Executive Summary
Our compensation philosophy is to align our executive compensation with the interests of our shareholders by ensuring our compensation decisions align with financial objectives that have a significant impact on shareholder value. The following various components of our executive compensation program are designed to achieve this:
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• “Pay-for-performance,” with a significant portion of total compensation tied to achieving our short- and long-term financial and strategic goals.
| • Foster entrepreneurship at all levels of the organization with a focus on employee value and retention by making long-term equity-based incentive opportunities a substantial component of our executive compensation.
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• The appropriate level for each compensation component is based in part, but not exclusively, on internal equity and consistency, experience and responsibilities, as well as other relevant considerations, such as rewarding extraordinary performance and leadership qualities. | • Hire, engage and retain talented and experienced executives who are motivated to achieve or exceed our short- and long-term corporate goals and who feel true ownership for our success year over year. |
2022 Performance Highlights
Throughout 2022, we delivered strong results driven by high customer retention, new business wins and accelerating pricing. We executed well even while operating in an unprecedented environment with underlying results impacted by supply chain challenges, continued rising inflation, the war in Ukraine, and the effect of currency exchange rates associated with a strengthening U.S. dollar. We are pricing for inflation and once the current challenges recede, we expect to see revenue and margins improve and accelerate. Diversey continues to be encouraged by the resiliency of the core business and the ability to grow while implementing pricing actions reflective of the inflationary environment. The macro background is unpredictable and the volatility in global exchange rates continues to impact the Company's strong execution.
Financial Performance
Consolidated revenues improved by approximately 4% as compared to the prior year and over 15% on a constant currency basis, with:
◦Food & Beverage increasing 27% over prior year
◦Base Institutional increasing 11% over prior year
◦Revenue growing more than 11% from pricing
•We improved our Adjusted EBITDA margins from quarter-to-quarter in 2022 with our fourth quarter margins improved by 90 basis points as compared to the third quarter and 420 basis points above the first quarter of 2022, reflecting the continued maturity of pricing actions and significant efforts to manage costs in a challenging operating environment.
•In the face of significant increases in input costs, we implemented price increases across our various geographies and products. For the full year 2022, we realized more than 11% revenue growth from pricing.
•We improved our adjusted EBITDA margins from quarter-to-quarter with our fourth quarter margins of 13.3% improved by 420 basis points above the first quarter of 2022 reflecting the continued maturity of pricing actions and significant efforts to manage costs in a challenging operating environment.
•We continue to experience high customer win rates for new business, and our water treatment products are further expanding our organic growth. Our revenue of $211 million in the quarter is a 13.9% increase over the comparable prior year quarter and a 27% increase on a currency-adjusted basis.
We encourage you to review our 2022 Annual Report. Adjusted EBITDA is not determined in accordance with accounting principles generally accepted in the United States (GAAP) and should not be viewed as a substitute for the most directly comparable GAAP financial measure, net income (loss) before income tax provision (benefit). Net income (loss) before income tax provision (benefit) was $(149.5) million for the year ended December 31, 2022. Additional information regarding our use of non-GAAP financial measures and reconciliations to the most directly
comparable GAAP financial measure can be found in "APPENDIX A - Reconciliation of Non-GAAP Financial Measures" below.
2022 Pay and Performance
Given we did not meet our Adjusted EBITDA target under the 2022 AIP, our senior leadership team, including our NEOs, did not receive a payout. However, the People Resources Committee approved a discretionary award to Ms. Kwant in the form of RSUs to recognize the strong performance of the Western Europe Region during these unprecedented market challenges.
Further details are included in the “2022 AIP Performance Metrics” section below.
Compensation Philosophy
Our compensation philosophy is to align our executive compensation program with the interests of our shareholders by ensuring our compensation decisions align with financial objectives that have a significant impact on shareholder value. The various components of our executive compensation program are designed to emphasize “pay-for-performance,” with a significant portion of total compensation tied to achieving our short- and long-term financial and strategic goals. Our compensation philosophy is also designed to foster entrepreneurship at all levels of the organization and is focused on employee value and retention by making long-term equity-based incentive opportunities a substantial component of our executive compensation. The appropriate level for each compensation component is based in part, but not exclusively, on internal equity and consistency, experience and responsibilities, as well as other relevant considerations, such as rewarding extraordinary performance and leadership qualities.
Another important goal of our executive compensation program is to help us hire, engage and retain talented and experienced executives who are motivated to achieve or exceed our short- and long-term corporate goals and who feel true ownership for our success year over year. Our executive compensation program is designed to reinforce a strong pay-for-performance alignment and serve the following purposes:
•Reward our NEOs for sustained financial and operating performance and strong leadership;
•Align our NEOs’ interests with the interests of our shareholders; and
•Encourage our successful NEOs to remain with us for the long term.
We further seek to ensure that each NEO’s base salary and short-term target annual incentive opportunity are competitive with the market, while maintaining an emphasis on variable pay, in order to appropriately retain and reward our NEOs for their commitment to us and for their achievements on our behalf. We believe that both the design of our executive compensation program and our compensation practices support our compensation philosophy.
In 2022, our People Resources Committee retained Mercer to assist with compensation topics, such as policy design, executive compensation benchmarking, and assistance with the CD&A.
In addition to the overall compensation structure, the Company employs the following best pay practices which reflect our compensation philosophy:
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What We Do | What We Don’t Do |
✓ Link executive pay to Company performance through our annual and long-term incentive plans | 🗴 Permit hedging or pledging by executives or directors of equity holdings |
✓ Balance among short- and long-term incentives, cash and equity and fixed and variable pay | 🗴 Re-price underwater share options |
✓ Compare executive compensation and Company performance to relevant peer group companies | 🗴 Adopt pay policies or practices that pose material adverse risk to the Company |
✓ Maintain a compensation Clawback Policy to recapture unearned incentive pay | 🗴 Use an aspirational peer group of significantly larger companies |
✓ Maintain minimum shareholding requirements for our directors and senior executives | 🗴 Grant in-the-money share options with an exercise price below the fair market value of an ordinary share on the grant date |
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✓ Use multiple types of equity awards to balance risk/reward | 🗴 Guarantee a minimum level of vesting for long-term incentives |
✓ Maintain overlapping performance periods for long-term incentives | 🗴 Provide excessive perquisites |
✓ Cap short-term incentives at 200% of target | |
✓ Retain an independent compensation consultant | |
Say on Pay and Shareholder Engagement
The People Resources Committee believes that our executive compensation program is consistent with our pay-for-performance philosophy and aligns the incentives for our executives with value creation for our shareholders. In 2022, the Company held a “say-on-pay” vote on the company’s executive compensation program as set forth in the proxy statement and 96.5% of shareholders voted “for” the proposal. When finalizing 2023 compensation, the People Resources Committee continued to apply the same principles and endorsed the 2022 "say-on-pay" vote in determining the amounts and types of executive compensation and did not implement substantial changes as a result of the shareholder advisory vote.
Our Compensation Process
Our executive compensation program includes base salaries, annual incentives and long-term equity-based incentives. Decisions with respect to increasing annual base salaries, setting target opportunities for annual incentives and determining long-term incentive award levels are made by our People Resources Committee and based on the individual’s role within the Company, duties and responsibilities, experience and performance and delivery of results.
The People Resources Committee is responsible for all determinations with respect to our executive compensation programs and the compensation of our NEOs. The People Resources Committee is composed entirely of independent directors as defined by our Corporate Governance Guidelines and Nasdaq listing standards. To set 2022 compensation, the People Resources Committee considered compensation provided by our peer group of companies in combination with general market compensation data, see the section headed “Compensation Benchmarking” below.
The People Resources Committee determines NEO compensation after consultation with the CEO and CHRO who provide insight and recommendations regarding compensation for all NEOs other than the CEO. Neither our CEO nor our CHRO participated in determining their own compensation.
Compensation Consultant
The People Resources Committee has the authority to retain, compensate and disengage an independent compensation consultant and any other advisors necessary to assist in its evaluation of executive compensation.
Mercer was engaged by the People Resources Committee in 2022 to provide recommendations for determining NEO compensation, including creating a peer group of companies, and to perform a competitive assessment of our executive compensation programs. In 2022, the People Resources Committee also retained Mercer to evaluate the compensation of our CEO, our other NEOs, and our other executives, and to develop and support the implementation of our compensation philosophy and programs as a public company and assist with compensation reporting requirements.
Compensation Benchmarking
In making compensation-related decisions, the People Resources Committee assesses whether compensation is competitive with the market. To set executive pay for 2022, the People Resources Committee established a peer group (Peer Group) to benchmark compensation, including base salaries, annual cash incentives and equity-based compensation. This benchmarking data was also used to assess total cash compensation (base salary and annual cash incentives) and total direct compensation (total cash compensation and total equity compensation). The selection criteria used to determine the composition of the Peer Group includes the following:
•Companies competing in the same talent market;
•Companies operating in similar industries, including specialty chemicals, environmental and facilities services, industrial machinery, specialized consumer services and diversified support services; and
•Companies of similar size, measured by revenue and market capitalization.
2021 and 2022 Peer Group
The 14 companies listed below form our 2021 and 2022 Peer Group and meet all or some of the above criteria. The Peer Group, supplemented by other sources of competitive pay information, was an important input in making post-IPO pay decisions for 2021 and establishing compensation levels and structure for 2022. The Peer Group companies shown below are US-based publicly-traded services or industrial companies ranging in size from $1.9 billion to $6.2 billion in annual revenue, and $1.3 billion to $21.6 billion in market capitalization as of December 31, 2021.
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Peer Group Companies |
ABM Industries Incorporated | Pentair plc |
Clean Harbors, Inc. | Rollins, Inc. |
Covanta Holding Corporation (no longer public) | Stericycle, Inc. |
Donaldson Company, Inc. | Terminix Global Holdings, Inc. |
Harsco Corporation | Tetra Tech, Inc. |
IDEX Corporation | UniFirst Corporation |
Nordson Corporation | Xylem Inc. |
The table below shows the size of the Peer Group companies, measured by annual revenue and market capitalization, compared to the size of the Company as of December 31, 2021.
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Peer Group Comparison |
Percentile Rank | Revenue ($ in millions) | Market Capitalization ($ in millions) |
75th Percentile | $3,775 | $15,346 |
50th Percentile | $2,599 | $6,400 |
25th Percentile | $2,122 | $3,665 |
Diversey | $2,614 | $4,225 |
Percentile Rank | 51% | 28% |
2023 Peer Group
The 17 companies listed below form our 2023 Peer Group and are used to set pay for 2023. The Peer Group companies shown below are US-based publicly-traded specialty chemical, industrial machinery and environmental and facilities services companies ranging in size from $1.9 billion to $7.1 billion in annual revenue, and $500 million to $19.9 billion in market capitalization as of December 31, 2022. The 2021/2022 peer group was modified in 2023 to remove ABM Industries Incorporated due to its increased size and Covanta Holding Corporation because it is no longer a public company. Also, five companies were added to provide a more robust peer group and to increase the focus on companies that sell a diverse profile of products directly to customers, participate in hygiene and health industries similar to Diversey and sell to customers in the US and abroad.
