Otis Worldwide Corp
For the period ended May 16, 2024. Filed Apr 5, 2024.
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May 16, 2024 · Filed Apr 5, 2024
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
| ☑ | | | Filed by the Registrant | | | ☐ | | | Filed by a party other than the Registrant |
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| CHECK THE APPROPRIATE BOX: | |||
|---|---|---|---|
| ☐ | | | Preliminary Proxy Statement |
| ☐ | | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☑ | | | Definitive Proxy Statement |
| ☐ | | | Definitive Additional Materials |
| ☐ | | | Soliciting Material under §240.14a-12 |
Otis Worldwide Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
| PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY): | |||
|---|---|---|---|
| ☑ | | | No fee required |
| ☐ | | | Fee paid previously with preliminary materials |
| ☐ | | | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
We are Otis
We are the world’s leading company for elevator
and escalator manufacturing, installation and service.
You’ll find us in the world’s most iconic structures, as well as residential and commercial buildings,
transportation hubs and everywhere people are on the move.
Our Vision
We give people freedom to connect and thrive in a taller, faster, smarter world.
The Otis Absolutes
In realizing our vision, our colleagues are guided by our commitment to The Otis Absolutes:
Safety
We are in the safety business. The well-being of our
colleagues, our customers and the riding
public is paramount.
EVERYTHING DEPENDS ON MOVING
PEOPLE SAFELY.
Ethics
We strive to be a trusted company, and the employer
and supplier of choice. Doing business the ethical,
lawful and honest way is who we are, and our
reputation depends on it.
DOING BUSINESS THE RIGHT WAY – IT’S WHO
WE ARE.
Quality
We stand for delivering quality results in everything we
do – from engineering, manufacturing, installation and
service, to selling, marketing and financial reporting.
WE DELIVER QUALITY RESULTS IN
EVERYTHING WE DO.
Creating value in 2023
In 2023, our 170th year in business and fourth as an independent company, Otis Worldwide Corporation (“Otis”) once again demonstrated our strengths, including solid execution of our strategy, operational excellence and strong financial performance. We continued to prove that our long-term strategy meets the needs of our customers, passengers and communities around the world.
Our reach is global, our people are local
| | | We maintain approximately 2.3 million customer units worldwide | | | | | We serve customers in more than 200 countries and territories |
| | | We have 71,000 colleagues, including 42,000 field professionals | | | | | We have over 1,400 branches and offices and a direct physical presence in more than 70 countries |
Executing on our strategy
Just as the needs of our customers and passengers around the world evolve, we are continuously adapting to meet those needs while driving returns for shareholders. We remain focused on optimizing our business model and executing against our strategic pillars. In 2023, we added Deliver modernization value as a fifth strategic pillar, as we intend to seize the growing opportunity presented globally. At the same time, we remain disciplined in our capital allocation strategy to support sustainable growth.
