STERIS plc
Shareholder Annual Meeting in a DEF 14A on 06/07/2021   Download
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DEF 14A 1 d47044ddef14a.htm DEF 14A DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

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Definitive Proxy Statement

 

  

 

Definitive Additional Materials

 

  

 

Soliciting Material Pursuant to § 240.14a-12

 

STERIS plc

 

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

  

 

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Date Filed:


 

 

 

LOGO

 

 

 

 

Proxy Statement
Notice of Annual Meeting of Shareholders
Tuesday, July 31, 2018
STERIS


STERIS plc

A public limited company incorporated in Ireland with company number 595593

Registered office: 70 Sir John Rogerson’s Quay

Dublin 2, Ireland

Directors: Richard C. Breeden (U.S.), Daniel A. Carestio (U.S.), Cynthia L. Feldman (U.S.), Christopher S. Holland (U.S.), Dr. Jacqueline B. Kosecoff (U.S.), David B. Lewis (U.S.), Paul E. Martin (U.S.), Walter M Rosebrough, Jr. (U.S.), Dr. Nirav R. Shah (U.S.), Dr. Mohsen M. Sohi (U.S.) and Dr. Richard M. Steeves (British & Canadian)

To Our Shareholders:

The 2021 Annual General Meeting (“Annual Meeting”) of Shareholders of STERIS plc will be held at 9:00 a.m. Eastern Daylight Saving Time (2:00 p.m. Dublin Time), on Thursday, July 29, 2021 at the Company’s U.S. headquarters at 5960 Heisley Road, Mentor, Ohio 44060, United States of America.

In accordance with Irish law, we are required to have a principal meeting place, which is a physical location where shareholders may attend the Annual Meeting in person and vote. Due to ongoing COVID-19 public health concerns and uncertainties related to governmental and private restrictions on travel, social distancing, and indoor gatherings, we will again conduct our Annual Meeting in Mentor, Ohio.

We continue to monitor COVID-19 developments and other circumstances. Should we determine that alternate Annual Meeting arrangements may be advisable or required, such as changing the date, time or location of the Annual Meeting, we will announce our decision by press release, post additional information at steris-ir.com, and make a public filing with the SEC. Regardless of whether you plan to attend in person, we also encourage shareholders to cast their votes prior to the Annual Meeting by one of the methods described in this Proxy Statement.

At the Annual Meeting, shareholders will be asked to vote on a number of matters described in the Notice of 2021 Annual Meeting of Shareholders, including the re-election of certain directors for terms expiring at the 2022 Annual Meeting. We urge our shareholders to vote “FOR” for all proposals presented to shareholders and described in the Notice of 2021 Annual Meeting of Shareholders.

The formal Notice of 2021 Annual Meeting of Shareholders and the Proxy Statement containing information relative to the Annual Meeting follow this letter. We urge you to read the Proxy Statement carefully and use one of the specified alternative methods of voting to assure that your shares will be voted at the 2021 Annual Meeting.

 


Please note that if you are a shareholder of record voting by proxy, your vote may not be counted unless it is received no later than 11:59 p.m. Eastern Daylight Saving Time on Wednesday, July 28, 2021 (4:59 a.m. Dublin Time on Thursday July 29, 2021).

Sincerely,

 

LOGO   LOGO
WALTER M ROSEBROUGH, JR.   MOHSEN M. SOHI
President and Chief Executive Officer   Chairman of the Board

 

 


STERIS plc

(A public limited company incorporated in Ireland with company number 595593)

NOTICE OF 2021 ANNUAL GENERAL MEETING OF SHAREHOLDERS

To the Holders of Ordinary Shares of STERIS plc:

The 2021 Annual General Meeting (the “Annual Meeting”) of shareholders of STERIS plc (the “Company”) will be held on Thursday, July 29, 2021 at 9:00 a.m. Eastern Daylight Saving Time (2:00 p.m. Dublin Time) at the Company’s U.S. headquarters at 5960 Heisley Road, Mentor, Ohio 44060, United States of America. The Company is monitoring COVID-19 developments and other circumstances. Should we determine that alternative Annual Meeting arrangements may be advisable or required, such as changing the date, time or location of the Annual Meeting, we will announce our decision by press release, post additional information at steris-ir.com, and make a public filing with the SEC.

You are being asked to consider and vote on the resolutions described below at the Annual Meeting.

Shareholders of the Company will be asked to consider certain proposals that may not be familiar to them because, unlike many companies with shares traded on the New York Stock Exchange, we are incorporated under the laws of Ireland. The Irish Companies Act 2014, as amended (the “Irish Companies Act”) obligates us to propose certain matters to shareholders for approval that would generally not be subject to periodic approval by shareholders of companies incorporated in the United States but are considered routine items for approval by shareholders of companies incorporated in Ireland. Each of these proposals is described more fully below.

Proposal 1—Ordinary resolutions to elect directors of the Company:

 

a)

To re-elect Richard C. Breeden as a director of the Company.

 

b)

To re-elect Daniel A. Carestio as a director of the Company.

 

c)

To re-elect Cynthia L. Feldmann as a director of the Company.

 

d)

To re-elect Christopher S. Holland as a director of the Company.

 

e)

To re-elect Dr. Jacqueline B. Kosecoff as a director of the Company.

 

f)

To re-elect Paul E. Martin as a director of the Company.

 

g)

To re-elect Dr. Nirav R. Shah as a director of the Company.

 

h)

To re-elect Dr. Mohsen M. Sohi as a director of the Company.

 

i)

To re-elect Dr. Richard M. Steeves as a director of the Company.

Proposal 2—Ordinary resolution regarding ratification of independent registered public accounting firm:

 

2.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending March 31, 2022.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


Proposal 3—Ordinary resolution to appoint Ernst & Young Chartered Accountants as our Irish statutory auditor:

 

3.

To appoint Ernst & Young Chartered Accountants as the Company’s statutory auditor under Irish law to hold office until the conclusion of the Company’s next annual general meeting.

Proposal 4—Ordinary resolution regarding our Irish statutory auditor’s remuneration:

 

4.

To authorize the board of directors of the Company (the “Board”) or the Audit Committee of the Board to determine the remuneration of Ernst & Young Chartered Accountants as the Company’s statutory auditor under Irish law.

Proposal 5—Advisory resolution (to be proposed as an ordinary resolution) on executive compensation:

 

5.

To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed pursuant to the disclosure rules of the U.S. Securities and Exchange Commission (the “SEC”), including the Compensation Discussion and Analysis and the tabular and narrative disclosure contained in the Company’s proxy statement dated June 14, 2021.

Proposal 6—Other business:

 

6.

To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

Proposals 3 and 4 are items required to be approved by shareholders under the Irish Companies Act and generally do not have an analogous requirement under United States law.

OUR BOARD OF DIRECTORS HAS DETERMINED THAT ALL THE RESOLUTIONS TO BE VOTED UPON AT THE MEETING ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AS A WHOLE. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” FOR ALL RESOLUTIONS.

In accordance with our articles of association (the “Articles”), all resolutions will be taken on a poll. Voting on a poll means that each share represented in person or by proxy will be counted in the vote.

All resolutions will be proposed as ordinary resolutions under Irish law. In each case, provided that a quorum is present, the relevant resolution must be passed by a simple majority of the votes cast for or against such resolution, whether in person or by proxy, in order to be approved. Abstentions and broker non-votes will not affect the voting results for a resolution. In the case of joint holders, the vote of the senior holder who tenders a vote shall be accepted to the exclusion of the votes of the other joint holders (with seniority being determined by the order that the names of the joint holders appear in the Company’s share register). Explanatory notes regarding each of the proposals (and related resolutions) are set out in the relevant sections of the accompanying proxy materials relating to such proposals. Only shareholders of record of Ordinary Shares at the close of business in New York on June 1, 2021 are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof. In accordance with the provisions of the Irish Companies Act and in accordance with our Articles, a shareholder of record is entitled to appoint another person as his or her proxy (or, in the case of a corporation which is a shareholder of record, a corporate representative) to exercise all or any of their rights to attend and to speak and vote at the Annual Meeting. A shareholder of record may appoint more than one proxy in relation to the Annual Meeting (provided that each proxy is appointed to exercise the rights attached to a different share or shares). A proxy need not be a shareholder of record. When you vote by telephone, through the Internet or by returning a completed proxy card, this proxy will be given to the Directors and employees of the Company and its affiliates.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


Pursuant to the rules of the SEC, we provide access to our proxy materials through the Internet. As a result, on or before June 14, 2021, a Notice of Internet Availability of Proxy Materials will be mailed to certain shareholders as of the close of business in New York on June 1, 2021. On the date of mailing of the Notice of Internet Availability of Proxy Materials, shareholders will be able to access the proxy materials on a website referred to and at the URL address included in the Notice of Internet Availability of Proxy Materials and in the proxy statement. These proxy materials will be available free of charge. In addition, on or before July 3, 2021, we will also mail paper copies of the proxy materials to those shareholders as of the close of business on June 1, 2021 who have not consented to alternative delivery under Irish law or who have previously requested paper copies of the proxy materials.

Please note that if you are a shareholder of record voting by proxy, your vote may not be counted unless it is received no later than 11:59 p.m. Eastern Daylight Saving Time on Wednesday, July 28, 2021 (4:59 a.m. Dublin Time on Thursday July 29, 2021).

The results of the polls taken on the resolutions at the Annual Meeting and any other information required by the Irish Companies Act will be made available on the Company’s website as soon as reasonably practicable following the Annual Meeting and for a period of two years thereafter.

During the Annual Meeting, management will present, for consideration at the meeting, the Company’s statutory financial statements under Irish law for the fiscal year ended March 31, 2021 (and the report of the directors and the Irish statutory auditor thereon) together with a review of the Company’s affairs. There also will be an opportunity for questions and answers immediately following the formal portion of the Annual Meeting.

By Order of the Board of Directors,

 

 

LOGO

J. Adam Zangerle

Company Secretary

The Company’s registered office is at 70 Sir John Rogerson’s Quay, Dublin 2, Ireland.

June 14, 2021

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on July 29, 2021. Our Proxy Statement for the Annual Meeting (which includes the notice of the Annual Meeting), the Annual Report to Shareholders (including the Company’s Annual Report on Form 10-K) for the fiscal year ended March 31, 2021 and the Company’s statutory financial statements under Irish law for the fiscal year ended March 31, 2021 (and the report of the directors and the Irish statutory auditor thereon) are available at www.proxyvote.com if you are a shareholder of record. You can also view these materials in the “Online IR Kit” in the “Shareholder Resources” section of steris-ir.com.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we encourage you to vote as promptly as possible by telephone, through the Internet or by requesting a paper proxy card to complete, sign and return by mail. Details of the deadlines for when your vote(s) must be submitted are described subsequently. If you attend the Annual Meeting in person, you may revoke your proxy and vote your shares in person.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


STERIS plc   

70 Sir John Rogerson’s Quay

Dublin 2, Ireland

www.steris.com

Annual General Meeting of Shareholders of the Company

July 29, 2021—9:00 a.m. Eastern Daylight Saving Time (2:00 p.m. Dublin Time)

PROXY STATEMENT

TABLE OF CONTENTS

 

PROXY SUMMARY

     1  

General Information

     1  

Financial and Operating Highlights

     2  

Director Nominee Highlights

     3  

Governance Highlights

     4  

Chief Executive Officer Highlights

     4  

Summary of Voting Proposals and Board Recommendations

     5  

GENERAL INFORMATION

     7  

Proxy Voting and Solicitation of Proxies

     7  

Voting and Annual Meeting Attendance

     7  

Redomiciliation and Combination

     8  

Votes Required to Adopt Proposals

     9  

Purposes of Annual Meeting

     9  

Proposal  1—RESOLUTIONS REGARDING THE ELECTION OF DIRECTORS

     10  

Nominees for Election as Directors

     11  

Proposal  2—RESOLUTION REGARDING RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     15  

Proposal  3—RESOLUTION APPOINTING ERNST & YOUNG LLP AS THE COMPANY’S STATUTORY AUDITORS UNDER THE IRELAND COMPANIES ACT 2014

     16  

Proposal  4—RESOLUTION TO AUTHORIZE THE BOARD OF DIRECTORS OR THE AUDIT COMMITTEE OF THE BOARD TO DETERMINE THE COMPANY’S IRELAND STATUTORY AUDITOR’S REMUNERATION

     17  

Proposal  5—ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION

     18  

Proposal  6—RESOLUTION TO TRANSACT SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING

     19  

BOARD OF DIRECTORS INFORMATION

     20  

Board Meetings and Committees

     20  

Governance Generally

     25  

Independent Registered Public Accounting Firm

     30  

Report of the Audit Committee

     32  

EXECUTIVE COMPENSATION

     33  

Compensation Discussion and Analysis

     33  

Report of the Compensation and Organization Development Committee

     53  

Compensation and Organization Development Committee Interlocks and Insider Participation

     54  

Tabular and Other Executive Compensation Disclosure

     54  

Potential Payments to Named Executive Officers Upon Termination of Employment or Change of Control

     61  

CEO Pay Ratio

     70  

NON-EMPLOYEE DIRECTOR COMPENSATION

     72  

Description of Director Compensation for Fiscal 2021

     72  

Director Compensation Table for Fiscal 2021

     73  

NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES

     74  

OWNERSHIP OF VOTING SECURITIES

     75  

5% Owners

     75  

Stock Ownership of Directors and Executive Officers

     76  

Shares and Career Restricted Stock Units

     77  

DELINQUENT SECTION 16(a) REPORTS

     78  

SHAREHOLDER NOMINATIONS OF DIRECTORS AND NOMINEE CRITERIA

     79  

SHAREHOLDER PROPOSALS

     82  

MISCELLANEOUS MATTERS

     84  

ANNUAL REPORT

     85  

APPENDIX A: NON-GAAP MEASURES AND RECONCILIATION

     A-1  
 

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    i


 

PROXY SUMMARY

 

This summary highlights certain information contained elsewhere in this Proxy Statement or in the other documents being distributed or made available to shareholders in conjunction with this Proxy Statement, but does not contain all the information you should consider prior to casting your vote. Therefore, you should read this entire Proxy Statement carefully before voting.

General Information

 

Meeting Date:

   July 29, 2021

Meeting Time:

  

9:00 a.m. Eastern Daylight Saving

Time (2:00 p.m. Dublin Time)

Meeting Location:

  

5960 Heisley Rd.

Mentor, Ohio 44060, U.S.A

Record Date:

  

Close of business in New York

June 1, 2021

Stock Symbol:

   STE

Exchange:

   New York Stock Exchange

Shares Outstanding on Record Date:

   85,376,813 ordinary shares

Registrar and Transfer Agent:

   Computershare

Jurisdiction of Formation:

   Ireland

Year of Incorporation:

   2016 (Predecessors, 2014 and 1985, respectively)

Public Company Since:

   2019 (Predecessors, 2015 and 1992, respectively)

Corporate Website:

   www.steris.com

Date Proxy Statement First Furnished to Shareholders:

   On or about June 14, 2021

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    1


       Proxy Summary: Financial and Operating Highlights

 

 

Financial and Operating Highlights

Despite the challenges brought on by COVID-19 in fiscal 2021, we continued to execute on our plans. The diversity of our products and service offerings was evident as increased demand in our Life Sciences and Applied Sterilization Technologies segments more than offset the decline in our Healthcare segment due to the pandemic. Combined with the strength of our balance sheet and cost management, we were able to continue to invest in new product development and expansion through acquisition.

 

•  As reported full year net income decreased 2.5% to $397.4 million, or $4.63 per diluted share, compared with $407.7 million, or $4.76 per diluted share, in the prior year.

•  Full year adjusted net income (see Appendix A) increased 9.8% to $530.2 million, or $6.17 per diluted share, compared with adjusted net income of $482.7 million, or $5.64 per diluted share, in fiscal 2020.(1)

•  Net cash provided by operations for fiscal 2021 increased 16.8% to $689.6 million, compared with $590.6 million in fiscal 2020.

•  Free cash flow (see Appendix A) for fiscal 2021 increased 18.6% to $450.9 million, compared with $380.2 million in the prior year.(1)

•  We increased our dividend for the 15th consecutive year in the second quarter of fiscal 2021.

•  The closing price of our ordinary shares reported on the New York Stock Exchange (NYSE) increased to $190.48 per share on March 31, 2021 from $139.97 per share on March 31, 2020.

•  The 52-week high closing price of our ordinary shares reported on the NYSE during fiscal 2021 increased to $203.91 per share, compared to a 52-week high during fiscal 2020 of $168.51 per share.

 

 

(1) 

Adjusted Net Income and Free Cash Flow, which are referenced in this Proxy Summary, are financial measures not prepared in accordance with Accounting Principles Generally Accepted in the United States (“GAAP”). For a discussion of these non-GAAP financial measures refer to Appendix A for definitions and the reconciliation to the most directly comparable GAAP measures.

 

2    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


       Proxy Summary: Director Nominee Highlights

 

 

Director Nominee Highlights

Each director nominee is elected annually by a majority of votes cast. For more information about our nominees, see pages 11 through 14 of this proxy statement.

 

                  Board Committee Memberships         
         
  Name   Age      

Director    

Since    

  Independent       Audit      

Compensation    

and    

Organization    

Development    

 

Nominating    

and    

Governance    

  Compliance      

Other    

Public    

Company    

Boards    

  Diversity    

Richard C. Breeden

Chairman & CEO Breeden Capital Management

  71   2008        

 

 

LOGO

         

Daniel A. Carestio

Senior VP & COO STERIS

  48   2021                          

Cynthia L. Feldmann

Former President & Founder Jetty Lane Associates

  68   2005                 2  

Christopher S. Holland

Former Senior VP & CFO C.R. Bard

  54   2020                 1    

Dr. Jacqueline B. Kosecoff

Managing Partner,

Moriah Partners, LLC

  71   2003        

 

LOGO

        4  

Paul E. Martin

Former Senior V.P. & CIO Baxter International

  63   2021                     3  

Dr. Nirav Shah

Member of Stanford University Faculty

  49   2018                  

Dr. Mohsen Sohi

CEO of Freudenberg and Co.

  62   2005                        

Dr. Richard Steeves

Former CEO and Director of Synergy Health

  59   2015                

 

LOGO

     

LOGO = Chairperson

 

Tenure Balance

 

  

Independence

 

  

Diversity

 

LOGO    LOGO    LOGO

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    3


       Proxy Summary: Governance Highlights

 

 

Governance Highlights

 

•  Strong Board independence (all but one of our director nominees are independent);

•  All members of the Audit, Compensation and Organization Development and Nominating and Governance Committees are independent;

•  Annual election of directors;

•  Board conducts annual self-evaluation;

•  Independent non-employee Chairman of the Board; if we do not have an independent Chairman, a lead independent director will preside over executive sessions of independent directors (which will occur at least every other regularly scheduled Board meeting);

•  Robust stock ownership guidelines for non-employee directors and officers;

•  Clawback policies applicable in specified situations to incentive compensation and equity awards;

•  No hedging or pledging or short sales of our shares is permitted by our directors, officers or employees;

•  Annual compensation risk assessment;

•  Incentive-based compensation programs linked to performance; and

•  No shareholder rights plan (Poison Pill).

Chief Executive Officer Compensation Highlights

Our Fiscal 2021 Compensation Programs Reward the Performance of Our President and Chief Executive Officer (our “CEO”). Our 2021 compensation programs were intended to reward our CEO for generating value for our stockholders, as demonstrated by the following:

 

•  86% of total compensation delivered to our CEO was variable;

•  100% of annual incentive compensation delivered to our CEO was tied to annual financial performance measures based on EBIT and Free Cash Flow paying out an aggregate amount of $1,690,530 at 152.3% of Target for fiscal 2021 (with no adjustments based upon personal achievement);

•  65% of variable Long Term Incentive Plan (LTIP) opportunity was delivered to our CEO in the form of stock options, subject to an exercise price equal to 110% of the closing price per share of our Ordinary Stock on the grant date and pro rata four-year vesting conditions; and

•  35% of variable LTIP opportunity was delivered to our CEO in the form of restricted stock, subject to pro rata four-year vesting conditions.

 

4    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


       Proxy Summary: Voting Proposals and Board Recommendations

 

 

Summary of Voting Proposals and Board Recommendations

 

 

  Proposal

  Number

  Proposal   Board Voting
Recommendation
 

 

  No. 1

 

 

By separate resolutions, to elect as directors the 9 nominees named in the Proxy Statement.