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2023 Peer Group Companies |
Ashland Inc.* | Rollins, Inc. |
Cabot Corporation* | RPM International Inc.* |
Clean Harbors, Inc. | Stepan Company* |
Donaldson Company, Inc. | Stericycle, Inc. |
Harsco Corporation | Terminix Global Holdings, Inc. |
H.B. Fuller Company* | Tetra Tech, Inc. |
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IDEX Corporation | UniFirst Corporation |
Nordson Corporation | Xylem Inc. |
Pentair plc | |
* Indicates new companies added for the 2023 Peer Group.
Our Compensation Program
Our NEO compensation program is made up of three primary elements: base salary, annual cash incentive awards and long-term equity compensation. Annual cash incentive awards and long-term equity compensation represent the performance-based elements of our compensation program. The performance metrics for our annual cash incentive awards are set each year to align with our short-term financial and operational business goals. The performance metrics for our long-term equity compensation are also set each year to align with our long-term financial and operational business goals.
Pay Elements
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Pay Element | Objectives | Features |
Base Salary | Provide a fixed level of cash compensation for performing day-to-day responsibilities | Targeted the median of the peer group with adjustments for individual performance |
Annual Incentive Plan (AIP) | Reward short-term financial, operational and individual performance | Cash payments based on meeting Global Adjusted EBITDA, Global Free Cash Flow, and Global or Regional/ Operational Revenue |
Long-Term Incentive Plan (LTIP) | Align management interests with those of shareholders, encourage retention and reward long-term Company performance | Granted 50% performance share units, 25% restricted share units and 25% share options |
The amount of each NEO’s annual cash incentive award for a performance period is intended to reflect the NEO’s relative contribution to the Company in achieving or exceeding our short-term goals. The amount of an NEO’s long-term incentive compensation is intended to reflect the NEO’s expected contribution to the Company in achieving our long-term goals of driving an increase in our overall equity value for our shareholders.
2022 Pay Mix
In 2022, the People Resources Committee considered the mix of pay for each NEO, including how much of target pay is cash versus non-cash, fixed versus variable and short- versus long-term and aligned with the interests of our shareholders. The following illustrations show the target mix of pay we delivered in 2022 to our CEO (86% at risk) and the average mix for each of our other NEOs (72% at risk).
CEO Average of Other NEOs
Base Salaries
We pay each of our NEOs a base salary based on the experience, skills, knowledge and responsibilities required of the individual and considering their working location. We believe base salaries are an important element in our overall compensation program as they provide a fixed element of compensation that reflects each NEO’s job responsibilities and value to us. The People Resources Committee has sole responsibility for determining a recommendation to the Board as to the base salary of our CEO. The People Resources Committee determines recommendations for the other NEOs’ base salaries after consultation with the CEO and the CHRO.
The People Resources Committee reviews our NEOs’ base salaries each year and, typically, base salary increases are determined based on the following factors: assumption of new responsibilities, relative importance of the position, individual performance and contributions and competitive marketplace. The base salary adjustments for Messrs. Redaelli and Verheul are based on the market analysis and are intended to more closely align their base salaries with the market. Base salaries are targeted at the median of our Peer Group based on data provided by our compensation consultant.
The table below shows each NEO’s annual base salary rates for 2021 and 2022 and the percentage change.
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Named Executive Officer | 2021 Annual Base Salary Rate ($)(1) | 2022 Annual Base Salary Rate ($)(1) | % Change |
Philip Wieland | 900,000 | 864,839(2) | (3.9) |
Todd Herndon | 600,000 | 625,200 | 4.2 |
Sinéad Kwant | 426,980 | 429,233(3) | 0.5 |
Gaetano Redaelli | 391,571 | 402,143(4) | 2.7 |
Rudolf Verheul | 360,921 | 362,837(5) | 0.5 |
(1) The 2021 and 2022 base salaries for each of Ms. Kwant and Messrs. Redaelli and Verheul were payable in Euros. The Euro denominated base salaries of each of Ms. Kwant and Messrs. Redaelli and Verheul were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(2) Mr. Wieland's annual base salary was unchanged between 2021 and 2022. Mr. Wieland’s 2022 base salary was paid in US$ for the period Jan 1 to May 31, 2022. Effective June 1, 2022, Mr. Wieland’s base salary of $900,000 was converted into GBP at the June 1, 2022 exchange rate of 0.799 GBP/US$. Following the conversion of Mr. Wieland’s base salary into GBP, his converted base salary of GBP 719,200 was paid in GBP through the remainder of 2022. The amounts of Mr. Wieland’s salary paid in GBP was converted into U.S. dollars using the Bloomberg GBP to US$ FX rate of 0.8316 effective December 31, 2022.
(3) Ms. Kwant received a 0.7% salary increase on April 1, 2022, increasing her base salary from €401,181 to €415,915.44.
(4) Mr. Redaelli received a 2.7% salary increase on April 1, 2022 from €367,920 to €377,853.
(5) Mr. Verheul received a 0.7% salary increase on April 1, 2022 from €339,120 to €352,819.
Annual Incentive Plan
We designed the Annual Incentive Plan for 2022 (2022 AIP) to incentivize our senior executives, including our NEOs, and other eligible employees to achieve our top business, financial and other goals. We re-evaluate the terms of our annual incentive plan each year, including target award opportunities, to ensure that we are adequately incentivizing our current objectives, which may change from year to year to reflect our primary areas of accountability and drive the right focus. Through our 2022 AIP, we provided short-term cash compensation that is at risk and subject to achievement of designated performance goals.
2022 AIP Target Opportunities
Each NEO’s 2022 AIP target opportunity was expressed as a percentage of the NEO’s base salary and varied based on the NEO’s position and level of responsibilities, as set forth in the table below. Based on performance achievement, the NEOs could earn between 0% and 200% of their 2022 AIP target opportunities.
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Named Executive Officer | 2022 Base Salary Level ($)(1)(2) | 2022 AIP Target (% of Base Salary) | 2022 AIP Payout Range (% of 2021 AIP Target) | 2022 AIP Target Award ($)(3) | Actual 2022 AIP Award ($) |
Philip Wieland | 864,839 | 100% | 0-200% | 864,839 | 0 |
Todd Herndon | 625,200 | 80% | 0-200% | 500,160 | 0 |
Sinéad Kwant | 442,652 | 60% | 0-200% | 265,591 | 0(4) |
Gaetano Redaelli | 402,143 | 50% | 0-200% | 201,072 | 0 |
Rudolf Verheul | 375,499 | 60% | 0-200% | 225,299 | 0 |
(1) Mr. Wieland's annual base salary is £719,200. The amount set forth in this table was converted from GBP to U.S. dollar using the using the Bloomberg GBP to US$ FX rate of 0.8316 effective December 31, 2022.
(2) The base salaries of Ms. Kwant and Messrs. Redaelli and Verheul are €415,915, €377,854 and €352,819, respectively. These amounts were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(3) Mr. Wieland’s AIP target award is payable in GBP. The amount set forth in this column was converted from GBP to U.S. dollar using the using the Bloomberg GBP to US$ FX rate of 0.8316 effective December 31, 2022. The AIP target awards of Ms. Kwant and Messrs. Redaelli and Verheul are payable in Euros. The amounts set forth in column for each of Ms. Kwant and Messrs. Redaelli and Verheul were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(4) The People Resources Committee approved a discretionary award to Ms. Kwant equal to 55% of her annual base salary values at $129,389 in the form of RSUs to recognize the strong performance of the Western Europe Region during these unprecedented market challenges. The RSUs will vest fully on January 1, 2024.
2022 AIP Performance Metrics
The People Resources Committee decided to continue to use Global Adjusted EBITDA and Global Free Cash Flow as metrics in the 2022 AIP and to add a revenue metric. The Global Revenue metric was added to reflect the importance of the Company’s growth ambition and pricing plans. The performance metrics that applied to the opportunities for our CEO, Chief Financial Officer and Chief Strategic Development Officer, Messrs. Wieland, Herndon and Redaelli, respectively, under the 2022 AIP are Global Adjusted EBITDA, Global Free Cash Flow, and Global Revenue. Mr. Redaelli participated in the same scheme as our CEO and Chief Financial Officer because of the global nature of his role. In addition, at the discretion of the Board, each NEO’s payout may be increased or decreased based on their individual performance on progressing our employee engagement, DE&I targets and ESG priorities.
The 2022 AIP for these three NEOs included the following three metrics:
•Adjusted EBITDA, which remains our primary metric to reflect our critical focus on increasing our margin and protecting the funding principle for the AIP pool.
•Global Free Cash Flow generation, which continues to be key in funding our growth investments.
•Global Revenue, which was introduced to reflect the importance of our growth ambition and pricing plans.
Our other NEOs, Ms. Kwant and Mr. Verheul, participated in a version of the 2022 AIP with greater regional/business unit focus. The AIP performance metrics for each of Ms. Kwant and Mr. Verheul had the same Global Adjusted EBITDA and Global Free Cash Flow targets as applied for the CEO, Chief Financial Officer and Chief Strategic Development Officer, but their revenue performance metrics were based on their specific responsibilities either regionally for Western Europe for Ms. Kwant or globally for Food & Beverage for Mr. Verheul.
Global EBITDA is the funding mechanism for the AIP pool, so if the EBITDA target is not met, the pool is reduced (and impacts the payout based on the other metrics) accordingly.
In 2022, the threshold performance levels were not achieved and the NEOs were not eligible to receive a payout under the AIP. However, the Board decided to award Ms. Kwant a discretionary award in the form of RSUs to recognize specific achievements in the Western Europe Region, as described in further detail on page 21 below.
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Why we use Global Free Cash Flow | Why we use Global Adjusted EBITDA* | Why we use Global and Regional/Operational Revenue |
The Global Free Cash Flow metric is a useful indicator of the amount of cash the Company has to pursue opportunities that enhance shareholder value. It tracks our cash generation and is based on cash flow from operating activities less capital expenditures (including our dosing and dispensing equipment), and cash proceeds from the securitization program and sale of property and equipment and other assets, underscoring our progress on generating cash from operations, improving our balance sheet and the effective deployment of capital investments. | Global Adjusted EBITDA aligns with shareholder expectations and provides the best representation of our financial performance. Also, it is frequently used by analysts, investors and other interested parties in the evaluation of the financial performance of companies in our industry and as a useful means of measuring our ability to meet our debt service obligations. Adjusted EBITDA provides the best representation of how we are achieving results and managing our capital, with capital management supporting expansion in our operating margin. | The Global and Regional Revenue metrics reflects the importance our growth ambition and pricing plans. |
*Adjusted EBITDA consists of EBITDA adjusted to eliminate the following: (i) certain non-operating income or expense items, (ii) the impact of certain non-cash and other items that are included in net income and EBITDA that we do not consider indicative of our ongoing operating performance and (iii) certain unusual and non-recurring items impacting results in a particular period.
We encourage you to review our 2022 Annual Report. Adjusted EBITDA and Global Free Cash Flow are not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP financial measures, net income (loss) before income tax provision (benefit) and cash provided by (used in) operating activities. Net income (loss) before income tax provision (benefit) and cash provided by (used in) operating activities were $(185.5) million and $33.7 million for the year ended December 31, 2022, respectively. Additional information regarding our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measure can be found on Annex A below.
2022 AIP Performance Targets and Results
Threshold, target, maximum and actual performance, and performance as a percentage of target, for each performance goal (Global Adjusted EBITDA, Global Free Cash Flow and Global Revenue, for Messrs. Wieland, Herndon and Redaelli, and the Western Europe Region Revenue goal for Ms. Kwant and Food & Beverage Revenue goal for Mr. Verheul) are set forth in the table below:
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($ in millions) | Global Adjusted EBITDA (all NEOs | Global Free Cash Flow (all NEOs | Global Revenue (Wieland, Herndon and Redaelli) | Western Europe Region Revenue (Kwant) | Food & Beverage Revenue (Verheul) |
Weighting | 50% | 25% | 25% | 25% | 25% |
Threshold | $418 | $122 | $2,727 | $865 | $753 |
Target | $440 | $135 | $2,871 | $911 | $793 |
Maximum | $462 | $149 | $3,015 | $957 | $833 |
Result | $330.1 | $(102.8) | $2,765.9 | $819.7 | $814.4 |
Weighted % of target | 0% | 0% | 7% | 0% | 38% |
2022 AIP Payouts
Based on 2022 performance, the calculated 2022 AIP award percentages for the NEOs are shown in the table below:
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Named Executive Officer | Target 2022 AIP Award (% of Base Salary) | Award Payout (as % of Target AIP Award) | Target Award ($) | Calculated Award ($) |
Philip Wieland | 100% | 0.0% | 864,389 | 0 |
Todd Herndon | 80% | 0.0% | 500,160 | 0 |
Sinéad Kwant | 60% | 0.0% | 265,591 | 0 |
Gaetano Redaelli | 50% | 0.0% | 201,072 | 0 |
Rudolf Verheul | 60% | 0.0% | 225,299 | 0 |
Discretionary Award for Ms. Kwant: Western Europe Region
Threshold performance levels under the 2022 AIP were not achieved, so the NEOs were not eligible for a payout based on the AIP performance results. However, the People Resources Committee approved a discretionary award to Ms. Kwant to recognize the strong performance of the Western Europe Region. During 2022, the Company experienced several unprecedented global and regional challenges that could not have reasonably been anticipated or budgeted and which had a significant impact on our financial results. Despite these unprecedented, significant and unexpected strains on our business, Ms. Kwant managed the difficulties and enabled the Company to deliver strong results for the Western European region. Her quick actions and thoughtful decisions allowed the Company to perform well in this market. The People Resources Committee felt it was reasonable and appropriate to exercise discretion to award Ms. Kwant an award to recognize her significant efforts and positive results during these unprecedented market challenges. This award was granted in the form of RSUs to retain and motivate Ms. Kwant and to align her interests with those of Diversey shareholders and is disclosed in the Summary Compensation Table as a Stock Award. The value of the RSUs awarded is equal to 55% of Ms. Kwant’s annual base salary, or $129,389. We intend to grant the RSUs in 2023 and the RSUs will vest upon the earlier of the closing of the merger involving Solenis and Diversey or January 1, 2024.
Long-Term Incentive Plans (LTIP)
LTIP awards are granted under the 2021 Plan that was adopted by our Board prior to the IPO. Long-term incentive plan awards granted to our NEOs prior to the IPO were approved by Bain Capital and awarded under our equity-based MEIP.
2021 Omnibus Incentive Plan
The 2021 Plan is administered by our People Resources Committee, and employees, including our NEOs, are eligible to receive awards under the 2021 Plan. The 2021 Plan provides for the grant of share options, share appreciation rights, restricted shares, restricted share units, bonus shares, dividend equivalents, other share-based awards, substitute awards, annual incentive awards and performance awards intended to align the interests of participants with those of our shareholders. For 2022, awards were comprised of performance share units (“PSUs”) (50%), RSUs (25%) and share options (25%). The Company chose this allocation of PSUs, RSUs and share options to emphasize company performance to align executives with the interest of shareholders. Also, share options were included to reflect the longer time horizon they provide for a newly public company.
The 2021 Plan has been an important factor in attracting, retaining, motivating, and rewarding certain employees, officers, directors and consultants by closely aligning the interests of such individuals with those of our shareholders.
2022 Equity Compensation Plan
Target equity compensation awards were set as a percentage of base salary as determined by the People Resources Committee and set forth in the table below.
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2022 Equity Compensation Plan Opportunities as a % of Base Salary |
Named Executive Officer | Target Equity Compensation Plan Amount as a Percentage of Base Salary |
Philip Wieland | 500% |
Todd Herndon | 300% |
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Sinéad Kwant | 175% |
Gaetano Redaelli | 120% |
Rudolf Verheul | 175% |
Performance Share Units
PSUs have a three-year performance period with cliff vesting at the end of the period. The performance metrics for the PSUs are Adjusted EBITDA growth (weighted 50%) and relative Total Shareholder Return (TSR) measured against Russell 1000 Index companies (weighted 50%). Adjusted EBITDA growth and relative TSR were both chosen because they align executive interests with long-term shareholder growth expectations, and additionally, in the case of relative TSR, because it is a common metric among our Peer Group and the broader market. Furthermore, our relative TSR performance metric is capped at target if the Company’s TSR is negative, the rationale being that if our Peer Group’s share prices are decreasing, our executives should not receive an award greater than target simply because our share price decreased less than that of the Peer Group. We grant PSUs because they reward achievement of longer-term goals and positive performance, create a direct correlation between longer-term business success and financial reward, and encourage retention and ownership.
Half of the PSUs vest based on achieving Adjusted EBITDA goals, as set forth in the table below:
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2022 Performance Share Units: Adjusted EBITDA Growth Goals |
Performance Level | Adjusted EBITDA Growth vs. 2021 Adjusted EBITDA | Percentage of PSUs subject to Adjusted EBITDA Goal to Vest |
Below Threshold | Less than 6% | 0% |
Threshold | 6% | 50% |
Target | 8% | 100% |
Maximum | 10% or greater | 200% |
* Linear interpolation will be applied for performance between threshold/target/maximum.
Half of the PSUs vest based on relative TSR compared to the Russell 1000. The number of shares of stock that are earned is based on the TSR of the Company compared to the TSR (assuming reinvestment of dividends) of the companies in the Russell 1000 Index over a three-year performance period. At the end of the performance period, the percentile rank of the Company’s TSR is calculated relative to the TSR of the Russell 1000 Index, as set forth in the table below:
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2022 Performance Share Units: Relative TSR Goals |
Performance Level* | Company’s Relative TSR Performance (Percentile Ranking) | Percentage of PSUs subject to relative TSR Goal to Vest |
Below Threshold | Less than 25th Percentile | 0% |
Threshold | 25th Percentile | 50% |
Target | 50th Percentile | 100% |
Maximum | 75th Percentile or greater | 200% |
* Linear interpolation will be applied for performance between threshold/target/maximum.
Restricted Share Units
RSUs are part of the LTIP to enhance executive retention and to better align the Company’s long-term compensation practices with its peers. The value of RSU grants in 2022 under the LTIP was equal to 25% of the target long-term equity incentive award for each executive. The time-based RSUs granted to the NEOs vest ratably over three years and are settled in cash based on the Company’s share price on the vesting date. The terms and conditions of grants of RSUs, including the quantity, grant date, vesting periods, settlement date and other terms and conditions with respect to the awards, are set out in the grant agreement.
Share Options
Stock options reward executives for increasing absolute long-term shareholder value. For 2022, the value of each stock option award was equal to 25% of the target long-term equity incentive award for each NEO using the Black-Scholes option pricing model. The exercise price of the stock options is equal to the closing share price of Diversey common stock on the grant date. The 2021 Plan prohibits repricing of stock options without shareholder approval. The People Resources Committee believes time-vested options encourage long-term value creation and executive retention because generally executives can realize value from such options only if the Company’s stock price increases after grant and the executive remains employed at Diversey until the options vest. Share options have three-year ratable vesting and have a term of 10 years. The exercise price of each option to purchase ordinary shares must be at least equal to the fair market value of our ordinary shares on the date of grant.
2022 LTIP Awards
In 2022, the People Resources Committee granted the following equity awards to the NEOs:
| | | | | | | | | | | |
Named Executive Officer | PSUs (#) | RSUs (#) | Options (#) |
Philip Wieland | 210,280 | 105,140 | 168,918 |
Todd Herndon | 84,112 | 42,056 | 67,567 |
Sinéad Kwant | 37,166 | 18,583 | 29,855 |
Gaetano Redaelli | 23,372 | 11,686 | 18,775 |
Rudolf Verheul | 31,417 | 15,708 | 25,237 |
2021 Pre-IPO Equity Compensation Plan (MEIP)
Under our pre-IPO equity-based MEIP, certain employees, directors and officers of the Company, including our NEOs (all such participants, the MEIP Participants) received indirect interests (MEIP Shares) in Constellation (BC) S.á.r.l., in the form of shares of Poolco, an entity incorporated for the purpose of pooling the MEIP Participants’ interests in Constellation (BC) S.á.r.l. The MEIP Shares allowed the MEIP Participants to share in distributions made by Constellation (BC) S.á.r.l., subject to meeting certain financial hurdles tied to Bain Capital’s initial investment in Constellation (BC) S.á.r.l. and to time vesting (generally over a four- or five-year period following the specified vesting commencement date).
Concurrent with the IPO, the MEIP interests were converted into ordinary shares in the Company as follows:
•Vested ordinary shares were issued in respect of MEIP Shares that were vested as of our IPO, and
•Restricted ordinary shares were issued in respect of MEIP Shares that were unvested as of our IPO.
The restricted ordinary shares will vest on the same terms and conditions as applied to the MEIP Shares to which they relate, subject to the acceleration provisions described below. Mr. Wieland and Ms. Kwant still hold restricted ordinary shares received as part of the equity conversion.
