is your company prepared for a ceo transition? - pearl … · is your company prepared for a ceo...
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Is Your Company Prepared for a CEO Transition?
©2012 Pearl Meyer & Partners, LLC
Is Your Company Prepared for a CEO Transition?
Jack RichieRetired VP HR
Rogers Corporation
World At Work Total Rewards Conference – May 21, 2012
Bernie AldrichChairman of the Board
Apogee Enterprises Warren PlanitzerVP Human ResourcesApogee EnterprisesMelissa Means
Managing DirectorPearl Meyer & Partners
Agenda
Introductions
Setting the Stage
The Rogers Corporation Story
The Apogee Enterprises Inc Story
A Sample Compensation Story
1©2012 Pearl Meyer & Partners, LLC
Introductions
Setting the Stage
The Rogers Corporation Story
The Apogee Enterprises Inc Story
A Sample Compensation Story
Introductions
Panelists
Jack Richie Retired Vice President of Human Resources –Rogers Corporation
Bernie Aldrich Chairman of the Board of Directors – ApogeeEnterprises Inc.
2©2012 Pearl Meyer & Partners, LLC
Bernie Aldrich Chairman of the Board of Directors – ApogeeEnterprises Inc.
Warren Planitzer Vice President of Human Resources – ApogeeEnterprises Inc.
Melissa Means Managing Director – Pearl Meyer & Partners
The following chart outlines key constituents and related steps toconsider when working on a CEO transition
Setting the Stage
3©2012 Pearl Meyer & Partners, LLC
CEO Transition
Advanced materials technologycompany specializing in uniquehigh-reliability, high-performancesolutions
2011 Sales of $553.2 M
Headquartered in Rogers, CT;manufacturing & sales worldwide
~2500 employees worldwide
Public Company, ROG on NYSE
Established in 1832
About Rogers Corporation
5©2012 Pearl Meyer & Partners, LLC
Advanced materials technologycompany specializing in uniquehigh-reliability, high-performancesolutions
2011 Sales of $553.2 M
Headquartered in Rogers, CT;manufacturing & sales worldwide
~2500 employees worldwide
Public Company, ROG on NYSE
Established in 1832
Our Technologies
6©2012 Pearl Meyer & Partners, LLC
High PerformanceFoams
Printed CircuitMaterials
PowerElectronicsSolutionscuramik® DBC SubstratesRO-LINX® Busbars
PORON® Urethane FoamsBISCO® Silicone Materials
ROGERS Advanced CircuitMaterials
GlobalHeadquartersRogers, Connecticut
ManufacturingCarol Stream, IllinoisChandler, ArizonaRogers, ConnecticutWoodstock, Connecticut
ManufacturingEschenbach & Bremen,GermanyGent & Evergem, Belgium
ManufacturingSuzhou, ChinaAnsan, KoreaNagoya, Japan (JV)
Sales OfficesBangaloreBeijingSeoulShanghaiShenzhenSingaporeTaipeiTokyo
North America Europe
Asia
2011 Revenues by Region*
Asia49%
N.America
20%
Other3%
Our Global Reach
7©2012 Pearl Meyer & Partners, LLC
GlobalHeadquartersRogers, Connecticut
ManufacturingCarol Stream, IllinoisChandler, ArizonaRogers, ConnecticutWoodstock, Connecticut
ManufacturingSuzhou, ChinaAnsan, KoreaNagoya, Japan (JV)
Sales OfficesBangaloreBeijingSeoulShanghaiShenzhenSingaporeTaipeiTokyo
Europe28%
80% of Sales Outside US
Megatrends Accelerating Our Growth
8©2012 Pearl Meyer & Partners, LLC
CLEAN TECHNOLOGY• Variable Frequency Motor
Drives• Wind & Solar Energy• Hybrid Electric Vehicles
MASS TRANSIT• Commercial Aircraft
interiors• Rail power distribution• Vibration Management
INTERNET• Wireless Infrastructure• Mobile Internet Devices• Wired Infrastructure
Preparing for the Trip
Board of Directors establish selection processfor new CEO
List of internal candidates selected
Quarterly progress report to Board
Directors target last 15 months of CEO’stenure to select new CEO
9©2012 Pearl Meyer & Partners, LLC
Board of Directors establish selection processfor new CEO
List of internal candidates selected
Quarterly progress report to Board
Directors target last 15 months of CEO’stenure to select new CEO
Starting the Trip – Is there an Internal Candidate?
Search Committee selected
Establish CEO qualifications
Develop process to assess internal candidates
Provide on-the-job development opportunitiesfor internal candidates
Develop internal communication plan
10©2012 Pearl Meyer & Partners, LLC
Search Committee selected
Establish CEO qualifications
Develop process to assess internal candidates
Provide on-the-job development opportunitiesfor internal candidates
Develop internal communication plan
Arriving at the 1st Destination
Internal or External?