| STRATEGIC PILLARS | | | | | 2023 RESULTS |
|---|---|---|---|---|---|
| Sustain New Equipment growth | | | | | • Achieved fourth consecutive year of New Equipment share gain, yielding approximately 350-basis point improvement since 2019(1) • Accelerated sales of Gen3 and Gen360 products, up 10 points from prior year • Increased New Equipment backlog by 2% at constant currency(2) • Continued enhancing our position in the fast-growing infrastructure segment |
| Accelerate Service portfolio growth | | | | | • Grew Service portfolio 4.2% to approximately 2.3 million units globally • Ended 2023 with approximately 900,000 units of our global portfolio now connected, including units in warranty period • Increased use of digital tools and a specialized service organization to improve productivity, customer satisfaction and portfolio growth• Accelerated growth in our repair business across all regions, marking a three-year CAGR in the low teens |
| Deliver modernization value | | | | | • Modernization orders were up 16.8% at constant currency(2) • Deployed targeted initiatives to accelerate orders through expansion of channel, sales effectiveness and standardized packages• Leveraged our New Equipment manufacturing and supply chain to better serve modernization customers while reducing costs |
| Advance digitalization | | | | | • Increased deployment of enterprise systems with a focus on sales capabilities, customer contact technologies, and field and supply chain efficiencies • Reduced connected product deployment cycle time by 60%, allowing faster expansion in 30 countries • Deployed field business analytics across 28 countries, improving route efficiency and enhancing the condition-based maintenance program with cloud-based analytic capabilities • Deployed Field Mobility applications to 95% of field professionals, focused on safety, quality and service while delivering significant productivity benefits |
| Focus and empower our workforce | | | | | • Achieved record-high enterprise Engagement and Belonging scores as well as targeted improvement on Inclusion score in colleague engagement survey• Expanded the reach and impact of our Employee Resource Groups to over 3,000 colleagues globally, covering various dimensions of diversity • Accelerated disability inclusion and accessibility efforts through advocacy, education and enhanced strategic partnerships• Established a Global Workplace Adjustment and Accommodations Framework, with targeted training to drive awareness, empathy, support and collaboration • Continued to increase volunteerism and participation in science, technology, engineering and math (STEM) programming in our communities |
| (1) | Based on Otis internal estimates. |
| (2) | As defined more fully in Appendix A on pages 98-101, Otis refers to non-GAAP New Equipment backlog at constant currency. Appendix A also provides a reconciliation of this non-GAAP financial measure to the corresponding GAAP financial measure. |
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Creating value in 2023
Financial highlights
2023 marked another year of strong financial performance for Otis. We grew organic sales 5.6%, expanded adjusted operating profit margins 30 basis points, grew adjusted earnings per share (“EPS”) by 11.7%, increased our quarterly dividend by 17.2%, while generating $1.63 billion in operating cash flow (approximately $1.53 billion in adjusted free cash flow), which we used to deploy approximately $1.35 billion to shareholders through $800 million in share repurchases and $539 million in dividends.(1) We also achieved modernization orders growth of 16.8%, ended the year with our modernization and New Equipment backlogs up 15% and 2%, respectively and grew our maintenance portfolio by 4.2% to approximately 2.3 million units, setting us up for another successful year in 2024.(1)
| (1) | As defined more fully in Appendix A on pages 98-101, Otis refers to non-GAAP sales as organic sales, non-GAAP backlog growth at constant currency as backlog growth, non-GAAP operating profit as adjusted operating profit, non-GAAP cash flow as adjusted free cash flow and non-GAAP diluted earnings per share as adjusted diluted EPS. Appendix A also provides a reconciliation of these non-GAAP financial measures to the corresponding GAAP financial measures. |
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ESG at Otis
| Environmental, social and governance (“ESG”) principles have been fundamental at Otis for decades, and the four pillars that drive our ESG strategy are holistically integrated within our larger corporate strategy. ESG drives value for our customers, colleagues and communities, helping us achieve a stronger, more sustainable and inclusive tomorrow. Above all, we are committed to the health and safety of our colleagues and the riding public. We strive to reduce the environmental impact of our products, operations and services and those of our customers. We foster a culture that embraces all voices and diverse points of view, and we proactively engage in the communities where we live and work. We act with integrity, every time, everywhere. We understand that the way we act matters. | | | goals ahead of schedule: We achieved ISO 14001 certification for all factories in 2021, and we expanded our Employee Assistance Program – Otis’ mental health and resilience resource – to all global colleagues in 2022. For more information about ESG at Otis, please visit our website at www.otisinvestors.com under “ESG,” where we expect to publish our 2023 ESG Report later this year. |