All of the ordinary shares (whether vested or restricted) in relation to the MEIP Shares are subject to a lock-up restriction expiring March 29, 2023 prohibiting MEIP Participants from selling ordinary shares (whether or not vested) until the second anniversary of the consummation of the IPO, except under certain circumstances. For current senior leadership team level, including our NEOs, a permissible sale during this two-year period (i) must be pursuant to a transaction in which Bain Capital is selling ordinary shares (Bain Sale) and (ii) cannot result in the MEIP Participant selling shares at a faster rate than Bain Capital. If, at the time of a Bain Sale, the total number of a MEIP Participant’s vested ordinary shares is less than the maximum number of ordinary shares that the MEIP Participant would be entitled to sell in the Bain Sale, a number of the MEIP Participant’s restricted ordinary shares will accelerate and vest, so that, after vesting, the MEIP Participant holds a number of vested ordinary shares equal to the maximum.
Also, in connection with our IPO, we granted an award of RSUs on a one-time basis to certain of our employees, including our NEOs. The RSUs granted to our NEOs will cliff-vest on December 31, 2023, generally subject to the NEO’s continued employment through the applicable vesting date and the terms and conditions of the relevant award agreement.
Retirement Benefits
We believe that providing retirement and welfare benefits as part of the total compensation package is necessary to attract and retain a highly talented and committed workforce.
For our U.S. employees, including our sole U.S.-based NEO, Mr. Herndon, we maintain a 401(k) plan, which is a tax-qualified retirement savings plan. The Company makes matching contributions of 100% on the first 6% of an employee’s eligible pay contributions (up to the annual compensation limits); matching contributions are 100% vested once made. At the end of each calendar year, the Company also may make a discretionary profit-sharing contribution, which typically vests based on the employee’s length of continuous employment. There were no discretionary profit-sharing contributions for the NEOs or any employee in 2022.
For employees outside the US, including for Mr. Verheul, who is a participant in a Dutch-based defined benefit pension plan, we provide retirement benefits that are customary for, or required to be provided within, the relevant jurisdiction.
We do not maintain a non-qualified deferred compensation plan.
Prerequisites and Other Compensation
We provide our U.S. employees, including our U.S.-based NEOs, with the following benefits:
•medical, dental and vision insurance;
•health savings and flexible spending accounts;
•paid time off, including vacation, company and personal holidays and sick days;
•life insurance and supplemental life insurance;
•short- and long-term disability insurance; and
•a 401(k) and profit-sharing plan with a company match of 100% on the first 6% contribution.
For employees outside the United States, we provide benefits that are customary for the relevant jurisdiction, and our non-U.S.-based NEOs are eligible for those benefits on the same basis as our other eligible employees.
We offer limited perquisites, including tax equalization benefits for business-related purposes or in connection with our NEOs who are serving on an international assignment. We also have provided relocation-related assistance to our NEOs as part of their onboarding.
Severance and Change in Control Arrangements
The Company has entered into employment agreements with Messrs. Herndon and Wieland and Ms. Kwant and offer letters with Messrs. Redaelli and Verheul, the key terms of which are described under “Employment Agreements and Offer Letters” below.
Deductibility of Compensation
We focus on long-term shareholder value when determining all elements of compensation. As a result, tax deductibility is not our only consideration in awarding compensation. Code Section 162(m) generally limits the tax deductibility of compensation paid by public companies to covered employees, such that a public company generally can take a tax deduction for up to $1 million of compensation paid to a covered employee in any calendar year.
Although our People Resources Committee will be mindful of the benefits of tax deductibility when determining executive compensation, our People Resources Committee may approve compensation that will not be fully-deductible to ensure competitive levels of total compensation for our executive officers and will retain flexibility to design compensation programs that are in the long-term interests of the Company and our shareholders, with deductibility of compensation being one of a variety of factors considered.
Code Section 280G
With respect to certain payments made or benefits provided to executives in connection with a change in control of a corporation that constitute “parachute payments” (as defined in Code Section 280G), Code Section 280G disallows a tax deduction for the payor with respect to, and Code Section 4999 imposes a 20% excise tax on the individual
receiving, any such “parachute payments” that constitute “excess parachute payments” (as defined in Code Section 280G). Generally, such payments and benefits are in the nature of compensation that is linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments and accelerated vesting and payouts in respect of awards under long-term incentive plans, including equity-based compensation. None of our NEOs is entitled to any gross-up with respect to any excise taxes that may be imposed under Code Section 4999. However, as noted below in the section titled “Employment Agreements and Offer Letters,” Mr. Herndon’s employment agreement includes a “best-net” cutback, which provides that, in the event any payments or benefits constitute “parachute payments” within the meaning of Code Section 280G, then the payments or benefits will either be (i) provided to him in full or (ii) reduced as necessary to avoid the Code Section 4999 excise tax, whichever results in a greater amount after taxes.
Risk Mitigation and Assessment Practices
Managing and monitoring compensation risks are important to the People Resources Committee, which regularly reviews our compensation program to determine whether any of our incentive compensation plans, programs and arrangements create potential risks to the Company. Based on its most recent evaluation, the People Resources Committee concluded that the executive compensation program is designed with the appropriate balance of risk and reward in relation to the Company’s business strategy. We do not believe that any of our incentive compensation plans, programs or arrangements create risks that are reasonably likely to have a material adverse effect on the Company. Also, the Company’s compensation programs are subject to appropriate risk mitigation factors, provided by our Clawback Policy and our anti-hedging and pledging policies.
In addition, the Company completed a risk assessment of the Company’s compensation programs for 2022 and determined that our pay policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
Equity Grant Timing Practices
Company-wide equity grants, including equity grants to NEOs, are awarded annually with a vesting commencement date of January 1. The awards are approved at the first People Resources Committee of the year, which is generally scheduled at least a year in advance. Throughout the year, equity awards may be made to new hires and, in rare circumstances, as a reward for exceptional performance. In all cases, the effective grant and vesting commencement date for these mid-year awards is the market closing price on the first day of the month, or first market trading day, following the date (month) of hire for executive roles. Options to eligible new hires are valued using a Black-Scholes valuation methodology, determined on a semi-annual basis. The exercise price of each of our stock option grants is the market closing price on the effective grant date.
Clawback Policy
Our Clawback Policy relates to any bonus, equity-based or other incentive-based compensation awarded or granted to the Company’s current and former executive officers, including the NEOs, to mitigate compensation risk. The Clawback Policy applies to the Company’s “executive officers,” and all other members of the Company’s senior leadership team (“Covered Executives”). In the event the Company is required to prepare an accounting restatement of its financial statements due to the Company’s material noncompliance with any financial reporting requirement under the federal securities laws, the Board will assess whether the Company should seek to recover any excess “Incentive Compensation” received by any Covered Executives during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement. In making this determination, the Board will look at factors as it deems appropriate, including whether such Covered Executive engaged in fraud or intentional misconduct which contributed to the need for such restatement.
Stock Ownership Guidelines
The Board adopted stock ownership guidelines with respect to its NEOs effective August 2022 (the “Stock Ownership Guidelines”). The Company strongly supports stock ownership by its NEOs and, accordingly, has introduced minimum stock ownership guidelines. NEOs can meet stock ownership requirements through direct or beneficial ownership of the Company’s securities, including vested performance-based awards and unvested time-based awards (not including options) granted under the long-term incentive plan. Executives who are promoted or appointed into a position that is subject to these requirements have five years from the effective date of the Stock
Ownership Guidelines to meet the minimum requirement. All of the Company’s NEOs have either met their ownership requirements or have time remaining to do so.
The ownership requirements as a multiple of annual base salary are set forth in the table below:
| | | | | |
Named Executive Officer | Multiple of Base Salary |
Philip Wieland | 6x |
Todd Herndon | 3x |
Sinéad Kwant | 3x |
Gaetano Redaelli | 3x |
Rudolf Verheul | 3x |
Executive Summary Compensation Table
The following table contains information concerning the annual compensation for our NEOs during 2022, 2021 and 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary $(1) | Bonus $(2) | Stock Awards $(4) | Non-Equity Incentive Plan Compensation $(5) | Changes in Pension Value and Nonqualified Deferred Compensation Earnings $(6) | All Other Compensation $(9) | Total $ |
Philip Wieland
Chief Executive Officer and Director | 2022 | 878,788 | — | 4,500,000 | 0 | — | 63,641 | 5,442,945 |
2021 | 900,000 | — | 1,000,000 | 387,000 | — | 67,511 | 2,354,511 |
2020 | 900,000 | — | 81,144,185(3) | 1,120,046 | — | 29,953 | 83,194,184 |
Todd Herndon
Chief Financial Officer | 2022 | 618,900 | — | 1,800,000 | 0 | — | 18,000 | 2,436,900 |
2021 | 600,000 | — | 1,000,000 | 206,400 | — | 113,932 | 1,920,332 |
2020 | 600,000 | — | | 709,736 | — | 17,100 | 1,326,836 |
Sinéad Kwant
President, Western Europe | 2022 | 431,943 | — | 795,352 | 0 | — | 39,321 | 1,266,616 |
2021 | 429,680 | — | 1,000,000 | 98,646 | — | 36,510 | 1,564,836 |
2020 | 137,147 | — | — | 0 | — | — | 137,147 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Gaetano Redaelli
Chief Strategic Development Officer | 2022 | 399,500 | — | 500,160 | 0 | — | 57,218 | 956,878 |
2021 | 391,571 | — | 250,000 | 89,615 | — | 67,226 | 798,412 |
2020 | 374,053 | — | — | 177,190 | — | 516,116 | 1,067,359 |
Rudolf Verheul
Global President, Food & Beverage Division | 2022 | 365,546 | — | 672,311 | 0 | 0(7) | 33,733 | 1,071,590 |
2021 | 361,517 | — | 1,000,000 | 112,668 | 0(8) | 30,244 | 1,504,429 |
2020 | 341,876 | — | — | 362,923 | 211,168 | 33,185 | 949,151 |
(1) The amounts in this column represent the actual base salary amounts earned by our NEOs for 2020, 2021 and 2022. The amounts set forth in the table above for each of Ms. Kwant and Messrs. Redaelli and Verheul were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022. The amounts set forth for Mr. Wieland were converted from GBP to U.S. dollar using the using the Bloomberg GBP to US$ FX rate of 0.8316 effective December 31, 2022.
(2) Annual cash “bonus” incentive awards are reported under “Non-Equity Incentive Plan Compensation.”
(3) On July 16, 2020, Mr. Wieland received an award of 1,966,655 MEIP Shares. The grant date fair value of Mr. Wieland’s MEIP Share award was equal to the product of (A) 1,966,655 and (B) $41.26, which was the value per MEIP Share established by an independent third-party valuation conducted as of December 31, 2020.
