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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 ý Filed by a Party other than the Registrant o
Check the appropriate box:
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| o | | Preliminary Proxy Statement |
| o | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ý | | Definitive Proxy Statement |
| o | | Definitive Additional Materials |
| o | | Soliciting Material under §240.14a-12 |
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MASIMO 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): |
| ý | | No fee required. |
| o | | Fee paid previously with preliminary materials. |
| o | | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
FY2022 Masimo at a Glance*
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$2.0 billion in revenues for FY2022 | | 150+ countries where we sell our products | | 200 million+ patients monitored each year using Masimo SET® technology(1) |
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2.5 million non-invasive technology boards and monitors have shipped over the past 10 years | | 3.6 million HEOS® connected devices | | 800+ engineers worldwide |
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1,000+ sales and clinical specialists | | 450+ consumer sales & marketing employees worldwide | | 20,000 points of global consumer retail distribution |
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* Unless otherwise noted, the information on this page is a summary as of December 31, 2022.
(1) In leading hospitals and other healthcare settings around the world.
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Letter to Masimo Corporation Stockholders
From Our Chairman and Chief Executive Officer |
| Joe Kiani Chairman and Chief Executive Officer May 24, 2023 |
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Dear Fellow Stockholders:
As a global technology company, we have done something people didn’t think was possible – save and improve lives with monitoring solutions. That is because our pulse oximeters work accurately and reliably during motion, during low perfusion, on all skin tones, and even under intense light and electromagnetic interference. When I founded Masimo 34 years ago, I witnessed other companies take poorly performing pulse oximeters, ones that suffered from too many false alarms and missed true alarms, and simply focus on making them prettier, or smaller, or reducing their power consumption, without attempting to make the technology really work. We did. We invented SET® pulse oximetry. By doing so, Masimo made a pulse oximeter that has been proven to make a clinical difference. We have helped substantially reduce the incidences of blindness in the Neonatal Intensive Care Unit due to retinopathy of prematurity and helped detect critical congenital heart disease in newborns, saving parents from the trauma of a newborn dying at home from an undiagnosed heart defect. We have helped save the lives of patients at risk of opioid-induced respiratory depression after surgery. In recent years, we have also helped save lives by monitoring COVID-19 patients reliably at home, helping clinicians intervene sooner and reducing hospital admissions.
Over the next ten years, we intend to continuously work to improve even more lives with a series of revolutionary new products and services, such as the Masimo W1™ advanced health tracking watch, the Freedom™ premium consumer smartwatch with complementary sleep and fitness band, Denon® earbuds with adaptive acoustic technology (AAT™), and Stork™, a hospital-quality baby monitor. With these breakthrough solutions and others, we are confident that we will not just survive, but thrive, and simultaneously generate more value for our stockholders and broader base of stakeholders, including the customers who depend on our products and the communities in which we operate.
Masimo has also solved numerous other problems for hospitals that had long been perceived as unsolvable, by devising continuous, noninvasive ways of monitoring parameters and biomarkers such as hemoglobin (SpHb®), carboxyhemoglobin (SpCO®), methemoglobin (SpMet®), pleth variability index (PVi®), oxygen reserve index (ORi™) and hydration index (Hi™). Some of these technologies have already been shown to improve patient outcomes: the integration of SpHb® and PVi® into a vascular filling algorithm, for example, was shown to reduce patients’ mortality by 33% thirty days after surgery and 29% ninety days after surgery.
Even with all of these achievements, we refuse to rest and remain focused on finding ways to further improve our technology. Our foundational SET® pulse oximetry, which broke new ground when it was originally launched in 1996 for its reliability and accuracy, is today wireless and wearable too. Powered by SET®, our tetherless Radius PPG® sensors and next-generation RD sensors are now helping improve the lives of new generations of patients and the clinicians who care for them.
As our work with our overburdened clinical collaborators increasingly brings us face to face with the communication challenges that are endemic in healthcare facilities, we have developed hospital automation solutions to further facilitate connectivity across the continuum of care, such as the Root® patient monitoring hub, Iris® and iSirona™ connectivity solutions, UniView™ and UniView :60™ intelligent displays, Halo ION® and Sepsis Index (Si) early warning solutions, Centroid™ patient position sensor, and Replica® remote monitoring mobile application. With Masimo Opioid Halo™, which was granted a “De Novo” clearance by the FDA earlier this year, we hope to provide a critical new resource to assist communities in addressing the opioid epidemic that is killing more than 80,000 people a year in the U.S. alone. We are also assisting our institutional customers in caring for their patients at home after discharge from the hospital with a suite of telehealth solutions that grew out of Masimo SafetyNet®, the first in a revolutionary new continuous telemonitoring product category. Masimo SafetyNet® was first deployed en masse during the pandemic, and is now the platform driving hospital-to-home innovations like Masimo W1™.
We have also become increasingly aware of opportunities to solve another seemingly insurmountable problem – the lack of care cohesion and its impact on patient safety. With our new Masimo Consumer Health solutions, we are working to overcome this challenge by allowing the monitoring of patients by hospitals while they are at home and automating access to health data when hospital care is needed, facilitating baseline comparisons and enabling clinicians to make more informed care decisions. Patients can be sent home sooner, using Masimo technologies to receive improved step down care from the comfort of their home, avoiding longer stays in a hospital and the accompanying increased risk of exposure to harmful viruses and bacteria, not to mention the sinking and demoralizing psychological impact of prolonged confinement in an institutional setting.
In 2022, I spent time in the hospital and saw firsthand the value our technologies bring to patient care. While we will double down on our hospital efforts, we will also expand our focus on technologies in the home. Home care was a necessary step in my recovery, and thanks to products like Masimo W1™ and Radius Tº™, I was able to have my step down care at home. This should be the case for everyone. I also witnessed how my clinicians worried about not knowing my baseline physiological data. In the future, Masimo W1™ will empower them with this data seamlessly and automatically.
We know our responsibility here. What Masimo does next, we will do not only because we can, but because we must. If we don’t do it, it may never happen.
To accomplish this, we brought in the consumer expertise and skills of the teams at Bowers & Wilkins®, Denon®, Marantz®, and Polk Audio® – their sales, marketing, and custom installation teams, their engineers, their technologies, and their distribution channels. While we believe that the one-third of the world suffering from chronic disease is particularly in need of our health and healthcare-related solutions, we are dedicated to making products for everyone, such as Freedom™ and our sleep and fitness band. For these advanced wearables, hearables – solutions whose capabilities are derived from sound waves and breakthrough audio engineering — are not only complementary but key to the other’s success. We believe that wearables and hearables represent meaningful opportunities for Masimo to significantly enhance its earnings power over time. With its technologies and talents, Masimo is well-positioned to seize these opportunities, and we have established Masimo Consumer Health as an internal “start up” to spearhead the development of wearable and hearable technology. Our immensely skilled team will give Masimo Consumer Health the best chance of success without exposing it to concerns about expense not accounted for by revenue.
In 2023, we are planning to not only launch Freedom™, our Freedom™ sleep and fitness band, and Stork™, but also to augment HEOS® home audio hubs in three million homes with Masimo secure health hub capabilities, helping people better manage their overall health and wellness.
Masimo Consumer Health is not our first start up. Our first start up – Masimo itself – I created on my own, thirty-four years ago, with nothing more than a vision and a $40,000 loan on my condominium. Since our founding, we have successfully overcome the odds to accomplish everything we set out to do, and so much more. I have no doubt that we will overcome the obstacles and achieve our dream of improving the health of every individual through revolutionary solutions for the home and in hospitals.
In 1996, after seven years of research and development, we launched Masimo SET® and we faced a competitor in hospitals who controlled the major patient monitoring companies’ pulse oximeters and held exclusive contracts with Group Purchasing Organizations, representing over 90% of U.S. hospitals. They tried to stop us, but we persevered. Today, we are the world leader in hospital pulse oximetry, monitoring over 200 million patients a year. As we move further into the consumer health space, we face another formidable competitor in the form of Apple, who seemingly believes that “efficient infringement” of others’ intellectual property is a legitimate business strategy, that locking up distribution channels is its right, and that poaching Masimo’s engineers is just part of the game – a tough game, with no rules. But, Masimo W1’s™ performance advantage over the Apple watch is greater than the performance advantage that distinguished our pulse oximeters from conventional hospital pulse oximeters back in 1996. We have also shown our willingness to fight for our rights and have already prevailed in proving in a court of law that Apple infringed on one of our pulse oximeter patents by importing and selling watches with light-based pulse oximetry functionality and components. The International Trade Commission is currently considering whether to implement an import ban on these Apple watches. We are confident that, through our vigorous efforts to defend our intellectual property rights, we will demonstrate that not only is it unethical and illegal to use other companies’ intellectual property, but that companies that do so also expose themselves to the risk of costly litigation and penalties that will destroy value for their stockholders.
Look at our revenues and earnings since the commercial release of our first product in 1996. While we generally have been able to maintain steady growth since our founding, our stock price has not increased linearly. Nevertheless, even with all the ups and downs, our stock price has increased by almost 1000% since our IPO. We are optimistic about the future, because we have the best people I have ever worked with, we have a hard-earned, excellent reputation for innovation and quality, and we have a commercial reach in healthcare and consumer care that we could have only dreamed about back in 1996, let alone 1989. With revolutionary products and parameters like Masimo W1™, Stork™, Freedom™, Hi™, Si™, SpHb®, ORi®, Opioid Halo™, and so many more, we are well-positioned to not only fulfill the vision and mission we set out with thirty-four years ago, but to usher in twenty-second century healthcare by completing the circle: hospital to home to hospital – a holistic care ecosystem that will be timely, precise, efficient, effective, safer and easier. Welcome to the twenty-second century!
Thank you for your continued support of Masimo and I hope you will be able to join us for our Annual Meeting.
Joe Kiani
Chairman and Chief Executive Officer
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Letter to Masimo Corporation Stockholders
From the Independent Directors |
Dear Fellow Stockholders,
On behalf of the Board, we would like to thank you for your continued investment in Masimo and for the confidence you have placed in this Board to oversee your interests in our company. The Board is committed to providing critical stewardship and nurturing a culture that prioritizes innovation, long-term stockholder value creation, and Masimo’s mission of improving lives.
2022 was a year of significant transformation for Masimo. In addition to continuing to profitably grow our professional healthcare franchise and steadfastly defending our intellectual property, the Company completed the acquisition and successful integration of Sound United. This has provided crucial infrastructure, enabling the creation of the Masimo Consumer Health platform and progressing our vision of making clinical-grade health monitoring seamlessly available wherever and whenever needed. The Board is confident that these strategic initiatives open massive long-term growth opportunities that, alongside our existing businesses, best position the Company to maximize the value of its unique assets for both our stockholders and broader base of stakeholders.
As your representatives, we are actively engaged in determining and overseeing the Company’s strategy, setting the Company’s rules and standards, and listening and responding to your ideas and concerns. This includes making significant enhancements to the Company’s governance framework. We would like to share some more detailed perspectives about the efforts the Board undertook on your behalf during the past year.
Engaging with Stockholders and Responding to Your Feedback
The Board regularly reviews and considers enhancements to its governance practices, and consistent engagement with stockholders is a critical part of the Board’s commitment to sound governance, allowing us to better understand our stockholders’ priorities and perspectives and incorporate them into our decision-making process. Since the 2022 Annual Meeting of Stockholders, various members of the Board, including the Chairman and CEO, proactively reached out to stockholders representing more than 58% of Masimo’s outstanding shares and met with stockholders representing more than 50% of Masimo’s outstanding shares. Members of the Board joined a number of these meetings along with members of management, and the input from these conversations has informed our recent decisions and actions with respect to governance practices, executive compensation, and both short and long-term strategy, including the actions described below.
Appointing a Lead Independent Director
In March 2023, the Board created a new position of Lead Independent Director and unanimously selected H Michael Cohen to fill that role. In this capacity, Mr. Cohen works closely with us and the CEO, presides at meetings of the Board at which the Chairman is not present and provides input on Board agendas and materials in advance of Board meetings. In connection with this decision, our CEO irrevocably and permanently waived his right under his employment agreement to trigger a change-in-control event upon the appointment of a Lead Independent Director.
Declassifying the Board and Enhancing Governance
The Board has put forward, and recommends a vote in favor of, a proposal to amend the Company’s certificate of incorporation to declassify the Board, which will result in one-year terms for all directors. This amendment requires the approval of at least 75% of our outstanding shares. If approved, the phased-in declassification of the Board would begin with the directors up for election at the 2024 Annual Meeting of Stockholders, with the Board becoming fully declassified at the 2026 Annual Meeting of Stockholders.
Termination of Rights Plan and Oversight of Sustainability Initiatives
The Board also terminated the Company’s rights agreement, committed in our Corporate Governance Guidelines to seek stockholder approval of any new rights plan within 12 months of adoption, and amended the Nominating, Compliance and Corporate Governance Committee charter to specifically empower the committee to exercise oversight over the Company’s sustainability initiatives.
Laying the Foundation to Expand and Refresh the Board
The Board is proposing to expand its size from five to seven members and has put forward, and recommends a vote for, a proposal to approve, on an advisory basis, the increase in the total number of authorized members of the Board from five to seven. With the support of an external advisory firm, the Nominating, Compliance and Corporate Governance Committee has initiated a search process for two new, highly qualified and complementary independent directors. This process reflects the Board’s commitment to regular refreshment with highly qualified, experienced directors. In connection with this process, the Board will continue to solicit feedback from the Company’s stockholders regarding specific individuals as well as qualities and experience that would be beneficial for the Board.
Further Aligning Our Executive Compensation Program with Performance
The Board made certain changes to the Company’s executive compensation program to further align compensation with stockholder returns in response to the say-on-pay vote at the 2022 Annual Meeting of Stockholders and subsequent stockholder feedback. Specifically, we have conducted a comprehensive review of our compensation program and, where appropriate, amended disclosures, plans and practices, as described in more detail throughout this Proxy Statement.
Masimo has further aligned compensation with long-term stockholder value by moving to multi-year performance goals for its equity-based incentive awards by incorporating three-year cumulative performance metrics rather than annual metrics at the end of a three-year performance period. In addition, the Company has added market-based performance conditions, including a relative Total Shareholder Return (“TSR”) metric that targets the Company’s TSR performance at the 55th percentile ranking relative to the constituents of the Nasdaq Composite Index. These changes continue our longstanding track record of responsiveness to stockholder input about our compensation practices, as evidenced by our strong say-on-pay approval scores from stockholders over the five years preceding 2022. You can read more about our changes on the executive compensation front in the letter from our co-director Craig Reynolds, who serves as our Compensation Committee Chairperson, including in the section captioned “Executive Compensation” of this Proxy Statement.
Overseeing Strategy and Execution
We continue to work closely with our visionary founder and CEO and the management team to develop and execute Masimo’s strategy. Our focus during the past year has been on ensuring the Company is taking the right steps to deliver continued strong financial performance for stockholders while investing in the long-term growth and sustainability of the Company. Our rigorous approach gives us confidence that the current strategy best positions Masimo to maximize value for all stockholders.
Your vote is especially important at this year’s Annual Meeting. As you may have seen, Politan Capital Management LP, Politan Capital Management GP LLC, Politan Capital Partners GP LLC, Politan Capital NY LLC, Politan Intermediate Ltd., Politan Capital Partners Master Fund LP, Politan Capital Partners LP, Politan Capital Offshore Partners LP, Quentin Koffey, Matthew Hall and Aaron Kapito (collectively, the “Politan Group”) have nominated Michelle Brennan and Quentin Koffey for election as directors at the Annual Meeting in opposition to the nominees recommended by your Board and to bring a proposal to amend our Bylaws before the Annual Meeting (the “Politan Group Proposal”).
Your Board does not endorse the Politan Group nominees or the Politan Group Proposal and unanimously recommends that you vote “FOR” the election of the nominees on the enclosed WHITE PROXY card proposed by your Board (Julie A. Shimer, Ph.D. and H Michael Cohen, each of whom is highly qualified), “FOR” the other proposals recommended by your Board and “AGAINST” the Politan Group Proposal. You may receive solicitation materials from the Politan Group, including proxy statements and blue proxy cards. Masimo is not responsible for the accuracy or completeness of any information provided by or relating to the Politan Group, its nominees or the Politan Group Proposal contained in solicitation materials filed or disseminated by or on behalf of the Politan Group or any other statements the Politan Group may make.
Your Board strongly urges you to discard and NOT to vote using any blue proxy card sent to you by the Politan Group. If you have already submitted a blue proxy card, you can revoke that proxy and vote for your Board’s nominees and on the other matters to be voted on at the Annual Meeting by signing and dating the enclosed WHITE proxy card and returning it in the enclosed postage-paid envelope or by voting via Internet by following the instructions on your WHITE proxy card, WHITE voting instruction form or notice. Only your latest validly executed proxy will count, and any proxy may be revoked at any time prior to its exercise at the Annual Meeting as described in the accompanying proxy statement.
PLEASE NOTE THAT THIS YEAR, YOUR PROXY CARD LOOKS DIFFERENT. IT HAS MORE NAMES ON IT THAN THERE ARE SEATS UP FOR ELECTION, UNDER NEW REQUIREMENTS CALLED A “UNIVERSAL PROXY CARD.” THIS MEANS THE COMPANY’S PROXY CARD IS REQUIRED TO LIST THE POLITAN GROUP NOMINEES IN ADDITION TO YOUR BOARD’S NOMINEES. PLEASE MARK YOUR CARD CAREFULLY AND ONLY VOTE “FOR” THE NOMINEES AND PROPOSALS RECOMMENDED BY YOUR BOARD AND “AGAINST” THE POLITAN GROUP PROPOSAL.
Your vote is extremely important no matter how many shares you own. Whether or not you expect to attend the meeting, please vote and submit your proxy over the Internet, by telephone or by mail. If you are a beneficial owner of our shares, the availability of telephone and internet voting will depend on the voting process of the broker or nominee. If you have any questions or require any assistance with voting your shares, please call Masimo’s proxy solicitor:
INNISFREE M&A INCORPORATED
Stockholders may call 1(877) 456-3463 (toll-free from the U.S. and Canada) or
+1 (412) 232-3651 (from other countries)
Banks and Brokers may call 1 (212) 750-5833
We will continue to work diligently in 2023 to help ensure that Masimo delivers for our stockholders, our customers and other stakeholders. On behalf of our fellow directors, thank you for your support and feedback, which directly contribute to making Masimo a stronger company. We look forward to hearing your perspectives at the Annual Meeting and throughout the year ahead.