 

 

 

 

 

 

 

FOR

each

 

 

 

 

 

 

All of the directors nominated by the Board to stand for election as directors of the Company are incumbent directors. Each nominee, if elected, will serve as a director for a term expiring at the next annual general meeting of shareholders and until his or her successor is duly elected and qualified.

 

 

 

  No. 2

 

 

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending March 31, 2022.

 

 

 

 

 

FOR

 

 

 

Our Audit Committee has appointed Ernst & Young LLP as the independent registered public accounting firm to audit our books and records for the year ending March 31, 2022. Ernst & Young LLP has acted as auditor for our predecessor since our predecessor was re-registered as a public limited company under the laws of England and Wales in November 2015 and previously served as auditor of STERIS Corporation for many years. We are offering shareholders the opportunity to ratify the appointment of our independent registered public accounting firm as a matter of good corporate governance practice.

 

 

 

  No. 3

 

 

To appoint Ernst & Young Chartered Accountants as the Company’s Irish statutory auditor to hold office until the conclusion of the Company’s next annual general meeting.

 

 

 

 

 

FOR

 

 

 

The Irish Companies Act 2014, as amended, (the “Irish Companies Act”) requires that statutory auditor(s) be appointed at each annual general meeting of shareholders, to hold office from the conclusion of the annual general meeting until the conclusion of the next annual general meeting. Our Audit Committee has recommended that Ernst & Young Chartered Accountants be appointed as our Irish statutory auditor to hold office from the conclusion of the 2021 Annual General Meeting of the shareholders of the Company until the conclusion of the next annual general meeting of the shareholders of the Company. Ernst & Young Chartered Accountants is based in Dublin and is affiliated with Ernst & Young LLP, who served as our predecessor’s U.K. statutory auditor from 2015 to 2019. If this proposal is not approved by the shareholders, the Board may appoint the Irish statutory auditor.

 

 

 

  No. 4

 

 

To authorize the Board of Directors of the Company or the Audit Committee of the Board to determine the remuneration of Ernst & Young Chartered Accountants as the Company’s Irish statutory auditor.

 

 

 

 

 

FOR

 

 

 

Under the Irish Companies Act, the remuneration of the Irish statutory auditor must be fixed by the shareholders at a general meeting or in such other manner as the shareholders may determine thereat. This resolution authorizes our Board or the Audit Committee of our Board to determine the remuneration of Ernst & Young Chartered Accountants as the Company’s Irish statutory auditors.

 

 

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    5


       Proxy Summary: Voting Proposals and Board Recommendations

 

 

 

  Proposal

  Number

  Proposal   Board Voting
Recommendation
 

 

  No. 5

 

 

To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed pursuant to the disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis and the tabular and narrative disclosure contained in the Company’s proxy statement dated June 14, 2021.

 

 

 

 

 

FOR

 

 

 

U.S. law requires that the shareholders periodically vote on a non-binding advisory basis on the compensation of our “named executive officers” as disclosed herein. Our shareholders have determined on a non-binding advisory basis that we should hold this vote every year and our Board has concurred with this vote as a matter of good corporate governance practice.

 

 

 

  No. 6

 

 

To transact such other business as may properly come before the Annual General Meeting or any adjournment or postponement thereof.

 

 

 

 

 

FOR

 

 

             

 

We are not aware of any other proposals that may come before the Annual Meeting. This proposal authorizes the proxy holders to vote on any other business that may properly come before that meeting in their best judgement and to the extent permitted by applicable law with respect to such matters in their discretion.

 

 

 

6    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


 

GENERAL INFORMATION

 

Proxy Voting and Solicitation of Proxies

This Proxy Statement was furnished on or about June 14, 2021, to the shareholders of STERIS plc (“STERIS” or the “Company”) of record as of the close of the stock transfer books on June 1, 2021. This Proxy Statement is provided in connection with the solicitation by the Board of Directors of proxies for the 2021 Annual Meeting of Shareholders of the Company (the “Annual Meeting”) to be held at 9:00 a.m. Eastern Daylight Saving Time, on Thursday, July 29, 2021, at the Company’s U.S. headquarters, 5960 Heisley Road, Mentor, Ohio 44060. The cost of soliciting the proxies will be borne by the Company. Directors, officers, and designated employees of the Company and affiliates may solicit proxies in person, by mail, by telephone, fax, or email. They will not receive any additional compensation for these activities. STERIS has engaged a professional proxy solicitation firm, Georgeson LLC (“Georgeson”), to assist in tracking voting with brokers, banks and other institutional holders. The Company will pay Georgeson a fee of approximately $13,500 for these services. Additional shareholder meeting services may be provided for additional fees.

As permitted by rules adopted by the U.S. Securities and Exchange Commission (“SEC”), we are making this Proxy Statement, and our 2021 Annual Report to shareholders, which includes STERIS’s Annual Report on Form 10-K (sometimes referred to as “Annual Report”), and our statutory financial statements under Irish law for the fiscal year ended March 31, 2021, together with the report of the directors and the Irish statutory auditor thereon (sometimes referred to as the “Irish Statutory Accounts”) available at www.proxyvote.com. If you received a Notice regarding this availability, the Notice instructs you how to access and review the Proxy Statement, the Annual Report and our Irish Statutory Accounts, as well as the alternative methods to vote your shares—over the Internet, by telephone, or by mailing a completed form of proxy (if requested). If you received a Notice and would like to receive a printed copy of our proxy materials, you should follow the instructions in the Notice for requesting such materials.

If you received a printed copy of the proxy materials, the Company offers the opportunity to electronically receive future proxy statements and annual reports over the Internet. By using these services, you are not only able to access these materials more quickly, but you are also helping STERIS save resources and reduce printing and postage costs.

Voting and Annual Meeting Attendance

As of the record date set by the Board of Directors (June 1, 2021), the Company had 85,376,813 Ordinary Shares outstanding and entitled to vote at the Annual Meeting, each of which is entitled to one vote.

We encourage you to vote by proxy in advance of the Annual Meeting, even if you plan on attending in person.

In order to comply with COVID-19 guidelines or mandates, we may limit the number of shareholders who may attend the meeting in person, and will require compliance with any then-applicable governmental requirements or recommendations or facility requirements. These requirements may include the use of face coverings, proof of vaccination or negative test result, and maintaining appropriate social distancing.

To attend the meeting in person, you must present valid photo identification, such as a driver’s license or passport. If you are a beneficial owner and not a shareholder of record you also must present a

 

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       General Information: Redomiciliation and Combination

 

 

letter from your broker or other nominee showing that you were the beneficial owner of the shares on the record date together with a legal proxy from your broker or other nominee to vote your shares in person at the Annual Meeting.

In accordance with the requirements of Irish law, shareholders of record who wish to participate in the Annual Meeting without leaving Ireland may also do so by attending in person at the offices of our Irish lawyers,

Matheson, located at 70 Sir John Rogerson’s Quay, Dublin 2, Ireland, at the time of the meeting, is where technological means will be made available to participate in the meeting. You will need to present the proxy card that you received, together with a form of personal photo identification, in order to be admitted. In order to comply with suggested COVID-19 social distancing guidelines, Matheson may be required to limit the number of shareholders who may attend the meeting in person in Ireland and will require compliance with any then-applicable governmental requirements or regulations or facility requirements. These requirements may include the use of face coverings, proof of vaccination, or a negative test result. We recommend that you contact Matheson shortly before the meeting if you plan to attend at Matheson to apprise yourself of any then-applicable requirements to attend the meeting at Matheson.

If you are a shareholder of record, you may appoint a proxy to vote on your behalf using any of the following methods:

 

 

through the Internet, as instructed on the proxy card or the Notice of Internet Availability; or

 

 

by telephone using the toll-free telephone number shown on the proxy card or the Notice of Internet Availability;

 

 

if you received proxy materials by mail or if you request a paper proxy card by telephone or through the Internet, you may elect to vote by mail by completing and signing the proxy card and returning it in the prepaid envelope provided to Vote Processing, c/o Broadridge, 51 Mercedes Way. Edgewood. NY 11717, United States of America (which will, upon receipt, be forwarded to the Company’s registered office in Ireland electronically) or otherwise depositing it at the Company’s registered office in Ireland.

To be valid, a proxy must be received using one of such procedures by no later than 11:59 p.m. Eastern Daylight Savings Time on Wednesday July 28, 2021 (or 4:59 a.m. Dublin Time on Thursday July 29, 2021) (or in the case of any adjournment or postponement thereof, such later time as may be announced by the Company, not being greater than 48 hours before the adjourned or postponed meeting).

We have retained Broadridge Financial Solutions (“Broadridge”) to distribute, receive, count and tabulate proxies.

Redomiciliation and Combination

On March 28, 2019, upon the consummation of a U.K. law Scheme of Arrangement (“the Redomiciliation”), the Company became the owner of the entire issued ordinary share capital of STERIS plc, a company organized under the laws of the United Kingdom and since renamed “STERIS Limited” (“Old STERIS”). Previously, on November 2, 2015, pursuant to a combination under U.K. law (the “Combination”), STERIS Corporation became a wholly owned indirect subsidiary of Old STERIS and Synergy Health plc became a wholly-owned direct subsidiary of Old STERIS.

 

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       General Information: Votes Required to Adopt Proposals

 

 

References in this Proxy Statement to the actions of “the Company,” “us,” “we” or “STERIS” (or its Board of Directors, Committees of its Board of Directors, or its Directors and/or officers) or any similar references relating to periods from and after the consummation of the Redomiciliation should be construed as references to the actions of STERIS plc (or where appropriate, its Board of Directors, Committees of its Board or its Directors and/or officers) unless the context requires otherwise, and references in this Proxy Statement to the actions of “the Company,” “us,” “we” or “STERIS” (or its Board of Directors, Committees of its Board of Directors, or any of its Directors and/or officers) or any similar references relating to periods before the consummation of the Redomiciliation should be construed as references to the actions of Old STERIS or STERIS Corporation, as applicable (or, where appropriate, their respective Boards of Directors, Committees of their respective Board of Directors, or their respective Directors and/or officers) unless the context requires otherwise.

STERIS’s Annual Report to Shareholders, which includes STERIS’s Annual Report on Form 10-K, including consolidated financial statements for the year ended March 31, 2021, but excluding exhibits, and STERIS’s Irish Statutory Accounts accompany this Proxy Statement. Requests for copies of exhibits to STERIS’s Annual Report on Form 10-K should be submitted to the Office of the Company Secretary, STERIS plc, 70 Sir John Rogerson’s Quay, Dublin 2, Ireland. A nominal fee may be charged for Exhibits (which fee will be limited to the expenses we incur in providing you with the requested exhibits). STERIS’s Annual Report on Form 10-K, including exhibits, and STERIS’s Irish Statutory Accounts are also available free of charge through our website in the “Online IR Kit” in the “Shareholder Resources” section of steris-ir.com. Nothing contained on or accessible through that website shall be deemed to be part of this Proxy Statement.

Votes Required to Adopt Proposals

Ordinary Shares represented by properly executed proxies will be voted in accordance with the specifications made thereon. If no specification is made, proxies will be voted “FOR” all proposals contained in the foregoing Notice of 2021 Annual Meeting of Shareholders.

Abstentions and broker non-votes are tabulated in determining the votes present at a meeting for purposes of determining a quorum. An abstention or a broker non-vote will have no effect with respect to the election of a director nominee. The proposal to elect directors is presented as separate ordinary resolutions. Each Director nominee will be elected, assuming a quorum is present, if a majority of the votes cast are in favor of his or her election. The other proposals are also proposed as ordinary resolutions requiring, assuming a quorum is present, a majority of the votes cast to be in favor of passage. Consequently, an abstention or broker non-vote also will have no effect on the passage of any of these proposals as the abstention or broker non-vote will not be counted in determining the number of votes cast.

Shareholder votes will be tabulated by a representative of Broadridge, our independent inspector of elections for the Annual Meeting.

Purposes of Annual Meeting

The Annual Meeting has been called for the purposes set forth in the foregoing Notice of 2021 Annual General Meeting of Shareholders. The persons named in the accompanying proxy form have been selected by the Board of Directors and will vote shares represented by valid proxies. They have indicated that, unless otherwise specified in the proxy, they intend to vote “FOR” for all proposals contained in the foregoing Notice of 2021 Annual General Meeting of Shareholders.

 

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PROPOSAL 1—RESOLUTIONS REGARDING THE ELECTION OF DIRECTORS

 

Nine of the current members of our Board of Directors (the “Board”) have been nominated for and are standing for re-election at the Annual Meeting. Mr. Lewis and Mr. Rosebrough are retiring from the Board and consequently have not been nominated to stand for re-election at the Annual Meeting. The Nominating and Governance Committee recommended the nine nominees to serve on the Board for an additional term. All nominees for Director have consented to be named and have agreed to serve as Directors, if re-elected. We have no reason to believe that any of the nominees will not be available to serve as a Director. However, if any nominee should become unavailable to serve for any reason, the proxies will be voted for such substitute nominees as may be designated by the Board.

The term of each re-elected Director will expire at the next annual general meeting of shareholders, and each Director will continue in office until the election and qualification of his or her respective successor or until his or her earlier death, removal or resignation. Under the terms of the Company’s current Articles, the Board is authorized to have up to fifteen and not less than seven members. The Board currently has eleven Directors. All but two of those Directors have been nominated for re-election. Proxies cannot be voted for a greater number of Directors than the nine nominees as identified in this Proxy Statement.

Each of the nine nominees for Director will be elected by the vote of a majority of the votes cast with respect to such nominee, which means that the number of votes cast for a nominee must exceed the number of votes cast against that nominee. A shareholder may: (i) vote for the election of a nominee; (ii) vote against the election of a nominee; or (iii) abstain from voting for a nominee.

Unless a proxy contains instructions to the contrary, it is assumed that the proxy will be voted FOR the re-election of each nominee for Director named on the following pages.

STERIS values a number of attributes and criteria when identifying nominees to serve as a Director, including professional background, expertise, reputation for integrity, business, financial and management experience, leadership capabilities, time availability, and diversity. In addition to the specific experience and qualifications set forth below, we believe all of the nominees are individuals with a reputation for integrity, demonstrate strong leadership capabilities, and are able to work collaboratively to make contributions to the Board and Company.

 

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       Proposal 1: Nominees for Election as Directors

 

 

Nominees for Election as Directors

Biographical and other background information concerning each nominee for Directors is set forth below. This information includes each nominee’s principal occupation as well as a discussion of the specific experience, qualifications, attributes, and skills of each nominee that led to the Board’s conclusion that such nominee should serve as a Director. Ages and other biographical information provided for all Directors are as of June 7, 2021. In addition, set forth below is the period during which each nominee has served as a Director of STERIS. For those persons who served as Directors or executives of Old STERIS immediately prior to the Redomiciliation and STERIS Corporation immediately prior to the Combination, the specified period includes their periods of service as Directors or executives of Old STERIS or STERIS Corporation, as the case may be, as STERIS plc’s predecessors. The information presented below has been confirmed by each nominee for purposes of its inclusion in this Proxy Statement.

Richard C. Breeden, age 71, director since April 2008, and Chairman and Chief Executive Officer of Breeden Capital Management LLC since 2005. Since 1996 he has also been Chairman of Richard C. Breeden & Co., LLC, a professional services firm providing consulting services. From time to time Mr. Breeden also handles asset distributions to victims of unlawful conduct, typically on behalf of U.S. Government agencies. Since late 2012, Mr. Breeden has served as Special Master on behalf of the U.S. Department of Justice to administer and distribute just over $4 billion in forfeited assets to victims of the fraud at Madoff Securities through the Madoff Victim Fund. Mr. Breeden has previously handled asset distributions to victims of unlawful conduct at WorldCom, Enron, Adelphia, Royal Dutch Shell, British Petroleum, JPMorgan Chase, and other companies. Mr. Breeden served as Chairman of the SEC from 1989 to 1993.

Daniel A. Carestio, age 48, director since January 2021, and Senior Vice President and Chief Operating Officer since August 2018. He served as Senior Vice President, Sterilization and Disinfection from February 2018 to July 31, 2018 and from August 2015 to February 2018 he served as a Senior Vice President, STERIS Applied Sterilization Technologies and Life Sciences. Mr. Carestio will become President and CEO effective immediately following the Annual Meeting.

Cynthia L. Feldmann, age 68, director since March 2005 and President and Founder of Jetty Lane Associates, a consulting firm, from December 2005 to December 2011. Ms. Feldmann is a retired certified public accountant with 27 years of experience in two large global accounting firms. From 2003 to 2005, Ms. Feldmann served as the Life Sciences Business Development Officer for the Boston law firm Palmer & Dodge, LLP. From 1994 to 2002, Ms. Feldmann was a partner with KPMG LLP, primarily serving as Partner-in-Charge of its National Medical Technologies Practice. From 1975 to 1994, Ms. Feldmann was employed by Coopers & Lybrand (now PricewaterhouseCoopers LLP), and during that time was named Partner-in-Charge of its Life Sciences practice. Ms. Feldmann has a Bachelor of Science, Accounting, and holds a Master Professional Director Certification from the American College of Corporate Directors. Ms. Feldmann served as a director of HeartWare International, Inc. until August 2016 and served as a director of Hanger, Inc. until January 2018. Ms. Feldmann is a director of, and a member of the Nominating Committee and chair of the Audit Committee of, UFP Technologies, Inc. and is a director of and serves on the Audit Committee of Frequency Therapeutics.

Christopher S. Holland, age 54, director since July 2020, and former Senior Vice President and Chief Financial Officer of C.R. Bard, a developer, manufacturer, and marketer of medical technologies, from May 2012 until its December 2017 acquisition by Becton, Dickinson and Company. Mr. Holland was

 

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       Proposal 1: Nominees for Election as Directors

 

 

recommended to the Nominating and Governance Committee for his initial election to the Company’s Board by a third-party search firm. He also has served as a director of Jabil Inc. since January 2018, and is a member of the Audit and Cybersecurity Committees of Jabil.

Dr. Jacqueline B. Kosecoff, age 71, director since October 2003 and, since March 2012, Managing Partner, Moriah Partners, LLC, a private equity firm focused on health services and technology, and Senior Advisor to Warburg Pincus LLC, a private equity fund. She also has served as a member of the Executive Advisory Board of SAP America, Inc., a software and enterprise applications provider, from November 2010 through May 2017. From October 2007 to November 2011, Dr. Kosecoff served as Chief Executive Officer of OptumRx (formerly named Prescriptions Solutions), a pharmacy benefits management company and subsidiary of UnitedHealth Group, and continued to serve as a senior advisor to OptumRx from December 2011 to February 2012. Dr. Kosecoff served as Chief Executive Officer of Ovations Pharmacy Solutions, a UnitedHealth Group company, from December 2005 to October 2007. From July 2002 to December 2005, Dr. Kosecoff served as Executive Vice President, Specialty Companies, of PacifiCare Health Systems, Inc., one of the nation’s largest consumer health organizations. From 1998 to 2002, Dr. Kosecoff was President and Founder of Protocare, Inc., a firm involved in the development and testing of drugs, devices, biopharmaceutical and nutritional products, and consulting and analytic services. Dr. Kosecoff is a director of GoodRx Holdings, Houlihan Lokey, TriNet Group, Inc. and Alignment Healthcare. Dr. Kosecoff served as a director of athenahealth, Inc. until February 2019 and of Sealed Air Corporation until May 2021.

Paul E. Martin, age 63, director since May 2021 and former Senior Vice President & Chief Information Officer of Baxter International, a multinational health care company, from January 2011 to October 2020. Mr. Martin was recommended to the Nominating and Governance Committee for his initial election to the Company’s Board by a third-party search firm. Mr. Martin also serves as director of Unisys Corporation, Ping Identity Holdings, and Owens Corning, a member of the Audit and Finance Committee of Unisys Corporation and Chair of its Security and Risk Committee, a member of the Audit and Finance Committees of Owens Corning, and a member of the Audit Committee of Ping Identity Holdings.

Dr. Nirav R. Shah, age 49, director since May 2018. Dr. Shah has served on the faculty of Stanford University since August 2018 and as Chief Medical Officer of Sharecare, Inc. since February 2021. Previously Dr. Shah served as Commissioner of Health of the State of New York from January 2011 to May 2014 and as Senior Vice President and Chief Operating Officer for Clinical Operations for Kaiser Permanente Southern California from May 2014 to October 2017. Dr. Shah is a graduate of Harvard College and Yale School of Medicine and is Board Certified in Internal Medicine.