Internal candidates will not succeed the currentCEO
• Internal candidates were not told at this time
11©2012 Pearl Meyer & Partners, LLC
Internal or External?
Internal candidates will not succeed the currentCEO
• Internal candidates were not told at this time
Off to the 2nd Destination – An Outside Search
Compensation package developed with PM&Pfor search firm
Guidance to search firm on screeningcandidates
Create and document external candidateevaluation process
Interviews of external candidates
12©2012 Pearl Meyer & Partners, LLC
Compensation package developed with PM&Pfor search firm
Guidance to search firm on screeningcandidates
Create and document external candidateevaluation process
Interviews of external candidates
The 2nd Destination – A Candidate is Selected
Work with PM&P to understand externalcandidate compensation to constructemployment offer
Work with PM&P to create “transitioncompensation package” for current CEO
13©2012 Pearl Meyer & Partners, LLC
Work with PM&P to understand externalcandidate compensation to constructemployment offer
Work with PM&P to create “transitioncompensation package” for current CEO
Arrival at Final Destination
Develop internal and external communicationsplan
New CEO contact each direct report
Current and new CEO develop transition plan
First day “town hall” meeting with allemployees at Corporate Offices
Coaching process for new CEO
14©2012 Pearl Meyer & Partners, LLC
Develop internal and external communicationsplan
New CEO contact each direct report
Current and new CEO develop transition plan
First day “town hall” meeting with allemployees at Corporate Offices
Coaching process for new CEO
Key Take Aways
Selection criteria based on competencies, skillsand experiences
All Directors need to agree on selection criteria
Interviews need to be structured and documented
Work with PM&P on compensation issues
Transition to new CEO as quickly as possible
Only include “qualified” internal candidates
15©2012 Pearl Meyer & Partners, LLC
Selection criteria based on competencies, skillsand experiences
All Directors need to agree on selection criteria
Interviews need to be structured and documented
Work with PM&P on compensation issues
Transition to new CEO as quickly as possible
Only include “qualified” internal candidates
Industry leader in GlassFabrication forArchitectural & PictureFraming Products
Founded in 1949
More than 3,400employees in 6 businessunits within the U.S. andBrazil
Publicly traded on theNASDAQ (APOG)
Fiscal 2012 sales >$663M
About Apogee Enterprises, Inc.
17©2012 Pearl Meyer & Partners, LLC
Industry leader in GlassFabrication forArchitectural & PictureFraming Products
Founded in 1949
More than 3,400employees in 6 businessunits within the U.S. andBrazil
Publicly traded on theNASDAQ (APOG)
Fiscal 2012 sales >$663MMandalay BayLas Vegas, NV
Primarily commercial &institutional customers
Visible presence onskylines around theworld:
• Africa, Asia, Australia,Europe, New Zealand,North and SouthAmericas, Middle East
Dominate the PictureFraming Glass &Acrylic Market
About Apogee Enterprises, Inc.
18©2012 Pearl Meyer & Partners, LLC
Primarily commercial &institutional customers
Visible presence onskylines around theworld:
• Africa, Asia, Australia,Europe, New Zealand,North and SouthAmericas, Middle East
Dominate the PictureFraming Glass &Acrylic Market
Freedom Tower & Ground Zero SiteNew York, NY
Background
Apogee Background
Board Discussion
CEO/Director Meeting
19©2012 Pearl Meyer & Partners, LLC
Board Action
Formulation of Board search committee
• Apogee business strategy
• Apogee situation
• Candidate attributes
Director interviews
Management interviews
Search firm selection – Spencer Stuart
20©2012 Pearl Meyer & Partners, LLC
Formulation of Board search committee
• Apogee business strategy
• Apogee situation
• Candidate attributes
Director interviews
Management interviews
Search firm selection – Spencer Stuart
Process
Candidate sourcing
Internal candidates
Pearl Meyer & Partners
Interview
21©2012 Pearl Meyer & Partners, LLC
Candidate sourcing
Internal candidates
Pearl Meyer & Partners
Interview
Selection
Offer
Development of compensation package
Identification and resolution of compensationissues
Clarification of existing non-competes
Board review and approval
22©2012 Pearl Meyer & Partners, LLC
Offer
Development of compensation package
Identification and resolution of compensationissues
Clarification of existing non-competes
Board review and approval
Issues
Timeline is difficult to co-ordinate between sitting CEO,Board, and new CEO
Verification, clarification, and valuation of LTI which newCEO will be forfeiting from current employer requiresindependent analysis
Verification, clarification, and valuation of departing CEOLTI and bonus opportunity must be addressed
Existing non-competes must be reviewed by legal counsel
