director nominee must
exceed the number of votes cast against that nominee). Each of our director
nominees is currently serving on the board. If a nominee who is currently
serving as a director is not re-elected, Delaware law provides that the director
would continue to serve on the board as a holdover director. Under our By-laws
and Corporate Governance Guidelines, each
director submits an advance, contingent, irrevocable resignation that the board
may accept if stockholders do not re-elect the director. In that situation, our
Corporate Governance Committee would make a recommendation to the board about
whether to accept or reject the resignation, or whether to take other action.
The board would act on the Corporate Governance Committees recommendation, and
publicly disclose its decision and the rationale behind it within 90 days from
the date that the election results were certified.
Table of Contents
If you hold your stock in street name,
your brokerage firm or other nominee may no longer vote your shares with respect
to the election of directors without specific instructions from you as to how to
vote with respect to the election of each of the ten nominees for director.
Abstentions and broker non-votes represented by submitted proxies will not be
taken into account in determining the outcome of the election of
directors.
With respect to Proposal 2 (the advisory vote on
executive compensation), Proposal 3 (the advisory vote on the frequency of
voting on executive compensation), Proposal 4 (stockholder ratification of the
selection of our auditors), and Proposal 5 (the advisory vote on a Stockholder
proposal), each proposal requires the affirmative vote of a majority of the
votes cast to be approved. Accordingly, an abstention or a broker non-vote will
have no effect on the outcome of any of those proposals.
Proposals 2, 3 and 5 are advisory votes.
Even though your votes with respect to Proposals 2 and 3 are advisory and
therefore will not be binding on the Company, the Compensation Committee will
review the voting results and take them into consideration when making future
decisions regarding executive compensation. At the Annual Meeting of
Stockholders held in 2011, stockholders selected annual frequency for
stockholder consideration of executive compensation on an advisory basis.
Stockholders must reconsider the desired frequency of such consideration in this
2017 meeting.
We expect that only Proposal 4 will be
considered routine under NYSE rules. Therefore, your brokerage firm or other
nominee may not vote your shares with respect to Proposals 1, 2, 3 or 5 without
specific instructions from you as to how to vote.
We have adopted a procedure called
householding, which has been approved by the SEC. Under this procedure, a
single copy of our annual report to stockholders, our proxy statement or our
Notice of Internet Availability of Proxy Materials, as applicable, will be sent
to any household at which two or more stockholders reside, unless one of the
stockholders at that address notifies us that they wish to receive individual
copies. This procedure reduces our printing costs and fees. Stockholders who
participate in householding will continue to receive separate proxy
cards. Householding will not affect dividend
check mailings, if any, in any way.
We will deliver promptly upon written or
oral request a separate copy of our annual report to stockholders, our proxy
statement or our Notice of Internet Availability of Proxy Materials, as applicable, to any
stockholder at a shared address to which a single copy of those documents was
delivered. If you share an address with another stockholder and you wish to
receive a separate copy of any of those documents, you may inform us of your
wish by contacting Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan
48326 (tel: +1-248-754-9200). Similarly, if you share an address with another
stockholder that is receiving multiple copies and wish to request that the
number of copies of those documents being delivered to that address be reduced
to a single copy, you may inform us of your wish by contacting Investor
Relations at the above address and telephone number.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
At this meeting, stockholders will elect
ten directors to a one-year term that will expire at our 2018 Annual Meeting and
until their respective successors have been duly elected and
qualified.
Our Board takes a thoughtful approach to
its composition and refreshment, with focus on creating a balanced board that,
as a whole, has the expertise, knowledge and qualifications needed to guide the
Company in execution of its business strategy. The Corporate Governance
Committee seeks to establish and maintain a board that is strong in its
collective knowledge and that possesses a diversity of skills, background and
experience with respect to vision, strategy and executive leadership, business
judgment and knowledge, corporate governance, accounting and finance, global
markets, clean technology, government experience and automotive industry
knowledge. The Committee understands the value of cognitive diversity in
decision making and has sought and will continue to seek qualified women and
members of minority groups as board candidates.
After 13 years of service, Ernest Novak
will complete his service on the Board at the April Annual Meeting. The Company
thanks him for his guidance and years of service.
The current slate of director nominees
blends fresh perspectives of newer directors with the continuity and
institutional knowledge of longer tenured directors for an average tenure of
less than eight years. Due to recent and expected retirements from the Board,
the Committee identified qualification as an Audit Committee expert,
technological acuity, and experience as a serving CEO as key desired attributes
in its search process. In November 2016 the board selected Michael S. Hanley to
join the Board. Hanley was selected in significant part because of his extensive
financial expertise in the automotive industry. In February 2017 the Board
selected Roger A. Krone to join the Board. Krone brings extensive technological
expertise and the perspective of a currently-serving CEO of a global
business.
See pages 25-26 for information on our
process for director nominations and candidate requirements.
Following the election of directors at
this Annual Meeting, your Board will have ten members and no vacancies. Each of
the nominees for election has agreed to serve if elected. All of the nominees
are presently directors of the Company. In the event that any nominee should
become unavailable for election, the Board may designate a substitute nominee,
in which event the shares represented by proxies at the meeting will be voted
for such substitute nominee unless an instruction to the contrary is indicated
on the proxy card.
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RECOMMENDATION |
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Your Board of
Directors recommends a vote FOR the election of each of the nominees for
director Jan Carlson; Dennis C. Cuneo; Michael S. Hanley; Roger A. Krone;
John R. McKernan, Jr.; Alexis P. Michas; Vicki L. Sato; Richard O. Schaum;
Thomas T. Stallkamp; and James R. Verrier. |
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Information on Nominees for
Directors |
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The following pages set forth as of March
1, 2017, with respect to each of the Companys current directors continuing to
serve, his or her name, the year in which he or she first became a director of
the Company, age, principal occupation, and his or her current directorships in
other entities; a narrative description of the
directors experience, qualifications, attributes and skills; all directorships
at public companies and registered investment companies held since March 1,
2012; and a description of any relevant legal proceedings in which the director
was involved since March 1, 2007.
Table of Contents
DIRECTORS AND
NOMINEES
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Jan Carlson |
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Age:
56 Director
since: 2010 |
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Principal
Occupation and Directorships Mr. Carlson was appointed President and Chief Executive Officer and
Director of Autoliv, Inc., in early 2007 and has been Chairman of its
board since May 2014. He joined Autoliv in 1999 as President of Autoliv
Electronics and held that position until April 2005, when he became Vice
President of Engineering of Autoliv and a member of that companys
Executive Committee. Mr. Carlson currently serves on the board of
directors for Trelleborg AB (a Swedish public company), Teknikföretagen
(the Association of Swedish Engineering Industries) and Svenskt Näringsliv
(the Confederation of Swedish Enterprise). Mr. Carlson will not stand for
re-election to the board of directors of Trelleborg AB in 2017. At the end
of February 2017, Mr. Carlson was nominated for election to the board of
directors of Telefonaktiebolaget LM Ericsson at its annual meeting of
shareholders to be held on March 29, 2017.
Mr. Carlson brings to the board
international perspective concerning the global automotive industry and
the experience and perspective of a currently-serving CEO of a global
automotive supplier headquartered outside the United States. Prior to
joining Autoliv, Mr. Carlson was President of Saab Combitech, a division
within Saab aircraft group specializing in commercializing military
technologies. Mr. Carlson has a Master of Science degree in Engineering
Physics and Electrical Engineering from the University of Linköping,
Sweden. |
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Dennis C. Cuneo |
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Age:
67 Director
since: 2009 |
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Principal
Occupation and Directorships Mr. Cuneo has been an attorney with Fisher & Phillips LLP since
July 1, 2010, serving as Partner of the firms Washington DC office, after
having been with Arent Fox LLP since November 2006. He also operates his
own consulting firm, DC Strategic Advisors LLC., which provides strategic
business advice to companies in the auto industry and other industries. He
was Senior Vice President of Toyota North America, Inc. from 2000 to 2006;
Corporate Secretary and Chief Environmental Officer of Toyota Motor North
America Inc. from 2004 to 2006, and Senior Vice President of Toyota Motor
Manufacturing North America from 2001 to 2006. Mr. Cuneo was formerly
Board Chairman of the Federal Reserve Bank of Cleveland, Cincinnati branch
and is on the boards of the Center for Automotive Research, and SSOE, a
privately held engineering and construction management firm. Mr. Cuneo is
also a director of AK Steel Holding Corporation.
Mr. Cuneo brings experience in, and
understanding of, the automotive industry and its trends. Mr. Cuneo is a
former senior executive and officer at Toyota Motor North America, Inc.
and Toyota Motor Manufacturing North America. Mr. Cuneos Toyota career
spanned more than 22 years, during which he was responsible for legal
affairs, administration, public relations, investor relations,
environmental affairs, corporate advertising, government relations,
philanthropy, planning, research and Toyotas Latin America Research
Group. Mr. Cuneo also provides a legal perspective on issues facing the
board and the Company with respect to board oversight areas, corporate
governance and regulatory matters. |
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BorgWarner
Inc. 2017 Proxy
Statement |
Table of Contents
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Michael S. Hanley |
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Age:
61 Director
since: 2016 |
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Principal
Occupation and Directorships Mr. Hanley retired as a Partner from Ernst & Young in 2014. He
served as the firms Global Automotive Leader from 2003 to 2014 and was
Senior Advisory Partner or Global Coordinating Partner for many automotive
clients during his 24 years as a Partner.
Mr. Hanleys extensive knowledge of
accounting and his financial expertise in the automotive industry make him
well qualified to serve as a member of our Board of Directors and as a
member of the Audit Committee of our board. Mr. Hanley provided assurance
and industry advisory services to global audit clients for 37 years and
was responsible for Ernst & Youngs automotive industry strategy and
initiatives worldwide. He graduated from the University of Toledo and is a
Certified Public Accountant (Retired). Mr. Hanley serves on the audit and
compensation committees, and chairs the governance committee, of another
public company, Shiloh Industries, Inc., of which he is a
director. |
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Roger A. Krone |
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Age:
60 Director
since: 2017 |
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Principal
Occupation and Directorships Mr. Krone was appointed Chairman and Chief Executive Officer of
Leidos Holdings, Inc. in July 2014. Prior to joining Leidos, he served as
President of Network and Space Systems for The Boeing Company, where his
organization provided integrated technologies to government and commercial
customers. In 1992, he joined McDonnell Douglas Corporation serving as
Director of Financial Planning, Vice President and Treasurer after a
14-year career at General Dynamics. Mr. Krone also previously served as
Chairman of the Board of Directors of the United Launch Alliance, a 50-50
joint venture between Boeing and Lockheed Martin that helps carry weather,
telecommunications and national security satellites to space and employs
more rocket scientists than any other company in the world.
Mr. Krone brings to the board nearly
four decades of business experience, technology acquisitions, program
management and financial expertise and the experience and perspective of a
currently-serving CEO of a global business recognized in solving important
problems in the defense, intelligence, homeland security, civil, and
health markets. Mr. Krone has a Bachelors degree in aerospace engineering
from the Georgia Institute of Technology, a Masters degree in aerospace
engineering from the University of Texas at Arlington, and a Master of
Business Administration from the Harvard Graduate School of Business. He
is a Certified Public Accountant. |
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Table of Contents
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John R. McKernan, Jr. |
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Age: 68 Director
since: 2009 |
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Principal Occupation and
Directorships Governor McKernan
is Senior Advisor to the U.S. Chamber of Commerce. He served as President
of its Foundation from October 2013 to February 2015. He served as
Chairman of the Board of Education Management Corporation, a large
provider of private post-secondary education in North America, from
December 2008 to June 2012. He was Executive Chairman of Education
Management Corporation from February 2007 to December 2008 and Chief
Executive Officer from September 2003 until February 2007. He served on
its Board of Directors from June 1999 to April 2015. Governor McKernan
served as governor of the State of Maine from 1987 to 1995. He is also a
director of HMH Holdings, Inc.
Governor McKernan brings to
BorgWarners board a blend of experience as a former governor of Maine, a
former US Congressman, a former state legislator and former CEO of a
public company. His knowledge of the legislative process combined with his
demonstrated leadership capabilities and CEOs perspective provide a
valuable point of view to the Companys board. Governor McKernan also has
significant experience as a director. Governor McKernans practice of
corporate, regulatory and administrative law enables him to provide a
legal perspective on issues facing the board and the Company in those
areas and with respect to corporate governance. |
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Alexis P.
Michas, Non-Executive
Chairman |
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Age: 59 Director
since: 1993 |
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Principal Occupation and
Directorships Mr. Michas is the
founder and Managing Partner of Juniper Investment Company, LLC
(Juniper). Juniper is also a Principal of Aetolian Investors, LLC a
registered Commodity Pool Operator. He was the Managing Partner and a
director of Stonington Partners, Inc., an investment management firm from
1994-2011. Mr. Michas received a Bachelor of Arts degree from Harvard
College and a Master of Business Administration degree from Harvard
Business School. Mr. Michas is the lead director of PerkinElmer, Inc., a
director of Allied Motion Technologies, Inc. and a director of Theragenics
Corporation, a privately held company. Mr. Michas also served as a
director of AirTran Airways, Inc., until that companys sale to Southwest
Airlines, Inc. on May 2, 2011 and as the Non-Executive Chairman of the
Board of Directors of Lincoln Educational Services Corporation until
2015.
Mr. Michas brings to our board many
years of private equity experience across a wide range of industries, and
a successful record of managing investments in public companies. Mr.
Michas also brings extensive transactional expertise, including mergers
and acquisitions, IPOs, debt and equity offerings, and bank financing.
This expertise allows Mr. Michas to provide our board with valuable
insight on trends in global debt and equity markets, and the impact of
such trends on the capital structure of the Company. We also benefit from
the corporate governance knowledge developed by Mr. Michas in his board
roles with other public companies, including his service as a lead
director and a member of the compensation, governance, audit, finance and
executive committees of such companies. Mr. Michas knowledge of the
Company and his thorough understanding of the role of boards of directors
qualify him to serve on our board and as Non-Executive
Chairman. |
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BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
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Vicki L. Sato, Ph.D. |
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Age:
68 Director
since: 2014 |
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Principal
Occupation and Directorships Dr. Sato serves as Professor of Management Practice of Harvard
Business School where she joined the faculty in 2006. Prior to that, she
was the President of Vertex Pharmaceuticals from 2000 until her retirement
from that position in 2005, and had previously served eight years as
Vertexs Chief Scientific Officer and Chair of the scientific advisory
board. Prior to joining Vertex in 1992, she was with Biogen, Inc. from
1984 to 1992, most recently as Vice President of Research and a member of
the scientific advisory board. Dr. Sato is also a business advisor to
enterprises in the biotechnology and pharmaceutical industries. Dr. Sato
is currently a director of Bristol Myers Squibb, PerkinElmer Corporation,
and Syros Pharmaceuticals, Inc., all publicly held companies. She was
recently appointed co-chair of the Advisory Council of LifeSci: NYC, a
public service group that advises New York City on matters of life science
competitiveness, and is an overseer of the Isabella Stewart Gardner Museum
in Boston. In addition to public board service, she is an advisor and
director to privately held Denali Therapeutics and Vir, Bio. She is the
author of numerous professional publications and received her AB, AM and
Ph.D. degrees from Harvard University.
Dr. Sato is an accomplished
executive and scientist with an extensive background advising and leading
research teams in life sciences innovation. Dr. Satos previous roles as
chief scientific officer and vice president of research for multi-national
companies, as well as her academic work on science-driven entrepreneurship
allow her to offer guidance as we develop our technology initiatives and
collaborative efforts. The expertise Dr. Sato has gained through her
service on the boards of other public companies contributes broad
understanding of corporate governance matters. |
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Richard O. Schaum |
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Age:
70 Director
since: 2005 |
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Principal
Occupation and Directorships Mr. Schaum has been General Manager of 3rd Horizon
Associates LLC, a technology assessment and development company, since May
2003. He was Vice President and General Manager of Vehicle Systems for
WaveCrest Laboratories, Inc. from October 2003 until June 2005. Before
that, for more than 30 years he was with DaimlerChrysler and its
predecessor Chrysler Corporation, most recently as Executive Vice
President, Product Development from January 2000 until his retirement in
March 2003. Mr. Schaum is a fellow of the Society of Automotive Engineers
and served as its President in 2007. Mr. Schaum is also a director of
Gentex Corporation and Sterling Construction Co.