Sincerely,
Masimo Independent Directors | | | | | | | | | | | |
| /s/ H Michael Cohen | /s/ Adam Mikkelson | /s/ Craig Reynolds | /s/ Julie A. Shimer, Ph.D. |
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Notice of 2023 Annual Meeting
of Stockholders |
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The 2023 Annual Meeting of Stockholders of Masimo Corporation will be held on Monday, June 26, 2023 at 2:00 p.m., Pacific Daylight Time at the Masimo Corporation Headquarters located at 52 Discovery, Irvine, California 92618. The items of business are as follows: | | Date: | Monday, June 26, 2023 |
| Time: | 2:00 p.m., Pacific Daylight Time |
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| COMPANY PROPOSALS | | Location: | Masimo Corporation Headquarters at 52 Discovery, Irvine, CA 92618 |
| 1. | Election of two Class I directors as named in our Proxy Statement; | |
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| 2. | Ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 30, 2023; | | | | | |
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| 3. | Advisory vote to approve the compensation of our named executive officers; | | | | | |
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| 4. | Advisory vote on the frequency of future advisory votes to approve named executive officer compensation; | | | | | |
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| 5. | Amendment to the Amended and Restated Certificate of Incorporation to provide for the phased-in declassification of our board of directors; | | | Your vote is important. |
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| 6. | Advisory vote to approve the increase to the total number of authorized members of our board of directors from five to seven; and | | Please vote by following the instructions on your proxy card or voting instruction form. |
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| STOCKHOLDER PROPOSAL | | | | | |
| 7. | Politan Group Proposal to repeal any provision of, or amendment to, the Bylaws adopted by the Board without stockholder approval subsequent to April 20, 2023 and up to and including the date of the 2023 Annual Meeting of Stockholders. | | | | | |
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| These items are more fully described in the following pages, which are part of this Notice. |
The record date for the 2023 Annual Meeting of Stockholders is May 11, 2023. Only stockholders of record at the close of business on that date are entitled to attend and to vote at the Annual Meeting. Stockholders of record can vote their shares by using the internet, telephone or mail. Instructions for using these convenient services are set forth on the proxy card. If you received your materials by mail, you may also vote your shares by marking the enclosed WHITE proxy card, signing and dating it, and mailing it in the enclosed envelope. If you are a beneficial owner of our shares, the availability of telephone and internet voting will depend on the voting process of the broker or nominee. |
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| 2023 Proxy Statement
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| Please note that Politan Capital Management LP, Politan Capital Management GP LLC, Politan Capital Partners GP LLC, Politan Capital NY LLC, Politan Intermediate Ltd., Politan Capital Partners Master Fund LP, Politan Capital Partners LP, Politan Capital Offshore Partners LP, Quentin Koffey, Matthew Hall and Aaron Kapito (collectively, the “Politan Group”) have provided notice of their intent to nominate Michelle Brennan and Quentin Koffey for election as directors at the Annual Meeting in opposition to the nominees recommended by your Board of Directors (the “Board”) and to bring a proposal to repeal any provision of, or amendment to, the Bylaws adopted by the Board without stockholder approval subsequent to April 20, 2023 and up to and including the date of the 2023 Annual Meeting of Stockholders (the “Politan Group Proposal”). With regard to the Politan Group Proposal, the Board has not adopted, and does not currently expect to adopt, any amendments to the Bylaws between April 20, 2023 and the Annual Meeting of Stockholders on June 26, 2023. |
| You may receive solicitation materials from the Politan Group, including proxy statements and blue proxy cards. Masimo is not responsible for the accuracy or completeness of any information provided by or relating to the Politan Group, its nominees or the Politan Group Proposal contained in solicitation materials filed or disseminated by or on behalf of the Politan Group or any other statements the Politan Group may make. |
Your Board does not endorse the Politan Group nominees or the Politan Group Proposal and unanimously recommends that you vote “FOR” only the nominees proposed by your Board, “FOR” the other proposals recommended by your Board and “AGAINST” the Politan Group Proposal on the WHITE proxy card. Your Board strongly urges you to discard and NOT to vote using any blue proxy card sent to you by the Politan Group. If you have already submitted a blue proxy card, you can revoke that proxy and vote for your Board’s nominees and on the other matters to be voted on at the Annual Meeting by marking, signing and dating the enclosed WHITE proxy card and returning it in the enclosed postage-paid envelope or by voting via Internet by following the instructions on your WHITE proxy card or WHITE voting instruction form. Only your latest validly executed proxy will count and any proxy may be revoked at any time prior to its exercise at the Annual Meeting as described in the accompanying proxy statement. |
| By order of the Board of Directors, | | | | | | | | |
/s/ JOE KIANI | | | | | | | | | | | |
| Chairman & Chief Executive Officer | | | | | | | | |
| Irvine, California | | | | | | | | | | | |
| May 24, 2023 | | | | | | | | | | | |
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This Notice of Annual Meeting and Proxy Statement are first being mailed to stockholders on or about May 26, 2023.
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| 2023 Proxy Statement
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| PROXY STATEMENT TABLE OF CONTENTS |
| NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS................................................................. | |
| SPECIAL NOTE ON FORWARD-LOOKING INFORMATION................................................................. | |
| PROXY STATEMENT SUMMARY................................................................................................................. | |
| BACKGROUND TO THE SOLICITATION................................................................................................... | |
| OUR EXECUTIVE OFFICERS......................................................................................................................... | |
| OUR BOARD OF DIRECTORS........................................................................................................................ | |
| 1 | CORPORATE GOVERNANCE AND BOARD MATTERS | Corporate Governance Practices......................................... | |
| Characteristics of our Board................................................ | |
| Consideration of Director Nominees.................................... | |
| Board Leadership Structure................................................. | |
| Board’s Role in Risk Oversight............................................ | |
| Investor Feedback and Engagement.................................... | |
| Corporate Responsibility and Sustainability...................... | |
| Cybersecurity Risk Practices................................................ | |
| Human Capital Management............................................... | |
| Charitable Outreach.............................................................. | |
| Meetings and Executive Sessions.......................................... | |
| Lead Independent Director................................................... | |
| Policy Regarding Board Member Attendance at Annual Meetings.................................................................................. | |
| Independence of the Board of Directors.............................. | |
| Code of Business Conduct and Ethics.................................. | |
| Stockholder Communications with our Board................... | |
| Information Regarding Board Committees........................ | |
| Non-Employee Director Compensation............................... | |
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| 2023 Proxy Statement
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| 2 | AUDIT RELATED MATTERS | Audit Committee’s Pre-Approval Policies and Procedures.............................................................................. | |
| Principal Accountant Fees and Services.............................. | |
| Audit Committee Report....................................................... | |
| 3 | EXECUTIVE COMPENSATION | Compensation Discussion and Analysis............................... | |
| Compensation Committee Interlocks and Insider Participation........................................................................... | |
| Compensation Committee Report........................................ | |
| Summary Compensation Table............................................ | |
| Grants of Plan-Based Awards During Fiscal Year 2022.... | |
| Outstanding Equity Awards at December 31, 2022........... | |
| Options Exercised and Stock Vested During Fiscal Year 2022......................................................................................... | |
| Pay Versus Performance Table............................................ | |
| Employment Arrangements with Named Executive Officers.................................................................................... | |
| Pay Ratio Disclosure.............................................................. | |
| 4 | OWNERSHIP OF OUR STOCK | Security Ownership of Certain Beneficial Owners and Management........................................................................... | |
| Securities Authorized for Issuance Under Equity Compensation Plans.............................................................. | |
| Stock Ownership Policy........................................................ | |
| Non-Employee Director Stock Ownership Policy............... | |
| 5 | PROPOSALS | COMPANY PROPOSALS: | |
| PROPOSAL 1: To Elect Two Class I Directors as Named in our Proxy Statement......................................................... | |
| PROPOSAL 2: To Ratify the Selection of Grant Thornton LLP as our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 30, 2023................................................................................... | |
| PROPOSAL 3: To Provide an Advisory Vote to Approve the Compensation of Our Named Executive Officers........ | |
| PROPOSAL 4: To Provide an Advisory Vote on the Frequency of Future Advisory Votes to Approve Named Executive Officer Compensation.......................................... | |
| PROPOSAL 5: To Approve an Amendment to the Amended and Restated Certificate of Incorporation to Provide For the Phased-in Declassification of Our Board of Directors............................................................................. | |
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| 2023 Proxy Statement
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| | PROPOSAL 6: To Provide an Advisory Vote to Approve the Increase to the Total Number of Authorized Members of Our Board of Directors From Five to Seven.. | |
| | STOCKHOLDER PROPOSAL: | |
| | PROPOSAL 7: Politan Group Proposal to repeal any provision of, or amendment to, the Bylaws adopted by the Board without stockholder approval subsequent to April 20, 2023 and up to and including the date of the Annual Meeting...................................................................... | |
| 6 | ADDITIONAL INFORMATION | Transactions with Related Persons, Promoters and Certain Control Persons........................................................ | |
| Delinquent Section 16(a) Reports......................................... | |
| Householding.......................................................................... | |
| Annual Report on Form 10-K.............................................. | |
| Questions and Answers You May Have About These Proxy Materials and Voting.................................................. | |
| Other Matters......................................................................... | |
| Appendix A........................................................................................................................................................... | A-1 |
| Appendix B........................................................................................................................................................... | B-1 |
| Appendix C........................................................................................................................................................... | C-1 |
| Appendix D........................................................................................................................................................... | D-1 |
| Appendix E........................................................................................................................................................... | E-1 |
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| 2023 Proxy Statement
YOUR VOTE IS IMPORTANT
You are cordially invited to attend the Annual Meeting. Whether or not you expect to attend the Annual Meeting, please complete, date, sign and return the enclosed WHITE proxy card or submit your WHITE proxy through the internet or by telephone as promptly as possible in order to ensure your representation at the Annual Meeting. If you are a beneficial owner of our shares, the availability of telephone and internet voting will depend on the voting process of the broker or nominee. If you choose to submit your WHITE proxy by mail, a return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person at the Annual Meeting. Please note, however, if your shares are held of record by a broker, bank or other agent and you wish to vote in person at the Annual Meeting, you must obtain a proxy issued in your name from that record holder.
This Proxy Statement, the proxy card, which contains instructions on how to vote your shares, together with our annual report, is first being mailed on or about May 26, 2023 to all stockholders entitled to receive notice of and to vote at the Annual Meeting.
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SPECIAL NOTE ON FORWARD-LOOKING INFORMATION |
This Proxy Statement contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or are proven to be incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. These statements are often identified by the use of words such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “ongoing”, “opportunity”, “plan”, “potential”, “predicts”, “seek”, “should”, “will” or “would”, and similar expressions and variations or negatives of these words. These forward-looking statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information currently available to management, all of which is subject to change. Such forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict and could cause our actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under Item 1A-“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2023, as amended by the Form 10-K/A, filed with the SEC on May 1, 2023 (the “2022 Annual Report on Form 10-K”) and subsequent Quarterly Reports on Form 10-Q, as updated by our future filings. Furthermore, such forward-looking statements speak only as of the date of this Proxy Statement. We make no representation as to the accuracy or completeness of the forward-looking statements and undertake no obligation to update or revise publicly any forward-looking statements to reflect events or circumstances after the date of this Proxy Statement for any reason, except as required by law.
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| 2023 Proxy Statement
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| Date and Time | | Location | | Record Date |
| Monday, June 26, 2023, 2:00 p.m. PDT | | The 2023 Annual Meeting of Masimo Stockholders will be held at the
Masimo Corporation Headquarters
at 52 Discovery, Irvine, California 92618. | | May 11, 2023 |
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Company Overview
We are a global technology company dedicated to improving lives. In connection with the acquisition of Viper Holdings Corporation d/b/a Sound United, LLC (Sound United), we announced an organizational structure change designed to accelerate our growth strategies and strengthen our focus on patient care, thereby creating two reportable segments: healthcare and non-healthcare. We commenced reporting under this new structure effective for the quarter ended July 2, 2022.
Healthcare
Our healthcare business develops, manufactures and markets a variety of noninvasive patient monitoring technologies, hospital automation and connectivity solutions, remote monitoring devices and consumer health products. Our patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software, cables and other services. We primarily sell our healthcare products to hospitals, emergency medical service (EMS) providers, home care providers, physician offices, veterinarians, long-term care facilities and consumers through our direct sales force, distributors and original equipment manufacturer (OEM) partners, such as GE Healthcare, Hillrom, Mindray, Philips, Physio-Control and Zoll, just to name a few.
Our core measurement technologies are our breakthrough Measure-through Motion and Low Perfusion™ pulse oximetry, known as Masimo Signal Extraction Technology® (SET®) pulse oximetry, and advanced rainbow® Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb®), alongside many other modalities, including brain function monitoring, hemodynamic monitoring, O3® regional oximetry, acoustic respiration rate monitoring, capnography and gas monitoring, nasal high-flow respiratory support therapy, patient position and activity tracking and neuromodulation technology solutions.
Our measurement technologies are available on many types of devices, from bedside hospital monitors like the Root® Patient Monitoring and Connectivity Hub, to various handheld and portable devices, and to the tetherless Radius-PPG®, Radius-VSM® and Masimo SafetyNet™ remote patient surveillance solution. The Masimo Hospital Automation™ Platform facilitates data integration, connectivity and interoperability through solutions like Patient SafetyNet™(1), Iris™, iSirona™, Replica® and UniView™ to facilitate more efficient clinical workflows and to help clinicians provide the best possible care, both in-person and remotely. Leveraging our expertise in hospital-grade technologies, we are also expanding our suite of products intended for use both inside and outside the hospital and products for personal home wellness, including Masimo Sleep™, a sleep quality solution, the Radius Tº™, a wireless wearable continuous thermometer, the Radius C® wireless tetherless capnograph and the Masimo W1™, a wrist-worn continuous biosensing health watch.
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(1) The use of the trademark Patient SafetyNet™ is under license from the University HealthSystem Consortium.
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| 2023 Proxy Statement
Non-healthcare
Our non-healthcare consumer audio business develops, manufactures, markets, sells and licenses premium and luxury audio sound products and related integration technologies. Our consumer audio products are sold direct-to-consumers or through authorized retailers and wholesalers. We also license certain audio technologies to select luxury automotive manufacturers such as BMW®, Maserati®, McLaren®, Polestar® and Volvo®. In addition, we maintain partnerships with certain airlines for bespoke headphones, allowing for the best in-flight audio experience. Our premium and luxury audio business includes iconic brands like Bowers & Wilkins®, Denon®, Marantz®, Polk®, Definitive Technology®, Classe®, Boston Acoustics® and HEOS® to meet differentiated consumers’ wants and needs.
Our Strategy
We are an organization engineered to improve life. We exist for people who care, those that: care about others, care about quality, care about precision and care about excellence. Our healthcare and non-healthcare segments are joined by the common goal of improving lives by providing patient-centered solutions to healthcare providers, expanding outside of the hospital and into the home and delivering innovative, high-quality information and experiences to consumers. We believe that people and infrastructures are ready for actionable patient care outside of the hospital.
We deliver value to our customers and stockholders through:
• our differentiated and clinically superior technologies;
• our proven track record of innovation;
• our customer-driven approach to product development;
• our robust product portfolio and pipeline that addresses unmet needs of healthcare professionals, patients, and consumers; and
• our scaled and integrated platforms to continuously monitor and deliver health information and other data, applications and experiences.
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| 2023 Proxy Statement
Fiscal 2022 Corporate Performance Highlights
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Financial Performance Summary(1) |
| | | | | | | % Change |
| (in millions, except per share data and percentages) | | 2022 | 2021 | 2019 | 2017 | | 1-Year (’22 vs ’21) | 3-Year (’22 vs ’19) | 5-Year (’22 vs ’17) |
| GAAP Revenue | | $2,035.8 | $1,239.2 | $937.8 | $790.2 | | 64% | 117% | 158% |
| Non-GAAP Revenue | | 2,035.8 | 1,239.2 | 936.4 | 738.2 | | 64 | 117 | 176 |
| GAAP Operating Profit | | 210.0 | 275.8 | 221.2 | 183.8 | | (24) | (5) | 14 |
| Non-GAAP Operating Profit | | 362.2 | 294.8 | 224.7 | 137.0 | | 23 | 61 | 164 |
| GAAP Earnings Per Share | | 2.60 | 3.98 | 3.44 | 2.23 | | (35) | (24) | 17 |
| Non-GAAP Earnings Per Share | | 4.59 | 3.99 | 3.22 | 1.73 | | 15 | 43 | 165 |
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(1) Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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| Strategic Achievements |
• We had a record year for U.S. healthcare business and the second highest year for our worldwide healthcare business in terms of new customer wins over to Masimo technologies; |
| • We achieved 7% growth in our installed base of technology boards and instruments, which now stands at approximately 2.5 million devices; |
| • We drove further adoption of our hospital automation platform solutions across the various care areas of the hospitals we serve. The number of beds connected via Patient SafetyNet™(2) and Iris Gateway® increased by 19% and our Root™ connectivity platform installations grew by more than 30% in 2022; |
| • We unlocked massive new market opportunities for our pipeline of consumer health products through the acquisition of Sound United, which provides immediate critical mass in the consumer channel; |
| • We launched the Masimo W1™, the first health watch to offer accurate, continuous measurements; and |
| • We unveiled a broad portfolio of consumer health products that are scheduled to launch in 2023, such as Freedom™ premium consumer smartwatch, our sleep and fitness band, Denon® earbuds with adaptive acoustic technology (AAT™), and the Stork™ hospital-quality home baby monitor with Safety-Net Alert. |
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(1) Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
(2) The use of the trademark Patient SafetyNet is under license from the University HealthSystem Consortium.
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| 2023 Proxy Statement
Total Shareholder Return (as of May 1, 2023)
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| TSR as of 5/1/2023 | Ticker | 1 Year | 5 Year | 10 Year |
| Masimo | MASI | 59% | 106% | 852% |
| S&P 500 | ^SP500TR | 2% | 71% | 219% |
| NASDAQ Composite | ^XCMP | (2)% | 79% | 311% |
| Medical Devices Index | ^DJSMDQT | 4% | 85% | 396% |
Our TSR has continued to outperform those of the S&P 500, the Nasdaq Composite Index and the Medical Devices Index over the prior ten-year period.
Stockholder Engagement
We believe that engaging with stockholders is fundamental to the Company’s success and our commitment to good governance. We seek to proactively listen to, understand and consider the opinions of our stockholders to stay aligned with stockholder priorities.
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| 2023 Proxy Statement
Over the past several years, we have significantly expanded our stockholder engagement program to better understand the issues that are important to our stockholders and incorporate feedback from our stockholders into our Board of Directors’ (the “Board”) decision-making process. Members of our management team, including our CEO, CFO, COO, General Counsel and our Vice President of Investor Relations, and independent directors regularly meet with stockholders to gather their perspectives on key topics including our long-term strategy, financial and operational performance, risk management, corporate responsibility, executive compensation and governance practices. We are committed to regular and transparent communication and engagement with our current and future stockholders. We offer regular opportunities for our stockholders to engage with our management team and the independent board members throughout the year to discuss topics that are relevant to our stockholders, including long-term strategy, financial and operational performance, risk management, executive compensation and governance practices.