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| In 2021, we identified 13 goals within our four ESG pillars that align with the strategic imperatives that form our business strategy. We have continued to build on our vision and legacy, carrying our innovations forward by focusing on technology for safer, more sustainable operations, improved customer service and passenger experiences, and a more inclusive workplace. | | ||
| We report on these goals in our ESG Report in accordance with the Global Reporting Initiative Standards, as well as in alignment with the Sustainability Accounting Standards Board guidelines for the Resource Transformation sector and the Task Force on Climate-related Financial Disclosures. We have completed two of these | | ||
| | | HEALTH & SAFETY | | | |||
| | | | | | | ||
| | | Aligned material issues | | | |||
| | | • Workforce well-being, health and safety • Product quality and reliability | | | • Public health, safety and accessibility | | |
| | | Goals • Commit to achieve a zero-harm workplace • Educate all field professionals and subcontractors annually on the life-saving Cardinal Rules, our fundamental work-safety principles• Expand availability of well-being and resilience services to all colleagues worldwide through an Employee Assistance Program by 2023(1) | |||||
| | | ENVIRONMENT & IMPACT | | | |||
| | | | | | | ||
| | | Aligned material issues | | | |||
| | | • Emissions, energy and climate change • Waste | | | • Product design and sustainable innovation | | |
| | | Goals • Achieve a 50% reduction of Scope 1 and Scope 2 GHG emissions by 2030 • Reach carbon neutrality for factory electricity by 2030 • Achieve 100% factory eligibility for zero-waste-to-landfill certification by 2025 • Complete ISO 14001 certification for all factories by 2025(2) | |||||
| | | PEOPLE & COMMUNITIES | | | |||
| | | | | | | ||
| | | Aligned material issues | | | |||
| | | • Inclusion • Community engagement | | | • Colleague development, engagement and retention | | |
| | | Goals • Achieve gender parity in our executive ranks by 2030 • Increase colleague favorability for the inclusive culture category in the company’s engagement survey by 4 percentage points by 2025 • Direct 50% of total global giving to STEM programs by 2025 • Impact 15,000 students globally through STEM-focused programming across the learning and vocational training continuum to improve livelihoods and help build the workforce of tomorrow by 2030 • Dedicate 500,000 colleague volunteer hours in support of vibrant communities, STEM education and social equity efforts globally by 2030 | |||||
| | | GOVERNANCE & ACCOUNTABILITY | | | |||
| | | | | | | ||
| | | Aligned material issues | | | |||
| | | • Regulatory, compliance and anti-corruption • Ethics and integrity | | | • Sustainable supply chain• Cybersecurity, data privacy and intellectual property | | |
| | | Goals • Award at least 20% of U.S. supplier spend annually to diverse suppliers(3) | |||||
| (1) | Completed in 2022. |
| (2) | Completed in 2021. |
| (3) | Diverse supplier is defined as a supplier that is at least 51% owned by an individual or group that is underrepresented (i.e., minority-, women-, veteran-, LGBTQ+, or disability-owned), a small business and/or a business operating in an economically disadvantaged location based on the U.S. Small Business Administration definitions. |
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Recent Awards and Accolades(1)
| • | The World’s Top Companies for Women – Forbes, 2023 |
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| • | World's Best Employers – Forbes, 2023 |
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| • | America’s Most Responsible Companies – Newsweek, 2023 and 2024 |
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| • | World’s Most Trustworthy Companies – Newsweek, 2023 |
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| • | America’s Greenest Companies – Newsweek, 2023 |
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| • | Best-managed Companies – Wall Street Journal, 2023 |
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| • | World’s Most Admired Companies – FORTUNE, 2023 and 2024 |
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| • | America’s Climate Leaders – USA Today, 2023 |
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| • | Zero-Waste-To-Landfill Certification achieved by eight additional Otis factories (Madrid, San Sebastian and Vigo in Spain; Chongqing, Jiaxing, Tianjin (2) and Hangzhou in China), 2023 |
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| • | LEED Platinum Certification, (San Sebastian factory), 2023 |
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| • | Inclusion Index – Seramount (United States), 2023 |
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| • | Global Inclusion Index – Seramount (Australia, Brazil, Chile, China, Colombia, France, Mexico, Singapore, United Kingdom), 2023 |
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| • | Noteworthy Companies – DiversityInc, 2023 |