Mr. Schaums nearly four decades of
business experience in program management, product development and
manufacturing in the global automotive industry bring technological
understanding, innovation expertise and extensive industry knowledge to
BorgWarners board. At WaveCrest Laboratories he oversaw development and
commercialization of proprietary transportation systems. As Executive Vice
President of Product Development at Chrysler, Mr. Schaum led all
Powertrain Operations, a business with $7 billion in sales. He has
intimate knowledge of the kinds of products BorgWarner must develop for
the future of transportation. |
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Table of Contents
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Thomas T. Stallkamp |
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Age:
70 Director
since: 2006 |
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Principal
Occupation and Directorships Mr. Stallkamp is the founder and principal of Collaborative
Management LLC, a private supply chain consulting firm. From 2004 to 2010,
he was an Industrial Partner in Ripplewood Holdings LLC, a New York
private equity group. From 2003 to 2004, he served as Chairman of MSX
International, Inc., a global provider of technology-driven engineering,
business and specialized staffing services, and from 2000 to 2003 he
served as its Vice Chairman and Chief Executive Officer. From 1980 to
1999, Mr. Stallkamp held various positions with DaimlerChrysler
Corporation and its predecessor Chrysler Corporation, the most recent of
which were Vice Chairman and President. Mr. Stallkamp also serves as a
director of Baxter International, Inc., a global diversified healthcare
company and served as a trustee of EntrepreneurShares Series Trust until
January 31, 2016.
Mr. Stallkamps experience within
and outside of the automotive industry, and his nearly 20-year tenure with
DaimlerChrysler and Chrysler Corporation, important customers of
BorgWarner, his international perspective and his financial acumen qualify
him for membership on the Companys board. His service on the boards of
Visteon (an automotive parts supplier) from 2002 to 2005 and Asahi TEC
Corporation (a manufacturer of automotive and other parts) from 2008 to
2010 has given him additional insight into the priorities of and
challenges confronting automotive suppliers. Mr. Stallkamps perspective
has been broadened by experience outside the auto industry and through his
private equity financing experience. |
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James R. Verrier |
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Age:
54 Director
since: 2013 |
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Principal
Occupation and Directorships Mr. Verrier has been President and Chief
Executive Officer and a member of the Board of Directors since January 1,
2013. From March 2012 through December 2012, he was President and Chief
Operating Officer of the Company. From January 2010 to March 2012, he was
Vice President of the Company and President and General Manager of
BorgWarner Morse TEC Inc. He was Vice President and General Manager,
Passenger Car of BorgWarner Turbo Systems Inc. from January 2006 to
January 2010. Mr. Verrier has served as a director of Parker Hannifan
Corporation since 2016.
Mr. Verrier has held positions of
increasing responsibility since joining the Company in 1989, including
assignments in quality control, human resources and operations management.
Prior to joining BorgWarner he held positions in the quality engineering
and metallurgy field with Lucas Aerospace, Rockwell Automotive and Britax
Wingard in the United Kingdom. He holds a degree in Metallurgy and
Materials Science from West Midlands College in the UK as well as an MBA
from the University of Glamorgan, also in the UK. |
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No director nominee,
director or executive officer is related to any other director nominee,
director or executive officer (or to any director or executive officer of any of the Companys subsidiaries) by
blood, marriage or adoption. There are no arrangements or understandings
between any nominee or any of our directors or executive officers or any
other person pursuant to which that nominee or director or executive
officer was nominated or elected as a director of the Company or any of
its subsidiaries. No director or executive officer of the Company is party
to, or has any material interests in, any material legal proceedings that
are adverse to the Company or its
subsidiaries. |
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BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
Corporate Governance Principles and
Board Matters |
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INDEPENDENCE OF THE DIRECTORS
The board has determined that all board
members meet the independence requirements of the New York Stock Exchange
(NYSE), with the exception of Mr. Verrier, our President and CEO. Under the
Companys Corporate Governance Guidelines, a director will not be considered
independent unless the board determines that such director has no direct or
indirect material relationship with the Company. In addition, the Companys
Corporate Governance Guidelines provide, among other things, that:
■ |
a director who is an employee, or
whose immediate family member is an executive officer, of the Company is
not independent until three years after the end of such employment
relationship |
■ |
a director who receives, or whose
immediate family member receives, more than $120,000 per year in direct
compensation from the Company, other than director and committee fees or
other forms of deferred compensation for prior service (provided such
compensation is not contingent in any way on continued service), is not
independent until three years after he or she ceases to receive more
than $120,000 per year in such compensation |
■ |
a director who is affiliated with or
employed by, or whose immediate family member is a current partner of, the
internal or external auditor of the Company, is a current employee of such a firm and personally works on the
Companys audit or was within the last three years a partner or employee
of such a firm and personally worked on the Companys audit at that time,
is not independent until three years after the end of the affiliation or
the employment or auditing relationship |
■ |
a director who is employed, or whose
immediate family member is employed, as an executive officer of another
company where any of the Companys present executives serve on that
companys compensation committee, is not independent until three years
after the end of such service or the employment
relationship |
■ |
a director who is an executive
officer or an employee, or whose immediate family member is an executive
officer, of a company that makes payments to, or receives payments from,
the Company for property or services in an amount that, in any single
fiscal year, exceeds the greater of $1 million, or 2% of such other
companys consolidated gross revenues, is not independent until three
years after falling below such threshold |
■ |
a director who is not considered
independent by relevant statute or regulation is not
independent |
BOARD LEADERSHIP STRUCTURE
Our Board of Directors currently separates
the role of Chairman and CEO. Mr. Michas is Non-Executive Chairman and Mr.
Verrier is President and CEO. The board believes that separating the Chairman
and CEO positions provides the most appropriate leadership structure for the
Company at this time. Separating the Chairman and CEO positions takes best
synergetic advantage of the talents of two leaders and allows Mr. Verrier to
devote his full attention to focusing on his responsibilities as CEO without the
additional responsibilities of Chairman.
The Non-Executive Chairman focuses
on:
■ |
effectiveness and independence of
the board, including providing independent oversight of the Companys
management and affairs on behalf of the Companys
stockholders |
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serving as the principal liaison
between the Companys management and the independent
directors |
■ |
contributing to agenda planning and
chairing the executive session of non-employee directors at each regularly
scheduled board meeting |
Director Michas, previously Lead Director,
became Non-Executive Chairman in April 2013 upon the retirement of the previous
Executive Chairman.
The Board of Directors recognizes that no
single leadership model is right for all companies at all times. The board has
reserved for itself the discretion to determine the most appropriate leadership
structure for the Company and the Board of Directors reviews the leadership
structure from time to time.
Table of Contents
BOARD COMMITTEES
The Board of Directors held four meetings
during 2016. Each of the directors attended at least 75% of the meetings of the
Board of Directors and each committee on which he or she served while members of
them. The Companys Corporate Governance Guidelines set forth the Companys
policy that directors should use their best efforts to attend the Companys
Annual Meeting of Stockholders. All directors serving at the time of the 2016
Annual Meeting of Stockholders attended the meeting.
The Board of Directors has a standing
Compensation Committee, Audit Committee, Corporate Governance Committee and Executive Committee. The charters for each of
our principal board committees can be found on the Companys website at
www.borgwarner.com. The responsibilities of our board committees are set forth in their
charters, which are reviewed at least annually.
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Member |
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Chair |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
COMPENSATION COMMITTEE |
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Members: Sato Chairperson, Carlson,
Stallkamp
All members of the
Compensation Committee are
independent under the New York Stock Exchange rules
Number of
Meetings: six |
Compensation Committee Purpose: The
Compensation Committee Charter provides that the Compensation Committee
will, among other things, assist the Board in fulfilling its oversight
responsibility relating to:
■reviewing and approving the Companys stated executive
compensation philosophy and strategy to ensure that members of management
are rewarded appropriately for their contributions to corporate growth and
value creation and that the executive compensation strategy supports
corporate objectives and stockholder interests
■reviewing and approving, chief executive officer and
other executive officer remuneration and compensation plans, and
supervising the administration of these plans
■ensuring that the compensation of Executive Officers is
internally equitable, is externally competitive, motivates Executive
Officers toward the achievement of business objectives and aligns their
focus with the long term interests of the Company and its
stockholders |
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In April 2016 the Compensation Committee
reviewed the Compensation Committee Charter and recommended to the Board that it
was not necessary to make changes to it. Stockholders can find it on our website
located at https://www.borgwarner.com/en/investors/corporate-governance.
AUDIT COMMITTEE |
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Members: Novak Chairman,
Cuneo, Hanley (as
of November 2016), McKernan,
Stallkamp
The Number of
Meetings: nine |
Audit Committee Purpose: The Audit Committee Charter
provides that the Audit Committee will among other things, assist the full
board in fulfilling the boards oversight responsibility relating
to:
■quality and integrity of the accounting, auditing,
financial reporting and risk management practices of the
Company
■appointment, compensation, retention and oversight of
the independent registered public accounting firm
■monitoring the independent registered public accounting
firms qualifications, independence and work (including resolving any
disagreements between the Companys management and the independent
registered public accounting firm regarding financial
reporting)
■pre-approval of all services to be performed by the
independent registered public accounting firm
■monitoring of the performance of the Companys internal
audit function and reviewing on behalf of the board the Companys pension
plans and risk management programs
The Committee met more often in 2016
than prior years to oversee the Companys review process of its
asbestos-related assets and liabilities. |
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Table of Contents
In October 2016 the Audit Committee
reviewed the Audit Committee Charter and recommended to the Board that it was
not necessary to make changes to it. Stockholders can find it on our website at
https://www.borgwarner.com/en/investors/corporate-governance.
Each member of the Audit Committee meets
the independence requirements set by the NYSE, Section 10A(m)(3) of the
Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC. The Board of Directors has designated the
Chairman of the Audit Committee, Mr. Novak, as our audit committee financial
expert and Messrs. Hanley, Krone and Stallkamp also qualify as audit committee
financial experts as defined by the rules and regulations of the SEC. None of
the members of the Audit Committee simultaneously serve on the audit committees
of more than two other public companies.
CORPORATE GOVERNANCE COMMITTEE |
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Members: Schaum
Chairman, Carlson, Sato
Number of Meetings:
four |
Corporate Governance Committee
Purpose: The Corporate Governance Committee Charter provides that the
Corporate Governance Committee will assist the Board in fulfilling its
oversight responsibility by, among other things, making recommendations
regarding:
■board composition and structure
■corporate governance principles, including the nature,
duties and powers of board committees
■term of office for members
■qualified persons to be nominated for election or
re-election as directors stockholders suggestions for board
nominations
■the emergency successor to the CEO
■any requests for waivers of application of the Companys
Code of Ethical Conduct
■any related person transactions
The Corporate Governance Committee
also establishes criteria for board and committee membership, evaluates
Company policies relating to the recruitment of directors and oversees the
evaluation of the board, its committees and management.
The Corporate Governance Committee
will consider nominees for the Board of Directors from a variety of
sources, including current directors, management, retained third-party
search firms, and stockholders. |
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In November 2016 the Corporate Governance
Committee reviewed the Corporate Governance Committee Charter and recommended to
the Board that it was not necessary to make changes to it. Stockholders can find
it on our website located at https://www.borgwarner.com/en/investors/corporate-governance.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
DIRECTOR
NOMINEE REQUIREMENTS
The Corporate Governance Committee seeks
to establish and maintain a board that is strong in its collective knowledge and
that possesses a diversity of skills, background and experience in areas
identified as relevant to guide the Company in execution of its business
strategy, recognizing that these areas may change over time. In considering
whether to recommend to the full board any candidate for inclusion in the
boards slate of recommended director nominees, the Corporate Governance
Committee will consider, among other things, the extent to which candidates
possess the following factors:
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the highest personal and
professional ethics, integrity and values |
■ |
demonstrated business acumen,
experience and ability to use sound judgment to contribute to effective
oversight of the business and financial affairs of the
Company |
■ |
ability to evaluate strategic
options and risks and form independent opinions, stated constructively to
contribute to guidance and direction of the Company |
■ |
active, objective and
constructive participation at meetings of the board and its committees,
with flexibility in approaching problems |
■ |
open mindedness on policy
issues and areas of activity affecting overall interests of the Company
and its stockholders |
■ |
stature to represent the
Company before the public, stockholders and various others who affect the
Company |
■ |
involvement only in activities
and interests that do not create a conflict with the directors
responsibilities to the Company and its stockholders |
■ |
willingness to objectively
appraise management performance in the interest of the
stockholders |
■ |
interest and availability of
time to be involved with the Company and its employees over a sustained
period |
■ |
ability to work well with
others, with deep and wide perspective in dealing with people and
situations, and respect for the views of others |
■ |
a reasoned and balanced
commitment to the social responsibilities of the Company |
■ |
contribution to the boards
desired diversity and balance |
■ |
willingness of independent
directors to limit public company board service to four or fewer boards
(any exceptions would require Corporate Governance Committee
approval) |
■ |
willingness to tender,
promptly following the Annual Meeting at which they are elected or
re-elected as Director, an irrevocable resignation that will be effective
upon (i) the failure to receive the required vote at the next Annual
Meeting at which they face re-election and (ii) board acceptance of such
resignation |
■ |
willingness to provide all
information, including completion of a questionnaire, required by the
Companys By-laws |
NOMINATION PROCESS AND
EVALUATION
The Committee accepts candidate
recommendations and referrals from a variety of sources including stockholders,
directors, management, search firms and other sources. An overview of the
process undertaken by the Committee when evaluating candidates
includes:
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Use of skills matrix to
identify specific attributes desired to be represented on the
board |
■ |
An assessment of the
candidates freedom from conflicts of interest and
independence |
■ |
Consideration of the narrowed
pool of candidates qualifications, expertise and cognitive
diversity |
■ |
Candidates are discussed and
interviewed by the Committee, (Non-executive chairman and
CEO) |
■ |
The Committee recommends
nominees to the full board |
■ |
The full board selects
nominees |
■ |
Stockholders vote on nominees
at annual stockholders meetings |
■ |
The Committee evaluates the
full board, its committees and individual directors
annually |
PROCESS FOR NOMINATION BY
STOCKHOLDERS
Stockholders who wish to recommend
candidates must do so in accordance with the procedures required in our
By-laws. Stockholders submitting such nominations must provide the information and
background material to the BorgWarner Inc. Corporate Governance Committee c/o
BorgWarner Inc. Corporate Secretary, 3850 Hamlin Road, Auburn Hills, Michigan
48326 not less than 90 nor more than 120 days prior to the first anniversary of
the preceding years Annual Meeting. Accordingly, any stockholder who wishes to
have a nomination considered at the 2018 Annual Meeting must deliver the
required materials between December 27, 2017 and January 26, 2018.
Table of Contents
The Companys By-laws require, among other
things, that the nominating stockholder disclose all material monetary
agreements between the nominating stockholder and the nominees; that director
nominees (including the boards nominees) complete a questionnaire regarding the
nominees background, qualifications and conflicts of interest; and that
stockholders proposing business disclose economic interests, including interest
in the Company as a result of derivative instruments.
PROXY ACCESS
In addition, we have a proxy access right
that permits a stockholder, or a group of up to 25 stockholders, owning
continuously for at least three years shares of our company representing an aggregate of at least 3% of the voting power
entitled to vote in the election of directors, to nominate and include in our
proxy materials director nominees constituting up to 20% of our board, provided
that the stockholder(s) and the nominee(s) satisfy the requirements of our
By-laws. Notice of proxy access director nominees must be received by our
Corporate Secretary at the address above no earlier than October 18, 2017 and no
later than the close of business on November 16, 2017.
Stockholder-recommended candidates and
stockholder nominees whose nominations comply with the required procedures and
who meet the criteria referred to above will be evaluated by the Corporate
Governance Committee in the same manner as the Corporate Governance Committees
nominees.
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a single stockholder, or group of up
to 25 stockholders
3% for 3 years owning three percent
outstanding stock for at least three consecutive
years |
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the individual or group may
submit director nominees
20%
for up to 20% of the board or 2 directors, whichever is
greater |
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nominees who satisfy
the requirements specified by the By-laws are included in the proxy
statement |
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EXECUTIVE
COMMITTEE |
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Members: Michas Chairman, Schaum,
Verrier |
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The Executive Committee is empowered
to act for the full board during intervals between board meetings when
telephonic meetings cannot reasonably be arranged, with the exception of
certain matters that by law may not be delegated. |
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The Executive Committee did not meet
during 2016 |
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EXECUTIVE
SESSIONS
The non-employee directors meet in
executive sessions without the presence of any corporate officer or member of
management in conjunction with regular meetings of the board. Non-Executive
Chairman Michas is the current presiding director. Interested parties can make concerns known directly to the
non-management directors on-line at compliancehotline. borgwarner.com or by
toll-free call to 1-800-461-9330.
CERTAIN
TRANSACTIONS
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Company has adopted a written policy
concerning Related Party Transactions under which the Corporate Governance
Committee is responsible for review, disapproval or approval or ratification of any Related Party Transactions in which a
director, nominee for director or Executive Officer or Immediate Family Member
of any of them has a material interest.