Stockholder Advisory Vote (the “Say-on-Pay” Vote)
We have received greater than 80% support for the Say-on-Pay Vote every year since 2018, with the exception of our Say-on-Pay Vote in 2022. Our Board and the Compensation Committee took seriously the Say-on-Pay result from our 2022 Annual Meeting of Stockholders, at which 53% of our stockholders voted against the Say-on-Pay vote. In response to this disappointing level of stockholder support, our independent directors led an even more extensive outreach effort following our 2022 Annual Meeting of Stockholders to understand our stockholders’ concerns and viewpoints with respect to both our executive compensation and broader corporate governance practices. We appreciate and value the time our investors spent with us during these conversations and have carefully considered the feedback received as we made changes to meaningfully strengthen our corporate governance practices and executive compensation program, as summarized below:
How We Engaged With Our Stockholders Over The Last Twelve Months
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| The following independent directors engaged with our stockholders: | | Met with stockholders representing more than: | | Matters discussed during these meetings included: |
• H Michael Cohen | | | | • Board Declassification
• Board Expansion
• Lead Independent Director
• Stockholders’ Rights Agreement
• Executive Compensation
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| Lead Independent Director and Chairperson of the Audit Committee | | 50% | |
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| • Julie A. Shimer, Ph.D. | | | |
| Chairperson of the Nominating, Compliance and Corporate Governance Committee | | of our outstanding shares. | |
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| • Craig Reynolds | | | |
| Chairperson of the Compensation Committee | | | | | |
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| 2023 Proxy Statement
How We Have Responded to the Feedback We Received | | | | | |
| Investor Feedback - Executive Compensation | Our Response |
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Consider adding a relative Total Shareholder Return (“TSR”) metric to the long-term incentive award.
| For 2023, the Company has added a relative TSR metric to the performance share units granted to our executive officers that requires Company TSR out-performance at the 55th percentile relative to the constituents of the Nasdaq Composite Index to achieve target payout over a three-year cumulative performance period. If the Company’s absolute TSR is negative, the funding percentage is capped at 100%. |
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For long-term incentive compensation plans, consider moving to three-year cumulative financial metrics rather than annual metrics at the end of a three-year performance period. | For 2023, we have incorporated three-year cumulative Adjusted Product Revenue and Operating Margin performance metrics in the design of the performance share units. |
| For long-term incentive compensation plans, consider moving to 3-year cumulative financial metrics rather than annual metrics at the end of a three-year performance period. | For long-term incentive compensation plans, consider moving to 3-year cumulative financial metrics rather than annual metrics at the end of a three-year performance period. |
Continue to enhance disclosure on our executive compensation program. | We have endeavored to increase the transparency of and details regarding our executive compensation program and governance practices throughout this Proxy Statement, including key details regarding 2023 enhancements to our incentive structures as outlined on page 70 of this Proxy Statement. |
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| Stockholders expressed a preference that future executive employment agreements include only double trigger cash severance provisions in connection with a change-in-control. | Going forward, the Compensation Committee has committed that any new employment agreements will include only double trigger change-in-control provisions. |
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| 2023 Proxy Statement
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| Investor Feedback - Corporate Governance | Our Response |
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Board Declassification: A number of stockholders expressed a strong preference for annual director elections. | The Board has approved, and recommends that stockholders vote in favor of, a proposal to stockholders for a vote at the Annual Meeting to amend the Company’s Amended and Restated Certificate of Incorporation to declassify the Board, which would result in one-year terms for all directors and requires the approval of 75% of the outstanding shares. If approved, the declassification of the Board would begin with the directors up for election at the 2024 Annual Meeting of Stockholders, with the Board becoming fully declassified at the 2026 Annual Meeting of Stockholders. |
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Board Expansion: Consider expanding the size of the Board, following contraction over the last few years due to director retirements and/or resignations. | The Board has decided to expand the size of the Board from five to seven members and has approved, and recommends a vote for, a proposal to approve, on an advisory basis, the increase in the total number of authorized members of our Board from five to seven. With the support of an external advisory firm, the Board’s Nominating, Compliance and Corporate Governance Committee has initiated a search process for two new, highly qualified and complementary independent directors. In connection with this process, the Board will continue to solicit feedback from the Company’s stockholders regarding specific individuals as well as qualities and experience that would be beneficial for the Board. |
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Lead Independent Director: Consider adding a lead independent director. | On March 22, 2023, the independent directors of the Board unanimously selected H Michael Cohen as the Board’s Lead Independent Director, responsible for presiding at meetings of the Board at which the Chairman is not present and providing input on Board agendas and materials in advance of Board meetings. |
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Investor Feedback - Corporate Governance -
(Continued) | Our Response -
(Continued) |
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Board Composition: A number of stockholders noted a heightened focus on diversity, including in particular a strong preference for increased female representation on the Board.
| During 2022, our Board amended our Corporate Governance Guidelines to implement a policy addressing board diversity when identifying potential director nominees. The policy provides that our Nominating, Compliance and Corporate Governance Committee will ensure that the initial list of director candidates from which new Board nominees are chosen includes qualified women and minority candidates. In addition, any third-party consultant retained by our Nominating, Compliance and Corporate Governance Committee to furnish an initial list of director candidates will be requested to include qualified women and minority candidates. |
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Stockholders’ Rights Agreement: A number of stockholders did not support the presence of “poison pill” arrangement. | On March 22, 2023, the Board terminated the Rights Agreement. The Board does not currently intend to adopt another rights plan. If a new rights plan were to be adopted as a result of new circumstances arising in the future, the Board has agreed to seek stockholder approval of the rights plan within 12 months of its adoption unless the rights plan is terminated prior to such time. |
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| 2023 Proxy Statement
Key Corporate Governance Practices
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Board Independence and Structure |
| l | Lead independent director* |
| l | All of our non-employee directors are independent |
| l | Independent Audit, Compensation and Nominating, Compliance and Corporate Governance Committees |
| l | Committees have authority to select, retain and terminate independent advisors at their sole discretion |
| l | Company is seeking to de-classify its Board to provide for annual elections through a management-sponsored proposal* |
| l | Formal diversity policy for director nominees* |
| l | Directors may contact any employees of our Company directly for transparent engagement |
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| Board Effectiveness |
| l | Annual evaluation of Board and committee performance |
| l | All directors attended more than 75% of the meetings of the Board and its committees in 2022 |
| l | Commitment to Board refreshment with two new independent directors having been appointed since 2018 and announced plans to add two new independent directors within the next 12 months* |
| l | Diverse mix of viewpoints, experience, skills, tenure and age represented on the Board |
| l | Director nominee selection process aligned with our long-term strategic plans |
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| Policies and Practices |
| l | Robust stock ownership policy for executive and Board members |
| l | Annual compensation-related risk assessment and compensation review |
| l | Compensation recovery (“Clawback”) policy |
| l | No hedging; pledging requires pre-approval |
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| Stockholder Rights |
| l | Annual stockholder advisory vote on named executive officer compensation |
| l | Stockholder engagement that includes our Compensation Committee Chairperson, Nominating, Compliance and Corporate Governance Chairperson and Lead Independent Director* |
| l | Stockholders have proxy access with market standard conditions for director nominations |
| l | The Company recently rescinded its prior rights plan and the Board will seek stockholder approval for any subsequent rights plan within 12 months of adoption unless the plan is terminated prior to such time* |
| l | Single class of outstanding shares of common stock with equal voting rights |
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* Newly adopted or enhanced during 2022 or 2023.
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| 2023 Proxy Statement
Executive Compensation Highlights
Masimo’s executive compensation program is designed to align the interests of our executive officers with those of our stockholders, attract and retain highly talented individuals and support our long-term growth and profitability goals. Our compensation program provides a balanced mix of fixed versus variable elements and short-term versus long-term incentives that are closely aligned with the Company’s performance and are sensitive to our stock performance. Highlights of the structure of our 2022 executive compensation program are presented below. After taking into consideration stockholders’ feedback, we made several enhancements to our long-term incentive (“LTI”) award structure for 2023. See “Stockholder Engagement” and “Compensation Discussion and Analysis – Executive Summary” for details regarding our 2023 LTI award design.
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| Type | | Component | | Objectives |
| Fixed Compensation | | Base salary | | l | Fixed annual cash compensation to compensate executives for performing core job responsibilities |
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Performance-based
Compensation | | Annual incentives | | l | Variable, cash awards paid annually, if earned |
| | | l | Drive the achievement of key business results on an annual basis |
| | | l | Based on actual performance as measured against multiple pre-established performance objectives |
| | | l | Rigorous performance goals that require performance above both the internal management plan and the prior year targets and results to achieve target payout |
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| | Long-term incentives | | l | Variable, equity award that is wholly performance based: |
| | | | | l 25% in the form of stock options that vest annually over a five-year period; and |
| | | | l 75% in the form of PSUs that vest after three years based on our actual performance in the third year of the performance period as measured against multiple pre-established performance objectives |
| | | | l | Rigorous performance goals that require performance above both the internal management plan and the prior year targets and results to achieve target payout |
| | | | l | Reinforce the need for long-term sustained performance, business growth and value creation |
| | | | l | Focus executives on annual objectives that support the long-term business strategy and creation of stockholder value |
| | | | l | Align the long-term interests of executives with those of our stockholders |
| | | | l | Encourage retention |
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| 2023 Proxy Statement
Total Target Compensation
Our compensation philosophy and structure has continued to evolve, based on changing market conditions, input from our Compensation Committee’s independent compensation advisor and direct feedback from our stockholders. The Compensation Committee believes that the current LTI equity award structure is strongly performance-oriented, with the vast majority of pay delivered in the form of long-term equity to focus our Named Executive Officers (“NEOs”) on driving increased stockholder value over a multi-year period and enables us to achieve our retention objectives, while maintaining a conservative approach to overall share usage and avoiding unnecessary risk-taking.
Masimo’s “at-risk” compensation (which includes the annual cash bonus and LTI compensation) comprised 92.0% of our Chief Executive Officer’s (“CEO”) FY2022 total compensation and an average of 79.9% of our other NEOs FY2022 total compensation, as shown below:
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* The percentages shown in the charts above do not include Kevin Duffy, whose employment was terminated effective August 5, 2022.
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| 2023 Proxy Statement
Director Nominee Snapshot
Our directors possess broad expertise, skills, experience and perspectives that facilitate the oversight and strategic direction required to govern our business and strengthen and support the executive management team. As shown in the following charts, our Board is comprised of individuals with expertise in fields that align with Masimo’s business and long-term strategy, and reflects a blend of tenure that allows for both new perspectives and continuity. Our Nominating, Compliance and Corporate Governance Committee is responsible for identifying and recommending director candidates to our Board for nomination. The Nominating, Compliance and Corporate Governance Committee reviews candidates for director nominees in the context of the current composition of our Board and committees, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating, Compliance and Corporate Governance Committee may consider the director nominee’s qualifications, diversity, skills and such other factors as it deems appropriate given the current needs of our Board, the committees and Masimo, to maintain a balance of knowledge, experience, diversity and capability. In 2022, to deepen our commitment to identifying diverse candidates for our Board, our Board amended our Corporate Governance Guidelines to implement a policy addressing board diversity when identifying potential director nominees. The policy provides that our Nominating, Compliance and Corporate Governance Committee will ensure that the initial list of director candidates from which new Board nominees are chosen includes qualified women and minority candidates. In addition, any third-party consultant retained by our Nominating, Compliance and Corporate Governance Committee to furnish an initial list of director candidates will be requested to include qualified women and minority candidates. With the support of an external advisory firm, our Nominating, Compliance and Corporate Governance Committee has initiated a search process for two new, highly qualified and complementary independent directors. This process reflects our Board’s commitment to regular refreshment with highly qualified, experienced directors and responsiveness to input from stockholders. In connection with this process, our Board will continue to solicit feedback from our stockholders regarding specific individuals as well as qualities and experience that would be beneficial for our Board.
| | | | | | | | | | | | | | | | | |
| TENURE | AGE |
5.25 years average tenure for all directors other than our CEO. | 60.6 years average age of all our directors. |
| Our Board term limit is 15 years. | Our Board does not have an age limitation. |
| None | 2 | 3 | 3 | 1 | 1 |
| < 1 year | 2 to 5 years | > 6 years | < 60 years | 60-70 years | > 70 years |
| | | | | |
| DIVERSITY | INDEPENDENCE |
2 of 5 Board leadership positions are held by directors who are women or racial/ethnic minorities. Our policy is to build a diverse board representing a wide range of backgrounds. | All independent except for CEO. |
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| | | | | |
1 Female | | 1 Ethnically diverse | 4 Independent | | 1 Not independent |
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| 2023 Proxy Statement
Primary Qualifications Snapshot*
| | | | | | | | | | | | | | | | | |
| Julie A.
Shimer, Ph.D. | H Michael
Cohen | Joe
Kiani | Adam
Mikkelson | Craig
Reynolds |
| Senior Leadership | u | u | u | | u |
Financial
Expertise | u | u | u | u | u |
| Technology and Innovation | u | | u | | u |
Healthcare
Industry and Operations | u | u | u | u | u |
| Consumer | u | | | | |
| Mergers and Acquisitions | u | u | u | u | u |
| Environmental, Social and Governance (ESG) | u | u | u | u | u |
| | | | | |
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* See page 32 for additional details on composition of primary board qualifications.
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| BACKGROUND TO THE SOLICITATION |
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The summary below details the significant contacts between the Company and the Politan Group beginning in August 2022 through the date of this Proxy Statement. This summary does not purport to catalogue every conversation of or among members of the Board, the Company’s management, the Company’s advisors and representatives of the Politan Group and their advisors relating to the Politan Group’s solicitation.
On August 15, 2022, without any prior communication with or outreach to the Company or any of its directors or officers, Quentin Koffey, the managing partner and chief investment officer of Politan, called the Company’s front desk, called Eli Kammerman, the Company’s Director of Investor Relations, and emailed Joe Kiani, the Company’s founder and Chief Executive Officer, requesting a meeting with Mr. Kiani. Mr. Koffey indicated that Politan had recently acquired a significant stake in the Company, but did not provide any further explanation of Politan’s rationale for its acquisition or intentions with respect to the Company.
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| 2023 Proxy Statement
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| | BACKGROUND TO THE SOLICITATION |
On August 16, 2022, Politan and certain of its affiliates filed a Schedule 13D with the SEC reporting beneficial ownership by Politan of approximately 4.4 million (or 8.4% of the then outstanding) shares of the Company’s common stock, of which 4.1 million shares were in the form of physically settled swap transactions that would be executed on an unspecified future date. In its Schedule 13D filing, Politan noted that it “intend[s] to engage in conversations, meetings and other communications with certain members of [Masimo’s] board of directors and management team, stockholders, industry analysts, and other interested parties, in each case to discuss [Masimo’s] business, operations, financial condition, strategic plans, governance, the composition of the executive suite and board and possibilities for changes thereto, as well as other matters related to [Masimo].” Over the course of the following week, the trading price of the Company’s common stock fell by more than six percent, from approximately $160 per share at the close of market on August 15, 2022, the trading day prior to Politan’s Schedule 13D filing, to approximately $150 per share at the close of market on August 23, 2022, one week after Politan’s Schedule 13D filing. Also on August 16, 2022, an article was published in 13D Monitor that contained information regarding Politan’s internal business strategies that the Company concluded could have only come from Politan. The article stated that Politan would “work quietly and behind the scenes with the Company to try to get one or two seats on the Board,” and “[i]f the Company does not settle, Politan … will … go multiple years and multiple proxy fights if that is what is necessary.”
On or about August 23, 2022, Politan filed a Notification and Report Form with the Federal Trade Commission and Department of Justice with respect to its intention to acquire shares of the Company’s common stock for an aggregate total amount of up to approximately $1.01 billion (which would result in an aggregate ownership of approximately 13% of the outstanding shares of the Company’s common stock).
On September 2, 2022, Mr. Koffey and other principals of Politan met with Mr. Kiani and several other members of the Company’s management team in the Discovery Lab, where the Company showcases its advanced technologies. At the meeting, Mr. Koffey praised Mr. Kiani’s vision and leadership and told the Company representatives he saw value in its recent strategies. Mr. Koffey proposed that he and an unnamed additional nominee of Politan’s choosing be installed as members of the Board, claimed that he would be Mr. Kiani’s “biggest cheerleader” if the Company added the Politan nominees, and threatened that, if the Company refused, Politan would win the board seats anyway. In the view of the Company representatives, Mr. Koffey seemed uninformed regarding the Company’s technology and showed no interest in the Discovery Lab. While Company management offered to provide Mr. Koffey non-public information about the Company and management’s business strategies, subject to executing a customary non-disclosure agreement, Mr. Koffey failed to express interest in acquiring any additional information about the Company, and during the course of the discussions, he did not raise any questions about the Company’s business or plans, could not identify any business strategy that he would want the Company to pursue and declined the proffered access to additional information the Company was prepared to provide. Mr. Koffey also failed to identify any relevant experience in the Company’s field or industry, or his qualifications for board service, other than the Politan Group’s standing as a large stockholder.
Following the meeting, the Board held multiple discussions and meetings, together with members of management and the Company’s legal and financial advisors, to consider and evaluate potential next steps. The Board discussed Mr. Koffey’s lack of board experience and expertise in the Company’s field and the failure of the Politan representatives to provide any actionable recommendations or guidance with respect to the Company’s business. The Board determined that it would not be in the best interests of the Company and its stockholders to invite Mr. Koffey to join the Board, but that it would be willing to arrange for a meeting between Politan and certain members of the Board and management as part of the Company’s outreach efforts to its large stockholders later in the year. The Board also adopted a stockholder rights plan to prevent Politan from acquiring control of the Company by amassing an outsized share of the common stock of the Company without paying a control premium and amended and restated the Company’s bylaws to increase transparency. On September 9, 2022, the Company filed a Form 8-K with the SEC announcing the adoption of the stockholder rights plan and amended and restated bylaws.
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| 2023 Proxy Statement
| | | | | | | | |
| | BACKGROUND TO THE SOLICITATION |
On September 8, 2022, Mr. Kiani emailed Mr. Koffey to convey the Board’s willingness to arrange for a meeting between Politan and members of the Board and management as part of the Company’s outreach efforts to its large stockholders later in the year, emphasizing that the Company would welcome meeting Politan as part of that process and that Mr. Kammerman would reach out to Mr. Koffey to coordinate arranging a meeting. Mr. Koffey ignored the Company’s offer to arrange for a meeting and did not engage with Mr. Kammerman with respect to scheduling such a meeting. On September 16, 2022, Mr. Koffey sent Mr. Kiani an email demanding the rescission of the amendments made to the bylaws. Subsequently, legal counsel to the Politan Group reached out to the Company’s legal counsel to restate Mr. Koffey’s demand and request a copy of the Company’s form questionnaire for director nominations. The Company’s legal counsel responded on September 28, 2022, by providing the Politan Group with a copy of the form questionnaire and inviting the Politan Group to specify any particular areas of concern. The Company’s legal counsel indicated that the Company welcomed further discussion of any legitimate concerns of the Politan Group.
On September 27, 2022, Politan filed an amendment to its Schedule 13D with the SEC announcing that it had exercised all of its stock swaps and reporting beneficial ownership by the Politan Group of approximately 8.8% of the Company’s common stock.
On October 9, 2022, the Politan Group’s legal counsel again contacted the Company’s legal counsel to reiterate its demand for the rescission of the bylaw amendments. The Politan Group’s legal counsel also provided a form of nomination notice, including a completed but unsigned questionnaire and related materials (the “Politan Form of Notice”) that presented Mr. Koffey as a nominee for election to the Board at the 2023 Annual Meeting.
On October 17, 2022, legal counsel to the Politan Group reached out to demand that the Board disable certain change-in-control provisions (the “Director Change of Control Provisions” or “DCCP”) contained in the Company’s Amended and Restated Employment Agreement with Mr. Kiani (as amended and in effect from time to time, the “Employment Agreement”), despite the fact that (1) the agreement was entered into in 2015 and Politan was aware of it when it purchased the Company’s stock seven years later, (2) the agreement was the product of extensive arms-length negotiations between the Board’s independent directors and Mr. Kiani and (3) the Company’s independent directors had no legal authority to unilaterally disable such provisions without the consent of Mr. Kiani. Neither the Politan Group nor any representative of the Politan Group had previously made any such demands of the Company or communicated to the Company any criticism of the DCCP or any other terms of the Employment Agreement.
On October 19, 2022, the Company’s legal counsel responded with a summary of the deficiencies in the Politan Form of Notice and noted the Board’s inability as a legal matter to unilaterally disable the DCCP without the consent of Mr. Kiani.
Neither the Politan Group nor any of its representatives substantively responded to the October 19, 2022 letter.
Without any prior notice, on October 21, 2022, Politan filed a complaint against the Company and each of its directors (the “Director Defendants”) in the Delaware Court of Chancery (the “Court”) in which Politan called for the invalidation of the bylaw amendments and requested a declaration that the Director Defendants breached their fiduciary duties by adopting the amended and restated bylaws and failing to disable the DCCP.
On December 1, 2022, the Board further amended the bylaws to extend the deadline for stockholders to give notice of their intention to nominate directors to stand for election and to submit stockholder proposals for consideration at the 2023 Annual Meeting from February 27, 2023 to April 24, 2023. The Board also effected a number of clarifications and modifications to the Company’s advance notice bylaw provisions. The Company filed a Form 8-K disclosing these bylaw amendments.
On January 17, 2023, the Court entered a status quo order, which confirmed the parties’ agreements that: (i) the 2023 Annual Meeting would be held on June 26, 2023, and (ii) the window for stockholders to give notice of intention to nominate directors and/or submit other proposals would open March 24, 2023, and close at 6:00 p.m. EST on April 24, 2023.
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| 2023 Proxy Statement
| | | | | | | | |
| | BACKGROUND TO THE SOLICITATION |
On January 23, 2023, the Director Defendants moved to dismiss Politan’s claim in its complaint for breach of fiduciary duty in connection with the DCCP. The Director Defendants again argued that directors could not be liable for failing to breach a contract and that such claim had no support in prevailing Delaware law. On February 3, 2023, after hearing arguments, the Court denied in part and deferred in part the motion to dismiss.
On February 5, 2023, the Board convened a meeting with members of management and representatives of the Company’s legal advisors and decided to amend and restate the bylaws to revert to the Company’s bylaws as they were in effect immediately prior to the September 2022 amendments, except that the window for stockholder director nominations and proposals remained March 24, 2023 to April 24, 2023. The Company filed a Form 8-K disclosing these bylaw amendments on the following day.
