UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. __)

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

THE AZEK COMPANY 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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THE AZEK COMPANY INC.

1330 W FULTON STREET #350

CHICAGO, ILLINOIS 60607

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held at 10:00 a.m. Eastern Time on Tuesday, March 8, 2022

Dear Stockholder of The AZEK Company Inc.:

You are cordially invited to attend the 2022 annual meeting of stockholders, or the Annual Meeting, of The AZEK Company Inc., a Delaware corporation, or AZEK, which will be held virtually, via live audio webcast at www.virtualshareholdermeeting.com/AZEK2022, on Tuesday, March 8, 2022 at 10:00 a.m. Eastern Time, for the following purposes, as more fully described in the accompanying proxy statement:

Our board of directors recommends that you vote “FOR” the director nominees named in Proposal One of the accompanying proxy statement, “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent public accounting firm as described in Proposal Two, “ONE YEAR” with respect to how frequently we should hold advisory votes on the compensation of our named executive officers as described in Proposal Three, “FOR” each of the amendments to our certificate of incorporation as described in Proposals Four and Five and “FOR” our adoption of the 2021 Employee Stock Purchase Plan as described in Proposal Six.

Our board of directors has fixed the close of business on January 11, 2022 as the record date, or the Record Date, for the Annual Meeting. Only stockholders of record as of the Record Date are entitled to notice of and to vote at the Annual Meeting. Further information regarding voting rights and the matters to be voted upon is presented in the accompanying proxy statement.

To be admitted to the Annual Meeting at www.virtualshareholdermeeting.com/AZEK2022 and to ask questions and/or vote, you will be required to enter the 16-digit control number found on your proxy card, voting instruction form or notice previously received. Stockholders may vote in advance of the Annual Meeting at www.proxyvote.com or by telephone at 1-800-690-6903, 24 hours a day through 11:59 p.m. Eastern Time on the day before the Annual Meeting and may vote during the Annual Meeting by following the instructions available at www.virtualshareholdermeeting.com/AZEK2022.

Each share of common stock that you own represents one vote for each of the matters to be acted upon at the Annual Meeting, except that each share of Class B common stock represents zero votes for the election of the two directors referred to above and any other matter relating to the election, replacement or removal of directors.

We appreciate your continued support of AZEK.

 

 

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the virtual Annual Meeting, you are urged to vote and submit your proxy as soon as possible by following the voting procedures described in these proxy materials.

 

 

 

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2022 Annual Meeting Information

 

 

Matters To Be Voted Upon and Voting Recommendations

 

 

2021 PERFORMANCE HIGHLIGHTS

 

 

 

 

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Who We Are at Our Core

 

Our core values guide how we work—influencing our decisions, our interactions with colleagues and customers and our standards for behavior. It is in part due to our fundamental commitment to living our core values that our employees are inspired to be part of our winning team and culture.

 

 

Always Do the Right Thing

We make decisions according to what is right, not what is cheapest, fastest or easiest. We always operate with integrity, transparency and courage.

It Starts and Ends with the Customer

For every action we take, we ask ourselves, “How will this affect our customers?” Our responsibility is to understand their expectations, then surpass them.

Value Every Individual

We strive to truly understand our colleagues’ everyday realities and empathize with their challenges and aspirations. We are committed to providing an inclusive culture where every individual feels engaged, safe, respected and supported with the necessary tools to be successful.

Lead Through Innovation

We consistently bring unique, high-tech and environmentally sustainable products to market. We invest in the art of the impossible, creating new solutions to address needs customers don’t yet know they have.

The Best Team Wins

Our goal is to win, period. We hire and develop the most talented individuals, with a focus on bringing diverse perspectives together in pursuit of this shared goal.

Better Today Than Yesterday

We always ask, “How can we do this better?” We accomplish every goal by rigorously implementing the AZEK Integrated Management System (AIMS). Our continuous improvement methodology includes Policy Deployment, Lean Six Sigma, Sales and Operations Planning, Stage Gate and Digital.

 

 

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Corporate Governance Highlights

 

 

Environmental and Social Best Practices

 

 

 

 

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Executive Compensation Highlights and Pay-for-Performance Alignment

Our executive compensation program is designed by our compensation committee to (i) align executive compensation with our financial and operational performance; (ii) attract, retain and motivate key executives critical to achieving our vision and strategy; and (iii) reward such executives for delivering desired business results and stockholder value, all while protecting against excessive risk taking. Our executive compensation program is described in more detail in the Compensation Discussion and Analysis section beginning on page 27 of this proxy statement. The following table summarizes our key executive compensation practices:

 

 

In keeping with our pay-for-performance philosophy, our executive compensation is heavily performance-based. For fiscal year 2021, approximately 66% of our Chief Executive Officer’s target compensation and approximately 52% of our other named executive officers’, or NEOs, target compensation (excluding Mr. Clifford as he commenced employment with us in August 2021), on average, was “at risk” compensation and was, or, in the case of performance-based restricted stock units, or PSUs, is, contingent upon our achievement of specific performance objectives. In addition, approximately 62% of our Chief Executive Officer’s target compensation and approximately 35% of our other named executive officers’ target compensation, on average, was granted in the form of long-term equity incentive compensation. In each case, target compensation consists of base salary, target annual incentive awards and long-term incentive awards. For more information, see “Compensation Discussion and Analysis—Fiscal Year 2021—Compensation Tables and Narrative Disclosures—Summary Compensation Table.”

 

 

 

 

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Human Capital and Diversity, Equity and Inclusion

We are committed to social responsibility within our workforce and our community at every level. The full board of directors and the compensation committee regularly engage with our chief executive officer, our chief human resources officer, our vice president of ESG and other senior leadership on a broad range of human capital management topics, including culture, talent management and succession planning, compensation and benefits, diversity and inclusion and employee engagement feedback gathered from our annual employee engagement survey. Our chief executive officer also periodically leads company-wide employee meetings to provide updates on the business and promote our values, including around sustainability and diversity, equity and inclusion initiatives, as well as smaller group meetings of employees to receive their feedback on the business and to allow us to identify areas of strength and opportunities for improvement to ensure continued engagement, satisfaction and retention of our employees.  We have evaluated and adopted certain human capital and human rights management policies to further our commitment to social responsibility and we are focused on hiring and retaining diverse and highly talented employees and empowering them to create value.  Specifically, we have committed to include diverse candidates in any pool of candidates from which employees are chosen. In our employee selection process and the operation of our business we adhere to equal employment opportunity policies and encourage the participation of our employees in training programs that will enhance their effectiveness in the performance of their duties. We provide attractive benefits that promote the health of our employees and their families and design compelling job opportunities, aligned with our values and mission, in an energizing work environment. We compensate our employees according to our fair remuneration policies and believe deeply in paying for performance. In conjunction with our 2020 initial public offering, we provided all employees an opportunity for ownership in our company by granting them shares of our Class A common stock, and our board of directors and our compensation committee have each approved our adoption of our 2021 Employee Stock Purchase Plan, subject to shareholder approval at the 2022 Annual Meeting and as further described elsewhere in this proxy statement. In 2021, AZEK was named one of Chicago Tribune’s Top Workplaces for creating a culture where our employees feel highly engaged, appreciated and fulfilled, and AZEK was included on Inc.’s list of best-led companies of 2021. Our culture is driven by a shared passion for our values, mission and performance. It is an inclusive culture of innovative, growth-minded individuals committed to always doing the right thing.

Director Nominees

Our nominating and corporate governance committee has recommended, and our board of directors has approved, Fumbi Chima and Brian Spaly as nominees for election as Class II directors at the Annual Meeting. If elected, each of Ms. Chima and Mr. Spaly will serve as Class II directors until our 2025 annual meeting of stockholders and until their successors are duly elected and qualified, or until their earlier death, resignation, disqualification or removal.

Ms. Chima is the Executive Vice President and Chief Information Officer at BECU, a Washington-based community credit union, and her decades of leadership and technology experience in the retail and financial sectors, as well as her showcased dedication to diversity, women’s employment and inclusion, led our board to the conclusion that she should continue to serve as one of our directors.

Mr. Spaly is the founder and former Chief Executive Officer of Trunk Club and currently serves as Executive Chairman of the Tecovas, Inc. board of directors as well as on the boards of directors of several other early-stage growth companies. The board believes that Mr. Spaly’s experience leading high-growth companies as CEO and serving public companies as a board member, along with his proven digital and direct marketing experience, will continue to benefit AZEK as we continue to focus on growing our business and further differentiating our leading product offering.

 

 

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Director Skills, Qualifications and Diversity

 

 

 

 

 

 

Director Independence, Diversity and Refreshment

 

 

 

 

 

 

 

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Stockholder Engagement

We maintain a robust year-round stockholder engagement program to properly understand stockholder interests, and our senior management and investor relations team routinely communicate with our stockholders to solicit their views with respect to key corporate matters, such as corporate strategy, corporate governance, risk oversight, ESG matters and human capital deployment. In fiscal year 2021, we contacted all institutional stockholders who owned at least 2% of our aggregate outstanding shares of common stock (as of September 30, 2021), representing approximately 53% of the outstanding shares of our common stock, and engaged with all stockholders who responded to our invitation to discuss corporate governance, executive compensation and ESG matters.   The below information highlights our stockholder engagement efforts in 2021.  We believe our proactive engagement approach has resulted in constructive feedback and input from stockholders and we intend to continue these efforts.