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| • | Japan PRIDE Index Gold – work with Pride (wwP), 2023 |
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| • | Corporate Strategy Well-being Award – WorkWell, 2023 |
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| • | INNOSTAR – Korea Management Registration, 2023 |
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| • | Project of the Year: East Rail Line-Cross Harbour Extension (Hong Kong) – Elevator World, January 2023 |
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| • | Project of the Year: 22 Bishopsgate, London – Elevator World, January 2023 |
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| • | Project of the Year: Elizabeth Line, London – Elevator World, January 2024 |
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| • | Project of the Year: Singapore MRT – Elevator World, January 2024 |
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| • | Top 100 Global Innovators – Clarivate, 2023 |
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| (1) | Global and regional recognition received in 2023 and in Q1 of 2024, which was based off 2023 performance. This list is not inclusive of all global, regional and local awards received. |
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Independent Lead Director letter
| | | TO OUR SHAREHOLDERS:2023 marked another consecutive year of solid performance for Otis. Guided by steady and nimble leadership, the company continued to thrive by remaining firmly focused on executing its business strategy. At the same time, Otis created new opportunities to drive innovative solutions and services in support of long-term sustainable growth. In May, for example, Otis introduced a new strategic pillar – Deliver modernization value – sharpening its focus on a sizable and growing segment that positions Otis for future growth as aging elevators across the globe require technology and other upgrades. And in the third quarter, Otis announced its transformational UpLift program, designed to leverage its global scale and drive efficiency across the organization. This Board will continue to oversee the company’s execution of these initiatives. We see the ability to embrace change and evolution as critical to the company’s future success. |
The Board itself also has evolved. Harold “Terry” McGraw, one of our founding directors, who had served on the Board since Otis became an independent publicly traded company in 2020, retired. We also welcomed two new directors with impressive leadership experience: Thomas Bartlett, former CEO of American Tower Corporation, who brings vast experience in the technology and infrastructure sectors, and Jill Brannon, Executive Vice President and Chief Sales Officer at FedEx, who brings decades of leadership delivering critical services to customers around the globe. We already are seeing both make valuable contributions in the boardroom and look forward to benefitting from their extensive expertise going forward.
With the recent evolution of our Board, we also realigned the composition of our Board committees to ensure that each committee is appropriately balanced with directors possessing relevant subject matter expertise as well as fresh and diverse perspectives. We see this balance as critical to providing strong and independent oversight to management as together we grapple with an array of macroeconomic and geopolitical issues, as well as industry and company-specific challenges. Composed of tested leaders bringing a diversity of experience across multiple industries, this Board truly is greater than the sum of its parts.
Looking ahead, we continue to believe that the company has opportunities to create value through its simultaneous commitment to execute its strategies and to always do the right thing. I would like to thank you, our shareholders, for entrusting us with your investments. I look forward to continued engagement with you in 2024 and respectfully request your support for the Board-recommended proposals contained in this Proxy Statement.
Yours truly,
JOHN H. WALKER
INDEPENDENT LEAD DIRECTOR
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Notice of 2024 Annual Meeting of Shareholders
Meeting information
| DATE AND TIME: May 16, 2024 9:00 a.m. Eastern time | | | LOCATION: We will be holding our 2024 Annual Meeting of Shareholders (“Annual Meeting”) virtually via live webcast. To attend, vote or submit questions during the Annual Meeting, please see “How to attend” below. You will not be able to attend the meeting in person. For more information, see “Virtual Annual Meeting.” |
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| Your vote is important. Please submit your proxy or voting instructions as soon as possible. | |||
Agenda
| 1. | | | Election of the 11 director nominees listed in the Proxy Statement |
| 2. | | | Advisory vote to approve executive compensation |
| 3. | | | Appointment of PricewaterhouseCoopers LLP to serve as independent auditor for 2024 |
| 4. | | | Shareholder proposal, if properly presented at the meeting |
| 5. | | | Other business, if properly presented |
Who may vote:
If you owned shares of Otis common stock at the close of business on March 18, 2024, you are entitled to receive this Notice of the 2024 Annual Meeting and to vote at the meeting, either online or by proxy.