The Board’s decision to rescind the amended bylaws mooted most of Politan’s claims and negated the need for an expedited trial before the 2023 Annual Meeting. Mr. Kiani also agreed to waive the DCCP solely for purposes of the 2023 Annual Meeting. Consequently, whatever the results of the upcoming election, they will not trigger a change-in-control event under the terms of the Employment Agreement.
On February 8, 2023, the Court, recognizing the significant developments which altered the scope of the trial as initially conceived, granted the Company’s request to adjourn trial until September 2023. The Court acknowledged the effect of Mr. Kiani’s waiver on both the litigation and the 2023 Annual Meeting. In so doing, the Court rejected Politan’s claim that the waiver was “illusory.” Moreover, the Court expressed its concerns that Politan’s continued push for a trial before the 2023 Annual Meeting may reflect “a desire to use the forum of a public trial to achieve non-litigation ends, [which is] neither the purpose of trial, nor an appropriate use of scarce judicial resources.”
On February 15, 2023, Mr. Koffey reached out to Mr. Kiani and offered to meet him for dinner. To facilitate frank discussion, they agreed to keep the content, but not the fact, of their meeting confidential. Messrs. Kiani and Koffey met for dinner in California on March 1, 2023.
On March 3, 2023, Politan filed a motion for leave to file a proposed amended complaint, which the Court granted on March 15, 2023, overhauling its challenge to the Employment Agreement, including by adding a new plaintiff, the California State Teachers’ Retirement System (“CalSTRS”), new defendants (including directors who departed the Board years ago) (the “Former Directors”), and much broader claims than before. Among other things, Politan is now seeking to invalidate the entirety of the Employment Agreement, challenge actions taken by the Former Directors back in 2015 and 2017 that were not only disclosed to stockholders at the time but also never challenged until Politan made clear its intent to seek Board seats, and challenge Mr. Kiani’s waiver to the DCCP (the same waiver that Politan previously demanded the Board effectuate back in October 2022). Politan issued a press release attacking the Employment Agreement and provided information to Reuters in advance of filing the amended complaint, which resulted in negative news coverage on the eve of trial of the Company’s three-year trade secrets litigation with Apple Inc.
Between December 2022 and March 2023, members of management, accompanied by members of the Board, conducted meetings with the Company’s stockholders at which they solicited feedback from stockholders on corporate governance and recent business and strategic initiatives. The Company’s outreach effort included meetings with many of the Company’s top 20 institutional investors representing, in the aggregate, approximately 50% of the Company’s then outstanding shares (based on prior investor filings). Feedback from stockholders included the view that the Board should conduct director elections on an annual – rather than staggered – basis, increase its size and prioritize diversity of backgrounds and experiences in its consideration of new directors, appoint a lead independent director and terminate its stockholder rights plan. On January 4, 2023, as part of the Company’s outreach to its large investors, Mr. Kammerman emailed Mr. Koffey and invited him to participate in an investor call with the Company’s now lead independent director, H Michael Cohen, the Company’s Chief Financial Officer, Micah Young, and the Company’s General Counsel, Tom McClenahan. Mr. Koffey did not reply.
On March 23, 2023, Mr. Kiani reached out to Mr. Koffey to inform him of governance changes the Company had made based on stockholder feedback, including (i) the initiation of a search process for two new, highly qualified and complementary independent directors to add to the Board; (ii) the appointment of a lead independent director to
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| 2023 Proxy Statement
| | | | | | | | |
| | BACKGROUND TO THE SOLICITATION |
the Board; (iii) the termination of the Company’s stockholder rights plan; and (iv) the declassification of the Board whereby (if approved by the Company’s stockholders) all members of the Board elected after the 2023 Annual Meeting would be elected for annual terms. In addition, in connection with this decision, Mr. Kiani irrevocably and permanently waived his right under the Employment Agreement to trigger a change-in-control event upon the appointment of a lead independent director.
Messrs. Kiani and Koffey discussed potential avenues for resolving the differences between the Company and Politan, other than the disputes over the Employment Agreement. Mr. Kiani explained to Mr. Koffey that, because Politan had challenged the validity of the Employment Agreement, Mr. Kiani needed to know whether the agreement remained valid and that was something the Court would have to decide. Mr. Kiani explained that the Company would like to add two new directors, welcomed Politan’s input in the selection of the new directors, and was prepared to work with Politan in advance of the 2023 Annual Meeting to agree on new Board members who would be independent of both the Company and Politan. Mr. Kiani also requested the names of the candidates with whom Politan had been speaking and expressed his hope that two of those candidates would be acceptable to the Board and could be added to the Board immediately, before the 2023 Annual Meeting. Mr. Koffey again insisted that one of the candidates be him. Mr. Kiani responded that the Board had already considered Mr. Koffey’s request to join the Board and determined at the time that it would not be in the best interests of the Company and its stockholders to invite Mr. Koffey to join the Board. He also noted that Politan’s recent press release and coordination with Reuters on the eve of the Company’s trial with Apple Inc. could adversely affect the outcome of the trial and was another sign that Mr. Koffey did not have the best interests of Masimo in mind, to which Mr. Koffey had no response.
Neither Mr. Koffey nor any other Politan representative engaged with Mr. Kiani with respect to his request to work with Politan to identify Board candidates. Instead, on March 27, 2023, Politan’s legal counsel sent a letter to the Company’s legal counsel accusing the Company of attempting to “dilute[e] the influence of Politan’s nominees.” Politan demanded that the Company either (i) expand the Board by adding one of the two new seats to Class I (to be up for election at the 2023 Annual Meeting) or (ii) commit to not implement any expansion until after the 2023 Annual Meeting and grant the directors elected at the 2023 Annual Meeting veto power over the selection of the new directors.
The Board and its advisors discussed the challenges associated with Politan’s demands. In particular, they considered the difficulty of finding highly qualified candidates to stand as nominees for the 2023 Annual Meeting amidst Politan’s threats to run a proxy contest and the corporate governance challenges that would arise from giving a veto power to a small group of directors on the appointment of new directors, which would detract from the rights of the other stockholders and directors and conflict with the powers granted to them by stockholders who had duly elected them. Accordingly, it was determined that if Politan were to challenge the Company’s proposal to expand the Board, in the interest of avoiding the cost and distraction of further litigation, the Board would postpone the Board expansion until after the 2023 Annual Meeting and instead include at the 2023 Annual Meeting a proposal for stockholders to vote on the proposed expansion of the Board.
On March 30, 2023, the Director Defendants filed a motion to dismiss Politan’s complaint. The Former Directors also filed a motion to dismiss on April 28, 2023.
On March 31, 2023, legal counsel to the Company communicated to Politan’s legal counsel that, given Politan’s challenge to the Company’s plan to expand the Board and the Company’s desire to avoid the cost and distraction of litigation, as well as the importance of identifying and seating highly qualified director nominees, the Company would postpone the Board expansion until after the 2023 Annual Meeting. The Company instead would include a proposal for stockholders to vote on the Board expansion at the 2023 Annual Meeting. The communication restated the Company’s willingness to work cooperatively with Politan to identify potential candidates for the Board rather than subject the Company to further litigation and a proxy contest.
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| 2023 Proxy Statement
| | | | | | | | |
| | BACKGROUND TO THE SOLICITATION |
Politan’s legal counsel again ignored the Company’s offer to work with Politan to identify candidates and instead, on April 5, 2023, reiterated Politan’s objections to the proposed Board expansion and insisted that the Board consider in its proposal requirements that the Company would (i) use a nationally recognized search firm, (ii) not consider any candidates who had pre-existing relationships of any kind with the Company’s board, management, or their respective advisors, (iii) put any new director added as part of a Board expansion to a stockholder vote at the 2024 annual meeting of stockholders, and (iv) wait until the conclusion of the 2023 Annual Meeting before selecting a search firm and identifying and interviewing candidates for the Board expansion so that directors elected at the 2023 Annual Meeting would have the ability to participate in the selection process.
In mid-April 2023, Politan’s legal counsel contacted the Company’s legal counsel, acknowledged the Company’s concern about the effect of Politan’s previous press release on the outcome of the Apple trial, and offered to delay its nominations until after the Apple trial. Accordingly, on April 20, 2023, the Board amended the bylaws to extend the deadline for stockholders to give notice of their intention to nominate directors to stand for election and to submit stockholder proposals for consideration at the 2023 Annual Meeting from April 24, 2023 to May 1, 2023. The Company filed a Form 8-K disclosing these bylaw amendments.
On April 29, 2023, Politan, through its counsel, submitted to the Company via email, and into escrow the Notice of Stockholder Proposal and Nomination of Candidates for Election to the Board to be Presented at the 2023 Annual Meeting (the “Nomination and Proposal Notice”), nominating Michelle Brennan and Quentin Koffey for election as Class I directors at the 2023 Annual Meeting. The Nomination and Proposal Notice also included a proposal to approve the repeal of any amendment to the Company’s Bylaws that the Board adopts without the approval of stockholders subsequent to April 20, 2023 and up to and including the date of the 2023 Annual Meeting.
On May 1, 2023, the Nomination Proposal and Notice was released from escrow.
On May 9, 2023, counsel for the Company submitted to Politan, on behalf of the Company, its notice pursuant to 17 CFR 240.14a-19 that the Company intended to nominate Julie A. Shimer and H Michael Cohen for election as Class I directors at the 2023 Annual Meeting. The Company’s notice was late and did not comply with the deadline set forth in 17 CFR 240.14a-19(d).
On May 1, 2023, counsel for the Company reached out to counsel for Politan to arrange interviews with Politan’s director nominees. More than two weeks later, on May 16, 2023, legal counsel to Politan sent a letter to the Company’s legal counsel, stating that Politan would only be willing to make its nominees available to be interviewed by the Company’s Nominating, Compliance and Corporate Governance Committee under a confidentiality agreement.
On May 17, 2023, counsel to the Company sent a response to Politan’s counsel noting the highly unusual nature of Politan’s request and that such an agreement would restrict the ability of the Company to make disclosures to shareholders that the committee believes would be appropriate and even required by law. Nevertheless, the Company’s legal counsel stated that the committee would be willing to accede to Politan’s request with respect to Ms. Brennan, who is not a principal of Politan and whose interview would not likely raise the same disclosure issues. The May 17 letter rejected Politan’s request with respect to Mr. Koffey’s interview and reiterated its request to schedule an interview with Ms. Brennan.
On May 19, 2023, legal counsel to Politan provided a letter to the Company’s legal counsel, ignoring the Company’s request to interview Ms. Brennan and reiterating Politan’s position that an interview with Mr. Koffey must be conducted subject to a confidentiality agreement.
The Company’s legal counsel responded to Politan’s May 19 letter on May 20, 2023, reiterating the Company’s willingness to interview Ms. Brennan immediately subject to the terms of the parties’ existing confidentiality agreement and asking Politan to provide dates and times when Ms. Brennan could be available to be interviewed.
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| 2023 Proxy Statement
| | | | | | | | |
| | BACKGROUND TO THE SOLICITATION |
As of the date of this proxy statement, Politan has not cooperated with the Company’s repeated attempts to arrange interviews for Ms. Brennan and Mr. Koffey with the Nominating, Compliance and Corporate Governance Committee.
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| 2023 Proxy Statement
Our executive officers are appointed by and serve at the discretion of our Board. Our executive officers, their respective age, position(s) and biographies are listed below. There are no family relationships among any of our directors or executive officers.
| | | | | | | | | | | | | | |
| Name | | Age(1) | | Position(s) |
| Joe Kiani | | 58 | | Chief Executive Officer and Chairman of the Board |
| | | | |
| Micah Young | | 44 | | Executive Vice President, Chief Financial Officer |
| Bilal Muhsin | | 42 | | Chief Operating Officer |
| | | | |
| | | | |
| Tao Levy | | 49 | | Executive Vice President, Business Development |
| Tom McClenahan | | 50 | | Executive Vice President, General Counsel and Corporate Secretary |
| Blair Tripodi | | 50 | | Chief Operating Officer, Consumer Division |
| | | | |
____________
(1) As of May 1, 2023.
| | | | | |
| Joe Kiani | About: |
| Chairman and CEO | Joe Kiani is the founder of Masimo and has served as our CEO and Chairman of the Board since our inception in 1989. He is an inventor on more than 100 patents related to signal processing, sensors and patient monitoring, including patents for the invention of Measure-through motion and low-perfusion pulse oximetry. Mr. Kiani holds a B.S.E.E. and an M.S.E.E. from San Diego State University. In addition to Mr. Kiani’s role at Masimo, he is also the Chairman of the Masimo Foundation for Ethics, Innovation and Competition in Healthcare (the “Masimo Foundation”), and the Chairman and CEO of Cercacor Laboratories, Inc. Mr. Kiani also serves on a number of other Boards of Directors, including CHOC Children’s Orange/CHOC Children’s at Mission Hospital, the Medical Device Manufacturers Association, Like Minded Media Ventures, CalTech and The Carter Center Board of Councilors founded by President Jimmy Carter. In 2021, Mr. Kiani was appointed by President Joe Biden to the President’s Council of Advisors on Science and Technology (PCAST). Mr. Kiani served on the Board of Directors of Stereotaxis, Inc. from September 2016 to May 2021. As Masimo’s founder, CEO and Chairman of the Board since our formation in 1989, Mr. Kiani has the deepest understanding of Masimo, our history, our culture and our technology. He has broad experience in a wide range of functional areas, including strategic planning, strategic investments, engineering and development, and legal and governmental affairs. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Kiani is critical to our continued development and growth. |
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| 2023 Proxy Statement
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| Micah Young | About: |
| Executive Vice President, Chief Financial Officer | Micah Young has served as our Executive Vice President, Chief Financial Officer (“CFO”) since October 2017. From July 2012 to September 2017, Mr. Young served as Vice President, Finance, at NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. Prior to that time, he served as NuVasive, Inc.’s Senior Director, Finance, Global Operations, from December 2009 to July 2012. From 2002 to 2009, Mr. Young held various accounting and finance positions with Zimmer Holdings, Inc., a company focused on the design, development, manufacture and marketing of orthopedic reconstructive, spinal and trauma devices, dental implants and related surgical products. Prior to his time at Zimmer Holdings, Inc., Mr. Young was an accountant at Deloitte & Touche LLP from 2000 to 2002. He holds a Bachelor of Science, Accounting and Criminal Justice from Indiana Wesleyan University and is a Certified Public Accountant (inactive). |
| Employed Since: 2017 |
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| Bilal Muhsin | About: |
| Chief Operating Officer | Bilal Muhsin has served as our Chief Operating Officer since May 2019. Prior to this, Mr. Muhsin served as Executive Vice President, Engineering, Marketing and Regulatory Affairs from March 2018 to May 2019. Prior to March 2018, Mr. Muhsin held various other roles, including Executive Vice President, Engineering; Vice President, Engineering, Instruments and Systems; Director and Manager level positions, within Masimo since June 2000. Mr. Muhsin’s technical, product and overall leadership skills have helped Masimo bring revolutionary new products to the marketplace, including Masimo SafetyNet®, Radical-7®, Root™ and various significant software products. Mr. Muhsin holds a B.S. in Computer Science from San Diego State University. |
| Employed Since: 2000 |
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| 2023 Proxy Statement
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| Tao Levy | About: |
| Executive Vice President, Business Development | Tao Levy has served as our Executive Vice President, Business Development since January 2018. From March 2013 to December 2017, Mr. Levy served as Managing Director, Medical Devices Equity Research, at Wedbush Securities. Prior to that time, he served as Senior Analyst, Medical Devices Equity Research at Loewen Ondaatje McCutcheon, from August 2012 to March 2013. From September 2010 to February 2012, Mr. Levy was Managing Director, Medical Devices Equity Research at Collins Stewart. Prior to his time at Collins Stewart, Mr. Levy was Director, Medical Devices Equity Research at Deutsche Bank where he served from 2002 to 2010. He holds a B.A. in Biology from the University of Pennsylvania. |
| Employee Since: 2018 |
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| Tom McClenahan | About: |
| Executive Vice President, General Counsel and Corporate Secretary | Tom McClenahan has served as our Executive Vice President & General Counsel since April 2013 and as our Corporate Secretary since August 2014. From April 2011 to April 2013, Mr. McClenahan was our Vice President and Assistant General Counsel. From November 2002 to April 2011, he was an associate and then principal with the law firm of Fish & Richardson. From September 1999 to November 2002, he was an associate with the law firm of Knobbe, Martens, Olson & Bear. Mr. McClenahan holds a B.S. in Mechanical Engineering from Iowa State University and a J.D. from the University of Minnesota Law School. |
| Employed Since: 2011 |
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| 2023 Proxy Statement
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| Blair Tripodi | About: |
| Chief Operating Officer, Consumer Division | Blair Tripodi has served as our Chief Operating Officer, Consumer Division since September 2022. Prior to September 2022, Mr. Tripodi was the Chief Commercial Officer of DEI Holdings, Inc. (“DEI”), a wholly owned subsidiary of Viper Holding Corporation, the parent company of Sound United, since September 2015. Mr. Tripodi joined DEI in January 2013 and served as Chief Marketing Officer and Senior Vice President, International for Sound United. Prior to joining DEI, Mr. Tripodi worked as Managing Director of Under Armour’s European, Middle Eastern and African business, being one of the first executives on the ground to help launch the global sports company. Mr. Tripodi’s previous experience includes serving as Director, Brand and Business Development for the U.S. Olympic Committee, as well as serving in various roles with Nike, Inc.
Mr. Tripodi holds a Bachelors of Arts in Psychology from the University of Western Ontario. |
| Employed Since: 2022 |
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| 2023 Proxy Statement
Our Board presently has five members and is divided into three classes, designated as Class I, Class II and Class III. Classes I and III currently consist of two directors and Class II has one director. All three classes have three-year terms. Class I, Class II and Class III directors currently have a remaining term of office until the 2023, 2024 and 2025 Annual Meeting of Stockholders, respectively. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors in office (even though the remaining directors may constitute less than a quorum). A director elected by our Board to fill a vacancy in a Class, including a vacancy created by an increase in the number of directors, will serve for the earlier of the remainder of the full term of that Class, until the director’s successor is elected and qualified or, if sooner, until the director’s death, resignation or removal.
Our Board has approved, and recommends that stockholders vote in favor of, a proposal to stockholders for a vote at the Annual Meeting to amend the Company’s Amended and Restated Certificate of Incorporation to declassify the Board, which would result in one-year terms for all directors. If approved, the phased-in declassification of the Board would begin with the directors up for election at the 2024 Annual Meeting of Stockholders, with the Board becoming fully declassified at the 2026 Annual Meeting of Stockholders. Further, our Board has approved, and recommends that stockholders vote on an advisory basis in favor of a proposal providing for, the increase to the total number of authorized members of our Board from five to seven.
The names of our current directors, their respective age, director class and position(s) are listed below.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Age(1) | | Director Class | | Term Expires | | Position(s) |
| Julie A. Shimer, Ph.D. | | 70 | | Class I | | 2023 | | Independent Director |
| H Michael Cohen | | 57 | | Class I | | 2023 | | Lead Independent Director |
Joe Kiani(2) | | 58 | | Class II | | 2024 | | Chief Executive Officer and Chairman of the Board |
| Adam Mikkelson | | 44 | | Class III | | 2025 | | Independent Director |
| Craig Reynolds | | 74 | | Class III | | 2025 | | Independent Director |
______________
(1) As of May 1, 2023.
(2) Please see “Our Executive Officers” on page 31 of this Proxy Statement for Mr. Kiani’s biography.
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| 2023 Proxy Statement
| | | | | | | | | | | | | | |
DIRECTOR DIVERSITY MATRIX |
| | | | | | | | | | | | | | |
Board Diversity Matrix (As of May 1, 2023)* |
| Total Number of Directors | 5 |
| Female | Male | Non-Binary | Did Not Disclose Gender |
| Part I: Gender Identity | | | | |
| Directors | 1 | 4 | — | — |
| Part II: Demographic Background | | | | |
| African American or Black | — | — | — | — |
| Alaskan Native or Native American | — | — | — | — |
| Asian | — | 1 | — | — |
| Hispanic or Latinx | — | — | — | — |
| Native Hawaiian or Pacific Islander | — | — | — | — |
| White | 1 | 3 | — | — |
| Two or More Races or Ethnicities | — | — | — | — |
| LGBTQ+ | — |
| Did Not Disclose Demographic Background | — |
* The Company’s Board Diversity Matrix is unchanged from April 4, 2022.