(4) Effective March 29, 2021, our NEOs received a one-time grant of restricted ordinary share units which vest on December 31, 2023. The value of these grants was: $1,000,000 for each of Mr. Wieland, Mr. Herndon, Ms. Kwant and Mr. Verheul, and $250,000 for Mr. Redaelli.
(5) The amounts in this column represent the annual cash incentive awards payable to our NEOs for each of 2020, 2021 and 2022. For 2020 and for Mr. Wieland only, the amount in this column also includes an additional standalone cash incentive opportunity for 2020 pursuant to his employment agreement, which provided for payment of an additional cash bonus (subject to the Company’s meeting certain performance targets) in an amount equal to the excess (if any) of (i) the sum of (A) $900,000, plus (B) the amount of his 2020 AIP award as determined by the Board (disregarding any proration for his partial year of employment in 2020), over (ii) the sum of (A) the amount of base salary paid to Mr. Wieland during 2020, plus (B) his prorated annual incentive bonus under the 2020 AIP plus (C) the base salary and cash bonus amounts actually paid or payable to him in respect of the 2020 calendar year from Bain Capital. In February 2021, the Board of Constellation (BC) S.á.r.l. determined that the performance targets had been satisfied and that the amount of Mr. Wieland’s additional cash bonus payable was $451,273.
(6) Mr. Redaelli no longer participates in the defined benefits plan as he transferred his balance to a defined contribution plan. The present values of Mr. Verheul’s accumulated benefits as of December 31, 2021 were calculated in conformity with generally accepted accounting principles, based on the following assumptions for the Former DB Plan: for the Guarantee Pension Module of Pension Plan 2006 of Pension Fund Pensura, a fixed discount rate of 1.21%, indexation based on the pension fund’s recovery plan including catch-up indexation and assumed long-term inflation of 2.00%, recent mortality rates and a retirement age of 67. For the Jubilee Plan a discount rate of 0.70% is applied and in addition an annual general wage increase of 2.50%, disability, mortality and turnover rates apply. The Euro denominated amounts set forth in the table above were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(7) The change in Mr. Redaelli’s pension value was $(4,755) in 2021
(8) The change in Mr. Redaelli’s pension value was and $(420,616) in 2022.
All other compensation for 2022 includes the following:
| | | | | | | | | | | | | | | | | | | | | | | |
Name | Year | Global Mobility Expenses ($) | Automobile Allowance ($)(b) | 401(k) Match ($) | Retirement Contributions ($) | Tax Equalization and Gross Up Payments ($) | Total ($) |
Philip Wieland | 2022 | 0 | 12,984 | 0 | 50,657 | 0 | 63,641 |
Todd Herndon | 2022 | 0 | 0 | 18,000(c) | 0 | 0 | 18,000 |
Sinéad Kwant | 2022 | 0 | 19,710 | 0 | 19,611(d) | 0 | 39,321 |
Gaetano Redaelli | 2022 | 900(a) | 14,048 | 0 | 42,270(d) | 0 | 57,218 |
Rudolf Verheul | 2022 | 0 | 8,094 | 0 | 25,639(e) | 0 | 33,733 |
(a) This amount represents payment for preparation of Mr. Redaelli’s income tax filings.
(b) The amounts in this column represent the automobile allowances that certain of our NEOs received. Mr. Wieland’s automobile allowance was paid in Pounds Sterling, and the automobile allowances for Ms. Kwant and Messrs. Redaelli and Verheul were paid in Euros. The amounts in Pounds Sterling were converted into U.S. dollars using the Bloomberg GBP to US$ FX rate of 0.8316 effective December 31, 2022 and the amounts in Euros were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(c) This amount represents the matching contributions we made to Mr. Herndon’s 401(k) retirement savings plan account.
(d) The amount reported for Ms. Kwant represents our contributions to her defined contribution pension plan, and the amount reported for Mr. Redaelli represents our contributions on his behalf to the Previndai statutory pension scheme and Azimut statutory pension scheme. These amounts were paid in Euros and were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(e) This amount represents employer contributions to Mr. Verheul’s defined contribution plan.
Grants of Plan-based Awards – 2022
This table shows grants of plan-based awards made to the Company’s NEOs during 2022.
| | | | | | | | | | | | | | | | | |
Name | Grant Date | All Other Stock Awards: Number of Shares of Stock or Units | All other option awards: number of securities underlying options (#) | Exercise of base price of option awards ($/share) | Grant Date Fair Value of Stock and Option Awards |
Philip Wieland |
Restricted Share Units | January 24, 2022 | 105,140(1) | | | 1,125,000 |
Performance Share Units | January 24, 2022 | 210,280(2) | | | 2,250,000 |
Stock Options | January 27, 2022 | | 168,918(3) | 10.73 | 1,125,000 |
Todd Herndon |
Restricted Share Units | January 24, 2022 | 42,056(1) | | | 450,000 |
Performance Share Units | January 24, 2022 | 84,112(2) | | | 900,000 |
Stock Options | January 27, 2022 | | 67,567(3) | 10.73 | 450,000 |
Sinéad Kwant |
Restricted Share Units | January 24, 2022 | 18,583(1) | | | 198,838 |
Performance Share Units | January 24, 2022 | 37,166(2) | | | 397,676 |
Stock Options | January 27, 2022 | | 29,855(3) | 10.73 | 198,838 |
Gaetano Redaelli |
Restricted Share Units | January 24, 2022 | 11,686(1) | | | 125,040 |
Performance Share Units | January 24, 2022 | 23,372(2) | | | 250,080 |
Stock Options | January 27, 2022 | | 18,775(3) | 10.73 | 125,040 |
Rudolf Verheul |
Restricted Share Units | January 24, 2022 | 15,708(1) | | | 168,075 |
Performance Share Units | January 24, 2022 | 31,417(2) | | | 336,161 |
Stock Options | January 27, 2022 | | 25,237(3) | 10.73 | 168,075 |
(1) These RSUs will vest in three equal annual installments beginning on January 1, 2023 subject to the NEO’s continued employment through the applicable vesting date and the terms and conditions of the relevant award agreement.
(2) These PSUs will vest in full on December 31, 2024, subject to the NEO’s continued employment through the applicable vesting date and the terms and conditions of the relevant award agreement.
(3) These stock options will vest in three equal annual installments beginning on January 1, 2023 subject to the NEO’s continued employment through the applicable vesting date and the terms and conditions of the relevant award agreement.
Outstanding Equity Awards at Year End
The following table presents information with respect to outstanding equity awards held by our NEOs as of December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | |
Name | Option Awards | Stock Awards |
| Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Equity incentive plan awards: number of securities underlying unexercised unearned options (#) | Option exercise price ($) | Option expiration date | Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#) | Equity incentive plan awards: market or payout value of unearned shares, units or other rights that have not vested ($) |
Philip Wieland(1)(2) | 56,306 | 112,612 | 168,918 | 10.73 | 01/27/2032 | 3,178,389 | 12,735,624 |
Todd Herndon(3) | 22,522 | 45,045 | 67,567 | 10.73 | 01/27/2032 | 260,401 | 787,583 |
Sinéad Kwant(4)(5) | 9,952 | 19,903 | 29,855 | 10.73 | 01/27/2032 | 305,697 | 1,160,112 |
Gaetano Redaelli(6) | 6,258 | 12,517 | 18,775 | 10.73 | 01/27/2032 | 70,499 | 210,928 |
Rudolf Verheul (7) | 8,412 | 16,825 | 25,237 | 10.73 | 01/27/2032 | 139,028 | 472,091 |
(1) On July 16, 2020, Mr. Wieland received an award of MEIP Shares, and any MEIP Shares that were unvested as of the consummation of our initial public offering were converted into restricted ordinary shares. The final 1/7th of this award vests on July 1, 2023, subject to his continued employment through the vesting date.
(2) On March 29, 2021, Mr. Wieland received an award of 66,666 restricted share units, which award vests in full on December 31, 2023, subject to his continued employment through the vesting date. On January 27, 2022, Mr. Wieland received an award of 168,918 options, which vest in three equal installments beginning January 1, 2023, in each case, subject to Mr. Wieland remaining in continuous employment with the Company on the vesting date.
(3) On March 29, 2021, Mr. Herndon received an award of 66,666 restricted share units, which award vests in full on December 31, 2023, subject to his continued employment through the vesting date. On January 27, 2022, Mr. Herndon received an award of 67,567 options, which vest in three equal installments beginning January 1, 2023, in each case, subject to Mr. Herndon remaining in continuous employment with the Company on the vesting date.
(4) On October 21, 2020, Ms. Kwant received an award of MEIP Shares, and any MEIP Shares that were unvested as of the consummation of our initial public offering were converted into restricted ordinary shares. The final 20% of this award vests on September 6, 2025, subject to Ms. Kwant’s continued employment through the vesting date.
(5) On March 29, 2021, Ms. Kwant received an award of 66,666 restricted share units, which award vests in full on December 31, 2023, subject to her continued employment through the vesting date. On January 27, 2022, Ms. Kwant received an award of 29,855 options, which vest in three equal installments beginning January 1, 2023, in each case, subject to Ms. Kwant remaining in continuous employment with the Company on the vesting date.
(6) On March 29, 2021, Mr. Redaelli received an award of 16,666 restricted share units, which award vests in full on December 31, 2023, subject to his continued employment through the vesting date. On January 27, 2022, Mr. Redaelli received an award of 18,775 options, which vest in three equal installments beginning January 1, 2023, in each case, subject to Mr. Redaelli remaining in continuous employment with the Company on the vesting date.
(7) On March 29, 2021, Mr. Verheul received an award of 66,666 restricted share units, which award vests in full on December 31, 2023, subject to his continued employment through the vesting date. On January 27, 2022, Mr. Verheul received an award of 25,327 options, which vest in three equal installments beginning January 1 ,2023, in each case, subject to Mr. Verheul remaining in continuous employment with the Company on the vesting date.
Shares Vested – 2022
This table shows shares vested for the NEOs during 2022. No NEOs exercised options in 2022.
| | | | | | | | |
Share Awards |
Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) |
Philip Wieland(1) | 1,050,954 | 13,988,198 |
Todd Herndon(2) | 749,303 | 3,836,431 |
Sinéad Kwant(3) | 51,142 | 309,409 |
Gaetano Redaelli(4) | 78,413 | 453,227 |
Rudolf Verheul(5) | 49,454 | 285,844 |
(1) On January 1, 2022, Mr. Wieland vested in 1,050,954 of his restricted ordinary shares. The value realized on vesting was determined by multiplying (i) the number of restricted ordinary shares that vested by (ii) $13.31, which is the closing price of an ordinary share as of January 1, 2022.