Dr. Mohsen M. Sohi, age 62, director since July 2005, and Chairman of the Board of Directors of STERIS since July 28, 2018. Since July 2012, Dr. Sohi has served as Chief Executive Officer of Freudenberg and Co., a general multi-industry company serving industries that include automotive, medical, aerospace, oil and gas, and power generation and transmission. From July 2010 to June 2012, Dr. Sohi served as Managing Partner of Freudenberg and Co. From March 2003 through June 2010, Dr. Sohi served as President and Chief Executive Officer of Freudenberg-NOK, a privately-held joint venture partnership between Freudenberg and NOK Corp. of Japan, one of the world’s largest producers of elastomeric seals and custom molded products for automotive and other applications. From January 2001 to March 2003, Dr. Sohi was with NCR Corporation, a leading global technology company, most recently as the Senior Vice President, Retail Solutions Division. Prior to NCR, Dr. Sohi was with Honeywell International Inc. and its pre-merger constituent, Allied Signal, Inc.,

 

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       Proposal 1: Nominees for Election as Directors

 

 

providers of aerospace, automation and control solutions, specialty materials, and transportation systems, for 14 years, serving from July 2000 to January 2001 as President, Honeywell Electronic Materials. Dr. Sohi previously served as a director of Aviat Networks, Inc. (formerly known as Harris Stratex Networks, Inc.) from 2007 until January 2015 and Hayes Lemmerz International from 2004 until 2009. Mr. Sohi serves as a member of the Supervisory Board of ZF AG and the Board of Tetra Laval Group.

Dr. Richard Steeves, age 59, director since November 2015. Dr. Steeves served as Chief Executive Officer and director of Synergy Health plc, a provider of specialty outsourced services to the healthcare and related industries, from 1992 until 2015, and founded the Company in 1991. Dr. Steeves served as a director of Gama Aviation plc from January 2018 to February 2019. Dr. Steeves has served since July 2017 as Executive Chairman of Advanced Research Cryptography Ltd., since October 2017 as Chairman of TrustFlight Ltd., and since April 2018 as Nonexecutive Chairman of Future Health Works Ltd.

 

The Board of Directors believes that each of the director nominees has the necessary personal and professional ethics, integrity, experience, commitment, judgment, diversity of background, and other attributes to make them well qualified to serve as a director of STERIS, including the following:

 

 

Mr. Breeden’s experience as Chairman of the SEC, CEO of an investment advisory firm, and a director of several public companies; Mr. Breeden’s experience provides our Board with extensive managerial, governance and regulatory insights regarding issues facing public companies; as an investor, Mr. Breeden also provides valuable insight on issues such as shareholder return, executive compensation programs, and capital structure;

 

 

Mr. Carestio’s many years of experience in all operating aspects of STERIS’s business and familiarity with the healthcare and related industries and the Company’s Customers. Mr. Carestio will lead the management team, assist the Board in its over-sight of the Company, and provide unique perspectives into the healthcare industry and our operations, direction and strategies;

 

 

Ms. Feldmann’s experience as Partner-in-Charge of a national medical technologies practice and Life Sciences practice for leading public accounting firms and director of publicly traded companies; Ms. Feldmann’s overall experience and financial expertise supports the Board’s oversight of critical financial policy, reporting, and risk matters encountered by public companies;

 

 

Mr. Holland’s thirty plus years of combined professional experience as a finance executive and investment banker, including experience as the CFO of a publicly traded medical technologies company; Mr. Holland’s extensive financial experience and experience relating to the healthcare industry, medical devices and technology, provide our Board with invaluable experience and expertise relative to those matters;

 

 

Dr. Kosecoff’s experience as Chief Executive Officer for a number of large healthcare organizations and a director of publicly traded companies; Dr. Kosecoff’s background provides our Board with extensive managerial, government and regulatory experiences, and insight in the healthcare industry;

 

 

Mr. Martin’s extensive professional management experience as an information technology executive, his technology and security risk experience and his financial experience; Mr. Martin’s IT experience as well as international experience and life sciences and healthcare experience provide the Company with invaluable resources and strengthen our Board’s oversight of information security and healthcare matters.

 

 

Dr. Shah’s experience at one of the nation’s leading public health agencies and service as COO for Clinical Operations of one of America’s leading health care providers and not-for-profit health plans;

 

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       Proposal 1: Nominees for Election as Directors

 

 

 

Dr. Shah provides the Board with years of policy and regulatory experience, management experience in our industry and experience as a practicing physician, as well as a new area of focus in innovative models in healthcare;

 

 

Dr. Sohi’s experience as President and Chief Executive Officer of international industrial companies and international operating experience; Dr. Sohi provides our Board with substantial manufacturing, operational and international experience, which are important factors for the Board’s oversight and the Company’s strategies; and

 

 

Dr. Steeves’s previous role as founder and former Chief Executive Officer of Synergy Health plc; Dr. Steeves provides the Board with extensive legacy business knowledge, as well as a strong technical and science background and knowledge of issues facing healthcare and medical device companies, particularly in the U.K. and Europe.

 

THE MEMBERS OF OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMEND A VOTE FOR THE ELECTION OF EACH OF RICHARD C. BREEDEN, DANIEL A. CARESTIO, CYNTHIA L. FELDMANN, CHRISTOPHER S. HOLLAND, DR. JACQUELINE B. KOSECOFF, PAUL E. MARTIN, DR. NIRAV R. SHAH, DR. MOHSEN M. SOHI, AND DR. RICHARD STEEVES AS DIRECTORS OF THE COMPANY.

 

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PROPOSAL 2—RESOLUTION REGARDING RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee has appointed Ernst & Young LLP as STERIS’s independent registered public accounting firm for the fiscal year ending March 31, 2022. Ernst & Young LLP was retained in 2015 as the independent registered public accounting firm of our predecessor entity, Old STERIS, and was first retained in 1989 as the independent registered public accounting firm of Old STERIS’s predecessor entity, STERIS Corporation, and served in that capacity continuously through the Combination and the Redomiciliation. The appointment was based upon the considerations described in the Section “Independent Registered Public Accounting Firm” that begins on page 30, including the evaluation described therein.

Although the ratification of this appointment is not required to be submitted to a vote of the shareholders, the Board and Audit Committee believe it appropriate as a matter of corporate governance policy to request that the shareholders ratify the appointment of the independent registered public accounting firm for the fiscal year ending March 31, 2022. If this proposal does not receive the affirmative vote of the holders of a majority of the shares entitled to vote and present in person or represented by proxy at the Annual Meeting, the Audit Committee will reconsider the appointment.

We anticipate that the lead audit partner from Ernst & Young LLP will be present at the Annual Meeting. The lead audit partner (or other attending representative) will be given the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to any appropriate questions that may be submitted by shareholders at the Annual Meeting.

 

OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING MARCH 31, 2022.

 

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PROPOSAL 3—RESOLUTION APPOINTING ERNST & YOUNG CHARTERED ACCOUNTANTS AS THE COMPANY’S IRISH STATUTORY AUDITOR

 

The Irish Companies Act requires that our statutory auditors be appointed at each annual general meeting of Shareholders, to hold office from the conclusion of the annual general meeting until the conclusion of the next annual general meeting. Ernst & Young Chartered Accountants has served as our Irish statutory auditor since the Redomiciliation and is affiliated with Ernst & Young LLP, who served as the U.K. statutory auditor of Old STERIS prior to the Redomiciliation from 2015 to 2019. Our Audit Committee has recommended that Ernst & Young Chartered Accountants be appointed as our Irish statutory auditor. If this resolution does not receive the affirmative vote of the holders of a majority of the shares cast in person or by proxy at the Annual Meeting, the Board may appoint a person or firm to fill the vacancy.

 

OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE APPOINTMENT OF ERNST & YOUNG CHARTERED ACCOUNTANTS AS OUR IRISH STATUTORY AUDITOR TO HOLD OFFICE FROM THE CONCLUSION OF THE ANNUAL MEETING UNTIL THE CONCLUSION OF THE NEXT ANNUAL GENERAL MEETING OF THE COMPANY.

 

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PROPOSAL 4—RESOLUTION TO AUTHORIZE THE BOARD OF DIRECTORS OR THE AUDIT COMMITTEE OF THE BOARD TO DETERMINE THE REMUNERATION OF ERNST & YOUNG CHARTERED ACCOUNTANTS AS THE COMPANY’S IRISH STATUTORY AUDITOR

 

Under the Irish Companies Act, the remuneration of our Ireland statutory auditor must be fixed by the shareholders in a general meeting or in such other manner as the shareholders may determine. We are asking our shareholders to authorize our Board or the Audit Committee to determine Ernst & Young Chartered Accountant’s remuneration as our Irish statutory auditor. It is expected that the Board would delegate the authority to determine the remuneration of the Irish statutory auditor for the Company’s fiscal year ending March 31, 2022 to the Audit Committee in accordance with the Board’s procedures and applicable law.

 

OUR BOARD OF DIRECTORS AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT YOU VOTE “FOR” THE AUTHORIZATION OF THE BOARD OF DIRECTORS OR AUDIT COMMITTEE TO DETERMINE OUR IRISH STATUTORY AUDITOR’S REMUNERATION.

 

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PROPOSAL 5—ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION

 

We believe that our compensation policies and procedures are based on a pay-for-performance philosophy and are aligned with the long-term interests of our shareholders. However, to obtain the specific input of shareholders with respect to these policies and procedures in accordance with the provisions of the United States Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and Section 14A of the United States Securities Exchange Act of 1934 (“Exchange Act”), the proposal described below provides shareholders with the opportunity to approve, on a non-binding advisory basis, the compensation of our named executive officers.

This proposal, commonly known as a “Say on Pay” proposal, gives shareholders the opportunity to provide input to endorse or not endorse the compensation of the Company’s named executive officers. The Company’s predecessors, STERIS Corporation and Old STERIS, conducted say on pay votes every year beginning in 2010 and continuing through 2018. We have held annual say on pay votes since 2019 and expect to continue to hold our say on pay votes on an annual basis. We strongly encourage you to carefully review the Compensation Discussion and Analysis and compensation tables and narrative discussions and related material beginning on page 33 of this Proxy Statement. Thereafter, we request your input on the compensation of the Company’s named executive officers through your vote on the following resolution:

“Resolved, that the shareholders approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis and the tabular and narrative disclosures contained in the Company’s proxy statement dated June 14, 2021

The non-binding resolution to approve the compensation of our named executive officers will be considered adopted if approved by the affirmative vote of the holders of a majority of the votes cast by shareholders represented in person or by proxy and entitled to vote thereon. Because your vote is advisory, it will not be binding upon the Board or the Compensation and Organization Development Committee. However, the Compensation and Organization Development Committee will take into account the outcome of the vote when considering future executive compensation decisions.

 

OUR BOARD OF DIRECTORS AND COMPENSATION AND ORGANIZATION DEVELOPMENT COMMITTEE UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.

 

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PROPOSAL 6—RESOLUTION TO TRANSACT SUCH OTHER BUSINESS AS MAY COME BEFORE THE MEETING

 

The Board is not aware of any business to be acted upon at the Annual Meeting other than that described in this Proxy Statement. If any other business properly comes before the Annual Meeting or any adjournment or postponement thereof, the proxy holders (as indicated on the accompanying proxy card or cards) will vote the proxies according to their best judgment and to the extent permitted by applicable law with respect to such matters in their discretion.

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UNLESS OTHERWISE SPECIFIED, THE PROXY HOLDERS WILL VOTE “FOR” FOR ALL

PROPOSALS.

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BOARD OF DIRECTORS INFORMATION

 

Board Meetings and Committees

Our Board of Directors met 8 times during the fiscal year ended March 31, 2021. The Board has four standing committees—the Audit Committee, the Compensation and Organization Development Committee, the Nominating and Governance Committee and the Compliance Committee. Each committee has adopted a written charter that may be found at the “Corporate Governance” section of steris-ir.com. A copy of each charter will also be made available upon a request sent to the Company’s Secretary. From time to time, our Board may also establish various special committees.

 

AUDIT COMMITTEE

Mr. Lewis, Mr. Breeden, and Mr. Holland are the current members of the Audit Committee. The Audit Committee provides oversight relating to the integrity of the Company’s financial statements and effectiveness of the Company’s internal controls over financial reporting, including its systems of internal accounting and financial controls, the internal audit process, the annual independent audit of the Company’s annual financial statements, compliance with legal and regulatory requirements, the qualifications and independence of the independent auditors as required by U.S. law under the Exchange Act, and information technology and security matters.

SEC rules provide that all members of the Audit Committee of a public company meet certain independence criteria. The Board has determined that Mr. Breeden, Mr. Holland, and Mr. Lewis each meet the independence criteria for audit committee members and that all such members also are independent within the meaning of the NYSE listing standards, and are “financially literate” and have accounting or related financial expertise within the meaning of NYSE listing standards. The Board has further determined that each of Mr. Breeden, Mr. Holland, and Mr. Lewis qualifies as an “audit committee financial expert” in accordance with Item 407(d)(5)(ii) of SEC Regulation S-K. Mr. Lewis, who is the Committee Chair, was determined to qualify as an audit committee financial expert as a result of the Board’s examination of his education, and other board and audit committee experiences. Mr. Lewis graduated from the University of Chicago, Booth School of Business with an MBA degree in Finance. He served as President and Chief Executive Officer of Lewis & Munday, a law firm he co-founded, from 1972 to 1982 and as its Chairman and Chief Executive Officer from 1982 to January 2011. In addition, Mr. Lewis has served on the audit committees of four other U.S. public companies, and as audit committee chair of all four of these other public companies.

The Audit Committee met 10 times during fiscal 2021. A copy of the Audit Committee’s charter may be found at the “Corporate Governance” section of steris-ir.com. A copy will also be made available upon a request sent to the Company’s Secretary.

 

COMPENSATION AND ORGANIZATION DEVELOPMENT COMMITTEE

Dr. Kosecoff, Mr. Breeden, Mr. Holland and Dr. Shah are the current members of the Compensation and Organization Development Committee (formerly called the Compensation Committee). SEC rules provide that only a person who meets certain independence criteria may serve on the compensation committee of a public company. The Board has determined that Dr. Kosecoff, Mr. Breeden, Mr. Holland, and Dr. Shah each meet those independence criteria for compensation committee members and that all such members are also independent within the meaning of the NYSE listing standards and SEC rules. None of the members of the Compensation and Organization Development Committee had any interlocking relationships with the Company, within the meaning of SEC rules.

 

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       Board of Directors Information: Board Meetings and Committees

 

 

The Compensation and Organization Development Committee is responsible for the Company’s general compensation philosophy for senior management, including approval of the compensation of the President and Chief Executive Officer and elements of other senior management compensation. The Compensation and Organization Development Committee’s approval is required for equity grants to the named executive officers and other executive officers and eligible employees under the Company’s 2006 Long-Term Equity Incentive Plan and for cash bonus payments to senior management under the Company’s Management Incentive Compensation Plan, as well as the aggregate amount payable under such Plan. In making these decisions, the Compensation and Organization Development Committee considers the recommendations of the President and Chief Executive Officer (with respect to other members of senior management) and the Committee’s compensation consultant. The Compensation and Organization Development Committee also is responsible for overseeing the Company’s human capital and work environment (including diversity, HR-related ethics complaints, management development, succession planning and other related areas of focus). The Compensation and Organization Development Committee is authorized to and has regularly retained independent compensation consultants to assist with the discharge of its compensation responsibilities. A more detailed description of this process is located under “Executive Compensation—Compensation Discussion and Analysis,” beginning on page 33.

The Compensation and Organization Development Committee met 5 times during fiscal 2021. A copy of the Compensation and Organization Development Committee’s charter may be found at the “Corporate Governance” section of steris-ir.com. A copy will also be made available upon a request sent to the Company’s Secretary.

 

NOMINATING AND GOVERNANCE COMMITTEE

Mr. Breeden, Ms. Feldmann, Dr. Kosecoff, and Mr. Lewis are the current members of the Nominating and Governance Committee. The Board has determined that all members of the Nominating and Governance Committee are independent within the meaning of the NYSE listing standards. The Nominating and Governance Committee provides oversight relating to the administration of the Company’s policies, programs, and procedures with respect to: senior management succession planning and other management and organizational development activities; the identification and recommendation to the Board of director nominees for appointment or election to the Board of Directors; the development and recommendation to the Board of corporate governance principles applicable to the Board and the Company; overseeing the process for evaluation of governance matters generally, including Board, Board Committees, and CEO evaluations; evaluation of related person transactions and potential conflicts; evaluation of shareholder proposals; compliance with the Board’s governance guidelines; and assessing and overseeing nonemployee Director compensation and making recommendations with respect to compensation of nonemployee Directors for approval by the Board. The Nominating and Governance Committee also regularly reviews the Company’s ESG issues and efforts.

The Nominating and Governance Committee met 4 times during fiscal 2021. A copy of the Nominating and Governance Committee’s charter may be found at the “Corporate Governance” section of steris-ir.com. A copy will also be made available upon a request sent to the Company’s Secretary.

 

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       Board of Directors Information: Board Meetings and Committees

 

 

COMPLIANCE COMMITTEE

Dr. Steeves, Mrs. Feldmann, Mr. Rosebrough, and Dr. Shah are the current members of the Compliance Committee. The Compliance Committee provides oversight relating to matters of non-financial compliance, including legal, regulatory, quality, and health, safety and environmental matters, compliance with applicable laws and regulations, and compliance programs and policies. The Compliance Committee met 4 times during fiscal 2021. A copy of the Compliance Committee’s charter may be found at the “Corporate Governance” section of steris-ir.com. A copy will also be made available upon a request sent to the Company’s Secretary.

Meetings

Each incumbent director attended more than 75% of the aggregate of all meetings of the Board of Directors and the Committees on which he or she served while in office during fiscal 2021.

Summary Table of Standing Committee Members

The following table summarizes the membership of the Board’s standing Committees during fiscal 2021 and the Committee Chairs at the end of fiscal 2021:

 

   

Directors

  

Audit     

  

Compensation     
and     
Organization      
Development     

  

Compliance     

  

Nominating     

and     

Governance     

Richard C. Breeden

   LOGO         LOGO        

 

   LOGO     

Cynthia L. Feldmann

   LOGO *     

 

   LOGO         LOGO *  

Christopher S. Holland

   LOGO *      LOGO *     

 

  

 

Dr. Jacqueline Kosecoff

  

 

   LOGO        

 

   LOGO     

David B. Lewis

   LOGO        

 

  

 

   LOGO     

Walter M Rosebrough, Jr.

  

 

  

 

   LOGO        

 

Dr. Nirav Shah

  

 

   LOGO         LOGO        

 

Dr. Richard M. Steeves

    

 

    

 

   LOGO          

 

LOGO = Member

LOGO = Chairperson

* = Committee member during part of fiscal 2021

The Board and Oversight of Risk Generally

The Board has determined that the existing leadership structure, with an independent, nonexecutive serving as Chairman of the Board and a separate person serving as President and Chief Executive Officer, as well as a director, is currently the most efficient and effective structure for the Company. The Board believes that separation of the Chairman of the Board and CEO roles provides an effective balance between management and director participation in the Board process.

The Board of Directors and each of its standing Committees has oversight with respect to business risks identified by the Company or risks which the Directors may identify or consider based on their

 

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       Board of Directors Information: Board Meetings and Committees

 

 

experience. Management of the Company is responsible for the operation of the business and the reasonable management of risks that may arise in the course of our business, and must provide the appropriate control environment, and procedures and programs to identify, detect, and reasonably manage risks encountered by the Company. While they do not conduct risk-related audits or implement risk-related procedures, the Board and its Committees endeavor to understand the Company’s strategies and drivers of success, engage in a constructive dialogue with management about potential risks and risk management, and monitor the Company’s internal control and compliance activities. For example: (1) the Audit Committee monitors internal controls and litigation and cybersecurity and cybersecurity risks; (2) the Compliance Committee monitors quality, regulatory and legal compliance risks; (3) the Compensation and Organization Development Committee provides risk oversight regarding the Company’s incentive and other compensation programs and practices and human capital management; (4) the Nominating and Governance Committee provides oversight regarding potential conflicts, governance and succession risks; and (5) the Board provides oversight concerning the Company’s enterprise risk management process, which is our integrated, process-orientated, approach to managing key business risks. Each Committee also provides reports on risk oversight matters in its area of responsibility to the Board. In providing this oversight, the Board and Committees rely on information, opinions, reports or statements, including financial statements and other data prepared or presented by officers or employees of the Company, legal counsel, independent accountants, or other professional or expert advisors.