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| 2023 Proxy Statement
We believe that our directors should understand the diverse populations we serve and possess the highest personal and professional ethics, integrity, and values and be committed to representing the interests of our stockholders. They must also have an inquisitive and objective perspective, practical wisdom, mature judgment and demonstrated leadership skills. We also endeavor to have a Board that represents a range of experiences in areas that are relevant to our business activities.
In the chart below, we identify and describe the key experience, qualifications and skills criteria we believe are important for our Board, as a whole, to possess. These are the criteria our Nominating, Compliance and Corporate Governance Committee considers when evaluating director nominees.
| | | | | | | | | | | | | | |
| | Senior Leadership Directors with significant leadership experience (Chief Executive Officer, Chief Financial Officer or other senior executive positions) possess an understanding of organizations, processes, strategic planning and risk management to assess, develop and implement our business strategy and operation plan. |
| | | | |
| | Financial Expertise Directors with financial expertise possess an understanding of complex financial information and business processes to oversee our financial statements, capital structure and internal controls. |
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| | Technology and Innovation Directors with technology and innovation experience possess an understanding of our business in the rapidly evolving healthcare and medical device industry and can help guide our Company in innovating new technologies, providing timely and high integrity data to healthcare professionals, and managing cybersecurity and information security risks. |
| | | | |
| | Healthcare Industry and Operations Directors with healthcare industry experience possess an understanding of manufacturing, operations, supply chain, insurance, technology, and regulatory frameworks to help the Company navigate the complex and rapidly evolving healthcare environment and stay abreast of industry best practices and innovations. |
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| | | | |
| | Consumer Directors with consumer experience possess an understanding of developing strategies to grow sales and market share, building brand awareness and overall preference among customers and enhancing Masimo Consumer Health’s reputation is relevant to the growth of our non-healthcare consumer business. |
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| | Mergers and Acquisitions Directors with experience in mergers and acquisitions possess an understanding of mergers and acquisitions strategy, identifying target companies, building business cases, conducting due diligence, structuring deals, executing transactions and conducting business integration. |
| | |
| | Environmental, Social and Governance (ESG) Directors with experience in environmental, social and governance possess an understanding of sustainable operations and have expertise in building strong environmental, labor, health & safety and ethical practices. |
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| 2023 Proxy Statement
| | | | | | | | | | | | | | |
BACKGROUND AND EXPERIENCE |
In the chart below, we identify and describe the key experience, qualifications and skills our directors bring to the Board that are important considering the Company’s business and structure.
| | | | | | | | | | | | | | | | | |
| Julie A.
Shimer, Ph.D. | H Michael
Cohen | Joe
Kiani | Adam
Mikkelson | Craig
Reynolds |
| Senior Leadership | u | u | u | | u |
Financial
Expertise | u | u | u | u | u |
| Technology and Innovation | u | | u | | u |
Healthcare
Industry and Operations | u | u | u | u | u |
| Consumer | u | | | | |
| Mergers and Acquisitions | u | u | u | u | u |
| Environmental, Social and Governance (ESG) | u | u | u | u | u |
| | | | | |
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| 2023 Proxy Statement
| | | | | | | | | | | | | | |
| SKILLS AND QUALIFICATIONS OF OUR BOARD |
The table below illustrates some of the skills, qualifications, background and experience of each member of our Board. This high level summary is not intended to be an exhaustive list of each of the Board members’ skills or contributions to the Board.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Julie A. Shimer, Ph.D. | | About: | | Specific Qualifications, Attributes, Skills, and Experience |
| | | | | | | | |
| | Dr. Shimer has served as a member of our Board since April 2019. Dr. Shimer is currently a private investor and has over 30 years of product development experience. Dr. Shimer was President and Chief Executive Officer of Welch Allyn, from March 2007 to April 2012. Prior to Welch Allyn, Dr. Shimer served as President and Chief Executive Officer of Vocera Communications, Inc., from September 2001 through February 2007, also serving on the Board of Directors. Dr. Shimer previously held executive positions at 3Com Corporation from January 2000 through August 2001, most recently serving as Vice President and General Manager of its networking products. Before joining 3Com, she held executive positions at Motorola, Inc., from 1993 through 1999, where she was Vice President and General Manager for the paging division, and prior to that post, Vice President of its semiconductor products section. Dr. Shimer worked for AT&T Bell Laboratories and Bethlehem Steel Company before joining Motorola.
Dr. Shimer is a member of the Society of Women Engineers and the Institute of Electrical and Electronics Engineers. Dr. Shimer holds a B.S. in Physics from Rensselaer Polytechnic Institute and M.S. and Ph.D. degrees in Electrical Engineering from Lehigh University. Our Nominating, Compliance and Corporate Governance Committee believes Dr. Shimer’s extensive executive leadership and financial background allow her to provide significant insight to the Board on business decisions as well as make valuable contributions to the Nominating, Compliance and Corporate Governance Committee and the Audit Committee. | | • Over 30 years of product development experience related to medical devices, connectivity devices and semiconductors
• Board of Directors and CEO experience in the medical device and manufacturing industries
• Extensive technical understanding of physics and electrical engineering
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| |
| |
| Years of Service: 4 | | |
| | |
| Committees: | | | | | |
| • Nominating, Compliance and Corporate Governance, Chairperson
• Audit | | | Current Public Company Boards: |
| | | | |
| | • Avanos Medical, Inc. (since 2014) |
| | | | |
| | Prior Public Company Board Experience: |
| | | | | |
| | | • Apollo Endosurgery, Inc. (2018 - 2023)
• Windstream Holdings (2017 - 2020)
• Netgear, Inc. (2007 - 2019)
• Earthlink Holdings Corp. (2013 - 2017) |
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| 2023 Proxy Statement
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| H Michael Cohen | | About: | | Specific Qualifications, Attributes, Skills, and Experience: |
| | | | | | | | |
| Lead Independent Director | | Mr. Cohen has served as a member of our Board since August 2018 and our Lead Independent Director since March 2023. Over the past 20 years, he has held various roles at Deutsche Bank, including Global Head, Healthcare Investment Banking, where he led the global practice, and most recently Vice Chairman, Healthcare Investment Banking. Prior to joining Deutsche Bank, Mr. Cohen worked at SG Cowen, Union Bank of Switzerland, and Booz Allen Hamilton. Mr. Cohen began his career in healthcare at Hambrecht & Quist, where he was a member of the equity research team covering biotechnology, medical device and diagnostic companies. He received his B.A. in Economics from the University of Vermont and his M.B.A. from Columbia University.
Our Nominating, Compliance and Corporate Governance Committee believes Mr. Cohen’s financial background and investment experience advising boards of directors of hundreds of companies in strategic and financial matters allow him to provide additional insight to the Board on strategy and business decisions as well as make valuable contributions to the Audit Committee and the Compensation Committee. | | • 30 years of experience in the healthcare industry
• Significant expertise in healthcare investment banking
• Strong banking experience and a deep understanding of economic indicators
|
| | |
| |
| |
| Year of Service: 4 | | |
| | |
| | |
| Committees: | | |
| • Audit, Chairperson
• Compensation | | |
| |
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| 2023 Proxy Statement
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Adam Mikkelson | | About: | | Specific Qualifications, Attributes, Skills, and Experience |
| | | | | | | | |
| | Mr. Mikkelson has served as a member of our Board since October 2016. Mr. Mikkelson is a Partner at Camber Capital Management, LLC, a healthcare-focused investment fund. Mr. Mikkelson has been with Camber Capital since 2007 and has nearly 15 years of experience in the healthcare investment arena, where he focused on identifying and actively monitoring investment opportunities in both the therapeutic and medical device sectors. Prior to joining Camber Capital, Mr. Mikkelson held various roles at Datamonitor plc and Leerink Partners. He received his B.S. in Business Administration from Boston University.
Our Nominating, Compliance and Corporate Governance Committee believes Mr. Mikkelson’s investment experience allows him to provide additional insight to the Board on strategy and business decisions as well as make valuable contributions to the Audit, Compensation and Nominating, Compliance and Corporate Governance Committees. | | • Over 15 years of healthcare investment experience
• Robust financial experience and understanding of business administration
• Significant expertise in therapeutic and medical device sectors
|
| |
| |
| |
| Years of Service: 6 | | |
| | |
| | |
| Committees: | | |
| • Audit
• Compensation
• Nominating, Compliance and Corporate Governance | | |
| |
| | | | |
| | | | |
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| 2023 Proxy Statement
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Craig Reynolds | | About: | | Specific Qualifications, Attributes, Skills, and Experience |
| | | | | | | | |
| | Mr. Reynolds has served as a member of our Board since April 2014. Mr. Reynolds previously held the role of Chief Executive Officer and a Director of Cereve, Inc., a medical company engaged in resolving insomnia issues. Prior to joining Cereve, Mr. Reynolds served as Chief Operating Officer of Philips-Respironics Home Health Solutions, a subsidiary of Philips, from 2008 to 2010. Prior to Philips-Respironics, Mr. Reynolds was the Chief Operating Officer and a member of the Board of Directors of Respironics, Inc., from 1998 to 2008. From 1993 to 1998, Mr. Reynolds was with Healthdyne Technologies, Inc., a medical device company, serving for five years as Chief Executive Officer and a director. From 1981 through 1992, Mr. Reynolds was with Healthdyne, Inc. in the positions of Executive V.P. (1981 to 1983), President of Healthdyne Cardiovascular Division (1984 to 1985) and President of Healthdyne Homecare Division (1986 to 1992). From 2008 through 2014, Mr. Reynolds served as a Director of Symmetry Medical, Inc., most recently as Chairman of the Board. He also served as Chairman of the Board of Symmetry Surgical, Inc. from 2014 through 2016. Mr. Reynolds was a member of the Board of Directors of Vapotherm, Inc. from 2010 through late 2020, and Welch Allyn, Inc. from 2010 through 2014.
Mr. Reynolds earned his B.S. in Industrial Management from the Georgia Institute of Technology and his M.B.A. from Georgia State University. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Reynolds’ experience allow him to provide additional insight to the Board on strategy decisions as well as make valuable contributions to the Compensation Committee and Nominating, Compliance and Corporate Governance Committee. | | • Board of Directors and Executive Officer experience in the healthcare and medical device industry including Chairman, CEO and COO roles
• Deep understanding of industrial management and strategy
• Wealth of experience in medical device products at a wide variety of medical device companies
|
| |
| |
| |
| Years of Service: 8 | | |
| | |
| Committees: | | | | | |
| • Compensation, Chairperson
• Nominating, Compliance and Corporate Governance | | | Prior Public Company Boards: |
| | | | |
| | • Healthdyne Technologies, Inc. (1993-1998)
• Respironics, Inc. (1998-2008)
• Vapotherm, Inc. (2018-2020)
• Symmetry Medical, Inc. (2008-2014)
• Symmetry Surgical, Inc. (2014-2016) |
| |
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| 2023 Proxy Statement
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
| | | | | | | | | | | | | | |
| CORPORATE GOVERNANCE AND BOARD MATTERS |
This section describes key Corporate Governance Guidelines and practices that we have adopted. Complete copies of the charters of the committees of our Board and our Code of Business Conduct and Ethics described below may be viewed on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.” Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this Proxy Statement, and references to our website address in this Proxy Statement are inactive textual references only. Alternatively, you can request a copy of any of these documents free of charge by writing to our Corporate Secretary, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618.
| | | | | | | | | | | | | | |
CORPORATE GOVERNANCE PRACTICES |
Our Board has adopted Corporate Governance Guidelines to ensure that our Board has the necessary authority and practices in place to exercise its duties and responsibilities, to review and evaluate our business operations as needed, to make decisions that are independent of our management and to serve the best interests of Masimo and our stockholders. These Corporate Governance Guidelines may be viewed on our website at https://investor.masimo.com/governance/governance-documents/default/aspx under “Governance Documents”, which provide a framework for the conduct of the Board’s business and provide that:
• except in unusual circumstances, the positions of Chairman of our Board and CEO will be held by the same person;
• the duties of our Lead Independent Director include (i) presiding at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors; (ii) providing input on Board agendas and materials in advance of Board meetings; (iii) if requested by stockholders, ensuring that he or she is available for consultation and direct communication, and (iv) performing such other functions as the Board may delegate;
• ordinarily, directors should not serve on more than four boards of publicly-held companies, including our Board, and all of our directors currently satisfy this requirement;
• outside directors must own a minimum number of shares of our common stock (see “Ownership of our Stock—Non-Employee Director Stock Ownership Policy” on page 122 of this Proxy Statement for additional information);
• a non-employee director will not be nominated for re-election at the next annual meeting of stockholders for which his or her class of directors is up for election following his or her 15th anniversary of service on our Board, unless our Board waives this term limit with respect to such non-employee director as a result of its determination that such nomination is in the best interests of Masimo and our stockholders;
• director candidates to be nominated to serve on our Board should be selected from a list of qualified candidates who represent a mix of diverse backgrounds and experiences, including with respect to diversity of gender, sexual orientation, disability, age, race, ethnicity or national origin, global perspective and experience, business experience, functional expertise, stakeholder expectations, culture and geography;
• the Nominating, Compliance and Corporate Governance Committee will oversee an annual self-evaluation process of the performance of the Board and its committees;
• the Nominating, Compliance and Corporate Governance Committee will oversee our strategy, practices and initiatives related to corporate responsibility and sustainability, including environmental, social and governance (ESG) matters;
• specifies certain qualifications and criteria that the Board will take into account when considering nominees for service on the Board (as discussed below under “–Consideration of Director Nominees—Director Qualifications”); and
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
• the Board will seek stockholder approval within 12 months of the adoption of any stockholder rights plan unless the plan is terminated prior to such time.
Our governance structure is designed to ensure effective decision-making and commitment to business success through maintenance of the highest standards of integrity, responsibility and ethics, and is also designed to promote the long-term interests of our stockholders, strengthen Board and management accountability, foster responsible decision-making, engender public trust and demonstrate our commitment to transparency, accountability, independence and diversity. Accordingly, some of our key corporate governance highlights include:
• all of our director nominees are independent, except for Mr. Kiani;
• strong Lead Independent Director with clearly delineated duties;
• our independent directors meet regularly in executive sessions at scheduled Board meetings, and may hold other special meetings throughout the year, which are designed to promote candor and discussion of matters in a setting that is independent of our Chairman and CEO;
• we have a single class of outstanding shares of common stock with equal voting rights;
• proxy access rights for up to 20 stockholders owning at least 3% of shares continuously for three years, who may nominate up to the greater of two individuals or 25% of our Board;
• prohibition on hedging and pledging transactions requiring pre-approval; and
• ESG matters receive strategic guidance and oversight at the highest levels of our Company, including by our Chairman and CEO, executive leadership and our Board.
| | | | | | | | | | | | | | |
CHARACTERISTICS OF OUR BOARD |
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| | | | | | | | | | | | |
| 2 New independent directors joined the Board since 2018 | |
5 year Board refreshment rate:
33%
| | 40% Diverse | |
| | | | | | | | | | | | |
| 80% Independent | |
Average age of our Board:
61
| | Average tenure of our non-employee Board members:
5.25 Years
| |
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|
| | | | | | | | | | | | | | |
| CONSIDERATION OF DIRECTOR NOMINEES |
Director Qualifications
The Board does not prescribe any minimum qualifications for director candidates other than the director candidates should be able to read and understand basic financial statements, understand the industry of the Company and having high standards of integrity, values and ethics. The Nominating, Compliance and Corporate Governance Committee may consider a potential director candidate’s experience, areas of expertise and other factors relative to the overall composition of our Board and its committees, including the following criteria:
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| 2023 Proxy Statement
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
• a background that demonstrates experience and achievement in business, finance, technology, healthcare or other activities relevant to our business and activities;
• a willingness to carry out and accept accountability for decisions of our Board and, as applicable, its committees;
• an ability to provide reasoned, informed and thoughtful counsel to management on a range of issues affecting us and our stockholders and to exercise sound business judgment;
• an ability to work effectively and collegially with other individuals;
• loyalty and commitment to driving our success and increasing long-term value for our stockholders;
• an understanding of the fiduciary responsibilities required of a director and sufficient time to devote to our Board and, as applicable, committee membership and matters; and
• meeting the independence requirements imposed by the SEC and Nasdaq.
Our Nominating, Compliance and Corporate Governance Committee and our Board seek the talents with backgrounds that would be most helpful to Masimo and our stockholders when selecting director nominees. In particular, our Nominating, Compliance and Corporate Governance Committee, when recommending director candidates to our full Board for nomination, may consider whether a director candidate, if elected, assists in achieving a mix of Board members that represents a diversity of background and experience. Diversity of background, including diversity of gender, sexual orientation, disability, age, race, ethnic or national origin, global perspective, experience (including in business, finance, government, technology, healthcare or other activities relevant to our business), functional expertise, stakeholder expectations, culture and geography is also a relevant factor, as a diverse Board is more likely to reflect varying perspectives and a breadth of experience that will positively contribute to robust discussion at Board meetings. Further, during 2022, we amended our Corporate Governance Guidelines to include a policy addressing board diversity when identifying potential director nominees. The policy provides that our Nominating, Compliance and Corporate Governance Committee will ensure that the initial list of director candidates from which new Board nominees are chosen includes qualified women and minority candidates. In addition, any third-party consultant retained by our Nominating, Compliance and Corporate Governance Committee to furnish an initial list of director candidates will be requested to include qualified women and minority candidates, as is the case with the search currently being conducted with the support of an external advisory firm to identify two new, highly qualified and complementary independent directors to the Board.
The Nominating, Compliance and Corporate Governance Committee retains the right to modify these criteria from time to time, and may add any specific additional criteria with respect to specific searches.
Stockholder Nominations and Proxy Access
The Nominating, Compliance and Corporate Governance Committee will consider director candidates recommended by our stockholders. The Nominating, Compliance and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates based on whether a candidate was recommended by a stockholder or not. Stockholders may nominate directors for election if such stockholders satisfy the advance notice provisions set forth in our Fifth Amended and Restated Bylaws (our “Bylaws”). To be timely for our 2024 Annual Meeting of Stockholders, stockholders who wish to recommend individuals for consideration by the Nominating, Compliance and Corporate Governance Committee to become nominees for election to the Board at the 2024 Annual Meeting of Stockholders, must do so by delivering a written recommendation to the Nominating, Compliance and Corporate Governance Committee, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, Attention: Corporate Secretary, no later than the close of business on March 12, 2024, and no earlier than April 11, 2024, unless the meeting date is more than 30 days before or after June 26, 2024, in which case the written recommendation must be received by our Corporate Secretary no later than the close of business on the later of (i) the 90th day before the 2024 Annual Meeting of Stockholders, or (ii) the 10th day following the day on which we first publicly announce the date of the 2024 Annual Meeting of Stockholders. Each written recommendation must contain the following minimum information:
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| 2023 Proxy Statement
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
• the name and address of the stockholder and any beneficial owner on whose behalf the nomination is being made;
• the class, series and number of shares of capital stock of Masimo, and any convertible securities of Masimo, that are beneficially owned by the stockholder and any beneficial owner on whose behalf the nomination is being made;
• any proxy, contract, arrangement, understanding or relationship pursuant to which the stockholder and any beneficial owner on whose behalf the nomination is being made has the right to vote any of our voting securities;
• any “short” interest in our securities held by the stockholder and any beneficial owner on whose behalf the nomination is being made;
• the proposed director candidate’s full legal name, age, business address and residential address;
• complete biographical information for the proposed director candidate, including the proposed director candidate’s principal occupation or employment and business experience for at least the previous five years;
• a description of the proposed candidate’s qualifications as a director;
• the class and number of shares of capital stock of Masimo that are beneficially owned by the proposed director candidate as of the date of the written recommendation; and
• any other information relating to the proposed director candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Director candidate recommendations from stockholders must include the written consent of each proposed nominee to serve as director if so elected. If a proposed director candidate is recommended by a stockholder in accordance with the procedural requirements discussed above, the Corporate Secretary will provide the foregoing information to the Nominating, Compliance and Corporate Governance Committee.