(2) On November 18, 2022, Mr. Herndon vested in 749,303 of his restricted ordinary shares. The value realized on vesting was determined by multiplying (i) the number of restricted ordinary shares that vested by (ii) $5.12, which is the closing price of an ordinary share as of November 18, 2022.
(3) On September 7, 2022, Ms. Kwant vested in 51,142 of her restricted ordinary shares. The value realized on vesting was determined by multiplying (i) the number of restricted ordinary shares that vested by (ii) $6.05, which is the closing price of an ordinary share as of September 7, 2022.
(4) On September 6, 2022, Mr. Redaeilli vested in 78,413 of his restricted ordinary shares. The value realized on vesting was determined by multiplying (i) the number of restricted ordinary shares that vested by (ii) $5.78, which is the closing price of an ordinary share as of September 6, 2022.
(5) On September 6, 2022, Mr. Verheul vested in 49,454 of his restricted ordinary shares. The value realized on vesting was determined by multiplying (i) the number of restricted ordinary shares that vested by (ii) $5.78, which is the closing price of an ordinary share as of September 6, 2022.
Pension Benefits
| | | | | | | | | | | |
Name | Plan Name | Years of Service (#) | Present Value of Accumulated Benefit ($) |
Rudolf Verheul(1) | Guarantee Pension Module of Pension Plan 2006 of Pension Fund Pensura | 26 | 1,355,458 |
| Jubilee Plan | 37 | 50,031 |
(1) The present values of Mr. Verheul’s accumulated benefits as of December 31, 2022 were calculated in conformity with generally accepted accounting principles, based on the following assumptions: (i) for the Guarantee Pension Module of Pension Plan 2006 of Pension Fund Pensura, a discount rate of 1.21%, indexation based on the pension fund’s recovery plan and assumed long-term inflation of 2.00%, recent mortality rates and a retirement age of 67, and (ii) for the Jubilee Plan, a discount rate of 0.70% is applied, and in addition to an annual general wage increase of 2.50%, and disability, mortality and turnover rates apply. We used the average exchange rate for 2022, as reported by the Federal Reserve Bank of New York, to convert the values from Euros into U.S. dollars.
Employment Agreements and Offer Letters
During 2022, we were party to employment agreements with Messrs. Wieland and Herndon and Ms. Kwant and offer letters with Messrs. Redaelli and Verheul, in each case, the key terms of which are described below.
Mr. Wieland
Mr. Wieland’s employment agreement provides for an employment term that commenced on July 14, 2020 and will continue until terminated upon either party’s prior written notice of not less than six months (which notice period shall not apply in the event of a termination by the Company for “cause” or by Mr. Wieland for “good reason” (as each is defined in his employment agreement and summarized below)) and generally describes his health, welfare and other employee benefits. On June 7, 2022, we entered into an amendment to Mr. Wieland’s employment agreement pursuant to which Mr. Wieland’s base salary and bonus amounts are paid in GBP.
Mr. Herndon
Mr. Herndon’s employment agreement provides for an initial five-year employment term (which commenced on November 18, 2019), with automatic one-year extensions thereafter, unless either party provides notice of non-renewal at least 60 days prior to expiration of the term, and generally describes his health, welfare and other employee benefits. Mr. Herndon’s employment agreement also references his MEIP award (which is described and discussed below).
In 2021, Mr. Herndon relocated from his primary residence in the Milwaukee, Wisconsin area to the Charlotte, North Carolina metropolitan area and in so doing participated in the Company’s relocation program.
Ms. Kwant
Ms. Kwant’s employment agreement provides for an indefinite term, which commenced on September 7, 2020 and may be terminated by giving notice of not less than three months.
The following is a summary of the material terms of each employment agreement:
| | | | | | | | | | | | | | |
Executive | Base Salary(1) | Annual Incentive(2) | Severance(3) | Restrictive Covenants(4) |
Philip Wieland Chief Executive Officer | $864,839 | Target: 100% Maximum: 200% of Target | An amount (which is inclusive of employee statutory redundancy pay and any payments or benefits in lieu of notice under UK law or our policies or practices) equal to the sum of his (i) base salary and (ii) target annual incentive opportunity, payable either in a lump sum or in ratable installments over the 12-month post-termination period | Yes |
Todd Herndon Chief Financial Officer | $625,200 | Target: 80% Maximum: 200% of Target | An amount equal to the sum of his (i) base salary and (ii) target annual incentive opportunity, payable in ratable installments over the 12-month post- termination period 12 months of Company- subsidized COBRA coverage (terminable earlier if he obtains other employment that offers group health benefits) | Yes |
Sinéad Kwant President, Western Europe | $442,652 | Target: 60% Maximum: 200% of Target | An amount equal to the sum of her (i) base salary and (ii) target annual incentive opportunity, payable in ratable installments over the 12-month post- termination period | Yes |
(1) Mr. Wieland’s base salary as set forth in his employment agreement is £719,200. The amount set forth in this table was converted from GBP to U.S. dollar using the using the Bloomberg GBP to US$ FX rate of 0.8316 effective December 31, 2022.
Ms. Kwant’s base salary is €415,915. The amount set forth in this table was converted from Euros to U.S. dollar using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(2) Target annual incentive target opportunity is expressed as a percentage of the NEO’s base salary.
(3) Severance is due upon a termination of the NEO’s employment by the Company without “cause” (including due to the Company’s non-renewal of the employment term, in the case of Mr. Herndon) or by Mr. Wieland or Mr. Herndon for “good reason” (each as defined in his employment agreement and summarized below). If Mr. Wieland had been terminated on December 31, 2022, the cash severance amount would
be equal to $1,729,678. If Mr. Herndon had been terminated on December 31, 2022, the cash severance amount would be equal to $1,125,360. If Ms. Kwant had been terminated on December 31, 2022, the cash severance amount would be equal to $708,243.
Mr. Herndon’s severance entitlement is subject to his execution and non-revocation of a release of claims and continued compliance with his restrictive covenants (as described in note (4) to this table below). In addition to the amounts set forth above, Mr. Herndon would also be entitled to his accrued benefits and reimbursement of any unreimbursed business expenses.
Mr. Herndon’s employment agreement includes a “best-net” cutback provision that provides that, in the event any payments and/or benefits provided under the employment agreement or any other arrangement with us or our affiliates constitute “parachute payments” within the meaning of Code Section 280G, then such payments and/or benefits will either be (i) provided to Mr. Herndon in full or reduced to the extent necessary to avoid the excise tax imposed by Code Section 4999, whichever results in Mr. Herndon receiving a greater amount on an after-tax basis.
For Mr. Wieland, “cause” generally means any of the following with respect to Mr. Wieland: (i) guilt of gross misconduct or commission of any material or (after warning) repeated or continued breach or non-observance of his obligations to Diversey or to any other company that was a subsidiary of Constellation (BC) S.á.r.l. (the Group) or refusal or neglecting to comply with any reasonable and lawful directions of the Diversey or the Board; (ii) guilt of any fraud or dishonesty or acting in a manner which, in the reasonable opinion of the Company, brings or is likely to bring Mr. Wieland, the Company or any member of the Group into disrepute or is materially adverse to the interests of the Company or any member of the Group; (iii) being, in the reasonable opinion of the Company, grossly negligent and/or incompetent in the performance of his duties, or failing to perform his duties to a satisfactory standard (having previously been given written notice of such failure (whether by means of routine appraisal or otherwise) and a reasonable opportunity to improve); (iv) guilt of a serious breach of any principles, rules, regulations or policies or any corporate governance code or guidelines applicable to Mr. Wieland or the Company or adopted by the Company from time to time; (v) commission of any criminal offense (other than a motor vehicle offense for which a noncustodial penalty may be imposed); (vi) facilitation of tax evasion: (vii) being or becoming disqualified from holding any office which Mr. Wieland holds in the Company or any member of the Group or resigning from such office without the prior written approval of the Board; (viii) failure to promptly report a notifiable data security breach of which Mr. Wieland is aware in accordance with the Group’s relevant policy then in place and legal obligations; (ix) becoming bankrupt or making any arrangement with or for the benefit of Mr. Wieland’s creditors or have a county court administration order made against him under the County Court Act of 1984; or (x) commission of a Material Breach (as defined therein, which includes a material breach by Mr. Wieland of (A) certain provisions of the employment agreement or (B) any non-compete, non-solicit, non-disparagement or confidentiality covenants in favor of any member of the Group.
For Mr. Wieland, “good reason” generally means any of the following occurring without his written consent: (i) reduction in base salary; (ii) reduction in target annual incentive opportunity; (iii) a material and adverse change in title, authority, or duties; or (iv) material breach by any member of the Group of any agreement between Mr. Wieland and such member of the Group. In order to resign for “good reason,” Mr. Wieland must provide written notice to the Company of the circumstances constituting grounds for “good reason” within 90 days of their first occurrence, at which time the Company will have 30 days to cure the circumstances. If the Company fails to cure within such 30-day period, Mr. Wieland must resign within 30 days after the end of the cure period or waive his right to resign for Good Reason on the basis of such circumstances.
For Mr. Herndon, “cause” generally means any of the following with respect to Mr. Herndon, subject to a five business day cure opportunity in the case of clauses (iv) through (vii): (i) gross negligence or willful misconduct in the performance of his duties; (ii) indictment for, conviction of or plea of guilty or no contest to (A) any felony or (B) any crime involving moral turpitude; (iii) commission of any willful act or omission involving theft or fraud with respect to us or our customers, suppliers or vendors; (iv) reporting to work intoxicated or under the influence or illegal drugs, or other willful conduct causing us public disgrace; (v) repeated failure to perform duties after written notice from our board; (vi) willful breach of fiduciary duty; or (vii) material breach of the employment agreement.
For Mr. Herndon, “good reason” generally means any of the following occurring without his written consent: (i) reduction in base salary; (ii) reduction in target annual incentive opportunity; (iii) a material and adverse change in title, authority duties, reporting or responsibilities; (iv) involuntary relocation of more than 50 miles; (v) material breach of a material provision of the employment agreement; or (vi) the failure of a successor to assume in writing (or by operation of law) the employment agreement upon consummation of a merger, sale or similar transaction. In order to resign for “good reason,” Mr. Herndon must provide written notice to the Company of the circumstances constituting grounds for “good reason” within 30 days of their first occurrence, at which time the Company will have 30 days to cure the circumstances. If the Company fails to cure within such 30-day period, Mr. Herndon must resign within 30 days after the end of the cure period or waive his right to resign for Good Reason on the basis of such circumstances.
