| • | In 2023, we improved our operating profit and operating margin and continued to execute our capital deployment strategy. Despite softer sales volume, our operating profit for the year increased 4% to $1.3 billion and our operating margin increased 200 basis points to 16.9% through disciplined pricing and continued improvement in operational efficiencies. We also continued to return value to our shareholders by repurchasing approximately 6.2 million shares of our common stock and increasing our quarterly dividend by approximately 2%. |
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| • | Our compensation program is designed to emphasize pay-for-performance. We make pay dependent on performance through traditional means, including an annual cash incentive, a long-term performance-based award and stock options/stock appreciation rights (“SAR”) that vest ratably over 3 years. In addition, and different from many other companies, we formulaically base the size of our annual restricted stock unit (“RSU”) award on delivered performance. If earned, this RSU award vests ratably over 3 years. |
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| • | We achieved 139% of our annual performance program’s performance target. In 2023, our annual incentives were based on the financial metrics of operating profit, net sales and working capital as a percent of sales as well as a DE&I performance modifier. As a result of our strong performance in 2023, particularly with respect to our operating profit, our executive officers earned 139% of target under our annual performance program, and received a cash bonus and an award of RSUs consistent with this performance. While most companies grant RSUs each year without a direct link to company performance, our program requires executives to earn their RSU grant each year through annual performance. |
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| • | Our 2021-2023 Long-term incentive program (“LTIP”) paid below target, at 60%. For the three-year period of 2021-2023, our LTIP was based on the financial metrics of cumulative earnings per share (“EPS”) and a three-year average return on invested capital (“ROIC”). We achieved 100% of our cumulative EPS target, but did not achieve our threshold for ROIC. Each of our executive officers received a share award consistent with this performance. |
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| • | We continue to engage with shareholders and improve our compensation program. At last year’s Annual Meeting, our executive compensation program received 92% shareholder support, consistent with levels we have received in recent years. We continue to seek feedback from shareholders and, as appropriate, make adjustments to our program to ensure it remains aligned with long-term value creation. |
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| MASCO 2024 | PART II - COMPENSATION DISCUSSION AND ANALYSIS |
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OUR NAMED EXECUTIVE OFFICERS
This Compensation Discussion and Analysis (“CD&A”) covers the elements of compensation awarded to, earned by or paid to our named executive officers (who we generally refer to as our “executive officers”) during 2023 and focuses on the principles underlying our company’s executive compensation policies and decisions. This CD&A explains the compensation for the following individuals:
| Name | Position |
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| Keith J. Allman | President and Chief Executive Officer |
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| Richard J. Westenberg | Vice President, Chief Financial Officer and Treasurer |
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| Imran Ahmad | Group President |
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| Jai Shah | Group President |
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| Kenneth G. Cole | Vice President, General Counsel and Secretary |
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| John G. Sznewajs | Former Vice President, Chief Financial Officer |
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| David A. Chaika | Former Interim Chief Financial Officer |
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| • | Richard Westenberg commenced service as our Vice President, Chief Financial Officer on October 16, 2023 and was appointed as our Treasurer, effective April 1, 2024. |
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| • | Imran Ahmad commenced service as our Group President on February 13, 2023. |
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| • | John Sznewajs’ service as our Vice President, Chief Financial Officer concluded on May 31, 2023. |
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| • | David Chaika, currently our Vice President, Finance, was appointed to serve as our Interim Chief Financial Officer, effective June 1, 2023, through October 15, 2023. Mr. Chaika’s service with us will conclude on or about April 30, 2024. |
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OUR 2023 PERFORMANCE COMPENSATION PROGRAMS
Based on our performance in 2023, our eligible executive officers earned incentive compensation under our performance-based compensation programs, which include:
| • | Our annual performance program, under which we pay cash bonuses and grant RSUs to our executive officers if we meet annual performance goals; and |
| • | Our LTIP, under which our executive officers earn a stock award if we meet performance goals over a three-year period (2021-2023). |
OUR EXECUTIVE OFFICERS’ PERFORMANCE-BASED TARGET COMPENSATION
The target compensation mix for our CEO and our other executive officers reflects our emphasis on long-term, performance-based compensation that incentivizes our executive officers to make strategic decisions that will strengthen our business and create long-term value for our stockholders. In 2023, approximately 88% of our CEO’s target compensation, and approximately 75% of the target compensation of our other executive officers, who participated in our 2023 annual performance program and 2023-2025 LTIP, was performance-based.
| PART II - COMPENSATION DISCUSSION AND ANALYSIS | MASCO 2024 |
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PERFORMANCE COMPENSATION AWARDED UNDER OUR PROGRAMS
| 2023 ANNUAL PERFORMANCE PROGRAM | 2021-2023 LTIP |
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| Financial Performance Metric · Metric Weight · Target · ActualPerformance (as adjusted) · Performance Percentage · Financial Performance Metric · Metric Weight · Target · ActualPerformance (as adjusted) · Performance Percentage |
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| Operating Profit (in millions) | 70% | $1,200 | $1,358 | 106% | | Cumulative EPS | 60% | $11.17 | $11.17 | 60% |
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| Net Sales (in millions) | 20% | $8,060 | $7,939 | 14% | |
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| Working Capital as a Percent of Sales | 10% | 18.5% | 18.5% | 10% | | ROIC | 40% | 48.5% | 42.9% | —% |
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| Financial Metric Performance Percentage | 130% | | Total Performance Percentage | 60% | |
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| Total Performance Percentage, as modified by our DE&I performance modifier of 107% | 139% | |
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| • | See “Our 2023 Annual Performance Program” and “Our Long-Term Incentive Program” below for a discussion of the establishment of our performance metrics and goals and a description of our calculation of operating profit, net sales, working capital as a percent of sales, cumulative EPS and ROIC performance. |
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Based on this performance, our eligible executive officers earned a cash bonus and restricted stock unit award under our 2023 annual performance program and a stock award under our 2021-2023 LTIP.