 

 

2021 STOCKHOLDER ENGAGEMENT BY THE NUMBERS

 

 

 

 

 

 

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TABLE OF CONTENTS

 

 

 

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THE AZEK COMPANY INC.

 

 

To Be Held at 10:00 a.m. Eastern Time on Tuesday, March 8, 2022

This proxy statement and the enclosed form of proxy are furnished in connection with the solicitation of proxies by our board of directors for use at the 2022 annual meeting of stockholders, or the Annual Meeting, of The AZEK Company Inc., a Delaware corporation, and any postponements, adjournments or continuations thereof. The Annual Meeting will be held virtually via live audio webcast on Tuesday, March 8, 2022 at 10:00 a.m. Eastern Time. The Annual Meeting can be accessed via the Internet at www.virtualshareholdermeeting.com/AZEK2022 where you will be able to attend and listen to the Annual Meeting live, submit questions and vote your shares electronically at the Annual Meeting. You will not be able to attend the Annual Meeting physically in person.

Our board of directors has fixed the close of business on January 11, 2022 as the record date, or the Record Date, for the Annual Meeting. Stockholders of record as of the Record Date are entitled to notice of and to vote at the Annual Meeting. The Notice of Internet Availability of Proxy Materials, or the Notice, containing instructions on how to access this proxy statement and our annual report on Form 10-K for our fiscal year 2021, or our 2021 Annual Report, is first being mailed on or about January 26, 2022 to all stockholders entitled to vote at the Annual Meeting.

In this proxy statement, the terms “AZEK,” “the Company,” “we,” “us” and “our” refer to The AZEK Company Inc. The mailing address of our principal executive offices is 1330 W Fulton Street #350, Chicago, Illinois 60607.

Notice of availability of proxy materials

On or about January 26, 2022, we expect to mail to our stockholders the Notice. The Notice provides instructions on how to vote via the Internet, mobile device, or by telephone and includes instructions on how to receive a paper copy of our proxy materials by mail. The accompanying proxy statement and our 2021 Annual Report can be accessed directly at the following Internet address: www.proxyvote.com. You will be asked to enter the sixteen-digit control number located on your Notice or proxy card.

Questions and answers about the proxy materials and our annual meeting

The information provided in the “question and answer” format below is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and shall not be deemed filed under the Securities Act or the Exchange Act, and references to our website address in this proxy statement are inactive textual references only.

Why are you holding a virtual Annual Meeting and how can stockholders attend?

We will be hosting the Annual Meeting via live webcast only. In addition to supporting the health and well-being of our stockholders and other meeting participants during the COVID-19 pandemic, we also believe hosting our Annual Meeting virtually helps to expand access, facilitate

 

 

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stockholder attendance, reduce costs and enable improved communication. It also reduces the environmental impact of our Annual Meeting. To participate in our virtual Annual Meeting, visit www.virtualshareholdermeeting.com/AZEK2022 with your 16-digit control number included in the Notice, on your proxy card if you are a stockholder of record of shares of common stock, or included with your voting instructions received from your broker, bank or other nominee if you are a street name stockholder, as described below.

The Annual Meeting live webcast will begin promptly at 10:00 a.m. Eastern Time on Tuesday, March 8, 2022. Stockholders may vote and submit questions while attending the meeting online. We encourage you to access the meeting prior to the start time. Online check-in will begin at 9:45 a.m. Eastern Time, and you should allow ample time for the check-in procedures. Participants should allow plenty of time to log in and ensure that they can hear streaming audio prior to the start of the virtual Annual Meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting platform at www.virtualshareholdermeeting.com/AZEK2022.

What matters am I voting on and how does the board of directors recommend that I vote?

 

Other than the six items of business described in this proxy statement, we are not aware of any other business to be acted upon at the Annual Meeting. You may be asked to consider any other business that properly comes before the Annual Meeting.

Who is entitled to vote?

Holders of our Class A common stock as of the close of business on the Record Date will be entitled to one vote for each share of our Class A common stock held by them on the Record Date with respect to all matters to be acted upon at the Annual Meeting. The sole holder of our Class B common stock as of the close of business on the Record Date will be entitled to one vote for each share of our Class B common stock held by it on the Record Date with respect to all matters to be acted upon at the Annual Meeting other than those matters that relate to the election, removal or replacement of directors. As of the Record Date, there were 155,037,431 shares of our Class A common stock and 100 shares of our Class B common stock outstanding. We refer to our Class A common stock and our Class B common stock collectively as our common stock. Stockholders do not have cumulative voting rights for the election of directors.

Stockholders of record; shares registered in your name

If shares of our common stock are registered directly in your name with our transfer agent, Equiniti Trust Company, you are considered the stockholder of record with respect to those shares, and the Notice was provided to you directly by us. As the stockholder of record, you have the right to grant your voting proxy and indicate your voting choices directly to the individuals listed on the proxy card or to vote virtually at the Annual Meeting. Throughout this proxy statement, we refer to these registered stockholders as “stockholders of record.”

Street name stockholders

If shares of our common stock are held on your behalf in a brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,” and the Notice was forwarded to you by your broker, bank or other nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee as to how to vote your shares in the manner provided in the voting instructions you receive from your broker, bank or other nominee. If you request a printed copy of our proxy materials by mail, your broker, bank or other nominee will provide a voting instruction form for you to use. Street name

 

 

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stockholders are also invited to attend the virtual Annual Meeting. However, because a street name stockholder is not the stockholder of record, you may not vote your shares of our common stock virtually at the Annual Meeting unless you follow your broker, bank or other nominee’s procedures for obtaining a legal proxy. Throughout this proxy statement, we refer to stockholders who hold their shares through a broker, bank or other nominee as “street name stockholders.”

How many votes are needed for approval of each proposal?

 

 

Voting results will be tabulated and certified by the inspector of election appointed for the Annual Meeting.

 

 

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What is a quorum?

A quorum is the minimum number of shares required to be present at the Annual Meeting to properly hold an annual meeting and conduct business under our bylaws and Delaware law. The presence in person or represented by proxy of the holders of a majority of the voting power of the shares of stock issued and outstanding and entitled to vote on a matter at the Annual Meeting will constitute a quorum for that matter at the Annual Meeting. Where a separate vote by a class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Proposal No. 5 requires a separate vote by the holders of our Class A common stock. Abstentions and broker non-votes are counted as shares present and entitled to vote for purposes of determining a quorum.

How do I vote?

If you are a stockholder of record, there are five ways to vote:

VOTING VIA THE INTERNET OR BY TELEPHONE IS FAST AND CONVENIENT, AND YOUR VOTE IS IMMEDIATELY CONFIRMED AND TABULATED. VOTING EARLY WILL HELP AVOID ADDITIONAL SOLICITATION COSTS AND WILL NOT PREVENT YOU FROM VOTING ELECTRONICALLY DURING THE ANNUAL MEETING IF YOU WISH TO DO SO.

If you are a street name stockholder, you will receive voting instructions from your broker, bank or other nominee. You must follow the voting instructions provided by your broker, bank or other nominee in order to direct your broker, bank or other nominee on how to vote your shares. As discussed above, if you are a street name stockholder, you may not vote your shares electronically at the Annual Meeting unless you obtain a legal proxy from your broker, bank or other nominee.

Can I change my vote?

Yes. If you are a stockholder of record, you can change your vote or revoke your proxy any time by:

If you are a street name stockholder, your broker, bank or other nominee can provide you with instructions on how to change your vote.

What is the effect of giving a proxy?

Proxies are solicited by and on behalf of our board of directors. Jesse Singh (our President and Chief Executive Officer), Peter Clifford (our Chief Financial Officer and Treasurer) and Paul Kardish (our Chief Legal Officer and Secretary) have been designated as proxy holders by our board of directors. When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of our board of directors as described above. If any matters not described in this proxy statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote the shares. If the Annual Meeting is postponed, adjourned or continued, the proxy holders can vote the shares on the new Annual Meeting date as well, unless you have properly revoked your proxy instructions, as described above.

 

 

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Why did I receive a Notice of Internet Availability of Proxy Materials instead of a full set of proxy materials?

In accordance with the rules of the U.S. Securities and Exchange Commission, or the SEC, we have elected to furnish our proxy materials, including this proxy statement and our 2021 Annual Report, primarily via the Internet. The Notice containing instructions on how to access this proxy statement and our 2021 Annual Report is first being mailed on or about January 26, 2022 to all stockholders entitled to vote at the Annual Meeting. Stockholders may request to receive all future proxy materials in printed form by mail or electronically by email by following the instructions contained in the Notice. We encourage stockholders to take advantage of the availability of our proxy materials on the Internet to help reduce the environmental impact and the cost of our annual meetings of stockholders.

How are proxies solicited for the Annual Meeting?