BorgWarner
Inc. 2017 Proxy
Statement |
Table of Contents
Proposal 2 - Approval, by Advisory Vote, of the
Compensation of Our Named Executive Officers |
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Our stockholders may approve, on a
non-binding, advisory basis, the compensation of our named executive officers as
disclosed in accordance with the executive compensation disclosure rules
contained in Item 402 of the SECs Regulation S-K. Accordingly, we are seeking
input from stockholders with this advisory vote on the compensation of our named
executive officers. The vote on this proposal is not intended to address any
specific element of compensation; but rather, the overall compensation of our
NEOs and the philosophy, policies and practices described in this proxy
statement.
While this vote is advisory, and not
binding on our Company, it provides valuable information to our Compensation
Committee. The Board of Directors and the Committee value the opinions of our
stockholders.
The Compensation Committee redesigned the
executive compensation program to address key concerns raised by stockholders
during our extensive outreach. Those changes are described in detail on
page 34.
These changes further strengthen the pay-for-performance objectives of our
compensation program.
Table of Contents
THE 2017 EXECUTIVE COMPENSATION PROGRAM
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Base Pay |
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■Determined based upon a
peer group median range (50th percentile) plus or minus 20% of
the median based on the executives experience, performance and
responsibilities |
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Annual Incentive
Plan |
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■Short-term cash incentive
targets are determined based upon a peer group median range (50th
percentile) plus or minus 20% of the median based on the executives
experience, performance and responsibilities
■Payment under the
short-term cash incentive plan is based upon the attainment of economic
value targets
■Payments are only made when
the performance targets are achieved |
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Long-Term Equity Awards |
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■Only one-third is comprised
of restricted stock
■Two-thirds is comprised of
performance shares. Performance shares are only paid upon the attainment
of Total Stockholder Return ("TSR") relative to a peer group and Relative
Revenue Growth ("RRG") metrics
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We maintain the highest level of oversight
of our executive pay programs. Our Board of Directors, our Chairman, CEO, and
our Executive Vice President and Chief Human Resources Officer engage in a
rigorous talent review process annually to address succession and executive
development for our CEO and other key executives. We closely monitor the
compensation programs and pay levels of executives from other companies that we
believe to be similar to the company in business characteristics and economics.
Accordingly, for the reasons we discuss
above, the board recommends that stockholders vote in favor of the compensation
of our named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation
Discussion and Analysis, compensation tables and narrative
discussion.
The votes cast for this proposal must
exceed the votes cast against this proposal for approval of the compensation
of our named executive officers, assuming that a quorum is present. For purposes
of determining the vote regarding this proposal, abstentions and broker
non-votes do not constitute a vote for or against the proposal and will be
disregarded in the calculation of votes cast. Proxies solicited by the board
will be voted FOR approval of the compensation unless a stockholder specifies
otherwise.
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RECOMMENDATION |
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Your Board of
Directors recommends a vote FOR the approval, by advisory vote, the
compensation of our named executive officers. |
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BorgWarner
Inc. 2017 Proxy
Statement |
Table of Contents
Table of Contents
Compensation Discussion and
Analysis |
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Executive Compensation Summary |
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2017 SAY-ON-PAY
PROPOSAL
Why you should vote in favor of our 2017
Say-on-Pay Proposal
■ |
We were able to position the
Company for future growth and success. |
■ |
We listened to stockholders,
redesigned our compensation program
for 2016 to simplify it, and reduced short and
long-term incentive compensation opportunities for the CEO and other NEOs
from the 65th percentile to the market median range (50th percentile) plus
or minus 20% of the median based on the executives experience,
performance and responsibilities. |
■ |
The Committee and the CEO
agreed to reduce his earned 2016 annual incentive plan award by $2.43
million (71%) from $ 3.38 million to $ 0.95 million. While overall
performance was strong, the Committee deemed this approach appropriate
given stockholder returns for the year and believes that this decision
supports our pay-for-performance philosophy. |
■ |
Payouts under our long-term
incentive program reflect performance. No payout was made under the
relative TSR component based on our stock price performance for the
three-year period 2014-2016 and payout under the 2016 relative revenue
growth component was 82.5% of target. |
■ |
No change in base salary or
annual incentive award opportunity will be provided to our CEO for
2017. |
The Compensation Discussion and Analysis
focuses on the compensation of the following named executive officers (NEOs)
of BorgWarner for fiscal 2016.
BorgWarner
Inc. 2017 Proxy
Statement |
Table of
Contents
|
Compensation Discussion and
Analysis |
|
31 |
OUR NAMED
EXECUTIVE OFFICERS
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James R. Verrier, President and Chief Executive Officer |
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Age:
54 Employee
since: 1989 |
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Biography Mr.
Verrier has been President and Chief Executive Officer and a member of the
Board of Directors since January 1, 2013. From March through December
2012, he was President and Chief Operating Officer of the company. From
January 2010 to March 2012, he was Vice President of the company, and
President and General Manager of BorgWarner Morse TEC Inc. He was Vice
President and General Manager, Passenger Car for BorgWarner Turbo Systems
Inc. from January 2006 to January 2010.
Since joining the company in 1989,
Mr. Verrier has held positions of increasing responsibility including
assignments in quality control, human resources and operations management.
Prior to joining BorgWarner, he worked in the quality engineering and
metallurgy fields at Lucas Aerospace, Rockwell Automotive and Britax
Wingard in the United Kingdom (UK).
Mr. Verrier currently serves on the
Board of Directors of Parker Hannifin Corporation, a global leader in
precision-engineered solutions for mobile, industrial and aerospace
markets. He is also a member of the Board of Trustees for the
Manufacturers Alliance for Productivity and Innovation (MAPI), the Board
of Directors of the Original Equipment Suppliers Association (OESA), and a
member of the Business Roundtable (BRT). Mr. Verrier serves on the 2016
Campaign Cabinet of the United Way for Southeast Michigan and was honored
as an EY Entrepreneur Of The Year 2014 in the automotive category in the
Michigan and Northwest Ohio region.
Mr. Verrier holds a degree in
metallurgy and materials science from West Midlands College and an MBA
from the University of Glamorgan (currently known as the University of
South Wales), both in the UK. |
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Ronald T. Hundzinski, Executive Vice President and Chief Financial
Officer |
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Age:
58 Employee
since: 2005 |
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Biography Mr.
Hundzinski has been Vice President and Chief Financial Officer since March
2012. He is responsible for investor relations, mergers and acquisitions,
treasury, tax, internal audit, financial reporting and information
technology. He is also a member of the corporate strategy
board.
During his career with BorgWarner,
Mr. Hundzinski served as Vice President and Treasurer, Vice President and
Corporate Controller, Vice President of Finance for Turbo Systems, Plant
Controller for Transmission Systems, and Business Unit Analyst for
TorqTransfer Systems. Prior to joining BorgWarner, Mr. Hundzinski held
leadership positions in finance at Emerson Electric, GKN and Meridian
Automotive.
Mr. Hundzinski earned a bachelors
degree in business administration from Western Michigan University,
received an MBA from the University of Colorado and holds a CPA
designation. He serves on the Board of Directors for Gentherm, a
manufacturer of heated, cooled and ventilated comfort products for the
automotive industry. |
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Table of
Contents
32 |
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Compensation Discussion and Analysis |
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Frederic B. Lissalde, Vice President, President and General Manager Turbo
Systems |
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Age:
49 Employee
since: 1999 |
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Biography Mr.
Lissalde has been President and General Manager of BorgWarner Turbo
Systems since May 2013. From May 2011 to May 2013 he was President and
General Manager of Turbo Systems Passenger Car Products.
Prior to that,
Mr. Lissalde served as Vice President and General Manager of BorgWarner
DualTronic and Clutch Systems from January 2008 until May 2011, and Vice
President of Global Sales and Marketing of BorgWarner Drivetrain Systems
in 2007. He also served as Managing Director of several operations in
Europe for BorgWarner Drivetrain Systems.
Mr. Lissalde also has experience in
integration of purchased companies; closing, restructuring and opening
manufacturing facilities; program management; engineering; operations; and
sales in the UK, Japan, Germany and France.
Mr. Lissalde holds a Masters of
Engineering degree in 1990 of the ENSAM Ecole Nationale Superieure des
Arts et Metiers - Paris and also an MBA (ISA 1994) from HEC
Paris. |
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John J. Gasparovic, Executive Vice President, Chief Legal Officer and
Secretary |
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Age:
59 Employee
since: 2007 |
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Biography Mr.
Gasparovic is Executive Vice President, Chief Legal Officer and Secretary
of BorgWarner Inc. and has been its chief legal officer since January
2007.
He joined BorgWarner from Federal Mogul Corporation where he was
Senior Vice President and General Counsel. Prior to that, he served as
Executive Vice President and General Counsel of Roadway Corporation; and
Vice President Business Development and General Counsel of Guardian
Automotive, a subsidiary of Guardian Industries Corp. In addition, Mr.
Gasparovic was a commercial litigator and trial lawyer with Jones Day in
Chicago and Cleveland.
Mr. Gasparovic earned a bachelors
degree from Wayne State University in 1979 and a law degree from
Northwestern University in 1982. He is a member of the Michigan, Ohio
(inactive) and Illinois (inactive) Bars. He also serves as a member of the
Advisory Board of Northwestern University Pritzker School of
Law. |
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BorgWarner
Inc. 2017 Proxy Statement |
Table of
Contents
|
Compensation Discussion and
Analysis |
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33 |
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Stefan Demmerle, Vice President, President and General Manager PowerDrive
Systems |
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Age:
52 Employee
since: 2012 |
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Biography
Dr. Demmerle has been President and
General Manager of BorgWarner PowerDrive Systems since November 2015,
wherein he led the acquisition and integration of Remy Inc. He joined
BorgWarner in 2012 as President and General Manager of BorgWarner
TorqTransfer Systems.
Prior to joining BorgWarner, Dr.
Demmerle became Vice President of the Powertrain Electronics Business at
Continental from 2010 to 2012 after leading Continental Diesel Systems
(formerly known as Siemens Diesel Systems Technology) as President and CEO
from 2006 to 2010. He previously held positions of increasing
responsibility within Siemens VDO Automotive in the transmission and
engine electronics businesses in France and worldwide.
Dr. Demmerle began his career in
France with assignments in sales and program management for automotive
engine components. He holds a masters degree in mechanical engineering
from the Technical University of Munich, Germany, as well as a Ph.D. in
mechanical engineering from the Institut polytechnique de Grenoble,
France. |
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Table of
Contents
34 |
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Compensation Discussion and Analysis |
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Stockholder Engagement and Refinements to Executive Compensation
Program |
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Management and the Board conducted
extensive outreach with our stockholders leading up to and following our 2016
Annual Meeting, at which our say-on-pay proposal received support from 40% of
votes cast. Outreach meetings were conducted in April 2016 and follow up
meetings were held in October through December 2016. In total, we reached out to
stockholders representing 66% of our outstanding shares and held in-person
meetings or calls with holders of 55% in April and 50% in October (in many
instances we met with a stockholder more than once). Two of our directors,
including the independent Chair of our Board,
participated in many of these meetings, and feedback was shared and discussed
with the full Board.
The Compensation Committee and Board,
based on discussion with and the feedback received from our investors,
determined that a number of changes should be incorporated into our compensation
program. These changes are fully described in the table below. These changes
were discussed with investors in advance of implementation and investors
indicated that they view the changes positively.
What We Learned |
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How We
Responded |
CEO Compensation Concern: Stockholders
expressed concern with the
alignment of our CEO's compensation with
financial and
stock performance. |
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■The Committee and the CEO agreed
to reduce his earned 2016 annual incentive plan award by $2.43 million
(71%) from $3.38 million to $0.95 million. While overall performance was
strong, the Committee deemed this approach appropriate given stockholder
returns for the year and believes that this decision supports our
pay-for-performance philosophy.
■The Committee did not reduce the
CEOs base salary or target annual incentive plan award. The Committee
believes the CEOs structural pay is within 20% of the market median
today. However, the Committee has taken steps to ensure that financial
performance goals (Economic Value in the annual incentive plan and
relative revenue growth under the long-term incentive program) reflect
stockholder expectations, such that pay and performance better align in
the future. |
Performance-Based
Compensation Concern:
Annual Performance based compensation set at the
65th
percentile. |
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■Reduced target award level to
the peer group median range (50th percentile) plus or minus 20%
of the median based on the executive's experience,
performance and responsibilities
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EV EV is the
way in which we convert investment into stockholder
value and the single
metric under our annual incentive plan.
Concern:
■Stockholders could
not calculate the EV measurement
used to determine payouts
under the annual incentive
plan.
■Stockholders did
not like the carryover feature of the annual incentive
plan |
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■Provided additional clarity on
EV calculation and detailed the formula (see pages
38-40)
■Eliminated carryover feature
for the Senior Executive Team |
Performance
Shares Represent
two-thirds of long-term incentive award Concern:
■Performance shares
awards were set at the 65th percentile |
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■Reduced target award level to
the peer group median (50th percentile) plus or minus 20% of
the median based on the executives experience, performance and
responsibilities |
Restricted Shares
Represent
one-third of long-term incentive award Concern:
■Restricted shares
were awarded off-cycle
■Restricted shares
were not subject to a double trigger in
the event of a Change of
Control |
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■Limit one-time equity grants
(except in cases of newly hired executives and
retention)
■Add double trigger change in
control provision for future equity
grants |
BorgWarner
Inc. 2017 Proxy Statement |
Table of
Contents
|
Compensation Discussion and
Analysis |
|
35 |
Company Performance Overview |
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BorgWarner is a leading producer of
highly-engineered components and systems for vehicle propulsion systems
worldwide. The company continued to demonstrate strong operational performance
in 2016. Highlights include:
(1) Allows for the impact of the Remy
acquisition and excludes one-time non-operating items.
These achievements demonstrate strong
performance in support of our pay for performance philosophy.
Our executive compensation program follows
a pay-for-performance approach designed so that pay levels are strongly linked
with our short-term operational performance and long-term market performance.
The Compensation Committee has identified the following objectives for the
compensation program:
■ |
Align the interests of our
executives with the long-term interests of the business, our stockholders
and employees |
■ |
Motivate exceptional performance
through measurable metrics that support our long-term strategy of growth
and value creation |
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Attract, develop, motivate and
retain top global talent |
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Pay competitively across salary
grades in all regions of the world |
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Apply compensation program design in
a consistent manner across the organization |
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Mitigate excessive risk
taking |
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Reflect the input of our
stockholders |
Table of Contents
36 |
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Compensation Discussion and Analysis |
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Compensation Program Overview and Elements |
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Approximately 88% of compensation for our
CEO is tied to short- and long-term incentives, and a significant portion of
compensation is at-risk and dependent upon the achievement of rigorous and
objective performance requirements.
88% of CEOs compensation is at risk (Annual Incentive +
Long-Term Incentive) |
Element |
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Key Features
of Our Compensation Program |
Salary |
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■Reviewed annually, adjusted as appropriate to align with
median-market levels (50th percentile of the Company's
Comparator Group) plus or minus 20% of the median considering scope of
responsibilities and experience, development opportunity, changes in
responsibilities and individual and business
performance |
Annual Cash
Incentive |
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■Variable pay component focused on short-term annual
objectives that demonstrate the strength of the business over the
long-term
■100% based on achievement of EV, a dynamic measure of
how well we convert investments into increased stockholder
value |
Long-Term
Equity Incentive |
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■Two-thirds in Performance Shares
■50% based on relative TSR measured at the end of a
3-year performance period
■50% based on RRG at the end of a 3-year performance
period
■No payout for relative TSR performance below the
25th percentile
■Maximum relative TSR payout requires performance at or
above the 90th percentile
■One-third in Restricted Shares
■50% vesting after two years and the remainder vesting
after three years |
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BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Compensation Discussion and
Analysis |
|
37 |
Added Relative Revenue Growth as a
Long-Term Incentive Metric. The Compensation
Committee approved a second performance metric for our long-term incentive
program beginning with 2016 grants. In addition to helping balance the program,
relative revenue growth is a critical measure of the long-term success of our
business. The new metric was introduced with our February 2016 incentive grants
and phased in so that it includes a one-year performance period for 2016, a
two-year performance period for 2016-2017, and three-year performance periods
for all grants going forward.
Compensation Alignment to Performance |
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Variable, at-risk compensation accounted
for approximately 86% of our CEOs reported compensation over the last three
years. Realized compensation for our CEO over the last three years is 53% below
the values reported in the summary compensation table, primarily because no
payouts have been made under our relative TSR performance share program for any
of the last three 3-year periods. We believe this demonstrates
strong-pay-for-performance alignment.