| Name | CashBonus($) | RestrictedStockUnitAward ($) | 2021-2023LTIP-StockAward ($) | TotalPerformanceCompensation ($) |
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| Keith J. Allman | 2,658,900 | 3,398,282 | 1,849,338 | 7,906,520 |
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| Imran Ahmad | 521,600 | 521,631 | — | 1,043,231 |
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| Jai Shah | 642,100 | 642,345 | 336,243 | 1,620,688 |
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| Kenneth G. Cole | 567,400 | 567,722 | 267,327 | 1,402,449 |
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| John G. Sznewajs | 766,100 | — | 373,628 | 1,139,728 |
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| David A. Chaika | 224,200 | 223,870 | 117,641 | 565,711 |
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| • | Imran Ahmad did not participate in our 2021-2023 LTIP. |
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| • | John Sznewajs’ awards under our 2023 annual performance program and our 2021-2023 LTIP were each pro-rated for the portion of 2023 he served as an executive officer. The amount he earned as a restricted stock unit award under our annual performance program was paid to him as a cash equivalent and is reflected in the cash bonus column. |
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| • | Richard Westenberg did not participate in our 2023 annual performance program or our 2021-2023 LTIP. |
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| MASCO 2024 | PART II - COMPENSATION DISCUSSION AND ANALYSIS |
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OTHER PERFORMANCE COMPENSATION WE PAID IN 2023
We grant stock options annually to our executive officers to align their long-term interests with those of our shareholders by reinforcing the goal of long-term share price appreciation. These stock options will provide value to our executive officers only if the price of our common stock increases above the option exercise price. On February 13, 2023, our Compensation Committee awarded the following stock options to our executive officers; these stock options will vest ratably over three years. Richard Westenberg and John Sznewajs did not receive a grant of stock options in 2023.
| Name | Stock Options/ SAR Awarded (#) | Stock Option/SARExercisePrice ($ pershare) | Value of StockOptions/SARAwarded atGrant($) |
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| Keith J. Allman | 144,460 | 56.56 | 2,442,978 |
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| Imran Ahmad | 22,170 | 56.56 | 374,919 |
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| Jai Shah | 26,250 | 56.56 | 443,916 |
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| Kenneth G. Cole | 20,360 | 56.56 | 344,310 |
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| David A. Chaika | 9,170 | 56.56 | 155,075 |
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| • | The stock options reflected in this table were priced based on our closing stock price on February 13, 2023, the date of grant. This column shows the aggregate grant date fair value of the stock options awarded, calculated in accordance with accounting guidance. |
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| • | The grant to Imran Ahmad was in the form of SAR, which also vest in equal installments over three years. During the periods in which the SAR are exercisable, each right will entitle Mr. Ahmad to a cash amount equal to the current market price per share of Company common stock on the date he exercises the SAR less the exercise price of the SAR. |
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| PART II - COMPENSATION DISCUSSION AND ANALYSIS | MASCO 2024 |
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Our compensation practices include:
| ü | An Emphasis on Long-Term Performance—Our compensation programs are weighted toward long-term incentives. We give approximately equal weight to RSUs, stock options and our three-year incentive program, under which we grant performance-based restricted stock units (“PRSUs”). |
| ü | Annual Restricted Stock Units Granted Only When Earned—Our annual grant of RSUs is based on our executive officers’ target opportunities, which are established at the beginning of the year, and the achievement of our performance goals under our annual performance program. While most companies grant RSUs each year without a direct link to company performance, our program requires executives to earn their RSU grant each year through annual performance. |
| ü | Long-Term Performance Program—A significant portion of our executive officers’ compensation opportunity is based on the achievement of three-year performance goals. |
| ü | Clawback Policy—If we restate our financial statements, other than as a result of changes to accounting rules or regulations, our clawback policy requires us to recover incentive compensation paid to our executives in the three-year period prior to the applicable recoupment trigger date, regardless of whether misconduct caused the restatement. |
| ü | Stock Ownership Requirements—We have minimum stock ownership requirements for our executive officers, including requiring our CEO to own stock valued at six times his base salary. |
| ü | Double-Trigger Vesting—We have double-trigger vesting of equity on a change in control. |
| ü | Tally Sheets and Risk Assessment—Our Compensation Committee uses tally sheets and oversees an annual risk assessment to evaluate whether our compensation programs present undue risk to us. |
| ü | Competitive Analysis—On an annual basis, our Compensation Committee reviews a market analysis of executive compensation paid by our peer companies and published survey data for comparably-sized companies. |
| ü | Limited Perquisites—We provide limited perquisites to our executive officers. |
Our compensation practices donot include:
| × | Excise Tax Gross-Ups—Our equity grants do not provide for excise tax gross-ups. |
| × | Hedging or Pledging—Our policy prohibits executive officers and directors from hedging our stock and from making pledges of our stock. |
| × | Employment Agreements and Change in Control Agreements—We have no employment agreements or change in control agreements with our executive officers. |
| × | Option Repricing—Our equity plan prohibits the repricing of options without shareholder approval. |
| MASCO 2024 | PART II - COMPENSATION DISCUSSION AND ANALYSIS |
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