Our board of directors is soliciting proxies for use at the Annual Meeting. All expenses associated with this solicitation will be borne by us. We will reimburse brokers, banks and other nominees for reasonable expenses that they incur in sending our proxy materials to you if a broker, bank or other nominee holds shares of our common stock on your behalf. In addition, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Our directors and employees will not be paid any additional compensation for soliciting proxies. We have also retained D.F. King & Co. to solicit proxies for a fee of $15,000 plus a reasonable amount to cover expenses.

How may my broker, bank or other nominee vote my shares if I fail to provide timely directions?

Brokers, banks and other nominees holding shares of our common stock in street name for their customers are generally required to vote such shares in the manner directed by their customers. In the absence of timely directions, your broker, bank or other nominee will have discretion to vote your shares on our sole “routine” matter: the proposal to ratify the appointment of PricewaterhouseCoopers LLP, or PwC, as our independent registered public accounting firm for our year ending September 30, 2022. Your broker, bank or other nominee will not have discretion to vote on the election of directors or the frequency with which we will hold Say-on-Pay Votes, the approval of amendments to our certificate of incorporation, or our Certificate, and bylaws or our adoption of the 2021 Employee Stock Purchase Plan, all of which are “non-routine” matters, absent direction from you. If the broker, bank or other nominee that holds your shares in street name returns a proxy card without voting on a non-routine proposal because it did not receive voting instructions from you on that proposal, this is referred to as a “broker non-vote.” Broker non-votes are considered in determining whether a quorum exists at the Annual Meeting. The effect of broker non-votes on the outcome of each proposal to be voted on at the Annual Meeting is explained above.

Where can I find the voting results of the Annual Meeting?

We will announce preliminary voting results at the Annual Meeting. We will also disclose voting results on a Current Report on Form 8-K that we will file with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K within four business days after the Annual Meeting, we will file a Current Report on Form 8-K to publish preliminary results and will provide the final results in an amendment to the Current Report on Form 8-K as soon as they become available.

I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?

The rules promulgated by the SEC permit companies, brokers, banks or other intermediaries to deliver a single copy of proxy materials, or, where applicable, a Notice of Internet Availability of Proxy Materials, to households at which two or more stockholders reside. Each stockholder, however, still receives a separate proxy card if he or she receives paper copies. This practice, known as “householding,” is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources. Stockholders sharing an address who have been previously notified by their broker, bank or other nominee and have consented to householding will receive only one copy of our proxy statement and annual report or Notice of Internet Availability of Proxy Materials. If you would like to opt out of this practice for future mailings and receive a separate proxy statement and annual report or Notice of Internet Availability of Proxy Materials for each stockholder sharing the same address, please contact your broker, bank or other nominee.

You may also obtain a separate proxy statement or annual report or Notice of Internet Availability of Proxy Materials without charge by sending a written request to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717, or by calling Broadridge’s Householding Department at 1-866-540-7095. We encourage stockholders to contact us by telephone instead of physical mail to help ensure timely receipt of any request for proxy materials. Additional copies of the proxy statement or annual report or Notice of Internet Availability of Proxy Materials will be sent promptly upon receipt of such request. Stockholders sharing an address that are receiving multiple copies of the proxy statement or annual report or Notice of Internet Availability of Proxy Materials can request delivery of a single copy of the proxy statement or annual report or Notice of Internet Availability of Proxy Materials by contacting their broker, bank or other nominee or sending a written request to Broadridge Householding Department at the address above or by calling 1-866-540-7095.

 

 

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What is the deadline to propose stockholder actions and director nominations for consideration at next year’s annual meeting of stockholders?

RULE 14A-8 STOCKHOLDER PROPOSALS

As prescribed by Rule 14a-8 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, stockholders may present proper proposals for inclusion in our proxy statement and for consideration at next year’s annual meeting of stockholders. For a Rule 14a-8 stockholder proposal to be timely and considered for inclusion in our proxy statement for our 2023 annual meeting of stockholders, the proposal must comply with all applicable requirements of Rule 14a-8, including with respect to ownership of our common stock, and our Corporate Secretary must receive the written proposal at our principal executive offices by the deadline prescribed by Rule 14a-8 under the Exchange Act (provided that the 2023 annual meeting of stockholders is not held more than 30 days from the first anniversary of the Annual Meeting, the applicable deadline will be September 28, 2022). Stockholder proposals should be addressed to:

The AZEK Company Inc.

Attention: Corporate Secretary

1330 W Fulton Street #350

Chicago, Illinois 60607

If a stockholder who has notified us of his, her or its intention to present a Rule 14a-8 stockholder proposal at an annual meeting does not appear and a qualified representative of that stockholder does not appear to present his, her or its proposal at such annual meeting, such proposal shall be disregarded and we are not required to present the proposal for a vote at such annual meeting.

ADVANCE NOTICE STOCKHOLDER PROPOSALS

Our bylaws also establish an advance notice procedure for stockholders who wish to present a proper proposal, including director nominations, before an annual meeting of stockholders (regardless of whether the proposal is intended to be included in our proxy statement). Any such advance notice stockholder proposal, including director nominations, must comply with all of the requirements set forth in our Certificate, our bylaws and applicable laws, rules and regulations. Our bylaws provide that, for business to be properly brought before an annual meeting by a stockholder, (i) the stockholder must be a stockholder of record at the time of the giving of the notice and at the time of the annual meeting, (ii) the stockholder is entitled to vote at the meeting, (iii) the business must be a proper matter for stockholder action, and (iv) the stockholder must give timely written notice to our Corporate Secretary, which notice must contain the information specified in our bylaws. For an advance notice stockholder proposal, including director nominations, to be timely for our 2023 annual meeting of stockholders, our Corporate Secretary must receive the written proposal at our principal executive offices at the address listed above:

In the event that we hold our 2023 annual meeting of stockholders more than 30 days before or more than 60 days after the one-year anniversary of the Annual Meeting, notice of an advance notice stockholder proposal must be received no earlier than the close of business on the 120th day before our 2023 annual meeting of stockholders and no later than the close of business on the later of the following two dates:

If a stockholder who has notified us of his, her or its intention to present an advance notice stockholder proposal, including director nominations, at an annual meeting does not appear and a qualified representative of that stockholder does not appear to present his, her or its proposal at such annual meeting, such proposal shall be disregarded and we are not required to present the proposal for a vote at such annual meeting.

You are advised to review our bylaws, which contain additional requirements regarding advance notice stockholder proposals, including director nominations.

Availability of bylaws

A copy of our bylaws is available via the SEC’s website at https://www.sec.gov. You may also contact our Corporate Secretary at the address set forth above for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

 

 

 

 

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BOARD OF DIRECTORS

 

Board of Directors Composition

We are managed under the direction of our board of directors, which is currently composed of eleven members. All of our directors, with the exception of our Chief Executive Officer, are independent within the meaning of the listing standards of the New York Stock Exchange, or the NYSE.

Our Certificate currently provides for a board of directors comprised of three classes of directors, with each class serving a three-year term beginning and ending in different years than those of the other two classes. Subject to the outcome of the vote at the 2022 Annual Meeting with respect to Proposal No. 5, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our board of directors is currently divided among the three classes as follows:

For more information regarding Proposal No. 5, which, if successful, would authorize us to amend our Certificate and bylaws to phase out our classified board structure, please see “PROPOSAL NO. 5— Approval of Amendments to our Certificate of Incorporation to Declassify our Board of Directors and Phase-In Annual Director Elections”.

Director Term and Committee Membership Information

The following table sets forth the names, ages as of January 14, 2022, and certain other information for each of the members of our board of directors with terms expiring at the Annual Meeting (who are also nominees for election as a director at the Annual Meeting) and for each of the continuing members of our board of directors. Full biographical information follows the table.

 

 

Legend: (C) Chairperson of the Board |  Chair |  Member |   Audit Committee Financial Expert

 

 

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Nominees for Director

 

 

 

 

 

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Continuing Directors

 

 

 

 

 

 

 

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Our board of directors is currently composed of eleven members. In accordance with our Certificate, as currently in effect, our board of directors is divided into three classes of directors. At the Annual Meeting, two Class II directors will be elected for a three-year term to succeed the Class II directors whose term is then expiring. Mr. Sumler, a Class II director, is not standing for re-election. Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier death, resignation, disqualification or removal. At the 2022 Annual Meeting, we are seeking stockholder approval to declassify our board of directors and phase-in the annual election of all directors, as described under “Proposal No. 5”.

Nominees

Our nominating and corporate governance committee has recommended, and our board of directors has approved, Fumbi Chima and Brian Spaly as nominees for election as Class II directors at the Annual Meeting. If elected, each of Ms. Chima and Mr. Spaly will serve as Class II directors until our 2025 annual meeting of stockholders and until their successors are duly elected and qualified, or until their earlier death, resignation, disqualification or removal. Each of the nominees is currently a director of the Company and has agreed to serve if elected. For information concerning the nominees, please see “Board of Directors—Nominees for Director.”