Leading Compensation Governance Practices |
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Stockholder engagement informs
compensation program |
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Significant portion of executive pay
performance-based and at risk |
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Rigorous goal setting process
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Annual compensation assessment
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Annual risk assessment
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Stock ownership guidelines for
executives |
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Clawback policy for recoupment of
incentive compensation under certain conditions |
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Policies prohibiting hedging or
pledging of company stock |
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Double trigger change in control
provisions for future restricted stock |
Table of Contents
Executive Compensation Program
Elements |
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Our Compensation Committee performs a
strategic review of our executive officers compensation at least annually, in
addition to discussions at Compensation Committee meetings held throughout the
year. The strategic review for the upcoming plan year typically occurs in
October during an extended meeting session. During this review, the Compensation
Committee evaluates our compensation philosophy and objectives to ensure that
they continue to reflect our intention to pay for performance, our business
strategies, competitive realities and our Board's determination of what is in
the best interests of stockholders. The Committee also considers feedback from
our stockholders. Our Compensation Committee then determines whether our
compensation programs meet these objectives, provide adequate incentives and
motivation to our executive officers and adequately compensate our executive
officers relative to comparable officers at other companies with which we
compete for executives. As part of this strategic review for 2016, our
Compensation Committee determined the compensation of our Senior Executive Team
including our CEO, CFO and the three other officers whose compensation is
detailed in the Summary Compensation Table on page 48. For compensation
decisions, relating to executive officers other than our CEO, our Compensation
Committee considers recommendations from our CEO.
The key elements of our executive
compensation program are base salary, short-term incentives through our
Management Incentive Plan ("MIP"), and long-term incentives in the form of
performance shares and restricted stock. We strive to have each compensation
element complement the others and reward the achievement of short-term and
long-term business objectives.
Management Incentive Plan |
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The MIP is our cash-based, annual
incentive plan for executives. It is designed to focus key managers on creating
EV for the Company and reinforce teamwork and collaboration by measuring the
management team at each business as well as the results for the combined
business. EV is the concept that capital has a cost and that earning more than
the cost of capital creates value for our stockholders. It is true economic
profit. EV is the foundation on which we operate and a very dynamic measure of
how well we turn investments into increased stockholder value. It is based on
our belief that a business can be financially strong in the long run only if it
consistently earns enough to cover its operating cost and, at the same time,
produces enough additional earnings to cover its cost of capital. We calculate
EV for purposes of the MIP as follows:
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EV |
= |
Net Operating Profit After
Tax |
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(Capital Invested x Cost of
Capital) |
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Net Operating Profit After
Tax ("NOPAT") |
Earnings prior to interest and
finance charges net of income taxes calculated at a fixed composite
statutory rate (35% has been used historically) |
Capital Invested |
For the Company the sum of debt,
non-controlling interest, and stockholders' equity less cash and cash
equivalents and 1987 leveraged buy-out related goodwill.
For each Business the sum of the
assets employed in the business less operating liabilities such as
accounts payable, accruals and long-term liabilities other than
debt. |
Cost of Capital |
Assumed rate of return on capital
invested required to fairly compensate debt and equity investors (15% has
been used historically) |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Executive Compensation Program
Elements |
|
39 |
MIP TARGETS AND AWARDS THROUGH 2016
The following describes the MIP structure,
goal-setting process, and resulting payouts:
■ |
During 2016, the Compensation
Committee established performance goals for the Company and business
segments for each year of a three-year cycle. For 2016, these were
established at the beginning of 2016 (the prior three-year cycle ended in
2015). To ensure the performance requirements are sufficiently rigorous,
the threshold goal is equal to at least the EV achieved in the last year
of the preceding three-year cycle. See below for changes beginning with
2017. |
■ |
In each year of the three-year
cycle, target and maximum goals increase by 0.5% and 1.0% of the capital
invested, respectively, with 2016 threshold, target and maximum
performance levels calculated as
follows: |
Performance
Level |
2016 EV Performance Target |
Threshold |
2015 NOPAT - (Capital
Invested x Cost of Capital) |
Target |
Threshold + 0.5% of
Capital Invested |
Maximum |
Threshold + 1.0% of Capital
Invested |
■ |
The target bonus opportunity for our
NEOs for 2016 ranged from 75% to 150% of base salary. |
■ |
Actual performance is measured at
the close of the fiscal year, with any earned bonuses paid in the first
quarter of the following year. |
■ |
NEOs receive 50% of the target
opportunity for achieving threshold performance and 200% of the target
opportunity for achieving maximum performance or above, with results in
between these levels interpolated. |
■ |
NEO bonus opportunities are weighted
based upon the EV performance at the total Company, segment or business
unit levels, depending on each NEOs responsibilities. For 2016, the
weightings were as follows: |
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NEO |
Total Company |
Segment |
Business Unit |
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James R. Verrier |
100% |
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Ronald T. Hundzinski |
100% |
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Frederic B. Lissalde |
20% |
20% |
60% |
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John J. Gasparovic |
100% |
|
|
|
Stefan Demmerle |
20% |
20% |
60% |
■ |
The 2016 actual EV was determined
using amounts from the Companys reported financial results which were
adjusted for non-comparable items as reported in the Company's financial
statements. |
■ |
Based on this EV achievement, actual
bonuses related to the total Company performance were earned at
approximately 178% of target. |
■ |
The corporate, segment and business
unit performance resulted in unadjusted bonus payouts of 178% to 196% of
target for the NEOs. |
■ |
The Compensation Committee can
adjust awards based on other financial or non-financial measures that
align with stockholder interests, and made such a downward adjustment in
2016 for the CEO. This MIP payout percentage would have resulted in a
payout of $3.38 million for Mr. Verrier; however, the Committee and Mr.
Verrier agreed to reduce his MIP payout to $0.95 million. While overall EV
performance was strong and supported the original payment, the Committee
deemed this approach appropriate given stockholder returns for the year
and believes that this decision supports our pay-for-performance
philosophy. The bonus payout percentages and bonus payout amounts, after
adjustment, for the NEOs are as
follows: |
|
NEO |
MIP Payout as % of Target Based on Actual EV
Performance |
Adjusted Bonus Payout |
|
James R. Verrier |
178% |
$950,000* |
|
Ronald T. Hundzinski |
178% |
$1,206,111 |
|
Frederic B. Lissalde |
188% |
$1,041,544 |
|
John J. Gasparovic |
178% |
$647,229 |
|
Stefan Demmerle |
196% |
$649,968 |
* Reflects agreement between Committee and
CEO to reduce CEO bonus as noted above.
Table of Contents
40 |
|
Executive Compensation Program Elements |
|
Prior MIP Carryover Feature
Eliminated. Historically, the MIP provided
that if the maximum bonus opportunity was not earned in a given year, the
shortfall amount could be earned at 50% in the following two years (50% each
year) by achieving results each year that were higher than the prior year. This
feature was only available if the threshold level of performance for the then
current year was achieved. No carryover was earned in 2016 by any NEOs. Based on
investor feedback, the Compensation Committee eliminated the carryover feature
of the MIP effective for 2017 awards for the Senior Executive Team.
2017 MIP
Beginning in 2017, the Committee
determined that the goals under the MIP for the Senior Executive Team would be
established annually based on the Boards review of the Companys long-term
business plan. The Committee no longer looks at the three-year cycle when
setting goals under the MIP. Further, the MIP no longer includes a
carryover opportunity for the Senior Executive Team. Beginning in 2017, the
Companys actual cost of capital and actual effective tax rate will be used in
calculating EV. Incorporating these changes, EV will be calculated in 2017 as
follows:
|
|
|
|
|
|
|
|
EV |
= |
Net Operating Profit After
Tax |
- |
(Capital Invested x Cost of
Capital) |
|
|
|
|
|
|
|
|
Net Operating Profit After
Tax ("NOPAT") |
Earnings prior to interest and
finance charges net of income taxes calculated at the Company's composite
statutory rate (32% has been used in setting 2017 performance levels)
|
Capital Invested |
For the Company the sum of debt,
non-controlling interest, and stockholders' equity less cash and cash
equivalents
For each Business the sum of the
assets employed in the business less operating liabilities such as
accounts payable, accruals and long-term liabilities other than debt
|
Cost of Capital |
Actual rate of return on capital
invested required to fairly compensate debt and equity investors (9.5% has
been used in setting 2017 performance
levels) |
Target awards are intended to be
comparable to opportunities normally provided by other companies to executives
with similar responsibilities and considering the executives experience and
other individual attributes. NEOs target MIP opportunities range from 75% to
150% of base salary. The actual payout of awards is capped at 200% of the target
opportunity.
The 2017 target, threshold, and maximum EV
achievement levels are established to directly link executive compensation to
executives ability to create value. In setting the EV performance levels, the
Committee considers the broader economic environment, industry conditions, and
the Companys current guidance and past performance with respect to operating
earnings and cash flow generation. The Committee has discretion to adjust EV
results for non-comparable items such as M&A costs, and is authorized to
reduce actual payouts at its discretion. For the Company, the 2017 EV goals have
been established as follows, with the target performance level set at the
midpoint of the Companys guidance range for operating earnings and cash flow
generation, and the maximum performance level set above the high end of that
range:
Performance
Level |
2017 Target EV Performance |
Threshold |
$245 million |
Target |
$265 million |
Maximum |
$285 million |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Executive Compensation Program
Elements |
|
41 |
Long-Term Equity Incentives |
|
We believe that long-term performance is
driven through an ownership culture that rewards our executives for maximizing
long-term stockholder value. Our long-term incentive plans provide participants
with appropriate incentives to acquire equity interests in our Company and align
their interests with the interests of our stockholders.
Two-thirds of the total value of the
target long-term incentive opportunity is delivered through performance shares
and one-third through restricted stock. Our Compensation Committee has
determined to place greater emphasis on performance shares due to the
significant challenges in the automotive industry, providing a more direct
comparison of our longer term performance to that of our industry peers, and
firmly aligning our executives interests with the interests of our
stockholders.
PERFORMANCE SHARES
The Compensation Committee designed the
performance share program for a select group of senior executives to provide a
competitive payout at the end of a three-year performance period, with goals set
at the beginning of each performance period. A new performance period begins
each January 1 and ends three years later on December 31.
Beginning with 2016 grants, executives may
earn performance shares based on achievement of two equally-weighted metrics:
relative TSR and RRG. The combination of TSR and RRG provides the appropriate balance
in the long-term incentive plan TSR goals focus management on increasing
stockholder value, and RRG focuses management on the long-term growth and
success of our business under the current strategy.
■ |
Relative TSR: Determined by ranking
the Companys three-year total stockholder return among a peer group of
companies in the automotive supply and aftermarket
industry. |
■ |
RRG: Determined based on the
three-year compound annual change in revenue, excluding the impact of
changes in currency exchange rates and acquisition and divestiture
activity, in excess of the three-year compounded annual change in industry
vehicle production, weighted to reflect the Companys relative
participation in the vehicle markets of the various regions of the world
and the Companys relative participation in the passenger car and
commercial vehicle markets. The change in industry vehicle production is
determined using data published by IHS Automotive, a leading global
automotive research firm. |
Both the TSR and RRG target awards are
expressed in terms of performance shares. A consistent methodology is used for
converting the target dollar amount to a specific number of shares: the average
closing price of the Companys common stock for the last five trading days of
the year preceding the date of grant, which coincides with the end of the prior
performance period. Payouts are determined at the end of the three-year
performance period based on the rank of the Companys TSR compared to those of a
peer group of companies (Peer Group Companies) and RRG compared to the weighted
average growth in vehicle production.
Performance Share Payout Schedule
Awards
Level |
Percentile Rank TSR |
Award Payout as Percent of
Target* |
|
Below 25th
percentile |
0.000% |
Threshold |
25th
percentile |
25.000% |
|
35th
percentile |
43.750% |
|
50th
percentile |
71.875% |
Target |
65th
percentile |
100.000% |
|
75th
percentile |
140.000% |
Maximum |
90th percentile |
200.000% |
* Interpolation is used to determine the
percent of performance shares when actual performance does not fall directly on
one of the levels listed above.
Table of Contents
42 |
|
Executive Compensation Program Elements |
|
Level |
Revenue Growth above Vehicle Production
Growth |
Award Payout as Percent of Target* |
Threshold |
2% |
50% |
Target |
4% |
100% |
Maximum |
6% |
200% |
* Interpolation is used to determine the
percent of performance shares when actual performance does not fall directly on
one of the levels listed above.
2016 PERFORMANCE SHARE GRANTS
Implemented New Long-Term Incentive
Metric to Drive Performance. Prior to 2016,
our performance shares were based solely on relative TSR. The new RRG metric was
introduced with our February 2016 incentive grants and phased in so that it
includes a one-year performance period for 2016, a two-year performance period
for 2016-2017 and three-year performance periods for all grants going forward.
The introduction of this new metric was well received by our investors who
agreed during our shareholder engagement that the Committee should include more
than one performance metric in the program. The Committee found that the TSR
metric, alone, in the existing long-term incentive plan did not provide a clear
line of sight to a specific business goal and, therefore, added the RRG metric
to provide a more balanced approach across the program. The Committee decided
that a phase-in approach was appropriate because RRG is a critical metric that
drives long-term value creation. The Committee also considered that:
(1) |
without the phase-in, the first RRG
payout would not be effective for three years. The Committee believes
rewarding RRG in the more immediate time period is a critical long-term
value driver at this point in the Companys growth cycle and that it will
support long-term TSR, and |
(2) |
the phase-in process will not result
in outsized long-term incentive program payouts or windfalls for
executives, even with strong performance. In fact, the 2016 phase-in
period resulted in a below target payout. As our strong RRG performance
indicates, the 2016 implementation of this metric is beginning to drive
results. |
The Peer Group Companies for the
performance share grants include publicly traded companies in the automotive
supplier industry with at least $1 billion in annual sales. This group was
selected because we compete with these companies for stockholder investment
dollars. The Compensation Committee considers a different group of companies for
compensation benchmarking purposes as described on page 45. For the performance
periods from January 1, 2014 to December 31, 2016, the Peer Group Companies
included the following companies:
Autoliv, Inc. |
Genuine Parts
Co. |
Tenneco Inc. |
Dana Holding Corporation |
Johnson Controls,
Inc. |
TRW Automotive Holdings
Corp. |
Delphi Automotive PLC |
Lear Corporation |
Visteon
Corporation |
Gentex
Corporation |
LKQ Corp. |
Wabco Holdings Inc. |
No Payout for
2014-2016. For the 2014-2016 performance
period, the Company's TSR was below the 25th percentile of the peer group
resulting in no payout of performance shares for that performance period. For
2016, the Company's revenue growth, excluding the impact of changes in currency
values and merger, acquisition and divestiture activity, was 5.3% while the weighted average vehicle production
increase was 2.0%. The 3.3% outperformance resulted in a 2016 relative revenue
growth performance share payout of 82.5% of target. The shares earned by our
NEOs are detailed below and are reflected in the Options Exercised and Stock
Vested table on page 52.
NEO |
Relative Revenue Shares at Target |
Shares Earned |
James R. Verrier |
58,961 |
48,643 |
Ronald T. Hundzinski |
14,942 |
12,327 |
Frederic B. Lissalde |
9,692 |
7,996 |
John J. Gasparovic |
8,077 |
6,664 |
Stefan Demmerle |
6,865 |
5,664 |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Executive Compensation Program Elements |
|
43 |
RESTRICTED
STOCK
Restricted stock awards incent and reward
executives for improving long-term stock value and serve as a retention tool.
Generally, restricted stock is granted in February and one-half of the shares
granted will vest on the second anniversary of the grant and the remainder of
the shares granted will vest on the third anniversary of the grant, in each
instance provided that the recipient is still employed by the
Company.
In response to stockholder feedback, all
future restricted stock grants will be subject to a double-trigger change of
control provision, meaning shares of restricted stock will automatically
accelerate and become fully vested only if the Company terminates an NEOs
employment other than for cause, or the NEO elects to terminate employment for
good reason, during the restriction period.
Fixed Compensation and
Benefits |
|
BASE SALARY
We establish executives base salaries in
accordance with the scope of the executives responsibilities, time in position
and potential, the competitive market and internal equity. When considering
market competitive base salaries, we target the median level among our
comparator companies which is determined
annually. We review base salaries annually, and adjust as appropriate to realign
salaries with market levels after taking into account changes in individual
responsibilities, individual and business performance, and experience. No
increase in base salary is being provided to our CEO for 2017.
EXECUTIVE BENEFITS AND
PERQUISITES
NEOs are eligible to participate in
employee benefit plans on the same basis as other employees (such as medical,
dental and vision care plans; health care flexible spending accounts; life,
accidental death and dismemberment and disability insurance; employee assistance
programs; and a defined contribution retirement plan including a 401(k)
feature). The retirement plans described on page 53 are provided to all
employees in order to permit them to accumulate funds for retirement and to
provide a competitive retirement package.
Our U.S.-based executives who exceed the
limits under the qualified BorgWarner Inc. Retirement Savings Plan participate
in the BorgWarner Inc. Retirement Savings Excess Benefit Plan (Excess Plan).