What and when such information should be shared with theexecutive management team to keep them informed yetprotect the confidentiality of the search / candidate
23©2012 Pearl Meyer & Partners, LLC
Timeline is difficult to co-ordinate between sitting CEO,Board, and new CEO
Verification, clarification, and valuation of LTI which newCEO will be forfeiting from current employer requiresindependent analysis
Verification, clarification, and valuation of departing CEOLTI and bonus opportunity must be addressed
Existing non-competes must be reviewed by legal counsel
What and when such information should be shared with theexecutive management team to keep them informed yetprotect the confidentiality of the search / candidate
On-Boarding
Pre-start date preparation
Announcement day
External and internal communication
Ongoing coaching and support
24©2012 Pearl Meyer & Partners, LLC
Pre-start date preparation
Announcement day
External and internal communication
Ongoing coaching and support
Introduction to the Company
First staff meeting
On-site business unit Town Hall meeting
Two-way communication
Speed and thoroughness
25©2012 Pearl Meyer & Partners, LLC
First staff meeting
On-site business unit Town Hall meeting
Two-way communication
Speed and thoroughness
Key Take Aways
Don’t underestimate the depth and breadth ofpreparation needed
Remain flexible with a solid strategy
Keep listening to all voices throughout the process
“One-size” does not fit all
It is difficult and unlikely that an internal CEO candidatecan be selected and groomed within a $500 million dollarorganization attempting a strategic directional change
First time CEO’s need coaching on the role of the Boardand communication with the Board
Executive management team needs to understand therole of the Board and frequency of communication withthe Board
26©2012 Pearl Meyer & Partners, LLC
Don’t underestimate the depth and breadth ofpreparation needed
Remain flexible with a solid strategy
Keep listening to all voices throughout the process
“One-size” does not fit all
It is difficult and unlikely that an internal CEO candidatecan be selected and groomed within a $500 million dollarorganization attempting a strategic directional change
First time CEO’s need coaching on the role of the Boardand communication with the Board
Executive management team needs to understand therole of the Board and frequency of communication withthe Board
A Sample Compensation Story –A Side-by-Side Comparison
27©2012 Pearl Meyer & Partners, LLC
A Sample Compensation Story –A Side-by-Side Comparison
Recruiter Information(as Provided by the Candidate)
Total Cash:$400,000 - base salary$450,000 - annual guaranteed bonus$320,000 - short-term cash bonus$250,000 - LTIP paid in cash (annual part of 2-year program)$25,000 - other compensation$1,050,000 - total cash compensation
LTI:$300,000 - annual restricted stock (RS) grant value; best over 3 yrs$250,000 - annual stock options (SO) grant value; vest over 3 yrs$1,800,000 - unvested restricted shares (net after $750,000 vests7/1/11)
There is no non-competition or restrictive covenants.
Two bonuses? What’sthe difference?
What does this include?
28©2012 Pearl Meyer & Partners, LLC
Total Cash:$400,000 - base salary$450,000 - annual guaranteed bonus$320,000 - short-term cash bonus$250,000 - LTIP paid in cash (annual part of 2-year program)$25,000 - other compensation$1,050,000 - total cash compensation
LTI:$300,000 - annual restricted stock (RS) grant value; best over 3 yrs$250,000 - annual stock options (SO) grant value; vest over 3 yrs$1,800,000 - unvested restricted shares (net after $750,000 vests7/1/11)
There is no non-competition or restrictive covenants.
PM&P Information(as Provided by the Candidate)
Compensation Components FY 2010 FY 2011
Cash & Equity Compensation
Base Salary $375,000 $400,000
Target Bonus($) $187,500 $200,000
Actual Bonus $320,000(85% of base salary)
TBD(estimated at 170%
achievement= $340,000)
Annual Perquisite Allowance $25,000 $25,000
Long-Term Incentives $935,340 $1,071,250
29©2012 Pearl Meyer & Partners, LLC
Long-Term Incentives(at target) $935,340 $1,071,250
- Stock Options(grant date fair value) $214,320 $306,000
- Restricted Units(RUs)(grant date fair value) $241,020 $285,250
- Growth Units(GUs)–(grant date fair valueat target)
$480,000(estimated at 177% achievement = $850,,000)
ActualTotal Direct $1,670,340 $1,846,250
PM&P Information(as Provided by the Candidate)
CompensationComponents
Unvested
NotesShares Stock Price on Date
of Grant
In-The Money Valueof Options / Fair
Market Value
As of 2011
Stock Options
14,000 granted on 2/28/08 – 3,500(25%) remain unvested $58.50 $0
Unvested Value The “in-the money” value is
based on a current stock priceof $57.00 as of June 22, 2011.
Please note 3,500 stock optionsare slated to vest in the nextfew days on June 26, 2011.However, due to the grant pricebeing higher than the currentstock price ($57.00), theoptions hold no current value.