If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not give instructions with respect to the voting of directors, your shares will be voted “FOR” the election of each of Ms. Chima and Mr. Spaly. We expect that each of Ms. Chima and Mr. Spaly will accept such nomination; however, in the event that a director nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee designated by our board of directors to fill such vacancy. If you are a street name stockholder and you do not give voting instructions to your broker, bank or other nominee, your broker, bank or other nominee will not vote your shares on this matter.

Vote Required; Recommendation of the Board of Directors

Our bylaws state that, to be elected, a nominee must receive a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting, which means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. As a result, any shares not voted “FOR” a particular nominee (whether as a result of stockholder abstention or a broker non-vote) will have no effect on the outcome of this proposal. Brokers do not have authority to vote on this proposal without instructions from the beneficial owner.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF FUMBI CHIMA AND BRIAN SPALY TO THE BOARD FOR A THREE-YEAR TERM EXPIRING IN 2025.

 

 

 

 

 

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CORPORATE GOVERNANCE

Corporate Governance Overview and Fiscal 2021 Highlights

We are committed to operating with integrity and accountability. Our corporate governance policies set clear expectations and responsibilities for our board of directors, leaders, employees and business partners to ensure we conduct our operations in a manner that is consistent with the highest standards of business ethics and accountability. Highlights of our corporate governance practices include the following:

In alignment with our core value of always striving to be better today than yesterday, we are committed to building on our strengths and improving how we measure and monitor our progress on our ESG-related initiatives. Our board of directors oversees corporate social responsibility and sustainability initiatives, including ESG-related strategies, policies and disclosures, see “Role of the Board in ESG Oversight” below. Fiscal 2021 ESG highlights include the following:

 

 

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Board Leadership

Our board of directors is responsible for the supervision and oversight of our business affairs. In executing this responsibility, our board of directors establishes corporate policies, sets strategic direction and oversees management. Our board of directors has not adopted a formal policy with respect to the separation of the offices of Chief Executive Officer and Chairperson of the Board. It is our board of directors’ view that rather than having a rigid policy, our board of directors should determine, as and when appropriate upon consideration of all relevant factors and circumstances, whether the two offices should be separate. Currently, our leadership structure separates the offices of Chief Executive Officer and Chairperson of the Board, with Mr. Singh serving as our Chief Executive Officer and Mr. Hendrickson serving as non-executive Chairperson of the Board. We believe this is appropriate as it provides Mr. Singh with the ability to focus on our day-to-day operations while Mr. Hendrickson focuses on the oversight by our board of directors.

Director Independence

Pursuant to the corporate governance standards of the NYSE, a director employed by us cannot be deemed an “independent director,” and each other director will qualify as “independent” only if our board of directors affirmatively determines that he has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. In making such determinations, the board of directors considered that certain directors serve as directors of other companies with which we engage from time to time in the ordinary course of business and, in accordance with our independence standards, determined that none of these relationships were material or impaired the independence of any of our directors. The fact that a director may own our capital stock is not, by itself, considered a material relationship. Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has affirmatively determined that each of Gary Hendrickson, Sallie Bailey, Fumbi Chima, Howard Heckes, Natasha Li, Vernon J. Nagel, Ashfaq Qadri, Bennett Rosenthal, Brian Spaly and Blake Sumler are independent in accordance with the NYSE rules. There are no family relationships among any of our directors or executive officers.

In addition, our board of directors has determined that Sallie Bailey, Fumbi Chima, Gary Hendrickson, Howard Heckes, Vernon J. Nagel and Brian Spaly each satisfy the independence requirements for audit committee members under the listing standards of the NYSE and Rule 10A-3 of the Exchange Act. Each of Sallie Bailey, Gary Hendrickson and Howard Heckes has been determined to be an “audit committee financial expert” as defined under SEC rules. All members of the audit committee are able to read and understand fundamental financial statements, are familiar with finance and accounting practices and principles and are financially literate.

Meetings of the Board of Directors

Our board of directors held eight (8) meetings (including regularly scheduled and special meetings) during our fiscal year 2021. Every director attended 100% of the meetings of our board of directors and of any board committees of which he or she was a member during our fiscal year 2021. Our non-employee directors meet by themselves, without non-independent directors and management present, not less than two times per year. Meetings of our non-employee directors are presided over by the chairperson of our board of directors. Under our Corporate Governance Guidelines, directors are encouraged and expected to attend our annual meeting of stockholders. All of our directors serving at the time of our 2021 annual meeting of stockholders attended that meeting.

Board Committees

Our board of directors has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and responsibilities described below. From time to time, our board of directors may establish other committees to facilitate the management of our business. A copy of each committee’s charter is posted on the environmental, social and governance section of our website, www.azekco.com. Members serve on these committees until their resignation or until as otherwise determined by our board.

 

 

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Membership and Functions of the Committees of the Board

 

 

 

 

 

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Corporate Governance Guidelines

Our board of directors has adopted Corporate Governance Guidelines, which are designed to assist our board of directors in performing its duties to us and our stockholders. These guidelines provide general guidance to our board of directors with a view to continuing a strong and effective working relationship both among the board members and also between our board of directors and management. The goal of these guidelines is to reflect current governance practices for our board of directors and to enhance the ability of our board of directors and management to guide the Company in its continuing growth and success. Our Corporate Governance Guidelines may be amended by our board of directors at any time. A copy of our Corporate Governance Guidelines is available under the environmental, social and governance section of our website, www.azekco.com.

Our Corporate Governance Guidelines address items such as:

 

Identification and Evaluation of Nominees for Directors; Board Diversity

The nominating and corporate governance committee considers candidates for director from a variety of sources, including candidates who are recommended by other board members and by management, as well as those identified by third-party search firms retained to assist in identifying and evaluating possible candidates. The nominating and corporate governance committee also considers candidates for director recommended by

 

 

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stockholders who submit such recommendations in writing to our Corporate Secretary and evaluates director candidates recommended by stockholders in the same way it evaluates candidates recommended by the other sources referenced above.

In accordance with our Corporate Governance Guidelines, the nominating and corporate governance committee identifies and considers candidates based on a diversity of skills, expertise, industry knowledge, diversity of opinion and perspectives and other attributes. The nominating and corporate governance committee has also committed to including candidates with a diversity of age, gender, ethnicity/race and education in any pool of candidates from which board of director nominees are chosen. The board of directors also confirms that our policy of non-discrimination applies in the selection of directors.

Code of Conduct and Ethics and Code of Ethics for Senior Financial Officers

We have adopted a Code of Conduct and Ethics for all officers, directors and employees. We have also adopted a Code of Ethics for Senior Financial Officers applicable to our Chief Executive Officer and senior financial officers. We intend to disclose future amendments to certain provisions of our Code of Ethics for Senior Financial Officers, or waivers of such provisions applicable to any principal executive officer, principal financial officer, principal accounting officer or other persons performing similar functions, on our website. A copy of each of our Code of Conduct and Ethics and our Code of Ethics for Senior Financial Officers is available under the environmental, social and governance section of our website, www.azekco.com.

Our Code of Conduct and Ethics addresses items such as:

Our Code of Ethics for Senior Financial Officers addresses items such as:

 

 

 

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Hedging and Pledging Policies, Derivatives Trading

As part of our insider trading policy, all of our directors, officers and employees are prohibited from engaging in hedging and other monetization transactions (which may include prepaid variable forward contracts, equity swaps, collars and exchange funds) involving our securities, holding our securities in a margin account or pledging our securities as collateral for a loan. We also prohibit our directors, officers and employees from speculating in our equity securities, including through the use of short sales or by trading in options or other derivative securities with respect to our securities.

Stock Ownership Policy

We have adopted a stock ownership policy for our executives. Our stock ownership policy was put in place in connection with our initial public offering, or our IPO, and is intended to increase the alignment of interests between our executives and stockholders. The guidelines and policies of peers and, on a broader basis, industry practices were considered in developing this policy. Our policy provides the following:

 

 

Ownership requirements and progress toward their achievement are reviewed annually as part of the compensation planning process. The policy requires retention of 100% of net shares acquired upon any vesting or exercise of equity awards until the ownership requirements are met for our Chief Executive Officer and retention of 50% of net shares acquired upon any vesting or exercise of equity awards until the ownership requirements are met for our other executives. For purposes of the stock ownership policy, we include direct ownership of shares, beneficially owned shares held indirectly (e.g. by family members and trusts), and vested deferred stock units, or DSUs. Unvested stock awards and unexercised options are not included in determining whether an executive has achieved the ownership levels. The compensation committee is responsible for monitoring the application of our stock ownership policy. Each of our current named executive officers is in compliance with this policy.

We have also adopted a stock ownership policy for our directors that requires each non-employee director to hold 100% of after-tax shares from director equity awards until the director holds shares and DSUs with an aggregate value equal to five times the annual cash retainer paid to non-employee directors. All of our non-employee directors currently meet the requirements or are otherwise in compliance with the policy via the retention requirement.