All of our U.S. based NEOs received Company contributions under the Excess Plan
in 2016. For further detail see page 54 under the Non-Qualified Deferred
Compensation section.
The benefits and perquisites we provide to
executives are currently at or below median competitive levels for comparable
companies. Executive perquisites for the U.S.-based NEOs are limited to a
taxable annual perquisite allowance in lieu of awarding individual perquisites.
No tax gross-ups are provided on benefits or perquisites. On certain occasions,
an NEOs spouse or other family member may accompany the NEO on a business trip
in which a company aircraft is utilized. No additional direct operating cost is
incurred in such situations because there is no incremental cost associated with
the additional traveler.
Except as described in the Pension
Benefits table below on page 53, none of our NEOs participate in or have account
balances in any of the Company-sponsored qualified or non-qualified defined
benefit pension plans.
Table of Contents
44 |
|
Executive Compensation
Program Elements |
|
Change of Control
Agreements |
|
We entered into Change of Control (COC)
Employment Agreements (the COC Agreements) with each of our NEOs and certain
other executives. In establishing the COC Agreements, our Board determined that
it is in the best interests of the Company and its stockholders to (i) maintain
NEOs continued dedication in the event of either a contemplated or actual COC,
and (ii) provide two to three years of compensation to NEOs terminated in
connection with the COC so as to focus their attention on executing the
transaction rather than the personal uncertainties and risks associated
therewith.
COC Agreements entered into in 2009 or
later: (i) do not provide for excise tax gross-up provisions, (ii) condition the
receipt of certain benefits on the execution of a non-compete agreement and (iii) incorporate a clause that allows an
executive to forego certain benefits in the event that receipt would trigger the
excise tax. See pages 55 and 56 for further details.
Each of our U.S.-based NEOs is eligible
for severance benefits under the BorgWarner Inc. Transitional Income Plan (the
TIP). The TIP was established to provide some financial protection to all U.S.
salaried employees in the event that their employment is terminated for reasons
beyond their control. The TIP benefit includes a lump sum payment that is based
on salary level and length of service (with a maximum benefit of 26 weeks of
base salary, adjusted for unemployment benefits) and medical coverage. In no
event would a U.S.-based NEO receive a payment under both the COC Agreement and
the TIP.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
Executive Compensation |
Process and
Practices |
|
Peer Group and Market
Assessment |
|
In evaluating and setting compensation,
our Compensation Committee considers a number of factors including individual
and business performance, internal equity, retention, the degree of alignment
between the incumbents job duties and the benchmarked job description, as well
as an assessment of market practices. The Compensation Committee believes that
benchmarking is a useful tool because it reflects the market in which we compete
for talent and provides credibility for our compensation programs with our
employees and stockholders.
Our Compensation Committee has
established, with the assistance of its independent compensation consultant, a
Comparator Group for benchmarking executive officer compensation. This group generally includes companies with revenues
between $2 billion and $20 billion in the automotive, transportation and general
industrial sectors. One of the companies, Johnson Controls Inc., has revenues in
excess of $20 billion but is included because it is an industry comparator and
is included in the Peer Group Companies used for TSR purposes. Due to
differences in size among the comparator companies, we use a regression analysis
to normalize the survey results to better reflect the size of our Company
relative to that of the comparator companies.
The Comparator Group used for establishing
2016 compensation decisions consisted of the following companies:
American Axle &
Manufacturing Holdings, Inc. |
ITT Corporation |
AMSTED Industries,
Inc. |
Johnson Controls, Inc. |
BAE Systems,
Inc. |
Kennametal Inc. |
Ball Corporation |
Lear Corporation |
Brunswick
Corporation |
Meritor, Inc. |
Cooper-Standard Holdings
Inc. |
Navistar International Corp. |
Cummins Inc. |
PACCAR Inc. |
Daimler Trucks North
America LLC |
Parker Hannifin Corporation |
Dana Holding
Corporation |
Polaris Industries Inc. |
Delphi Automotive
PLC |
Praxair, Inc. |
Denso International
America, Inc. |
Robert Bosch Corporation |
Donaldson Company,
Inc. |
The Sherwin-Williams Company |
Dover
Corporation |
Tenneco Inc. |
Eastman Chemical
Co. |
The Timken Company |
Eaton
Corporation |
TRW Automotive Holdings Corp. |
Federal-Mogul
Corporation |
Valmont Industries, Inc. |
Genuine Parts
Co. |
Visteon Corporation |
Harley-Davidson,
Inc. |
Worthington Industries, Inc. |
Illinois Tool Works Inc. |
|
Table of Contents
46 |
|
Executive Compensation Process and Practices |
|
Independent Compensation
Consultant |
|
Our Compensation Committee retained Pearl
Meyer as its independent compensation consultant. The Compensation Committee
annually reviews its relationship with the compensation consultant to ensure
continued independence. The review process includes consideration of the factors
impacting independence set forth in New York Stock Exchange rules. The
compensation consultant reports directly to the Compensation Committee and does
not perform any other services for the Company or management.
The compensation consultant regularly
participates in Compensation Committee meetings, and in collaboration with the
Compensation Committee, aids in determining the appropriate compensation
program, design, levels and peer groups for the Company.
Compensation Risk
Management |
|
Each year, the Compensation Committee
oversees a risk assessment of the Companys executive compensation program.
Based on its most recent review, the Compensation Committee concluded that our
compensation program and practices do not create risks that are reasonably
likely to have a material adverse effect on the Company. Our executive
compensation program includes a number of features that mitigate unnecessary risk taking, including a balance of short- and
long-term incentives, with long-term incentives comprising the majority of our
executives compensation; a mix of performance metrics on our short- and
long-term incentive programs; clawback provisions; and stock ownership
guidelines.
STOCK OWNERSHIP
GUIDELINES
In order to promote equity ownership and
align the interests of management and our stockholders, we have established
stock ownership guidelines that outline our expectations for our executives to
hold a significant and sustained long-term personal financial interest in the
Company.
Position |
Stock Ownership
Guideline |
CEO |
Three times average salary plus target bonus for prior three
years (equates to seven times annual base salary) |
CFO and
Presidents |
Two times average salary plus target bonus for prior three
years |
EVP & General Counsel |
One times average salary
plus target bonus for prior three years |
Executives are expected to meet the
guidelines within five years after appointment as an officer, and enough stock
must be secured each year to demonstrate progress toward fulfilling the goal by year five. Our Compensation Committee reviews the
ownership level for our CEO and all other persons covered under this guideline
each year.
SHORT SALES;
PLEDGING
Our Insider Trading and Confidentiality
Policy prohibits our directors and employees from engaging in any transaction
involving a put, call or other option on BorgWarner securities, from selling any
BorgWarner securities he or she does not own
(i.e., selling short) and from pledging any BorgWarner securities as
collateral to secure personal loans or other obligations.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Executive Compensation Process and
Practices |
|
47 |
CLAWBACK
POLICY
The Board adopted a policy setting forth
procedures to recover payment in the event that an executive engages in any
fraud or intentional illegal conduct that materially contributed to the need for
a restatement of the Companys publicly filed financial results. Performance-based compensation received by the
executive during the three-year period preceding the restatement will be subject
to reduction or reimbursement to the Company at the Compensation Committees
discretion.
Deductibility of
Compensation |
|
The Compensation Committee considers
Section 162(m) of the U.S. Internal Revenue Code in making its executive
compensation decisions. Section 162(m) generally limits to $1 million the amount
of non-performance-based compensation paid to the CEO and the three other
highest paid executive officers, other than the CFO, that is tax
deductible.
Our Compensation Committee believes that
stockholder interests are best served by compensation programs that attract,
retain and reward the executive talent necessary for our success. Accordingly, the Compensation Committee has discretion and
flexibility in structuring our compensation programs, and may authorize
compensation that is not fully deductible under Section 162(m) if it believes
such compensation will enable us to better achieve our strategic business goals,
promote the interests of our stockholders and meet compensation
objectives.
Compensation Committee
Report |
|
The Compensation Committee of the Company
has reviewed and discussed the Compensation Discussion and Analysis required by
Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this Proxy
Statement.
THE COMPENSATION COMMITTEE
Jan Carlson |
|
Vicki L. Sato |
|
Thomas T. Stallkamp |
|
|
Chairperson |
|
|
The Compensation Committee Report does not
constitute soliciting material. It is not considered filed by us and shall not
be incorporated by reference into any of our other filings under the Securities
Act or the Exchange Act unless we state otherwise.
Compensation Committee
Interlocks and Insider Participation |
|
During our last completed fiscal year, the
voting members of our Compensation Committee were Jan Carlson, Vicki L. Sato,
Chairperson, and Thomas T. Stallkamp. None of these persons was an officer or
employee of the Company or any of its subsidiaries, or was formerly an officer
of the Company or of any of its subsidiaries. None of these persons has any
relationship requiring disclosure by the Company under Item 404 of Regulation
S-K.
No executive officer of the Company served
as a member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose
executive officers served on the Companys Compensation Committee or the
Companys Board of Directors. No executive officer of the Company served as a
director of another entity, or as a member of the compensation committee (or
other board committee performing equivalent functions or, in the absence of any
such committee, the entire board of directors) of such other entity, one of
whose executive officers served on the Compensation Committee or the Board of
Directors of the Company.
Table of Contents
Executive Compensation
Tables |
|
Summary Compensation
Table |
|
The following table sets forth information
regarding compensation earned by our NEOs during 2016:
Name and Principal Position (a) |
|
Year (b) |
|
|
Salary ($) (c) |
|
|
Bonus ($) (d) |
|
|
Stock Awards(1) ($) (e) |
|
|
Non-Equity Incentive
Plan Compensation(2) ($) (f) |
|
|
Change in Pension
Value and
Non- Qualified Deferred Compensation Earnings ($) (g) |
|
|
|
All
Other Compensation ($) (h) |
|
|
Total ($) (i) |
James R. Verrier |
|
2016 |
|
|
1,245,000 |
|
|
|
|
|
9,316,086 |
|
|
950,000 |
|
|
34,732 |
|
|
|
821,698 |
|
|
12,367,516 |
President and Chief |
|
2015 |
|
|
1,150,000 |
|
|
|
|
|
12,136,267 |
|
|
3,480,000 |
|
|
(21,699 |
) |
|
|
676,064 |
|
|
17,420,632 |
Executive
Officer |
|
2014 |
|
|
967,500 |
|
|
|
|
|
5,872,638 |
|
|
2,600,000 |
|
|
37,175 |
|
|
|
527,917 |
|
|
10,005,230 |
Ronald T. Hundzinski |
|
2016 |
|
|
665,750 |
|
|
|
|
|
2,360,819 |
|
|
1,206,111 |
|
|
|
|
|
|
313,723 |
|
|
4,546,403 |
EVP and |
|
2015 |
|
|
612,250 |
|
|
|
|
|
4,167,731 |
|
|
1,276,000 |
|
|
|
|
|
|
240,477 |
|
|
6,296,458 |
Chief Financial
Officer |
|
2014 |
|
|
526,250 |
|
|
|
|
|
1,526,659 |
|
|
1,016,500 |
|
|
|
|
|
|
199,792 |
|
|
3,269,201 |
Frederic B. Lissalde(3) |
|
2016 |
|
|
606,630 |
|
|
|
|
|
1,531,424 |
|
|
1,041,544 |
|
|
|
|
|
|
277,361 |
|
|
3,456,959 |
Vice President |
|
2015 |
|
|
577,369 |
|
|
|
|
|
2,643,784 |
|
|
978,856 |
|
|
|
|
|
|
400,923 |
|
|
4,600,932 |
and President and |
|
2014 |
|
|
657,188 |
|
|
|
|
|
1,174,725 |
|
|
1,131,350 |
|
|
|
|
|
|
410,293 |
|
|
3,373,556 |
General Manager, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BorgWarner Turbo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Gasparovic |
|
2016 |
|
|
477,250 |
|
|
|
|
|
1,276,226 |
|
|
647,279 |
|
|
|
|
|
|
158,321 |
|
|
2,559,076 |
EVP, Chief Legal Officer & |
|
2015 |
|
|
456,250 |
|
|
|
|
|
1,045,457 |
|
|
690,000 |
|
|
|
|
|
|
151,026 |
|
|
2,342,733 |
Secretary |
|
2014 |
|
|
441,250 |
|
|
|
|
|
822,021 |
|
|
667,500 |
|
|
|
|
|
|
147,767 |
|
|
2,078,538 |
Stefan Demmerle(4) |
|
2016 |
|
|
442,750 |
|
|
|
|
|
1,084,769 |
|
|
649,968 |
|
|
|
|
|
|
152,674 |
|
|
2,330,161 |
Vice President |
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and President and |
|
2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Manager, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BorgWarner |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PowerDrive Systems |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The aggregate values in column
(e) reported for 2016, 2015, and 2014 represent the grant date fair market
value (FMV) of the awards noted in the Grants of Plan-Based Awards
Table. Assuming maximum performance levels are achieved for the
Performance Share Plans, the maximum value of all stock awards granted
would be $16,816,477 for Mr. Verrier, $4,260,063 for Mr. Hundzinski,
$2,764,414 for Mr. Lissalde, $2,304,197 for Mr. Gasparovic, and $1,958,974
for Mr. Demmerle based on FMV at the time of grant. |
(2) |
The values in column (f) reflect
payments made under the MIP. The 2016 plan year payout, paid in February
2017, includes no Carryover Bonus payments as carryover was eliminated for
the Senior Executive Team. The 2015 and 2014 plan year payouts paid in the
following February, do not include any Carryover Bonus payment as there
was no Carryover to be earned from prior plan years. |
(3) |
Compensation reported for Mr.
Lissalde is converted to US Dollars using an exchange rate of 1 Euro =
1.108 USD, which is a periodic average rate for 2016. |
(4) |
Dr. Demmerle was not a NEO in
2014 or 2015, therefore no data is reflected for those
years. |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Executive Compensation Tables |
|
49 |
All Other Compensation Table |
|
The following table details, by category,
the amounts reported above in the All Other Compensation column of the Summary
Compensation Table for each of our NEOs. All of our NEOs exceeded the aggregate
threshold of $10,000 for perquisites and personal benefits. The chart below
indicates the amount in each category for each of our NEOs:
Name (a) |
|
Perquisite Allowance ($) (b) |
|
|
Personal Use
of Leased Vehicle ($) (c) |
|
|
Registrant Contributions to
Defined Contribution Plans(1) ($) (e) |
|
|
Value
of Dividends on Unvested Shares
of Stock (f) |
|
|
French Benefit Allowance ($) (g) |
|
|
Relocation Cost ($) (h) |
|
|
Other ($) (i) |
|
|
Total of All
Other Compensation ($) (j) |
James R. Verrier |
|
50,000 |
|
|
|
|
|
678,608 |
|
|
93,090 |
|
|
|
|
|
|
|
|
|
|
|
821,698 |
Ronald T.
Hundzinski |
|
35,000 |
|
|
|
|
|
246,503 |
|
|
32,220 |
|
|
|
|
|
|
|
|
|
|
|
313,723 |
Frederic B.
Lissalde(2)(3)(4) |
|
14,107 |
|
|
54,953 |
|
|
|
|
|
21,474 |
|
|
166,200 |
|
|
20,627 |
|
|
|
|
|
277,361 |
John J.
Gasparovic |
|
25,000 |
|
|
|
|
|
123,658 |
|
|
9,663 |
|
|
|
|
|
|
|
|
|
|
|
158,321 |
Stefan Demmerle |
|
28,750 |
|
|
|
|
|
107,987 |
|
|
15,937 |
|
|
|
|
|
|
|
|
|
|
|
152,674 |
(1) |
Amounts credited by the Company
on behalf of its Named Executive Officers during 2016 pursuant to the
provisions of the RSP and the Excess Plan. |
(2) |
Mr. Lissalde is a French national
working in Germany and receives a Benefit Allowance to enable him to
maintain coverage in the French Social Benefit System. |
(3) |
The Relocation Cost amount
relates to tax equalization payments, tax preparation support and language
lessons. |
(4) |
Compensation reported for Mr.