Cybersecurity Oversight

The Board recognizes the importance of maintaining the trust and confidence of our Customers and employees to safeguard sensitive information and the integrity of our information systems. To more effectively prevent, detect and respond to information security threats, the Company has appointed an Executive Cybersecurity Steering Committee consisting of the Company’s Chief Compliance Officer, General Counsel, Chief Operating Officer, Chief Financial Officer and Chief Information Officer, and has appointed a Chief Information Security Officer (“CISO”) reporting to the Chief Information Officer. The CISO, along with his team, is responsible for leading an enterprise-wide information security strategy, including policy, standards, architecture, and processes. The Audit Committee meets with the CISO and various members of the Executive Cybersecurity Steering Committee routinely to review and discuss the Company’s cyber risks and threats, incident responses, technology, the status of projects to strengthen the Company’s information security systems, assessments of the Company’s security program and the emerging threat landscape.

The Audit Committee’s engagement of Ernst & Young LLP to audit the Company’s internal controls over financial reporting includes SOX testing with respect to processes and procedures designed to control access to information systems. An independent third-party security company engaged by the Company tests for cyber vulnerabilities on a monthly basis. Another third party performs penetration tests on an annual basis. The Company also has initiated regular information technology reviews performed by a third party based on the NIST Cybersecurity Framework.

The Company also conducts information security and awareness training to ensure that employees are aware of information security risks and to enable them to take steps to mitigate those risks. As part of this program, the Company also takes steps designed to provide appropriate guidance regarding security to our executive management and employees, including any employee who may come into possession of confidential financial information.

 

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       Board of Directors Information: Board Meetings and Committees

 

 

To date, no attempted cyber-attack or other attempted intrusion on our information technology networks has resulted in a material adverse impact on our operations or financial results, or in any penalties or settlements. In the event an attack or other intrusion were to be successful, we have a response team of internal and external resources engaged and prepared to respond. We also maintain cyber liability insurance to help mitigate potential liabilities resulting from cyber issues.

The Company also has various technical, administrative, and physical safeguards in place to help protect against unauthorized access to, use, or disclosure of the Customer and individual information and data we collect and store. The Company’s Chief Compliance Officer is responsible for supervision of the Company’s Compliance Department and assesses the effectiveness of privacy controls and compliance with various legislative and regulatory requirements. The Company’s Audit Committee also is responsible for reviewing data privacy risks, as well as steps taken by management to understand and mitigate such risks. The Chief Compliance Officer periodically provides updates on data privacy issues to the Audit Committee.

 

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       Board of Directors Information: Governance Generally

 

 

Governance Generally

Our business is managed by our employees under the oversight of the Board of Directors. The Board of Directors directs and oversees the management of the business and affairs of the Company, and serves as the ultimate decision making body of the Company except for those matters reserved to our shareholders at law or under our Articles. The Board oversees the STERIS management team, to whom it has delegated responsibility for the Company’s day-to-day operations, as well as other matters. While the Board’s oversight role is very broad and may concentrate on different areas from time to time, its primary areas of focus are oversight of strategy, governance and compliance, as well as assessing management’s performance. In many of these areas, significant responsibilities are delegated to Board Committees. Except for Messrs. Rosebrough and Carestio, none of the Board members was an employee of the Company during fiscal 2021. The Board limits membership of the Audit Committee, Compensation and Organization Development Committee, and Nominating and Governance Committee to persons determined to be independent non-management directors.

The Board of Directors has established Governance Guidelines that, along with the charters of the Board committees, the Company’s Code of Business Conduct and the Director Code of Ethics, provide the framework for the governance of the Company. Our Director Code of Ethics, Governance Guidelines, Code of Business Conduct, Board Committee charters and other corporate governance information are available at the Corporate Governance section of steris-ir.com. Any shareholder also may request these items in print, without charge, by submitting a request to the Company Secretary.

The Board of Directors has charged the Nominating and Governance Committee with helping the Company to remain in the forefront of good corporate governance. The Nominating and Governance Committee is responsible for periodically reviewing and making recommendations to the Board of Directors in connection with the Company’s governance principles and practices.

Independence Standards

The Board believes that independent directors must comprise a substantial majority of the Board. It is expected that at least two-thirds of the Board should be independent. Under our Governance Guidelines, an independent director is one who meets the definition of independence as defined by NYSE listing requirements. A director will not be considered independent if he or she has a material relationship with the Company. Generally, the Board will not consider a director to be independent under the following circumstances:

 

 

The director is, or has been within the last three years, an employee of the Company, or an immediate family member of the director is, or has been within the last three years, an executive officer, of the Company;

 

 

The director or an immediate family member has received, during any 12-month period within the last three years, more than $120,000 in direct compensation from the Company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

 

 

(a) The director or an immediate family member is a current partner of a firm that is our internal or external auditor; (b) the director is a current employee of such firm; (c) the director has an immediate family member who is a current employee of such a firm who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (d) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such firm and personally worked on our audit within that time;

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    25


       Board of Directors Information: Governance Generally

 

 

 

The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another entity where any of the present executive officers at the same time serves or served on that entity’s compensation committee;

 

 

The director is a current employee, or an immediate family member is a current executive officer, of an entity that has made payments to, or received payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or two percent of such entity’s consolidated gross revenues; or

 

 

The director is an executive officer of a charitable organization and, within the last three years, the Company’s charitable contributions in any year to the organization (exclusive of gift-match payments) exceed the greater of $1 million or two percent of the organization’s consolidated gross revenues.

Based upon the foregoing criteria, the Board of Directors determined that all of the following incumbent directors are independent within the meaning of NYSE listing requirements: Richard C. Breeden, Cynthia L. Feldmann, Christopher Holland, Dr. Jacqueline B. Kosecoff, David B. Lewis, Paul E. Martin, Dr. Nirav R. Shah, Dr. Mohsen M. Sohi, and Dr. Richard M. Steeves. The Board of Directors also determined that each of the Compensation and Organization Development Committee members meets the additional requirements for independence required to be a member of a compensation committee under NYSE listing requirements and applicable law. The Board of Directors also has determined that each of the members of the Audit Committee meets the requirements for independence and financial literacy and possesses the accounting or related financial management expertise required to be a member of an audit committee under NYSE listing requirements and applicable law and is an audit committee financial expert as defined in SEC regulations.

Related Person Transactions

During fiscal 2021, we have not been a participant in, and there are not currently proposed, any related person transactions (within the meaning of, and required to be disclosed under, Item 404(a) of SEC Regulation S-K).

Our Director Code of Ethics provides that STERIS directors may not receive any loans, consulting fees, or other material personal profit or benefit in connection with any transaction involving STERIS, other than compensation, expense payments and committee fees as a director (or in the case of a director employed by the Company, compensation as an employee), as approved by the full Board. Other than such payments, a director must disclose to the Company’s General Counsel any transaction, or proposed transaction, between a STERIS entity and the director, a member of the director’s immediate family, or a business the director or an immediate family member owns, controls, or has a substantial interest in. Directors also may not have a personal or family financial interest in any STERIS supplier, customer, consultant, reseller or competitor that has a reasonable potential for causing a conflict of interest or divided loyalty, or resulting in material personal gain.

Our Code of Business Conduct for employees requires that relationships with third parties, as well as all business decisions, be based on what is required by law and in the best interests of STERIS, and not be motivated or influenced by personal considerations. This Code also requires that employees discuss with their supervisor or the STERIS Legal Department any activity that might create a conflict of interest, including personal financial interests that might reasonably affect their business judgment on behalf of the Company. Our Conflicts of Interest Policy also contains prohibitions with respect to conflicts of interest or transactions involving personal financial gain.

 

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       Board of Directors Information: Governance Generally

 

 

In addition, our Board has adopted a policy with respect to related party transactions. In general, this policy requires that all transactions or proposed transactions between the Company and a related party that exceed $120,000 and in which the related party has a direct or indirect material interest, be disclosed to and ratified or approved by the Nominating and Governance Committee or by disinterested members of our full Board. Under this policy, related parties include all of our Directors and executive officers and their immediate family members, and entities owned (more than 5% ownership) by a Director, executive officer or their immediate family members. In fiscal year 2021, there were no related party transactions between us and related parties that required ratification or approval under this policy.

Governance Guidelines

Our Board adopted its Governance Guidelines to assist primarily with the proper management and governance of the activities of the Board. The following is a summary of those Guidelines. A complete copy of the Governance Guidelines may be found at the “Corporate Governance” section of steris-ir.com.

Term—There is no limitation on the number of terms a Director may serve. However, the Nominating and Governance Committee will not ordinarily recommend a nominee for election for a term beginning on or after the nominee’s 75th birthday unless it has determined that under the circumstances such nomination would be in the best interest of the Company and its shareholders. The Nominating and Governance Committee made this determination with respect to David B. Lewis for the 2020-21 term.

Annual Meeting of Shareholders—The Board of Directors encourages all of its members to attend the Annual Meeting of Shareholders. All of the current Directors who were then Directors attended the 2020 Annual Meeting of Shareholders in person or via telecommunication equipment.

Executive Sessions—The independent Directors of the Board will meet separately as a group at least every other regularly scheduled Board meeting. During fiscal 2021, the independent Directors met in executive session 5 times. The Chairman or Lead Director (if the Chairman is not independent) will assume the chair of the meetings of independent Directors and assume such further tasks as set forth in the Governance Guidelines and as the independent Directors may determine from time to time. As indicated under “Independence Standards” above, the current Chairman has been determined to be independent.

Authority—Each member of the Board has complete and open access to management. Board members are expected to use their judgment so as to not distract management from the day-to-day operation of the Company. The Board and each Committee have the authority to obtain advice, reports or opinions from internal and external counsel and expert advisors and have the power to hire independent legal, finance and other advisors as they may deem necessary, without consulting with, or obtaining approval from, any officer in advance.

Board and Committee Evaluations—The Board has conducted self-evaluations as well as individual director evaluations to assess the effectiveness of the Board and its members. The Chairman (or Lead Director, if the Chairman is not independent) and the Nominating and Governance Committee coordinate these evaluations. The purpose of these self-evaluations is to increase the effectiveness of the Board and each Committee, as well as their individual members. Changes in Board committee structure, if any, are to be evaluated and recommended by the Nominating and Governance Committee, but require the concurrence of the full Board.

 

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       Board of Directors Information: Governance Generally

 

 

Majority Voting—If an incumbent nominee for Director in an uncontested election does not receive the vote of at least the majority of the votes cast at any meeting for the election of Directors at which a quorum is present, and no successor has been elected at such meeting, the Director will promptly offer his or her resignation as a Director to the Board of Directors. A majority of votes cast for the purposes of this provision means that the number of shares voted “for” a Director’s election exceeds 50% of the number of votes cast with respect to that director’s election.

The Nominating and Governance Committee will make a recommendation to the Board regarding whether to accept or reject the offered resignation or whether other action should be taken. The Board will consider the offer of resignation and disclose its decision regarding the offer and the rationale for its decision within 90 days from the date of the certification of the election results. If an incumbent Director’s offer of resignation is not accepted by the Board, such fact will be promptly communicated to the Director and such Director will continue to serve until a successor is duly elected, or such Director’s earlier resignation or removal.

If a director’s resignation is accepted by the Board then the resignation will be effective as of the date of acceptance, and the acceptance will be promptly communicated to the Director. If a Director’s resignation is accepted in the foregoing circumstances, or a director otherwise resigns or is removed or fails to be re-nominated, then the Board, in its sole discretion, may fill any resulting vacancy, or may decrease the size of the Board of Directors, pursuant to the Company’s Articles. If an election of directors is contested, a plurality voting standard shall apply to all directors.

New Director Orientation—All new Directors will be provided an orientation to acquaint them with the Company’s business, strategies, long-range plans, financial statements, the Governance Guidelines, and the Director Code of Ethics. New Directors will also be introduced to our senior management, internal auditor, and independent auditor. In addition, from time to time, Directors will receive information and updates on legal and regulatory changes that affect the Company, its employees and the operation of the Board. The Nominating and Governance Committee will from time to time make other recommendations regarding further educational opportunities for directors.

Attendance at Meetings—In order to effectively oversee management, all Directors are expected to attend Board meetings and meetings of committees of which they are members. Directors who attend less than 75% of Board meetings and meetings of committees of which they are members for two consecutive years will be subject to assessment by the Board to determine continued eligibility for directorship.

Shareholder Communications—Shareholders and other interested parties may communicate with the Board of Directors as a group, with the non-management directors as a group, or with any individual director by sending written communications to STERIS plc, 70 Sir John Rogerson’s Quay, Dublin 2, Ireland, Attention: Corporate Secretary. Complaints regarding accounting, internal accounting controls, or auditing matters will be forwarded directly to the chairperson of the Audit Committee. All other communications will be provided to the individual Directors or group of Directors to whom they are addressed. Communications that are considered to be improper for submission to the intended recipients will not be provided to the directors. Examples of communications that would be considered improper for submission include, without limitation, solicitations, routine Customer matters, communications that do not relate, directly or indirectly, to our business and communications that relate to improper or irrelevant topics.

 

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       Board of Directors Information: Governance Generally

 

 

Insider Trading Policy—Hedging and Pledging of Company Securities

The Company maintains an Insider Trading Policy which restricts activities in or relating to Company stock by Directors, executive officers and employees, and their respective related persons. These restrictions include advance clearance requirements for Directors, executive officers and certain other employees for all transactions as well as “blackout” provisions. The Insider Trading Policy also includes a blanket prohibition that prevents Directors, executive officers, employees and their respective related persons from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars or exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, decreases in the market value of the Company’s equity securities, whether granted as part of compensation to, or otherwise held directly or indirectly by, such Director, executive officer, employee or their respective related persons. The Insider Trading Policy further prohibits other types of speculative transactions in Company stock, including short-term trading, short sales, option trading and pledging (including margin purchases of Company stock).

STERIS Ethics Line

Employees have been instructed that if they have any questions or concerns about compliance with the Company’s Policies, applicable laws, or principles as outlined in the STERIS Code of Business Conduct, or are unsure of the “right thing” to do, they should talk with their supervisor, their local or Corporate Human Resources department personnel, STERIS’s Vice President, Chief Compliance Officer or the STERIS Legal Department, or submit a report to the STERIS Ethics Line. The STERIS Ethics Line does not replace other communication channels already in place. However, if employees have an issue regarding an ethics or compliance related matter or believe they cannot communicate effectively using existing internal channels, they are instructed by the Code of Business Conduct to call the STERIS Ethics Line. Reports on the STERIS Ethics Line may be made anonymously and without reprisals for matters reported in good faith.

Sustainability

The Company supports its mission, vision and values by designing and manufacturing products and providing services which reduce their impact on the environment as we produce or provide them, and when the Company’s Customers use them, and by pursuing sustainable practices throughout the Company. The Company has established a Sustainability Committee, comprised of a cross-section of employees representing all of the Company’s operations worldwide.

Sustainability objectives have been established for many of the Company’s operating facilities. The Company also strives to create an environment focused on the health and safety of its employees as well as the communities and environments in which the Company operates. The Company has programs in place to ensure all facilities around the globe, including those acquired, work toward OSHA world-class standards for injury-free incidents.

For a more detailed discussion of some of the Company’s sustainability and related efforts, including environmental health and safety and energy and conservation, please refer to the “Sustainability” section of the Company’s website at steris.com/sustainability. Information available on or through the Company’s website is not part of this Proxy Statement unless specifically incorporated herein.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    29


       Board of Directors Information: Independent Registered Public Accounting Firm

 

 

Independent Registered Public Accounting Firm

Ernst & Young LLP was appointed as the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2021, by the Audit Committee of the Board of Directors, which appointment was ratified by the shareholders on July 28, 2020. The lead audit partner from Ernst & Young LLP is expected to be present at the Annual Meeting and will be given an opportunity to make a statement if so desired and to answer appropriate questions with respect to that firm’s audit of the Company’s financial statements and records for the fiscal year ended March 31, 2021.

During fiscal 2021, the Audit Committee regularly evaluated the services provided by Ernst & Young LLP. The Audit Committee discussed the services of Ernst & Young LLP privately with the Senior Vice President and Chief Financial Officer (“CFO”) and Vice President, Controller and Chief Accounting Officer (“Controller”) outside of the presence of the firm, separately with the Vice President, Chief Compliance Officer (who is responsible for Internal Audit), outside the presence of the firm and the CFO and Controller, and with the firm outside the presence of the foregoing individuals. These discussions generally occurred at each regular Audit Committee meeting, as well as at other times.

As part of the independent registered public accounting firm appointment process for fiscal 2021, the Audit Committee conducted, with the assistance of an independent third party, a comprehensive formal evaluation of Ernst & Young LLP. The evaluation included an assessment of the following categories: quality of services provided; sufficiency of audit firm resources; communication and interaction; and independence, objectivity and professional skepticism. This evaluation was performed individually by each member of the Audit Committee. The Senior Vice President and Chief Financial Officer, the Vice President, Controller and Chief Accounting Officer, the Vice President, Chief Compliance Officer, and other members of management who regularly interacted with Ernst & Young LLP undertook a similar assessment and provided their evaluation of Ernst & Young LLP to the Audit Committee. The Audit Committee reviewed and discussed the evaluation responses from the Committee members and from management.

Also, as part of its annual independent auditor appointment process, the Audit Committee considers whether to rotate its independent registered public accounting firm. Ernst & Young LLP has been the Company’s independent registered public accounting firm since the end of fiscal 2019 and was the independent registered public accounting firm for Old STERIS from the Combination until the Redomiciliation (and was first retained by the predecessor entity of Old STERIS, STERIS Corporation, beginning with the 1989 fiscal year). Ernst & Young LLP rotates its lead audit partner every five years; the Audit Committee interviews candidates proposed by Ernst & Young LLP and selects the lead audit partner from the proposed candidates. There are significant benefits to having an independent registered public accounting firm with an extensive history with the Company. These include:

 

 

Higher quality audit work and accounting advice, due to Ernst & Young LLP’s institutional knowledge of our business and operations, accounting policies and financial systems, and internal control framework; and

 

 

Operational efficiencies and a resulting lower fee structure because of Ernst & Young LLP’s history and familiarity with our business.

The Audit Committee has adopted policies and procedures which are intended to control the non-audit or audit related services provided by Ernst & Young LLP and to monitor their continuing independence. Under these policies, the Audit Committee must pre-approve all services performed by Ernst & Young

 

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       Board of Directors Information: Independent Registered Public Accounting Firm

 

 

LLP. In addition, the Audit Committee may delegate authority to grant certain pre-approvals to a member of the Committee. Pre-approvals granted by a member of the Committee are reported to the full Audit Committee at its next regularly scheduled meeting.

The aggregate fees for professional services by Ernst & Young LLP for the Company for the fiscal years ended March 31, 2021 and March 31, 2020 were:

 

   
 

 

  Years Ended March 31,  
   
 

 

      2021             2020      
 
  Type of Fees   (in thousands)  

  Audit Fees

    $6,107       $4,824  

  Audit-Related Fees

    2       2  

  Tax Fees

    1,807       266  

  All Other Fees

    0       0  

  Total

    $7,916       $5,092  

All of the services provided by Ernst & Young LLP in fiscal year 2021 were pre-approved in accordance with the Audit Committee’s pre-approval policies and procedures described above. In the above table, “Audit Fees” are fees paid to Ernst & Young LLP for professional services for the audit of the Company’s consolidated financial statements included in Form 10-K and in the Company’s Ireland Annual Report and review of financial statements included in Form 10-Qs, for the audit of the Company’s internal control over financial reporting and for services that are provided by the accountant in connection with statutory audits; “Audit-Related Fees” include fees billed by Ernst & Young LLP for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements, benefit plan audits and access to technical research tools; and “Tax Fees” include fees for tax compliance, tax advice and tax planning. The increase in Audit Fees in fiscal year 2021 is primarily due to audit services arising from the Company’s acquisition and financing activities in the fiscal year 2021. The increase in Tax Fees in fiscal year 2021 is primarily due to tax planning associated with acquisitions and management of intangible property.

 

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       Board of Directors Information: Report of the Audit Committee

 

 

Report of the Audit Committee

The Audit Committee has been established in accordance with the Exchange Act. The Board of Directors of the Company has adopted a written Audit Committee charter. A copy of the Audit Committee’s charter may be found at the “Corporate Governance” section of steris-ir.com. Based on the review and determination of the Board, members of the Audit Committee meet the financial literacy and independence criteria to serve on the audit committee of a public company. The Audit Committee met 10 times during fiscal 2021 and holds executive sessions following each regular quarterly meeting.