Related Persons Transaction Policy

We have adopted formal written procedures for the review, approval or ratification of transactions with related persons, or the Related Persons Transaction Policy. The Related Persons Transaction Policy provides that the audit committee of our board of directors is charged with reviewing for approval or ratification all transactions with “related persons” (as defined in paragraph (a) of Item 404 of Regulation S-K) that are brought to the audit committee’s attention. A copy of our Related Persons Transaction Policy is available under the environmental, social and governance section of our website, www.azekco.com. See “Related Party Transactions” below for a description of related party transactions for fiscal 2021.

Role of the Board in Risk Oversight; Cybersecurity Risk

Our board of directors takes an active role in the oversight of risk management, while management is responsible for addressing the day-to-day risks facing our company. While our board of directors has primary responsibility for overseeing risk management, our board of directors also delegates certain oversight responsibilities to its committees. For example, our audit committee oversees management of financial risks, including those related to our internal control over financial reporting and disclosure controls and procedures, audit and auditor matters and other accounting matters. With the assistance of our independent compensation consultant, our compensation committee regularly considers and evaluates risks related to our cash and equity-based compensation programs and practices as well as evaluates whether our compensation plans encourage participants to take excessive risks that are reasonably likely to have a material adverse effect on us. Our compensation committee believes that our compensation programs appropriately incentivize our executive officers to take prudent risks and are focused on both the short-term and the long-term interests of our stockholders, which is reflected by the fact that our executive officers receive a balanced mix of short-term and long-term, performance-based, variable compensation, as well as fixed salary compensation and long-term, service-based compensation. Our compensation committee also believes that excessive risk taking is mitigated by compensation policies we maintain, including our executive officer stock ownership policy, our hedging and pledging prohibitions and our clawback policy. Consistent with SEC disclosure requirements, the compensation committee has worked with management to assess compensation policies and practices for our employees and has concluded that such policies and practices

 

 

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do not create risks that are reasonably likely to have a material adverse effect on us. Our nominating and corporate governance committee oversees management of risks associated with director independence, conflicts of interest, composition and organization of our board of directors, director succession planning and corporate governance. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our full board of directors keeps itself regularly informed regarding such risks through committee reports and otherwise. In particular, throughout fiscal 2021 and currently, our board of directors regularly received and continues to receive updates from management on the impact of the COVID-19 pandemic on our business, our employees and our suppliers and customers.

Cybersecurity has become a particularly acute area of risk for companies of all sizes and in all industries, including us. While management is primarily responsible for our cybersecurity program and managing our cybersecurity risks, including our procedures and day-to-day operations, our audit committee oversees our enterprise risk assessment and management program, which includes oversight of cybersecurity risks. In performing its oversight responsibilities, our audit committee receives regular reports from, and meets with, our Chief Information Officer not less frequently than twice annually to review our information technology and cybersecurity risk profile and to discuss our activities to manage those risks. We use a variety of security products and vendors to protect our information technology infrastructure and data. Our programs continue to adapt and mature as threats continue to evolve. We maintain data encryption, monitoring, loss prevention, data storage, identity / authentication controls, including two-factor authentication tools, and anti-malware and anti-virus solutions. We perform penetration tests and cyber simulations to practice our incident response procedures. Our cybersecurity plans are reviewed on an annual basis, and we prioritize new and updated programs as needed to respond to the cybersecurity risks we face. We train employees on cybersecurity risks quarterly and generate internal phishing campaigns to assess the effectiveness of the training. As of January 2022, we’ve also hired a Chief Information Security Officer to supplement and develop our security posture as we grow. Cyber insurance is evaluated and renewed annually to address the latest offerings. We also regularly review our privacy policies to ensure compliance with all applicable data privacy regulations. We update our privacy policies on our website following such updates.

Role of the Board in ESG Oversight

In 2021, we formalized our ESG strategy, which we call our FULL-CIRCLE ESG strategy. Our nominating and corporate governance committee is responsible for our corporate social responsibility and sustainability initiatives, including ESG-related policies, strategies and disclosures. To support the nominating and corporate governance committee in these efforts, we have established a management-level ESG Steering Committee consisting of leaders from across our organization. The ESG Steering Committee generally meets monthly and reports directly to our Chief Executive Officer. Further, during 2021, we issued our first ESG report, which outlined many of the sustainability and impact-focused initiatives we have undertaken and laid out our commitment to continue to reduce the carbon footprint of our products and our operations as well as other environmental and social initiatives that positively impact our employees, customers, communities and the planet.

Communications with the Board of Directors

Although we do not have a formal policy regarding communications with our board of directors, stockholders, employees and others who are interested in communicating with our board of directors may do so by writing to us at The AZEK Company Inc., Attn: Corporate Secretary, 1330 W Fulton Street #350, Chicago, Illinois 60607. The Corporate Secretary will forward to the chairperson of our board of directors and such other board members as may be deemed appropriate any such communication, provided that such communication addresses a legitimate business issue.

Non-Employee Director Compensation

DIRECTOR COMPENSATION PROGRAM

We have adopted a director compensation program that was developed primarily based on peer benchmark data in consultation with our independent compensation consultant and that provides the following compensation for non-employee directors:

 

 

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FISCAL 2021 DIRECTOR COMPENSATION TABLE

The following table sets forth information regarding the compensation earned for service on our board of directors during the year ended September 30, 2021 by the directors who were not also NEOs. Mr. Singh did not receive any additional compensation for his service on the board of directors during the year ended September 30, 2021. Mr. Singh’s compensation for the year ended September 30, 2021 is set forth under “Executive Compensation—Summary Compensation Table.”

 

 

 

For each non-employee director, the aggregate number of stock awards outstanding as of the end of the fiscal year ended September 30, 2021 was: Ms. Bailey: 18,279; Mr. Hendrickson: 8,479; Ms. Chima: 5,575, Mr. Heckes: 5,046 and Mr. Spaly: 4,961. This includes unvested restricted stock, RSUs that had not yet vested or for which settlement has been deferred and DSUs that had not settled.

Director and Officer Indemnification Agreements

In addition to the indemnification and advancement of expenses required in our Certificate and bylaws, we have entered into indemnification agreements with each of our current directors and executive officers. These agreements provide for the indemnification of, and the advancement of expenses to, such persons for all reasonable expenses and liabilities, including attorneys’ fees, judgments, fines and settlement amounts, incurred in connection with any action or proceeding brought against them by reason of the fact that they are or were serving in such capacity. For additional information, please see “Related Person Transactions—Indemnification of Directors and Officers.”  

 

 

 

 

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PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our audit committee has appointed PwC as our independent registered public accounting firm to audit our consolidated financial statements for the year ending September 30, 2022. PwC has served as our independent registered public accounting firm since 2010.

At the Annual Meeting, our stockholders are being asked to ratify the appointment of PwC as our independent registered public accounting firm for the year ending September 30, 2022. Stockholder ratification of the selection of PwC as our independent registered public accounting firm is not required by Delaware law, our Certificate or our bylaws. However, our audit committee is submitting the appointment of PwC to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Notwithstanding the appointment of PwC and even if our stockholders ratify the appointment, our audit committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if our audit committee believes that such a change would be in the best interests of our company and our stockholders. If our stockholders do not ratify the appointment of PwC, our board of directors may reconsider the appointment. Representatives of PwC are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire, and are expected to be available to respond to appropriate questions from our stockholders.

Fees Paid to the Independent Registered Public Accounting Firm

The audit committee engaged PwC to perform an annual audit of the Company’s financial statements for fiscal year 2021. The audit committee was responsible for determination and approval of audit fees primarily based on audit scope, with consideration of audit team skills and experiences.

Pursuant to SEC rules, the fees billed by PwC are disclosed in the table below:

 

 

Audit Fees

Consists of fees billed for professional services rendered in connection with the audit of our consolidated financial statements, reviews of our quarterly consolidated financial statements, issuances of consents and similar matters.

AUDIT-RELATED FEES

Consists of fees for professional services rendered in connection with our secondary offerings completed in fiscal year 2021.

TAX FEES

Consists of fees for professional services for tax advisory and compliance services.

 

 

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ALL OTHER FEES

Consists of fees for permitted products and services other than those that meet the criteria above.

Auditor Independence

In our fiscal year ended September 30, 2021, there were no other professional services provided by PwC, other than those listed above, that would have required our audit committee to consider their compatibility with maintaining the independence of PwC.

Pre-Approval Policies and Procedures

Consistent with requirements of the SEC and the Public Company Accounting Oversight Board, or the PCAOB, regarding auditor independence, our audit committee is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. In recognition of this responsibility, our audit committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. All services provided by PwC in fiscal 2021 and 2020 were pre-approved by our audit committee.

Vote Required; Recommendation of the Board of Directors

The ratification of the appointment of PwC requires the affirmative vote of the holders of a majority of the voting power of the shares of our common stock entitled to vote on the proposal that are present in person or represented by proxy at the Annual Meeting and are voted for or against the proposal. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote against this proposal. This proposal is considered a routine matter with respect to which a broker or other nominee can generally vote in its discretion. Therefore, no broker non-votes are expected in connection with this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL YEAR.

