Knowles Corp
For the period ended Mar 14, 2025. Filed Mar 14, 2025.
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Mar 14, 2025 · Filed Mar 14, 2025
Contents
Executive Compensation Program Overview
Philosophy and Objectives
Knowles' executive compensation program is designed to achieve the following key objectives:
| Long-Term Focus | Our compensation structure emphasizes long-term stock-based components, reinforcing a commitment to strategic, long-term goals and shareholder value creation. Short-term incentives are designed within the context of multi-year business plans, driving a sustained focus on growth. |
|---|---|
| Pay for Performance | Variable compensation for senior leaders closely links to both individual and company performance metrics, including operational and financial outcomes. Payout is rooted in pre-defined objectives that reflect our overarching business strategies and priorities. |
| Attract and Retain Key Talent | We provide competitive compensation programs that attract and retain talented executives with a strong track record of success, assuring a high performing and stable leadership team. We continue to monitor market trends and align compensation programs with market where relevant. |
| Risk Mitigation | Compensation programs are carefully crafted, balancing fixed and variable elements. Implementing caps on short-term and long-term incentives ensures a balanced approach to risk and reward. Our approach to prudent risk management is also supported by robust governance processes and policies. |
Executive Compensation Program Structure
Our executive total direct compensation ("TDC") is composed of base salary, annual cash incentives and long-term incentives. The table below describes the structure of our 2024 compensation program and key element features:
| Pay Element | Purpose | Characteristics |
|---|---|---|
| Base Salary(See page 30) | Rewards day-to-day performance and standard job duties. | Cash•Determined based on the executive's responsibilities, performance, skills, and experience relative to market data |
| Annual Incentive ("AIP")(See page 31) | Designed to motivate and reward executives for achieving specific, pre-established financial and individual strategic goals. | Cash•Comprised of a company financial performance component, and an individual strategic objective component |
| Long-Term Incentives ("LTIP" or "LTI")(See page 35) | Designed to motivate and reward executives' contributions to enhancing long-term shareholder value and the achievement of long-term business objectives. | Performance Share Units (PSUs)•3-year relative total shareholder return ("r-TSR") against component companies in Russell 2000 Index•A holding period of one year following settlement of the PSUsRestricted Stock Units (RSUs)•Value realized depends on long-term stock price performance•Delivered in shares over three-year vesting period subject to continued employment |
Pay-for-Performance Emphasis
Pay-for-Performance is a core tenet of Knowles' executive compensation program. Knowles' focus on pay-for-performance is best demonstrated through the structure of our executive compensation program, where the majority of executive pay is at risk and variable, based on a combination of annual and long-term performance factors and Knowles' stock price performance.
As shown below for 2024, 88% of Mr. Niew's TDC and, on average, 74% of the TDC for the other NEOs was at risk and variable. In addition, 73% of Mr. Niew's TDC and, on average, 55% of the TDC for the other NEOs was equity-based and, therefore, aligned with interests of shareholders.
The LTIP is delivered through a mixture of performance share units ("PSUs") and restricted stock units ("RSUs") as shown below.
Our Compensation programs are designed so that strong Company performance results in total compensation above target, while performance below expectations results in total compensation below target by taking into consideration short-term financial targets and long-term shareholder value creation.
The chart below compares the CEO's target and realizable TDC over the last three fiscal years. As a significant portion of the TDC is tied to LTIP award values, the difference between target and realizable TDC aligns to the change in the Company's stock price between the grant date and 2024 year-end. For instance, the grant price for the 2024 LTIP awards was $16.75, and the higher closing price of $19.93 as of December 31, 2024 resulted in higher realizable pay compared to target due to the stock price appreciation. This fluctuation could also work in an opposite direction, reducing realizable pay significantly, thereby reinforcing the alignment between executive compensation and shareholder value. On the short-term side, when financial performance did not meet expectations, the cash AIP payout was reduced, as shown in the chart.
(1)Target compensation is comprised of base salary, target AIP value, and the grant date value (calculated based on the grant date closing stock price) of LTIP awards in each year. The grant date closing stock price was $21.14 in 2022, $19.09 in 2023 and $16.75 in 2024.
(2)Realizable compensation is comprised of base salary, actual AIP value earned, and the value of LTIP awards based on Knowles' December 31, 2024 closing stock price of $19.93. The realizable value for PSUs granted in 2022 was adjusted to reflect the recent payout at target (100%). The realizable value shown for PSUs granted in 2023 and 2024 (for which the performance period has not ended) assumes payout at 100%. Note, the realizable compensation amounts shown above may differ from the amounts required to be reported by SEC rules in the Summary Compensation Table or in the Pay Versus Performance section of this Proxy Statement.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.