The Audit Committee has reviewed and discussed with the Company’s management and Ernst & Young LLP, the Company’s independent registered public accounting firm, the audited financial statements of the Company contained in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021 and Ireland Annual Report. The Audit Committee has also discussed with the Company’s independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Accounting Oversight Board and the Securities and Exchange Commission.

The Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young LLP their independence. The Audit Committee has also concluded that Ernst & Young LLP’s provision of non-audit services to the Company is compatible with their independence.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2021 filed with the Securities and Exchange Commission.

The Audit Committee evaluated Ernst & Young LLP in connection with its consideration of the appointment of an independent registered public accounting firm in connection with its reappointment of the firm for fiscal 2022. Based upon the evaluation and considerations described in the Section “Independent Registered Public Accounting Firm” that begins on page 30, the Audit Committee recommends that the Company’s shareholders ratify the reappointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2022.

Other actions regularly undertaken by the Audit Committee during the fiscal year include: pre-review and discussion with management of Form 10-Qs filed by the Company with the SEC, pre-review and discussion with management of Company earnings releases, annual review of internal controls over financial reporting (ICFR), critical accounting policies and pronouncements (including the recently implemented lease accounting standard) as well as other important financial accounting and reporting issues.

The Audit Committee also is responsible for and periodically reviews the Company’s cybersecurity programs, security risks and the Company’s efforts to minimize and eliminate these risks. For more information on cybersecurity oversight and risk, and the Audit Committee’s roles and responsibilities with respect to the same, see “Cybersecurity Oversight” at page 23.

In addition, the Audit Committee, with the assistance of an independent third party, undertook a self-evaluation of its performance and effectiveness during fiscal 2021.

Audit Committee of the Board of Directors

David B. Lewis—Chair

Richard C. Breeden

Christopher S. Holland

 

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

COMPENSATION COMMITTEE OVERVIEW

The Compensation and Organization Development Committee of our Board of Directors, which we refer to in this Compensation Discussion and Analysis as the Compensation Committee or the Committee, is responsible for approving the compensation, benefits and perquisites of the President and Chief Executive Officer (sometimes referred to herein as the CEO) and senior management, and our general compensation philosophy. The Committee also approves annual equity grants available under our equity incentive compensation plan for eligible employees, as well as cash bonus payments to senior management and the maximum amount payable under our annual management cash bonus plans, based upon performance criteria established by the Committee under those plans. The Committee has regularly retained an independent compensation consultant to assist with its responsibilities. Each member of the Committee satisfied the independence standards of the SEC and NYSE.

The Committee’s responsibilities have been expanded in recent years to include oversight of the Company’s human capital and work environment (including diversity, HR-related ethics complaints, management development, succession planning and other related areas of focus). The Committee also reviews the results of the Company’s Employee Engagement Survey, which is conducted annually, an anonymous survey in which all employees are encouraged to participate. This process has been helpful in enabling the Company to focus on strengths and identify potential areas of improvement. For a more detailed discussion of the Company’s human capital actions, see the discussion of “Employees and Human Capital Management” in the Company’s Annual Report on Form 10-K for the fiscal year ending March 31, 2021.

Named Executive Officers

Our named executive officers for fiscal 2021, as shown in the Fiscal 2021 Summary Compensation Table appearing on page 54, were as follows:

 

 

Walter M Rosebrough, Jr., President and CEO

 

 

Michael J. Tokich, Senior Vice President and CFO

 

 

Daniel A. Carestio, Senior Vice President and COO

 

 

J. Adam Zangerle, Senior Vice President, General Counsel and Corporate Secretary

 

 

Cary L. Majors, Senior Vice President, North America Commercial Operations

In portions of the remainder of this Compensation Discussion and Analysis we will discuss compensation paid and awarded to our named executive officers and the basis for the decisions that were made with respect thereto.

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

General Compensation Philosophy

Our management compensation programs are designed to align management’s interests with the long-term interests of shareholders and to support and promote the achievement of our goals and objectives by helping to recruit and retain executive talent required to successfully manage our business. Our management compensation programs also seek to align compensation with individual and Company performance to achieve the goals and objectives of the business by providing and balancing incentives for annual financial performance as well as the generation of long-term value.

Our general compensation philosophy includes the following principles:

 

•  Be performance based, with variable pay constituting a significant portion of total compensation,

•  Create commonality of interest between our executives and shareholders by aligning realized compensation with changes in shareholder value,

•  Encourage growth in the setting and attainment of our short and long-term objectives,

•  Reward our executives for long-term improvement in shareholder value,

•  Attract, retain and motivate highly skilled executives,

•  Build a strong talent base to reinforce our succession planning objectives,

•  Be competitive with companies in our peer group,

•  Maximize the financial efficiency of the overall program,

•  Ensure that corporate governance practices and the impact of our say on pay proposals are upheld, and

•  Avoid incentive compensation designs that may lead to excessive risk taking.

The Committee also believes that it must maintain flexibility in establishing compensation practices to allow it to address compensation trends, competitive issues, business needs, industry and the broader economic environment, and special situations that will be encountered in the recruitment, retention, and promotion of employees. Therefore, the compensation practices approved by the Committee will likely vary from year to year and from person to person, depending on the particular circumstances.

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

Compensation Governance Practices

The Company maintains several best practices in compensation governance, some of which are summarized in the table below. A more detailed discussion of certain of these practices appears subsequently in the “Compensation Governance” section of this Compensation Discussion and Analysis and other of these practices are mentioned in other portions of this Proxy Statement.

 

               
What the Company Does     What the Company Doesn’t Do

•  Hold an annual say on pay advisory vote for shareholders.

 

•  Engage independent outside compensation consultants and utilize market and industry data to ensure we compensate fairly and competitively, but not excessively.

 

•  Mitigate undue risk-taking by using multiple performance metrics, imposing caps on payouts, employing clawback policies for annual incentive and equity awards, making annual incentive awards subject to complete Committee discretion, and performing annual compensation risk assessments.

 

•  Utilize only “double trigger” vesting of equity awards for change in control situations.

 

•  Provide multiyear vesting for equity awards, with vesting requirements generally more stringent than peers.

 

•  Regularly review compensation, especially incentive design, to ensure continued alignment with company strategy and shareholder interests.

 

•  Set meaningful stock ownership guidelines for the Chief Executive Officer (6 times base salary) and other executives (4 times base salary for CFO and COO, 3 times base salary for other SVPs, and 2 times base salary for all other corporate VPs).

 

•  Use an appropriate mix of cash and non-cash compensation, with an emphasis on variable (at risk) compensation.

 

•  Use premium stock options as part of the non-cash variable incentive compensation program.

   

•  Provide employment agreements to U.S. executives.

 

•  Permit hedging or pledging or short sales of Company shares.

 

•  Reprice underwater stock options.

 

•  Provide discretionary accelerated vesting of equity awards.

 

•  Provide excessive benefits or perquisites to executives.

 

•  Provide gross-ups for Code Section 280G excise taxes that may be imposed on severance or similar payments made in connection with a change in control.

               

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

Consideration of 2020 Say on Pay Vote Results

The Committee reviewed the results of our 2020 “say on pay” vote, in which our named executive officer compensation was supported by more than 96% of the shares voted on the matter. After taking into consideration the strong support for our executive compensation program reflected in our annual say on pay vote results, the Committee decided to continue to apply the same philosophy, compensation objectives, and governing principles as it has used in recent years when making subsequent decisions or adopting subsequent policies regarding named executive officer compensation. Also, after taking into consideration this strong support, the Committee decided to continue using the same executive pay structure of base salary, cash bonus and a mix of restricted stock and stock options, subject to the changes in option exercise prices described herein.

We received feedback in prior years that our equity award program could be enhanced by making modifications regarding performance based equity awards. After undertaking a lengthy review of potential performance based equity award designs, we decided to modify our stock option award program beginning in fiscal 2019 with the May 2018 awards by providing stock options with a premium exercise price equal to 10% above grant date market value. Also beginning with fiscal 2019 awards, options comprised at least 50% in value of each executive officer’s equity awards. For fiscal 2021 options comprised 65% of the value of the CEO’s awards and 75% of the value of the CFO’s awards. Additionally, the Committee decided to eliminate certain benefits and perquisites provided to U.S. based executive officers effective beginning with the 2020 fiscal year.

The Committee has solicited the input of our shareholders regarding our executive compensation program at every Annual Meeting since the 2010 Annual Meeting of Shareholders through a non-binding advisory “say on pay” proposal and will continue to seek shareholder input on our executive compensation in accordance with the provisions of the Dodd-Frank Act, at the Annual Meeting. The following table shows the results of the “say on pay” vote by the Company’s shareholders (and the shareholders of Old STERIS, in respect of periods prior to the Redomiciliation) for fiscal 2016 through 2020.

 

         
 

      2020

      2019

      2018

      2017

      2016

% of Shares voting on proposal in favor

 

96.35%

 

 

98.41%

 

 

97.91%

 

 

96.30%

 

 

97.56%

 

Votes for

 

71,550,687

 

71,956,904

 

73,785,206

 

71,343,570

 

57,679,692

Votes against

 

2,713,406

 

1,160,520

 

1,573,621

 

2,744,812

 

1,440,427

Abstentions

 

107,870

 

259,498

 

157,991

 

161,901

 

88,954

Broker non-votes

 

2,628,272

 

3,000,447

 

2,521,095

 

2,778,675

 

3,578,390

Recent Activity

Some of the recent executive compensation or related matters approved, decided, or supported by the Committee include:

 

 

Reviewing Employee Engagement survey results;

 

 

Including reviews of market trends and compensation education at each regular Committee meeting;

 

 

Expanding the Committee’s Charter authority to include responsibility for overseeing the Company’s human capital and work environment (including diversity, HR-related ethics complaints, management development, succession planning, and other related areas of focus);

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

 

Assuming responsibility for the administration of the Cantel Medical equity plans. See “Cantel Plans” on page 63;

 

 

Assuming, Amending and Restating the Company’s 2006 Long-Term Equity Incentive Plan in conjunction with the Redomiciliation;

 

 

Assuming, Amending and Restating the Company’s Management Incentive Compensation Plan in conjunction with the Redomiciliation;

 

 

Reviewing various types of potential performance based long-term equity award alternatives;

 

 

Approving a change in the strike price of stock option grants for executives, including the CEO, beginning with the 2019 fiscal year, to require that option exercise prices be 110% of grant date fair market value;

 

 

Eliminating for all U.S. based executive officers, beginning with the 2020 fiscal year, most benefits and perquisites not available generally to employees, including tax preparation/financial planning and auto allowances, and club dues and limited personal use of private aircraft by the CEO;

 

 

Providing more favorable restricted stock vesting and extended option exercise periods for employees with at least 25 years of service; and

 

 

Reviewing and revising the Company’s peer group to improve benchmarking for compensation decisions

Roles and Responsibilities

The roles and responsibilities of our Compensation Committee, Compensation Consultant, CEO and other members of management with respect to compensation decisions are discussed throughout this Proxy Statement and in particular within this Compensation Discussion and Analysis. This collaborative process is summarized below.

 

 

  Responsible Party

 

    

 

Primary Role and Responsibilities Relating to Compensation Decisions

 

 

Compensation Committee
(Composed solely of independent, non-employee Directors and reports to the Board)

    

•  Oversees our executive compensation program, policies and practices, taking into account business goals and strategies, legal and regulatory developments and evolving best practices;

 

•  Approves performance goals for purposes of compensation decisions for our named executive officers;

 

•  Conducts an annual evaluation of the CEO’s performance in consultation with the full Board and determines his compensation;

 

•  Reviews and approves the CEO’s recommendations for compensation for the other named executive officers and senior executives, making changes when deemed appropriate; and

 

•  Approves all changes to the composition of the peer group.

 

Independent Consultant to the Compensation Committee
(FW Cook)

 

    

•  Provides the Compensation Committee with analysis and advice pertaining to CEO, executive compensation program design, including industry survey analysis, explanation of current and developing best practices and regulatory changes;

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

      

 

•  Recommends a relevant group of peer companies against which to benchmark the competitiveness and appropriateness of our CEO, executive and Director compensation;

 

•  Analyzes peer companies’ annual CEO and executive compensation to assist the Compensation Committee in determining the appropriateness and competitiveness of our CEO and executive compensation;

 

•  Reviews compensation disclosure materials;

 

•  Analyzes our compensation practices to assist the Compensation Committee in determining whether risks arising from such practices are reasonably likely to have a material adverse effect on the Company; and

 

•  Provides specific analysis and advice periodically as requested by the Compensation Committee.

 

Senior Management

    

•  The CEO recommends to the Compensation Committee annual compensation for the other named executive officers and senior executives based on his assessment of their performance and the Senior Vice President and Chief Financial Officer’s or Senior Vice President and Chief Operating Officer’s assessment of the performance of certain of such persons;

 

•  Our CEO; Senior Vice President, General Counsel and Company Secretary and Vice President and Chief Human Resources Officer, and other Human Resources and Legal personnel, work with the Compensation Committee Chair to set agendas, prepare materials for Compensation Committee meetings, and generally attend meetings, as appropriate, and prepare meeting minutes; and

 

•  Our Senior Vice President and Chief Financial Officer also works with Human Resources personnel in the preparation of some materials for Compensation Committee meetings.

Compensation Consultant

Frederic W. Cook & Co., Inc. (“FW Cook”) has served as the Compensation Committee’s compensation consultant since November 2016. For fiscal year 2021, as required by the NYSE listing standards, the Compensation Committee considered various independence factors and potential conflicts of interest with respect to the compensation consultant and found the compensation consultant to be independent and that no conflicts of interest existed.

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

Principal Components of Compensation for Named Executive Officers

For the named executive officers, our compensation program is designed to recruit and retain management and align compensation with individual and Company performance on both an annual and longer-term basis. In addition, compensation of our named executive officers is generally structured to provide a significant portion of the compensation opportunity on the basis of the long-term performance of STERIS stock, as well as business performance and other factors that influence shareholder value. Based on this general compensation philosophy, the Committee has established compensation for our named executive officers consisting of the following principal components:

 

 

Compensation
Component

 

  

 

Description

 

  

 

Objectives

 

 

Base Salary

  

 

•  Fixed compensation that is reviewed annually and is based on performance, experience, responsibilities, skill set and market value.

  

 

•  Provide a base level of compensation that corresponds to the job function performed.

 

•  Attract, retain, reward and motivate qualified and experienced executives.

 

 

Annual Incentive Compensation

  

 

•  “At-risk” compensation earned based on performance measured against pre-established annual goals.

 

•  Goals are based upon Company-wide financial results as well as goals personal to the executive’s position.

 

  

 

•  Incentivize executives to achieve annual goals that ultimately contribute to long-term Company growth and shareholder return.

 

Equity Compensation

  

 

•  “At-risk” compensation in the form of restricted stock awards whose value fluctuates according to shareholder value and stock options with premium exercise prices whose value is solely dependent upon increases in share price.

 

•  Award vests based on continued service.

 

•  Service requirements generally exceed peers and market.

 

  

 

•  Align executive interests with those of shareholders.

 

•  Reward continuous service with the Company.

 

•  Incentivize executives to achieve goals that drive Company performance over the long-term.

 

Other Benefits and Perquisites

  

 

•  Broad-based benefits provided to Company employees (e.g., health and group insurance), a defined contribution plan and other personal benefits where appropriate.

 

  

 

•  Provide a total compensation package that is competitive with the marketplace and addresses unique needs and special situations.

The charts below illustrate the relative opportunities between fixed compensation, consisting of base salary, and variable compensation, consisting of bonus, stock options and restricted stock for fiscal 2021. The first chart shows the opportunity for the CEO and the second shows the average opportunities for the other named executive officers. Base salaries are those shown in the Fiscal 2021 Summary Compensation Table. Bonus amounts shown are for fiscal 2021. Values shown in the charts

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    39


       Executive Compensation: Compensation Discussion and Analysis

 

 

for restricted stock and stock option awards reflect the fair market value based upon the NYSE composite closing price and the grant date fair value under FASB ASC topic 718, respectively, as of the effective dates of grant. Differences in pay mix between the named executive officers are driven by market median pay levels that are used to determine named executive officer target pay opportunities, consistent with the Company’s pay philosophy and objectives, as well as other factors such as performance, experience and the complexity and responsibilities of the position.    

 

Pay Mix of Named Executive Officers FY 2021

 

LOGO

 

   LOGO

Amounts shown are based upon figures appearing in the Fiscal 2021 Summary Compensation Table that begins on page 54.

The realized value of variable compensation will depend upon actual Company performance.

Process for Determining Senior Management Compensation

In General

Senior management compensation is generally reviewed and established on an annual basis by the Committee. Our fiscal year ends on March 31. Therefore, Committee members typically begin the assessment of compensation for senior management during the second half of the fiscal year. The Committee typically meets again early in the new fiscal year to evaluate the performance of the Company and our named executive officers, and based on that evaluation of Company performance and individual evaluations, to determine bonus amounts, if any, for the recently completed fiscal year, and finalize base salaries, set bonus criteria, and approve equity awards for senior management for the new fiscal year.

For fiscal year 2021, the Company’s compensation consultant assisted with the annual compensation reviews, providing historical and prospective views regarding total compensation for our executive officers. The consultant reports to the Committee for senior management compensation matters and is charged with providing the Committee with competitive pay data and compensation trends, analysis and recommendations. Base salaries, cash bonus levels, equity compensation, and total compensation of senior management are examined against data from multiple sources and surveys developed and provided by the consultant, as described below. The Committee targets the payment of base salaries, cash bonuses and equity compensation and total direct compensation within a general

 

40    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


       Executive Compensation: Compensation Discussion and Analysis

 

 

range of 10% above or below the market median of those components. Actual bonus payments and realized equity values will vary based upon Company performance. This is a guideline around which there is likely to be variation, depending on individual factors and business results. Factors used in the process of assessing and determining senior management compensation include individual and team performance, scope of responsibilities and accountability, competitive and other industry compensation data, special circumstances and expertise, business performance, and comparison with compensation of our other senior managers. The CEO also provides recommendations to the Committee for compensation adjustments for the other senior managers.

Peer Group and Survey Data

The Committee and the Committee’s compensation consultant review market data relating to compensation to help assess the compensation of our senior executives, including each of the named executive officers. This review includes the consultant’s analysis of proxy data from certain healthcare equipment and healthcare supply companies and other companies in similar businesses to those of the Company in a size range of roughly one-third to three times that of the Company (see peer listing below), information derived from compensation surveys, including companies from healthcare and technology industries, and other executive compensation data obtained by the consultant. This data is adjusted by the consultant to reflect the Company’s relative size. Peer group data is used for executive pay benchmarking purposes for the Company’s CEO and CFO. The survey data also is utilized for executive pay benchmarking purposes for all of the other named executive officers. The Committee evaluates this data with the assistance of its compensation consultant to develop for each executive position target ranges for base salary, incentive compensation (cash bonus), and long-term equity compensation, as well as total direct compensation. These target ranges reflect market median pay consistent with the Company’s pay philosophy.

In the third quarter of fiscal year 2020, FW Cook reviewed with the Committee the peer group proposed to be used for executive pay benchmarking purposes for the Company’s CEO and CFO for fiscal year 2021. The compensation consultant regularly reviews the group with the Committee to ensure that the companies comprising the peer group continue to be appropriate. In selecting recommended peers, the compensation consultant focused on companies that are in the health care equipment and health care supplies industries and to a lesser extent, life sciences tools and services, markets reflective of the Company’s primary business and where we often compete for senior executive talent. Also, size measures considered to construct the peer group for fiscal year 2021 included:

 

 

Revenue between approximately $1.5 billion and $3.4 billion

 

 

Market capitalization between approximately $4.6 billion and $22.9 billion

 

 

Employees between 4,500 and 22,500

No relative weighting was given to any one of these factors in determining peers. Rather, potential peer companies were included based on how well they met all of these factors.

As a result of this analysis, the consultant recommended that Patterson Companies be deleted from the peer group due to its lower market capitalization and be replaced with Mettler – Toledo International, and that the peer group otherwise remain unchanged from that approved for fiscal year

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

2020. These recommendations were considered and approved by the Committee. As a consequence, the Company’s peer group for fiscal 2021 was comprised of the following:

 

     

•  Bio-Rad Laboratories, Inc.