 

 

 

 

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REPORT OF THE AUDIT COMMITTEE

 

The primary purpose of the audit committee is to assist our board of directors in overseeing (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent auditors’ qualifications and independence, (4) the performance of the independent auditors and our internal audit function and (5) other matters as set forth in the audit committee’s charter. The audit committee is further responsible for the appointment and oversight of our independent auditor and is involved in the selection of the independent auditor’s lead audit partner.

While our management has primary responsibility for our financial statements, for maintaining effective internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting, the audit committee has reviewed and discussed the Company’s audited financial statements for the year ended September 30, 2021 with management and PwC and, with and without management present, reviewed and discussed the results of PwC’s examination of the financial statements. The audit committee also discussed with management, PwC and our internal auditors, the quality and adequacy of our internal controls and the processes for assessing and monitoring risk. The audit committee reviewed with both PwC and our internal auditor their audit plans, audit scope and identification of audit risks.

The audit committee has discussed with PwC the matters required to be discussed by the PCAOB. The audit committee has also received the written disclosures and the letter from PwC required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the audit committee concerning independence and has discussed PwC’s independence with PwC.

Based on the foregoing, the audit committee has recommended to our board of directors that such audited financial statements be included in our 2021 Annual Report as filed with the SEC.

Respectfully submitted by the members of the audit committee of the board of directors:

Sallie B. Bailey (Chairperson)

Fumbi Chima

Howard Heckes

Gary Hendrickson

Brian Spaly

January    , 2022

This report of the audit committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Act, or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.

 

 

 

 

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EXECUTIVE OFFICERS

The following table identifies certain information about our executive officers as of January 14, 2022. Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.

 

 

Jesse Singh, a director since he joined us in June 2016, is our Chief Executive Officer and President. Prior to joining us, Mr. Singh worked for 14 years at the 3M Company, a manufacturer and marketer of a range of products and services through its safety & industrial, transportation & electronics, health care and consumer segments, and served in numerous leadership roles at 3M, including Chief Commercial Officer, President of 3M’s Health Information Systems business and VP of the Stationery and Office supplies business, which included the iconic Post-it and Scotch Brands. During his career at 3M, Mr. Singh was involved in running 3M’s worldwide, customer-facing operations, which was comprised of 4,000 shared services, 12,000 sales and 5,000 marketing professionals. He also served as CEO of 3M’s joint venture in Japan and led 3M’s global electronics materials business. Mr. Singh currently serves on the board and as a member of the audit and compensation committees of Carlisle Companies Incorporated. Mr. Singh brings to our board of directors extensive senior leadership experience and a comprehensive knowledge of our business and perspective of our day-to-day operations.

Peter Clifford is currently serving as our Senior Vice President and Chief Financial Officer and joined us in August 2021. Prior to joining us, Mr. Clifford served as President and Chief Operating Officer, from May 2019 to August 2021, as well as Chief Financial Officer, from March 2015 to May 2019, of Cantel Medical Corp., which was publicly traded until its acquisition by STERIS plc in June 2021. Before joining Cantel Medical Corp., from March 2006 to March 2015, Mr. Clifford held many senior financial positions at IDEX Corporation, including as Chief Financial Officer of IDEX Corporation’s Fluid Metering Technology and Health & Science Technologies Divisions. Mr. Clifford also worked in various financial leadership roles at General Electric Company before joining IDEX Corporation.

Jose Ochoa is currently serving as our President, Residential Segment. Mr. Ochoa joined us in July 2017. Prior to joining us, Mr. Ochoa spent 15 years at Owens Corning, a developer and producer of insulation, roofing and fiberglass composites, in various roles. Most recently, he was Vice President of Strategic Marketing for the Roofing and Asphalt division, and served on the operating committee and as an officer of the company. Prior to that, Mr. Ochoa was Vice President and General Manager of the Engineered Insulation Systems (EIS) business, Vice President and General Manager of the Foam Insulation division and General Manager of the Latin America division. Prior to Owens Corning, Mr. Ochoa served as Vice President of Technology for ServiceLane, a privately funded startup focused on home services, where he established a national network for home maintenance with Lowe’s Home Improvement Center. Mr. Ochoa also co-founded Fifth Gear Media, which later merged to form Luminant Worldwide Corp. before its initial public offering. Before Fifth Gear Media, Mr. Ochoa held a variety of leadership positions with Frito-Lay, Inc. (part of the PepsiCo Company), The Procter & Gamble Company and AT Kearney, Inc.

 

 

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Scott Van Winter joined us in January 2017 and is currently serving as our President, Commercial Segment. With more than 25 years of experience in the performance polymers industry, Mr. Van Winter most recently served as Chief Executive Officer and Executive Vice President at Jindal Films Americas, LLC, a leader in the development and manufacture of specialty films, from January 2015 to December 2016, where he led the U.S. and European businesses. Prior to joining Jindal Films America, Mr. Van Winter served as General Manager and Senior Vice President of the Lumirror Polyester Film Division of Toray Plastics (America), Inc., from April 2007 to January 2015, and Vice President of OPS Sheet and Specialty Films for Alcoa KAMA Co. from June 2002 to June 2004.

Sandra Lamartine is currently serving as our Senior Vice President and Chief Human Resources Officer and joined us in April 2021. Ms. Lamartine brings to AZEK more than two decades of experience in organizational design, leadership development and talent management, spanning a number of industries, including building products, professional services, telecommunications and nutrition/dairy. Most recently, from 2016 to 2021, Ms. Lamartine served as Chief People Officer for Glanbia Nutritionals under Glanbia, Inc. Previously, from 2007 to 2016, Ms. Lamartine held various roles at James Hardie Building Products, including serving as the top HR executive from 2010 to 2016, overseeing initiatives that created a significant reduction in employee turnover, as well as the creation of award-winning development and onboarding programs.  

Bobby Gentile is currently serving as our Senior Vice President of Operations and joined us in November 2016. Mr. Gentile has over 20 years of professional operations experience and most recently served as the Vice President of Manufacturing and Logistics at Overhead Door Corporation, a manufacturer of doors and openers, from April 2009 to November 2016. Prior to that, Mr. Gentile was an Operations Leader for Gardner Bender, a manufacturer of electrical and wire management products, from April 2006 to April 2009. He also held the role of Director of Operations for Newell-Rubbermaid Inc., known today as Newell Brands Inc., a leading global consumer goods company, from 2001 to 2006.

Jonathan Skelly is currently serving as our Senior Vice President of Customer Experience and joined us in January 2018. Mr. Skelly has 20 years of strategy, mergers and acquisitions, analytics, integration and business development experience. He most recently served as Vice President of Corporate Development for W. W. Grainger, Inc., an industrial supply company, from 2010 to December 2017. During that time, Mr. Skelly was responsible for all global and domestic corporate development and mergers and acquisitions. Prior to that, he held a variety of leadership positions including Director of Strategic Business Development for The Home Depot Inc. and Director of Mergers & Acquisitions for Hughes Supply, Inc.

Paul Kardish is currently serving as our Senior Vice President and Chief Legal Officer. Prior to joining us in September 2019, Mr. Kardish had over 25 years of broad legal, human resources, corporate governance and compliance, security, and government relations experience, serving as the Executive Vice President, General Counsel and Secretary of Schneider National, Inc. from August 2013 through March 2019, and prior to that holding positions at several Fortune 250 companies spanning multiple industries, including Honeywell International Inc., Intel Corporation, Micron Technology, Inc. and Freeport McMoRan Inc. He holds a bachelor’s degree in social work/psychology from Juniata College, a juris doctor from Gonzaga University School of Law and a Master of Laws degree from New York University School of Law. He was admitted to the Texas Bar in 1993 and to the Wisconsin Bar in 2013. Mr. Kardish also served as a Special Agent with the Federal Bureau of Investigation and is trained in emergency management. He also serves as a member of the Board of Directors for the American Red Cross-Northeastern Wisconsin.

Samara Toole is currently serving as our Senior Vice President and Chief Marketing Officer. Prior to joining us in October 2021, Ms. Toole had over 20 years of experience driving growth and building brands for purpose-driven companies in the home, lifestyle, and consumer products industries. Most recently, Toole served as Chief Marketing Officer of California Closet Company, Inc. from November 2014 to April 2021, where she drove significant growth by developing a sophisticated multi-touchpoint marketing strategy, up leveling ecommerce and marketing software tools, and overseeing the production of award-winning content. Prior to that, Ms. Toole served as the Senior Vice President of Marketing for Serena & Lily, Inc., a luxury lifestyle brand, from January 2006 to November 2014, and Ms. Toole held other senior-level roles in the lifestyle and consumer product categories prior thereto.

Michelle Kasson is currently serving as our Chief Information Officer and joined us in December 2019. Ms. Kasson has over 25 years of corporate IT experience in the consumer product goods, food and pharmaceutical industries. She most recently served as IT Director at the J.M. Smucker Company for 11 years with responsibilities including enterprise software development, managed service delivery, portfolio development and project execution. Prior to that, Ms. Kasson held a variety of information technology roles at Procter and Gamble, from May 1992 to October 2008. Ms. Kasson received a Bachelors in Management Information Systems from the University of Dayton in 1992 and a Masters of Business Administration from Xavier University in Cincinnati, OH in 1997.

