MASCO CORP DE

Program Opportunities

We provide annual performance-based cash bonus and restricted stock unit opportunities to our executive officers to incentivize them to achieve rigorous annual performance goals and our strategic business objectives and to align our executive officers’ interests with those of our shareholders.

Our Compensation Committee establishes the cash bonus and restricted stock unit opportunities available to each executive officer as a percentage of the officer’s annual base salary. Under our annual performance program, if the threshold goal is not achieved, our executive officers do not earn a payout. If the maximum goal is exceeded, the payout percentage is capped at 200% of the target opportunity.

Our eligible executive officers had the following target opportunities under our 2023 annual performance program:

Performance Metrics

Our Compensation Committee selected the financial metrics of operating profit (weighted at 70%), net sales (weighted at 20%) and working capital as a percent of sales (weighted at 10%) for our 2023 annual performance program, because it believed that improvement in these metrics would continue to reinforce our executive officers’ focus on revenue, profit growth and capital efficiency to drive shareholder value. Additionally, these metrics are easily derived from our audited financial statements, which our Compensation Committee believes provides transparency both for our shareholders (as requested from shareholders when we sought feedback) and our executive officers.

Our 2023 annual performance program also included a diversity, equity and inclusion (DE&I) performance modifier component. This component could increase or decrease the performance percentage achieved under our annual performance program by up to 10% based on an assessment of our progress related to our DE&I strategy.

We calculate the cash bonuses to be paid and restricted stock units to be granted to our executive officers under the annual performance program by multiplying each executive officer’s base salary by his or her target opportunity, multiplying that result by the program performance percentage achieved, and multiplying that result by the DE&I performance modifier. The total payout for each executive officer is limited to 200% of target opportunity.

Program Targets and Achievement

Our performance targets are designed to be challenging, and our Compensation Committee has a robust process for establishing our targets, which includes reviewing our operating profit and revenue forecast for the year, taking into account analyst forecasts, shareholder expectations, and general economic and industry conditions. In 2023, the factors considered included an expectation of lower consumer demand and an unfavorable sales mix of our products. In 2023, we achieved 151% of our operating profit target, 72% of our net sales target and 100% of our working capital as a percent of sales target. After weighting the operating profit metric at 70%, the net sales metric at 20% and the working capital as a percent of sales target at 10%, our performance percentage for our 2023 annual performance program was 130% of our financial metrics target.

The Compensation Committee assessed our performance with respect to the DE&I performance modifier (a percentage between 90% and 110%). The assessment is based on quantitative and qualitative factors and an evaluation of our achievement and performance relative to criteria established at the beginning of the year. The DE&I performance modifier was assessed at 107%, bringing our performance percentage for our 2023 annual performance program to 139%.

To calculate achievement of our operating profit performance target, we adjusted our 2023 reported operating profit of $1,348 million to exclude the expense recognized due to rationalization charges and to exclude the positive impact on our operating profit by an acquisition transaction. Our operating profit for purposes of the annual performance program was $1,358 million.

To calculate achievement of our net sales performance target, we adjusted our 2023 reported net sales of $7,967 million to exclude the positive impact on our net sales by an acquisition transaction. Our net sales for purposes of the annual performance program were $7,939 million.

To determine achievement of our working capital as a percent of sales performance target, we define working capital as a percent of sales as a twelve-month average of our reported accounts receivable and inventories, less accounts payable, divided by our reported sales for the year. For 2023, our working capital as a percent of sales was 18.5%.

Compensation Paid Under the 2023 Annual Performance Program

Based on a total performance percentage of 139%, we calculated the actual cash bonuses to be paid and restricted stock units to be granted to our executive officers as follows: