Carpenter Technology Corporation
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

CARPENTER TECHNOLOGY CORPORATION

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  Fee paid previously with preliminary materials.
  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.

 

 

 


LOGO

CARPENTER TECHNOLOGY NOTICE OF 2021 Annual Meeting and Proxy Statement AEROSPACE & DEFENSE INDUSTRIAL & CONSUMER ENERGY MEDICAL TRANSPORTATION


LOGO

CARPENTER TECHNOLOGY CarpenterTechnology.com CARPENTER TECHNOLOGY STRATEGY Distinctive product and process capabilities Our driving force is to leverage our core technical strength in engineered materials and process capabilities to solve our customers' current and anticipated challenges. We will grow in market segments where we can provide differentiated and value-added solutions to complex problems. We will solidify our position as the industry leader by being the preferred solutions provider and providing our customers a competitive advantage. Areas of excellence Technology development Respond quickly to customer technical questions Rapidly translate customer needs into solutions Develop proprietary and breakthrough products Establish and maintain process expertise and excellence Capture internal "know-how" Operational excellence Be safe and compliant Practice system thinking Develop and execute standard work Identify and eliminate waste Employ root cause problem solving Perform daily management Control key process variables Strategic marketing Think, act and execute in a future outcome manner Translate broad strategies into actionable plans Demonstrate market knowledge Segment and target markets based on potential value and growth Provide timely customer solutions Support the go-to-market approach and advantage Talent engagement Acquire talent on an ongoing basis Provide an attractive mix of rewards and recognition Sustain a high-performance environment Employ a living, strategic work plan Develop talent based upon criticality to the organization Anticipate changing requirements of a shifting workforce and marketplace Create compelling careers


LOGO

September 16, 2022

Dear Stockholders:

You are cordially invited to attend the 2022 Annual Meeting of Stockholders of Carpenter Technology Corporation to be held on October 11, 2022, at 11:00 a.m. Eastern Daylight Time. This year’s Annual Meeting will again be completely virtual. You will be able to attend the Annual Meeting as well as vote and submit your questions during the live webcast of the meeting by visiting www.virtualshareholdermeeting.com/CRS2022. Details regarding admission to the meeting and the business to be conducted are provided in the accompanying Notice of Annual Meeting and Proxy Statement.

Fiscal year 2022 marked a turning point for Carpenter Technology in the post-COVID-19 recovery. Over the course of the year, we saw the return of a strong demand environment in each of the end-use markets we serve most significantly as the Aerospace industry and related supply chains began to ramp up their activity to meet build rates. The result was record backlogs and bookings with improving profitability. We expect that the momentum generated in the second half of fiscal year 2022 will carry into fiscal year 2023 and beyond.

A few highlights from the year:

 

   

We achieved a Total Case Incident Rate (TCIR) of 1.0 for the year, which is significantly below industry averages. Our ultimate goal is to be a zero-injury workplace, and we continue to emphasize a safety culture, mindset and focus.

 

   

We navigated through significant challenges including an unplanned outage of our Reading, PA press, continued COVID-19 isolations, a difficult hiring environment and other supply chain challenges.

 

   

We maintained a strong liquidity position, and we extended our debt maturities profile with the completion of a notes refinancing offering during the year.

 

   

We realized price gains through contract negotiations with customers across end-markets and increased base prices on transactional business multiple times over the course of the fiscal year.

 

   

We advanced our ESG-related activities and disclosures, including our first Task Force on Climate-related Financial Disclosures (TCFD), detailing our strategy to address environmental risks, our target Green House Gas (GHG) emissions reduction, and our roadmap to achieve that goal.

 

   

We demonstrated our continued commitment to provide direct returns to our stockholders as fiscal year 2022 marks our 115th straight year of uninterrupted dividend payments.

We continue to execute our strategy to be the preferred solutions provider in specialty materials with a reputation for zero injuries, unquestionable quality, intimate customer connections, innovative growth, creative technology and engaged talent. We look forward to building on our success and accelerating our growth in the coming year.

Thank you for your continued support and confidence in Carpenter Technology. I hope you can join us at the Annual Meeting.

 

 

         LOGO

 

Sincerely,

 

LOGO

 

Tony R. Thene

President & Chief Executive Officer


Notice of Annual Meeting

of Stockholders

 

 

 

 

Carpenter Technology Corporation will hold its 2022 Annual Meeting of Stockholders virtually via live webcast at www.virtualshareholdermeeting.com

/CRS2022 on Tuesday, October 11, 2022, at 11:00 a.m. We will vote on the following matters:

 

1.

The election of four directors to three-year terms expiring in 2025;

 

2.

Approval of the appointment of PricewaterhouseCoopers LLP as Carpenter Technology’s independent registered public accounting firm for fiscal year 2023;

 

3.

Approval of our named executive officers’ compensation, in an advisory vote;

 

4.

Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees; and

 

5.

Any other business that is properly presented at the meeting.

The 2022 Annual Meeting of Stockholders of Carpenter Technology Corporation will be held in a virtual meeting format only, via live webcast. We believe that holding the Annual Meeting virtually will allow us to increase stockholder accessibility and to broaden participation.

Only stockholders who were record owners of our common stock at the close of business on August 12, 2022, may vote at the meeting. A list of those stockholders will be available during the meeting on the internet at www.virtualshareholdermeeting.com/CRS2022. Carpenter Technology’s Board of Directors solicits this proxy.

How to Vote:

It is important that you vote your shares. We encourage you to take advantage of the easy and cost-effective internet and telephone voting that Carpenter Technology offers.

 

       

LOGO

 

 

Internet:

 

Visit the website listed on your proxy card. You will need the control number that appears on your proxy card when you access the web page.

 

   

    

 

 

 

LOGO

 

Mail:

 

Complete and sign the proxy card and return it in the enclosed postage pre-paid envelope.

       
       

LOGO

 

Telephone:

 

If your shares are held in the name of a broker, bank, or other nominee: Follow the telephone voting instructions, if any, provided on your proxy card. If your shares are registered in your name: Call 1-800-690-6903 and follow the telephone voting instructions. You will need the control number that appears on your proxy card when you call.

 

   


    

 

 

 

 

LOGO

 

At the Meeting:

 

You may attend the Annual Meeting virtually and vote during the live webcast at www.virtualshareholdermeeting.com /CRS2022.

Important notice regarding the availability of proxy materials for the Annual Meeting to be held on October 11, 2022. This Proxy Statement and our Annual Report to Stockholders for the fiscal year ending June 30, 2022, are available electronically at www.proxyvote.com.

Selected information from Carpenter Technology’s 2022 Annual Report on Form 10-K, including financial statements, is being delivered along with this Proxy Statement, but is not incorporated as part of the Proxy Statement and is not to be considered part of the proxy solicitation material.

This Proxy Statement and the accompanying Notice of Annual Meeting of Stockholders are being sent to stockholders on or about September 16, 2022.

On behalf of the Board of Directors,

 

 

LOGO

 

 

James D. Dee

Senior Vice President, General Counsel and Secretary

 

 

   
  

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Table of Contents

 

Proxy Summary     6  
Proposal No. 1 – Election of Directors     10  
Nomination Process and Criteria for Selection     10  
Director Skills Summary     11  
Nominees     12  
Corporate Governance     19  
Board Information     19  

Majority Voting Standard for Election of Directors

    19  

Board Independence

    19  

Board Leadership Structure

    19  

Meetings of the Board, Committees and Independent Directors

    19  

Board Committees

    20  
Board of Directors’ Role in Risk Oversight     22  
Stockholder Engagement and Communication with the Board     23  
Transactions with Related Parties     24  
Compensation Committee Interlocks and Insider Participation     24  
Delinquent Section 16(a) Reports     24  
Corporate Responsibility and Sustainability     25  
Environmental, Social and Governance (“ESG”) Overview     25  

Environmental

    25  

Social

    27  

Governance Policies and Practices

    28  
Security Ownership of Principal Beneficial Owners     30  
Directors, Nominees and Management Stock Ownership     31  
Director Compensation     33  
Fiscal Year 2022 Director Compensation Table     35  
Proposal No. 2 – Approval of Appointment of Independent Registered Public Accounting Firm     37  
Audit/Finance Committee Report     39  
Proposal No. 3 – Advisory Vote to Approve the Compensation of our Named Executive Officers     41  
Human Capital Management Committee Report     42  
Proposal No. 4 – Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees     43  
Compensation Discussion and Analysis (Table of Contents)     57  
Executive Compensation (Table of Contents)     80  
General Information     97  

Why We Solicit Proxies

    97  

Method and Cost of Solicitation

    97  

Who Can Vote

    97  

How to Vote

    97  

Broker Non-Votes and Abstentions

    98  

Quorum and Required Votes

    99  

If You Change Your Mind After Voting

    99  

Stockholder Nominations to the Board of Directors

    99  

2023 Stockholder Proposals

    99  

Householding of Proxy Materials

    100  

Where You Can Find More Information

    100  
Other Matters     100  
Exhibit A     A-1  
 

 

Forward-Looking Statements: This Proxy Statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. Words such as “guidance,” “believe,” “expect,” “anticipate,” “project” and similar expressions may identify forward-looking statements. Please read these forward-looking statements in conjunction with our Annual Report on Form 10-K, which identifies factors that could cause future results to differ materially from forward-looking statements, expectations, and assumptions expressed or implied in this Proxy Statement.

Website References: No websites that are cited or referred to in this Proxy Statement shall be deemed to form a part of, or to be incorporated by reference into, this Proxy Statement or any of our filings with the Securities and Exchange Commission.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  


 

Proxy Summary

 

 

 

Annual Meeting of Stockholders

 

Meeting Date:

October 11, 2022

 

Time:

11:00 a.m.

 

Held Virtually at:

www.virtualshareholder
meeting.com/CRS2022

 

Record Date:

August 12, 2022

 

This summary gives you an overview of selected information in this year’s proxy. Please read the entire proxy before voting.

Agenda and Voting Matters

 

Proposal

 

  

Board

Recommendation

 

  

Page

Reference

 

 

 

1. Election of four directors to three-year terms expiring in 2025

 

  

 

For all nominees

 

    

 

 

10

 

 

 

 

 

 

2. Ratification of PricewaterhouseCoopers LLP as our independent auditors for fiscal year 2023

 

  

 

For

 

    

 

 

37

 

 

 

 

 

 

3. Advisory vote to approve the compensation of our named executive officers

 

  

 

For

 

    

 

 

41

 

 

 

 

 

 

4. Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees

 

  

 

For

 

    

 

 

43

 

 

 

 

 

Director Nominees: Terms to Expire 2025

 

Name

 

 

Director
Since

 

   

Experience and
Qualifications

 

 

Board
Committees

 

 

Board
Tenure

 

 

 

Dr. Viola L. Acoff

 

 

 

 

2019

 

 

 

 

Metallurgical, Advanced Materials, and Innovation Experience

 

 

 

  Corporate Governance

  Human Capital Management

  Science and Technology

 

 

 

 

 

3 years

 

 

 

Dr. Kathy Hopinkah Hannan

 

 

 

 

2022

 

 

 

 

Accounting and Financial Expertise, Strategy and Leadership Experience

 

 

 

  Audit/Finance

  Strategy

 

 

 

 

5 months

 

 

 

I. Martin Inglis

 

 

 

 

2003

 

 

 

 

Chief Operating Officer and Chief Financial Officer Experience

 

     

 

 

 

19 years

 

 

 

Stephen M. Ward, Jr.

 

 

 

 

2001

 

 

 

 

Chief Executive Officer and Chief Information Officer, Innovation and Digital Transformation Experience

 

 

 

  Corporate Governance (Chair)

  Human Capital Management

  Science and Technology

 

 

 

 

21 years

 

 

 

LOGO

 

   

6

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Proxy Summary • Governance Highlights    

 

 

Governance Highlights

Our commitment to good corporate governance is illustrated by the following practices:

 

  Board independence (10 out of 11 directors are independent)

 

  Strong corporate governance guidelines and policies

 

  Diversity of Board skills and experience

 

  Robust stock ownership guidelines for Directors and Executive Management

 

  Directors attended all Board and Committee meetings in fiscal year 2022

 

  Separate Chairman and Chief Executive Officer

 

  Succession planning process
  Majority voting with Director resignation policy for uncontested elections

 

  Stockholder outreach program

 

  Director training and education

 

  Annual Board and Committee evaluations

 

  Mandatory retirement policy

 

  Board risk oversight and assessment

 

  Independent Directors meet in executive sessions without management present
 

 

Compensation Governance Practices

Our executive compensation program reflects the Board’s strong commitment to good governance.

 

       

What we do

       

Balanced portfolio: The program design provides a balanced mix of cash and equity, annual and long-term incentives, and performance metrics (financial and operational goals).

 

Double-trigger benefits: We have a double-trigger for change-in-control separation benefits. This means that a change-in-control of Carpenter Technology alone does not trigger any severance obligations to our Named Executive Officers (“NEOs”) under our Change in Control Severance Plan or vesting of awards.

 

Clawback policy: We have a clawback policy that applies to both annual cash bonuses and short- and long-term cash incentives, as well as equity awards for NEOs and other senior executives.

 

Key practices: The Human Capital Management Committee (formerly the Compensation Committee) analyzes performance against robust and diversified performance metrics, ensures substantial equity ownership guidelines, annually reviews compensation peer groups, and provides and oversees limited perquisites.

 

    

Equity ownership guidelines: We maintain equity ownership guidelines that require Corporate Vice Presidents and above to achieve an equity ownership level, over a five-year period, equal to a certain multiple of base salary. For the CEO, the level is 5x base salary; for Senior Vice Presidents, 3x base salary; and for Corporate Vice Presidents, 2x base salary.

 

Independent compensation consultants: We engage independent compensation consultants who provide information to support the Human Capital Management Committee’s work, including a peer group analysis, market compensation data, and an analysis of various compensation instruments and metrics.

 

Risk assessment: The Human Capital Management Committee reviews an annual assessment by the independent compensation consultant to confirm that metrics and goals are appropriate to drive high performance without encouraging risk-taking beyond established risk parameters.

  

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

7


 

    Proxy Summary • Compensation Governance Practices    

 

 

       

What we don’t do

       

Excise tax gross-ups: The compensation program does not include any change in control tax gross-ups to our executives.

 

Dividend payments or accruals on unearned restricted stock units (“RSUs”): We do not pay or accrue dividends on unearned RSUs. Dividend equivalents are paid on time-based RSU awards granted prior to October 8, 2019, and will only be paid upon satisfaction of the terms and conditions applicable to the underlying RSUs on time-based RSU awards granted on or after October 8, 2019. Additionally, no dividend equivalent rights are granted on shares underlying stock options.

 

Excessive perquisites: We do not provide excessive perquisites to our NEOs. Those offered are primarily financial and tax counseling, tax preparation, medical examinations, individual disability income protection plans, relocation expenses and parking fees at our Philadelphia headquarters.

 

    

Hedging/pledging of company stock: Our policy prohibits hedging or pledging of Carpenter Technology stock by NEOs.

 

Option repricing: Our long-term incentive plan does not permit repricing of stock options without stockholder approval. Additionally, the plan does not permit Carpenter Technology to offer a cash buyout of underwater options.

 

Employment contracts: We do not provide employment contracts to our NEOs.

  

 

   

8

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Proxy Summary • Stockholder Engagement and Advisory Say-On-Pay Vote    

 

 

 

LOGO

 

Pay for Performance

Our compensation program targets market median positioning but is strongly focused on delivering a substantial portion of that compensation through performance-based compensation elements. This ensures proper alignment with our stockholders and ties the ultimate value delivered to NEOs (above/below target) to Carpenter Technology’s performance.

Target Direct Compensation Mix – CEO

 

 

LOGO

Target Direct Compensation Mix – NEOs*

 

 

LOGO

 

*

Represents target pay mix for Messrs. Dee, Graf, Lain and Malloy.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

9


Proposal 1:

Election of Directors

Carpenter Technology has a strong Board, bringing diverse experience and perspectives in areas vital to our business of manufacturing, fabricating and distributing specialty metals, including products for critical industries in aerospace, defense, medical, energy, transportation, and industrial and consumer end-use markets.

Our Board has eleven directors that serve in three classes, with each class serving for three-year terms. The term of office of one class of directors expires each year at the Annual Meeting. Dr. Viola L. Acoff, Dr. Kathy Hopinkah Hannan, I. Martin Inglis and Stephen M. Ward, Jr., have been re-nominated for election at the 2022 Annual Meeting of Stockholders to serve for an additional term. If elected, their terms will expire at the 2025 Annual Meeting.

Unless otherwise directed by the stockholders, the shares represented by proxies will be voted for the four nominees. Each nominee has consented to being nominated as a director and is expected to serve as a director if elected.

Majority voting standard: Generally, directors will be elected by a majority of the votes cast. In the event of a contested election, where the number of candidates exceeds the number of directors to be elected, directors will be elected by a plurality of the votes cast.

Resignation policy: If an incumbent director fails to obtain the required majority vote in an uncontested election, that director must promptly tender a resignation to the Board. The Corporate Governance Committee will recommend to the Board whether to accept or reject the resignation. The Board will then decide whether to accept or reject the resignation and publicly disclose its decision within 90 days following certification of the election results.

Mandatory retirement policy: All non-management directors must retire at the Annual Meeting of Stockholders that occurs after the director attains age 72 unless the Board determines there are extraordinary circumstances that warrant a longer tenure. A management director (officer of Carpenter Technology) must retire from the Board at the earlier of attaining age 65 or retiring as an officer of Carpenter Technology.

Dr. Jeffrey Wadsworth has attained the mandatory retirement age and will retire from the Board at this year’s Annual Meeting of Stockholders.

Mr. Inglis will attain age 72 on October 2, 2022. The Board has determined by resolution that his tenure be extended until expiration of his elected term in 2025 due to his outstanding leadership and extensive financial and operational management experience.

Nomination Process and Criteria for Selection

The Board’s Corporate Governance Committee is responsible for identifying and recommending qualified individuals to become members of the Board of Directors. Candidates are considered for nomination based upon various criteria, including their general training and experience in business, science, engineering, finance or administration, and their personal integrity and judgment. The Corporate Governance Committee will review and consider any candidates for director recommended by a stockholder of record who is entitled to vote at an annual meeting and who satisfies the notice, information and consent provisions set forth in Carpenter Technology’s By-Laws. The Corporate Governance Committee will use the same evaluation criteria and process for director nominees recommended by stockholders as it uses for other director nominees. The Corporate Governance Committee functions pursuant to a written charter that was adopted and is reviewed annually by the Board. A copy of the charter is posted on Carpenter Technology’s website at www.carpentertechnology.com.

In evaluating candidates to recommend to the Board of Directors, the Corporate Governance Committee considers whether a candidate enhances the diversity of the Board. The Corporate Governance Committee considers a number of characteristics, including each candidate’s professional background and capabilities, knowledge of specific industries, and experience working outside the United States. We believe the foremost responsibility of a Carpenter Technology director is to represent the interests of stockholders, which requires directors to have time available to devote to Board activities. Accordingly, Carpenter Technology seeks to attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities to Carpenter Technology. Carpenter Technology believes there should be mostly independent directors on the Board, and it is our policy to avoid nominating outside professionals, such as lawyers, investment bankers, or accountants, whose firms provide services to Carpenter Technology.

 

   

10

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Proposal 1: Election of Directors    

 

 

Director Skills Summary

Our Board of Directors brings diverse experience and perspectives to areas critical to our business. Their collective knowledge ensures appropriate management and risk oversight and supports our strategy of long-term sustainable stockholder value creation.

 

Director Name

 

  

CEO
Experience

 

  

Key Industry
Experience

 

  

Operational
Manufacturing
Experience

 

  

Financial
Experience

 

  

Strategy
Experience

 

  

International
Experience

 

  

R&D or Innovation
Experience

 

 

Dr. Viola L. Acoff

       

 

 

                      

 

 

Dr. Kathy Hopinkah Hannan

       

 

 

 

       

 

 

  

 

 

  

 

 

    

 

Dr. A. John Hart

       

 

                      

 

 

 

I. Martin Inglis

       

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Steven E. Karol

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

    

 

Kathleen Ligocki

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

    

 

Charles D. McLane, Jr.

       

 

       

 

 

  

 

 

         

 

Tony R. Thene

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

    

 

 

Dr. Jeffrey Wadsworth

  

 

 

  

 

 

       

 

 

  

 

 

       

 

 

 

Stephen M. Ward, Jr.

  

 

 

  

 

 

    

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ramin Younessi

       

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

 

 

 

LOGO

 

 

 

 

 

 

 

FOR

  

 

The Board of Directors recommends that you vote FOR the election of Dr. Viola L. Acoff, Dr. Kathy Hopinkah Hannan, I. Martin Inglis and Stephen M. Ward, Jr

 

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

11


 

    Proposal 1: Election of Directors    

 

 

Nominees

 

Terms to Expire 2025

 

Dr. Viola L. Acoff

 

Dr. Acoff is currently the Associate Dean for Undergraduate and Graduate Programs at The University of Alabama College of Engineering, a position she has held since 2014. Dr. Acoff joined the faculty at The University of Alabama in 1994. Since 2004, she has been a full professor in the University’s Department of Metallurgical and Materials Engineering, where she served as Department Head from 2009 to 2014. Dr. Acoff also led the Department of Chemical and Biological Engineering. She received a Doctor of Philosophy in Materials Engineering and holds graduate and undergraduate degrees in the same field. All degrees were earned at the University of Alabama at Birmingham.

 

Dr. Acoff also serves on the TMS Foundation Board of Directors, the Executive Board of Boy Scouts of America (Black Warrior Council), the Board of Trustees for TMS Foundation, and the Four Little Girls Memorial Fund. She holds multiple awards, honors, and publications.

 

    

LOGO

 

Associate Dean for Undergraduate and Graduate Programs at The University of Alabama College of Engineering

 

AGE                    DIRECTOR SINCE

 

55                2019

 

COMMITTEES

  Corporate Governance

  Human Capital Management

  Science and Technology

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIPS
0

 

 

Qualifications

       

 

  Innovation Experience

  Research and Development

  Intellectual Property

 

  

 

Dr. Acoff’s qualifications include, among other things, her expertise in additive manufacturing, advanced materials, welding metallurgy, physical metallurgy and materials characterization. Additionally, Dr. Acoff’s strong background as a professor in the metallurgical and materials area enables her to contribute valuable knowledge to our Board.

 

  

 

Dr. Kathy Hopinkah Hannan

 

Dr. Hannan is a former partner with KPMG, where she held several global leadership roles during her distinguished 30-year career. Her roles included Global Lead Partner & National Managing Partner for Diversity & Corporate Responsibility, Vice Chairman of Human Resources, and as a leader in KPMG’s tax practice. In addition, she served on KPMG’s U.S. and Americas Management Committees and as a member of the Board of Trustees of The KPMG Foundation.

 

Dr. Hannan currently serves on the Boards of Otis Worldwide Corporation, Annaly Capital Management, Inc., and Ginkgo Bioworks. She also serves on the Board of Trustees of the Smithsonian National Museum of the American Indian (NMAI). Dr. Hannan holds a bachelor’s degree in Accounting from Loras College, and a PhD in Leadership/Ethics from Benedictine University. She is a Certified Public Accountant.

 

    

LOGO

 

Former Partner with KPMG

 

AGE                     DIRECTOR SINCE

 

61                2022

 

COMMITTEES

  Audit/Finance

  Strategy

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIP
3

  Otis Worldwide Corporation

  Annaly Capital Management, Inc.

  Ginkgo Bioworks

 

 

Qualifications

       

 

  Financial Experience

  Strategic Experience

  Leadership Experience

  

 

Dr. Hannan’s qualifications include, among other things, her extensive accounting and financial expertise. Dr. Hannan’s strategy and leadership experience enable her to share valuable perspectives on a variety of issues.

 

  

 

   

12

  

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Proposal 1: Election of Directors    

 

 

I. Martin Inglis

 

Mr. Inglis joined Battelle, a research and development enterprise headquartered in Columbus, Ohio, in 2004, and served as Executive Vice President and Chief Operating Officer, retiring in July 2014. Through July 2013, he also served as Chief Financial Officer. Previously, he had retired as Group Vice President, Business Strategy for Ford Motor Company. He joined Ford of Europe in London in 1971 and held various finance and operations positions in international and domestic markets. He was named head, Global Products and Business Strategy, and elected a corporate Vice President in 1996; President, Ford South America, in 1999; head, Ford North America, in 2000; and Chief Financial Officer in 2001. Mr. Inglis also served on the Advisory Board of three venture funds (Reservoir Ventures, Battelle Ventures, and Fletcher Spaght), stepping down in mid-2015 from the first two.

 

Mr. Inglis is active in local charities and serves on the Board of Breckenridge Creative Arts where he is the Chairman. He served as the Chairman of the Columbus Symphony Orchestra for six years through 2014. He holds a bachelor’s degree in business economics from Strathclyde University, Glasgow, Scotland.

 

    

LOGO

 

Chairman, Carpenter Technology
Corporation; Retired Chief Operating
Officer, Battelle; Previous Chief
Financial Officer, Ford Motor Company

 

AGE                     DIRECTOR SINCE

 

71                2003

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIPS
0

 

Qualifications

       

 

  Financial Experience

 

  Strategic Experience

 

  Labor Relations

 

  

 

Mr. Inglis’ qualifications include, among other things, his extensive financial expertise and background as a Chief Financial Officer in both the public and private sectors. Additionally, Mr. Inglis’ substantial operational and labor relations experience and broad international knowledge enable him to provide valuable perspective to support Carpenter Technology’s growth strategies.

 

  

 

Stephen M. Ward, Jr.

 

Mr. Ward is the retired President and Chief Executive Officer of Lenovo Corporation, the international computer company formed by the acquisition of IBM’s PC business by Lenovo. Mr. Ward is a member of the founding team of C3.ai, the leading developer of Artificial Intelligence enterprise platforms and serves as a board member and Compensation Committee Chairperson.

 

Prior to joining Lenovo, Mr. Ward was senior vice president and general manager of IBM’s Personal Systems Group, responsible for the Personal Computing Division, the Retail Store Solutions Division, and the Printing Systems Division. In his 26-year career with IBM, he also served as IBM’s Chief Information Officer, and IBM Vice President of Business Transformation, directing business process and information technology investments. Mr. Ward was also general manager of IBM’s Global Industrial Sector, responsible for the marketing, sales, and service of IBM products and services to all manufacturing and industrial companies worldwide and General Manager of the IBM ThinkPad product lines. Mr. Ward began his career at IBM as an engineer in the Storage Products Division. He held various management positions in manufacturing, production control, and project development for disk drive, tape, and optical storage projects and software development, and was also an assistant to the IBM chairman.

 

Previously, he held positions on the boards of Lenovo, E-Ink, E2open, where he was a co-founder, QDVision, KLX Aerospace, KLXE Energy, and Vonage Holdings Corp. Mr. Ward earned a BS degree in mechanical engineering from California Polytechnic State University at San Luis Obispo.

 

    

LOGO

 

Retired President and Chief Executive
Officer, Lenovo Corporation

 

AGE                      DIRECTOR SINCE

 

67                2001

 

COMMITTEES

  Corporate Governance (Chair)

  Human Capital Management

  Science and Technology

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIPS
1

  C3.ai

 

Qualifications

       

 

  Chief Executive Officer

 

  Chief Information Officer

 

  Information Technology and Digital Transformation

 

  Innovation Experience

 

  International Experience

 

  Financial Experience

 

  

 

Mr. Ward’s qualifications include, among other things, his broad executive experience and focus on General Management, Digital Transformation, Cyber, and Product and Services innovation, which enable him to share with the Board valuable perspectives on a variety of issues relating to management, strategic planning, tactical capital investments, and international growth.

 

  

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

13


 

    Proposal 1: Election of Directors    

 

 

Terms to Expire 2023

 

Steven E. Karol

 

Mr. Karol is Managing Partner and founder of Watermill Group, a private investment firm specializing in strategic and operational management. He serves on the Boards of private companies owned by the Watermill Group, including Quality Metalcraft, Inc., Experi-Metal, Inc., Cooper and Turner, LTD., Beck Industries, Weston Industries, ILS, Inc. and ENBI Global, Inc. Additionally, Mr. Karol is Chairman of the Board and CEO of HMK Enterprises, Inc., a privately-held investment company. From 2006 through February 2012, Mr. Karol served as a Director of Latrobe Specialty Metals, Inc. (“Latrobe”), a manufacturer and distributor of high-performance materials, which was partially owned by the Watermill Group during this time period and was acquired by Carpenter Technology in February 2012.

 

Mr. Karol is currently a member of the Board of Advisors of The Walter Group. He has also served as Chairman of the Board at Mooney Aircraft Company, Director and Chairman of the Audit Committee at StockerYale, and as a Director for Jeepers! Inc., Intelligent Energy Limited, Inter-Tel Corp., Superior Tubes, and Fine Tubes.

 

Mr. Karol is currently a member of the Young President’s Organization-Gold and has served as a member of the leadership team for this organization. During this time, Mr. Karol served on the International Board of Directors (1991—2001), Chairman of Strategic Planning (1993—1996), and as International President (1998—1999). He is currently a trustee of Tufts University and is Chairman of the Committee on Trustees. He received the 2009 Tufts Distinguished Service Award. He is also past Chairman of the Board of Trustees of Vermont Academy, and a Director Emeritus at the National Brain Tumor Society. In addition, he is a co-founder and President of the Herbert M. Karol Cancer Foundation. He formerly served as a member of the Board of Overseers of the Boston Symphony Orchestra, and he is a Trustee Emeritus of the Boston Ballet.

 

    

LOGO

 

Managing Partner, Watermill Group; Chairman and Chief Executive Officer, HMK Enterprises, Inc.

 

AGE                     DIRECTOR SINCE

 

68                2012

 

COMMITTEES

  Strategy (Chair)

  Corporate Governance

  Human Capital Management

 

CURRENT NON-CARPENTER TECHNOLOGY PUBLIC DIRECTORSHIPS 0

 

Qualifications

       

  Chief Executive Officer

 

  Deep Industry Knowledge

 

  Strategic Experience

 

  Financial Experience

  

Mr. Karol’s qualifications include, among other things, his extensive business experience and experience as a Chief Executive Officer and Chairman of the Board, which enable him to contribute to the Board’s operational and growth initiatives. In addition, Mr. Karol’s experience as a Director of Latrobe (a wholly owned subsidiary of Carpenter Technology) enhances his contributions to the Board, particularly with respect to his industry knowledge and expertise.

 

    

 

   

14

  

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Proposal 1: Election of Directors    

 

 

Charles D. McLane, Jr.

 

Mr. McLane served as the Executive Vice President and Chief Financial Officer of Alcoa Corporation from 2007 to 2013. As Chief Financial Officer, he had accountability for Alcoa’s Finance organization, which included Treasury, Controllership, Pension, Investor Relations, Tax, Audit and Financial Planning & Analysis. He was also responsible for the Global Business Service group, which provides IT, purchasing and business support services globally.

 

Mr. McLane joined Alcoa in 2000 as Director of Investor Relations, following Alcoa’s acquisition of Reynolds Metals Company. Two years later, he was appointed Vice President and Corporate Controller, which also had responsibility for Alcoa Business Support Services. He also had accountability for Alcoa’s transactional service functions, including procurement, financial shared services, environment, health and safety services, and corporate aircraft operations. Prior to joining Alcoa, Mr. McLane worked for Reynolds Metals for 27 years serving in a series of financial assignments, including Division Controller, Director of Finance and Administration for Reynolds’ Global Can business unit, Assistant Controller and Assistant Treasurer.