Our Bylaws also permit eligible stockholders to nominate candidates for election to the Board in accordance with procedures providing for proxy access (the “Proxy Access Bylaw”). The Proxy Access Bylaw may be used by an eligible stockholder, or a group of up to 20 eligible stockholders, who has continuously owned at least 3% of the outstanding shares of our common stock for at least the prior three years, and including the day of the submission of the proxy access notice, who continues to hold the qualifying minimum number of shares through the date of the applicable annual meeting of stockholders, so long as the eligible stockholder(s) and the director nominee(s) satisfy the requirements specified in the Proxy Access Bylaw. The Proxy Access Bylaw further provides that an eligible stockholder, or a group of eligible stockholders, may nominate up to the greater of (i) 25% of the total number of directors who are members of the Board as of the last day on which a proxy access notice may be submitted, or (ii) two directors, subject to reduction in the event a director has been elected to the Board through proxy access at one of the two immediately preceding annual meetings of our stockholders.
Stockholders who wish to recommend director nominees for inclusion in our proxy materials at the 2024 Annual Meeting of Stockholders in compliance with the Proxy Access Bylaw must do so by delivering a proxy access notice to be received by our Corporate Secretary no earlier than December 28, 2023, and no later than January 27, 2024.
In the event that the date of the 2024 Annual Meeting of Stockholders is more than 30 days before or after June 26, 2024, such proxy access notice must be received by the later of (i) 180 days prior to the 2024 Annual Meeting of Stockholders, or (ii) the 10th day following the date that the 2024 Annual Meeting of Stockholders is first publicly announced or disclosed.
In addition, pursuant to Rule 14a-19 of the Exchange Act (“Rule 14a-19”), the SEC’s universal proxy rule, notices of a solicitation of proxies in support of director nominees other than our own nominees must be postmarked or electronically submitted no later than April 27, 2024, and each nomination must comply with the SEC regulations
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
under Rule 14a-19, which requires, among other things, that such notice include a statement that such person intends to solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote on the election of directors. If, however, the date of the 2024 Annual Meeting of Stockholders is more than 30 days before or after June 26, 2024, then the Rule 14a-19 deadline shall be the later of 60 calendar days prior to the date of the 2024 Annual Meeting of Stockholders or the 10th calendar day following the day on which we first make a public announcement of the date of our 2024 Annual Meeting of Stockholders. A nomination that does not comply with the requirements set forth in the Amended and Restated Certificate of Incorporation and Bylaws will not be considered for presentation at the 2024 Annual Meeting of Stockholders. We intend to file a proxy statement and white proxy card with the SEC in connection with our solicitation of proxies for our 2024 Annual Meeting of Stockholders.
Evaluating Nominees for Director
Our Nominating, Compliance and Corporate Governance Committee will consider director candidates that are recommended by members of the committee, other members of our Board, members of management, advisors and our stockholders who submit recommendations in accordance with the requirements set forth above.
The Nominating, Compliance and Corporate Governance Committee may also retain a third-party search firm to identify candidates on terms and conditions acceptable to the Nominating, Compliance and Corporate Governance Committee. For example, it has retained an external advisory firm in connection with its efforts to identify two new, highly qualified and complementary independent directors to the Board. The Nominating, Compliance and Corporate Governance Committee will evaluate all candidates for director using the same approach regardless of who recommended them.
The Nominating, Compliance and Corporate Governance Committee will review candidates for director nominees in the context of the current composition of our Board and committees, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the Nominating, Compliance and Corporate Governance Committee may consider the director nominee’s qualifications, diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board, the committees and Masimo, to maintain a balance of knowledge, experience, diversity and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating, Compliance and Corporate Governance Committee may review such directors’ overall service to the Board, the committees and Masimo during their term, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the Nominating, Compliance and Corporate Governance Committee will also determine whether the nominee must be independent for Nasdaq purposes, which determination will be based upon applicable Nasdaq listing standards and applicable SEC rules and regulations. When considering diversity in evaluating director nominees, the Nominating, Compliance and Corporate Governance Committee will focus on whether the nominees can contribute varied perspectives, skills, experiences and expertise to the Board and considers diversity to include gender, sexual orientation, age, disability, race, ethnicity or national origin, global perspective and experience, business experience, functional expertise, stakeholder expectations, culture and geography.
In 2022, our Board amended our Corporate Governance Guidelines to implement a policy addressing board diversity when identifying potential director nominees. The policy provides that our Nominating, Compliance and Corporate Governance Committee will ensure that the initial list of director candidates from which new Board nominees are chosen includes qualified women and minority candidates. In addition, any third-party consultant retained by our Nominating, Compliance and Corporate Governance Committee to furnish an initial list of director candidates will be requested to include qualified women and minority candidates, as is the case with the search currently being conducted with the support of an external advisory firm to identify two new, highly qualified and complementary independent directors to the Board.
The Nominating, Compliance and Corporate Governance Committee will evaluate each of the director candidates that have been recommended to it in compliance with the applicable requirements and make a recommendation to
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the Board as to whether or not the Board should nominate the proposed director candidate for election by our stockholders.
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| BOARD LEADERSHIP STRUCTURE |
Our Board believes that our CEO is best situated to serve as Chairman because he is the director who is most familiar with our business and industry and possesses detailed and in-depth knowledge of the issues, opportunities and challenges faced by us and is therefore best positioned to ensure that the Board’s time and attention are focused on the most critical matters. Our independent directors bring experience, oversight and expertise from outside the Company, while the CEO brings Company-specific experience and expertise. Our Nominating, Corporate Governance and Compliance Committee regularly reviews our leadership structure. The committee’s review generally considers a variety of factors, including our governance practices and stockholder feedback on our Board and its leadership structure. In addition, the committee considers feedback on the Chairman of the Board received in connection with such Board evaluation. As a result of this ongoing review, the Board believes that the combined role of Chairman and CEO, working together with the Lead Independent Director, facilitates information flow between management and the Board, which is essential to effective governance. The Board believes that having one person serve as Chairman and CEO can provide synergies and efficiencies that enhance the functioning of the Board and, importantly, allow it to most effectively execute its role in overseeing business strategy. To balance the authority and influence inherent in the combined role of Chairman and CEO, our Board has been thoughtful in structuring the Lead Independent Director’s role with robust and clearly defined responsibilities. Importantly, the Board has considered feedback from stockholder engagement efforts and best practices in corporate governance.
Lead Independent Director
On March 22, 2023, in response to specific and broad-based stockholder feedback, our Board created a new position of Lead Independent Director and unanimously selected H Michael Cohen as our Lead Independent Director with responsibilities that are substantially similar to many of the functions typically fulfilled by a board chairman, as described below, and believes that such responsibilities provide an opportunity for the independent directors to discuss management performance and other issues.
As set forth in our Corporate Governance Guidelines, the responsibilities of the Lead Independent Director include:
• presiding at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors;
• providing input on Board agendas and materials in advance of Board meetings;
• if requested by stockholders, ensuring that he or she is available for consultation and direct communication; and
• performing such other functions as the Board may delegate.
Having the flexibility to select the appropriate structure based on the specific needs of our business is critical. Accordingly, consistent with the Board’s commitment to good corporate governance practices, our Board periodically reviews its leadership structure and will continue to evaluate and implement the leadership structure that it concludes most effectively supports our Board in fulfilling its responsibilities.
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| BOARD’S ROLE IN RISK OVERSIGHT |
Our Board has an active role, as a whole and also at the committee level, in overseeing the management of our risks. The Board exercises this oversight responsibility directly and through its committees. Each committee is responsible for evaluating certain risks and overseeing the management of such risks and reporting to the entire Board as necessary. The oversight responsibility of the Board and its committees is informed by regular reports from our management team, including senior personnel that lead a variety of functions across our business, and from our internal audit department, as well as input from external advisors, as appropriate. These reports are designed to provide timely visibility to the Board and its committees about the identification and assessment of key risks, our risk mitigation strategies, and ongoing developments.
The full Board has primary responsibility for evaluating strategic and operational risk management. Our Board has responsibility for overseeing certain of our major risk exposures, including in the areas of financial and enterprise risk, legal and regulatory compliance, environmental sustainability, social responsibility, and cybersecurity, as well as risks in other areas as our Board deems necessary or appropriate from time to time. Our Board also oversees the steps we have taken to monitor or mitigate these exposures, including policies and procedures for assessing and managing risk and related compliance efforts. Our Board may exercise direct oversight with respect to these areas or delegate such oversight to committees in its discretion. In addition, our audit committee oversees our internal audit function.
While our Board oversees risk management, our Company’s management is charged with managing risk and bringing to our Board’s attention emerging risks as well as discussing the status of the long-term risks facing our Company. Our strategic planning processes are designed to facilitate the identification and management of such risks and ensure regular communication with our Board and its committees. Our Board, with independent leadership from the Lead Independent Director and working through its committees, proactively participates in the oversight of management’s actions. Periodically, at regularly scheduled Board meetings, our Company’s management provides the full Board with an analysis and assessment of the key risks facing our Company. Our Lead Independent Director and the Chairpersons of our committees review and approve the agendas for, and information provided in, such meetings, and, after consulting with the Chairman of our Board, may call for additional meetings or executive sessions of our Board or its committees to discuss risk-related topics as they may, individually or collectively, determine necessary or appropriate. Our Board also regularly engages with outside advisors and experts as it deems appropriate from time to time to evaluate and anticipate current key risk areas and consider strategies to respond. These advisors and experts provide valuable information, including outside perspectives and best practices, landscape overview, industry trends and peer data in areas such as the global regulatory environment, governance, compensation, global operations and sustainability, to facilitate our Board’s fulsome review and discussion of these risk areas with the management team, which then informs action and strategy.
Management assesses and prioritizes risks over the long term using quantitative and qualitative input on multiple key dimensions of enterprise risk, including, among other things, (i) patient safety, (ii) business and financial metrics, (iii) operational risks (disruptive events), (iv) reputation and brand, (v) legal and regulatory, and (vi) talent and employee well-being. We consider the immediacy and severity of enterprise risks as part of our assessment process.
Our Board committees each play a significant role in carrying out our Board’s risk oversight function. Our Audit Committee oversees risks related to our Company’s financial statements integrity and the financial reporting process, including our internal control over financial reporting, disclosure controls and procedures and accounting matters. Our Audit Committee may engage such other advisors as it deems appropriate to assess our Company’s management of risk. It also regularly reviews our risk management processes and regulatory compliance, including but not limited to mechanisms and channels for compliance concerns to be reported. Our Audit Committee also regularly reviews financial risks (insurance, credit, debt, currency risk and hedging programs), and other risks as the committee deems necessary or appropriate from time to time, including competition, pricing, regulation, intellectual property, technology and facilities obsolescence, natural and man-made disasters and industrial espionage, and reviews our procedures for detecting fraud. In addition, our Audit Committee considers and approves amendments
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to the Code of Business Conduct and Ethics, and review the results of management’s efforts to monitor compliance with the same. In its oversight of our controls and procedures, our Audit Committee discusses with management and the independent auditors the design, implementation, adequacy and effectiveness of our accounting and financial reporting processes and systems of internal control, and establishes and oversees the processes and procedures for the receipt and treatment of complaints about accounting, internal accounting controls or audit matters.
Our Nominating, Compliance and Corporate Governance Committee considers risks related to succession planning, our environmental, social and governance practices and other governance-related risk exposures. Our Nominating, Compliance and Corporate Governance Committee oversees and reviews our cybersecurity, data privacy and other information technology risks, controls and procedures. In addition, our Nominating, Compliance and Corporate Governance Committee regularly reviews the corporate compliance program to assess its effectiveness and reviews our major legal compliance risk exposures.
Our Compensation Committee reviews risks relating to the compensation program and arrangements as well as human capital management, which is designed to attract, retain and motivate top quality talent. As part of its normal review of these risks, our Compensation Committee considers our Company’s compensation policies and practices to determine if their structure or implementation provides incentives to employees to take unnecessary or inappropriate risks that could have a material adverse effect on our Company. Our Compensation Committee also reviews compensation and benefits plans affecting employees, in addition to those applicable to executive officers. Our Compensation Committee has determined that the implementation and structure of the compensation policies and practices do not encourage unnecessary and inappropriate risks that could have a material adverse effect on our Company. Our Compensation Committee further determines whether our Company’s compensation program and practices appropriately further the Company’s long-term strategic plan and avoid undue emphasis on short-term market value, without encouraging unreasonable or unrestricted risks. In making these determinations, our Compensation Committee considers the views of our Company’s compensation staff, legal counsel and internal audit team, results of stockholder advisory votes, as well as its outside advisors. In addition, our Compensation Committee oversees our Company’s compliance with regulatory requirements associated with the compensation of our directors, executive officers and other employees. Our Compensation Committee also oversees risk management relating to human capital management, including diversity, equity and inclusion, pay equity, workplace culture, employee engagement and the attraction and retention of talent.
The activities of each committee are reported regularly to the full Board. Our Board believes its choice of leadership structure as described under “Board Leadership Structure” above, facilitates effective risk oversight by our Board by ensuring independent director review, led by our Lead Independent Director and working through our independent Board committees, of key risk areas and management’s risk management actions and priorities. We further believe that Mr. Cohen, in his role as Lead Independent Director of the Board, will be instrumental in guiding our independent directors’ understanding of the most critical risks facing our Company and in helping them collaborate with members of management to reinforce the effectiveness of the Company’s enterprise risk management.
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| INVESTOR FEEDBACK AND ENGAGEMENT |
We believe that engaging with stockholders is fundamental to the Company’s success and our commitment to good governance. We seek to proactively listen to, understand and consider the opinions of our stockholders to stay aligned with stockholder priorities. See the discussion under “Stockholder Engagement” for additional details regarding our stockholder engagement.
Over the past several years, we have significantly expanded our stockholder engagement program to better understand the issues that are important to our stockholders and incorporate feedback into the Board’s decision-making process. Members of our management team, including our CEO, CFO, Chief Operating Officer, General Counsel and our Vice President of Investor Relations, and independent directors regularly meet with stockholders to gather their perspectives on key topics including our long-term strategy, financial and operational performance, risk management, corporate responsibility, executive compensation and governance practices.
Beyond our governance-focused engagement, our investor relations team and members of our senior management team regularly communicate with investors in connection with quarterly earnings calls, investor and industry conferences, analyst meetings and individual discussions with our stockholders. We believe that these practices helped the Company to successfully obtain high levels of stockholder approval on our Say-on-Pay Vote for five straight years preceding 2022 and will continue to incorporate the feedback provided by stockholders in the upcoming years.
As described in the diagram below, we report stockholder feedback regularly to our Board, which in turn uses this feedback to evaluate any changes to the Company’s practices year-round.
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In response to the results of our Say-on-Pay Vote at the 2022 Annual Meeting of Stockholders, our independent directors led an extensive outreach effort to understand our stockholders’ concerns and make responsive changes to our executive compensation program which are summarized below.
How Our Independent Directors Engaged With Stockholders Over The Last Twelve Months
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| The following independent directors engaged with our stockholders: | | Met with stockholders representing more than: | | Matters discussed during these meetings included: |
• H Michael Cohen | | | | • Board Declassification
• Board Expansion
• Lead Independent Director
• Stockholders’ Rights Agreement
• Executive Compensation
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| Lead Independent Director and Chairperson of the Audit Committee | | 50% | |
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| • Julie A. Shimer, Ph.D. | | | |
| Chairperson of the Nominating, Compliance and Corporate Governance Committee | | of our outstanding shares. | |
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| • Craig Reynolds | | | |
| Chairperson of the Compensation Committee | | | | | |
How We Have Responded to the Feedback We Received
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| Investor Feedback - Corporate Governance | Our Response |
Board Declassification: A number of stockholders expressed a strong preference for annual director elections. | The Board has approved, and recommends that stockholders vote in favor of, a proposal to stockholders for a vote at the Annual Meeting to amend the Company’s Amended and Restated Certificate of Incorporation to declassify the Board, which would result in one-year terms for all directors and requires the approval of 75% of the outstanding shares. If approved, the declassification of the Board would begin with the directors up for election at the 2024 Annual Meeting of Stockholders, with the Board becoming fully declassified at the 2026 Annual Meeting of Stockholders. |
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Board Expansion: Consider expanding the size of the Board, following contraction over the last few years due to director retirements and/or resignations. | The Board has decided to expand the size of the Board from five to seven members and has approved, and recommends a vote for, a proposal to approve, on an advisory basis, the increase in the total number of authorized members of our Board from five to seven. With the support of an external advisory firm, the Board’s Nominating, Compliance and Corporate Governance Committee has initiated a search process for two new, highly qualified and complementary independent directors. In connection with this process, the Board will continue to solicit feedback from the Company’s stockholders regarding specific individuals as well as qualities and experience that would be beneficial for the Board. |
Lead Independent Director: Consider adding a lead independent director. | On March 22, 2023, the independent directors of our Board unanimously selected H Michael Cohen as the Board’s Lead Independent Director, responsible for presiding at meetings of the Board at which the Chairman is not present and providing input on Board agendas and materials in advance of Board meetings. |
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| Investor Feedback - Corporate Governance - (Continued) | Our Response - (Continued) |
Board Composition: A number of stockholders noted a heightened focus on diversity, including in particular a strong preference for increased female representation on the Board.
| During 2022, our Board amended our Corporate Governance Guidelines to implement a policy addressing board diversity when identifying potential director nominees. The policy provides that our Nominating, Compliance and Corporate Governance Committee will ensure that the initial list of director candidates from which new Board nominees are chosen includes qualified women and minority candidates. In addition, any third-party consultant retained by our Nominating, Compliance and Corporate Governance Committee to furnish an initial list of director candidates will be requested to include qualified women and minority candidates. |
Stockholders’ Rights Agreement: A number of stockholders did not support the presence of “poison pill” arrangement. | On March 22, 2023, the Board terminated the Rights Agreement. The Board does not currently intend to adopt another rights plan. If a new rights plan were to be adopted as a result of new circumstances arising in the future, the Board has agreed to seek stockholder approval of the rights plan within 12 months of its adoption unless the rights plan is terminated prior to such time. |
Executive Compensation: Consider adding a relative TSR metric to the long-term incentive award. | For 2023, the Company has added a relative TSR metric to the performance share units granted to our executive officers that requires Company TSR out-performance at the 55th percentile relative to the constituents of the Nasdaq Composite Index to achieve target payout over a three-year cumulative performance period. If the Company’s absolute TSR is negative, the funding percentage is capped at 100%. |
Executive Compensation: For long-term incentive compensation plans, consider moving to three-year cumulative financial metrics rather than annual metrics at the end of a three-year performance period. | For 2023, we have incorporated three-year cumulative Adjusted Product Revenue and Operating Margin performance metrics in the design of the performance share units. |
Executive Compensation: Continue to enhance disclosure on our executive compensation program. | We have endeavored to increase the transparency of and details regarding our executive compensation program and governance practices throughout this Proxy Statement, including key details regarding 2023 enhancements to our incentive structures as outlined on page 70 of this Proxy Statement. |
Executive Compensation: Stockholders expressed a preference that future executive employment agreements include only double trigger cash severance provisions in connection with a change-in-control. | Going forward, the Compensation Committee has committed that any new employment agreements will include only double trigger change-in-control provisions. |
Voluntary CEO Waiver
In connection with the Board’s unanimous selection of H Michael Cohen as Lead Independent Director, Mr. Kiani has voluntarily irrevocably and permanently waived his right to treat the appointment of any lead independent director as “Good Reason” under his employment agreement with the Company, to terminate employment, and to receive contractual separation payments on this basis. For more information, please see the section entitled “Employment Arrangements with Named Executive Officers—Employment Agreement with Mr. Kiani” starting on page 105 of this Proxy Statement.