 

•  Hologic, Inc.

 

•  ResMed Inc.

   

•  Bruker Corporation

 

•  IDEXX Laboratories Inc.

 

•  Stericycle, Inc.

   

•  The Cooper Companies, Inc.

 

•  Integra LifeSciences.

 

•  Teleflex Incorporated

   

•  Dentsply International Inc.

 

•  Mettler Toledo

 

•  Varian Medical Systems Inc.

   

•  Hill-Rom Holdings, Inc.

 

•  PerkinElmer Inc.

 

•  Waters Corporation

All of the peer group companies operate businesses generally similar to STERIS and to varying degrees met the Company’s peer group size criteria. On balance, STERIS’s actual or projected financial and other criteria at September 30, 2019 generally fell within a reasonable range around the peer group’s medians in terms of annual revenue (STERIS: $2.8 billion or 60th percentile), market cap (STERIS: $12.2 billion or 52nd percentile) and employees (STERIS: $12,000 or 64th percentile).

The following table, which is based upon information provided by FW Cook, shows the metrics and the rankings of the Company relative to its fiscal 2021 peer group at the end of September 2019 (market cap is at September 15, 2019), that was utilized for the selection of the fiscal 2021 peer group:

 

     
  

 

   Revenues
(Trailing Twelve
Months)
     Market Cap
(9/15/2019)
     Employee
Numbers
 

Median

  

 

$2.613 billion

 

  

 

$11.63 billion

 

  

 

8,377

 

Company

  

 

$2.840 billion

 

  

 

$12.20 billion

 

  

 

12,000

 

Company Percentile Rank

  

 

60%

 

  

 

52%

 

  

 

64%

 

2021 Compensation Decisions

The Committee’s consideration of the primary elements of compensation (base salary, incentive compensation (cash bonus) and equity compensation) for all of the named executive officers is based upon a combination of common criteria and measures applicable to all of the officers, as well as individual goals and objectives applicable specifically to each officer. For fiscal 2021, the Committee considered and applied a number of common criteria and measures to evaluate the named executive officers, including:

 

 

•  Consolidated Company as well as business unit financial performance;

•  Prior individual performance and compensation;

•  The complexity and scope of responsibilities of the officer’s position, as well as any changes in the officer’s role, responsibilities or duties;

•  The officer’s overall experience as well as experience with STERIS; and

•  Market and survey data provided by the consultant.

•  In the case of the CEO, the Committee’s evaluation of his individual performance after receiving input from the other non-executive Directors; and

•  In the case of the other named executive officers, the CEO’s assessments and recommendations regarding individual performance.

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

Individual goals and objectives varied for each named executive officer based on his area of responsibility. Although these goals and objectives are all considered important, they are not assigned any particular weight for incentive compensation purposes. In fiscal year 2021:

 

 

•  Mr. Rosebrough’s individual goals and objectives related to acquisitions and divestitures and integration, legal and regulatory compliance, Customer relations, quality, new product introduction, employee relations and retention, organizational development, safety performance, process improvement, investor relations, profit, cash flow, and ROIC.

•  Mr. Tokich’s individual goals and objectives related to financial reporting and compliance, working capital initiatives, investor relations, cost management, regulatory compliance, acquisitions and divestitures and integration, information technology initiatives, employee relations and retention, business strategy initiatives, profit, cash flow and ROIC, and safety performance.

•  Mr. Carestio’s individual goals and objectives related to acquisitions and divestitures and integration, regulatory compliance, business unit financial performance, business unit organizational leadership, Customer relations, employee relations and retention, new product introductions, quality leadership, profit, cash flow and ROIC, and safety performance.

•  Mr. Zangerle’s individual goals and objectives related to acquisitions and divestitures and integration, legal and regulatory compliance, Customer relations, employee relations and retention, cost of legal and regulatory compliance, and safety performance.

•  Mr. Majors’s individual goals and objectives related to acquisitions and divestitures and integration, regulatory compliance, business unit financial performance, business unit organizational leadership, Customer relations, employee relations and retention, service quality leadership, profit, cash flow and ROIC, and safety performance.

As CEO, Mr. Rosebrough has the broadest complexity and scope of responsibilities, as he has oversight for all aspects of our operations. Our other named executive officers, as well as other senior managers, report directly to Mr. Rosebrough (except for Mr. Majors who reports to Mr. Carestio). As a result of these various factors, individual performance against these factors, the individual’s roles and scope of responsibilities, and the Company’s performance, each element of compensation will necessarily vary between the named executive officers.

The Committee believes that our underlying executive compensation program is appropriate to reflect annual financial performance as well as rewarding and motivating behaviors that can create long-term shareholder value. For fiscal year 2021, the Committee evaluated the performance of the named executive officers, applying in each case the common criteria and measures and individual goals and objectives described above, as well as the Company’s actual performance against the targeted financial performance for payment of the incentive compensation. As a result, the Committee approved the fiscal year 2021 compensation described in the following pages for each of the named executive officers.

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

Base Salary:

The payment of base salary is not directly tied to achievement of pre-established financial goals. The Committee considers a number of factors in determining base salary, including previous individual performance, the consultant’s data regarding compensation trends and practices, base salaries paid by other medical device, hospital supply, and other public operating companies, the complexity and responsibility of the executive’s position, and the executive’s overall experience and achievements against objectives, as well as the general and industry market for executive talent. While the market median may serve as a general guideline, other factors such as experience, time in position, complexity of functions, competitive environment, special skills and past performance are also considered. The Committee believes that base salaries for executives with significant experience and strong past performance should generally fall within the range of plus or minus 10% of the market median for similar positions of public operating companies based on survey data. Based on these considerations and the Company’s fiscal year operating plan (including the Company’s planned merit increase budget), information from the consultant, and recommendations of the CEO with respect to compensation adjustments for the other named executive officers, the Committee determines the appropriate salary level for the named executive officers. Changes in salary levels are generally effective at the end of the first fiscal quarter or beginning of the second fiscal quarter, with some exceptions for situations involving promotional increases. The Board of Directors also reviews the compensation actions of the Committee.

Due to the COVID-19 situation and then current uncertainties regarding the Company’s short-term performance, the CEO’s base salary of $925,000 in effect for most of fiscal 2020 was not increased for fiscal 2021. His salary for fiscal 2021 was slightly below the median of peer companies.

With respect to the other named executive officers, the Committee applied the common criteria and results of individual performance objectives described above under Executive Compensation Overview, including the evaluation and recommendation of the CEO regarding individual performance results as well as peer and other survey data from the consultant, to assess base salaries for each officer. However, also due to the COVID-19 situation, salary increases for the other executive officers and certain other employees were initially deferred and did not become effective until August 10, 2021.

The following table reflects fiscal 2020 and 2021 base salaries of the named executive officers and the percentage increase in base salary of each named executive officer for fiscal 2021.

 

  Name

 

  

 

Fiscal 2020
Base Salary

 

  

Fiscal 2021
Base Salary

 

  

Percentage

Increase

 

  Walter M Rosebrough, Jr.

  

$915,000

  

$925,000

  

1.09%

  Michael J. Tokich

  

$515,750

  

$536,125

  

3.95%

  Daniel A. Carestio

  

$521,750

  

$542,385

  

3.95%

  J. Adam Zangerle

  

$402,500

  

$422,820

  

5.05%

  Cary L. Majors

  

$373,000

  

$392,105

  

5.05%

Annual Incentive Compensation (cash bonus):

The Company’s Management Incentive Compensation Plan (“MICP” or “Plan”) is generally designed to set target bonus opportunities to reflect the market median for comparable positions and to produce median cash bonus compensation if target results are achieved. Bonus opportunities also are

 

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structured to be sufficient to produce top quartile cash compensation when maximum goals are achieved. In general, if threshold levels of performance are not exceeded, executives earn no bonus and their resulting compensation levels are in the bottom quartile. However, for fiscal 2021, due to the Covid-19 situation and then current uncertainties regarding the impact of that situation on the Company’s outlook, a somewhat different goal structure was utilized with no requisite threshold performance, but with progressively higher performance goals for increased incentive compensation. The foregoing performance to compensation relationships are all consistent with the Company’s pay-for-performance philosophy.

In fiscal 2021, all executive officers of the Company were selected by the Committee for participation in the Company’s Management Incentive Compensation Plan (“MICP” or “Bonus Plan”) at the beginning of the fiscal year. At the same time, the Committee approved metrics for the MICP for fiscal 2021 participants. These metrics are described below and were essentially the same measures as those utilized by the Company in prior years. An individual’s annual incentive compensation target (target bonus level) was expressed as a percentage of base salary received. The incentive compensation target bonus level was based upon each participant’s level of responsibility.

Target bonus levels as a percentage of base salary received for fiscal 2021 were as follows for each named executive officer:

 

  Name

  

Fiscal 2021    

Target Level    

 

  Walter M Rosebrough, Jr.

  

 

120.0%    

 

  Michael J. Tokich

  

 

75.0%    

 

  Daniel A. Carestio

  

 

90.0%    

 

  J. Adam Zangerle

  

 

70.0%    

 

  Cary L. Majors

  

 

70.0%    

 

For fiscal 2021, the target bonus for our CEO was 120% of base salary, the same level as for fiscal 2020 and slightly below the median levels for target bonuses for CEOs of peer companies. His fiscal 2021 bonus was based on performance against full fiscal year 2021 financial objectives and could range from 0% to a maximum of 200% of his target bonus based on actual performance. Per the MICP provisions, the Committee also had the ability to modify Mr. Rosebrough’s bonus based upon performance against individual objectives.

Financial targets were based on our operating plan financial metrics for the 2021 fiscal year, as reviewed with the Committee and approved by the Board. The Committee and the Board evaluate the annual operating plan and consider financial metrics important to shareholder value and that support the overall strength and success of the Company’s business. After consideration of the consultant’s compensation data, the recommendation of management, and approval of the Company’s operating plan, the Company financial performance metrics described below were identified and approved by the Committee to establish criteria for calculating bonus compensation targets under the Company’s incentive compensation plans.

Consistent with STERIS’s practices for the past several years, for fiscal year 2021 the Committee determined applicable financial metrics and weighting to be:

 

 

Earnings before interest and taxes (“EBIT”)—75% weighting, and

 

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Free cash flow (which we define as cash flow from operating activities less purchases of property, plant, equipment and intangibles, plus proceeds from the sale of property, plant, equipment and intangibles)—25% weighting,

excluding in each case the effect of amounts related to the following special items that the Committee considers not representative of ongoing operations: impairment and restructuring charges, goodwill impairment charges, amortization and impairment of purchased intangible assets, loss from fair value adjustment of acquisition related consideration, gains or losses on sales of assets outside the ordinary course of business, gain or loss on sales or divestiture of a subsidiary, costs associated with divestiture of discontinued operations, acquisition-related transaction and integration expenses, pandemic related charges, costs or expenses, and other special or one-time regulatory, tax, litigation, settlement, pension, benefit, or governmental charges, costs or expenses, and the effects of other such items. We chose the two metrics, EBIT and free cash flow, because we believe these two operating metrics are the most representative short-term measure of long-term shareholder value creation; we view EBIT as the key driver of our ultimate bottom line earnings and utilization of a free cash flow objective is intended to incent management to appropriately manage “non-income” cash/balance sheet items (in addition to earnings) like inventory, accounts receivable, accounts payable and capital spending.

Under the MICP, the fiscal year 2021 financial performance objectives were as follows: target performance for EBIT and free cash flow for 100% payout under the approved targets for the MICP for the year were $579.4 million and $253.2 million, respectively. Spending lower than planned capital expenditures was limited to $10 million to increase free cash flow for bonus purposes. Free cash flow payout percentage was limited to the EBIT payout percentage until EBIT exceeded $642.2 million.

The maximum performance recognized, and incentive compensation payable, was capped at 200% of target performance. To achieve this performance level, EBIT of $799.4 million and free cash flow of $422.4 million would have been required.

The following table shows achievement of financial objectives for fiscal 2020, as adjusted, as well as fiscal 2021 performance objectives:

 

    

Achievement for Prior Year
Ending March 31, 2020

 

  

 

    Performance Objectives for Year Ending March 31,  2021    

 

  

0% Threshold

 

  

100% Target

 

  

200% Maximum

 

  Total Company EBIT

    

 

$630.5

    

 

$0

    

 

579.4

    

 

799.4

  Free Cash Flow

    

 

$340.3

    

 

$0

    

 

253.2

    

 

422.4

Actual financial performance against Plan criteria for fiscal year 2021 was EBIT of $548.4 million on a U.S. GAAP basis and free cash flow of $450.9. Actual financial performance against the MICP criteria for fiscal year 2021, as such criteria were adjusted for the special items discussed above, was EBIT of $697.6 million and free cash flow of $461.6 million. This performance resulted in a weighted aggregate performance achievement of 152.3% against targeted Plan criteria for the year. The following table shows the financial metrics for the year and Plan financial attainment percentages for the same period

 

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for named executive officers (the EBIT financial metrics largely consistent with the adjusted metrics contained in the Company’s announcement of its financial results for its fiscal 2021 fourth quarter and full fiscal year):

 

Year Ending March 31, 2021

 
           
    

0%

Threshold

   

100%

Target

   

200%

Maximum

    Weighting    

Twelve
Months

Adjusted

   

Attainment

%

   

Weighting

Attainment

%

 

  Total Company EBIT

 

 

$0

 

 

 

$579.4

 

 

 

$799.4

 

 

 

75%

 

 

 

$697.6

 

 

 

136.4

 

 

 

102.3

 

  Free Cash Flow

 

 

$0

 

 

 

$253.2

 

 

 

$422.4

 

 

 

25%

 

 

 

$461.6

 

 

 

200.0

 

 

 

50.0

 

  Total

                                                 

 

152.3

 

A reconciliation of the EBIT and free cash flow used to determine the targets and actual achievement for the year ending March 31, 2021 is provided below:

 

   
  Year Ending March 31, 2021

Total Company EBIT - Actual

(in millions)

Free Cash Flow  - Actual

(in millions)

  Metric, as reported

 

$548.4

 

$450.9

  Adjustments for comparability:

  Inventory and property “step up” to fair value

 

$ 5.6

 

  Amortization of acquired intangible assets

 

$ 83.9

 

  Acquisition and divestiture related transaction and integration expenses

  $ 35.6   $ 28.7

  Incremental COVID-19 costs

 

$ 25.8

 

$ 23.7

  Tax restructuring costs

 

$ 1.6

 

$ 1.8

  Restructuring

 

$(3.0

 

$ 1.1

  Net loss on divestiture

 

$ 2.0

 

$(0.5

  Gain on fair value adjustment of acquisition related contingent consideration

 

$(0.5

 

  LIFO accounting change

 

$ (1.8

 

  Deferred employer social security payments

 

 

$(13.4

  Less: capital expenditure savings limit

 

 

$(30.7

  Metric on comparable basis to target

 

$697.6

 

$461.6

Following the end of the fiscal year, the Committee reviewed the incentive compensation plan terms and criteria and approved bonuses calculated using an aggregate 152.3% financial achievement level based upon the adjusted financial metrics described above. After also considering individual performance (including business unit performance where applicable) against the objectives for each named executive officer described above in the “2021 Compensation Decisions” section of this Compensation Discussion and Analysis, the Committee approved the following incentive compensation awards for fiscal year 2021:

 

   

CEO—payment of $1,690,530, based on performance against applicable plan criteria and personal goals and objectives for fiscal 2021 (152.3% of target bonus opportunity); and

 

   

Four other named executive officers—an aggregate payment of $2,518,964, based on performance against the applicable plan criteria and individual goals and objectives (individual bonuses ranged from 167.53% to 182.76% of target bonus opportunities).

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

Long-Term Equity Incentive Compensation:

Equity incentives are considered necessary to attract and retain employees critical to our continuing, long-term success, as well as providing employees significant alignment of interest with our shareholders. The Committee views nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units as a direct link between management and shareholders. Equity incentives are provided under the Company’s 2006 Long-Term Equity Incentive Plan (the “2006 Plan”). The 2006 Plan was initially approved by shareholders of STERIS Corporation in July of 2006. The Plan has since been approved by shareholders and amended and restated on several occasions.

Most recently, the Plan was assumed, amended and restated by the Company effective March 28, 2019 in conjunction with the Redomiciliation. Also, in connection with the Redomiciliation, all outstanding awards under the 2006 Plan in respect of Old STERIS ordinary shares were converted into equity awards for the same number of Company ordinary shares with the other terms and conditions of the awards remaining the same, except as otherwise required by law.

With respect to the amount and type of equity incentives provided to each recipient, the Committee generally considers its compensation consultant’s data regarding competitive trends and practices, the award recipient’s salary and level within our organization, the nature and complexity of the position, the recommendation of the CEO, and the Committee’s own evaluation of the performance of named executive officers, since the Committee members generally have an opportunity to observe their performance and have information on the level of past awards. The Committee ultimately decides the amount and mix of long-term compensation (stock options, stock appreciation rights, restricted shares, restricted share units and other types of equity awards) granted to each named executive officer, other corporate officers, and any other executives who report to the CEO, with input from the CEO.

For the past several years, long-term equity awards to each named executive officer have generally consisted of stock options and restricted stock. In keeping with the Company’s approach, the consultant has developed long-term equity awards guidelines for consideration by the CEO and Committee for senior management. The CEO and Committee also consider other factors in determining award mix, including retention concerns and the executive’s current equity holdings compared to the Officer Stock Ownership guideline requirements (discussed subsequently) for Company stock, since stock options do not count toward the Officer Stock Ownership guidelines.

The consultant’s long-term equity guidelines place more emphasis on options than restricted stock. This is consistent with the Company’s pay-for-performance philosophy as all value earned through stock options is solely dependent upon an increase of our stock price, which reflects investors’ views on the Company’s financial performance and long-term prospects. The Committee believes that options provide a strong linkage to the Company’s performance because the executive benefits only if and to the extent the Company’s stock price increases and the vesting provisions help prevent executives from fully capitalizing on near-term increases in stock values. The 2006 Plan provisions prohibit stock options from being granted at option prices less than 100% of fair market value of the underlying shares on the grant date and prohibit options from being re-priced. Beginning in fiscal 2019, option prices for employee stock option awards have been fixed at 110% of the grant date fair market value of the underlying ordinary shares.

The Committee believes that the vesting requirements for Company equity awards are more restrictive than those required generally by other companies both in terms of the length of the vesting period (generally four years) and the use of cliff vesting for the majority of restricted stock awards. Restricted

 

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stock awards made to employees who have attained age 55 and have at least five years of service generally vest on a prorata basis over a four year period. Restricted stock awards to employees who have at least twenty-five years of service also will generally vest on a prorata basis over a four-year period.

The approval of long-term equity incentive compensation is typically made early in the fiscal year (April or May) and effective shortly after the date of filing of the Company’s 10-K filing for its prior fiscal year. The compensation consultant provides survey data for long-term incentives, reflecting market median data and provides the Committee with equity award guidelines in dollars based upon this data. Beginning with fiscal year 2020 pursuant to a new methodology approved by the Committee in fiscal 2019, share values to be utilized for annual awards were determined shortly before the grant date based upon Company share price averages over a predetermined period following the Company’s announcement of its prior year financial results. These values and the other information were then used in determining the number of options and restricted shares to be awarded to recipients, and values were not modified to reflect any subsequent increase or decrease in value of the Company’s stock between the end of the predetermined period and the effective date of the grant.

The value of Mr. Rosebrough’s fiscal year 2021 equity grants was below the median of the peer group data and survey data provided by the consultant. Because of market factors and the broader complexity and scope of responsibilities of his position, Mr. Rosebrough’s long-term equity compensation is greater than the other named executive officers.

As part of its oversight of the long-term equity award program, the Committee and management annually review data from the compensation consultant regarding the cost of the program in terms of share usage and value transfer. The Company’s overhang from outstanding grants was at the peer group median as of September 30, 2019, while total overhang, including overhang from shares available for future grant, was between the 25th percentile and the median. The Company’s three-year average share usage approximated the peer group median. The Company’s three-year average fair value transfer was near or above the 25th percentile of peers in absolute dollars as a percentage of market capitalization and as a percentage of revenue. On balance, the Committee believes it has prudently managed the equity program in support of the shareholders’ interests.

Fiscal 2021 awards to the named executive officers under the 2006 Plan were as follows:

 

       
Name Number of
Restricted Shares

Number of

Stock Options

Aggregate Award

Fair Values ($)

   Walter M Rosebrough, Jr.