 

Mr. McLane has served on the board of directors of the Alcoa Foundation, Alcoa World Alumina, and the National Board of Directors for the Girl Scouts of the USA. Previously, he was a member of the Conference Board’s Council of Financial Executives Institute and a member of the CFO Board Academy, as well as a member of the board of Sapa AB. Mr. McLane earned both a bachelor’s and a master’s degree in accounting from Virginia Commonwealth University. He also attended the Executive Program at the University of Virginia’s Darden School of Business and the Wharton School of Business at the University of Pennsylvania.

 

    

LOGO

 

Former Executive Vice President and Chief Financial Officer – Alcoa Corporation

 

AGE                     DIRECTOR SINCE

 

69                2020

 

COMMITTEES

  Audit/Finance (Chair)

  Strategy

 

CURRENT NON-CARPENTER TECHNOLOGY PUBLIC DIRECTORSHIPS 0

 

Qualifications

       

  Deep Industry Knowledge

 

  Strategic Experience

 

  Financial Experience

 

   Mr. McLane’s qualifications include, among other things, his extensive accounting and financial expertise and background as a Chief Financial Officer in the public sector.     

 

Tony R. Thene

 

Mr. Thene was appointed to serve as Carpenter Technology’s President and Chief Executive Officer in July 2015, when he was also appointed to the Board of Directors. He previously served as Carpenter Technology’s Senior Vice President and Chief Financial Officer from January 2013 until June 2015. Prior to joining Carpenter Technology, Mr. Thene served as the Chief Financial Officer of the Engineered Products and Solutions Business Group at Alcoa, Inc. from 2010 until 2013. Previously, he served as Vice President, Controller and Chief Accounting Officer of Alcoa. He also previously held various other positions during his 23-year career at Alcoa, including Director, Investor Relations; Chief Financial Officer for the Flat Rolled Products Group; Chief Financial Officer for Alcoa World Alumina and Chemicals; and manufacturing manager for the Alumina Chemicals business.

 

Mr. Thene earned his undergraduate degree in Accounting from Indiana State University and his MBA from Case Western Reserve University, Cleveland, Ohio. He is also a Certified Public Accountant.

 

Mr. Thene serves on the Board of Directors of Mativ Holdings, Inc., formed on July 6, 2022, by merger of Schweitzer-Mauduit International Inc., and Neenah, Inc., two leading global manufacturers of specialty materials. Previously he served on the Board of Directors of Neenah, Inc. from 2018 until 2022. He also served on Furman University’s Board of Trustees.

 

 

    

LOGO

 

President and Chief Executive Officer, Carpenter Technology Corporation

 

AGE                     DIRECTOR SINCE

 

61                2015

 

COMMITTEES

  Strategy

 

CURRENT NON-CARPENTER TECHNOLOGY PUBLIC DIRECTORSHIPS 1

  Mativ Holdings, Inc.

 

Qualifications

       

 

  Chief Executive Officer

 

  Financial Experience

 

  Key Industry Experience

 

  Operational Manufacturing Experience

 

  

 

Mr. Thene’s qualifications include his extensive financial knowledge, operational and manufacturing experience, and his leadership skills.

  

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

15


 

    Proposal 1: Election of Directors    

 

 

Terms to Expire 2024

 

Dr. A. John Hart

 

Dr. Hart is a Professor of Mechanical Engineering at the Massachusetts Institute of Technology (“MIT”). He is also the Director of the MIT Laboratory for Manufacturing and Productivity (LMP), and the MIT Center for Additive and Digital Advanced Production Technologies (APT). From 2013 to 2020, he was an Associate Professor of Mechanical Engineering at MIT. Dr. Hart has worked extensively with industry via his research and as a consultant, and is a co-founder of Desktop Metal, Inc. and VulcanForms, Inc.

 

Dr. Hart earned his master’s and Ph.D. degrees from MIT, and his undergraduate degree from the University of Michigan. He has received numerous awards for his research and teaching accomplishments.

 

    

LOGO

 

Professor of Mechanical Engineering at

the Massachusetts Institute of

Technology

 

AGE                     DIRECTOR SINCE

 

43                2019

 

COMMITTEES

  Audit/Finance

  Science and Technology

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIPS
0

 

 

Qualifications

       

  Research and Development

 

  Key Industry Experience

 

  Innovation Experience

 

  

Dr. Hart’s qualifications include, among other things, his extensive work in the areas of additive manufacturing, advanced materials, machine design, and automation. His industry expertise and his background as a professor in these areas add valuable support to both the Board and Carpenter Technology.

 

  

 

Kathleen Ligocki

 

Kathleen Ligocki is a serial CEO, an experienced board member and an advisor for growth companies. During her operating career from 2015 to 2019, Ms. Ligocki served as the CEO of Agility Fuel Solutions, a leader in sustainable clean energy storage and propulsion solutions for commercial vehicles around the world. From 2014 to 2015, she served as the Chief Executive Officer of Harvest Power, one of the leading organics management companies in North America with a mission to create a more sustainable future by transforming organic wastes into bioenergy and soil amendment products. From 2012 to 2014, she worked as an Operating Partner at Kleiner Perkins Caufield & Byers, one of Silicon Valley’s top venture capital providers. From 2010 to 2012, Ms. Ligocki served as Chief Executive Officer of Next Autoworks, an auto company with a unique low-cost business model. From 2008 to 2009, Ms. Ligocki served as Chief Executive Officer of GS Motors, a Mexico City based auto retailer owned by Grupo Salinas, a large Mexican conglomerate. From 2003 to 2007, she served as Chief Executive Officer of Tower Automotive, a Fortune 1000 global auto supplier. Ms. Ligocki also founded her own firm, Pine Lake Partners, a consultancy firm focused on start-ups and turnarounds. She has held executive positions at Ford and United Technologies, where she led operations in the Americas, Europe, Africa, the Middle East, and Russia. She started her career at General Motors in manufacturing leadership, sales and strategy/program management.

 

Ms. Ligocki earned a BA with highest distinction from Indiana University Kokomo and holds an MBA from the Wharton School at the University of Pennsylvania where she was a GM fellow. She also has been awarded honorary doctorate degrees from Indiana University Kokomo, Central Michigan University, and Oakland University. In addition to Carpenter, she currently serves as an Independent Director on the public boards of Lear Corporation (Fortune 200 auto supplier) and PPG Industries (Fortune 500 coatings company) and as the Chair of the Board for Farmers Business Network, a venture capital-backed firm in the ag-tech sector. Ms. Ligocki is a board member at Indiana University Foundation and serves on the Advisory Board of Lime Rock New Energy, an investment fund focused on energy transition, and as an Operating Advisor for Assembly Ventures, an investment fund focused on new mobility technologies.

 

    

LOGO

 

Former CEO of Agility Fuel Solutions

 

AGE                     DIRECTOR SINCE

 

65                2017

 

COMMITTEES

  Human Capital Management (Chair)

  Corporate Governance

  Strategy

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIPS
2

  Lear Corporation

  PPG Industries

 

 

Qualifications

       

 

  Chief Executive Officer

 

  International Experience

 

  Key Industry Experience

 

  Operational Manufacturing Experience

 

  Financial Experience

 

  

 

Ms. Ligocki’s qualifications include, among other things, her Chief Executive Officer experience and leadership skills. Her international knowledge and operational manufacturing experience bring valuable insight to the Board.

 

  

 

   

16

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Proposal 1: Election of Directors    

 

 

Ramin Younessi

 

Mr. Younessi served as Group President, Construction Industries Group, of Caterpillar, Inc. before retiring in December 2020. As Group President of Caterpillar’s Construction Industries Group, he was responsible for Earthmoving, Excavation, Building Construction Products, China Operations and Global Construction & Infrastructure Divisions, Global Rental and Used Equipment Services, and Strategic Procurement. Mr. Younessi joined Caterpillar in 2013 and has also served as Caterpillar’s Group President of Energy & Transportation and Vice President of Industrial Power Systems. Prior to joining Caterpillar, Mr. Younessi held a number of senior executive positions at Daimler AG and Navistar Inc. In addition, Mr. Younessi has been an investor and Senior Advisor to Madison Dearborn Partners (MDP), a leading private equity investment firm, and board member on several portfolio companies since 2013.

 

Mr. Younessi holds a bachelor’s degree in Electrical Engineering from Rochester Institute of Technology, a master’s degree in Electrical Engineering from Syracuse University and a master’s degree in Engineering Management from the University of Maryland. Mr. Younessi is a registered professional engineer in the state of Illinois and a member of SAE International.

 

 

    

LOGO

 

Retired Group President – Caterpillar Inc.

 

AGE                     DIRECTOR SINCE

 

57                2021

 

COMMITTEES

  Audit/Finance

  Science and Technology

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIPS
0

 

 

Qualifications

       

 

  Operational Manufacturing Experience

 

  Financial Experience

 

  International Experience

 

  Research and Development

 

  

 

Mr. Younessi’s qualifications include, among other things, his extensive, operational manufacturing experience, research and development, financial and global business experience.

 

  

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

17


 

    Proposal 1: Election of Directors    

 

 

Term to Expire 2022 – Dr. Jeffrey Wadsworth is retiring from the Board at the 2022 Annual Meeting of Stockholders, having attained the mandatory retirement age.

The Board of Directors and management of the Company express their sincerest gratitude to Dr. Wadsworth for his many years of service on the Board of Directors. Dr. Wadsworth’s expertise and leadership, particularly in the research and development arena has been invaluable to the Company during his tenure as a director.

 

Dr. Jeffrey Wadsworth

 

Dr. Wadsworth, now retired, was President and Chief Executive Officer of Battelle, a research and development enterprise headquartered in Columbus, Ohio from January 2009 to September 2017. He formerly was Executive Vice President, Global Laboratory Operations at Battelle, Director of Oak Ridge National Laboratory, Chief Executive Officer and President of UT-Battelle LLC, and Senior Vice President for U.S. Department of Energy Science Programs at Battelle. Previously, he was Director of Homeland Security Programs at Battelle and part of the White House Transition Planning Office during the formation of the U.S. Department of Homeland Security. From 1992 to 2002, Dr. Wadsworth was at the Lawrence Livermore National Laboratory in Livermore, California, where from 1995 he was Deputy Director for Science and Technology. Prior to that, he was with Lockheed Missiles and Space Company, Research and Development Division.

 

Dr. Wadsworth was elected to the U.S. National Academy of Engineering in 2005, has been elected Fellow of three technical societies, and holds numerous awards and honors. He also served on the Board of Directors of 3D Systems Corporation. Dr. Wadsworth holds a bachelor’s degree in metallurgy, and Ph.D., D.Met and D.Eng. degrees, all from Sheffield University, England.

 

    

LOGO

 

Retired President and Chief Executive
Officer, Battelle

 

AGE                     DIRECTOR SINCE

 

72                2006

 

COMMITTEES

  Science and Technology (Chair)

  Audit/Finance

 

CURRENT NON-CARPENTER TECHNOLOGY
PUBLIC DIRECTORSHIPS
0

 

 

Qualifications

       

 

  Chief Executive Officer

 

  Research and Development

 

  Key Industry Experience

 

  Financial Experience

 

  

 

Dr. Wadsworth’s qualifications include, among other things, his strong background in Carpenter Technology’s primary area of focus—metallurgy. Additionally, Dr. Wadsworth’s significant leadership experience in the research and development arena enriches his contributions to the Board, particularly with respect to innovation and strategy matters.

 

  

 

   

18

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Corporate Governance

Carpenter Technology’s business, property and affairs are managed under the direction of its Board of Directors in accordance with the General Corporation Law of the State of Delaware and Carpenter Technology’s Certificate of Incorporation and By-Laws. While Carpenter Technology’s non-employee directors are not involved in day-to-day operating details, they are kept informed of Carpenter Technology’s business through written reports and documents provided to them regularly, as well as by operating, financial and other reports presented by Carpenter Technology’s officers during meetings of the Board of Directors and its committees.

Board Information

Majority Voting Standard for Election of Directors

The By-Laws provide that directors will be elected by a majority of the votes cast except in the event of a contested election, where the number of candidates for election exceeds the number of directors to be elected. In a contested election, directors will be elected by a plurality of the votes cast.

Board Independence

In determining independence, each year the Board evaluates whether directors have a “material relationship” with Carpenter Technology. To assess the “materiality” of a director’s relationship with Carpenter Technology, the Board considers all relevant facts and circumstances, including the individuals or organizations with which the director has an affiliation. When a director is affiliated with one of Carpenter Technology’s service providers or customers, the Board considers how often or regularly services are provided, whether the services are being carried out at arm’s length in the ordinary course of business, and whether the services are being provided substantially on the same terms as those prevailing at the time for unrelated parties in comparable transactions.

Mr. Thene was appointed Carpenter Technology’s President and Chief Executive Officer (“CEO”) and a member of Carpenter Technology’s Board of Directors effective July 1, 2015. With the exception of Mr. Thene, all other members of the Board of Directors qualify as independent directors under the applicable requirements of the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”). Board committees also satisfy applicable requirements for certain of their members to qualify as independent directors.

Board Leadership Structure

At Carpenter Technology, the roles of Chairman and Chief Executive Officer are split into two separate positions. The Board believes this split is the most appropriate leadership structure for Carpenter Technology to clearly distinguish the functions of the Board and management. The separation of the Chairman and Chief Executive Officer positions allows our Chief Executive Officer to concentrate on operational and strategic issues while the Chairman focuses on governance and Board leadership.

Meetings of the Board, Committees, and Independent Directors

Carpenter Technology expects attendance and active participation by directors at Board and committee meetings. Each director attended at least 75% of the total number of meetings of the Board and the committees on which the director served during fiscal year 2022.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

19


 

    Corporate Governance • Board Information    

 

 

As required by Carpenter Technology’s Corporate Governance Guidelines, the independent directors of the Board meet in an executive session at least twice per year to review the performance of the Chief Executive Officer and to address any other matters of concern. Gregory A. Pratt, former Chairman of the Board, or I. Martin Inglis, current Chairman of the Board, presided over all executive sessions in fiscal year 2022.

 

 

Board/Committee

 

 

 

# Meetings Held

 

 

 

Full Board

 

 

 

 

 

 

Total: 5

 

 

 

 

 

Audit/Finance

 

 

 

 

 

 

10

 

 

 

 

 

Corporate Governance

 

 

 

 

 

 

5

 

 

 

 

 

Human Capital Management

 

 

 

 

 

 

6

 

 

 

 

 

Science and Technology

 

 

 

 

 

 

5

 

 

 

 

 

Strategy

 

 

 

 

 

 

5

 

 

 

 

 

Total Meetings

 

 

 

 

 

 

Total: 36

 

 

 

 

 

Executive Sessions

(Independent directors meet without management present)

 

 

 

 

 

5

 

 

 

Annual Meeting of Stockholders

 

 

 

 

 

 

1

 

 

 

 

 

Average Director Attendance

 

 

 

 

 

 

100%

 

 

 

 

 

All directors, with the exception of Dr. Kathy H. Hannan, who joined the Board in April 2022, attended last year’s Annual Meeting and all directors are expected to attend in 2022

 

       

Board Committees

The Board of Directors has three standing committees: Audit/Finance, Corporate Governance and Human Capital Management. The Board currently has two additional committees: Strategy and Science & Technology. The Board periodically establishes ad hoc committees, on an interim basis, to assist the Board with specific matters when prudent and advisable. Summary information about each committee is shown in the following table.

 

   

20

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Corporate Governance • Board Information    

 

 

Significant Functions of the Committee

 

Audit/Finance Committee

 

   Assists the Board in its oversight of the integrity of Carpenter Technology’s financial statements:

 

   qualifications, independence and performance of Carpenter Technology’s independent registered public accounting firm;

 

   performance of Carpenter Technology’s internal audit personnel; and

 

   overall compliance with accounting, legal, regulatory, ethical and business conduct requirements.

 

   Selects the independent registered public accounting firm and provides a recommendation to the Board with respect to including the Company’s audited financial statements in the Annual Report on Form 10-K.

 

   Reviews and provides recommendations to the Board relating to major financial matters affecting the Company.

 

 

 

MEMBERS

 

Charles D. McLane, Jr., Chair

 

A. John Hart

 

Kathy H. Hannan

 

Jeffrey Wadsworth

 

Ramin Younessi

 

  All members are independent

 

  All members are financially literate under NYSE standards

Corporate Governance Committee

 

   Functions as a nominating committee with respect to directors:

 

   assists the Board in identifying qualified individuals to become directors; and

 

   recommends the overall composition of the Board and its committees.

 

   Assists the Board in developing, implementing and monitoring a set of corporate governance principles for the Company, and overseeing processes to assess the performance and effectiveness of the Board, its committees and Carpenter Technology’s management.

 

   Ensures orderly succession at the Board and management levels.

 

   Leads the Environmental, Social and Governance program for the Board.

 

 

 

MEMBERS

 

Stephen M. Ward, Jr., Chair

 

Viola L. Acoff

 

Steven E. Karol

 

Kathleen Ligocki

 

  All members are independent

 

Human Capital Management Committee (formerly the Compensation Committee)

 

   Establishes the philosophy for executive compensation.

 

   Designs and oversees administration of Carpenter Technology’s equity and incentive compensation plans.

 

   Reviews and approves compensation of Carpenter Technology’s executive officers.

 

   Reviews and approves annually the corporate goals and objectives relevant to compensation of the CEO and evaluates the CEO’s performance in light of those goals and objectives.

 

   Reviews succession plans for Carpenter Technology’s CEO and executive officers.

 

   Assists the Board with other human resource matters, including overseeing management’s work to promote organizational effectiveness, leadership development, and diversity, equity, and inclusion, and the design and administration of employee benefits programs.

 

   Oversees the Social aspects of the Environmental, Social and Governance program.

 

 

 

MEMBERS

 

Kathleen Ligocki, Chair

 

Viola L. Acoff

 

Steven E. Karol

 

Stephen M. Ward, Jr.

 

  All members are independent

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

21


 

    Corporate Governance • Board of Directors’ Role in Risk Oversight    

 

 

Significant Functions of the Committee

 

Science and Technology Committee

 

   Reviews and monitors major scientific or technological developments that could affect Carpenter Technology’s current business or operations or implicate significant strategic planning or considerations for the future.

 

   Makes periodic recommendations to the Board concerning major developments or potential business opportunities for Carpenter Technology with respect to scientific or technological matters.

 

   Oversees the Environmental aspects of the Environmental, Social and Governance program.

 

 

 

MEMBERS

 

Jeffrey Wadsworth, Chair

 

Viola L. Acoff

 

A. John Hart

 

Stephen M. Ward, Jr.

 

Ramin Younessi

 

   All members are independent

Strategy Committee

 

   Ensures that Carpenter Technology has developed a relevant operative strategy for the Company’s industry and markets.

 

   Reviews and monitors implementation and maintenance of the corporate strategy.

 

   Reviews implementation of the corporate strategy through capital investments and corporate developments, including acquisitions, divestitures, joint ventures, strategic alliances and facility utilization.

 

 

 

MEMBERS

 

Steven E. Karol, Chair

 

Kathy H. Hannan

 

Kathleen Ligocki

 

Charles D. McLane, Jr.

 

Tony R. Thene

 

   All members are independent except Mr. Thene, Carpenter Technology’s President and CEO

 

Board of Directors’ Role in Risk Oversight

As a part of its oversight function, the Board monitors management’s processes for operating Carpenter Technology’s business, including risk management. The Board’s oversight of risk includes monitoring management’s work to identify risks and manage risk parameters, including those relating to enterprise, financial, operational, cybersecurity, business and reputation risks.

In addition to the formal compliance program, the Board encourages management to promote a corporate culture that understands and is committed to risk management and also incorporates business integrity into Carpenter Technology’s overall corporate strategy and day-to-day business operations.

Oversight of Carpenter Technology’s risk management processes is an important part of Board and committee work throughout the year.

 

   

22

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Corporate Governance • Stockholder Engagement and Communication with the Board    

 

 

Risk Oversight Role and Responsibilities

 

 

Full Board

 

The full Board oversees management’s processes for managing significant strategic and business risks, such as those relating to our products, markets, capital investments, and cybersecurity.

 

 
                                                                     
         
                                                            

Audit/Finance Committee

 

    

Corporate Governance Committee

 

    

Human Capital Management Committee

    

Science and Technology Committee

    

Strategy Committee

Oversees management’s processes for managing business and operational risks that could have a financial impact, such as those relating to internal controls, liquidity or raw materials

    

Oversees management’s processes for managing the risks associated with governance issues, such as the independence of the Board and key executive succession

    

Sets incentive metrics and the mix of incentive pay for executive compensation plans and policies; strives to drive high performance while avoiding an inadvertent incentive to take risks beyond the established risk parameters

    

Oversees management’s processes for managing the risks associated with major scientific or technological developments that could affect business, operations or strategic planning

    

Oversees management’s processes for the continual development, implementation and maintenance of Carpenter Technology’s corporate strategy, and ensures that the annual business plan is aligned with and supports the corporate strategy

 

         
                                                                       
 
                               
 

Management

 

Carpenter Technology’s risk management processes include continuous work to assess and analyze the most likely areas of future risk and to address them in our long-term planning process and in our daily risk management activities.

 

Stockholder Engagement and Communication with the Board

Carpenter Technology has long supported a robust investor relations program to communicate regularly with investors about economic, financial, operational and strategic matters. As a result of institutional investors’ changing practices, the Board worked with management to establish further engagement with investors’ governance personnel to discuss leadership, compensation, social responsibility and other governance matters. James D. Dee, Carpenter Technology’s SVP, General Counsel and Chief Governance Officer, and John Huyette, Carpenter Technology’s VP, Corporate Development and Investor Relations, assist the Board in understanding stockholders’ priorities and views on an ongoing basis. Messrs. Dee’s and Huyette’s roles are to communicate with stockholders throughout the year about investor relations, governance, compensation and social responsibility developments; to solicit feedback from stockholders and disseminate that information to the Board and management; to keep the Board and others in management apprised of stockholder views and priorities; and to arrange appropriate direct interactions for stockholders with the CEO, management, and directors. The Board also requested that the Corporate Governance Committee regularly interact with the Chief Governance Officer, and that the Audit/Finance Committee regularly interact with the Chief Financial Officer (“CFO”) to help the Board stay well informed of stockholder views.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

23


 

    Corporate Governance • Transactions with Related Parties    

 

 

Any stockholder who wishes to interact with the Board directly should send a request to our Chief Governance Officer, who will work with the Corporate Governance Committee to arrange appropriate interactions. Stockholders can contact Mr. Dee at jdee@cartech.com or 610-208-3423. Also, stockholders can contact Mr. Huyette at JHuyette@cartech.com or 610-208-2061 regarding Investor Relations matters.

How to Communicate with our Board of Directors

Stockholders can communicate with the Board of Directors by sending a letter addressed to Carpenter Technology’s Board of Directors, c/o Corporate Secretary, 1735 Market Street, 15th Floor, Philadelphia, PA 19103. Carpenter Technology’s Corporate Secretary will review the correspondence and forward it to the Chairman of the Board or to the Chair of the appropriate Board committee or to any individual director or directors to whom the communication may be specifically directed. If the communication is unduly hostile, threatening or illegal, does not reasonably relate to Carpenter Technology or its business, or is similarly inappropriate, the Corporate Secretary will not forward the communication, and will notify the sender if and as appropriate. Stockholders and other interested parties may also communicate with the non-employee directors, the non-executive Chairman, or the Audit/Finance Committee by sending an email to boardauditcommittee@cartech.com.

Transactions with Related Parties

 

 

A “related party transaction” is a transaction with Carpenter Technology in an amount exceeding $120,000 in which a related person has a direct or indirect material interest. A related person includes an executive officer, director, or five percent stockholder of Carpenter Technology and any immediate family member of such a person. If Carpenter Technology management identifies a related party transaction, the transaction is brought to the attention of the Audit/Finance Committee for its approval, revision, or rejection after considering all the relevant facts and circumstances.

Any proposed transactions with executive officers, directors, substantial stockholders, or the family members or affiliates of any of those parties, require approval by the Audit/Finance Committee and will be disclosed as required by the SEC. Carpenter Technology’s Code of Business Conduct and Ethics requires that Carpenter Technology’s officers and directors avoid conflicts of interest, as well as the appearance of conflicts of interest, and disclose to Carpenter Technology’s General Counsel any material transaction or relationship that could reasonably be expected to give rise to a conflict of interest between private interests and the interests of the Company. Carpenter Technology checks for any potential related party transactions primarily by circulating a Directors and Officers Questionnaire to each member of the Board of Directors and each NEO annually.

Fiscal Year 2022 Related Party Transactions

During fiscal year 2022, there were no related party transactions.

Compensation Committee Interlocks and Insider Participation

No member of the Human Capital Management Committee was a current or former officer or an employee of Carpenter Technology or any of its subsidiaries during fiscal year 2022, or had any relationship requiring disclosure by Carpenter Technology under the SEC’s proxy rules.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires Carpenter Technology’s directors and executive officers, and persons that own more than 10% of Carpenter Technology common stock, to file with the SEC and the NYSE reports of ownership and changes in ownership. Directors, executive officers, and greater than 10% stockholders are required by SEC regulations to give Carpenter Technology copies of all Section 16(a) forms they file.

Based solely on the review of the reports furnished to Carpenter Technology and other company records or information otherwise provided, Carpenter Technology believes that all applicable Section 16(a) reports were timely filed by its directors, executive officers, and more than 10% stockholders during fiscal year 2022, except that, due to administrative errors, Dr. Hannan filed a late Form 3 and a late Form 4, reflecting an award of Director Stock Units and an award of Director Stock Options, and Marshall Akins filed a late Form 3.

 

   

24

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Corporate Responsibility and Sustainability

Environmental, Social and Governance (“ESG”) Overview

Carpenter Technology’s Environmental, Social and Governance (ESG) Program is built upon our Vision and Core Values and aligns with our business strategy for growth. We will address the challenges ahead by relying on our vision: to partner with our customers to solve their most challenging material problems. And we aim to achieve our goals as we always do, by living up to our Core Values.

Carpenter Technology’s sustainability strategy focuses on four areas of our operations: environmental stewardship; the health and safety of our employees and community; social responsibility; and corporate governance. Highlights of Carpenter Technology’s ESG efforts include that:

 

 

Our material solutions play an important role in the global efforts to address climate change;

 

 

Our manufacturing operations are more environmentally sustainable than many other global metal manufacturers;

 

 

We are one of the safest industrial manufacturing companies in the United States with a TCIR of 1.0 in fiscal year 2022; and

 

 

We are committed to creating an inclusive workplace for our employees and to serving the communities in which we live and work.

Carpenter Technology’s Board of Directors maintains overall responsibility for ESG-related matters, including climate-related risks and opportunities. Our Board and its Committees oversee ESG-related aspects of our corporate strategy, plans of action, risk management policies, annual budgets, business plans and the Company’s performance objectives. The Board and its Committees work closely with management to ensure that the Company is properly addressing ESG considerations.

Management has implemented an ESG Steering Committee to ensure the Company’s sustainability strategy is aligned across the enterprise and to define annual and midterm targets that inform our public reporting. The Steering Committee meets quarterly and reports progress to the Company’s Leadership Team. The ESG Steering Committee, which reports to Carpenter Technology’s President and Chief Executive Officer, includes the Company’s Senior Vice President and General Counsel; the Senior Vice President and Chief Financial Officer; the Vice President and Chief Human Resources Officer; the Vice President of Corporate Environmental, Health & Safety; and the Vice President of Investor Relations and Corporate Development.

The latest information on our ESG Program is available at www.carpentertechnology.com/sustainability.

Environmental

Carpenter Technology is committed to protecting the environment and recognizes the need to minimize our impact through a managed sustainability program. The Environmental, Health and Safety (“EH&S”) team oversees our environmental management system with technical experts in all facilities where we operate. Like most organizations in our industry, we are subject to domestic and international environmental laws and regulations and consider the regulatory landscape a relevant factor when assessing climate-related risks and opportunities.

Through our ESG materiality assessment, Carpenter Technology has identified, evaluated and prioritized relevant climate-related risks and opportunities with potential meaningful impact on our business. We presently are addressing the following areas:

EH&S Management System

Our EH&S Management System includes mechanisms for regularly evaluating environmental compliance and managing changes in business operations while assessing actual and potential environmental impacts. In 2022, we received ISO 14001 Certification for our Reading, PA, Latrobe, PA, Athens, AL, and Liverpool, UK facilities.

Greenhouse Gas Emissions & Energy Management

Our operations are more environmentally sustainable than many other global metal manufacturers.

 

 

Our specialty alloys do not require the coking or iron ore operations that are found in carbon steels, which require carbon-intensive inputs like coal;

 

 

We use Electric Arc Furnaces and Vacuum Induction Melting processes to melt alloys, as opposed to traditional blast furnaces;

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

25


 

    Corporate Responsibility and Sustainability • Environmental    

 

 

 

We source carbon-free, nuclear energy to power our melting operations; and

 

 

We have a sustainable sourcing model, with more than 70% of our material inputs from reclaimed or recycled steel and alloys.

We have set the goal of reducing the intensity of Scope 1 and 2 CO2 emissions per ton of material by 30% by 2035. We are using 2019 CO2 emissions as our baseline year, as it was the last full year of operation before the COVID-19 pandemic. We intend to achieve this goal through four main activities:

 

 

Recycle waste heat from our furnaces to improve efficiency of furnace operations;

 

 

Convert natural gas fueled boilers and furnaces to electric;

 

 

Increase the share of carbon-free grid-electricity, using renewable and nuclear-based energy; and

 

 

Improve our operational efficiencies.

In addition, we will pursue other initiatives that will help us to further reduce our CO2 emissions.

Air Emissions

We closely monitor and report air emissions from our major manufacturing sites. Emissions tracked include GHGs, nitrogen oxides, sulphur oxides, volatile organic compounds and hazardous air pollutants. We seek to have all of our manufacturing facilities strictly comply with applicable regulatory requirements regarding emissions limits and hold valid air permits where required. We have implemented many measures to reduce emissions, including capture and control systems for dust, mist, and fume pollution. Additionally, we continue to reduce air emissions through regular equipment repair and upgrades.

Waste Management

We are committed to reducing waste generated by our operations. Our waste management approach aims to reduce environmental risk and operational costs by prioritizing waste prevention in our manufacturing processes. We track the amounts and types of waste generated by each facility and regularly review third-party audits that inspect waste management partners. We are currently analyzing all nonhazardous waste produced to determine recyclability.

Water Management

To minimize the impact of our operations on local water supplies, we implement best practices in water use. For example, we have reduced the nitrates in the treated water discharge from our Reading, PA, facility by nearly 64% since 1997. And in 2021, we began installing new treatment systems at our largest facility in Reading, PA, that are estimated to reduce water consumption and discharge volume by up to 80% when fully implemented.

Sustainable Sourcing

Carpenter Technology utilizes as much recycled or reclaimed material as possible in the production of our products. We rely heavily on the use of reclaimed metal in our production of highly specialized metal alloys.

As a responsible participant in the metals supply chain, we take seriously our responsibility to ensure materials used in our products are sourced in an ethical manner and in compliance with applicable laws and regulations, including the Security Exchange Commission’s (“SEC”) “Conflict Minerals” rules. Every year we audit our suppliers for Conflict Mineral Compliance to ensure the integrity of our supply chain. Our most recent Conflict Minerals Disclosure can be found on EDGAR, the SEC’s filing database, along with our most recent annual filings.