32,000 granted on 2/24/09 – 16,000(50%) remain unvested $28.00 $464,000
24,000 granted on 2/26/10 – 18,000(75%) remain unvested $40.17 $302,940
25,000 granted on 2/25/11 – 25,000(100%) remain unvested $57.05 $0
Sub-Total 62,500 -- $766,940
Restricted Units
13,000 vests on 2/24/2012 $741,000
Unvested Value Reflects the value of unvested
restricted shares multiplied bythe current stock price of$57.00 as of June 22, 2011.
4,000 vests on 7/31/2012 $228,000
6,000 vests on 2/26/2013 $342,000
2,400 vests on 3/12/2013 $136,800
6,000 vests on 6/28/2013 $342,000
5,000 vests on 2/25/2014 $285,000
5,000 vests on 7/13/2014 $285,000
Sub-Total 41,400 -- $2,359,800
Growth Units 4,800 $100
$850,000(estimated at 177%
achievement to be paidin cash)
Unvested Value Reflects the estimated
expected payout of 177% oftarget (current performanceachievement) at the end of the2-year performance period(1/1/2010 – 12/31/2011).Award to be paid in cash 50%in 2013 and 50% in 2014.
Total 103,900 -- $3,976,740
30©2012 Pearl Meyer & Partners, LLC
Benefits - Health insurance premium paid by 70% company and 30% employee, Vacation – Entitled to 4 weeks ofvacation, Receives annual $25,000 perq allowance to pay for other perquisites
Retirement and Non-Qualified Deferred Compensation Plans - All retirement benefits are fully vested
Severance/CIC Benefits - Severance – 1X salary plus bonus, medical/dental for 1 year and all outstanding equity isforfeited; CIC – Single Trigger – immediate acceleration of all outstanding equity; CIC – Double Trigger – 1Xsalary plus bonus, medical/dental for 1 year
CompensationComponents
Unvested
NotesShares Stock Price on Date
of Grant
In-The Money Valueof Options / Fair
Market Value
As of 2011
Stock Options
14,000 granted on 2/28/08 – 3,500(25%) remain unvested $58.50 $0
Unvested Value The “in-the money” value is
based on a current stock priceof $57.00 as of June 22, 2011.
Please note 3,500 stock optionsare slated to vest in the nextfew days on June 26, 2011.However, due to the grant pricebeing higher than the currentstock price ($57.00), theoptions hold no current value.
32,000 granted on 2/24/09 – 16,000(50%) remain unvested $28.00 $464,000
24,000 granted on 2/26/10 – 18,000(75%) remain unvested $40.17 $302,940
25,000 granted on 2/25/11 – 25,000(100%) remain unvested $57.05 $0
Sub-Total 62,500 -- $766,940
Restricted Units
13,000 vests on 2/24/2012 $741,000
Unvested Value Reflects the value of unvested
restricted shares multiplied bythe current stock price of$57.00 as of June 22, 2011.
4,000 vests on 7/31/2012 $228,000
6,000 vests on 2/26/2013 $342,000
2,400 vests on 3/12/2013 $136,800
6,000 vests on 6/28/2013 $342,000
5,000 vests on 2/25/2014 $285,000
5,000 vests on 7/13/2014 $285,000
Sub-Total 41,400 -- $2,359,800
Growth Units 4,800 $100
$850,000(estimated at 177%
achievement to be paidin cash)
Unvested Value Reflects the estimated
expected payout of 177% oftarget (current performanceachievement) at the end of the2-year performance period(1/1/2010 – 12/31/2011).Award to be paid in cash 50%in 2013 and 50% in 2014.
Total 103,900 -- $3,976,740
PM&P Information (as Provided by the Candidate)
The following outlines some issues to consider for the Companywhen formulating an offer for a new CEO candidate:
• The Company is 4 months into its current fiscal year and should take thisinto account when determining the annual bonus and LTI awardopportunities
• All retirement plan benefits are fully vested
• If the executive voluntarily terminates employment, the executive willleave behind the following:
» A cash bonus payout under the annual incentive plan of $340,000
» A total of 62,500 stock options with an in-the-money value of $766,940
» A total of 41,400 time-based restricted units with a current value of $2,359,800
» An opportunity for a growth unit plan cash payout of $850,000
» Total lost value of the above
31©2012 Pearl Meyer & Partners, LLC
The following outlines some issues to consider for the Companywhen formulating an offer for a new CEO candidate:
• The Company is 4 months into its current fiscal year and should take thisinto account when determining the annual bonus and LTI awardopportunities
• All retirement plan benefits are fully vested
• If the executive voluntarily terminates employment, the executive willleave behind the following:
» A cash bonus payout under the annual incentive plan of $340,000
» A total of 62,500 stock options with an in-the-money value of $766,940
» A total of 41,400 time-based restricted units with a current value of $2,359,800
» An opportunity for a growth unit plan cash payout of $850,000
» Total lost value of the above $4,316,740