8,868

99,464

4,198,157

   Michael J. Tokich

2,452

44,472

1,626,432

   Daniel A. Carestio

4,432

26,776

1,468,862

   J. Adam Zangerle

3,008

18,168

   996,783

   Cary L. Majors

2,376

14,344

   787,166

For a discussion of the 2006 Plan and Cantel Plans, see pages 62 and 63.

Benefit Programs and Perquisites:

Our named executive officers are eligible to participate in a number of benefit programs, including health, disability and life insurance programs and a qualified 401(k) plan, all of which also are available

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

generally to employees in the United States. None of our U.S. based executive officers have special retirement benefit arrangements such as supplemental retirement plans or excess or restoration retirement benefit plans.

At one time the Company maintained a nonqualified deferred compensation plan permitting named executive officers and other management employees to defer their compensation. Contributions under that plan have been frozen. None of the named executive officers are participants in that plan. The Company maintains no other retirement or deferred compensation arrangements for named executive officers.

Named executive officers and other senior employees may also participate in other benefit programs, including an employee relocation program and a senior executive severance plan (see page 61 for a description). The Company’s severance arrangements cover all of the named executive officers. Beginning with fiscal 2020, the Committee discontinued providing most allowances and other perquisites for executives including auto and tax preparation/financial planning allowances and club dues and limited personal use of private aircraft by the CEO. The values of the remaining perquisites and other benefits, consisting solely of employer matching 401(k) contributions and payment of costs of tax advice and return preparation for UK and Ireland income taxes for certain of the named executive officers, are included in the Fiscal 2021 Summary Compensation Table under “All Other Compensation” on page 54.

Agreements Regarding Named Executive Officer Compensation

The Committee reviews and approves, or makes recommendations to the Board to approve, any agreements with the named executive officers relating to compensation or separation payments. The Company (including its subsidiaries) has no employment agreements with U.S. executives. The named executive officers are party to equity award agreements and covered by a Senior Executive Severance Plan and other plans described in the succeeding pages. These agreements and plans are discussed, in part, in the section of this Proxy Statement entitled “Potential Payments to Named Executive Officers upon Termination of Employment or Change in Control.” The Committee believes that employment or other special agreements regarding senior management compensation for US-based executives should generally be limited to special circumstances.

Compensation Governance

We maintain several compensation governance best practices, some of which are summarized in the table that begins on page 35. A more detailed discussion of certain of these practices appears below and other of these practices are mentioned in other portions of this Proxy Statement.

Risk Assessment

The Committee has reviewed the Company’s employee compensation policies and practices and determined that the same are not reasonably likely to have a material adverse effect on the Company. This determination was based in part on a review of compensation practices and programs conducted by the Committee’s compensation consultant, FW Cook, and by management, with risk being evaluated from several perspectives, including pay mix, award time horizons, award limitations including caps, metric structure, metric alignment with business strategy, payout cliffs, and other practices or policies that mitigate risk-taking. Other risk mitigating factors reviewed included clawbacks,

 

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stock ownership guidelines and stock retention policies, anti-hedging and pledging policies and equity grant practices, as well as more specific factors with respect to sales and service incentive plans.

Clawback and Related Provisions for Annual Incentive Compensation and 2006 Plan Equity Awards

The Company’s Management Incentive Compensation Plan (cash incentives) contains “clawback” provisions. Under these provisions, if the Company’s financial statements for any fiscal year are required to be restated due to material noncompliance with any financial reporting requirement as a result of intentional misconduct of a participant, the participant is required to forfeit or return, as applicable, at the request of the Board or Committee, all or a portion of the participant’s award. The amount to be recovered is the amount of the award in excess of that which would have been payable had the financial statements initially been filed as restated. The Company is entitled to obtain repayment by a variety of different methods.

The 2006 Plan (equity incentives) also contains forfeiture and recovery provisions for “Detrimental Conduct.” Detrimental Conduct includes acts of dishonesty intended to result in material personal gain or enrichment at the expense of the Company and other acts or conduct detrimental or prejudicial to the business, reputation, or other significant interest of the Company.

Restrictions on Securities Transactions

The Company maintains an Insider Trading Policy which restricts activities in or relating to Company stock by Directors, executive officers and employees and their respective related persons. These restrictions include advance clearance requirements for Directors, executive officers and certain other employees for all transactions as well as “blackout” provisions. The Insider Trading Policy also includes a blanket prohibition that prevents Directors, executive officers, employees and their respective related persons from purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars or exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, decreases in the market value of the Company’s equity securities, whether granted as part of compensation to, or otherwise held directly or indirectly by, such Director, executive officer, employee or their respective related persons. The Insider Trading Policy further prohibits other types of speculative transactions in Company stock, including short-term trading, short sales, option trading and pledging (including margin purchases of Company stock).

Officer Stock Ownership Guidelines

One of the primary objectives of the Company’s equity incentives is to build stock ownership among executives, thereby aligning their interests more closely with those of the shareholders. To reinforce this objective, the Committee first established stock ownership guidelines for senior managers of STERIS Corporation in 2006. The guidelines have been subsequently revised on several occasions. The Committee believes the guidelines further align the interests of senior management with those of the shareholders. Senior managers (including the named executive officers) are required to maintain a significant equity interest in the Company through ownership of stock that they acquire either with their own funds or through certain long-term incentive awards. The Committee believes that stock ownership helps create economic alignment with shareholders and is a factor in motivating our senior management to enhance shareholder value. The stock ownership requirements are expressed as a multiple of salary rather than a fixed number of shares, as was the case at one time. The Committee believes that this approach, which is consistent with the approach used in the Director Stock

 

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       Executive Compensation: Compensation Discussion and Analysis

 

 

Ownership Guidelines, reflects prevailing market practices, and also has the benefit of adjusting for changing circumstances that should influence stockholding requirements. The following table outlines the required officer share ownership values at various levels within the Company, as defined by multiples of base salary for each officer:

 

 

   Position:

 

 

Shareholding
Requirements:

 

  CEO

  6 times base salary

  CFO and COO

  4 times base salary

  Other Senior Vice Presidents

  3 times base salary

  Corporate Vice Presidents

  2 times base salary

The following share types are included under these guidelines (stock options do not count toward share ownership):

 

 

Shares purchased/owned outright;

 

 

Shares acquired from exercised stock options (but not unexercised options);

 

 

Shares purchased through the STERIS Corporation 401(k) plan; and/or

 

 

Unvested restricted shares and restricted shares that have vested.

From the time a senior manager achieves a position subject to these guidelines, he or she has a five-year period to attain the applicable shareholding requirements. Likewise, if an officer already subject to the guidelines is promoted to a position with higher shareholding requirements, he or she has a five-year period in which to satisfy the higher requirements. A steady increase in share ownership over the five-year period is encouraged, subject to hardship exceptions. If the share ownership guideline is not achieved within the applicable five-year period, the CEO or the Committee is authorized to take into consideration the facts and circumstances with respect to that failure and take whatever action he or they consider appropriate, including restricting or eliminating future equity awards to the particular officer. Based on the closing price of the Company’s Ordinary Shares on the NYSE on March 31, 2021 and base salaries in effect at that date, the CEO and all of the other named executive officers satisfied these guidelines.

Tax Deductibility of Compensation

Prior to the passage of Tax Cuts and Jobs Act of 2017 (the “TCJA”) on December 22, 2017, Section 162(m) of the Internal Revenue Code of 1986, as amended the (“Code”) generally disallowed a tax deduction in publicly held companies for compensation paid to certain covered executive officers in excess of $1 million per officer, unless such compensation qualified as “performance-based.” Under the TCJA, the performance-based exception has been repealed with respect to taxable years beginning after December 31, 2017, subject to a special rule that “grandfathers” certain compensation paid pursuant to a written binding contract in effect as of November 2, 2017 that is not materially modified thereafter. As a result of TCJA, most of the compensation paid to our named executive officers in excess of $1 million per officer in a year will not be deductible. While the TCJA may limit the deductibility of compensation paid to our named executive officers, the Committee will—consistent with past practice—retain flexibility to design compensation programs and take such other actions it believes to be in the best long-term interests of the Company and our shareholders.

 

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       Executive Compensation: Report of the Compensation and Organization Development Committee

 

 

Report of the Compensation and Organization Development Committee

The Compensation and Organization Development Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussion, the Compensation and Organization Development Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in STERIS’s Annual Report on Form 10-K for the year ended March 31, 2021.

Compensation and Organization Development Committee of the Board of Directors.

Dr. Jacqueline B. Kosecoff, Chairman

Richard C. Breeden

Christopher S. Holland

Dr. Nirav R. Shah

 

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  Executive Compensation: Compensation and Organization Development Committee Interlocks and Insider Participation

 

 

Compensation and Organization Development Committee Interlocks and Insider Participation

None of the members of the Board who served on the Compensation and Organization Development Committee during fiscal year 2021 was ever an officer or employee of the Company or of any of its subsidiaries. None of the members of the Board who served on the Compensation and Organization Development Committee during fiscal 2021 had any relationship requiring disclosure under any paragraph of Item 404 of SEC Regulation S-K.

Tabular and Other Executive Compensation Disclosure

The persons named in the below table are sometimes referred to in this Proxy Statement as the “named executive officers”.

FISCAL 2021 SUMMARY COMPENSATION TABLE    

 

               
Name and
Principal Position

Fiscal

Year

Salary

($)(1)

Bonus

($)

Stock

Awards

($)(2)

Option

Awards

($)(3)

Non-Equity

Incentive Plan

  Compensation  

($)(4)

All Other

  Compensation  

($)(5)

Total

($)

  Walter M Rosebrough, Jr

  President and Chief

  Executive Officer

  2021   925,000     1,468,984   2,729,173   1,690,530   33,422   6,847,109
  2020   915,000     1,388,688   2,579,110   1,558,947   16,895   6,485,640
  2019   880,000     1,286,370   2,388,819   1,365,444   62,257   5,992,890
  Michael J. Tokich

  Senior Vice President and

  Chief Financial Officer

  2021   536,125     406,174   1,220,258   673,181   22,119   2,857,857
  2020   515,750     371,630   1,115,935   548,902   15,755   2,567,972
  2019   484,750     440,282   818,034   470,062   33,763   2,246,891
  Daniel A. Carestio

  Senior Vice President

  and Chief Operating

  Officer

  2021   542,385     734,161   734,701   891,377   10,145   2,912,769
  2020   521,750     669,469   669,524   555,461   9,638   2,425,842
  2019   481,731     481,166   723,476   431,615   28,654   2,146,642
  J. Adam Zangerle

  Senior Vice President,

  General Counsel, and

  Secretary

  2021   422,820     498,275   498,508   495,245   22,310   1,937,158
  2020   402,500     445,956   446,318   342,680   15,150   1,652,604
  2019   376,250     377,582   277,533   291,806   34,213   1,457,364
  Cary L. Majors

  Senior Vice President,

  North America Commercial

  Operations

  2021   392,105     393,584   393,582   459,161     1,638,432
  2020   373,000     297,304   297,515   317,692     1,285,511
  2019   355,250     261,762   261,677   325,670   9,355   1,213,714

 

(1)

Regular base salary earned.

 

(2)

The dollar amounts reflect the closing sales price per share of the Company’s stock on the New York Stock Exchange Composite Tape on the effective date of the grant. For a discussion of specific restricted stock awards granted in fiscal 2021, see “Grants of Plan-Based Awards in Fiscal 2020” below and the narrative discussion that follows. Restricted stock recipients can vote their restricted shares and will receive cash dividend equivalent payments at the same times and amounts per share as all other shareholders receiving dividend payments.

 

(3)

The dollar amounts reflect the grant date fair value under FASB ASC topic 718 for option awards. The aggregate grant date fair value of option awards is computed in accordance with FASB ASC Topic 718, utilizing assumptions discussed in the Notes to our financial

 

54    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


  Executive Compensation: Tabular and Other Executive Compensation Disclosure

 

 

 

statements in our Form 10-K for the fiscal years ended March 31, 2021, March 31, 2020 and March 31, 2019, as applicable. For a discussion of specific option awards granted in fiscal 2021, see “Grants of Plan-Based Awards in Fiscal 2021” below and the narrative discussion that follows.

 

(4)

The dollar amounts for fiscal 2021 represent incentive compensation paid under the Management Incentive Compensation Plan.

 

(5)

The dollar amounts for fiscal 2021 consist of Company matching contribution to the Company 401(k) plan and payment of all costs of preparation of U.K. and Ireland personal income tax returns and U.K and Ireland tax advice for certain named executive officers. U.S. dollar values of tax related amounts were calculated as follows: Ireland costs were based in euro exchange rates on the first day of the month in which the applicable invoice was received and UK costs were based on pound sterling exchange rates on the date of the applicable invoice.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    55


  Executive Compensation: Tabular and Other Executive Compensation Disclosure

 

 

GRANTS OF PLAN-BASED AWARDS IN FISCAL 2021

 

             
Name  

Grant

Date

   

Approval

Date

   

 

Estimated Possible Payouts

Under Non-Equity Incentive

Plan Awards(1)

   

All Other

Stock

Awards:

 Number of 

Shares of

Stock or

Units

(#)

   

All Other

Option

Awards;

Number

of

Securities

 Underlying 

Options

(#)

   

Exercise

or

Base
Price of

Option

Awards

($/Sh)

   

Grant
Date

Fair
Value of

Stock
and

Option

Awards

($)

 
 

 Threshold  

($)

 

Target

($)

   

Maximum

($)

 
                   
 Walter M Rosebrough, Jr.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

    8,868      

 

 

 

 

 

   

 

 

 

 

 

    1,468,984  
                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    99,464       182.22       2,729,173  
                 

 

 

 

 

 

 

 

 

 

  0     1,110,000       2,220,000    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Michael J. Tokich  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

    2,452      

 

 

 

 

 

   

 

 

 

 

 

    406,174  
                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    44,472       182.22       1,220,258  
                 

 

 

 

 

 

 

 

 

 

  0     401,827       803,654    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Daniel A. Carestio  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

    4,432      

 

 

 

 

 

   

 

 

 

 

 

    734,161  
                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    26,776       182.22       734,701  
                 

 

 

 

 

 

 

 

 

 

  0     487,731       975,462    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 J. Adam Zangerle  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

    3,008      

 

 

 

 

 

   

 

 

 

 

 

    498,275  
                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    18,168       182.22       498,508  
                 

 

 

 

 

 

 

 

 

 

  0     295,616       591,232    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Cary L. Majors  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

    2,376      

 

 

 

 

 

   

 

 

 

 

 

    393,584  
                 

 

    6/01/2020 (2)      4/29/2020      

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

    14,344       182.22       393,582  
                 
 

 

   

 

 

 

 

 

   

 

 

 

 

 

  0     274,077       548,154      

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

 

(1)

Amounts shown in these columns represent the annual incentive compensation opportunity under the Bonus Plans for fiscal 2021 for each named executive officer. See “Compensation Discussion and Analysis—Principal Components of Compensation for Named Executive Officers—Annual Incentive Compensation (cash bonus)” above, for more detail regarding these amounts.

 

(2)

Restricted stock and stock option grants made as part of the annual long-term equity grant. All restricted stock and stock option awards were granted under the Company’s 2006 Long-Term Equity Incentive Plan.

NARRATIVE SUPPLEMENT TO THE FISCAL 2021 SUMMARY COMPENSATION TABLE AND THE GRANTS OF PLAN-BASED AWARDS IN FISCAL 2021 TABLE

Vesting Schedule

Stock option awards to employees generally vest and become nonforfeitable in increments of 25% per year over a four-year period, with full vesting four years after the date of grant. Restricted stock awards to employee recipients generally cliff vest on the fourth anniversary of the grant date if the recipient remains in continuous employment through that date. However, employees who are grantees of restricted stock and have attained age 55 and been employed for at least 5 years at the time of the grant or meet these criteria during the term of the grant, or have 25 years of service at the time of grant or meet that criterion during the term of the grant, will be subject to installment vesting rules over the four-year period. All outstanding unvested equity awards are subject to “double trigger” vesting and will

 

56    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


       Executive Compensation: Tabular and Other Executive Compensation Disclosure

 

 

not vest immediately upon a change of control unless the recipient does not receive a qualified replacement award. Stock options and restricted stock will vest immediately if the grantee dies while employed by the Company.

Forfeiture and Post-Employment Treatment

The unvested portion of a stock option award (and the right to acquire the underlying shares) is generally forfeited at termination of employment (unless employment terminates on account of death). The vested portion of a stock option award (and the right to acquire the underlying shares) is forfeited following termination of employment and expiration of the applicable post-employment exercise period and also may be forfeited in the case of a termination of employment for “Cause.” Unvested restricted stock is forfeited at termination of employment, unless employment terminates on account of death. Unvested equity awards are subject to “double trigger” vesting upon a change in control, as described above. See “STERIS Equity Incentive Plan” beginning on page 62 for additional information.

Dividends

Dividends are payable on restricted stock at the same times and in the same amounts as payable generally from time to time on our outstanding Shares. Dividend equivalents are payable on restricted stock units at the same times and in the same amounts as dividends are payable generally from time to time on our outstanding shares.

Option Exercise Price

Options granted under the 2006 Plan for fiscal 2018 and prior fiscal years have an exercise price equal to the NYSE Composite Transaction Reporting System closing price of our Shares on the effective date of the grant, which may not be earlier than the approval date. The Company’s May 2018 stock option awards and all subsequent stock option grants all have an exercise price of 110% of the NYSE Composite Transaction System closing price of our shares on the effective date of the grant, which effective date may not be earlier than the approval date. The Company intends to continue granting options at a premium option price of 10% in excess of grant date market value.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    57


       Executive Compensation: Tabular and Other Executive Compensation Disclosure

 

 

OUTSTANDING EQUITY AWARDS ON MARCH 31, 2021

 

   
 

 

  Option Awards     Stock Awards*  
               
Name   Option
Grant
Date
    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price ($)
    Option
Expiration
Date
    Stock
Award
Grant
Date
    Number of
Shares or Units
of Stock That
Have Not
Vested (#)
   

Market Value of
Shares or Units of
Stock That Have
Not Vested

($)(1)

 

  Walter M Rosebrough, Jr.

               
 

 

5/30/2017

 

 

 

0

 

 

 

34,000

 

 

 

77.07

 

 

 

5/30/2027

 

                       
 

 

5/31/2018

 

 

 

68,134

 

 

 

68,134

 

 

 

114.22

 

 

 

5/31/2028

 

                       
 

 

5/31/2019

 

 

 

27,801

 

 

 

83,403

 

 

 

147.05

 

 

 

5/31/2029

 

                       
 

 

6/01/2020

 

 

 

0

 

 

 

99,464

 

 

 

182.22

 

 

 

6/01/2030

 

                       
                                         

 

5/30/2017

 

 

 

4,000

 

 

 

761,920

 

                                         

 

5/31/2018

 

 

 

6,194

 

 

 

1,117,833

 

                                         

 

5/31/2019

 

 

 

7,791

 

 

 

1,484,030

 

           

 

6/01/2020

 

 

 

8,868

 

 

 

1,689,177

 

  Michael J. Tokich

               
 

 

8/10/2015

 

 

 

20,000

 

 

 

0

 

 

 

67.98

 

 

 

8/10/2025

 

                       
 

 

6/01/2016

 

 

 

30,000

 

 

 

0

 

 

 

69.72

 

 

 

6/01/2026

 

                       
 

 

5/30/2017

 

 

 

24,000

 

 

 

8,000

 

 

 

77.07

 

 

 

5/30/2027

 

                       
 

 

5/31/2018

 

 

 

23,332

 

 

 

23,332

 

 

 

114.22

 

 

 

5/31/2028

 

                       
 

 

5/31/2019

 

 

 

12,029

 

 

 

36,087

 

 

 

147.05

 

 

 

5/31/2029

 

                       
 

 

6/01/2020

 

 

 

0

 

 

 

44,472

 

 

 

182.22

 

 

 

6/01/2030

 

                       
                                         

 

5/30/2017

 

 

 

6,000

 

 

 

1,142,880

 

                                         

 

5/31/2018

 

 

 

4,240

 

 

 

807,635

 

                                         

 

5/31/2019

 

 

 

2,780

 

 

 

529,534

 

           

 

6/01/2020

 

 

 

2,452

 

 

 

467,057

 

  Daniel A. Carestio

               
 

 

5/30/2017

 

 

 

0

 

 

 

4,500

 

 

 

77.07

 

 

 

5/30/2027

 

                       
 

 

5/31/2018

 

 

 

14,932

 

 

 

14,932

 

 

 

114.22

 

 

 

5/31/2028

 

                       
 

 

10/01/2018

 

 

 

4,734

 

 

 

4,734

 

 

 

125.58

 

 

 

10/1/2028

 

                       
 

 

5/31/2019

 

 

 

7,217

 

 

 

21,651

 

 

 

147.05

 

 

 

5/31/2029

 

                       
 

 

6/01/2020

 

 

 

0

 

 

 

26,776

 

 

 

182.22

 

 

 

6/01/2030

 

                       
                                         

 

5/30/2017

 

 

 

5,500

 

 

 

1,047,640

 

                                         

 

5/31/2018

 

 

 

2,712

 

 

 

516,582

 

                                         

 

10/01/2018

 

 

 

1,748

 

 

 

332,959

 

                                         

 

5/31/2019

 

 

 

5,008

 

 

 

953,924

 

           

 

6/01/2020

 

 

 

4,432

 

 

 

844,207

 

  J. Adam Zangerle

               
 

 

8/10/2015

 

 

 

8,000

 

 

 

0

 

 

 

67.98

 

 

 

8/10/2025

 

                       
 

 

6/01/2016

 

 

 

15,000

 

 

 

0

 

 

 

69.72

 

 

 

6/01/2026

 

                       
 

 

5/30/2017

 

 

 

10,5000

 

 

 

3,500

 

 

 

77.07

 

 

 

5/30/2027

 

                       
 

 

5/31/2018

 

 

 

10,768

 

 

 

10,768

 

 

 

114.22

 

 

 

5/31/2028

 

                       
 

 

5/31/2019

 

 

 

4,811

 

 

 

14,433

 

 

 

147.05

 

 

 

5/31/2029

 

                       
 

 

6/01/2020

 

 

 

0

 

 

 

18,168

 

 

 

182.22

 

 

 

6/01/2030

 

                       
                                         

 

5/30/2017

 

 

 

6,000

 

 

 

1,142,880

 

                                         

 

5/31/2018

 

 

 

3,636

 

 

 

692,585

 

                                         

 

5/31/2019

 

 

 

3,336

 

 

 

635,441

 

                                         

 

6/01/2020

 

 

 

3,008

 

 

 

572,964

 

  Cary L. Majors

               
 

 

5/31/2018

 

 

 

7,466

 

 

 

7,466

 

 

 

114.22

 

 

 

5/31/2028

 

                       
 

 

5/31/2019

 

 

 

3,207

 

 

 

9,621

 

 

 

147.05

 

 

 

5/31/2029

 

                       
 

 

6/01/2020

 

 

 

0

 

 

 

14,344

 

 

 

182.22

 

 

 

6/01/2030

 

                       
                                         

 

5/30/2017

 

 

 

6,500

 

 

 

1,238,120

 

                                         

 

5/31/2018

 

 

 

2,520

 

 

 

480,010

 

                                         

 

5/31/2019

 

 

 

2,224

 

 

 

423,628

 

                                           

 

6/01/2020

 

 

 

2,376

 

 

 

452,580

 

 

(1)

Market Value is computed by multiplying the number of shares or units of stock by the NYSE Composite Transaction Reporting System closing price of STERIS’s ordinary shares on March 31, 2021 of $190.48 per share.

 

58    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


       Executive Compensation: Tabular and Other Executive Compensation Disclosure

 

 

The vesting schedule for each grant in the table on the prior page is shown below, based on the option or stock award grant date, as applicable.

Option Awards Vesting Schedule

 

 
Grant Date    Vesting Schedule
8/10/2015    25% exercisable on 5/28/2016, 5/28/2017, 5/28/2018 and 5/28/2019 (Tokich and Zangerle)
6/01/2016    25% exercisable on 6/1/2017, 6/1/2018, 6/3/2019 and 6/1/2020 (Tokich and Zangerle)
5/30/2017    25% exercisable on 5/30/2018, 5/30/2019, 6/1/2020 and 6/1/2021 (Rosebrough, Tokich, Carestio and Zangerle)
5/31/2018    25% exercisable on 5/31/2019, 6/1/2020, 6/1/2021 and 5/31/2022
5/31/2019    25% exercisable on 6/1/2020, 6/1/2021, 5/31/2022 and 5/31/2023
6/01/2020    25% exercisable on 6/1/2021, 6/1/2022, 6/1/2023 and 6/1/2024

Stock Awards Vesting Schedule

 

 
Grant Date    Vesting Schedule*
  5/30/2017    100% on 6/1/2021 (Tokich, Carestio, Zangerle, and Majors)
  5/30/2017    25% on 5/30/2018, 25% on 5/30/2019, 25% on 6/1/2020 and 25% on 6/1/2021 under 55/5 Rule (Rosebrough)
  5/31/2018    100% on 5/31/2022 (Tokich, Carestio, Zangerle, and Majors)
  5/31/2018    25% on 5/31/2019, 25% on 6/1/2020, 25% on 6/1/2021 and 25% on 5/31/2022 under 55/5 Rule (Rosebrough)
  5/31/2019    100% on 5/31/2023 (Tokich, Carestio, and Majors)
  5/31/2019    75% on 5/31/2022 and 25% on 5/31/2023 under 55/5 Rule (Zangerle)
  5/31/2019    25% on 6/1/2020, 25% on 6/1/2021, 25% on 5/31/2022 and 25% on 5/31/2023 under 55/5 Rule (Rosebrough)
  6/1/2020    100% on 6/3/2024 (Majors)
  6/1/2020    50% on 6/1/2022, 25% on 6/1/2023 and 25% on 6/3/2024 under 55/5 Rule (Zangerle)
  6/1/2020    75% on 6/1/2023 and 25% on 6/3/2024 under 55/5 Rule (Tokich) and under 25 year Service Rule (Carestio)
  6/1/2020    25% on 6/1/2021, 25% on 6/1/2022, 25% on 6/1/2023 and 25% on 6/3/2024 under 55/5 Rule (Rosebrough)

 

*

All stock awards are restricted stock

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    59


       Executive Compensation: Tabular and Other Executive Compensation Disclosure

 

 

OPTION EXERCISES AND STOCK VESTED IN FISCAL 2021

 

 

 

  

 

Option Awards

     Stock Awards  
       
Name   

Number of Shares

Acquired on

Exercise (#)

    

Value Realized on

Exercise ($)(1)

    

Number of Shares

Acquired on

Vesting

(#)

    

Value Realized on

Vesting

($)(2)

 

 Walter M Rosebrough, Jr.(3)

           
  

 

28,085       

 

  

 

2,424,916     

 

                 
  

 

51,000       

 

  

 

3,921,451     

 

                 
  

 

51,000       

 

  

 

4,000,125     

 

                 
                    

 

4,000         

 

  

 

662,600      

 

                    

 

3,097         

 

  

 

513,018      

 

                    

 

2,597         

 

  

 

430,193      

 

        

 

4,681         

 

  

 

775,408      

 

 Michael J. Tokich(4) 

           
  

 

80       

 

  

 

10,678     

 

                 
  

 

27,920       

 

  

 

3,759,707     

 

                 
        

 

4,700         

 

  

 

778,555      

 

 Daniel A. Carestio(5) 

           
  

 

8,000       

 

  

 

812,829     

 

                 
  

 

15,000       

 

  

 

1,586,957     

 

                 
  

 

13,500       

 

  

 

1,418,834     

 

                 
        

 

2,500         

 

  

 

414,125      

 

 J. Adam Zangerle(6) 

           
  

 

12,252       

 

  

 

1,525,129     

 

                 
        

 

2,500         

 

  

 

414,125      

 

 Cary Majors(7)

           
  

 

3,000       

 

  

 

261,371     

 

                 
                      

 

2,500         

 

  

 

414,125      

 

 

(1)

Value realized on exercise equal to the difference between the market price (sale price on exercise date or closing price on exercise date, as applicable) of the option shares at exercise and the option exercise price, times the number of option shares being exercised.

 

(2)

Value realized based on the closing price of the shares on the date of vesting multiplied by the number of shares that vested on that date.

 

(3)

1,839 shares were withheld to cover the required tax withholding due on the vesting of the 4,000 restricted shares. These shares vested on June 1, 2020.

1,413 shares were withheld to cover the required tax withholding due on the vesting of the 3,097 restricted shares. These shares vested on June 1, 2020.

1,165 shares were withheld to cover the required tax withholding due on the vesting of the 2,597 restricted shares. These shares vested on June 1, 2020.

2,150 shares were withheld to cover the required tax withholding due on the vesting of the 4,681 restricted shares. These shares vested on June 1, 2020.

 

(4)

1,454 shares were withheld to cover the required tax withholding due on the vesting of the 4,700 restricted shares. These shares vested on June 1, 2020.

 

60    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


       Executive Compensation: Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control

 

 

(5)

747 shares were withheld to cover the required tax withholding due on the vesting of the 2,500 restricted shares. These shares vested on June 1, 2020.

 

(6)

771 shares were withheld to cover the required tax withholding on 2,500 restricted shares. These shares vested on June 1, 2020.

 

(7)

747 shares were withheld to cover the required tax withholding on 2,500 restricted shares. These shares vested on June 1, 2020.

Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control

We maintain various contracts, agreements, plans, and arrangements (collectively, agreements) that may provide for payments or the provision of other benefits to executive officers following or in connection with any termination or constructive termination of employment or a change in control of the Company or change in an executive officer’s responsibilities. Some of these agreements are available generally to all of our salaried employees on the same basis as, and do not discriminate in scope, terms or operation in favor of, our executive officers. None of the named executive officers are covered by a Company maintained defined benefit pension plan. All named executive officers are eligible for participation in the STERIS Corporation 401(k) Plan, a defined contribution arrangement. The only other agreements concerning compensation to which any of the named executive officers are party or in which any of the named executive officers participate, that are not available generally to all our salaried employees, are described below.

Senior Executive Severance Plan

In connection with the Redomiciliation, the Company approved the STERIS plc Senior Executive Severance Plan (the “Severance Plan”). The Severance Plan replaced Old STERIS’s Senior Executive Severance Plan (“Predecessor Plan”). The Severance Plan covers all persons who participated in the Predecessor Plan at the time of the Redomiciliation and remain employed by the Company and all persons who have since become executive officers. Additional participants include other employees of the Company and subsidiaries whose participation is approved by the Board or Compensation and Organization Development Committee of the Company. Executives currently covered by the Predecessor Plan will not become participants in the Severance Plan until their coverage by the Predecessor Plan ends. The Severance Plan provisions and benefit levels are the same as those contained in the Predecessor Plan. Under the Severance Plan, a participant who terminates employment for Good Reason (as defined in the Severance Plan), or whose employment is terminated other than for Cause (as defined in the Severance Plan), will be entitled to severance benefits. Generally, severance benefits will consist of severance pay equal to the participant’s annual base salary, prorated incentive compensation (bonus), and reimbursement for continuing medical and dental coverage. Payment of severance benefits is contingent on the participant’s execution of a release of claims in favor of the Company and its affiliates. If the termination is in conjunction with a Change in Control (as defined in the Severance Plan) and within specified time frames, the severance pay amount will equal two times the participant’s annual base salary. The Severance Plan or a participant’s participation in the Severance Plan may be terminated upon twelve months’ prior notice, with some limitations. A participant who is covered by both an agreement or other plan or arrangement providing benefits in the nature of severance and by the Severance Plan will be entitled to receive benefits under whichever provides for greater benefits, but not both.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    61


       Executive Compensation: Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control

 

 

STERIS Equity Incentive Plan

In conjunction with the Redomiciliation, the Company assumed and amended and restated the 2006 Long-Term Equity Incentive Plan of Old STERIS (“2006 Plan”), all effective March 28, 2018. Also in connection with the Redomiciliation, all outstanding 2006 Plan awards in respect of Old STERIS ordinary shares were converted into equity awards for the same number of Company ordinary shares, with the other terms and conditions of the awards remaining the same, except as otherwise required by law.

The Board has paramount authority for administration of the Plan. This authority has been largely delegated to the Board’s Compensation and Organization Development Committee (the “Compensation Committee”). The Plan also permits certain delegations to be made to or by the Chief Executive Officer with respect to matters not impacting Directors or executive officers.

The 2006 Plan authorizes the issuance or grant of various stock and stock related incentives, including stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, performance shares and other stock awards and other awards that may be denominated or payable in, valued in whole or in part by reference to or otherwise based on or related to, the Company’s shares or factors that may influence the value of its shares. Awards may be made to employees and non-employee directors. As of June 2, 2021, after giving effect to the Company’s regular annual equity award grants made on that date, there were approximately Three Million Two Hundred Seventy-One Thousand (3,271,000) ordinary shares remaining available for grant under the 2006 Plan. The aggregate 2006 Plan available share limit is reduced by the number of: (1) shares purchased pursuant to an option exercise, regardless of whether shares are tendered in payment of the option price; (2) shares withheld by STERIS to satisfy tax withholding obligations; and (3) shares covered by SARs to the extent the SAR is exercised and settled in shares, whether or not shares are actually issued upon exercise. Also, shares that are repurchased by STERIS with option right proceeds will not increase the aggregate Plan share limit described above. The 2006 Plan provides that the number of shares underlying awards that expire or are forfeited will not reduce the number of shares available for issuance under the Plan.

Repricing of options and SARs is prohibited under the 2006 Plan without shareholder approval. The 2006 Plan also provides that no stock options or SARs will be granted with an exercise or base price less than the fair market value of STERIS Shares on the date of grant. Beginning with the 2019 fiscal year, all stock option and SAR grants have an exercise price of 110% of the fair market value of STERIS shares on the grant date. Plan awards are made upon such terms as the Compensation Committee (or its delegate) may approve and are set forth in an evidence of award. Stock option awards to employees generally vest and become nonforfeitable in increments of 25% per year over a four-year period, with full vesting four years after the date of grant. Restricted stock awards to employee recipients generally cliff vest on the fourth anniversary of the grant date if the recipient remains in continuous employment through that date. However, certain employees who are grantees of restricted stock and have attained age 55 and been employed for at least 5 years at the time of the grant or meet these criteria during the term of the grant, may be subject to annual installment vesting rules over the four-year period. Also, employees who have at least 25 years of service at the time of grant or satisfy this requirement during the term of the grant, may be subject to annual installment vesting rules over the four-year period.

In general, upon termination of an award recipient’s employment, the nonvested portions of his or her stock option grants, restricted stock awards, and other equity incentive awards are immediately forfeited. However, unvested option grants and restricted stock awards will become vested and

 

62    Notice of Annual Meeting of Shareholders and 2021 Proxy Statement


       Executive Compensation: Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control

 

 

nonforfeitable upon an optionee’s death while employed and unvested restricted stock units and other equity incentive awards may be modified by the Company to give the award recipient the benefit of the award or unit through the date of death. Also, stock option and stock appreciation rights held by certain persons who are age 55 and have at least 5 years of service at termination, or who have at least 25 years of service at termination, may be exercisable for an extended period equal to the remaining term of the award. These extended exercise provisions are contingent upon the grantee remaining in Good Standing (as defined in the 2006 Plan) and not dying prior to expiration of the term, and are subject to the other 2006 Plan terms. If a recipient fails to remain in Good Standing, any outstanding stock options, restricted stock awards and other equity incentive compensation awards may be forfeited.

The 2006 Plan provides for “double trigger” vesting. Under these provisions, outstanding unvested equity awards will not vest upon a change in control unless the participant does not receive a qualifying replacement award. To qualify as a replacement award, the award must satisfy a number of criteria, including a requirement that the value of the replacement award be at least equal to the value of the award being replaced. The Board or Compensation Committee, as constituted immediately prior to the change in control, determines in its sole discretion whether the criteria have been satisfied. If a participant receives a qualifying replacement award, accelerated vesting will occur only to the extent the participant’s employment is terminated by the participant for Good Reason (as defined in the 2006 Plan) or by his or her employer other than for Cause or other Detrimental Activity (as defined in the 2006 Plan), within two years after the change in control. In general a change in control includes any of the following: the acquisition by any person or group of 25% or more of the combined voting power of the Company’s outstanding voting stock; certain changes in the composition of a majority of the Board membership; the consummation of certain reorganizations, mergers or consolidations or disposition of all or substantially all of the assets of the Company or certain other business transactions involving the Company; or approval by the shareholders of a complete liquidation or dissolution of the Company. The Redomiciliation did not constitute a change of control under the 2006 Plan.

In connection with the grant of stock options, restricted stock, restricted stock units and stock appreciation rights under the 2006 Plan, optionees and other award recipients agree to restrictive covenants which may include non-competition, non-interference and non-disclosure. If the recipient breaches any of these covenants, in addition to any other remedies the Company may have, awards then held by the recipient and stock then held that was received pursuant to awards may be forfeited.

Cantel Plans

Pursuant to the Company’s Merger Agreement for the acquisition of Cantel Medical Corp. (“Cantel”) the Company agreed that upon closing of the acquisition, the Company would assume the Cantel 2016 Incentive Plan and the Cantel 2020 Equity Incentive Plan (collectively the “Cantel Plans”) and the outstanding equity awards thereunder. These awards consist solely of time-vesting restricted stock units and performance stock units. In accordance with the Merger Agreement provisions, all of these awards were converted at the closing to time-vesting restricted stock units of STERIS at the general stock exchange conversion ratio calculated in accordance with the Merger Agreement, with the conversion of performance stock units being based on target performance. In conjunction with the merger, the Board of the Company determined that no further awards would be made under the Cantel Plans and the Cantel Plans were amended accordingly, thereby permanently freezing the Cantel Plans.

 

Notice of Annual Meeting of Shareholders and 2021 Proxy Statement    63


       Executive Compensation: Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control

 

 

Management Incentive Compensation Plan

The Company maintains a Management Incentive Compensation Plan (“MICP”). The MICP covers most management employees of the Company and its subsidiaries. The CEO and all executive officers, including all of the named executive officers, were covered by the MICP, as described below, for fiscal 2021.

The MICP provides annual incentive compensation to participants based upon achievement of financial and other objectives. Each MICP participant is assigned annually a “target” bonus based upon his or her position and level of responsibility within the Company. The target bonus is an amount equal to the percentage of the participant’s base salary that he or she would receive as a bonus if all of the objectives established for, or otherwise applicable to, the participant are achieved. Achievement is determined generally utilizing Company-wide financial metrics and financial objectives. If the objectives are exceeded, a larger bonus may be payable. If the objectives are not attained, a smaller bonus or no bonus may be payable. In no case will the bonus payable to a participant exceed a cap of 200% of his or her target bonus. Generally, a participant is not entitled to a bonus in respect of a particular fiscal year unless he or she has remained in the employ of the Company through the end of that fiscal year, except to the extent a bonus payment may be otherwise contractually required.

Bonus payments are at the discretion of the Company’s Compensation and Organization Development Committee, which administers the MICP. The Compensation and Organization Development Committee reserves the discretion to modify, limit or deny any benefits that may otherwise be payable.

TABLES OF PAYMENT ESTIMATES

Introduction

The tables that follow estimate and summarize the potential payments and benefits under compensation and benefit plans and contractual agreements to which the named executive officers are a party or a participant that may be realizable by each of the named executive officers in the event of a termination of employment and/or change in control under the circumstances described in the footnotes and column headings to the tables, as supplemented by the narrative descriptions of agreements and/or plans addressing or containing provisions relating to change in control and/or termination payments and benefits. These narrative descriptions are found under “Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control” above beginning on page 61.

Excluded Amounts

The amounts shown in the tables that follow do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include accrued salary and vacation pay, and distributions of plan balances under our 401(k) plan.

 

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       Executive Compensation: Potential Payments to Named Executive Officers Upon Termination of Employment or Change in Control

 

 

Walter M Rosebrough, Jr.(1)

The table below describes those benefits to which Mr. Rosebrough would have been entitled under the Company’s Senior Executive Severance Plan (“Senior Executive Severance Plan”) and his equity awards under various scenarios, including change in control scenarios, as of March 31, 2021.

 

       
 

Termination by
the Company
without Cause or
Termination by
the  employee for
Good Reason
(2)

($)

Change in
Control

without
Termination and
no Qualifying
Replacement
Award

($)

Change in Control
without

Termination but
with Qualifying
Replacement
Award

($)

Change in

Control and

Termination by

the Company
without Cause
or Termination by
the employee for
Good Reason
(4

($))