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| CORPORATE RESPONSIBILITY & SUSTAINABILITY |
Under the guidance and supervision of the Board, we pursue high standards of corporate responsibility and sustainability, including how we support, protect and empower our employees, how we work with our customers, how we govern the Company and how we connect with our communities. Our Nominating, Compliance and Corporate Governance Committee is tasked with the responsibilities to implement policies and practices that foster the Company’s environmental, social and governance initiatives, policies, practices and programs.
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| | Environment | | | |
| l | We are committed to operating in an environmentally responsible manner and supports the internationally recognized environmental principles set forth in the United Nations Global Compact. |
| l | We strive to identify new opportunities to improve the sustainability of our business and encourage our employees to join in our efforts. |
| Minimizing our environmental impact | | l | As a global manufacturer of patient monitoring technology, our mission is to improve patient outcomes and reduce the cost of care. We also understand that the materials we use and the products we manufacture, which include single-patient-use sensors, have an impact on the environment. |
| | l | We are always considering ways to reduce the Company’s overall environmental footprint. We have implemented and will continue to implement measures to promote greater environmental responsibility, conserve resources and reduce waste in an effort to help combat climate change. |
| | l | We actively seek to decrease our energy consumption through the use of energy efficient fixtures and machinery, occupancy sensors, motion sensors and automated lighting controls. |
| | l | We have installed solar photovoltaic panels on key facilities to supply our energy needs for lighting, HVAC, manufacturing needs and electric vehicle charging. |
| | l | The lightweight design of our latest generation of RD patient sensors reduces material waste compared to our traditional cable-based sensors. Based on our shipments of the RD sensors between 2016 and 2022, the new RD sensors have resulted in approximately 2,688 metric tons of material eliminated, of which 1,588 metric tons was eliminated in 2022 alone. |
| | l | In 2023, we continue to focus on additional sensor material reduction savings, including material commodities. |
| | l | To reduce landfill waste, we recycle returned Masimo products to harness re-useable natural elements and materials to minimize raw material usage. |
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| | Supply Chain |
| l | Our suppliers are critical partners in our chain. We are committed to efforts in preventing forced labor, modern slavery and human trafficking and child labor in our supply chain. |
| l | Ethical sourcing is an important facet of our ethical conduct strategy. We prohibit any form of forced labor, including slavery and human trafficking in our supply chain. We evaluate suppliers through questionnaires, supplier audits and risk-based assessments. |
| Responsibility in supply chain | | l | We are committed to further improving our supply chain due diligence processes, driving accountability within the supply chain by leveraging the industry standard Responsible Mineral Initiative-Conflict Mineral Reporting Template and continuing our outreach efforts in order to further develop transparency in our supply chain and mitigate the risk that our use of conflict minerals benefits or finances armed groups. |
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| | Workforce/Workplace | | | |
| l | We understand the need for great ideas, innovation and leadership to stay current and relevant. |
| l | We seek to retain our employees through fair and competitive compensation, benefits and challenging work experiences with increasing levels of responsibility. |
| l | We are committed to maintaining a safe workplace environment free from discrimination and harassment. |
Building an innovative, collaborative and
diverse workforce | | l | We do not tolerate employment discrimination based on race, religion, gender, age, marital status, ethnicity, national origin, sexual orientation, citizenship status, disability or other protected characteristics. |
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| CYBERSECURITY RISK PRACTICES |
Cybersecurity is a critical component of our risk management. We rely on information technology and any failure, inadequacy, interruption or security lapse of such technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
Our cybersecurity program is focused on the following:
l Cybersecurity Awareness: We identify and assess cyber risks through the dissemination of information from industry groups and third-party experts.
l Training: We provide annual cybersecurity training for company personnel with network access and conduct periodic phishing exercises.
l Technical Safeguards: We deploy measures to protect our network perimeter and internal information technology platforms, such as internal and external firewalls, network intrusion detection and prevention, penetration testing, vulnerability assessments, threat intelligence, anti-malware and access controls.
l Vendor Management: For our vendors that receive personal information, we maintain data protection agreements that contain contractual provisions requiring safeguards for the protection of personal information.
l Incident Response Plans: We maintain and update incident response plans that address the life cycle of a cyber incident (i.e., detection, response and recovery), as well as data breach response plans, and test those plans annually with tabletop exercises.
l Mobile Security: We deploy controls to prevent loss of data through mobile devices.
l Security Standards: We hold accreditations for information and security standards for HIPAA, HITRUST, NIST CSF, ISO 27001 and PCI DSS.
l Insurance: We maintain a cybersecurity insurance program with established and respected insurance companies.
At the core of our long-term strategy for human capital management is attracting, developing and retaining the best talent globally with the right skills to drive our future success. We seek to attract and retain highly talented, highly motivated, experienced and well-educated individuals to support our long-term growth and profitability goals.
Our success and future growth is largely dependent on our continued ability to attract, recruit, retain and develop a diverse workforce at all levels of the organization. To succeed, we have developed key recruitment and retention strategies that we focus on as part of our overall management of our business. These include:
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• Compensation. Our compensation program is designed to align the compensation of our employees with their performance and to provide the proper incentives to attract, retain and motivate employees to achieve superior results. The structure of our compensation program balances incentive earnings for both short-term and long-term performance.
▪ Our executive compensation program is designed so that a significant portion of compensation is “at-risk” based on performance, to align the interests of our executive officers with those of our stockholders.
▪ We utilize a nationally recognized compensation consultant to evaluate our executive compensation program.
▪ We provide employee compensation packages that are competitive and consistent with employee positions, experience, skills, knowledge and geography.
▪ Annual increases and cash incentives are based on merit, and not guaranteed.
▪ We offer a wide variety of benefits, including health insurance, paid time-off and a retirement plan, as well as voluntary benefits such as financial and personal wellness benefits.
• Developing Leaders of Tomorrow/Succession Planning. We are committed to identifying and developing the talents of our next generation of leaders. Our executive management team conducts organization and leadership reviews of all business leaders, focusing on our high-performing and high potential talent, diversity, and succession planning for critical roles. Our Board regularly oversees CEO and senior management succession planning, which is reviewed at least annually. Our CEO provides our Board with recommendations and evaluations of potential CEO successors, and reviews their development progress. Our Board regularly reviews potential internal senior management candidates with our CEO, including the qualifications, experience, and development priorities of these individuals. In addition, our Board engages with potential CEO and senior management successors at Board and committee meetings and in less formal settings to allow directors to personally assess candidates. Further, our Board periodically reviews the overall composition of our senior management’s qualifications, tenure, and experience, as well as our strategies for enhancing representation of diverse teammates at senior levels of our Company and professional development for managers and senior leaders. Our Board also establishes steps to address emergency CEO succession planning in extraordinary circumstances. Our emergency CEO succession planning is intended to enable our Company to respond to unexpected position vacancies, including those resulting from a major catastrophe, by continuing our Company’s safe and sound operation and minimizing potential disruption or loss of continuity to our Company’s business and operations.
• Employee Feedback and Retention. In 2020 and 2021, we were certified as a Great Place to Work®. In addition, for 2021 and 2022, we were recognized on Fortune Best Workplaces in Manufacturing & Production™. To assess and improve employee retention and engagement, we survey employees and take actions to address areas of employee concerns. The average tenure of our employees is approximately 5.4 years and more than 18% of our employees have been employed by us for more than ten years.
• Inclusion and Diversity. In fiscal 2022, our full-time employees increased from approximately 2,000 as of January 1, 2022 to 4,000 as of December 31, 2022 and our dedicated contract personnel worldwide increased from approximately 4,200 as of January 1, 2022 to approximately 5,900 as of December 31, 2022, primarily as a result of the Sound United acquisition. Of our full-time employees, approximately 69% were male and approximately 31% were female, and women represented approximately 23% of our management/leadership roles. Minorities represented approximately 47% of our U.S. workforce, and approximately 40% of our management/leadership roles.
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We undertake philanthropic activities both directly and indirectly through the non-profit organizations we support throughout the globe. We believe in being an active corporate citizen and, among other things, support programs, initiatives and research designed to improve patient safety and outcomes, promote efficient and cost-effective healthcare delivery, and provide advanced healthcare to people worldwide who may not otherwise have access to lifesaving technologies. The following summarizes our key contributions to charitable organizations during fiscal year 2022.
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$1.0 Million in contributions to the Masimo Foundation
| | $4.9 Million in cash contributions to nonprofit organizations (other than the Masimo Foundation) | | $0.4 Million in contributions of Masimo products to charitable organizations
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| MEETINGS AND EXECUTIVE SESSIONS |
Our Board meets on a regular basis throughout the year to review significant developments affecting the Company and to act upon matters requiring its approval. Our Board also holds special meetings, as required from time to time, when important matters arise requiring Board action between scheduled meetings. During fiscal 2022, our Board met twenty-eight times. None of our directors attended fewer than 75% of the total number of meetings held by the Board and the committees (on which and for the period during which the director served) during fiscal 2022.
As required under applicable Nasdaq listing standards, our independent directors periodically meet in executive sessions at which only they are present.
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| LEAD INDEPENDENT DIRECTOR |
On March 22, 2023, in response to specific and broad-based stockholder feedback, our Board created a new position of Lead Independent Director and unanimously selected H Michael Cohen as our Lead Independent Director with responsibilities that are substantially similar to many of the functions typically fulfilled by a board chairman, as described below, and believes that such responsibilities provide an opportunity for the independent directors to discuss management performance and other issues.
As set forth in the Company’s Corporate Governance Guidelines, the responsibilities of the Lead Independent Director include:
• presiding at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors;
• providing input on Board agendas and materials in advance of Board meetings;
• if requested by stockholders, ensuring that he or she is available for consultation and direct communication; and
• performing such other functions as the Board may delegate.
Having the flexibility to select the appropriate structure based on the specific needs of our business is critical. Accordingly, consistent with the Board’s commitment to good corporate governance practices, our Board periodically reviews its leadership structure and will continue to evaluate and implement the leadership structure that it concludes most effectively supports our Board in fulfilling its responsibilities.
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| POLICY REGARDING BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS |
It is the policy of our Board to invite directors and nominees for director to attend annual meetings of our stockholders. We expect any of them in attendance to be available to answer appropriate questions from our stockholders. We held one Annual Meeting of Stockholders in fiscal 2022, which was attended by the Chairman of our Board, Mr. Kiani.
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| INDEPENDENCE OF THE BOARD OF DIRECTORS |
Our Board has the responsibility for establishing corporate policies and for the overall performance of the Company, although it is not involved in day-to-day operations. As required under the rules and listing standards of The Nasdaq Stock Market LLC (the “Nasdaq Rules”), a majority of the members of our Board must qualify as “independent” as affirmatively determined by our Board. Our Board consults with our legal counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent” including those set forth in applicable Nasdaq Rules. Consistent with these considerations, after review of all relevant transactions or relationships between each director, and the director’s family members and Masimo, our senior management, and our independent registered public accounting firm, our Board has determined that all of our directors other than Mr. Kiani are independent, as that term is defined in Nasdaq Listing Rule 5605(a)(2), and that all members of the Audit Committee and the Compensation Committee meet the heightened independence standards applicable to such committees.
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| CODE OF BUSINESS CONDUCT AND ETHICS |
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, executive officers and directors. The Code of Business Conduct and Ethics is available to stockholders on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.” If we make any substantive amendments to our Code of Business Conduct and Ethics or grant any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents” and/or in our public filings with the SEC.
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| STOCKHOLDER COMMUNICATIONS WITH OUR BOARD |
Our Board has adopted a formal process by which stockholders may communicate with the Board or any of its directors. Stockholders of Masimo wishing to communicate with our Board or an individual director may send a written communication to the Board or such director, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, Attention: Compliance Officer. Each communication must set forth:
• the name and address of all the Masimo stockholders on whose behalf the communication is sent; and
• the number of shares of our common stock that are beneficially owned by the stockholders as of the date of the communication.
Each communication will be reviewed by our Compliance Officer to determine whether it is appropriate for presentation to the Board or the individual director. Examples of inappropriate communications include junk mail, spam, mass mailings, product complaints, product inquiries, new product suggestions, resumes, job inquiries, surveys, business solicitations and advertisements, as well as unduly hostile, threatening, illegal, unsuitable, frivolous, patently offensive or otherwise inappropriate material. These screening procedures have been approved by a majority of the independent members of our Board. Communications determined by our Compliance Officer to be appropriate for presentation to the Board or such director will be submitted to the Board or the individual director on a periodic basis.
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
In accordance with our Open Door Policy for Reporting Accounting, Audit, and Other Compliance Concerns (the “Open Door Policy”), all communications directed to the Board, a committee of the Board or an individual director relating to accounting topics, internal accounting controls, or auditing matters involving the Company are forwarded to our Compliance Officer regardless of the method of communication, and then promptly and directly forwarded by the Compliance Officer to the Audit Committee or the Board, as appropriate. All communications directed to the Board, a committee, or an individual director that relate to non-financial matters (including, without limitation, purported or suspected violations of any law or regulation, our Code of Business Conduct and Ethics or other policies) will be forwarded to our Compliance Officer, and, if the Compliance Officer deems the matter to be a potentially significant violation of law, the Code of Business Conduct and Ethics or company policy, the Compliance Officer will promptly and directly forward the communication to the Nominating, Compliance and Corporate Governance Committee.
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| INFORMATION REGARDING BOARD COMMITTEES |
Our Board has established a standing Audit Committee, Compensation Committee, and Nominating, Compliance and Corporate Governance Committee to devote attention to specific subjects and to assist our Board in the discharge of its responsibilities. All of these independent committees operate under a written charter adopted by our Board, each of which is available on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.”
The following table provides committee membership and meeting information for fiscal 2022 for the Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee.
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| | Committee Membership | |
| Name | | Independent | | Audit | | Compensation | | Nominating, Compliance and
Corporate Governance | |
| Employee Director: | | | | | | | | | | |
| Joe Kiani | | — | | — | | — | | — | |
| Non-Employee Directors: | | | | | | | | | | |
| H Michael Cohen | | u | | À¬ | | ü | | — | |
| Adam Mikkelson | | u | | Àü | | ü | | ü | |
| Craig Reynolds | | u | | — | | ¬ | | ü | |
| Julie A. Shimer, Ph.D. | | u | | Àü | | — | | ¬ | |
Total meetings in fiscal 2022 | | | | 5 | | 21 | | 2 | |
| | | | | | | | | | |
______________
¬ Committee Chairperson. À Financial Expert. ü Member. u Independent.
Audit Committee
We maintain a separately-designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The charter of the Audit Committee grants the Audit Committee full access to all of our books, records, facilities and personnel.
Both our independent registered public accounting firm and internal financial personnel regularly meet privately with our Audit Committee and have unrestricted access to the Audit Committee. The policy of our Audit Committee is to create an environment that supports the integrity of our financial reporting process and the independence of the audit and the independent registered public accounting firm, and to maintain and foster an open avenue of communication among our Audit Committee, the independent registered public accounting firm and our financial management, and our internal auditors.
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
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| Members and Number of Meetings | | Primary Committee Functions | | |
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Committee Members:(1) | | l Appointing, retaining and determining the compensation of our independent registered public accounting firm; l Reviewing and discussing the independence of the prospective independent registered public accounting firm before its engagement; l Overseeing and approving any audit and non-audit services provided by our independent registered public accounting firm; l Reviewing at least annually the qualifications, performance and independence of our independent registered public accounting firm; l Overseeing the relationship with our independent registered public accounting firm, including the rotation of the audit partners, as well as reviewing and resolving any disagreements between our management and our independent registered public accounting firm regarding financial controls over financial reporting; l Discussing with our management and our independent registered public accounting firm the design, implementation, adequacy and effectiveness of our accounting and financial reporting processes and systems of internal control, the adequacy and effectiveness of our information and cybersecurity policies and the internal controls regarding information security; l Reviewing and discussing with our management and our independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements; l Overseeing and approving the annual Audit Committee Report to be included in our annual public filings; l Reviewing the quarterly earnings announcements and any other public announcement regarding our results of operations with our management; l Obtaining, reviewing and discussing reports from our independent registered public accounting firm relating to our critical accounting policies and practices; l Evaluating the cooperation received by our independent registered public accounting firm during their audit examinations; l Reviewing with our independent registered public accounting firm and, if appropriate, management, any “management” or “internal control” letter; l Evaluating the performance, responsibilities, budget and staffing of our internal audit function and reviewing our internal audit plan; l Overseeing management risks relating to data privacy, technology and information security, including cybersecurity and back-up of information systems, and the steps we have taken to monitor and control such exposures; l Establishing and overseeing the processes and procedures for the receipt, retention and treatment of any complaints regarding accounting, internal controls or audit matters, as well as the confidential and anonymous submissions by employees concerning questionable accounting, auditing and internal control matters; l Considering and approving amendments to the Code of Business Conduct and Ethics, and reviewing the results of management’s efforts to monitor the compliance with the same; l Considering waivers of the Code of Business Conduct and Ethics (other than waivers subject to review by the Board as a whole, as required by applicable law, the Nasdaq requirements and the SEC rules), and retaining authority to grant any such waivers; l Periodically reviewing with our management the status of any legal or regulatory matters that could have a significant impact on our financial statements, including any material reports or inquiries from regulatory or governmental agencies; | | |
| Mr. Cohen, Chairperson | | | |
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| Mr. Mikkelson | | | |
| Dr. Shimer | | | |
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Number of Meetings:(2) | | | |
| 5 | | | |
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| | | |
| Attendance Rate: | | | |
| 100% | | | |
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
| | | | | | | | | | |
| Audit Committee | | Primary Committee Functions - (Continued) | | |
| | l Reporting to the Board material issues that arise regarding the quality or integrity of our financial statements, our compliance with legal or regulatory requirements, the performance or independence of our independent registered public accounting firm, the performance of our internal audit function or such other matters; l Investigating any matter brought to its attention, with full access to our books, records, facilities and employees, and with sole authority to select, retain and terminate any consultant, legal counsel or advisor to advise the Audit Committee; and l Reviewing annually the performance of the Audit Committee and its members, including compliance of the Audit Committee with its charter. | | |
| _____________ | | | | |
| (1) Our Board has determined that each of Messrs. Cohen and Mikkelson and Dr. Shimer is an audit committee financial expert, as defined under applicable SEC rules, and that Messrs. Cohen and Mikkelson and Dr. Shimer each meet the background and financial sophistication requirements under Nasdaq Listing Rule 5605(c)(2)(A). In making this determination, the Board made a qualitative assessment of Messrs. Cohen’s and Mikkelson’s and Dr. Shimer’s level of knowledge and experience based on a number of factors, including each of their respective formal education and experience. | | |
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| (2) Typically, the Audit Committee meets at least quarterly and with greater frequency if necessary. | | |
Compensation Committee
The charter of the Compensation Committee grants the Compensation Committee full access to all of our books, records, facilities and personnel. The Compensation Committee has the authority, in its sole discretion, to retain and terminate (or obtain the advice of) any compensation consultant or other advisor to assist it in the performance of its duties, but only after taking into consideration factors relevant to the advisor’s independence specified in Nasdaq Listing Rule 5605(d)(3). The Compensation Committee is responsible for evaluating whether any compensation consultant retained or to be retained by it has any conflict of interest. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any advisor retained by the Compensation Committee, and has sole authority to approve the advisor’s fees and the other terms and conditions of the advisor’s retention.
The policy of our Compensation Committee is to maintain an overall compensation structure designed to attract, retain and motivate top quality management and other employees by providing appropriate levels or risk and reward in proportion to individual contribution and performance. Our Compensation Committee is responsible for establishing appropriate incentives for management to further our long-term strategic plan and avoid undue emphasis on short-term market value.