(4) Mr. Wieland’s employment agreement provides for the following restrictive covenants: (i) perpetual confidentiality, (ii) assignment of inventions and (iii) non-competition and non-solicitation for 12 months following termination of employment (less any period of “garden leave”). Mr. Herndon’s employment agreement provides for the following restrictive covenants: (i) perpetual confidentiality, (ii) assignment of inventions and (iii) non-competition and non-solicitation during employment and for 12 months following termination of employment. Ms. Kwant’s employment agreement provides for the following restrictive covenants: (i) perpetual confidentiality, (ii) assignment of inventions and (iii) non-competition and non-solicitation for 12 months following termination of employment.
Mr. Redaelli and Mr. Verheul
During 2022, we were party to offer letters with Messrs. Redaelli and Verheul. The offer letters generally set forth their positions and initial compensation and benefit terms. The offer letters do not provide for severance, but Messrs. Redaelli and Verheul are entitled to severance in the event of a termination without “cause,” with Mr. Redaelli’s severance determined pursuant to Italy’s statutory severance rules (which entitle him to an amount equal to the sum of (i) 42 months of his base salary and (ii) his target annual incentive), and Mr. Verheul’s severance determined pursuant to the negotiated arrangement with the local works council (which entitles him to an amount equal to the
sum of (i) his base salary and (ii) average annual incentive paid for the three fiscal years immediately preceding his termination).
Pay Ratio Disclosure
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires that Diversey determine the ratio of the CEO’s annual total compensation (under the Summary Compensation Table definition) to that of Diversey’s global median employee.
To determine the median employee, we made a direct determination from our global employee population, excluding non-U.S. locations to the extent that the total employees excluded in these locations in aggregate do not exceed 5% of our total employee population. From our global population of approximately 9,000 employees, we have excluded employees from the following countries: Turkey (395), Peru (27), Bangladesh (7), Tanzania (6), Pakistan (5), Ghana (4), Sri Lanka (2), and Uganda (1). We established a consistently applied compensation measure inclusive of base pay, overtime, incentives, and allowances. Our population was evaluated as of October 3, 2022, and reflects paid compensation from January 1, 2022, through October 3, 2022. Where allowed under the rule, we have annualized compensation through December 31, 2022, and annualized compensation for employees newly hired in 2022. Non-U.S. compensation was converted to U.S. dollars based on applicable exchange rates as of October 3, 2022.
Based on the above determination, the annual total compensation (under the Summary Compensation Table definition) for the median employee is $54,438. Using the CEO’s annual total compensation of $5,442,945 under the same definition, the resulting ratio is 100:1.
Payments upon Termination or Change in Control
The employment agreements with each of Messrs. Wieland and Herndon and Ms. Kwant provide for severance in the event of a termination without “cause” or resignation for “good reason,” as set forth in the table below and as described below.
Messrs. Redaelli and Verheul are entitled to severance in the event of a termination without “cause,” as set forth in the table below. Mr. Redaelli’s severance amount reflects his entitlement under Italy’s statutory severance rules, and Mr. Verheul’s severance amount reflects his entitlement negotiated with the local works council.
In the event of a change in control, the People Resources Committee may, in its discretion, provide for any or all of the following actions with respect to equity awards granted to our NEOs: (i) awards may be continued, assumed or substituted with new rights, (ii) awards may be purchased for cash equal to the excess (if any) of the price per ordinary share paid in the change in control transaction over the aggregate exercise price of such awards, (iii) outstanding and unexercised share options and share appreciation rights may be terminated prior to the change in control (in which case holders of such unvested awards would be given notice and the opportunity to exercise such awards), or (iv) vesting or lapse of restrictions may be accelerated. All awards will be equitably adjusted in the case of the division of shares and similar transactions.
The following table sets forth the expected benefits to be received by each NEO in each of the noted termination scenarios assuming the People Resources Committee accelerates the vesting of all equity awards granted to such NEO. This table assumes a termination date of December 31, 2022, except where otherwise noted. For purposes of this table, “involuntary termination” means a termination without “cause,” provided, that, for Messrs. Wieland and Herndon, an “involuntary termination” also includes a resignation for “good reason.”
| | | | | | | | |
Name | Cash ($)(1) | Equity ($) |
Philip Wieland(2) | | |
Involuntary termination | 1,729,678 | — |
Change in control | — | 7,447,490 |
Involuntary termination after change in control | 1,729,678 | — |
Todd Herndon(3) | | |
Involuntary termination | 1,125,000 | — |
| | | | | | | | |
Change in control | — | 463,156 |
Involuntary termination after change in control | 1,125,000 | — |
Sinéad Kwant(4) | | |
Involuntary termination | 708,237 | — |
Change in control | — | 1,016,760 |
Involuntary termination after change in control | 708,237 | — |
Gaetano Redaelli(5) | | |
Involuntary termination | 1,609,571 | — |
Change in control | — | 120,780 |
Involuntary termination after change in control | 1,609,571 | — |
Rudolf Verheul(6) | | |
Involuntary termination | 609,798 | — |
Change in control | — | 350,913 |
Involuntary termination after change in control | 609,798 | — |
(1) Mr. Wieland’s severance amounts are payable in GBP. The amount set forth in this column with respect to Mr. Wieland were converted from GBP to U.S. dollar using the using the Bloomberg GBP to US$ FX rate of 0.8316 effective December 31, 2022. The severance amounts payable to each of Ms. Kwant and Messrs. Redaelli and Verheul are payable in Euros. The amounts set forth in column for each of Ms. Kwant and Messrs. Redaelli and Verheul were converted into U.S. dollars using the Bloomberg Euro to US$ FX rate of 0.9396 effective December 31, 2022.
(2) As described above, pursuant to his employment agreement, Mr. Wieland would receive an amount equal to the sum of his (i) base salary and (ii) target annual incentive.
(3) As described above, pursuant to his employment agreement, Mr. Herndon would receive (i) an amount equal to the sum of his (A) base salary and (B) target annual incentive opportunity and (ii) 12 months of Company-subsidized COBRA coverage (terminable earlier if he obtains other employment that offers group health benefits). For purposes of this disclosure, we have assumed that Mr. Herndon would receive all 12 months of Company-subsidized COBRA coverage, in the amount of $1,500 per month.
(4) As described above, pursuant to her employment agreement, Ms. Kwant would receive (i) an amount equal to the sum of her (A) base salary and (B) target annual incentive opportunity.
(5) Upon Mr. Redaelli’s involuntary termination without “cause,” he would receive an amount equal to the sum of (i) 42 months of his base salary and (ii) his target annual incentive.
(6) Upon Mr. Verheul’s involuntary termination without “cause,” he would receive an amount equal to the sum of his (i) base salary and (ii) average annual incentive paid for the three fiscal years immediately preceding his termination.
Director Compensation
All of our directors are reimbursed for travel, food, lodging and other expenses directly related to their activities as directors and are additionally entitled to the protection provided by the indemnification provisions in our bylaws and pursuant to separate indemnification agreements.
We do not compensate our non-executive directors who are current or former employees of, or advisors to, Bain Capital Private Equity or its affiliates, and those directors associated with our principal shareholder, Bain Capital. Additionally, as an employee director, Mr. Wieland receives no additional compensation for his Board service.
Our director compensation program is intended to encourage eligible directors to align their interests with those of shareholders by providing for a majority of annual compensation to be paid in the form of equity.
The annual compensation period for our directors who are eligible to receive compensation for their service on our Board begins on March 29 and ends on March 28th of the following year. The compensation arrangements of each of our directors eligible to receive compensation for their service on our Board and Committee Chairs for the period from March 29, 2022 to March 28, 2023 is shown below. Our Board may revise the compensation arrangements for our directors from time to time.
| | | | | | | | |
Board Position | Annual Retainer | Annual Equity Incentive |
Chair of the Board | $195,000 | $200,000 |
Non-Employee Director | $90,000 | $125,000 |
Additional Cash Fees |
•Audit Committee Chair | $25,000 | — |
•NCGC Chair | $20,000 | — |
•People Resources Committee Chair | $20,000 | — |
An annual retainer is payable, at the election of the director, in cash, in ordinary shares of the Company or fully-vested deferred restricted share units with a grant-date fair value equal to the annual retainer amount. Deferred restricted share units convert into ordinary shares upon the earlier of the director’s termination of service with Diversey or upon a change in control of the Company. Annual retainer amounts payable in connection with a director’s service as Audit Committee Chair, NCGC Chair and People Resources Committee Chair are paid in addition to any other compensation earned for such director’s service as Chair of the Board or as a member of the Board. To ensure that a majority of each director’s compensation is paid in the form of equity, in the event that the Chair of the Board is also the Chair of a Committee, the annual retainer payable in connection with such Committee Chair position is paid, at the election of the Chair, in either ordinary shares of the Company or fully-vested deferred restricted share units with a grant-date fair value equal to the annual retainer amount.
An annual equity incentive is payable in restricted share units with a grant-date fair value equal to the annual equity incentive amount, which vest on the first anniversary of the grant date.
2022 Director Compensation
The following table shows 2022 compensation for our eligible directors who served in 2022. During 2022, Mr. Bassoul, Mr. Figuereo, Mr. Foss, Dr. Hochman and Ms. Zanotti were eligible to receive compensation for their service on our Board.
| | | | | | | | | | | |
Name | Fees earned or paid in cash ($)(1) | Share awards ($)(2) | Total ($) |
Selim Bassoul | $23,225 | 125,000 | 148,225 |
Juan Figuereo | — | 239,995 | 239,995 |
Eric Foss | $108,082 | 227,227 | 335,309 |
Rodney Hochman, M.D. | — | 215,000 | 215,000 |
Katherine Zanotti | $52,500 | 134,589 | 187,089 |
(1) The directors can choose to receive their board retainer amounts in cash, ordinary shares, or fully vested deferred RSUs. The amounts reported in this column represent the portion of annual retainers each eligible director elected to receive in cash for the period from January 1, 2022 to December 31, 2022, along with any amounts earned under applicable pre-IPO retainer arrangements.
(2) The amounts reported in these columns reflect the aggregate grant date fair value of share awards, grants of restricted share units and deferred restricted share units (as applicable, RSUs) calculated in accordance with ASC 718 reflecting each eligible director’s annual equity incentive award and annual retainer amounts such director elected to receive in the form of equity awards for the period from January 1, 2022 to December 31, 2022. The amounts reported for the RSUs do not reflect compensation actually received by the director. The actual value that a director may realize from a RSU is contingent on the price of an ordinary share on the date the RSU is settled. Thus, there is no assurance that the value eventually realized by the director will correspond to the amount shown. The aggregate number of share awards outstanding at fiscal year-end for each director for their service as a director was as follows: 92,076 for Mr. Bassoul, 37,892 for Mr. Figuereo, 28,618 for Mr. Foss, 29,968 for Dr. Hochman and 16,773 for Ms. Zanotti.