Lissalde is converted to US Dollar using an exchange rate of 1 Euro =
1.108 USD, which is a periodic average rate for
2016. |
Table of Contents
50 |
|
Executive Compensation Tables |
|
Grants of Plan-Based Awards |
|
The following table summarizes the grants
of equity and non-equity plan awards to our NEOs in 2016:
Name (a) |
|
Grant Date (b) |
|
Estimated
Possible Payout Under Non-Equity Incentive Plan
Awards(1) |
|
|
Estimated
Future Payout Under Equity Incentive Plan Awards |
|
|
All
Other Stock Awards: Number of Shares
or Stock Units (#) (i) |
|
|
All
Other Option Awards: Number
of Securities Underlying Option (#) (j) |
|
|
Exercise or Base Price
of Option Awards ($/Share) (k) |
|
|
Grant
Date Fair Value of Stock and
Option Awards ($) (l) |
Threshold ($) (c) |
|
|
Target ($) (d) |
|
|
Maximum ($) (e) |
Threshold (#) (f) |
|
|
Target (#) (g) |
|
|
Maximum (#) (h) |
James R. Verrier |
|
|
|
|
945,000 |
|
|
1,890,000 |
|
|
3,780,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2016 |
(2) |
|
|
|
|
|
|
|
|
|
|
49,500 |
|
|
132,000 |
|
|
264,000 |
|
|
|
|
|
|
|
|
|
|
|
3,908,520 |
|
|
2/9/2016 |
(3) |
|
|
|
|
|
|
|
|
|
|
31,173 |
|
|
62,345 |
|
|
124,690 |
|
|
|
|
|
|
|
|
|
|
|
1,846,035 |
|
|
2/9/2016 |
(4) |
|
|
|
|
|
|
|
|
|
|
29,481 |
|
|
58,961 |
|
|
117,922 |
|
|
|
|
|
|
|
|
|
|
|
1,745,835 |
|
|
2/9/2016 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61,948 |
|
|
|
|
|
|
|
|
1,815,696 |
Ronald T. Hundzinski |
|
|
|
|
337,500 |
|
|
675,000 |
|
|
1,350,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2016 |
(2) |
|
|
|
|
|
|
|
|
|
|
12,525 |
|
|
33,400 |
|
|
66,800 |
|
|
|
|
|
|
|
|
|
|
|
988,974 |
|
|
2/9/2016 |
(3) |
|
|
|
|
|
|
|
|
|
|
7,900 |
|
|
15,800 |
|
|
31,600 |
|
|
|
|
|
|
|
|
|
|
|
467,838 |
|
|
2/9/2016 |
(4) |
|
|
|
|
|
|
|
|
|
|
7,471 |
|
|
14,942 |
|
|
29,884 |
|
|
|
|
|
|
|
|
|
|
|
442,433 |
|
|
2/9/2016 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,748 |
|
|
|
|
|
|
|
|
461,574 |
Frederic B.
Lissalde(6) |
|
|
|
|
276,723 |
|
|
553,446 |
|
|
1,106,892 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2016 |
(2) |
|
|
|
|
|
|
|
|
|
|
8,138 |
|
|
21,700 |
|
|
43,400 |
|
|
|
|
|
|
|
|
|
|
|
642,537 |
|
|
2/9/2016 |
(3) |
|
|
|
|
|
|
|
|
|
|
5,125 |
|
|
10,249 |
|
|
20,498 |
|
|
|
|
|
|
|
|
|
|
|
303,473 |
|
|
2/9/2016 |
(4) |
|
|
|
|
|
|
|
|
|
|
4,846 |
|
|
9,692 |
|
|
19,384 |
|
|
|
|
|
|
|
|
|
|
|
286,980 |
|
|
2/9/2016 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,182 |
|
|
|
|
|
|
|
|
298,434 |
John J. Gasparovic |
|
|
|
|
181,125 |
|
|
362,250 |
|
|
724,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2016 |
(2) |
|
|
|
|
|
|
|
|
|
|
6,788 |
|
|
18,100 |
|
|
36,200 |
|
|
|
|
|
|
|
|
|
|
|
535,941 |
|
|
2/9/2016 |
(3) |
|
|
|
|
|
|
|
|
|
|
4,270 |
|
|
8,540 |
|
|
17,080 |
|
|
|
|
|
|
|
|
|
|
|
252,869 |
|
|
2/9/2016 |
(4) |
|
|
|
|
|
|
|
|
|
|
4,039 |
|
|
8,077 |
|
|
16,154 |
|
|
|
|
|
|
|
|
|
|
|
239,160 |
|
|
2/9/2016 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,470 |
|
|
|
|
|
|
|
|
248,256 |
Stefan Demmerle |
|
|
|
|
166,031 |
|
|
332,063 |
|
|
664,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2016 |
(2) |
|
|
|
|
|
|
|
|
|
|
5,775 |
|
|
15,400 |
|
|
30,800 |
|
|
|
|
|
|
|
|
|
|
|
455,994 |
|
|
2/9/2016 |
(3) |
|
|
|
|
|
|
|
|
|
|
3,630 |
|
|
7,259 |
|
|
14,518 |
|
|
|
|
|
|
|
|
|
|
|
214,939 |
|
|
2/9/2016 |
(4) |
|
|
|
|
|
|
|
|
|
|
3,433 |
|
|
6,865 |
|
|
13,730 |
|
|
|
|
|
|
|
|
|
|
|
203,273 |
|
|
2/9/2016 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,184 |
|
|
|
|
|
|
|
|
210,563 |
(1) |
2016 bonus opportunity under the
MIP. Estimated possible payout levels do not reflect carryover
opportunities for the prior years. |
(2) |
2016 Performance Share Grant:
Value of grant = number of target shares times the closing stock price on
grant date of $29.61. |
(3) |
Additional 2016-2017 Relative
Revenue Performance Share Grant granted same day as approved by the
Compensation Committee of the Board of Directors. FMV at grant date =
number of restricted shares times the closing stock price on February 9,
2016 of $29.61. |
(4) |
Additional 2016 Relative Revenue
Performance Share Grant granted same day as approved by the Compensation
Committee of the Board of Directors. FMV at grant date = number of
restricted shares times the closing stock price on February 9, 2016 of
$29.61. |
(5) |
2016 Restricted Stock Grant:
Granted same day as approved by the Compensation Committee of the Board of
Directors. The shares will vest 50% on the second anniversary of the grant
date and 100% on the third anniversary of the grant date. FMV at grant
date = number of restricted shares times the average of the high and low
stock price on February 9, 2016 of $29.31 in accordance with ASC Topic
718. |
(6) |
Mr. Lissaldes Non-Equity
Incentive Plan threshold, target and maximum payout values are converted
to U.S. Dollars using an exchange rate of 1 Euro = 1.108 USD, which is a
periodic average rate for 2016. |
BorgWarner
Inc. 2017 Proxy
Statement |
Table of Contents
|
Executive Compensation Tables |
|
51 |
The equity awards reflected in the Grants
of Plan-Based Awards table are granted under the 2014 Plan. Further details
regarding our incentive plans can be found in our Compensation Discussion and
Analysis on pages 38-43.
Outstanding Equity Awards at Fiscal Year
End |
|
The following table summarizes all equity
awards to our NEOs that remain either unexercised and/or unvested as of December
31, 2016:
Name (a) |
|
Option
Awards |
|
|
Stock
Awards |
|
Number
of Securities Underlying Unexercised Options Exercisable (#) (b) |
|
|
Number
of Securities Underlying Unexercised Options Unexercisable (#) (c) |
|
|
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised and Unearned Options (#) (d) |
|
|
Option Exercise Price ($) (e) |
|
|
Option Expiration Date (f) |
|
|
Number of Shares
or Units of Stock That Have
Not Vested(1) (#) (g) |
|
|
Market Value
of Shares or Units of Stock That Have
Not Vested(1) ($) (h) |
|
|
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other Rights That Have
Not Vested(2) (#) (i) |
|
|
Equity Incentive Plan Awards: Market or Payout
of Unearned Shares, Units or Other Rights That Have
Not Vested(2) ($) (j) |
James R. Verrier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160,250 |
|
|
6,320,260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168,695 |
|
|
6,653,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald T. Hundzinski |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,750 |
|
|
2,119,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,400 |
|
|
1,672,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frederic B. Lissalde |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,251 |
|
|
1,390,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,012 |
|
|
1,104,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Gasparovic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,634 |
|
|
656,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,003 |
|
|
907,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan Demmerle |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,065 |
|
|
1,028,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,734 |
|
|
778,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The values in column
(g) represent the number of restricted shares of stock and/or stock units
granted in 2014, 2015, and 2016 plus reinvested dividends and/or dividend
equivalents. The dollar value in column (h) is calculated using the
closing stock price on December 31, 2016 of $39.44 per share. |
(2) |
The values of columns (i) and (j)
are comprised of performance share grants made under the BorgWarner Inc.
2014 Stock Incentive Plan, issued for the performance periods of
2015-2017, 2016-2017, and 2016-2018. Column (i) represents the lowest
potential payout for all outstanding unearned 2015-2017 and 2016- 2018
relative TSR performance shares and the target potential payout for all
outstanding unearned 2016-2017 and 2016-2018 relative revenue growth
performance shares that would be paid out at the end of each performance
period. The payout level of the 2015-2017 and 2016-2018 relative TSR
performance shares is shown at 25% of the target payout level because
actual performance over the most recent period was at 0% of the target
level. The payout level of the 2016-2017 and 2016-2018 relative revenue
growth performance shares is shown at a 100% of target payout level
because actual performance over the most recent period was at 82.5% of the
target level. Column (j) represents the number of performance shares in
column (i) times the closing stock price of $39.44 on December 31, 2016.
Actual future payouts will depend on several factors, including (i) the
number of performance shares that are earned, as determined after the end
of the performance period based on the level at which the applicable
performance goals have been achieved, as described on pages 41-42; and
(ii) the FMV of stock, as defined in the 2014
Plan. |
Table of Contents
52 |
|
Executive Compensation Tables |
|
Regarding adjustments to shares, in the
event of any merger, reorganization, consolidation, recapitalization, stock
dividend, stock split, extraordinary distribution with respect to the stock or
other change in corporate structure affecting the stock, our Compensation
Committee or our Board of Directors shall make
such substitution or adjustments in the aggregate number, kind and option price
of shares or adjustments in the consideration receivable upon exercise as it may
be necessary to avoid dilution.
Option Exercises and Stock Vested |
|
The following table summarizes all option
exercises and stock vestings by our NEOs during 2016:
Name
(a) |
|
Option
Awards |
|
|
Stock
Awards |
|
Number of
Shares Acquired on Exercise (#) (b) |
|
|
Value Realized on
Exercise ($) (c) |
|
|
Number of
Shares Acquired on
Vesting(1) (#) (d) |
|
|
Value Realized on
Vesting(2) ($) (e) |
James R. Verrier |
|
|
|
|
|
|
|
122,544 |
|
|
4,157,645 |
Ronald T.
Hundzinski |
|
28,000 |
|
|
509,704 |
|
|
37,995 |
|
|
1,310,897 |
Frederic B.
Lissalde |
|
|
|
|
|
|
|
21,844 |
|
|
783,354 |
John J.
Gasparovic |
|
|
|
|
|
|
|
12,600 |
|
|
444,731 |
Stefan Demmerle |
|
|
|
|
|
|
|
16,239 |
|
|
582,479 |
(1) |
Number of shares disclosed in column (d) represents
the total number of relative revenue performance shares earned for the
2016 performance period and paid in 2017, the total number of shares of
restricted stock granted in 2013 that lapsed in 2016, the total number of
shares of restricted stock granted in 2014 that lapsed in 2016, and the
total number of shares of restricted stock granted in 2015 that lapsed in
2016. |
(2) |
Amount in column (e) is equal to the number of relative
revenue performance shares vested multiplied by $39.44, which is the
closing stock price at the end of performance period on December 31, 2016,
the FMV of the shares of restricted stock granted in 2013 that lapsed and
were paid in 2016, the FMV of the shares of restricted stock granted in
2014 that lapsed and were paid in 2016, and the FMV of the shares of
restricted stock granted in 2015 that lapsed and were paid in
2016. |
BorgWarner
Inc. 2017 Proxy
Statement |
Table of Contents
|
Executive Compensation Tables |
|
53 |
As previously stated in the Compensation
Discussion and Analysis, the granting of performance shares is designed to
provide competitive payouts at the end of a three-year period relative to how
well the Company performs against its Peer Group Companies in TSR. At the end of
the 2014 to 2016 performance period, the
Companys TSR was below the 25th percentile relative to the Peer Group
Companies TSR; therefore, no performance shares were earned for this period
(see page 42 for listing of Peer Group Companies).
Name (a) |
|
Plan
Name (b) |
|
|
Number of Years Credited
Service (#) (c) |
|
|
Present Value of Accumulated
Benefit(1) ($) (d) |
|
|
Payment During Last Fiscal
Year ($) (e) |
James R. Verrier |
|
The
BorgWarner Pension Plan |
|
|
6.4 |
|
|
214,003 |
|
|
|
Ronald T. Hundzinski |
|
|
|
|
|
|
|
|
|
|
|
Frederic B. Lissalde |
|
|
|
|
|
|
|
|
|
|
|
John J. Gasparovic |
|
|
|
|
|
|
|
|
|
|
|
Stefan Demmerle |
|
|
|
|
|
|
|
|
|
|
|
(1) |
Converted from U.K. Pound to U.S. Dollar using an
exchange rate of 1 Pound= 1.2345 US Dollar, which is the rate as of
December 31, 2016. |
Our U.S.-based NEOs are eligible to
participate in the RSP. This plan, which is available to all U.S. salaried and
hourly employees, allows our NEOs to take advantage of current tax-advantaged
opportunities for accumulating future retirement income. The RSP is comprised of
two primary components: a Company Retirement Account and a Savings Account with
a match feature. In the Company Retirement Account, the Company makes a
contribution to the employees account each pay period based on years of service
and eligible pay. For the majority of employees, including our NEOs, this ranges
from 4% to 6% of compensation up to the Social Security wage base and from 8% to
11.5% of compensation above the Social Security wage base. In the Savings
Account, participants may make contributions to the plan of 1% to 70% of their
eligible earnings on a before-tax and/or after-tax basis (up to the statutorily
prescribed annual limit on pre-tax contributions under the IRC). The Company
matches 100% of the first 3% of the employees pre-tax contributions.
Participant contributions are held in trust as required by law. All employee
contributions are 100% vested when contributed. The first 3% of compensation
contributed to the Company Retirement Account vests immediately and any other
employer contributions vest 100% after three years of service.
Mr. Verrier participated in the BorgWarner
Pension Plan while working for the Company in the United Kingdom from 1989 to
1996. The plan, which was frozen to additional benefit accruals as of April 1,
2007, was a contributory defined benefit pension plan with a normal retirement
age of 65. Participants earned 1/60th of the average of their highest three
consecutive years of gross earnings out of their last ten years of gross
earnings for each year of credited service under the plan. Deferred pensions are
increased annually for inflation up to a maximum of 5% per year. A similar
inflation adjustment is applied once pension payments begin.
The present value of Accumulated Pension
Benefits as of December 31, 2016 for Mr. Verrier is calculated using the
following assumptions:
■ |
Mortality: Based on UK Self
Administered Pension Scheme table, with allowance for future mortality
improvements |
■ |
Discount Rate:
2.67% |
■ |
Assumed Retirement Age:
60 |
■ |
Assumed Inflation:
3.75% |
Table of Contents
54 |
|
Executive Compensation Tables |
|
Non-Qualified Deferred Compensation |
|
The following table shows the
non-qualified deferred compensation activity for our NEOs during
2016.
Name (a) |
|
|
|
|
Executive Contributions in Last
FY ($) (b) |
|
|
Registrant Contributions in Last
FY ($) (c) |
|
|
Aggregate Earnings
in Last FY ($) (d) |
|
|
Aggregate Withdrawals/ Distributions ($) (e) |
|
|
Aggregate Balance
at Last FYE ($) (f) |
James R. Verrier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
648,108 |
|
|
189,091 |
|
|
|
|
|
2,634,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald T. Hundzinski |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
217,997 |
|
|
10,233 |
|
|
|
|
|
825,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frederic B. Lissalde |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. Gasparovic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
99,247 |
|
|
72,189 |
|
|
|
|
|
985,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan Demmerle |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
|
|
|
|
83,077 |
|
|
13,850 |
|
|
|
|
|
243,655 |
The Excess Plan is an unfunded,
non-qualified retirement plan, which keeps certain highly compensated U.S.
employees whole with regard to Company contributions that are otherwise limited
under the RSP by IRC provisions. Participation is automatic once these limits
are reached in a plan year. The contributions vest in the same manner as under
the RSP. Distributions are made following a participants separation from
service, with distributions attributable to amounts earned or vested before
January 1, 2005 distributed within 30 days of participants separation from
service and amounts earned or vested after
December 31, 2004 distributed in the seventh month following the month in which
the participants separation from service occurs. No in-service withdrawals or
loans are available.
Excess Plan balances are invested in the
same investment choices that are selected by the participants under the RSP. As
these plans are unfunded, no money is actually invested. Rather, a notional
account is maintained which mirrors the returns of these investments.