How to attend:
To attend the meeting, please go to www.virtualshareholdermeeting.com/OTIS2024. To participate by voting or submitting questions during the Annual Meeting, you will need to log in to www.virtualshareholdermeeting.com/OTIS2024 using the control number located on your Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), proxy card or voting instruction form. You will not be able to attend the Annual Meeting in person.
Please review your 2024 Proxy Statement (“Proxy Statement”) and vote using one of the methods described on the following page.
By Order of the Board of Directors.
TOBY W. SMITH
SENIOR VICE PRESIDENT, CORPORATE SECRETARY
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Notice of 2024 Annual Meeting of Shareholders
How to Vote
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| INTERNET Online during the Virtual Annual Meeting: Go to www.virtualshareholdermeeting.com/OTIS2024 and follow the instructions on the website. Online in advance of the Virtual Annual Meeting: Up until 11:59 p.m. Eastern time on May 15, 2024, go to www.proxyvote.com and follow the instructions on the website | | | TELEPHONEUp until 11:59 p.m. Eastern time on May 15, 2024, call 1-800-690-6903 | | | MAIL Sign, date and return your proxy card or voting instruction form in the enclosed postage-paid envelope |
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Important notice regarding the availability of proxy materials for the Annual Meeting to be held on May 16, 2024. This Notice of the 2024 Annual Meeting and Proxy Statement and our 2023 Annual Report to Shareholders (“2023 Annual Report”) are available free of charge at www.proxyvote.com. References in either document to our website or any third-party website are for the convenience of readers, and information available at or through these websites is not a part of nor is it incorporated by reference in the Proxy Statement or 2023 Annual Report.
The Board of Directors (the “Board”) is soliciting proxies to be voted at our Annual Meeting on May 16, 2024, and at any postponed or reconvened meeting. We expect that the proxy materials or a Notice of Internet Availability will be mailed and made available to shareholders beginning on or about April 5, 2024. At the Annual Meeting, votes will be taken on the matters listed in this Notice of the 2024 Annual Meeting.
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Notice of 2024 Annual Meeting of Shareholders
Virtual Annual Meeting
For our Annual Meeting, we have adopted a virtual meeting format. This format enables shareholders to participate regardless of geographic location, physical or resource constraints. It also safeguards the health and safety of our shareholders, colleagues and members of our Board. All that is required is an internet-connected device.
How will the Annual Meeting be held?
The Annual Meeting will be held solely via live webcast through an online virtual meeting platform that allows shareholders around the globe to listen to the entire meeting on their computer or other device and submit questions. Members of management, our Board and a representative of our independent auditor will be in virtual attendance. There will not be a physical meeting location.
How can shareholders attend and participate in the Annual Meeting?
Only shareholders of record and beneficial owners as of March 18, 2024, the record date, may attend or participate in the meeting by voting or submitting questions. To attend and participate, go to www.virtualshareholdermeeting.com/OTIS2024 and log in using the 16-digit control number included on your Notice of Internet Availability, proxy card or voting instruction form.
On the day of the Annual Meeting, May 16, 2024, shareholders may begin to log in to the online virtual meeting platform beginning at 8:45 a.m. Eastern time. The meeting will begin promptly at 9:00 a.m. Eastern time. Please allow ample time to log in.
How can shareholders receive technical assistance in connection with the Annual Meeting?
Beginning at 8:45 a.m. Eastern time on the day of the meeting, we will have technicians ready to assist you with any technical difficulties you may have when logging in or accessing the Annual Meeting. If you encounter any difficulties accessing the Annual Meeting during the check-in or meeting time, please call the technical support number that will be posted on the online virtual meeting platform log-in page.
How can shareholders submit questions at the Annual Meeting?
Once logged in to the virtual meeting platform as instructed above, shareholders may submit questions directly by following the instructions on the website. We will answer as many shareholder-submitted questions that are appropriate and pertinent to the meeting agenda as time permits. Substantially similar questions may be answered as a group.
YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON.
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Table of contents
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