2023 Director Compensation
Mercer was retained to prepare a peer group assessment of the Director Compensation program to assist the Company in aligning director compensation for eligible directors consistent with peer group practices. The peer group consists of 13 United States-based publicly-traded services and industrial companies ranging in size from $1.9 billion to $7.1 billion in revenue, and $561 million to $17.2 billion in market capitalization.
Compensation Committee Interlocks and Insider Participation
During 2022, the following directors served as members of the People Resources Committee: Mr. Bassoul, Mr. Foss, Mr. Hanau, Ms. Levine and Ms. Zanotti. Mr. Hanau and Ms. Levine stepped down as members of the People Resources Committee in December 2022. No member of the People Resources Committee was an employee or former employee of our Company or any of our subsidiaries. None of our directors currently serve, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or People Resources Committee.
APPENDIX A – Reconciliation of Non-GAAP Financial Measures
Global Free Cash Flow
Global Free Cash Flow is a supplemental non-GAAP financial measure that tracks our cash generation and is used by management for the purposes of determining incentive compensation. We define Global Free Cash Flow as cash provided by (used in) operating activities less capital expenditures (including dosing and dispensing equipment), and cash proceeds from the securitization program and sale of property and equipment and other assets.
Our management believes Global Free Cash Flow is a useful indicator of the Company’s ability to internally pursue opportunities that enhance shareholder value and to service or incur additional debt. Our computations of Global Free Cash Flow may not be comparable to other similarly titled measures of other companies. Global Free Cash Flow should not be considered as an alternative to, or more meaningful than, cash provided by (used in) operating activities as determined in accordance with GAAP or as indicator of our operating performance or liquidity.
The following table reconciles cash provided by (used in) operating activities to Global Free Cash Flow for the periods presented:
| | | | | | | | |
(in millions) | Year Ended December 31, 2022 | Year Ended December 31, 2021 |
Cash provided by (used in) operating activities | $33.7 | $(88.7) |
•Proceeds from sale of property and equipment and other assets | 0.4 | 4.0 |
•Dosing and dispensing equipment | (77.3) | (64.6) |
•Capital expenditures | (59.6) | (54.6) |
•Collection of deferred factored receivables | — | | 40.1 |
Global Free Cash Flow before Adjustments | (102.8) | 163.7 |
•IPO LTIP | — | | 19.9 |
•IPO Readiness | — | | 10.0 |
•Management fee termination | — | | 11.9 |
Global Free Cash Flow | $(102.8) | $(121.9) |
Adjusted EBITDA
This Annual Report on Form 10-K references Adjusted EBITDA, which is a non-GAAP financial measure that we derive from EBITDA, which itself is derived from net income (loss), a GAAP financial measure. EBITDA consists of net income (loss) before income tax provisions (benefit), interest expense, interest income, depreciation and amortization. Adjusted EBITDA consists of EBITDA adjusted to (i) eliminate certain non-operating income or expense items, (ii) eliminate the impact of certain non-cash and other items that are included in net income and EBITDA that we do not consider indicative of our ongoing operating performance, and (iii) eliminate certain unusual and non-recurring items impacting results in a particular period.
We consider EBITDA and Adjusted EBITDA to be key indicators of our financial performance. Additionally, we believe EBITDA and Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that investors, analysts and rating agencies
consider EBITDA and Adjusted EBITDA useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance, and management uses these measures for one or more of these purposes.
EBITDA and Adjusted EBITDA are supplemental measures that are not required by, or presented in accordance with, U.S. GAAP. EBITDA and Adjusted EBITDA are not measures of our financial performance under U.S. GAAP and should not be considered as an alternative to revenues, net income (loss), income (loss) before income tax provision or any other performance measures derived in accordance with U.S. GAAP, nor should they be considered as alternatives to cash flows from operating activities as a measure of liquidity in accordance with U.S. GAAP.
The following table reconciles loss before income tax provision (benefit) to EBITDA and Adjusted EBITDA for the periods presented:
| | | | | | | | |
(in millions) | Year Ended December 31, 2022 | Year Ended December 31, 2021 |
Loss before income tax provision (benefit) | $(185.5) | $(149.5) |
Interest expense | 112.0 | | 126.3 | |
Interest income | (4.8) | | (9.9) | |
Amortization expense of intangible assets acquired | 90.2 | | 96.7 | |
Depreciation expense included in cost of sales | 80.3 | | 82.7 | |
Depreciation expense included in selling, general and administrative expenses | 10.0 | | 8.1 | |
EBITDA | 102.2 | | 154.4 | |
Transaction and integration costs | 51.3 | | 45.8 | |
Restructuring, exit and related costs | 133.5 | | 38.4 | |
Foreign currency gain related to hyperinflationary subsidiaries | (1.9) | | (2.1) | |
Adjustment for tax indemnification asset | 4.7 | | 6.9 | |
Acquisition accounting adjustments | 1.3 | | — | |
Bain Capital management fee | — | | 19.4 | |
Non-cash pension and other post-employment benefit plan | (14.2) | | (15.7) | |
Unrealized foreign currency exchange (gain) loss | (5.9) | | 12.9 | |
Factoring and securitization fees | 5.7 | | 4.7 | |
Share-based compensation | 56.2 | | 115.2 | |
Tax receivable agreement adjustments | (22.6) | | (10.1) | |
Loss on extinguishment of debt | — | | 15.6 | |
Realized foreign currency exchange loss on debt refinancing | — | | 4.5 | |
COVID-19 inventory charges | 18.3 | | 13.9 | |
Other items | 1.5 | | 6.3 | |
Consolidated Adjusted EBITDA | $ | 330.1 | | $ | 410.1 | |
ITEM 12. CERTAIN BENEFICIAL OWNERS AND MANAGEMENT RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan Information
The following table provides information as of December 31, 2022 for ordinary shares of the Company that may be issued under our 2021 Plan.
| | | | | | | | | | | |
| Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column A) |
Plan Category | A | B | C |
Equity compensation plans approved by security holders | 6,285,166 | — | 3,409,396 |
Equity compensation plans not approved by security holders | — | — | — |
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
Our ordinary shares trade on Nasdaq under the ticker symbol “DSEY.” The following table shows information regarding the beneficial ownership of our ordinary shares, which is our only class of shares outstanding, as of March 31, 2023, unless otherwise stated in a footnote to the table below, by each person or entity known by us to beneficially own more than five percent (5%) of our ordinary shares, by our directors, by our NEOs and by all our directors and executive officers as a group. For purposes of the following table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or sole or shared investment power with respect to a security, or any combination thereof, and the right to acquire such power (for example, through the exercise of employee share options granted by the Company) within 60 days. Unless otherwise indicated, the address of each of the beneficial owners is c/o Diversey Holdings, Ltd., c/o 1300 Altura Road, Suite 125, Fort Mill, South Carolina, 29708. As of March 31, 2023, there were 324,683,350 ordinary shares outstanding.
| | | | | | | | |
| Ordinary Shares Beneficially Owned |
Name and Address of Beneficial Owner | Number of Shares | Percentage |
5% SHAREHOLDERS | | |
Bain Capital(1) | 236,561,159 | 72.86% |
NAMED EXECUTIVE OFFICERS AND DIRECTORS: | | |
Philip Wieland | 4,325,964 | 1.33% |
Todd Herndon | 2,711,980 | |
Sinéad Kwant | 271,857 | |
Gaetano Redaelli | 501,546 | |
Rudolf Verheul | 311,087 | |
Kenneth Hanau(2) | 0 | |
Eric Foss | 789,910 | |
Michel Plantevin | 0 | |
Juan Figuereo | 37,892(3) | |
Selim Bassoul | 75,409(4) | |
Rodney Hochman, M.D. | 0(5) | |
| | | | | | | | |
Robert Farkas | 0 | |
Susan Levine | 0(6) | |
Katherine Zanotti | 16,773 | |
Emily Ashworth | 0 | |
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (15 PERSONS) | 9,736,797 | 3.27% |
* Represents beneficial ownership of less than 1%
(1) Represents ordinary shares held by BCPE Diamond Investor, LP, a Delaware limited partnership. Fund XI, is the sole member of BCPE Diamond GP, LLC, a Delaware limited liability company (BCPE Diamond GP), which is the general partner of the BCPE Diamond Investor, LP. Bain Capital Partners XI, L.P., a Cayman Islands exempted limited partnership (Partners XI), is the general partner of Fund XI. Bain Capital Investors, LLC, a Delaware limited liability company (BCI and collectively with the BCPE Diamond Investor, LP, BCPE Diamond GP, Fund XI and Partners XI, the Bain Capital Entities), is the general partner of Partners XI. As a result, BCI may be deemed to share voting and dispositive power with respect to the securities held by BCPE Diamond Investor, LP. Voting and investment decisions with respect to securities held by the Bain Capital Entities are made by the managing directors of BCI. The address of each of the Bain Capital Entities is c/o Bain Capital Private Equity, L.P., 200 Clarendon Street, Boston, Massachusetts 02116.
(2) Does not include shares held by BCPE Diamond Investor, LP. Mr. Hanau, who is a member of our board of directors, is a managing director of BCI, and as a result, and by virtue of the relationships described in footnote 1 above may be deemed to share beneficial ownership of the shares beneficially owned by the Bain Capital Entities. The address for Mr. Hanau is c/o Bain Capital Private Equity, LP, 200 Clarendon Street, Boston, Massachusetts 02116.
(3) Represents 7,666 ordinary shares issuable in connection with 7,666 deferred RSUs held by Mr. Figuereo. Mr. Figuereo has the right to be issued the ordinary shares represented by the deferred RSUs within 60 days of the earlier to occur of (i) his termination of service and (ii) the consummation of a change of control of the Company.
(4) Includes 26,333 ordinary shares issuable in connection with 26,333 deferred RSUs held by Mr. Bassoul. Mr. Bassoul has the right to be issued the ordinary shares represented by the deferred RSUs within 60 days of the earlier to occur of (i) his termination of service and (ii) the consummation of a change of control of the Company.
(5) Includes 2,890 ordinary shares issuable in connection with 2,890 deferred RSUs held by Dr. Hochman. Dr. Hochman has the right to be issued the ordinary shares represented by the deferred RSUs within 60 days of the earlier to occur of (i) his termination of service and (ii) the consummation of a change of control of the Company.
(6) Does not include shares held by BCPE Diamond Investor, LP. Ms. Levine, who is a member of our board of directors, is a managing director of BCI, and as a result, and by virtue of the relationships described in footnote 1 above may be deemed to share beneficial ownership of the shares beneficially owned by the Bain Capital Entities. The address for Ms. Levine is c/o Bain Capital Private Equity, LP, 200 Clarendon Street, Boston, Massachusetts 02116.