Gregory Jorgensen is currently serving as our Vice President and Chief Accounting Officer and joined us in April 2019. Mr. Jorgensen has 20 years of financial reporting and technical accounting experience in manufacturing, distribution and other various industries. He was previously Vice President and Chief Accounting Officer with Beacon Roofing Supply, Inc. from 2016 to 2019 as well as with Hertz Global Holdings Inc., where he has served as the Vice President of Financial Reporting, Technical Accounting, and Policy from 2014 to 2016. Prior to that, Mr. Jorgensen was the Assistant Corporate Controller for Ball Corporation, a global packaging solutions company based out of Denver, Colorado. He is a Certified Public Accountant and holds a Bachelor of Science in Accounting from Brigham Young University.

 

 

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Amanda Cimaglia is currently serving as our Vice President, ESG. Prior to joining us in January 2021, Ms. Cimaglia was a Managing Director with Solebury Trout’s ESG 360 practice, where she advised private and public companies on the development and communication of ESG strategies, including investor relations and corporate communications initiatives. From 2012 to 2019, Ms. Cimaglia held a variety of roles at Hannon Armstrong, the first U.S. public company solely dedicated to investments in climate solutions, where she most recently served as head of investor relations and ESG. Ms. Cimaglia holds a bachelor’s degree in business administration, cum laude, from Loyola University Maryland and a master of science in investor relations from Fordham University. She has served as a member of the ESG working groups for both the American Council on Renewable Energy (ACORE) and the New York Stock Exchange (NYSE).

Morgan Walbridge is currently serving as our Vice President and Deputy Chief Legal Officer. Prior to joining us in February 2021, Ms. Walbridge served as Deputy General Counsel and Secretary of Century Aluminum Company from March 2014 to February 2021. Prior thereto, Ms. Walbridge was Associate General Counsel and Assistant Secretary of Thompson Creek Metals Company from March 2011 to March 2014. Ms. Walbridge began her legal career as a corporate transactional attorney at McDermott, Will & Emery . Ms. Walbridge has over 15 years of experience as a corporate attorney and has spent over a decade in-house at publicly traded companies.

 

 

 

 

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PROPOSAL NO. 3

FREQUENCY OF SAY-ON-PAY VOTES

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act enable our stockholders, at least once every six years, to indicate their preference regarding how frequently we should solicit a non-binding advisory vote on the compensation of our named executive officers as disclosed in the our proxy statement. Such advisory votes are commonly referred to as “Say-on-Pay Votes”. Accordingly, we are asking stockholders to indicate whether they would prefer Say-on-Pay Vote every year, every other year or every three years. Alternatively, stockholders may abstain from casting a vote. For the reasons described below, our board of directors recommends that the stockholders select a frequency of “One Year”.

Our board of directors believes that an annual Say-on-Pay Vote is the most appropriate frequency for us at this time. While our executive compensation programs are designed to promote the creation of stockholder value over the long term, our board of directors recognizes that executive compensation disclosures are made annually, and holding an annual Say-on-Pay Vote provides us with more direct and immediate feedback on our compensation disclosures.

Accordingly, our board of directors is asking stockholders to indicate their preferred voting frequency by voting for one, two or three years or abstaining from voting on this proposal. While our board of directors believes that its recommendation is appropriate at this time, the stockholders are not voting to approve or disapprove that recommendation, but are instead asked to indicate their preferences, on an advisory basis, as to whether the Say-on-Pay Vote should be held every year, every other year or every three years.

Our board of directors and the compensation committee value the opinions of the stockholders in this matter and, to the extent there is any significant vote in favor of one frequency over the other options, even if less than a majority, our board of directors will consider the stockholders’ concerns and evaluate any appropriate next steps. However, because this vote is advisory and, therefore, not binding on us or our board of directors, our board of directors may decide that it is in the best interests of the stockholders that we hold a Say-on-Pay Vote more or less frequently than the option preferred by the stockholders. The vote will not be construed to create or imply any change or addition to the fiduciary duties of the Company or our board of directors.

Vote Required; Recommendation of the Board of Directors

The frequency that receives the affirmative vote of the holders of a majority of the voting power of the shares of our common stock entitled to vote on the proposal that are present in person or represented by proxy at the Annual Meeting will be the frequency recommended by stockholders. If no frequency receives the foregoing vote, then we will consider the option of ONE YEAR, TWO YEARS, or THREE YEARS that receives the highest number of votes cast to be the frequency recommended by stockholders. Abstentions and broker non-votes will have no effect on the outcome of this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “ONE YEAR” AS THE PREFERRED FREQUENCY OF SAY-ON-PAY VOTES.

 

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides our stockholders with a description of our executive compensation program and philosophy, the decisions made by our compensation committee and the various factors that the compensation committee considered when making those decisions. We intend for our compensation program to align with the interests of our stockholders as well as our other stakeholders, including our other employees and the communities in which we operate. For fiscal year 2021, our NEOs were:

 

 

Overview of Fiscal 2021 Company Performance and Pay for Performance Alignment

Fiscal Year 2021 Financial Performance Summary

In our first year as a public company, we delivered record financial results and achieved a number of important milestones, all while executing against our strategy of delivering long-term, sustainable growth and value creation for our stockholders, customers, partners and employees.  Net sales for the year increased 31.1% year-over-year to $1.2 billion. Net income increased by $215.4 million to $93.2 million, or $0.59 per share, for fiscal year 2021 and Adjusted EBITDA increased 23.4% year-over-year. Adjusted EBITDA is a non-GAAP financial measure and should not be considered in isolation or as a substitute for any of our financial measures reported under generally accepted accounting principles, or GAAP. For a discussion of Adjusted EBITDA, including a reconciliation to net income, its closest comparable GAAP measure, see pages 45-48 of our 2021 Annual Report as filed with the SEC on November 23, 2021.

These results were driven by strong end-market demand combined with superior execution against our internal business initiatives. We delivered the first two phases of our multi-phase capacity expansion plan, increasing decking capacity by approximately 40% as compared to our 2019 baseline, advancing our goal of achieving over 100% decking capacity expansion by the end of 2022, while also continuing to improve throughput in our existing operations, launching a number of new product lines and capitalizing on continued material conversion trends. In a very challenging inflationary environment, we were able to offset raw material inflation through price and productivity gains. We expanded our consumption and supply of recycled materials to meet increasing demand and believe we are well-positioned to achieve our 2026 goal of recycling one billion pounds annually.

 

 

 

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Fiscal Year 2021 Pay for Performance Alignment

We believe that executive compensation for fiscal 2021 reflected our strong financial and operational results for the year and demonstrates our pay-for-performance philosophy discussed in more detail below. For each of our annual and long-term incentive programs, we believe that we establish aggressive, but achievable, goals and performance targets to properly incentivize our management to perform strongly and to consistently deliver value to our stockholders.

Compensation Philosophy

Our executive compensation program is designed by our compensation committee to (i) align executive compensation with our financial and operational performance; (ii) attract, retain and motivate key executives critical to achieving our vision and strategy; and (iii) reward such executives for delivering desired business results and stockholder value.  

Consistent with this philosophy, performance-based compensation represented a significant portion of our NEO’s target total direct compensation for fiscal 2021.  In particular, 100% of the cash incentive awards paid to our NEOs under our annual incentive plan are tied to pre-established financial and/or individual performance goals designed to be aligned with our operational and long-term strategic initiatives.  In addition, 50% of the equity awards granted to our NEOs under our 2021 long-term incentive compensation program were PSUs, which vest based on pre-established financial goals and are awarded to incentivize achievement of our financial and performance goals over a multi-year timespan and tie our NEOs’ compensation to those goals. 25% of such awards are granted in the form of service-vesting, non-qualified stock options, or stock options, which are awarded to motivate our NEOs by ensuring that they only have value to the extent the market price of our Class A common stock increases. The remaining 25% of such awards are granted in the form of RSUs, which are awarded in order to motivate our NEOs to continue their employment with us for many years. Our compensation committee believes that this balancing of RSUs, PSUs and stock options appropriately motivates our NEOs in furtherance of our success and our stockholders’ realization of value.

We assess the market competitiveness of our executive compensation program based on peer group data to deliver a total package consisting of base salary, annual incentive awards, long-term incentive awards, retirement benefits and other perquisites intended to be competitive for the relevant market for executive talent and closely aligned with the interests of our stockholders. The compensation committee utilizes “median market” ranges that are computed based on peer group data when targeting the compensation opportunities for our NEOs but retains discretion to make adjustments it deems advisable to balance our overall performance and the individual performance of our executive officers with our pay for performance philosophy. In exercising its discretion to set target compensation levels, the compensation committee considers an executive’s experience and skill set, among other factors. Individual executive compensation may ultimately be higher or lower than the targeted median.

Roles and Responsibilities

Role of the Compensation Committee

Our compensation committee is primarily responsible for establishing and overseeing our general compensation strategy. In addition, the compensation committee oversees our compensation and benefit plans and policies, administers our omnibus equity incentive plan and reviews and approves compensation decisions relating to our executive officers, including our Chief Executive Officer. Our compensation committee has structured our executive compensation program to align with a compensation philosophy that is based on several objectives, including instilling an ownership culture and linking the interests of our executive officers with those of our stockholders and our other stakeholders; paying for performance; rewarding executive officers for achievement of both our annual and longer-term financial and key operating goals; and facilitating the

 

 

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attraction, motivation and retention of highly talented executive leaders. In addition to structuring our overall executive compensation program, our compensation committee routinely reviews, with the assistance of management and our independent compensation consultant, the actual compensation of our executive officers in the context of both our corporate goals and performance and our performance relative to our peers, as well as our peers’ executive compensation levels and programs. Further, our compensation committee reviews and approves annual grants and other incentive compensation awarded to our executive officers and certain other key employees, ensures that proper due diligence, deliberations and reviews of our executive compensation and overall compensation philosophy and strategy are conducted and oversees risks associated with our compensation practices. For more information regarding our compensation committee’s management and oversight of compensation-related risks, see “Corporate Governance—Role of the Board in Risk Oversight; Cybersecurity Risk”.

While our compensation committee reviews our executive compensation programs throughout the year, decisions with respect to salary increases, annual incentives and long-term incentives, including the metrics and objectives used to measure the performance of our executive officers and other employees, are typically made during the first fiscal quarter of each fiscal year. These decisions follow discussions that our compensation committee holds with and without management and our independent compensation consultant. In determining annual and long-term compensation amounts, our compensation committee reviews our performance over the prior year and, more generally, the performance of each individual executive officer. In determining our Chief Executive Officer’s compensation, our compensation committee considers, among other things, our performance relative to our peers, the value of incentive awards granted to Chief Executive Officers of our peers and the value of awards granted to our Chief Executive Officer in prior years. Consideration is also given to compensation elements such as bonuses and perquisites, if any. The compensation committee considers recommendations from our Chief Executive Officer regarding the compensation of our executive officers other than himself. Our Chief Executive Officer makes such recommendations regarding base salary, and short-term and long-term compensation, including equity incentives, for our executive officers based on our results, an executive officer’s individual contribution toward these results, the executive officer’s role and performance of his or her duties and his or her achievement of individual goals. Our compensation committee then reviews the recommendations and other data, including various compensation survey data and publicly available data of our peers, and makes decisions as to the target total direct compensation for each executive officer, including our Chief Executive Officer, as well as each individual compensation element. While our Chief Executive Officer typically attends meetings of the compensation committee, the compensation committee meets outside the presence of our Chief Executive Officer when discussing his compensation and when discussing certain other matters.

Role of Management

Management, and in particular our Chief Executive Officer, consults with our compensation committee with respect to our overall compensation philosophy, our compensation programs and objectives and compensation decisions with respect to individual executives and other employees. Management also presents regularly to the compensation committee with respect to our performance and strategy, both in order to keep the compensation committee apprised of how our performance will impact outstanding incentive awards and to inform the compensation committee with respect to future compensation decision-making. Management also provides the compensation committee with individual evaluations of each executive officer in connection with determining such officer’s achievement of personal objectives and such officer’s target compensation for the following fiscal year.

Role of the Independent Compensation Consultant

Under its charter, our compensation committee has the right to retain or obtain the advice of compensation consultants, independent legal counsel and other advisers. For fiscal year 2021, our compensation committee retained FW Cook & Co., Inc., or FW Cook, as its independent compensation consultant. FW Cook primarily advised the compensation committee with respect to our compensation philosophy and objectives, our determination of appropriate peers for benchmarking executive compensation levels and practices, market pay levels, our executive compensation risk assessment, the positioning of our director and executive compensation policies within these frameworks, the forms of long-term incentive awards issued to our directors and executive officers, and our compensation-related proxy disclosure. The compensation committee consulted with FW Cook regularly throughout the year, and one or more representatives of FW Cook attended portions of our compensation committee meetings. The compensation committee considered the information presented by its independent compensation consultant, but all decisions regarding the compensation of our executive officers were made independently by the compensation committee. In fiscal year 2021, in compliance with SEC and NYSE rules, the compensation committee assessed the independence of FW Cook and concluded that no conflict of interest exists that would prevent FW Cook from independently advising the compensation committee. FW Cook did not provide any services to us in fiscal year 2021 other than the services provided directly to the compensation committee.

 

 

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Benchmarking

Each year, our compensation committee, with the advice of our independent compensation consultant, evaluates each of our NEO’s total direct compensation opportunity, which reflects that executive’s base salary and target award amounts under both our annual incentive and long-term incentive plans, as well as the form of such long-term incentive awards, against total direct compensation opportunities for comparable executives of similarly-situated companies. The compensation committee does not necessarily set total compensation opportunities for our NEOs to be higher or lower than any specific peer company, nor does the compensation committee restrict compensation of our NEOs to any particular range based on our peers. The compensation committee does take such peers into consideration to determine whether our NEOs’ individual total compensation opportunities are reasonable and appropriate in the context of such executive’s background, performance, tenure with the Company and other factors. We strive to balance offering competitive compensation to attract the best talent available with ensuring that such compensation remains aligned with our stockholders’ and other stakeholders’ objectives and best interests. The companies included in our peer group for fiscal year 2021 total direct compensation opportunity benchmarking purposes are below:

 

 

We regularly evaluate whether our peer group remains appropriate for benchmarking purposes for subsequent fiscal years, and the companies included in our peer group for fiscal year 2022 total direct compensation opportunity benchmarking purposes are below. For fiscal year 2022, we removed Apogee Enterprises, Inc., Cornerstone Building Brands, Inc., Ferro Corporation, GMS, Inc. and JELD-WEN Holding, Inc. from our peer group because each of those companies is no longer sufficiently comparable in either size or business fit, including, in certain cases, due to major corporate transactions and similar events. We added A.O. Smith Corporation, AAON, Inc., Floor and Décor Holdings, Inc., James Hardie Industries plc, Lennox International Inc., PGT Innovations, Inc., RH and SiteOne Landscape Supply, Inc. because they are more closely aligned with us than certain members of our fiscal year 2021 peer group across multiple metrics, including total assets, revenue, market capitalization and enterprise value, and they more closely resemble us in terms of product offerings and targeted markets.

 

 

 

 

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Elements of Executive Compensation

Our executive compensation program is made up of the following principal components.  Detailed narratives of these compensation elements are provided below under "—2021 NEO Compensation Details."

 

2021 NEO Compensation Details

 

Base Salary

Base salaries are designed to be competitive and fairly compensate our executive officers, including our NEOs, for the responsibility level of each respective position. Our compensation committee reviews the salaries of our executive officers annually to determine whether adjustments are appropriate.  In determining the base salaries for our executive officers, our compensation committee reviews each individual’s role and responsibilities, previous year’s salary and individual performance, as well as the base salaries of similarly situated executives at comparable companies from peer group and survey data. Annual adjustments are generally effective in January, but our compensation committee may also review the salaries of our executive officers in connection with a promotion or other change in responsibility.

The annual base salaries of the NEOs as of the end of fiscal year 2021 were $790,974 for Mr. Singh, $600,000 for Mr. Clifford, $412,016 for Mr. Kardish, $450,150 for Mr. Ochoa, $395,201 for Mr. Skelly and, at the time of his resignation, $520,000 for Mr. Nicoletti. Each of our NEOs received a merit-based base salary increase of between 3% and 4% for fiscal year 2021 as compared to their base salary for fiscal year 2020.

Annual Incentive

Our annual incentive compensation is composed of cash compensation payable during the first fiscal quarter following the completion of each fiscal year. Annual incentive compensation is designed to motivate and reward achievement of corporate annual performance goals established by our compensation committee as well as performance with respect to annual goals of each individual executive officer. In determining an executive officer’s actual annual incentive compensation payable following any particular fiscal year, our compensation committee measures the actual outcomes for each performance metric as compared to the pre-established, target goals. For more information regarding our alignment of our NEO’s compensation to our performance for fiscal year 2021, see “—Overview of Fiscal 2021 Company Performance and Pay for Performance Alignment.” The annual incentive compensation paid to each of our NEOs for fiscal year 2021, including the methodology used to calculate such compensation, is described below.

TARGET INCENTIVE OPPORTUNITIES

For our executive officers, 75% of each individual’s target annual incentive award is determined by reference to corporate objectives, which can be company-wide, based on such individual’s specific operating segment or a combination of both, and 25% of each individual’s annual incentive award is based upon individual performance relative to individual goals established at the beginning of that fiscal year, including ESG goals. Beginning with our fiscal year 2021, 10% of each executive officer’s annual incentive compensation opportunity is tied to ESG objectives, highlighting our commitment to our ESG goals and performance. Payouts between threshold, target and maximum levels are generally interpolated on a straight-line basis, provided that the increase in payout between target and maximum levels is accelerated as compared to the increase between threshold and

 

 

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target levels to further incentive our executive officers and other employees to achieve our more ambitious goals.  The target opportunity for fiscal year 2021 for each of the NEOs was as follows: