KENNAMETAL INC

Base Salary

Base salary provides a competitive level of fixed income for our executives. We target base salary levels for each tenured executive position at median pay levels for similar positions in the market. The level of base salary an executive receives is determined based on the results of an annual evaluation of the executive with respect to certain objective and subjective factors. Objective factors include the executive’s level of responsibility, skills and training, accomplishment of the goals set forth in such person’s annual individual performance plan and, for newer executives, prior experience. Subjective factors include the Committee’s assessment of the executive’s potential and individual contributions. The Committee evaluates the CEO with input from the independent Chairman of the Board and the other non-management Board members, as noted above. The CEO evaluates each of the executives who report directly to him. Both objective and subjective factors are considered, as relevant, and the CEO makes recommendations to the Committee for changes to base salary (other than his own) during the annual compensation setting process. The Committee evaluates the CEO’s and other executives’ base salary on an annual basis and may make changes in its discretion as part of the broader compensation setting process.

In setting the NEOs’ base salaries for Fiscal 2024, the Committee considered all of the factors described above for each executive and conducted an examination of the applicable market data.

For Fiscal 2024, the Committee approved salary increases for two NEOs. Mr. Watson’s salary was increased 25% at the July 2023 meeting (effective October 1, 2023) as part of a multi-year plan to move his salary toward the market median. Upon Mr. Chowbey’s promotion to President and Chief Executive Officer on June 1, 2024, his salary was increased 88%, but still remained 11% below the market median for the CEO position. No other NEOs received salary increases in Fiscal 2024.

AIP

Overview. The AIP is a formula-based, pay-for-performance annual cash incentive plan. The AIP is the main vehicle we use to reward participants for their contributions to strong annual business performance. The purpose of the AIP is to motivate participants to help the Company to achieve pre-established shorter-term financial and strategic goals, which are designed to create sustainable long-term shareowner value, and to reward participants to the extent the Company achieves those goals. All executives, senior management team members, and other team members participate in the AIP.

AIP Target Amounts. AIP target amounts are established for tenured executives based on a combination of individual factors and market-competitive data for similar jobs at other companies and are established as a percentage of base salary. Consistent with our executive compensation philosophy, individuals with greater job responsibilities have a greater proportion of their total cash compensation tied to Company performance through the AIP. Each year, the Committee sets AIP target amounts for our CEO and other executives based on recommendations from our management and the CEO (except with respect to his own target AIP) and its own evaluation of the competitiveness of each executive’s compensation package based on input from its compensation consultant.

AIP Performance Goals. We link AIP opportunities directly with Company performance to maximize shareowner value. The Board approves the goals for overall Company performance based upon management’s financial and strategic plans.

The Committee has the responsibility to review and approve the AIP design.

Individual Performance. Although the Committee reviews and approves the individual performance goals of the CEO, and the CEO has the responsibility to establish individual goals for the NEOs, the Fiscal 2024 AIP design did not have an individual component. However, the Committee has the discretion to adjust an executive’s calculated AIP award based on its assessment of the individual’s performance. The Committee did not adjust the calculated AIP award for any of our NEOs.

2024 AIP. The 2024 AIP design for NEOs was modified from the 2023 AIP design by eliminating the individual component and changing the ESG metric to a +/- 10% modifier. Both a Corporate and Segment Revenue metric were added, and Segment Presidents have a Segment Adjusted EBIT metric. The table below shows the weightings for each metric.

The Committee and management believe the use of Revenue and Segment Revenue will help to focus team members on increasing market share, customer service, and proper pricing of products. Adjusted EBITDA, adjusted EBIT and PWCPS will help to focus team members on the successful execution of the simplification/modernization of manufacturing efforts at the Company. Revenue, Segment Revenue, adjusted EBITDA, adjusted EBIT and PWCPS performance goals were set by the Committee for the two six-month increment periods of July 1, 2023 through December 31, 2023 and January 1, 2024 through June 30, 2024. The rationale for establishing financial performance goals on a half-year basis was to better align the goal setting process to the cyclicality and volatility of the Company’s industry and its rapid impact on the Company’s operational and financial results. The Committee was concerned that establishing full-year financial performance goals could result in a plan that was either too challenging or not challenging enough given the timing of our fiscal year in relation to a number of factors including economic volatility, Eastern European conflict, China’s continued slow growth, along with inflation and supply chain issues.

ESG annual goals were established as part of the Fiscal 2024 AIP. Four D&I goals and one safety goal were established for NEOs. D&I focused on: (i) improvement in the number of women in leadership roles globally, (ii) improvement in the number of ethnically diverse employees in leadership roles in the United States, (iii) EMEA D&I survey results, and (iv) APAC D&I survey results. The safety goal focused on fatal and serious incidents (“FSI”) risks identified (along with mitigation action plans in place within 24 hours to address the identified risks) across 38 manufacturing locations. Payout calculations for the ESG component is calculated based upon the number of the goals achieved as shown in the tables below.

2024 Target AIP Amounts. For 2024, the Committee approved target AIP amounts as a percentage of base salary for our NEOs at the following levels:

The following tables present the possible payouts under the AIP at different levels of performance relative to the target performance goals established for the year:

2024 Corporate Financial Performance Metrics.

With respect to each of the financial performance metrics, no AIP is awarded if actual performance is below the threshold for the performance goal and no payout is made in excess of 200% of the AIP target amount, regardless of the performance achieved. Under the terms of the AIP, the Committee makes the same adjustments that are made for non-recurring or unusual items in our financial results as reported to our shareowners in determining whether performance goals have been met.

2024 Financial Performance Goals. At the July 2023 meeting, the Board approved the following Financial Performance Goals for the Company for the July 1, 2023 through December 31, 2023 performance period: Corporate Revenue of $1,045 million, Corporate Adjusted EBITDA of $161 million, Corporate PWCPS of 32.3%, Metal Cutting Revenue of $646 million, Infrastructure Revenue of $399 million, Metal Cutting Adjusted EBIT of $75 million and Infrastructure Adjusted EBIT of $23 million, which reflected the Company’s business plan for the first half of Fiscal 2024. At its January 2024 meeting, the Board established the following Financial Performance Goals for the Company for the January 1, 2024 through June 30, 2024 performance period: Corporate Revenue of $1,079 million, Corporate Adjusted EBITDA of $192 million, Corporate PWCPS of 31.5%, Metal Cutting Revenue of $675 million, Infrastructure Revenue of $404 million, Metal Cutting Adjusted EBIT of $96 million, and Infrastructure Adjusted EBIT of $32 million. At the time it set these respective goals, the Board considered the targets to be challenging for the Company, but achievable if the financial and strategic plans of the Company were well executed. These Financial Performance Goals were then adopted by the Committee as the target Financial Performance Goals under the Fiscal 2024 AIP.

2024 Corporate ESG Performance Goals. At the July 2023 meeting, the Board approved Corporate ESG Performance Goals with the following desired outcomes for the Company for the July 1, 2023 through June 30, 2024, performance period, reflecting an improvement in D&I metrics and identification of FSI risks: (i) the number of women in leadership roles globally to be ≥ 23.0%, (ii) the number of ethnically diverse employees in leadership roles in the United States to be ≥ 12.0%, (iii) belonging score for all employees within EMEA to be ≥ 70, (iv) belonging score for all employees within APAC ≥ 72, and (v) average > 1.75 per month FSI risk identified across 38 global manufacturing locations. The Committee also retains the discretion to reduce payments for safety risks and occurrences and ESG issues even if the performance goals are achieved.

2024 Financial Performance.

The following tables show the financial performance achieved (as a percentage of target) and the amount of 2024 AIP awards paid to each of our NEOs

2024 ESG Performance (+/- 10% modifier), measuring improvement in D&I metrics and risk identification in safety metric:

Actual achievement of two of five ESG goals resulted in a 95% modifier applied to the full fiscal year calculation of financial performance for NEOs, or a 5% reduction in AIP payouts.

Based on the actual performance in the tables above for the financial and ESG metrics the fiscal year total payout for twelve months is as follows: 80.5% for Corporate NEOs; 81.2% for the President, Metal Cutting Segment (Mr. Chowbey, prior to his promotion); and 80.6% for the President, Infrastructure Segment.

Long-Term Incentives

Overview. Kennametal’s long-term incentives are designed to focus our employees on sustainable, long-term performance. We use these incentives because we believe they promote an ownership culture, align the interests of our employees and shareowners, and foster the long-term perspective necessary to increase shareowner value. They also aid in retention and help advance stock ownership by our employees.

All of our executives, members of senior management, and a significant number of key employees are eligible to receive long-term incentive awards under our broad-based LTI program. We use a portfolio approach to our LTI program, which includes RSU awards and PSU awards. We provide more information about each of these components below.

The Committee approves all equity-based and other long-term incentive awards for our executives. All the NEOs’ outstanding long-term incentive awards have been granted under shareowner approved plans, which provide for the granting of non-statutory and incentive stock options, incentive bonus awards, performance share awards, PSU awards, restricted stock awards, RSU awards, stock appreciation rights, share awards, stock unit awards, and other share-based awards.

Target Long-Term Incentive Award Amounts. Each year the Committee grants equity-based awards for each of our executives based on the executive’s performance and career potential (individual factors). The Committee also considers the long-term compensation paid by our competitors for similar positions based on the peer group and survey data provided by its compensation consultant (external factors). The Committee sets target LTI program opportunities for our executives for the relevant three-year vesting cycle at its meeting following each fiscal year-end.

Fiscal 2024 LTI Decisions.

The following table shows the target long-term incentive value granted to each of our NEOs under our broad-based annual LTI program for Fiscal 2024.

Timing of Equity Grants. The Committee grants equity-based awards to our executives on both an annual and as-desired basis. Currently we do not grant stock options or stock appreciation rights, and only grant RSUs and PSUs. We do not have any program, plan or practice to time annual or ad hoc grants of equity-based awards in coordination with the release of material non-public information or otherwise. In addition, we do not grant stock options or stock appreciation rights during periods in which there is material nonpublic information about our Company, including at any time during the four business days prior to or the one business day following the filing of our periodic reports or the filing or furnishing of a Form 8-K that discloses material nonpublic information.

RSU Awards. Since 2010, we have granted restricted stock unit (“RSU”) awards as part of our LTI program. We grant RSU awards because we believe they build ownership in the Company, serve to promote the retention of our employees and address the cyclicality of our business, thereby aligning the interests of our employees and our shareowners. We typically grant RSU awards annually to our executives as part of our broader LTI program, but we sometimes make these grants for other purposes. For example, we may grant these awards to attract new talent or to recognize or motivate our employees. RSU awards granted under our annual broad-based LTI program generally vest at the rate of one-third per year over three years. We believe our use of RSU awards helps to promote our retention efforts in that any unvested portion of a RSU award is forfeited if an executive voluntarily terminates employment prior to the applicable vesting date, unless for specific qualified reasons outlined in the award agreements.

The number of RSUs awarded to each NEO in Fiscal 2024 was determined by dividing 40% of the total LTI opportunity grant value by the closing price of our stock on the grant date.

PSU Awards. PSU awards are both performance-based and service-based, which can only be earned if the Company achieves certain threshold performance criteria established by the Committee and requires the executive to be employed by the Company through the vesting date anniversary following the close of the performance period. Performance metrics for PSUs granted in fiscal years 2022, 2023, and 2024 are shown below.

For the 2022, 2023, and 2024 PSUs, 66.66% of the PSUs were weighted based on Adjusted ROIC performance and 33.34% were weighted based on Average Adjusted EBITDA Margin, with the Average Adjusted EBITDA Margin applied at the end of the three-year performance period.

Adjusted ROIC goals have been established at threshold, target and maximum award levels for each year within the applicable performance period. The Committee has established this approach to goal setting to address the cyclicality of our industry and to partially mitigate the risk of establishing long-term performance goals at either the peak or trough of the business cycle. In addition, the service condition encourages retention.

For Fiscal 2024 only one-third of the Fiscal 2022, Fiscal 2023, and Fiscal 2024 PSU awards tied to Adjusted ROIC will be reported in subsequent tables following the Committee Report under applicable disclosure rules, as financial targets for remaining tranches will be set near the beginning of each of the subsequent fiscal years. The remaining tranches will be reported as separate grants when the applicable Adjusted ROIC goals are established by the Committee.

The number of target PSUs awarded to each NEO in Fiscal 2024 was determined by dividing 60% of the total LTI opportunity grant value by the closing price of our stock on the grant date with the opportunity to earn more or less than the target PSUs awarded as described below.

The table below presents the Adjusted ROIC goals for the 2022 PSUs for Fiscal 2024 (which was the third year of the 2022 PSUs) and Adjusted EBITDA Margin three-year average goals. Any fiscal year performance below threshold ROIC results in no payment for that fiscal year’s tranche; any EBITDA Margin three-year average performance below threshold results in no payment for the three-year period.

The table below presents the Adjusted ROIC goals for the 2023 PSUs for Fiscal 2024 (which was the second year of the 2023 PSUs) and Adjusted EBITDA Margin three-year average goals. Any fiscal year performance below threshold ROIC results in no payment for that fiscal year’s tranche; any EBITDA Margin three-year average performance below threshold results in no payment for the three-year period.

The table below presents the Adjusted ROIC goals for the 2024 PSUs for Fiscal 2024 (which was the first year of the 2024 PSUs) and Adjusted EBITDA Margin three-year average goals. Any fiscal year performance below threshold ROIC results in no payment for that fiscal year’s tranche; any EBITDA Margin three-year average performance below threshold results in no payment for the three-year period.

PSUs Earned for Fiscal 2024.

At its July 2024 meeting, the Committee certified Fiscal 2024 Adjusted ROIC performance of 7.6%. This performance resulted in the following payout multiple (subject to continued service) for outstanding PSUs as follows:

The Committee also certified Fiscal 2022 through Fiscal 2024 Adjusted EBITDA Margin three-year average performance of 16.3%, which was below the threshold goal of 16.7%. As a result, no PSUs vested that were tied to Adjusted EBITDA Margin average performance over the three-year performance period.

Overall, the 2022 PSUs vested as follows:

The total number of PSUs that vested related to the 2022 PSUs was 67.3% of target (weighted 2/3 adjusted ROIC and 1/3 Adjusted EBITDA Margin).

The Company did not grant any Stock Option Awards in Fiscal 2023. The Stock Option Awards granted in prior years are disclosed in the compensation tables provided below.

Retirement Plans

We maintain both qualified and non-qualified defined benefit and defined contribution retirement plans that are designed to work together to provide retirement pay to our executives. We provide certain pension and retirement benefits as part of our broader executive compensation program to attract and retain our executives.

Qualified Plans. We maintain a qualified retirement plan for substantially all U.S. employees, including our executive officers. The Thrift Plus Plan (“TPP”) is a defined contribution or “401(k)” plan in which all NEOs participate and is offered to encourage employees to save for their own retirement and future financial security.

Non-Qualified Plan. We maintain two non-qualified retirement plans: the Executive Retirement Plan (“ERP”) and the Kennametal Restoration Plan. Our ERP is a legacy program that provides a formula-based benefit to eligible NEOs is no longer open to new participants. Our Kennametal Restoration Plan allows eligible NEOs to make pre-tax contributions on eligible compensation in excess of the Internal Revenue Code dollar limits applicable to the TPP.

For a description of these plans and our NEOs’ participation therein, see “2024 Nonqualified Deferred Compensation and Retirement Programs” starting on page 73 below.

Perquisites Allowance

Effective August 1, 2019, we eliminated the fixed perquisite allowance for all executives, and as of December 2015, the officer life insurance benefit was frozen to new participants. None of the current NEOs participate in the officer life insurance.

In Fiscal 2022, an annual executive physical program was approved by the Committee with the following goals:

Executives are eligible to choose their own healthcare provider for their physicals, and the company will provide a sliding-scale taxable cash stipend (capped at $15,000) based on the cost of the physical for which the executive pays.

Personal benefits paid to our NEOs for 2024 are included in a supplemental table to the Summary Compensation Table as part of the footnotes to the Summary Compensation Table. Other than the personal benefits included therein, our executives receive the same benefits that are generally provided to other salaried employees, including eligibility to participate in group medical and dental plans, vision, long- and short-term disability, group life insurance, accidental death and dismemberment insurance, business travel accident insurance, health care and dependent care spending accounts, qualified retirement plans, and other benefits, in accordance with the terms of the programs.

2025 Executive Compensation Program

The Committee made the following determinations regarding the Company’s Fiscal 2025 executive compensation program for the NEOs.

Changes to 2025 Base Salary

For Fiscal 2025, the Committee approved the following base salary increases for our NEOs: Mr. Chowbey 0%; Mr. Watson, 5.0%; Mr. Cardenas, 2.6%; Ms. Keating, 3.0%; and Ms. Bacchus, 2.6%. Mr. Chowbey received an 88% increase in June 2024 related to his promotion to President and Chief Executive Officer.

Changes to 2025 AIP

Two changes were made to the Fiscal 2025 AIP. The performance period for PWCPS was changed to twelve months from two 6-month performance periods, which reflects less volatility to this financial metric compared to sales and profitability metrics. Also, for the Segment Presidents, adjusted EBIT was reduced to 15% weight (from 25%) and Corporate adjusted EBITDA was increased to 35% (from 25%) to increase their focus on overall earnings of the Company.

Regarding the target AIP as a percent of salary, Mr. Watson’s target was increased to 75% from 70%. No other NEOS had a change to their AIP targets. Mr. Chowbey’s AIP target was increased to 110% from 75% in June 2024 related to his promotion to President and Chief Executive Officer.

Changes to 2025 LTI Program

No changes were made to the Fiscal 2025 long-term incentive program, reflecting our continued commitment to pay for performance.

The following table shows the target long-term incentive grant value set for each of our NEOs under our LTI program for Fiscal 2025:

Stock Ownership Guidelines

We have adopted Stock Ownership Guidelines for directors, executives and key managers to effectively link the interests of management and our shareowners and to promote an ownership culture throughout our organization. We believe that stock should be acquired and held in quantities that encourage management to make decisions and take actions that will enhance Company performance and increase its value. These guidelines were first adopted in 1995 and are reviewed annually by the Committee at its October meeting as a standing agenda item. Employees have five years from the date they become subject to the guidelines to acquire the requisite holdings.

The current guidelines are:

Shares owned outright, vested and unvested restricted stock and RSUs, deferred stock credits, and shares owned in benefit plans (such as a 401(k)) count toward fulfilling the ownership guidelines. Unearned performance share awards are not included for stock ownership purposes.

Insider Trading Policy / Hedging and Pledging Policy

We have an insider trading policy that prohibits executives from engaging in any transaction in our stock unless that transaction has been pre-cleared and approved. Although we generally do not mandate when executives may trade, among other requirements, our insider trading policy defines pre-clearance procedures and trading window periods, which open 24 hours after our quarterly earnings release and remain open for approximately 1 1/2 months thereafter. We believe our insider trading policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and NYSE listing standards. A copy of our insider trading policy was filed as Exhibit 19.1 to our Annual Report on Form 10-K for the year ended June 30, 2024. Additionally, the Company’s policy is to only engage in transactions of Company securities in compliance with insider trading laws.

Our insider trading policy includes hedging and pledging prohibitions that prohibit the hedging of Company stock by directors, executive officers and other corporate officers, as defined in the policy, and their family members, without the prior approval and express authorization of the Company’s General Counsel. Further, this policy also prohibits the pledging of Company stock by directors, executive officers and other corporate officers and their family members, unless the General Counsel has granted an exception to the individual. An exception to this prohibition may be granted where an individual wishes to pledge Company stock as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resorting to the pledged stock. For additional details about the Company’s insider trading policy, see the subsection entitledProhibited Transactions under theEthics and Corporate Governance section above.

Employment Agreements

We have employment agreements with all executive officers. The employment agreement with Mr. Rossi terminated upon his retirement, subject to any remaining covenants. We have summarized the material terms of these agreements below.

General. The agreements require our executives to devote their entire time and attention to the business and affairs of Kennametal while they are employed.

Term. There is no predetermined term. Each executive entered into the agreement upon commencing duties as an executive officer of the Company.

Compensation. Except as noted below, the executive officer’s base salary, AIP opportunity, if any, and any other compensation for services are not specified under the agreements but rather are determined by the Committee upon the commencement of employment and assignment of the executive to a salary band. Thereafter, the Committee makes determinations regarding base salary, incentive awards, and all other components of compensation as described in this CD&A section.

Non-competition/Non-disclosure. Unless the Company provides prior consent in writing, if an executive officer decides to voluntarily terminate his or her employment or the Company terminates the executive’s employment for cause, then for two or three years after the date of termination (depending on the executive), the executive cannot, in any geographic area in which the Company is offering its services and products: (a) directly or indirectly engage in; (b) assist or have an active interest in; or (c) enter the employ of, or act as agent for, or advisor or consultant to, any entity which is or is about to become directly or indirectly engaged in any business that is competitive with any business of the Company or any of our subsidiaries or affiliates in which the executive is or was engaged. Messrs. Watson and Cardenas and Ms. Keating and Ms. Bacchus are subject to a one-year non-competition provision if terminated by the Company without cause. Under the terms of his employment agreement Mr. Rossi was, and Mr. Chowbey is, subject to a two-year non-competition provision if terminated by the Company without cause. However, in case of termination for any reason, the executive cannot disclose any of our confidential or trade secret information.

Assignment of Inventions. Each executive officer must assign to us all inventions conceived or made during his or her employment with the Company.

Employment Termination. The executive officer’s employment may be terminated by either party at any time, for any reason or no reason at all; provided, that the Company may only terminate an executive officer’s employment with the approval and authorization of the Board.

Severance. If, with Board authorization, we involuntarily terminate an executive officer’s employment prior to a change in control and not for cause (and the executive has been employed by the company for a minimum of 2 years), the executive is entitled to 12 months of severance in the form of salary continuation, except for our CEO, Mr. Chowbey , who is entitled to 24 months of severance in the form of salary continuation. Mr. Rossi’s employment agreement also included the 24- month severance term. Our executive officers are not entitled to severance under any other termination scenario outside of a change in control context as described below.

Change in Control. Under certain circumstances, the agreements provide for payments to an executive officer if his employment is terminated after a change of control. See “Termination Conditions and Arrangements” below and the “Potential Payments upon Termination or Change in Control” section of this Proxy Statement for a more detailed discussion.

No partial excise tax gross-up in agreements. Our executive officer employment agreements do not provide for any partial excise tax gross-up.

Termination Conditions and Arrangements

In a non-change in control context, our executive employment agreements provide for severance if the executive’s employment is terminated by us without “cause.” Additional details regarding the severance provisions and potential payments to our NEOs outside of a change in control context can be found in the “Potential Payments upon Termination or Change in Control” section.

Our executive employment agreements, stock and incentive plans and certain of our retirement and post-employment plans contain change in control provisions. The change in control provisions in the executive employment agreements are applicable only for those executives that have entered into these agreements, which includes each of our NEOs. The provisions of our incentive plans and retirement plans are applicable to a broader base of our employees and include all those who participate in those plans. We include these provisions because we believe they help to align executive, Company, and shareowner interests. If we evaluate a possible transaction, we want our management to focus on the potential fit with our corporate goals and strategy and the creation of long-term value for our shareowners. We believe that change in control protections enable our management to consider corporate transactions objectively and to decide whether they are in the best interests of the Company and its shareowners without undue concern over whether the transactions may jeopardize future employment.

The change in control protections under our executive employment agreements only provide payments upon the occurrence of a “double trigger,” rather than on the single occurrence of a change in control when the executive has not experienced a separation from service. For severance benefits to be “triggered,” a change in control must take placeand an executive must be involuntarily terminated by us (other than for “cause” or Disability (as defined in the employment agreements)) or must voluntarily leave for “good reason” within 6 months prior to or 24 months following the change in control in the case of Messrs. Chowbey, Watson, and Cardenas, and Mses. Keating and Bacchus, and including Mr. Rossi prior to his retirement. For additional information concerning the change in control arrangements for our NEOs, see the “Potential Payments upon Termination or Change in Control” section of this Proxy Statement.

Recoupment of Awards and Incentive Payments

In any case where there has been an allegation of fraud or misconduct, the Board of Directors would investigate and carefully review the facts and circumstances of the alleged misconduct before determining the appropriate course of action. If, after completing its investigation, the Board were to determine that an employee or officer did engage in fraudulent behavior or misconduct, the Board would take appropriate action, which could include, among other things, termination of employment, institution of legal proceedings against the wrongdoer, or bringing the misconduct to the attention of the proper authorities. If the misconduct results in a material restatement of the Company’s financial results, then the Board, in addition to the above remedies, may also seek repayment of any bonus received for the period restated, seek repayment of gains realized because of exercising stock options awarded for the period restated, or cancel any outstanding stock options or other equity or incentive compensation. Pursuant to a new rule adopted by the Securities and Exchange Commission in October 2022, we adopted a clawback policy in Fiscal 2024 to reflect the requirements of the new mandatory recoupment rule issued by the New York Stock Exchange.

The Company also incorporates restrictive covenants (prohibiting working for competitors for a period following separation from employment and disclosure of confidential or proprietary information) into the executive employment agreements, and the ERP. If the Board of Directors determines that a violation of any one of these covenants has occurred, it may, in its discretion, discontinue any future payments and/or take appropriate legal action to recoup amounts paid under these programs.

Tax, Accounting, and Regulatory Considerations

We consider the effect of tax, accounting and other regulatory requirements in designing and implementing compensation programs, and while these factors may affect plan designs, ultimately decisions reflect the pay strategy of the Company and the program intent.

Section 162(m) of the Code currently imposes a $1 million limit on the amount that a public company may deduct for compensation paid to an employee who is chief executive officer, chief financial officer, or another “covered employee” (as defined by Section 162(m)), or was such an employee beginning in any year after 2017. Accordingly, compensation awarded to covered employees in excess of one million dollars will generally not be deductible.

We reserve the right to design programs, structure other compensation arrangements and authorize compensation we determine to be appropriate and in the best interest of the Company and our shareowners, even where the compensation paid under such programs is not deductible. This discretion is an important feature of the Committee’s compensation practices because it provides the Committee with sufficient flexibility to respond to specific circumstances facing the Company.

Tools and Analytics

The Committee utilizes various tools and analytics provided by both Pay Governance and our internal management and human resources personnel to execute its duties. These tools and analyses provide internal and external context and perspective to assist the Committee with its decision-making process. The Committee reviews and considers the following information, as appropriate, when making compensation decisions:

The information above is reviewed either annually or by special request of the Committee.

Compensation for Non-Employee Directors

The Nominating/Corporate Governance Committee has responsibility for the review and oversight of non-employee director compensation. The role of the Nominating/Corporate Governance Committee in this context is explained in further detail in the “Ethics and Corporate Governance” section of this Proxy Statement. The compensation of non-employee directors in 2024 is described more fully in the “Board of Directors Compensation and Benefits” section of this Proxy Statement.