BorgWarner
Inc. 2017 Proxy
Statement |
Table of Contents
|
Executive Compensation Tables |
|
55 |
Potential Payments Upon
Termination or Change of Control |
|
The following table shows the
post-employment payments that would be paid to each of our NEOs under certain
COC related events. The calculations assume each NEOs employment is terminated
on December 31, 2016. For purposes of the calculations, the closing stock price
on the last business day of 2016 ($39.44) was used to determine the vested
market value of restricted stock.
|
Payment
Triggering Events in Connection with a COC |
|
|
Involuntary
Termination |
Voluntary
Termination |
Name (a) |
COC Only ($) (b) |
With Cause ($) (c) |
Without Cause(1)
($) (d) |
With Good Reason(1)
($) (e) |
Without
Good Reason(2)
($) (f) |
James R. Verrier |
|
|
24,673,738 |
24,673,738 |
11,793,408 |
Ronald T.
Hundzinski |
|
|
9,011,302 |
9,011,302 |
3,472,653 |
Frederic B.
Lissalde |
|
|
7,758,378 |
7,758,378 |
2,319,381 |
John J. Gasparovic
|
|
|
4,685,027 |
4,685,027 |
1,393,704 |
Stefan Demmerle |
|
|
4,796,451 |
4,796,451 |
1,673,275
|
(1) |
For all Named
Executive Officers, includes cash severance payment based on three times
the average of base plus bonus (two times for Mr. Gasparovic), value of
unvested restricted stock, prorated 2015-2017, 2016-2017, and 2016-2018
performance share payments, retirement benefit based on three times (two
times for Mr. Gasparovic) the 2016 Company contributions to the RSP, value
of welfare benefits (i.e. health care, life insurance, and disability
insurance coverage) for three years (two years for Mr. Gasparovic),
outplacement services and excise tax. |
(2) |
Includes the value of
unvested restricted stock, prorated 2015-2017, 2016-2017, and 2016-2018
performance share payments. |
Table of Contents
56 |
|
Executive Compensation Tables |
|
CHANGE OF CONTROL EMPLOYMENT
AGREEMENTS
New COC Agreements were implemented
beginning in 2009 for new and future officers of the Company. The new COC
Agreements eliminate excise tax gross-up provisions, allow a portion of the
benefit to be attributable to a non-compete agreement in order to reduce the
potential for the excise tax, and allow executives to forego a portion of
benefits if the benefit triggers the excise tax.
Below is a general description of the
material terms and conditions of our existing COC Agreements for U.S.-based
executives.
In the event that a NEO terminates
employment for Good Reason or the Company terminates a NEOs employment with the
Company without Cause within two to three years of a COC or in anticipation of a
COC, the NEO is entitled to the following:
■ |
a lump sum cash amount equal to two
to three times his or her annual base salary and average annual bonus for
the most recent three years; |
■ |
a lump sum cash amount equal to two
to three times the Companys retirement contributions that would have been
made on his or her behalf in the first year after termination of
employment; |
■ |
for Executives who entered into COC
Agreements prior to 2009, a tax gross-up for any excise taxes imposed
pursuant to IRC Section 4999 of the IRC so that the NEO will be in the
same after tax position he or she would have been in had no excise tax
been imposed; |
■ |
Executives who entered into COC
Agreements in or after 2009 may elect to forego a portion of COC payments
which could otherwise trigger IRC Section 4999 excise taxes as the tax
will not be grossed-up under the COC Agreement; |
■ |
continuation of medical, dental and
life insurance benefits for two to three years; and |
■ |
outplacement services at a cost not
to exceed $40,000. |
Change of Control generally means (a)
the acquisition by any party of beneficial ownership of 20% or more of either
(i) the then outstanding shares of our common stock or (ii) the combined voting
power of our then outstanding voting securities entitled to vote generally in
the election of our directors, (b) a change in the majority of our Board of
Directors, (c) a major corporate transaction, such as a merger or sale of
substantially all of our assets, which results in a change in the majority of
our Board of Directors or a majority of stockholders or (d) a complete
liquidation or dissolution of the Company.
Cause generally means the willful and
continued failure of the executive to perform substantially the executives
duties or the willful engaging by the executive in illegal conduct or gross
misconduct materially injurious to us.
Good Reason generally means the
diminution of responsibilities, authority or duties, our failure to comply with
compensation or benefit provisions, transfer to a new work location more than 35
miles from the executives previous work location, a purported termination of
the COC Agreement by us other than in accordance with the COC Agreement, or our
failure to require any successor to us to comply with the COC
Agreement.
TERMINATIONS NOT RELATED TO A COC
In the event of an involuntary or
voluntary termination with or without cause not in connection with a COC, no
additional payments are made to NEOs.
In the event of termination of employment
by retirement not in connection with a COC, no additional payments are made to
NEOs.
The stated amounts do not include life or
disability insurance benefits or vested benefits under the qualified RSP or
under the TIP, as these benefit plans are available to all U.S.-based salaried
employees. The provisions of each plan would determine the timing and method of
payments made under the above scenarios.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Executive Compensation Tables |
|
57 |
The following table details the
compensation earned by each non-employee director who served on the Board of
Directors in 2016. Directors who are employees of BorgWarner are not compensated
for their service on the Board:
Name (a) |
Fees Earned or Paid in
Cash ($) (b) |
Stock Awards(1) ($) (c) |
Option Awards ($) (d) |
Non-Equity Incentive
Plan Compensation ($) (e) |
Changes in Pension Value
and Nonqualified Deferred Compensation Earnings ($) (f) |
All Other Compensation (g) |
Total ($) (h) |
Aggregate Number
of Outstanding Stock
and Option Awards(2) (#) (i) |
Jan Carlson |
107,000 |
123,001 |
|
|
|
|
230,001 |
3,166 |
Dennis C. Cuneo |
99,500 |
123,001 |
|
|
|
|
222,501 |
3,166 |
Jere A.
Drummond(3) |
48,667 |
|
|
|
|
|
48,667 |
|
Michael S.
Hanley(4) |
16,583 |
|
|
|
|
|
16,583 |
|
John R. McKernan |
99,500 |
123,001 |
|
|
|
|
222,501 |
3,166 |
Alexis P. Michas |
265,000 |
123,001 |
|
|
|
|
388,001 |
3,166 |
Ernest J. Novak,
Jr. |
121,500 |
123,001 |
|
|
|
|
244,501 |
3,166 |
Vicki L. Sato |
113,000 |
123,001 |
|
|
|
|
236,001 |
3,166 |
Richard O.
Schaum |
105,500 |
123,001 |
|
|
|
|
228,501 |
3,166 |
Thomas T. Stallkamp |
108,500 |
123,001 |
|
|
|
|
231,501 |
3,166 |
(1) |
The values in column
(c) reported for 2016 represent the grant date fair market value of the
restricted stock award granted on April 27, 2016. (FMV at grant date =
number of restricted shares times the average of the high and low stock
price on April 27, 2016 of $39.285) |
(2) |
Aggregate number of
outstanding shares of restricted stock and outstanding vested and unvested
stock options at fiscal year-end only, including dividends. |
(3) |
Jere A. Drummond
completed his service on the Board of Directors at the April 27, 2016
Annual Meeting of Stockholders. |
(4) |
Michael S. Hanley was
named to the Board of Directors on November 8,
2016. |
Table of Contents
58 |
|
Executive Compensation Tables |
|
Annual compensation for our non-employee
directors for 2016 was comprised of the following components: annual cash
retainer, and equity compensation consisting of restricted stock for board
service, and retainers for committee service. Our non-employee directors were
not granted any Stock Option Awards and did not receive any Non-Equity Incentive
Plan Compensation for 2016.
Effective January 1, 2016 non-employee
director compensation was increased. In 2016 non-employee directors annual cash
retainer for board service became $92,000 and annual equity compensation became
$123,000 worth of restricted stock. Committee members received annual retainers
as follows for each committee on which they served: $6,000 for the Corporate
Governance Committee; $9,000 for the Compensation Committee and $7,500 for the
Audit Committee. Audit Committee members serving during most of 2016 were paid $9,000 each
in 2017, and the Audit Committee Chair was paid $15,000 in 2017, for the extra
time they devoted to Audit Committee work in 2016. Chairs of the committee received the
following additional annual retainers for their service to the committees:
$6,000 for Corporate Governance, $9,000 for
Compensation and $17,500 for Audit in view of their commitment of additional
time to their oversight of the committees. The Non-Executive Chairs
compensation was $388,000 consisting of an annual cash retainer of $265,000 and
an equity retainer of $123,000 to be granted in restricted stock. Board and
standing committee meeting attendance fees are no longer paid. Non-employee
directors are paid up to $1,000 per day for their attendance requested by the
Company at meetings or events not associated with board or Committee meetings.
Additional compensation arrangements may be made if special committees are
convened, though none are planned at this time.
All of our directors met the expected
stock ownership guidelines in 2016. Effective January 1, 2016 the stock
ownership expectation of non-employee directors was raised to an amount
equivalent to five times the amount of the annual cash retainer for board
service within five years of January 1, 2016 or within five years of joining the
Board of Directors. All of our directors met the stock ownership guidelines in
2016 or were appropriately progressing toward meeting them.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
Proposal 3 - Advisory Vote on the Frequency of Advisory Votes on the
Companys Executive Compensation Program |
|
In accordance with the Dodd-Frank Act, the
Company seeks your input with regard to the frequency of future stockholder
advisory votes on executive compensation programs. In particular, we are asking
whether the advisory vote should occur every three years, every two years
or every year. The Company asks that you support a frequency period of every one
year (an annual vote) for future non-binding stockholder votes on compensation
of our Named Executive Officers.
|
|
|
RECOMMENDATION |
|
Your Board of Directors recommends a
vote FOR the frequency of every one year for
the advisory vote on the Companys Executive Compensation
Program. |
|
|
|
|
Table of Contents
Proposal 4 - Ratification of Selection of Independent Registered Public
Accounting Firm |
|
PricewaterhouseCoopers LLP, its member
firms, and their respective affiliates (collectively, PwC) an independent
registered public accounting firm, performed an audit of our consolidated
financial statements for the fiscal year ended December 31, 2016 and the
effectiveness of our internal control over financial reporting as of December
31, 2016. The Audit Committee has selected PwC to serve as our independent
registered public accounting firm for the 2017 fiscal year, and the Committee is
presenting this selection to stockholders for ratification. Representatives of
PwC will be present at the Annual Meeting to respond to stockholders questions,
and will have an opportunity, if they desire, to make a statement.
If the stockholders do not ratify the
engagement of PwC at the Annual Meeting, the adverse vote will be considered a
direction to the Audit Committee to consider other auditors for next year. However, because of the
difficulty in making any substitution of auditors so long after the beginning of
the current year, the selection for 2017 will stand unless the Audit Committee
finds other good reason for making a change.
To ratify the selection of PwC as our
independent registered public accounting firm for the fiscal year ending
December 31, 2017, the votes cast for this proposal must exceed the votes cast
against it. For purposes of determining the vote regarding this proposal,
abstentions and broker non-votes (if any) do not constitute a vote for or
against the proposal and will be disregarded in the calculation of votes
cast. Unless you specify otherwise in your proxy, the persons you have
appointed will vote your shares FOR ratification of the selection of PwC as
our independent registered public accounting firm for the fiscal year ending
December 31, 2017.
The aggregate fees billed to us for the
years ended December 31, 2015 and 2016 by PwC for professional services were as
follows:
|
2016 |
2015 |
Audit fees |
$10,870,543 |
$9,416,378 |
Audit-related
fees(1) |
$54,000 |
$ |
Tax
fees(2) |
$888,719 |
$2,089,362 |
All other fees |
|
|
|
$11,813,262 |
$11,505,740 |
(1) |
Includes audits of financial
statements of employee benefit plans and consultations related to
interpretations of accounting guidance. |
(2) |
Includes fees connected with tax
compliance, tax planning and expatriate services. The expatriate services
were $511,670 in 2016. |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
Your Audit Committee has adopted
procedures for pre-approving all audit and audit-related services provided by
the independent registered public accounting firm, including the fees and terms
of such services. These procedures include reviewing detailed back-up
documentation for audit and permitted audit-related services. The documentation
includes a description of, and a budgeted amount for, particular categories of
audit-related and tax services that are recurring in nature and therefore
anticipated at the time that the budget is submitted. Audit Committee approval
is required to exceed the pre-approved amount for a particular category of audit
services, audit-related services or tax-services, and to engage the independent
registered public accounting firm for any non-audit services not included in
those pre-approved amounts. For these types of pre-approval, the Audit Committee
considers whether such services are consistent with the rules on auditor independence promulgated by the SEC and the PCAOB. The
Audit Committee also considers whether the independent registered public
accounting firm is best positioned to provide the most effective and efficient
service, based on such reasons as the auditors familiarity with the Companys
business, people, culture, accounting systems, risk profile, and whether the
services enhance the Companys ability to manage or control risks and improve
audit quality. The Audit Committee may form, and delegate pre-approval authority
to, subcommittees consisting of one or more members of the Audit Committee, and
such subcommittees must report any pre-approval decisions to the Audit Committee
at its next scheduled meeting. All of the services provided by the independent
registered public accounting firm were pre-approved by your Audit
Committee.
|
|
|
RECOMMENDATION |
|
Your Board of Directors
recommends a vote FOR the ratification of PwC as the Independent
Registered Public Accounting Firm. |
|
|
|
|
Table of Contents
Report of the
BorgWarner Inc.
Management of your Company is responsible
for the preparation, presentation and integrity of your Companys consolidated
financial statements and for the effectiveness of internal control over
financial reporting. Management and the Companys internal auditing department
are responsible for maintaining its accounting and financial reporting
principles and internal controls and procedures designed to maintain compliance
with accounting standards and applicable laws and regulations. PwC was the
independent registered public accounting firm for the Company in 2016 and was
responsible for performing independent audits of your Companys consolidated
financial statements and of the design and effectiveness of internal control
over financial reporting, and expressing an opinion on (1) the conformity of the
financial statements with accounting principles, generally accepted in the
United States of America (GAAP) and (2) the effectiveness of internal control
over financial reporting based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Audit Committee is directly responsible
for the selection, appointment, compensation, retention, and oversight of the
independent registered public accounting firm. In conjunction with the mandated
rotation of the independent registered public accounting firms lead engagement
partner, the Audit Committee and its chairperson are involved in the selection
of PwCs new lead engagement partner.
In the performance of its oversight
function, the Audit Committee has reviewed and discussed with management and PwC
the audited consolidated financial statements for the year ended December 31,
2016. The Audit Committee also has discussed with PwC the matters required to be
discussed by the Public Company Accounting Oversight Board (PCAOB) Auditing
Standard No. 16 Communications with Audit Committees. The Audit Committee
received from PwC the written disclosures and the letter required by applicable
requirements of the PCAOB regarding the
independent registered accountants communications with the Audit Committee
concerning independence, and has discussed with PwC their independence. The
Audit Committee has concluded that PwCs provision of audit and non-audit
services to the Company is compatible with their independence.
The Audit Committee discussed with PwC the
overall scope and plans for their audit. The Audit Committee met with PwC, with
and without management present, to discuss the results of their audits, the
evaluations of the Companys internal controls, and the overall quality of the
Companys financial reporting. In addition, the Audit Committee provided
guidance and oversight to the internal audit function, including the audit plan,
and results of internal audit activity. The Vice President of Internal Audit has
direct access to the Audit Committee to discuss any matters desired, and the
Vice President of Internal Audit presented an update of internal audit activity
at each regularly scheduled Audit Committee meeting.
The members of the Audit Committee are not
full-time employees of your Company and are not performing the functions of
auditors or accountants. It is not the duty or responsibility of the Audit
Committee or its members to conduct field work or other types of auditing or
accounting reviews or procedures or to set auditor independence standards.
Members of the Audit Committee necessarily rely on the information provided to
them by management and the independent registered public accounting firm.
Accordingly, the Audit Committees considerations and discussions referred to
above do not assure that the audit of the Companys financial statements has
been carried out in accordance with generally accepted auditing standards, that
the financial statements are presented in accordance with GAAP, or that the
Companys independent registered public accounting firm is
independent.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Report of the Borgwarner Inc. Audit
Committee |
|
63 |
Based upon the reports and discussions
described in this report, and subject to the limitations on the role and
responsibilities of the Audit Committee that are described above and in the
Audit Committees charter, the Audit Committee recommended to the Board of
Directors that the audited consolidated financial statements of the Company be
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2016 for filing with the SEC. PwC has
been retained as the Companys independent registered public accounting firm
continuously since 2009. The members of the Audit Committee and the board
recommend the continued retention of PwC to serve as the Companys independent
registered public accounting firm for 2017.
|
BORGWARNER INC. AUDIT
COMMITTEE |
|
|
|
Ernest J. Novak, Jr.
Chairman |
|
Dennis C. Cuneo |
John R. McKernan, Jr. |
Thomas T. Stallkamp |
Michael S. Hanley |
|
|
|
(as of November 8,
2016) |
The Audit Committee Report does not
constitute soliciting material. It is not considered filed by the Company and
shall not be incorporated by reference into any of its other filings under the
Securities Act or the Exchange Act unless we state otherwise.
Table of Contents
Security Ownership
of
Certain
Beneficial Owners and
Management |
|
The following table sets forth, as of
February 15, 2017, certain information regarding beneficial ownership of common
stock by those persons and entities that are known to the Company as
beneficially owning more than five percent of the Companys common
stock.
Name and Address of Beneficial Owner |
Number of Shares |
Percent of
Class |
The Vanguard Group |
19,546,044(a) |
9.17% |
100 Vanguard Blvd. |
|
|
Malvern, PA
19355 |
|
|
Capital Research Global Investors |
15,638,259(b) |
7.3% |
333 South Hope Street |
|
|
Los Angeles, CA
90071 |
|
|
BlackRock, Inc. |
12,478,872(c) |
5.9% |
55 East 52nd Street |
|
|
New York, NY
10022 |
|
|
GIC Private Limited |
11,261,469(d) |
5.29% |
168, Robinson Road |
|
|
#37-01, Capital Tower |
|
|
Singapore 068912 |
|
|
a. |
Pursuant to a Schedule 13G/A
dated February 10, 2017 on behalf of The Vanguard Group indicating that it
had sole voting power for 321,677 shares, sole dispositive power for
19,184,500 shares, shared dispositive power for 361,544 shares, and shared
voting power for 41,005 shares. |
b. |
Pursuant to a Schedule 13G/A
dated February 13, 2017 on behalf of Capital Research Global Investors
indicating that it had sole voting power for 15,638,259 shares and sole
dispositive power for 15,638,259 shares. |
c. |
Pursuant to a Schedule 13G/A
dated January 19, 2017 on behalf of BlackRock, Inc., indicating that it
had sole voting power for 10,577,688 shares and sole dispositive power for
12,474,872 shares. |
d. |
Pursuant to a Schedule 13G dated
February 3, 2017 on behalf of GIC Private Limited indicating that it had
sole voting and sole dispositive power for 6,837,912 shares and shared
voting and shared dispositive power for 4,423,557
shares. |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
|
Security Ownership of Certain
Beneficial Owners and Management |
|
65 |
The following table sets forth, as of
March 1, 2017, certain information regarding the beneficial ownership of common
stock by each person who was a director of the Company at December 31, 2016,
each nominee for election as a director, each
executive officer named in the Summary Compensation Table, and the directors and
executive officers of the Company as a group.
Name of Beneficial Owner(a) |
Amount and Nature of
Stock Ownership(b) |
Percent
of Class |
James R. Verrier |
370,165 |
* |
Ronald T.
Hundzinski |
155,924 |
* |
Stefan Demmerle |
52,852 |
* |
John J.
Gasparovic |
102,345 |
* |
Frederic B.
Lissalde |
84,849 |
* |
Jan Carlson |
12,715 |
* |
Dennis C.
Cuneo(c) |
21,456 |
* |
Michael S.
Hanley |
|
* |
Roger A. Krone |
|
* |
John R. McKernan,
Jr. |
23,236 |
* |
Alexis P. Michas |
82,827 |
* |
Ernest J. Novak,
Jr. |
46,448 |
* |
Vicki L. Sato |
6,964 |
* |
Richard O.
Schaum |
47,344 |
* |
Thomas T.
Stallkamp(d) |
46,556 |
* |
All directors and executive officers of the Company (22
persons) |
1,398,024 |
* |
* |
Represents less than one percent. |
(a) |
For
purposes of the above table, the address for each named person is 3850
Hamlin Road, Auburn Hills, Michigan 48326. |
(b) |
Includes all shares with respect to which each officer or
director directly, or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares the power to vote
or to direct voting of such shares or to dispose or to direct the
disposition of such shares. |
(c) |
Includes 10,000 shares held by The DCC Trust. |
(d) |
Includes 30,984 shares held by a spousal
lifetime access trust, for which Mr. Stallkamps wife is
trustee. |
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange
Act of 1934 requires the Companys executive officers, directors and persons who
beneficially own more than 10% of a registered class of the Companys equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of the Companys common stock. Such officers, directors and
persons are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms that they file with the SEC. Based on information provided to the Company by each director and
executive officer, the Company believes all such reports required to be filed in
2016 were timely.
CODE OF
ETHICS
The Company has long maintained a Code of
Ethical Conduct, updated from time to time, which is applicable to all
directors, officers and employees of the Company. In addition, the Company has
adopted a Code of Ethics for CEO and Senior Financial Officers which applies to the Companys CEO, CFO, Treasurer and
Controller. Each of these codes is posted on the Companys website at www.borgwarner.com.
Table of Contents
66 |
|
Security Ownership of Certain Beneficial Owners and
Management |
|
RISK
OVERSIGHT
Our Board of Directors regularly and
continually receives information intended to apprise the board of the
strategic, operational, commercial, financial, legal, and compliance risks the
Company faces. Oversight of risk is an evolving process in which management
assesses the degree to which risk management is integrated and continually seeks
opportunities to further engrain enterprise risk management into business
processes throughout the organization. The board actively encourages management
to continue to drive this evolution. In 2016, the Board of Directors endorsed
the Companys continued enhancement of its enterprise risk management governance
infrastructure, processes, integration, communications and
sustainability.
While the Board of Directors has
responsibility for oversight of the Companys risk management practices, the
Audit, Compensation and Corporate Governance Committees of the board contribute
to the risk management oversight function. In particular, the Audit Committee
focuses on financial and compliance risk, including internal controls and
receives risk assessment and management reports from the Companys internal
Enterprise Risk Management Committee and from the Companys internal audit
function. The members of the Enterprise Risk Management Committee (the Companys
Controller, Treasurer, Vice President of Internal Audit, Vice President of
Strategic Risk Management, Director of Strategic Risk Management, Vice President and Chief
Compliance Officer, Vice President and Chief Information Officer and business
operations leaders) have direct access to the Audit, Compensation and Corporate
Governance Committees and the Board of Directors. The Audit Committee receives,
reviews and discusses regular reports from them concerning risk identification
and assessment, risk management policies and practices and mitigation
initiatives, to assure that the risk management processes designed and
implemented by the Company are adapted to the Companys strategy and are
functioning as expected. In addition, as part of its compensation philosophy,
the Compensation Committee strives to adopt compensation incentives that
encourage appropriate risk-taking behavior that is consistent with the Companys
long term business strategy and objectives. The Corporate Governance Committee
oversees risk management practices in its domain, including director candidate
selection, governance and succession matters.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
Proposal 5 - |
Vote on Stockholder Proposal to Allow Certain Stockholders to Act by Written Consent |
|
We have been advised that a stockholder,
John Chevedden, intends to present the following stockholder proposal at our
Annual Meeting. We will furnish the address and share ownership of the proponent
promptly upon written or oral request. The proposal will be voted on at the
Annual Meeting if the proponent or a qualified representative is present at the
meeting and submits the proposal for a vote. The text of the proposal and the
supporting statement appear below exactly as received by us. The proposal may
contain assertions about the Company or other matters that the Company believes
are incorrect, but the Company has not attempted to refute all of those
assertions. The Company disclaims responsibility for the accuracy and content of
the proposal and supporting statement. Following the stockholder proposal are
the Company's reasons for opposing the proposal.
Proposal [5] - Right to Act by
Written Consent
Resolved, Shareholders request that our
board of directors undertake such steps as may be necessary to permit written
consent by shareholders entitled to cast the minimum number of votes that would
be necessary to authorize the action at a meeting at which all shareholders
entitled to vote thereon were present and voting. This written consent is to be
consistent with applicable law and consistent with giving shareholders the
fullest power to act by written consent consistent with applicable law. This
includes shareholder ability to initiate any topic for written consent
consistent with applicable law.
This proposal topic won majority
shareholder support at 13 major companies in a single year. This included
67%-support at both Allstate and Sprint. Hundreds of major companies enable
shareholder action by written consent.
Taking action by written consent in lieu
of a meeting is a means shareholders can use to raise important matters outside
the normal annual meeting cycle. A shareholder right to act by written consent
and to call a special meeting are 2 complimentary ways to bring an important
matter to the attention of both management and shareholders outside the annual
meeting cycle. Taking action by written consent saves the expense of holding a
special shareholder meeting.
Please vote to enhance shareholder
value:
Right to Act by Written Consent
Proposal [5]
|
|
|
|
|
|
RECOMMENDATION |
|
|
Your Board of
Directors recommends a vote AGAINST the
stockholder proposal. |
|
|
|
|
|
|
Table of Contents
The Board of Directors has carefully
considered the stockholder proposal asking that it take action to permit
stockholders to act by written consent without a meeting. At this time, the
Board recommends a vote against this stockholder proposal. We intend to seek
input from our stockholders as part of our investor outreach program to help
assess the desirability and need for such an amendment, particularly in light of
the governance practices described below. Given this commitment to obtain
feedback and the Companys responsiveness to other corporate governance reforms,
the stockholder proposal is unnecessary.
The Company has a demonstrated commitment
to corporate governance policies that are in the best interests of the Company
and responsive to stockholder feedback and emerging governance best practice.
The Company maintains a robust stockholder outreach program through which
stockholders can communicate directly with the
Board and the Board has taken actions to promote effective governance and
accountability for stockholders, including:
■ |
Implementation of the right
for stockholders representing 20% of the outstanding shares of the
Companys stock for at least one year to call a special
meeting |
■ |
Adoption in July 2016 of a
proxy access bylaw provision that allows qualifying stockholders to
include their director nominees in the Companys proxy
materials |
■ |
Implementation of majority
voting in the election of directors |
■ |
Repeal of the Companys
poison pill stockholder rights plan |
■ |
Declassification of the Board
of Directors, and |
■ |
Removal of certain
supermajority voting requirements from the Companys Certificate of
Incorporation and By-laws |
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
The Company is not aware of any business
to come before this Annual Meeting other than the matters described in this
proxy statement. However, if any other matters should properly come before this meeting, votes pursuant to the proxy will be
cast thereon in accordance with the discretion of the persons named in the
accompanying proxy.
The cost of solicitation of proxies will
be borne by the Company. In addition to solicitation of proxies through the
internet and by use of the mails, proxies may be solicited by directors,
officers and regularly engaged employees of the Company. None of these
directors, officers or employees will receive any extra compensation for doing
this. We have also retained Alliance Advisors
L.L.C. to assist us in soliciting proxies for a fee of $10,000 plus reasonable
out-of-pocket expenses. Brokers, nominees and other similar record holders will
be requested to forward solicitation material and will be reimbursed by the
Company upon request for their reasonable out-of-pocket expenses.
Stockholder proposals that are intended to
be presented at the 2018 Annual Meeting of Stockholders pursuant to SEC
Rule 14a-8 must be received by the Company on or before November 18, 2017, for
inclusion in the proxy statement relating to that meeting.
A stockholder who intends to present
business, including the election of a director, at the 2018 Annual Meeting of
Stockholders other than pursuant to Rule 14a-8, must comply with the
requirements set forth in the Company's By-laws. Among other things, under the
Company's By-laws to bring business before an Annual Meeting a stockholder must
give written notice to the Secretary of the Company not less than 90 days and
not more than 120 days prior to the first anniversary of the preceding year's
Annual Meeting. Therefore, for stockholder proposals to be presented other than pursuant to Rule 14a-8, the Company must
receive notice no sooner than December 27, 2017, and no later than January 26,
2018. The notice should contain (a) as to each person whom the stockholder
proposes to nominate for election as director, all information that is required
to be disclosed in solicitations of proxies for election of directors under the
securities laws, including the person's written consent to serve as a director
if elected, and (b) as to any other business: the reason for conducting such
business; any material interest in such business the stockholder has; the name
and address of the stockholder proposing such business as it appears in the
Company's books; and the number of shares of the Company that are beneficially
owned by the stockholder. Stockholders should consult the Company's Amended and
Restated By-laws to ensure that all of the specific requirements of such notice
are met.
Table of Contents
Available
Information on Corporate Governance and SEC Filings |
|
Through its website (www.borgwarner.com), the
Company makes available, free of charge, the Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to
those reports, and other filings with the SEC, as soon as reasonably practicable
after they are electronically filed with, or furnished to, the SEC. The Company
also makes the following documents available on its website: the Audit Committee
Charter; the Compensation Committee Charter; the Corporate Governance Committee
Charter; the Company's Corporate Governance Guidelines; the Company's Code of Ethical Conduct; and the Company's Code of
Ethics for CEO and Senior Financial Officers. You may also obtain a copy of any
of the foregoing documents, free of charge, if you submit a written request to
Investor Relations, 3850 Hamlin Road, Auburn Hills, Michigan 48326.
No person is authorized to give any
information, or make any representation, other than that contained in this proxy
statement, and if given or made, such information may not be relied upon as
having been authorized.
BorgWarner
Inc. 2017 Proxy Statement |
Table of Contents
Table of Contents
Table of Contents
*** Exercise
Your Right
to Vote ***
Important Notice Regarding the Availability of Proxy Materials for
the
Stockholder Meeting to Be Held on April 26, 2017
|
Meeting
Information |
|
|
Meeting Type: Annual
Meeting |
|
|
For
holders as of: March 01, 2017 |
|
|
Date: April 26,
2017 |
Time: 9:00 AM EST |
|
|
Location: |
The Townsend Hotel 100
Townsend Street Birmingham,
MI 48009 |
|
|
|
|
|
You are receiving this communication because you hold shares in the
above named company.
This is not
a ballot. You cannot use this notice to vote these shares. This communication
presents only an overview of the more complete proxy materials that are
available to you on the Internet. You may view the proxy materials online
at www.proxyvote.com or easily request a paper copy (see reverse side).
We encourage
you to access and review all of the important information contained in the proxy
materials before voting.
See the reverse side of this notice to obtain
proxy materials and voting
instructions. |
Table of Contents
Before You Vote
How to Access the
Proxy Materials
Proxy Materials Available to VIEW or RECEIVE:
1. Annual
Report on Form 10k 2. Notice & Proxy
Statement
How to
View Online:
Have the information that is
printed in the box marked by the arrow ➔XXXX XXXX XXXX XXXX (located on
the following page) and visit: www.proxyvote.com.
How to
Request and Receive a PAPER or E-MAIL Copy:
If you want to receive a paper or e-mail copy of these documents, you
must request one. There is NO charge for requesting a copy. Please choose one of
the following methods to make your request:
|
1) |
BY
INTERNET: |
www.proxyvote.com |
|
2) |
BY
TELEPHONE: |
1-800-579-1639 |
|
3) |
BY
E-MAIL*: |
sendmaterial@proxyvote.com |
* If
requesting materials by e-mail, please send a blank e-mail with the information
that is printed in the box marked by the arrow ➔XXXX XXXX XXXX XXXX (located on
the following page) in the subject line.
Requests,
instructions and other inquiries sent to this e-mail address will NOT be
forwarded to your investment advisor. Please make the request as instructed
above on or before April 12, 2017 to facilitate timely
delivery.
How To Vote
Please Choose One of the
Following Voting Methods
Vote In Person: Many stockholder meetings have attendance requirements including,
but not limited to, the possession of an attendance ticket issued by the entity
holding the meeting. Please check the meeting materials for any special
requirements for meeting attendance. At the meeting, you will need to request a
ballot to vote these shares.
Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the
information that is printed in the box marked by the arrow ➔XXXX XXXX XXXX XXXX available and follow the instructions.
Vote By Mail: You can vote by mail by requesting a paper copy of the
materials, which will include a proxy card.
Table of Contents
The Board of Directors recommends you vote FOR the
following: |
1. |
Election of Directors |
|
|
|
Nominees |
|
|
1a |
Jan Carlson |
|
|
1b |
Dennis C. Cuneo |
|
|
1c |
Michael S. Hanley |
|
|
1d |
Roger A. Krone |
|
|
1e |
John R. McKernan, Jr. |
|
|
1f |
Alexis P. Michas |
|
|
1g |
Vicki L. Sato |
|
|
1h |
Richard O. Schaum |
|
|
1i |
Thomas T. Stallkamp |
|
|
1j |
James R. Verrier |
The Board of Directors recommends you vote FOR the
following proposal: |
2 |
Advisory approval of the compensation of our named executive
officers. |
The Board of Directors recommends you vote 1 YEAR on the
following proposal: |
3. |
An advisory vote
on the frequency of advisory votes on the Company's executive compensation
program. |
|
|
The Board of Directors recommends you vote FOR the
following proposal: |
|
|
4 |
The selection of PricewaterhouseCoopers LLP as Independent
Registered Public Accounting firm for the Company for 2017. |
|
|
The Board of Directors recommends you vote AGAINST the
following proposal: |
|
|
5 |
Stockholder proposal to allow certain stockholders to act by
written consent. |
|
|
NOTE: Such other business as may properly come before the
meeting or any adjournment
thereof. |
Table of Contents
This regulatory filing also includes additional resources:
borg_courtesy-pdf.pdf
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