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| Members and Number of Meetings | | Primary Committee Functions |
| | |
Committee Members:(1) | | l Reviewing the effectiveness of our overall general compensation strategy, to assure that it promotes stockholder interests and supports our strategic and tactical objectives, and that it provides for appropriate rewards and incentives for our management and employees; l Establishing annual and long-term performance goals for our executive officers; l Conducting and reviewing with the Board an annual evaluation of the performance of our CEO and other executive officers; l Reviewing compensation practices and trends and considering the competitiveness of the compensation of our executive officers; l Reviewing and approving all salaries, bonuses, cash-based incentive compensation, equity awards, perquisites, post-service arrangements and other compensation and benefit plans for our CEO and all other executive officers; |
| Mr. Reynolds, Chairperson | |
| Mr. Cohen | |
| Mr. Mikkelson | |
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| |
Number of Meetings:(2)
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| 21 | |
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| |
| Attendance Rate: | |
| 100% | | |
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| Compensation Committee | | Primary Committee Functions - (Continued) |
| | l Reviewing and approving the terms of any offer letter, employment agreements, termination agreements or arrangements, change-in-control agreements and other material agreements between us, on the one hand, and any of our executive officers, on the other; l Acting as the administering committee of our Board for our executive compensation and cash incentive plans and for any equity incentive plans, including (i) establishing performance metrics, (ii) determining bonus payouts and whether awards that have performance-related criteria have been earned, (iii) approving and granting equity awards to employees and executive officers; (iv) amending equity plans as necessary or appropriate to carry out our compensation strategy; (v) correcting any defect in any equity compensation plan or other arrangement and (vi) modifying existing equity awards (with the consent of the grantees and/or stockholders, if required) and approving authorized exceptions to provisions of the equity plans; l Reviewing and approving all equity-based incentive compensation plans and bonus plan, or any amendments thereto, and the aggregate cash amounts and numbers of shares to be paid or reserved for issuance thereunder after taking into consideration our strategies; l Providing oversight for our overall compensation plans and benefit programs, including health and welfare benefit plans; l Reviewing and approving compensation program as well as salaries, fees, bonuses and equity awards for the non-employee members of our Board; l Reviewing and discussing with management, and recommending the annual Compensation Discussion and Analysis disclosure and the related tabular presentations regarding named executive officer compensation included in our annual public filings; l Reviewing and discussing with appropriate executive officers compensation-related proposals to be considered at our annual meeting, and the results of any stockholder advisory votes and, based on such discussions, provide recommendations to the Board; l Overseeing our compliance with regulatory requirements associated with the compensation of our directors, executive officers and other employees, including (i) monitoring our compliance with the requirements relating to loans to officers and directors and (ii) reviewing and administering the “Clawback policy” or similar policy or agreement between our company and our executive officers; l Overseeing and approving the annual Compensation Committee Report included in our annual public filings; l Overseeing risks and exposures associated with our executive compensation program and arrangements, including incentive plans, and reviewing with management the steps management has taken, or should consider taking, to monitor or mitigate such exposures; l Reviewing human capital management strategies, programs and policies, including, but not limited to, those regarding recruitment, retention, career development, diversity, equity and inclusion, pay equity, workplace culture, and employee engagement; and l Reviewing annually the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter. |
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| _____________ | | |
| (1) Our Board has determined that all members of our Compensation Committee meet the criteria for independence under Nasdaq Listing Rule 5605(a)(2) and Rule 10C-1 of the Exchange Act. |
| (2) The Compensation Committee meets from time to time during the year. |
The Compensation Committee has retained the services of Compensia, Inc. (“Compensia”) to assist the Compensation Committee in assessing and determining competitive compensation packages and to provide input on other executive compensation related matters. Compensia provides no other services to Masimo, and its sole relationship with Masimo is as an advisor to the Compensation Committee.
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
For more information regarding the Compensation Committee’s engagement of Compensia, see “Executive Compensation—Compensation Discussion and Analysis” starting on page 69 of this Proxy Statement.
The Compensation Committee meets outside the presence of all of our executive officers, including the NEOs, in order to consider appropriate compensation for our CEO. Our CEO may not participate in or be present during any deliberations or determinations of the Compensation Committee regarding his compensation. When considering the appropriate compensation of our other NEOs, the Compensation Committee meets outside the presence of all executive officers except for our CEO. The specific determinations of the Compensation Committee with respect to executive compensation for fiscal 2022 are described in greater detail in the “Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement.
Nominating, Compliance and Corporate Governance Committee
The charter of the Nominating, Compliance and Corporate Governance Committee grants the committee full access to all of our books, records, facilities and personnel.
The policy of our Nominating, Compliance and Corporate Governance Committee is to promote good corporate governance, ensure the Board is comprised of only highly qualified directors with a wide range of diverse backgrounds, and foster open communication between our Nominating, Compliance and Corporate Governance Committee and our management.
| | | | | | | | | | |
| Members and Number of Meetings | | Primary Committee Functions | | |
| | | | |
Committee Members:(1) | | l Evaluating the composition, size, organization and governance of our Board and its committees to ensure that they appropriately reflect the knowledge, skills, integrity, ethics, diversity (including that of gender, sexual orientation, disability, age, race, ethnicity or national origin, global perspective and experience, business experience, functional expertise, stakeholder expectations, culture and geography), and other characteristics required to fulfill their respective duties, and determining future requirements; l Making recommendations to our Board about the appointment of directors to committees of our Board; l Recommending the selection of chairs of these committees to the Board; l Reviewing and recommending to our Board director independence determinations made with respect to continuing and prospective directors and members of the independent committees of the Board; l Developing and recommending to our Board policies for considering director nominees for election to the Board and committee members; l Identifying potential candidates for election to the Board consistent with criteria approved by the Board; l Overseeing our Board’s performance and annual self-evaluation process; l Considering the need and, if necessary, develop and institute plans or programs for the continuing education of directors and/or for the orientation of new directors, and evaluating the participation of members of the Board in continuing education activities in accordance with Nasdaq Rules; l Reviewing and evaluating plans for succession to the offices of our CEO and other executive officers, and making recommendations to the Board with respect to the selection of appropriate individuals to succeed to these positions; | | |
| Dr. Shimer, Chairperson | | | |
| Mr. Mikkelson | | | |
| Mr. Reynolds | | | |
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Number of Meetings:(2)
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| 2 | | | |
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| Attendance Rate: | | | |
| 100% | | | |
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| Nominating, Compliance, Corporate Governance Committee | | Primary Committee Functions - (Continued) | | |
| | l Reviewing our process for stockholder communications with the Board, and making such recommendations to the Board with respect thereto as the committee deems appropriate; l Overseeing corporate governance practices, including reviewing and recommending to the Board for approval any changes to our corporate governance framework; l Overseeing our corporate compliance programs; l Overseeing our major legal compliance risk exposures and the steps management has taken to monitor or mitigate such exposures, including our procedures and any related policies with respect to risk assessment and risk management; l Overseeing our efforts with regard to corporate responsibility and sustainability, including potential long and short-term trends and impacts to our business of environmental, social and governance initiatives, and our public reporting on these topics; l Overseeing our environmental, social and governance program and strategy; l Reviewing, as appropriate, related party transactions; l Overseeing our information security risk management, including our cybersecurity, data privacy and other information technology risks, controls and procedures and our plans to mitigate cybersecurity risks and to respond to data breaches; l Overseeing and determining compliance with our stock ownership guidelines; and l Reviewing annually the performance of the Nominating, Compliance and Corporate Governance Committee and its members, including compliance of the Nominating, Compliance and Corporate Governance Committee with its charter. | | |
| __________________ | | | | |
| (1) Our Board has determined that all members of our Nominating, Compliance and Corporate Governance Committee meet the criteria for independence under Nasdaq Listing Rule 5605(a)(2). | | |
| (2) The Nominating, Compliance and Corporate Governance Committee meets from time to time during the year. | | |
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| CORPORATE GOVERNANCE AND BOARD MATTERS |
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| NON-EMPLOYEE DIRECTOR COMPENSATION |
During fiscal 2022, our Non-Employee Director Compensation Policy provided for the following compensation:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Compensation Item(s): | | Annual
Amount |
| Annual Cash Retainer(1) | | |
| | Board Service | | $ | 70,000 | |
| | Audit Committee | | 12,500 | |
| | Compensation Committee | | 10,000 | |
| | Nominating, Compliance and Corporate Governance Committee | | 5,000 | |
| Committee Chairperson Annual Cash Retainer(2) | | |
| | Audit Committee | | $ | 25,000 | |
| | Compensation Committee | | 20,000 | |
| | Nominating, Compliance and Corporate Governance Committee | | 15,000 | |
| Equity Awards(3)(4) | | |
| | Restricted Share Units | | $ | 200,000 | |
____________
(1) All annual cash retainers are payable on a quarterly basis in arrears. For Board committee members, excluding the Chairperson of each Board committee.
(2) All annual cash retainers are payable on a quarterly basis in arrears.
(3) Each year on the date of our annual meeting of stockholders, each non-employee director is granted an award of restricted share units (“RSUs”) with respect to shares of our common stock having a grant date fair value of $200,000, rounded down to the nearest whole share, which will vest on the earlier of the first anniversary of the grant date or the date of the next annual meeting of stockholders.
(4) Our Non-Employee Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change-in-control of Masimo.
(5) The chart above illustrates the proportions of the base annual cash retainer paid to each non-employee Board member and the annual equity award granted to each non-employee Board member. Board member may be eligible for additional cash retainers for serving on various committees as well as for serving as a Committee Chairperson.
The following table sets forth summary information concerning compensation paid or accrued for services rendered to us in all capacities to the non-employee members of our Board for the fiscal year ended December 31, 2022.
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Fiscal 2022 Non-Employee Director Compensation Table: |
Name(1) | | Fees Earned
or Paid in Cash | | Stock Awards(2)(3) | | Option Awards(4) | | All Other
Compensation | | Total |
| H Michael Cohen | | $ | 105,000 | | | $ | 199,953 | | | $ | — | | | $ | — | | | $ | 304,953 | |
| | | | | | | | | | |
| Adam Mikkelson | | 97,500 | | | 199,953 | | | — | | | — | | | 297,453 | |
| Craig Reynolds | | 95,000 | | | 199,953 | | | — | | | — | | | 294,953 | |
| Julie A. Shimer, Ph.D. | | 97,500 | | | 199,953 | | | — | | | — | | | 297,453 | |
______________
(1) Our Chairman and CEO, Mr. Kiani, is not included in this table as he is an employee of Masimo and therefore receives no compensation for his service as a director. Mr. Kiani’s compensation is included in the “Summary Compensation Table” on page 92 of this Proxy Statement.
(2) These amounts generally represent the aggregate grant date fair value of the RSU awards granted to each listed non-employee director in fiscal 2022, computed in accordance with Financial Accounting Standard Board Accounting Standard Codification Topic 718 (“ASC Topic 718”). These amounts do not represent the actual amounts paid to or realized by the directors during fiscal 2022. The value as of the grant date for the RSU awards is calculated based on the number of RSUs at the grant date market price and is recognized once the requisite service period for the RSUs is satisfied. For a detailed description of the assumptions used for purposes of determining grant date fair value, see Note 20 to our Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Stock-Based Compensation” included in our 2022 Annual Report on Form 10-K.
(3) As of December 31, 2022, each of our non-employee directors held RSU awards with respect to 922 shares of our common stock.
(4) As of December 31, 2022, none of our non-employee directors held any options to purchase shares of our common stock other than Mr. Reynolds, who held options to purchase an aggregate of 50,000 shares.
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| AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES |
The Audit Committee has adopted a policy for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, Grant Thornton LLP. The policy generally pre-approves specified services in the defined categories of audit, audit-related and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting. By the adoption of this policy, the Audit Committee has delegated the authority to pre-approve services to the Chairperson of the Audit Committee, subject to certain limitations.
The Audit Committee has determined that the rendering of the services other than audit services by Grant Thornton LLP is compatible with maintaining the independent registered public accounting firm’s independence.
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| PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The following table represents aggregate fees billed to Masimo for the fiscal years ended December 31, 2022 and January 1, 2022 by Grant Thornton LLP, our independent registered public accounting firm for such periods. All fees described below were approved by the Audit Committee.
| | | | | | | | | | | | | | |
| | | Fiscal Year Ended |
| Fees | | December 31, 2022 | | January 1, 2022 |
Audit Fees(1) | | $ | 4,404,388 | | | $ | 2,238,944 | |
Audit-Related Fees(2) | | 39,222 | | | 37,212 | |
Tax Fees(3) | | 39,075 | | | 36,267 | |
All Other Fees(4) | | 6,000 | | | — | |
| Total Fees | | $ | 4,488,685 | | | $ | 2,312,423 | |
______________
(1) Audit fees consist of fees billed for services rendered for the audit of our consolidated annual financial statements, including performance of the attestation procedures required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements.
(2) Audit-related fees consist of fees for assurance and related services performed by our independent registered public accounting firm and include fees reasonably related to the performance of the audit of our U.S. retirement savings plan.
(3) Tax fees consist of fees related to certain U.S. state and local tax preparation and consultation services.
(4) All other fees primarily consist of fees associated with other mandatory filings.
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Our Audit Committee is composed of “independent directors,” as determined in accordance with Nasdaq Listing Rule 5605(a)(2) and Rule 10A-3 of the Exchange Act. The Audit Committee operates pursuant to a written charter adopted by the Board, a copy of which may be viewed on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.”
As described more fully in its charter, the purpose of the Audit Committee is to assist our Board with its oversight responsibilities regarding the integrity of our financial statements, assessing the independent registered public accounting firm’s qualifications and independence and the performance of the persons performing internal audit duties for us and the independent registered public accounting firm. Management is responsible for the preparation, presentation and integrity of our financial statements as well as our financial reporting process, accounting policies, internal audit function, internal accounting controls and disclosure controls and procedures. The independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with generally-accepted auditing standards and issuing a report. The Audit Committee’s responsibility is to monitor and oversee these processes. The following is the Audit Committee’s report submitted to the Board for fiscal 2022.
The Audit Committee has:
• reviewed and discussed our audited financial statements with management and Grant Thornton LLP, the independent registered public accounting firm;
• discussed with Grant Thornton LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC; and
• received from Grant Thornton LLP the written disclosures and the letter regarding their communications with the Audit Committee concerning independence as required by the applicable requirements of the Public Company Accounting Oversight Board and discussed Grant Thornton LLP’s independence with them.
In addition, the Audit Committee has met separately with management and with Grant Thornton LLP as part of the committee’s quarterly meetings.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2022 for filing with the SEC. The Audit Committee also has selected and engaged Grant Thornton LLP as Masimo’s independent registered public accounting firm for the fiscal year ending December 30, 2023, and is seeking ratification of the selection by Masimo’s stockholders.
| | | | | |
| Audit Committee |
| Mr. H Michael Cohen |
| Mr. Adam Mikkelson |
| Dr. Julie A. Shimer |
This foregoing audit committee report is not “soliciting material,” is not deemed “filed” with the SEC, and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing of ours under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent we specifically incorporate this report by reference.
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|
| A Letter From Our Compensation Committee Chairperson |
| Craig Reynolds Compensation Committee Chairperson May 24, 2023 | |
Dear Fellow Stockholders,
Fiscal year 2022 represented an inflection point for Masimo. Our long-standing healthcare business outperformed expectations and we continued to innovate and deliver clinically proven new products in the professional healthcare markets. We also accelerated our strategy to capture consumer health market opportunities with the acquisition and integration of Sound United, which brought with it consumer engineering, sales, marketing and distribution expertise that we are leveraging to capture new opportunities in the hearables, wearables and telemonitoring markets. While these efforts are remarkable on their own, during 2022, we also spent considerable time and effort to evolve our executive compensation and corporate governance practices through a series of twenty-one compensation committee meetings and two nominating, governance and compliance committee meetings to review and consider potential changes, with the hope of exceeding stockholder expectations for 2023 and beyond.
We take stockholders’ input very seriously, and viewed the 47.4% support of say-on-pay at our 2022 Annual Meeting of Stockholders as unacceptable. We were particularly disappointed given the continuous improvements in the say-on-pay results over the last five years preceding 2022. Accordingly, since the 2022 Annual Meeting of Stockholders, we proactively met with a significant number of stockholders, representing more than 50% of Masimo’s outstanding shares to help us better understand stockholder perspectives and concerns expressed through that vote. With this critical information in hand, we reviewed our executive compensation practices and considered what changes would better serve stockholders’ interests and align with the expectations you shared during these valuable conversations. Following that review, and after thorough deliberation, we have adopted the following key changes to our executive compensation practices, effective for fiscal year 2023:
• We have transitioned our performance share units granted under the long-term incentive program to be based entirely on three-year cumulative financial performance metrics;
• To effectively balance growth, profitability and stockholder experience, we have added a relative Total Shareholder Return metric to the performance share units that requires us to outperform the Nasdaq Composite Index over the three-year performance period to achieve target performance; and
• Any new employment agreements we enter into will include only double trigger change-in-control provisions, that is, we must experience a qualifying change-in-control event and an executive must have his or her employment terminated in order to be eligible to receive any severance payments.
We believe these changes will meaningfully strengthen the pay and performance alignment of our compensation structure, and reinforce our commitment to incentivizing consistent, long-term growth and stockholder value creation.
As management continues to execute on our strategic priorities, the Compensation Committee remains committed to designing an executive compensation program that drives achievement of these opportunities and priorities and, in turn, strong stockholder returns.
We thank you for your time and valuable feedback in helping us further enhance Masimo’s compensation practices, and appreciate your continued support and investment in the years ahead.
Sincerely,
Craig Reynolds
Compensation Committee Chairperson
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| 2023 Proxy Statement
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| COMPENSATION DISCUSSION AND ANALYSIS |
The following Compensation Discussion and Analysis may contain statements regarding future individual and Company performance targets and goals. Any targets and goals so disclosed are referenced in the limited context of Masimo’s compensation program and should not be understood to be statements of management’s expectations or estimates of results or other guidance. Masimo specifically cautions investors not to apply these statements to other contexts.
This Compensation Discussion and Analysis describes the material elements of our executive compensation program for our Principal Executive Officer, Principal Financial Officer, the next three most highly-compensated executive officers of the Company that were serving as an executive officer at the end of fiscal 2022 and one executive officer that was no longer serving as an executive officer at the end of fiscal 2022 (our “Named Executive Officers” or “NEOs”). During fiscal 2022, these individuals were:
| | | | | | | | |
| Name | | Position(s) |
| Joe Kiani | | Chief Executive Officer and Chairman of the Board |
| Micah Young | | Executive Vice President, Chief Financial Officer |
| Bilal Muhsin | | Chief Operating Officer |
| Tao Levy | | Executive Vice President, Business Development |
| Tom McClenahan | | Executive Vice President, General Counsel and Corporate Secretary |
| Kevin Duffy | | Former President, Consumer Division(1) |
| | |
| | |
| | |
| | |
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(1) Mr. Duffy’s employment with us commenced on April 11, 2022 in connection with the Sound United acquisition and was terminated without cause effective August 5, 2022.
Our Compensation Discussion and Analysis also provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why the Compensation Committee of our Board (the “Compensation Committee”) arrived at the specific compensation decisions for our executive officers, including our NEOs, for fiscal 2022, including the key factors that the Compensation Committee considered in determining their compensation.
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| COMPENSATION DISCUSSION AND ANALYSIS TABLE OF CONTENTS |
| | | | |
| l | Executive Summary.................................................................................................................................... | |
| l | Compensation Philosophy & Objectives................................................................................................... | |
| l | Governance of Executive Compensation Program.................................................................................. | |
| l | Individual Compensation Elements........................................................................................................... | |
| l | Other Compensation Policies and Practices............................................................................................. | |
| l | Tax and Accounting Considerations.......................................................................................................... | |
| l | Compensation Committee Interlocks and Insider Participation........................................................... | |
| l | Summary Compensation Table.................................................................................................................. | |
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| 2023 Proxy Statement
Our compensation program is designed to attract and retain highly-qualified employees within our industry and motivate them to perform at the highest level while executing our long-term plan. In retaining and motivating high-caliber talent, the Compensation Committee is committed to promoting a performance-based culture. Accordingly, we deliver the vast majority of our executives’ pay opportunities in the form of annual and long-term incentives tied to challenging financial metrics that incentivize management to successfully deliver on the long-term plan and our commitments to our stockholders.
Fiscal 2022 Corporate Performance Highlights
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Financial Performance Summary(1) |
| | | | | | | % Change |
| (in millions, except per share data and percentages) | | 2022 | 2021 | |
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