In addition, Carpenter Technology is a member of the Responsible Minerals Initiative, an international organization that seeks to mitigate the social and environmental impacts of extraction and processing of minerals in supply chains.

You can find additional environmental information and data at www.carpentertechnology.com/sustainability including: our Sustainability Accounting Standards Board Index (SASB) disclosure, the Task Force on Climate-related Financial Disclosures (TCFD) Report and our annual Sustainability Report.

 

   

26

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Corporate Responsibility and Sustainability • Safety    

 

 

Safety

Carpenter Technology’s Safety Vision

Above all else, the safety of our employees is Carpenter Technology’s top priority. It is our number one Core Value. We believe that every employee shares the responsibility to actively participate in all aspects of the safety program and to strive for our ultimate goal of a zero injury workplace. The hallmarks of our safety program are:

 

 

Dedicated leadership, accountability, and employee engagement and empowerment;

 

 

Continual improvement plans (Plan-Do-Check-Act);

 

 

Tools, resources, and education to improve total workplace safety and health; and

 

 

A skilled, technology-driven workforce that proactively assesses risks, strives to eliminate hazards, and integrates learning from incidents and near-misses to prevent further occurrences.

Carpenter Technology tracks the Human Performance Rate (HPR) metric, a method of evaluating safety culture. This internal metric tracks implementation of proactive measures across a number of dimensions to help prevent injuries. We improved our score from 157.4 in fiscal year 2021 to 363.0 in fiscal year 2022, reflecting our increased focus on safety initiatives like our STOP program and employee engagement activities. We will continue to track this safety metric as a part of the Executive Incentive Bonus Compensation Plan.

Safety and COVID-19

Carpenter Technology’s commitment to safety has not waivered during the COVID-19 pandemic. The actions and procedures that we implemented at the start of the pandemic created a strong foundation for our continued operations. Our response has been dynamic; we have altered our approach as we learned more about COVID-19 and have cascaded any changes or alterations to our protocols company-wide. We provide regular communications to our employees to ensure the safety procedures and protocols that have been put in place are understood and adhered to.

Council for Employee Wellbeing

Carpenter Technology understands that the safety of our employees goes beyond just physical wellness. This year we launched a new Council for Employee Wellbeing which is tasked with integrating mental and emotional wellness into our existing safety program. The Council collaborates closely with our Environmental, Health & Safety team to ensure efforts are integrated throughout our Health & Safety program. The Council also works closely with Carpenter Technology’s benefits team and Employee Assistance Program to provide resources and materials that support employee wellness.

Social

Community Relations

We believe that part of being a responsible corporate citizen is improving the communities where our employees live and work. We aim to strengthen our communities through volunteer activities and donations made on behalf of Carpenter Technology. Through our Carpenter Cares Program and community partnerships, we encourage our employees to participate in volunteer opportunities that are meaningful to them and support their efforts.

Our annual “Impact Awards” provides a unique opportunity to celebrate performance and support our local communities. Each year, we recognize outstanding achievements of our employees in the course of their job. We then make donations on behalf of the winners to their selected charities. More than 40 nonprofits have benefitted from these donations. Past nonprofits that have received donations include Moffitt Cancer Center Foundation; Center for Victims; Make-A-Wish Philadelphia, Delaware & Susquehanna Valley; Philadelphia Children’s Foundation; Wounded Warrior Project; The Children’s Hospital of Philadelphia; Lifeline of Berks; St. Jude’s Children’s Hospital; Four Diamonds; YMCA of Darlington, South Carolina; Cradles to Crayons; Helping Harvest Fresh Food Bank; The Delaware Valley Chapter of the Alzheimer’s Association; and Berks County Community Foundation.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

27


 

    Corporate Responsibility and Sustainability • Governance Policies and Practices    

 

 

Diversity

Our Diversity Mission

Carpenter Technology has a culture that builds on the different backgrounds, experiences and perspectives from all employees. Our commitment to diversity, inclusion, and belonging is woven into our Core Value of dignity and respect. Our policies require that everyone is treated equally regardless of their race, age, religion, gender identity, different physical and mental abilities, military status, creed, or sexual orientation. By embracing our diverse perspectives, we accelerate the creation of innovative solutions that deliver value to our customers.

Diversity, Inclusion and Belonging Committee

Our Diversity, Inclusion and Belonging (“DIB”) Committee plays a critical role in advancing us to the next level of awareness and engagement. The team is comprised of volunteers from all levels and sites throughout the Company who are focused on further cultivating an environment where equality thrives. The team is empowered to foster a culture of belonging where every employee feels at home.

Since its inception, the DIB Committee has spearheaded several important Company initiatives. The DIB Committee continued its work this year by focusing on training employees on unconscious bias to help better understand how these biases may impact the workplace.

Human Rights

Carpenter Technology is committed to maintaining a culture rooted in respect for fundamental human rights, consistent with the Company’s Core Values. As such, Carpenter Technology seeks to conduct its business in accordance with the highest standards of ethical conduct and in compliance with all applicable laws, rules, and regulations. Our Human Rights Policy (the “Policy”) reflects Carpenter Technology’s approach to ensuring socially responsible business practices including the prohibition of human trafficking and forced labor, health and safety of our employees and worksites and fair labor and working hours. All Carpenter Technology employees are required to adhere to the Policy, and we expect our suppliers, vendors and customers to act in accordance with the Policy. A copy of our policy can be found at: https://www.carpentertechnology.com/hubfs/CRS_human_rights_policy.pdf.

Governance Policies and Practices

Corporate Governance Guidelines and Charters

Carpenter Technology’s Corporate Governance Guidelines, as well as the charters for all the Board committees and our Code of Business Conduct and Ethics, are available on Carpenter Technology’s website at www.carpentertechnology.com. Copies will be mailed to stockholders upon written request to the Corporate Secretary, Carpenter Technology Corporation, 1735 Market Street, 15th Floor, Philadelphia, PA 19103.

Code of Ethics

The Board of Directors has adopted a Code of Ethics for Carpenter Technology’s CEO and senior financial officers. There were no waivers of the Code of Ethics for fiscal year 2022 or through the date of this Proxy Statement.

 

 

Ethics Hotline: Carpenter Technology utilizes an independent web-based ethics hotline for both employees and non-employees to voice any concerns they may have in a confidential manner. A Board approved corporate staff member reviews any reports and, if necessary, involves the legal, finance, asset protection, human resources or other department, as applicable.

Annual Board Performance Self-Evaluation

The Board conducts an annual self-evaluation to determine whether the Board and its committees are functioning effectively. The Corporate Governance Committee oversees the self-evaluation process. Results of the self-evaluation process are discussed with the Board as soon as practicable. The Corporate Governance Committee also evaluates individual directors as each is considered for re-election to the Board.

 

   

28

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Corporate Responsibility and Sustainability • Governance Policies and Practices    

 

 

Director Training and Education

We have an orientation process for new directors that involves meeting with senior management and visiting our manufacturing facilities. All directors are encouraged to attend outside educational seminars presented by accredited third-party organizations as well as internal programs organized by Carpenter Technology for the directors’ ongoing education.

Succession Planning

The Corporate Governance Committee is responsible for determining the process for evaluating our CEO succession planning. Carpenter Technology’s CEO presents an annual report to the Board on succession planning for the CEO position. The CEO also recommends, on a continuing basis, a suitable successor should the CEO be unexpectedly disabled or otherwise unavailable to perform the duties of that office.

The Human Capital Management Committee is responsible for monitoring succession planning and management development for positions other than that of the CEO.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

29


Security Ownership of

Principal Beneficial Owners

Principal Beneficial Owners

Listed below are the only individuals and entities known by Carpenter Technology (through their Section 13 filings) to own more than 5% of the Company’s outstanding common stock as of the record date of August 12, 2022. Except as noted below, these investment advisors and their investment vehicles have sole voting and investment power over these shares of Carpenter Technology stock.

 

Name and Address of Beneficial Owner     

Amount and Nature of

Beneficial Ownership

 

 

      

Percent

of Class(1)

 

 

BlackRock Fund Advisors

400 Howard Street

San Francisco, CA 94105

     7,554,173 (2)         15.64%  

The Vanguard Group LLP

P.O. Box 2600, V26

Valley Forge, PA 19482

     5,542,840 (3)         11.47%  

Dimensional Fund Advisors, L.P. (U.S.)

6300 Bee Cave Road

Building One

Austin, TX 78746

     3,322,976 (4)         6.88%  

State Street Corp

One Lincoln Center

Boston, MA 02211

     2,979,404 (5)         6.17%  

T. Rowe Price Group Inc.

100 East Pratt Street

Baltimore, MD 21202

     2,497,899 (6)         5.17%  

 

(1)

The percentages are calculated on the basis of 48,304,311 shares of common stock outstanding as of August 12, 2022.

 

(2)

This information was based upon the BlackRock Inc. Section 13 filing reflecting shares owned as of June 30, 2022. BlackRock is an investment advisor registered under the Investment Advisors Act of 1940. It furnishes investment advice to investment companies and serves as investment manager to certain other investment vehicles, including commingled group trusts. BlackRock reports sole voting power with respect to 7,554,173 shares of Carpenter Technology stock. The investment companies and investment vehicles own all these shares.

 

(3)

This information was based upon The Vanguard Group, Inc. Section 13 filing reflecting shares owned as of June 30, 2022. Vanguard is an investment advisor registered under the Investment Advisors Act of 1940. It furnishes investment advice to investment companies and serves as investment manager to certain other investment vehicles, including commingled group trusts. Vanguard reports sole voting power with respect to 0 shares of Carpenter Technology stock, and shared voting power with respect to 42,432 shares of Carpenter Technology stock. The investment companies and investment vehicles own all these shares of Carpenter Technology stock.

 

(4)

This information was based upon the Dimensional Fund Advisors, L.P. (US) Section 13 filing reflecting shares owned as of June 30, 2022. Dimensional is an investment advisor registered under the Investment Advisors Act of 1940. It furnishes investment advice to investment companies and serves as investment manager to certain other investment vehicles, including commingled group trusts. Dimensional reports sole voting power with respect to 3,000,522 shares of Carpenter Technology stock. The investment companies and investment vehicles own all the shares. Dimensional disclaims beneficial ownership of these shares.

 

(5)

This information was based upon the State Street Corp. Section 13 filing reflecting shares owned as of June 30, 2022. State Street is an investment advisor registered under the Investment Advisors Act of 1940. It furnishes investment advice to investment companies and serves as investment manager to certain other investment vehicles, including commingled group trusts. State Street reports sole voting power with respect to 0 shares of Carpenter Technology stock, and shared voting power with respect to 2,381,552 shares of Carpenter Technology stock. The investment companies and investment vehicles own all these shares of Carpenter Technology stock.

 

(6)

This information was based upon the T. Rowe Price Group Inc. Section 13 filing reflecting shares owned as of June 30, 2022. T. Rowe Price is an investment advisor registered under the Investment Advisors Act of 1940. It furnishes investment advice to investment companies and serves as investment manager to certain other investment vehicles, including commingled group trusts. T. Rowe Price reports sole voting power with respect to 910,588 shares of Carpenter Technology stock, and shared voting power with respect to 0 shares of Carpenter Technology stock. The investment companies and investment vehicles own all these shares of Carpenter Technology stock.

 

   

30

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Directors, Nominees and

Management Stock Ownership

The following table shows the ownership of Carpenter Technology common stock as of August 12, 2022, by each director or nominee, the executive officers during fiscal year 2022 who are considered to be named executive officers (“NEOs”) under applicable SEC regulations, and Carpenter Technology’s directors and executive officers as a group. Except as noted below, the directors and executive officers have sole voting and investment power over their respective shares of common stock.

 

Name   Number of Shares
Beneficially Owned(1)
   

Employee
Restricted

Stock Units(2)

     Director Stock
Units(3)
     Shares and Units
Beneficially Owned(1)
   

Percentage of

Outstanding
Shares(4)(5)

 

Acoff, V. L.

 

 

12,818

 

 

 

0

 

  

 

14,136

 

  

 

26,954

 

 

 

0.0

Hannan, K. H.

 

 

0

 

 

 

0

 

  

 

1,324

 

  

 

1,324

 

 

 

0.0

Hart, A. J.

 

 

12,818

 

 

 

0

 

  

 

14,136

 

  

 

26,954

 

 

 

0.0

Inglis, I. M.

 

 

31,634

(6) 

 

 

0

 

  

 

59,630

 

  

 

91,264

(6) 

 

 

0.1

Karol, S. E.

 

 

594,020

(6)(7) 

 

 

0

 

  

 

32,783

 

  

 

626,803

(6)(7) 

 

 

1.2

Ligocki, K.

 

 

23,204

 

 

 

0

 

  

 

18,046

 

  

 

41,250

 

 

 

0.0

McLane, Jr., C. D.

 

 

10,500

 

 

 

0

 

  

 

13,265

 

  

 

23,765

 

 

 

0.0

Wadsworth, J.

 

 

25,097

 

 

 

0

 

  

 

47,248

 

  

 

72,345

 

 

 

0.1

Ward, Jr., S. M.

 

 

46,425

(6) 

 

 

0

 

  

 

67,582

 

  

 

114,007

(6) 

 

 

0.1

Younessi, R.

 

 

0

 

 

 

0

 

  

 

3,482

 

  

 

3,482

 

 

 

0.0

Thene, T. R.

 

 

627,508

 

 

 

96,157

 

  

 

0

 

  

 

723,665

 

 

 

1.3

Lain, T.

 

 

89,180

 

 

 

23,954

 

  

 

0

 

  

 

113,134

 

 

 

0.2

Dee, J. D.

 

 

148,370

 

 

 

13,478

 

  

 

0

 

  

 

161,848

 

 

 

0.3

Malloy, B. J.

 

 

117,496

(6) 

 

 

16,276

 

  

 

0

 

  

 

133,772

(6) 

 

 

0.2

Graf, D.

 

 

10,710

 

 

 

10,623

 

  

 

0

 

  

 

21,333

 

 

 

0.0

 

All directors and executive officers as a group (15 persons)

 

 

 

 

1,749,780

 

(6)(7) 

 

 

 

 

160,488

 

 

  

 

 

 

271,632

 

 

  

 

 

 

2,181,900

 

(6)(7) 

 

 

 

 

3.5

 

 

(1)

The amounts include the following shares of common stock that the individuals have the right to acquire by exercising outstanding stock options within 60 days after August 12, 2022:

 

Acoff, V. L.

 

 

12,818

 

  

Ligocki, K.

 

 

14,704

 

  

Thene, T. R.

  

 

463,462

 

Hannan, K. H.

 

 

0

 

  

McLane, Jr., C. D.

 

 

10,500

 

  

Lain, T.

  

 

63,389

 

Hart, A. J.

 

 

12,818

 

  

Wadsworth, J.

 

 

24,897

 

  

Dee, J. D.

  

 

106,837

 

Inglis, I. M.

 

 

28,034

 

  

Ward, Jr., S. M.

 

 

24,897

 

  

Malloy, B. J.

  

 

85,390

 

Karol, S. E.

 

 

24,897

 

  

Younessi, R.

 

 

0

 

  

Graf, D.

  

 

6,586

 

 

  

All directors and executive officers as a group (15 persons): 879,229

 

(2)

These stock units convert to an equivalent number of shares of common stock when they become vested as per the terms of the relative agreement(s) and the plan. The stock unit values are equivalent to Carpenter Technology’s common stock values, but the units have no voting rights.

 

(3)

These stock units convert to an equivalent number of shares of common stock upon the director’s termination of service as allowed under the plan. The stock unit values are equivalent to Carpenter Technology’s common stock values, but the units have no voting rights.

 

(4)

Ownership is rounded to the nearest 0.1% and is 0% when less than 0.1%.

 

(5)

The percentages are calculated based on the number of shares of common stock outstanding plus the number of shares of common stock that would be outstanding if the individual’s options were exercised, but does not include any shares issuable upon the conversion of stock units.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

31


 

    Directors, Nominees and Management Stock Ownership    

 

 

(6)

Voting and investment power is shared with respect to the following shares of common stock:

 

 

Inglis, I. M.

  

 

400

 

    

 

Karol, S. E.

  

 

10,000

 

 

Malloy, B. J.

  

 

10,577

 

 

Ward, Jr., S. M.

  

 

21,528

 

 

(7)

The amount includes shares held by the following institutions, of which Mr. Karol is an affiliate:

 

    

 

SEK Limited

  

 

283,580

 

 

HMK Enterprises Inc.

  

 

45,000

 

 

   

32

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Director Compensation

The Board regularly reviews director compensation with the assistance of its outside advisor to ensure that it is appropriate and competitive in light of market circumstances and prevailing “best practices” for corporate governance. The compensation elements reflect the Board’s view that compensation to the non-employee directors should consist of an appropriate mix of cash and equity awards. Our director compensation approach provides for quarterly vesting of equity awards and allows elective deferral of the delivery of earned shares and cash.

Elements of Annual Director Compensation

 

Pay Element    Board Year 2022 Compensation     

Annual Retainer (50% Cash/50% Stock Units)

   Board Members:   $130,000 Cash/Stock Units  

 

At least 50% of the annual retainer is paid in stock units,

which aligns the directors’ personal interests with those of

our stockholders.

   Board Chair*:   $200,000 Cash/Stock Units
   *The roles of Chairman and CEO are separate, and the Chairman attends Board and committee meetings.

Committee Chair Retainers (Cash)

   Audit/Finance Committee:   $25,000

 

   Human Capital Management Committee:   $17,500
 

 

  

Corporate Governance, Strategy and

Science and Technology Committees:

  $12,500

Stock Options (Equity)

   Directors receive an annual stock option award subject to the conditions stated below.

Non-Retainer Stock Units (Equity)

   Directors receive additional awards of stock units subject to the conditions stated below.

Stock Options and Stock Units

We compensate our non-employee directors with equity-based compensation under our Stock-Based Compensation Plan for Non-Employee Directors (“Director Stock Plan”).

Initial Grant: Directors receive up to 4,000 stock options upon joining the Board.

Annual Stock Option Grant: In addition to any initial grant of stock options, each director is granted a number of stock options annually, on or about the date of Carpenter Technology’s Annual Meeting of Stockholders or on another date as the Board may determine. These options will have a fair value on the grant date, alone or in combination with the annual non-retainer stock units described below, of up to $90,000 (or such different number as determined by the Board).

Annual Non-Retainer Stock Units Grant: In addition to the grant of options or an award of retainer stock units, each director is granted an additional award of stock units annually having a fair value on the grant date, alone or in combination with the annual stock option grant described above, of up to $90,000 (or such different number as determined by the Board).

Grant Date: The grant date for the awards described above will be on or about the date of the Annual Meeting of Stockholders (or such other date as determined by the Board). The number of units and options is based on the last sale price of Carpenter Technology’s common stock on the date of grant.

Vesting: Subject generally to the director’s continued service, one-quarter of the stock options or stock units vest for every three months of service following the grant date, and are fully vested on the first anniversary of the grant date. All stock options have ten-year terms.

 

Upon a Change in Control: In the event of a change in control (as defined in the Director Stock Plan), all stock units vest immediately and are payable in shares of common stock, and stock options become immediately exercisable. A director may exercise vested options at any time during the original term.

 

Upon Death or Disability: In the event of separation from service due to Death or Disability (as defined in the Director Stock Plan), all stock units and stock options vest immediately.

 

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

33


 

    Director Compensation • Director Stock Ownership Policy    

 

 

Deferral Policy: Directors may elect under the Director Stock Plan to have distribution of all or a portion of their stock units deferred until the later of their separation from service or a specific date/event. Carpenter Technology distributes a participating director’s deferred units, based on the director’s advance election, in a lump sum or in any number of annual installments up to a maximum of 15, beginning on the later of the director’s separation from service or the date/event elected.

Dividend Equivalents on Stock Units: In the event that the Company pays dividends on outstanding common stock, dividend equivalents are credited to each director who has outstanding stock units. Dividend equivalents are reinvested in the form of additional stock units, with the number of units credited determined by dividing the dividend dollar amount by the closing price of Carpenter Technology common stock on the NYSE on the dividend equivalent payment date. Stock units that are attributable to dividend equivalents vest on the same basis as the underlying stock unit award. No dividend equivalent rights are granted on shares underlying stock option awards.

Director Stock Ownership Policy

It is our policy that non-employee directors must maintain a reasonable equity interest in order to provide them with a proprietary interest in Carpenter Technology’s growth and performance, to generate an increased incentive to contribute to the Company’s future success and prosperity by their personal efforts, and generally to enhance the community of interest between directors and our stockholders.

The current policy requires each director to hold equity in Carpenter Technology with an aggregate fair market value equal to at least six times the annual cash retainer. There is a five-year phase-in period for satisfying the minimum equity holding requirements, and a director is expected to retain the equity for the duration of Board service. All current non-employee directors satisfy the minimum equity holding requirements or are on track to satisfy such requirements in the stated phase-in period.

Compensation for Non-Employee Directors

Directors have three options with respect to payment of the cash portion of their annual retainer and 100% of committee chair fees:

 

 

Receive cash currently;

 

 

Defer all or a portion until a future date/event and then receive cash under Carpenter Technology’s Deferred Compensation Plan for Non-Management Directors (“Director Cash Deferral Plan”); or

 

 

Defer all or a portion until the later of their separation from service or a specific date/event and then receive common stock under the Director Stock Plan.

Under the Director Cash Deferral Plan, interest is credited semi-annually at Carpenter Technology’s “Five-Year Medium-Term Note Borrowing Rate,” a term defined in the Director Cash Deferral Plan. Carpenter Technology distributes a participating director’s deferred cash based on the director’s advance election, in a lump sum or in any number of annual installments up to a maximum of 15, beginning on a future date or upon the event elected.

 

   

34

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Director Compensation • Fiscal Year 2022 Director Compensation Table    

 

 

Fiscal Year 2022 Director Compensation Table

This table shows the compensation paid or awarded to each non-employee director during fiscal year 2022. Our CEO is not compensated for his Board service.

 

Name  

Fees Earned or

Paid in Cash
(includes Chair
Retainer)

($)

   

Stock   
Awards(1)

($)   

    

Option   
Awards(2)

($)   

    

Change in   
pension value   
and   
nonqualified   
deferred   
compensation   
earnings(3)

($)   

    

All Other   

Compensation(4)

($)   

    

Total

($)

 

Acoff, Viola L.

    $65,000       $115,033           $35,014           $       0           $  9,771           $224,818  

Hannan, Kathy H.

    $14,107       $  53,877           $82,597           $       0           $         0           $150,581  

Hart, A. John

    $65,000       $115,033           $35,014           $       0           $  9,771           $224,818  

Inglis, I. Martin

    $97,500       $200,046           $60,030           $       0           $44,595           $402,171  

Karol, Steven E.

    $77,500       $115,033           $35,014           $       0           $24,457           $252,004  

Ligocki, Kathleen

    $82,500       $115,033           $35,014           $       0           $12,850           $245,397  

McLane, Jr., Charles D.

    $83,750 (5)      $115,033           $35,014           $       0           $  8,568           $242,365  

Pratt, Gregory A.

    $50,000       $           0           $         0           $       0           $24,967           $  74,967  

Wadsworth, Jeffrey

    $77,500       $115,033           $35,014           $       0           $35,849           $263,396  

Ward, Jr., Stephen M.

    $77,500       $115,033           $35,014           $1,361           $51,103           $280,011  

Younessi, Ramin

    $48,750       $115,033           $84,574           $       0           $  1,380           $249,737  

 

(1)

The grant date fair value of stock units granted to our directors in fiscal year 2022 was computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation. Assumptions made in this valuation are set forth in Note 16 to the financial statements contained in Carpenter Technology’s 2022 Annual Report on Form 10-K. Annual stock units granted and credited to each director’s account are subject to partial forfeiture if the director separates from Board service prior to the first anniversary of the grant date for any reason other than Death or Disability.

 

 

Each director, with the exception of Messrs. Pratt and Inglis, and Dr. Hannan, was credited with 3,441 stock units for fiscal year 2022 on October 12, 2021, representing a grant date fair value of $115,033. Retainer stock units credited to each director represent $65,022 of the annual retainer. The remaining stock units credited represent an annual award of additional stock units as described above with a grant date fair value of $50,011.

 

 

Mr. Inglis, who serves as Chairman, was credited with 5,984 stock units for fiscal year 2022 on October 12, 2021, representing a grant date fair value of $200,046. Of this total number, 2,992 stock units represent $100,023 of his annual retainer. The remaining stock units credited represent an annual award of additional stock units with a grant date fair value of $100,023.

 

 

Mr. Pratt retired from the Board on October 12, 2021, and did not receive a stock unit grant.

 

 

Dr. Hannan joined the Board on April 13, 2022, and was credited with 1,324 stock units for fiscal year 2022 on that date, representing a grant date fair value of $53,927. Of this total number, 748 stock units represent $30,452 of her prorated annual retainer. The remaining stock units credited represent a prorated annual award of additional stock units with a grant date fair value of $23,425.

 

 

The total number of stock units credited to each director under Carpenter Technology’s Stock-Based Compensation Plan for Non-Employee Directors as of June 30, 2022, including stock units that were credited with respect to prior fiscal years and reinvested dividend equivalents, was: V. Acoff – 14,136; K. H. Hannan – 1,324; A. J. Hart – 14,136; I. M. Inglis – 59,630; S. Karol – 32,783; K. Ligocki – 18,046; C. McLane, Jr. – 13,265; G. Pratt – 12,561; J. Wadsworth – 47,248; and S. Ward, Jr. – 67,582; R. Younessi—3,482.

 

(2)

The grant date fair value of option awards granted to our directors in fiscal year 2022 was computed in accordance with FASB ASC Topic 718, Compensation – Stock Compensation. Assumptions made in this valuation are set forth in Note 16 to the financial statements contained in Carpenter Technology’s 2022 Annual Report on Form 10-K.

 

 

Each director, with the exception of Messrs. Pratt and Inglis, and Dr. Hannan, received an annual award of 2,826 stock options for fiscal year 2022 on October 12, 2021, representing a grant date fair value of $35,014.   Mr. Younessi received an additional award of 4,000 stock options upon joining the Board on October 12, 2021, representing a grant date fair value of $49,560. Mr. Inglis received an annual award of 4,845 stock options for fiscal year 2022 on October 12, 2021, representing a grant date fair value of $60,030. Mr. Pratt retired from the Board on October 12, 2021, and did not receive a stock option grant.

 

 

Dr. Hannan joined the Board on April 13, 2022, and was credited with 991 stock options for fiscal year 2022 on that date representing a grant date fair value of $16,397. She also received an additional award of 4,000 stock options upon joining the Board, representing a grant date fair value of $66,200.

 

 

The total number of shares subject to stock options credited to each director that remains outstanding as of June 30, 2022, including stock options that were granted in prior fiscal years, was: V. Acoff –15,644; K. H. Hannan – 4,991; A. J. Hart – 15,644; I. M. Inglis – 32,879; S. Karol – 27,723; K. Ligocki – 17,530; C. McLane, Jr. – 13,326; G. Pratt – 39,776; J. Wadsworth – 27,723; S. Ward, Jr. – 27,723; and R. Younessi – 6,826.

 

(3)

Reflects above-market earnings equal to 101% above 120% of the AFR Long-Term Rate on compensation deferred that is not tax qualified.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

35


 

    Director Compensation • Fiscal Year 2022 Director Compensation Table    

 

 

(4)

Includes the aggregate dollar amount of dividend equivalents paid in fiscal year 2022 on the stock unit balance credited to each director’s account with respect to dividends paid on outstanding common stock during fiscal year 2022. Dividend equivalents are reinvested in the form of additional stock units, with the number of units credited being determined by dividing the dividend dollar amount by the closing price on the NYSE on the dividend equivalent payment date.

 

(5)

Includes fees deferred in the form of stock units pursuant to an advance deferral election for compensation earned in 2022.

 

   

36

  

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Proposal 2:

Approval of Appointment of Independent

Registered Public Accounting Firm

The Audit/Finance Committee has selected PricewaterhouseCoopers LLP (“PwC”), subject to approval by the stockholders at the Annual Meeting, to serve as Carpenter Technology’s independent registered public accounting firm for fiscal year 2023. PwC would be engaged to audit and report upon Carpenter Technology’s financial statements and internal controls over financial reporting for fiscal year 2023. PwC, or one of its predecessor firms, has served as Carpenter Technology’s independent registered public accounting firm since 1918. The Audit/Finance Committee and the Board of Directors believe PwC is well qualified to act in this capacity. A representative of PwC is expected to attend the Annual Meeting of Stockholders and be available to respond to appropriate questions from stockholders.

Vote Required for Approval

The affirmative vote of a majority of the shares in person or represented by proxy at the meeting and entitled to vote is required to approve the appointment of PwC as the Company’s independent registered public accounting firm.

Audit Fees

The aggregate fees billed by PwC for professional services rendered for the annual audit of Carpenter Technology’s consolidated financial statements and internal controls over financial reporting for fiscal year 2022, the reviews of the financial statements included in Carpenter Technology’s quarterly reports on Form 10-Q, audit and attestation services related to statutory or regulatory filings required by certain foreign locations, issuance of comfort letters, and review of registration statements, were $2,060,000 in fiscal year 2022 as compared to $2,070,000 in fiscal year 2021.

Audit-Related Fees

PwC billed $10,000 in audit-related fees in fiscal year 2022, the same as those in fiscal year 2021. The fees in both fiscal year 2022 and 2021 were related to agreed upon procedures related to Carpenter Technology’s compliance with certain federal and state environmental reporting requirements.

Tax Fees

The aggregate fees billed by PwC for tax services were $410,000 for fiscal year 2022, compared to $553,405 in fiscal year 2021. Fees in both fiscal years were primarily for domestic and international tax compliance services and other tax projects.

All Other Fees

The aggregate fees billed by PwC for all other services were $4,000 in fiscal year 2022, compared to $449,600 in fiscal year 2021. The fees in 2021 related primarily to a pre-implementation review of a new SAP ERP system implementation. The fiscal year 2022 fees and the remaining services in fiscal year 2021 are for subscriptions to certain PwC reference tools.

Pre-Approval Policies and Procedures for Audit and Non-Audit Services

Policy Statement

The Audit/Finance Committee is required to specifically pre-approve the audit and non-audit services performed by the independent auditor to ensure that such services do not impair the auditor’s independence.

Delegation

The Chairman of the Audit/Finance Committee has the Committee’s delegated authority to pre-approve requests for services that were not approved at a scheduled meeting. The Chairman reports any pre-approval decisions to the Audit/Finance Committee at its next scheduled meeting. All services, regardless of fee amounts, are subject to restrictions to ensure the services will not impair the independence of the auditor. In addition, all fees are subject to ongoing monitoring by the Audit/Finance Committee.

Audit Services

The annual audit services engagement terms and fees are subject to the specific pre-approval of the Audit/Finance Committee. The Committee must approve any changes in terms, conditions and fees resulting from changes in audit scope. In addition to the annual audit services engagement, the Audit/Finance Committee may grant pre-approval for other audit services, which are those services that only the independent auditor reasonably can provide.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

37


 

    Proposal 2: Approval of Appointment of Independent Registered Public Accounting Firm    

 

 

Audit-Related Services

Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of Carpenter Technology’s financial statements as traditionally performed by its independent auditor. The Audit/Finance Committee believes the performance of audit-related services does not impair the independence of the auditor. All PwC audit-related fees for fiscal year 2022 were pre-approved by the Audit/Finance Committee.

Tax Services

The Audit/Finance Committee believes the independent auditor can provide tax services to the Company, such as domestic and international tax consulting and compliance services, without impairing the auditor’s independence. All PwC fees for tax services during fiscal year 2022 were pre-approved by the Audit/Finance Committee.

All Other Services

The Audit/Finance Committee may grant pre-approval of those permissible non-audit services classified as “all other services” that it believes are routine and recurring services that will not impair the independence of the auditor. All PwC fees for other services during fiscal year 2022 were pre-approved by the Audit/Finance Committee.

 

 

 

 

 

 

 

 

LOGO

 

 

 

 

 

 

 

 

 

 

 

 

FOR

  

 

 

The Board of Directors recommends that you vote FOR the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for fiscal year 2023.

 

 

 

   

38

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Audit/Finance Committee Report

The Audit/Finance Committee consists of five members, each of whom has been determined by the Board to be an independent director under applicable rules or other requirements of the NYSE and the SEC with respect to qualification of members of an audit committee. Each member is financially literate as required by NYSE standards, and each of Mr. McLane and Dr. Hannan, qualifies as an “audit committee financial expert” under applicable SEC standards. The Audit/Finance Committee functions pursuant to a written charter that was adopted and is reviewed annually by the Board. A copy of the charter is posted on Carpenter Technology’s website at www.carpentertechnology.com.

 

 

The Audit/Finance Committee’s primary responsibilities include appointing the independent registered public accounting firm to be retained to audit Carpenter Technology’s consolidated financial statements and recommending to the Board the inclusion of these financial statements in the Annual Report on Form 10-K. The Audit/Finance Committee is also responsible for approving any non-audit services to be provided by the independent registered public accounting firm. Additionally, the Audit/Finance Committee reviews the adequacy of Carpenter Technology’s financial reporting and internal controls over financial reporting, the integrity of Carpenter Technology’s financial statements, and the independence and performance of Carpenter Technology’s independent registered public accounting firm.

 

Management is primarily responsible for the preparation, presentation and integrity of Carpenter Technology’s financial statements; establishing, maintaining and evaluating the effectiveness of disclosure controls and procedures; establishing, maintaining and evaluating the effectiveness of internal controls over financial reporting; and evaluating any change in internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

 

The independent registered public accounting firm is responsible for performing an independent audit of Carpenter Technology’s financial statements in accordance with standards established by the Public Company Accounting Oversight Board (“PCAOB”) and expressing an opinion on whether those financial statements conform to U.S. generally accepted accounting principles, as well as expressing an opinion on the effectiveness of Carpenter Technology’s internal controls over financial reporting.

 

 

The Audit/Finance Committee reviewed and discussed with management and Carpenter Technology’s independent registered public accounting firm, PwC, Carpenter Technology’s audited financial statements and schedule for fiscal year 2022 and the report of PwC. The Committee also discussed other matters with PwC, such as the quality (in addition to acceptability), clarity, consistency and completeness of Carpenter Technology’s financial reporting and the matters required to be discussed by the applicable requirements of PCAOB and the SEC.

The Audit/Finance Committee met with management periodically during fiscal year 2022 to consider the adequacy of Carpenter Technology’s internal controls and discussed these matters and the overall scope and plans for the audit with PwC. The Audit/Finance Committee also discussed with management and PwC Carpenter Technology’s disclosure controls and procedures and the certifications by Carpenter Technology’s CEO and CFO. In particular, the Audit/Finance Committee was kept apprised by management of the progress of the evaluation of Carpenter Technology’s system of internal control over financial reporting and provided oversight and advice to management during the process. In connection with this oversight, the Audit/Finance Committee received periodic updates provided by senior management and PwC at several meetings during the fiscal year. At the conclusion of the process, management provided the Audit/Finance Committee with, and the Audit/Finance Committee reviewed, a report on the effectiveness of Carpenter Technology’s internal controls over financial reporting. The Audit/Finance Committee also reviewed PwC’s report on Carpenter Technology’s internal controls over financial reporting.

The Audit/Finance Committee has considered whether the independent registered public accounting firm can maintain independence while also providing non-audit services, and has received from PwC written disclosures and a letter concerning the firm’s independence from Carpenter Technology, as required by applicable requirements of the PCAOB. These disclosures have been reviewed by the Audit/Finance Committee and discussed with PwC.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

39


 

    Audit/Finance Committee Report    

 

 

Based on the reviews and discussions described in this report, the Audit/Finance Committee has recommended to the Board that Carpenter Technology’s audited consolidated financial statements be included in Carpenter Technology’s 2022 Annual Report on Form 10-K for filing with the SEC.

Submitted by the Audit/Finance Committee of the Board of Directors,

CHAIR: Charles D. McLane, Jr.

Members:

Dr. A. John Hart

Dr. Kathy H. Hannan

Dr. Jeffrey Wadsworth

Ramin Younessi

 

   

40

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Proposal 3:

Advisory Vote to Approve the Compensation

of Our Named Executive Officers

Each year since 2012, we have asked our stockholders to vote to approve, on an advisory basis, the compensation of our named executive officers (“NEOs”) as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis (“CD&A”), the Compensation Tables, and any related material as required pursuant to Section 14A of the Securities Exchange Act of 1934. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our NEO compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this Proxy Statement. We expect to continue conducting the say-on-pay vote annually.

The say-on-pay vote is advisory, and therefore not binding on the Company, the Human Capital Management Committee or the Board of Directors. However, the Board of Directors and the Human Capital Management Committee value our stockholders’ opinions. If there is a significant vote against the NEO compensation, the Human Capital Management Committee will evaluate whether any actions are necessary to address stockholder concerns.

 

 

Our Pay-for-Performance Compensation

 

Our executive compensation programs are designed to provide compensation levels benchmarked to attract, motivate and retain exceptional managerial talent for the present and future, to reward executives for achieving financial and strategic company goals, and to align their interests with the interests of stockholders.

 

We believe the compensation of our NEOs is reasonable, competitive and strongly focused on pay-for-performance principles. We emphasize compensation opportunities that appropriately reward executives for delivering financial results that meet or exceed pre-established goals, and executive compensation varies depending upon the achievement of those goals.

 

Through stock ownership requirements and equity incentives, we believe we have aligned the interests of our NEOs with those of our stockholders and the long-term interests of the Company.

 

 

We believe that the compensation policies and procedures articulated in this Proxy Statement are effective in achieving Carpenter Technology’s goals, and that the executive compensation reported was appropriate and aligned with fiscal year 2022 results. Before voting, we encourage you to read the CD&A and “Executive Compensation” sections of this Proxy Statement for details about our executive compensation programs and NEO compensation in fiscal year 2022.

The Human Capital Management Committee continually reviews the compensation programs for our NEOs to ensure that they achieve the desired goal of offering total compensation consisting of base salary competitive with an identified peer group of companies and incentive opportunities that are performance-oriented and linked to the interests of stockholders. We are asking stockholders to indicate their support for our NEO compensation as described in this Proxy Statement. We expect that we will hold a say-on-pay vote again at next year’s annual meeting.

 

 

 

 

 

LOGO

 

 

 

 

 

 

 

 

FOR

  

 

 

The Board of Directors recommends that you vote FOR Proposal 3 to approve the compensation of the NEOs as disclosed in this Proxy Statement on an advisory basis.

 

 

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

41


Human Capital Management Committee Report

The Human Capital Management Committee consists of four members, each of whom has been determined by the Board to meet the NYSE and SEC requirements for compensation committee members. The Human Capital Management Committee functions pursuant to a written charter that was adopted and is reviewed annually by the Board. A copy of the charter is posted on Carpenter Technology’s website at www.carpentertechnology.com.

The Human Capital Management Committee has reviewed and discussed the CD&A with management, legal counsel, and its independent compensation consultant. The Human Capital Management Committee also considered the results of prior say-on-pay votes and input from stockholder engagement during the last fiscal year when reviewing the CD&A.

Based on such review and discussion, the Human Capital Management Committee recommended to the Board that the CD&A be included in this Proxy Statement and incorporated by reference into our 2022 Annual Report on Form 10-K.

Submitted by the members of the Human Capital Management Committee,

Chair: Kathleen Ligocki

Members:

Dr. Viola L. Acoff

Steven E. Karol

Stephen M. Ward, Jr.

 

   

42

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Proposal 4:

Approval of the Amended and Restated Stock-Based Incentive Compensation Plan

for Officers and Key Employees

We are asking stockholders to approve the amended and restated Carpenter Technology Corporation Stock-Based Incentive Compensation Plan for Officers and Key Employees (the “Omnibus Plan”). Carpenter Technology Corporation’s Board of Directors (the “Board”) approved the adoption of the amended and restated Omnibus Plan to be effective October 11, 2022, subject to stockholder approval. The amended and restated Omnibus Plan increases the number of shares of common stock of Carpenter Technology Corporation (the “Company”) reserved for issuance by an additional 2,300,000 shares and automatically extends the term of the Omnibus Plan through the 10th anniversary of the date the amended and restated Omnibus Plan is approved by the stockholders, unless terminated earlier in accordance with the terms of the Omnibus Plan. Although stockholders approved the reservation of an additional 1,350,000 shares for issuance under the Omnibus Plan at the Company’s 2020 Annual Meeting of Stockholders, which we anticipated would be sufficient to last through our 2023 Annual Meeting of Stockholders, based on historical usage rates at the time of such approval, the impact of the COVID-19 pandemic and the volatility in the price of the Company’s common stock (the “Common Stock”) have increased our annual average equity expenditures, or “run rate,” and we could deplete our current share reserve more rapidly than anticipated. If we do not increase the number of shares available for issuance under the Omnibus Plan, based on our historical and expected usage rates (which are adjusted under our fungible design ratio of 2.0:1, whereby every one share granted pursuant to a “full-value” award (e.g. a restricted stock unit) reduces the shares available for issuance under the Omnibus Plan by two shares, we may not have a sufficient number of shares authorized under the Omnibus Plan to grant Awards through Fiscal Year 2024 consistent with our historical compensation practices. In such event, we would lose an important compensation tool aligned with stockholder interests to attract and retain qualified employees. The Board has determined that it is advisable to increase the share reserve under the Omnibus Plan at this time to ensure that we have sufficient shares to make equity-based awards over the next three fiscal years in amounts determined appropriate by the Human Capital Management Committee of the Board (the “HCM Committee”) and consistent with our historical compensation practices to promote retention and alignment of interests of key employees with those of our stockholders.

In connection with the amendment and restatement of the Omnibus Plan, the HCM Committee considered a number of factors, including the changes to our run rate due to the COVID-19 pandemic and volatility in the price of our Common Stock, the estimated dilution associated with the Omnibus Plan and the total number of shares of Common Stock outstanding under existing and future Awards relative to external guidelines.

 

 

Historical Equity Award Granting Practices (Run Rate): In setting the number of shares authorized for issuance under the Omnibus Plan, the HCM Committee considered the historical number of equity awards granted in the past three full fiscal years. The following table sets forth information regarding awards granted and our annual run rate for each of the last three fiscal years.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

43


 

    Proposal 4: Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees    

 

 

Fiscal

Year

  

Options

Granted*

    

Time-
Based

RSU
Granted*

    

Performance-
Based

RSU Granted

    

Performance-
Based

RSU
Earned**

    

Weighted
Average

Basic
Common

Shares

    

Run

Rate***

 

2022

     36,444        319,298        128,343        28,837        48,500,000        0.79

2021

     67,142        475,984        184,320        44,628        48,300,000        1.22

2020

     167,926        214,757        109,878        33,979        48,100,000        0.87
                                  Three-Year Average        0.96

 

*

Options and Time-Based RSUs include Director grants.

**

Performance-based earned within the respective fiscal year, regardless of original grant date.

***

Calculated as (options granted + time-based RSUs granted + performance-based RSUs earned) divided by weighted average basic common shares.

 

 

Potential Dilution and Overhang: In setting the number of shares authorized for issuance under the Omnibus Plan, the HCM Committee also considered the dilution (based on total outstanding award shares) and overhang (based on total potential award shares) that would result from approval of the Omnibus Plan, including the policies of certain institutional investors and major proxy advisory firms.

As of August 30, 2022, approximately 1,663,361 shares remained available for issuance under the Omnibus Plan. Separately, we also had approximately 260,325 shares available for issuance under the Director Stock Plan. Also as of August 30, 2022, 3,783,443 shares were subject to outstanding Awards (as defined in the applicable plan) under all plans, including 1,919,180 options with a weighted average exercise price of $42.84 and weighted average remaining term of 3.9 years and 1,864,263 full-value awards. The Omnibus Plan provides for a fungible plan design in determining the number of shares of Common Stock subject to an award, described more fully below.

 

 

      Assuming Approval of the Omnibus Plan  

Options Outstanding as of August 30, 2022

     1,919,180  

Weighted Average Exercise Price of Options Outstanding

   $ 42.84  

Weighted Average Remaining Term of Options Outstanding

     3.9 years  

Time-Based RSU Awards Outstanding as of August 30, 2022

     999,537  

Performance-Based Awards Outstanding as of August 30, 2022, assuming maximum performance

     864,726  

Total Equity Awards Outstanding (Including Options, RSU Awards and Performance-Based Awards)

     3,783,443  

Common Stock Outstanding as of August 30, 2022

     48,304,311  

Dilution as a Percentage of Common Stock Outstanding, as of August 30, 2022(1)

     7.8

Shares Available for Future Grant (Omnibus Plan + Non-Employee Directors Plan)

     1,923,686  

New Share Request

     2,300,000  

Overhang, as a Percentage of Common Stock Outstanding, as of August 30, 2022(2)

     16.6

 

(1)

Dilution consists of the number of shares subject to equity awards outstanding as of August 30, 2022 divided by the number of shares of our common stock outstanding.

(2)

Overhang consists of the number of shares subject to equity awards available for issuance (assuming approval of the 2,300,000 new shares) + equity awards outstanding as of August 30, 2022, divided by the number of shares of common stock outstanding.

 

   

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    Proposal 4: Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees    

 

 

Purpose of the Omnibus Plan—Why our Board recommends you vote to approve this proposal

The purpose of the Omnibus Plan is to attract and retain valued employees by offering them a greater stake in the Company’s success and a closer identity with it, and to encourage ownership of the Common Stock. Our Omnibus Plan is designed to motivate our key employees to achieve superior performance as measured by financial and operating metrics as well as stock price appreciation.

We believe that equity granted under the Omnibus Plan is a critical component of our compensation program and pay-for-performance culture. Equity compensation contributes to long-term sustainable growth and aligns management’s interests with the interests of our stockholders.

The Board believes your vote to approve this proposal will help us to achieve superior performance in the future.

The Omnibus Plan as amended and restated if this proposal is approved is described in more detail below. If this proposal is not approved by our stockholders, the amendment and restatement of the Omnibus Plan will not become effective, but the Omnibus Plan will remain in effect in accordance with its present terms, unaffected by its proposed amendment and restatement.

Compensation Governance Highlights of the Omnibus Plan as Amended and Restated Designed to Protect Stockholders’ Interests

 

 

Awards are subject to potential reduction, cancellation or forfeiture in certain circumstances

 

 

No tax gross-ups

 

 

No discounted options may be granted

 

 

No repricing of stock options without stockholder approval other than appropriate adjustments to the exercise price consistent with a change in the Company’s capitalization

 

 

Minimum one-year vesting requirement with respect to all Awards other than those that, in the aggregate, do not exceed five percent (5%) of the shares available under the Omnibus Plan

 

 

Limited discretionary accelerated vesting

 

 

Dividends on restricted stock and dividend equivalents on time-based and earned but unvested performance-based restricted stock units for Awards granted under the Omnibus Plan are paid subject to the vesting and payment terms applicable to the underlying Awards

 

 

No dividend equivalent rights are granted on shares of the Common Stock underlying stock option awards

 

 

Maximum term of each stock option Award that can be granted under the Omnibus Plan is ten years

 

 

No automatic benefits upon a change in control, and change in control benefits under Awards pursuant to the Omnibus Plan cannot be triggered upon any event that does not result in an actual change in control of the Company

 

   

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Key Elements of the Omnibus Plan

 

   
Administration    HCM Committee, which is made up entirely of independent directors.
Effective Date    The amended and restated Omnibus Plan would become effective upon approval by the Company’s stockholders.
Eligible Participants    Awards may be granted to any officer, management director or other key employee of the Company or a subsidiary who is selected by the Company to participate in the Omnibus Plan. As of August 30, 2022, approximately 3,733 employees were eligible to participate in the Omnibus Plan upon its approval. Of the total employees eligible to participate in the Omnibus Plan, approximately 370 received Awards under the Omnibus Plan during fiscal year 2022. Non-employee directors and consultants are not eligible to participate in the Omnibus Plan.

Total Shares Available

for Awards Under Plan

   2,300,000 shares recently approved by the Board, plus approximately 1,663,361 shares that remained available for issuance as of August 30, 2022 under the Omnibus Plan immediately prior to such approval, as well as shares that are subject to outstanding awards, some of which may be forfeited, canceled or expire unexercised and again become available for issuance of new Awards under the terms of the Omnibus Plan.

Unavailable for

Issuance

  

The following will not again become available for issuance under the Omnibus Plan:

 

   any shares tendered or withheld to pay the exercise price of stock options;

 

   any shares withheld in respect of taxes; and

 

   any shares repurchased by the Company from an optionee with proceeds from the exercise of stock options.

Award Types    Stock Options, Restricted Stock and Restricted Stock Units; only Non-Qualified Options may be granted under the Omnibus Plan.
Performance Metrics    Performance Goals may be measured on an absolute or relative basis.
Nontransferability of Awards   

In general, during a Participant’s lifetime, Awards are exercisable only by the Participant and are not transferable other than by will or laws of descent and distribution.

 

However, the HCM Committee may provide for limited lifetime transfers of Awards to certain family members, trusts for the benefit of family members, or partnerships in which such family members are the only partners. In addition, the HCM Committee may provide in any Award Agreement (as defined in the Omnibus Plan) terms and conditions under which the Participant must sell or offer to sell any vested Awards and any Common Stock acquired pursuant to an Award to the Company.

Amendments and Termination   

Stockholder approval is required for any amendment which:

 

   increases the number of shares available for Awards under the Omnibus Plan (other than to reflect a change in the Company’s capital structure);

 

   constitutes a repricing or exchange of any Award or involves the buy-out by the Company of any previously granted Award;

 

   makes changes to the amendment provisions of the Omnibus Plan that require stockholder approval; or

 

   as otherwise required by applicable law, regulation, or rules of any stock exchange or automated quotation system on which the Common Stock may then be listed or quoted.

 

Unless terminated earlier by the Board, the Omnibus Plan will terminate and expire on the date which is ten years after the most recent stockholder approval of the Omnibus Plan or upon the date on which all outstanding Awards have expired, terminated, been paid or otherwise provided for, and no Awards under the Omnibus Plan shall thereafter be granted.

 

   

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    Proposal 4: Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees    

 

 

Summary of the Omnibus Plan as Amended and Restated

The following general description of certain features of the Omnibus Plan is qualified in its entirety by reference to the Omnibus Plan, which is attached as Exhibit A. Capitalized terms not otherwise defined in this summary have the meanings given to them in the Omnibus Plan.

General. The Omnibus Plan authorizes the grant of Options, Restricted Stock, and Restricted Stock Units (collectively, “Awards”). Only Non-Qualified Options may be granted under the Omnibus Plan.

Number of Shares Reserved. The Company’s Board has reserved an additional 2,300,000 shares of Common Stock, in addition to 1,663,361 shares that remained available for issuance as of August 30, 2022, under the Omnibus Plan immediately prior to such increase, as well as shares that are subject to outstanding awards, some of which may be forfeited, canceled or expire unexercised and again become available for issuance of new Awards under the terms of the Omnibus Plan. The maximum number of shares that may be granted to any Employee under the Omnibus Plan during any calendar year shall not exceed 500,000.

The Omnibus Plan provides for a fungible plan design in counting the maximum number of shares that may be issued under the Plan. In determining the number of shares of Common Stock available for Awards under the Plan, a share of Common Stock subject to an award of Restricted Stock, Restricted Stock Unit, or any other full value share award shall count against the number of shares available for Awards under the Plan as two and one-half shares of Common Stock for Awards granted prior to October 13, 2020, and two shares of Common Stock for Awards granted on or after October 13, 2020, and a share of Common Stock subject to an Option shall count against the number of shares available for Awards under the Plan as one share of Common Stock.

To the extent any shares subject to an Award are forfeited or to the extent an Award otherwise terminates for any reason without an actual distribution of shares to the Participant, any shares counted against the number of shares available for issuance pursuant to the Omnibus Plan with respect to such Award shall, to the extent of any such forfeiture or termination, again be available for Awards under the Omnibus Plan. However, the following will not again become available for issuance under the Omnibus Plan: any shares withheld in respect of taxes; any shares tendered or withheld to pay exercise price of stock options; and any shares repurchased by the Company from an optionee with proceeds from the exercise of stock options.

In the event that any stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange, extraordinary or unusual cash distribution or other similar corporate transaction or event, affects the Common Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Omnibus Plan, then the HCM Committee will, in such manner as it may deem equitable, adjust any or all of the following:

 

 

the number and kind of shares of Common Stock which may thereafter be issued in connection with Awards;

 

 

the number and kind of shares of Common Stock issuable in respect of outstanding Awards;

 

 

the aggregate number and kind of shares of Common Stock available under the Omnibus Plan; and

 

 

the exercise or Award-date price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award.

Administration. The HCM Committee administers the Omnibus Plan. Subject to the other provisions of the Omnibus Plan, the HCM Committee has the authority to:

 

 

select the employees who will receive Awards pursuant to the Omnibus Plan;

 

 

determine the type(s) of Awards to be granted to each Participant;

 

 

determine the number of shares of Common Stock to which an Award will relate, the terms and conditions of any Award granted under the Omnibus Plan (including, but not limited to, restrictions as to vesting, transferability or forfeiture, exercisability or settlement of an Award and waivers or accelerations thereof as described under “Termination of Employment” below, and waivers of or modifications to performance conditions relating to an Award, based in each case on such considerations as the Committee shall determine) and all other matters to be determined in connection with an Award;

 

 

determine whether, to what extent, and under what circumstances an Award may be canceled, forfeited, or surrendered;

 

   

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determine whether, and to certify that, Performance Goals to which the settlement of an Award is subject are satisfied;

 

 

correct any defect or supply any omission or reconcile any inconsistency in the Omnibus Plan, and to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Omnibus Plan; and

 

 

make all other determinations as it may deem necessary or advisable for the administration of the Omnibus Plan.

The HCM Committee may delegate to the Company’s CEO its authority under the first four items above, to grant Awards covering a pre-determined aggregate number of shares of Common Stock. Such delegation is limited to the authority to grant and amend Awards to Participants who are not subject to the requirements of Rule 16b-3 of the Exchange Act. Any Awards granted or amended by the CEO are to be subject to the terms of the Omnibus Plan. The CEO shall report to the HCM Committee, in a form and manner to be determined by the HCM Committee, at least annually on the disposition of shares subject to Awards granted or amended by the CEO. Any reference to the HCM Committee hereafter includes the CEO to the extent the HCM Committee has delegated the authority to grant or amend Awards.

Eligibility. Awards may be granted to any officer or other key employee of the Company or a subsidiary including a director who is such an employee, who is selected by the Company to participate in the Omnibus Plan. The maximum number of shares that may be awarded to any Participant as Awards in any calendar year may not exceed 500,000.

As of August 30, 2022, approximately 3,733 employees were eligible to participate in the Omnibus Plan and would be eligible to participate in the amended and restated Omnibus Plan upon its approval. Of the total employees eligible to participate in the Omnibus Plan, approximately 370 received Awards under the Omnibus Plan during fiscal year 2022. Non-employee directors and consultants are not eligible to participate in the Omnibus Plan.

Each Award granted under the Omnibus Plan will be evidenced by a written agreement between the Participant and the Company that describes the Award and states the terms and conditions applicable to such Award. The principal terms and conditions of each particular type of Award are described below.

Performance Goals. The Award Agreements may provide for vesting of the Award based on achievement of Performance Goals during a specified period. Performance Goals may be measured on an absolute or relative basis.

The Performance Goals may be applied to the Company, any affiliate or any business unit, either individually, alternatively or in combination.

Adjustments. The Committee may modify the Performance Goals previously established with respect to a particular grant of an Award to address accounting expenses of equity compensation; amortization of acquired technology and intangibles; asset write-downs; litigation-related events; changes in tax laws accounting principles or other laws or provisions affecting reported results; reorganization and restructuring programs; discontinued operations; and extraordinary or nonrecurring or infrequent events.

Types of Awards. The following table provides details about each type of Award under the Omnibus Plan.

 

   

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    Proposal 4: Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees    

 

 

Award Type    Information Detail

Options

 

An Option is the right to purchase shares of Common Stock for a specified period of time at a fixed price (the “exercise price”).

 

Each Award Agreement will specify the exercise price, the term of the Option, and the date or dates when the Option will become exercisable.

 

Options shall only be transferable by will or under the laws of descent and distribution, and, during the Participant’s lifetime, may only be exercised by the Participant.

 

Only Non-Qualified Options may be granted under the Omnibus Plan.

  

Vesting. Subject to certain exceptions, Options shall not vest and are not exercisable sooner than one (1) year from the grant date of the Award.

 

Exercise Price. The HCM Committee will determine the exercise price of an Option at the time the Option is granted. The exercise price of an Option will not be less than 100% of the Fair Market Value of Common Stock on the date the Option is granted. For purposes of the Omnibus Plan, Fair Market Value is defined as the closing price of a share of Common Stock on the New York Stock Exchange, or, in the absence of a closing price on such date, the closing price on the last trading day preceding such date. However, the HCM Committee may use the closing price as of the indicated date, the average price or value as of the indicated date or for a period certain ending on the indicated date, the price determined at the time the transaction is processed, the tender offer price for shares of Common Stock, or any other method which the HCM Committee determines is reasonably indicative of the Fair Market Value of the Common Stock; provided, however, that for purposes of granting Options or Restricted Stock Units, Fair Market Value of Common Stock shall be determined in accordance with the requirements of Code Section 409A. Other than in connection with a change in capitalization, the exercise price of an Option may not be reduced without stockholder approval.

 

Consideration. The means of payment for shares issued upon exercise of an Option will be specified in each Award Agreement and generally may be made by the Participant in cash, by the surrender at Fair Market Value of Common Stock, by any combination of cash and shares of Common Stock, by “cashless exercise” arrangements such as through a broker or by net exercise, to the extent permitted by applicable law. The HCM Committee will determine the methods by which, or the time or times at which, Common Stock will be delivered or deemed to be delivered to the Participant upon the exercise of such Option. The Committee may not permit payment through any method that would constitute a prohibited extension of credit to those officers of the Company who are subject to the provisions of the Sarbanes-Oxley Act of 2002.

 

Term of the Option. The term of an Option granted under the Omnibus Plan will be no longer than ten years from the date of grant.

 

Reload Grants. Options shall not be granted in consideration for and shall not be conditioned upon the delivery of shares of Common Stock to the Company in payment of the exercise price and/or tax withholding obligation under any other option held by a Participant.

 

   

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Award Type    Information Detail
    

 

No dividend equivalent rights. No dividend equivalent rights are granted on shares underlying stock option awards.

Restricted Stock

 

An Award of Restricted Stock is a grant to the recipient of a specified number of shares of Common Stock that are subject to forfeiture upon specified events during the Restriction Period.

 

Each grant of Restricted Stock is to specify the duration of the Restriction Period and any other conditions under which the Restricted Stock would be forfeitable to the Company, including any applicable Performance Goals, and will include restrictions on transfer to third parties during the Restriction Period.

  

Subject to certain exceptions, the Restriction Period for such Awards must be at least:

 

   three years for Awards that vest solely on the passage of time unless otherwise determined by the HCM Committee, and

 

   one year for Awards that are earned in whole or in part upon the attainment of Performance Goals.

 

During the Restriction Period, the HCM Committee may, but is not required to, authorize the payment of a dividend declared and paid on Common Stock to any Participant awarded Restricted Stock. Any dividend with respect to Restricted Stock will only be paid upon satisfaction of the performance, employment or other conditions and subject to the payment terms applicable to the Restricted Stock. Payment may be made in cash or deemed reinvested in Restricted Stock as determined by the Committee in its sole discretion. During the Restriction Period, the Participant will have the right to vote the shares of Restricted Stock.

Restricted Stock Units

 

A Restricted Stock Unit is a book-entry unit with a value equal to one share of Common Stock.

 

A grant of Restricted Stock Units will vest and become payable to the Participant upon other future events, including the achievement of Performance Goals established by the HCM Committee or the passage of time.

 

Each grant of Restricted Stock Units will specify the conditions, including the passage of time and Performance Goals, if applicable, that must be satisfied in order for payment to be made.

 

Payment of Restricted Stock Units may be made in cash, shares of Common Stock, or a combination of both, equal to the Fair Market Value of the shares of Common Stock to which the Award relates.

  

The HCM Committee may, but is not required to, authorize the payment of an amount equivalent to a dividend declared and paid on Common Stock to any Participant awarded Restricted Stock Units. Any dividend equivalent paid with respect to Restricted Stock Units subject to Awards granted under the amended and restated Plan will only be paid upon satisfaction of the terms and conditions and subject to the payment terms applicable to the Restricted Stock Units.

 

Such dividend equivalent will be in the form of:

 

   cash, or

 

   additional Restricted Stock Units that are subject to the provisions of the Award Agreement governing the Restricted Stock Units upon which the dividend is paid.

 

A Participant will not have voting rights with respect to Restricted Stock Units prior to payment of Common Stock in satisfaction of such Restricted Stock Units.

General Provisions

Vesting. Awards under the Omnibus Plan generally have a minimum Restriction Period or minimum vesting period of one year, unless the Award is a part of a pool of Awards representing no more than five percent (5%) of the shares of Common Stock available for Awards under the Omnibus Plan.

Nontransferability of Awards. In general, during a Participant’s lifetime, his or her Awards shall be exercisable only by the Participant and shall not be transferable other than by will or laws of descent and distribution. However, the HCM

 

   

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Committee may provide for limited lifetime transfers of Awards to certain family members, trusts for the benefit of family members, or partnerships in which such family members are the only partners.

In addition, the HCM Committee may provide in any Award Agreement terms and conditions under which the Participant must sell or offer to sell any vested Awards and any Common Stock acquired pursuant to an Award to the Company.

Termination of Employment. Each Award Agreement will provide rules for the exercise or vesting of such Award following termination of employment for any reason, which may include, but not be limited to, Death, Disability, termination for Cause or Retirement. The HCM Committee may take actions and provide in Award Agreements for such post-termination rights that it believes to be equitable under the circumstances or in the best interests of the Company with respect to Awards that are not fully earned, vested or exercisable, subject to the terms of the Plan. However, in the absence of specific HCM Committee resolution to the contrary, the following terms will apply to Awards following a Participant’s termination:

In the event of the Participant’s Death on or after the one-year anniversary of the grant of an Option, the Option will vest immediately and the Participant’s beneficiary may exercise the Option at any time before the expiration of the term of the Option. In the event of the Participant’s termination due to Disability or Retirement (unless the HCM Committee, or the CEO, if applicable, determines otherwise with respect to Retirement) on or after the one-year anniversary of the grant of an Option, the Option will vest immediately and will be exercisable for the remainder of the term. A Participant will have the lesser of three months following termination or the remainder of the unexpired exercise period for any reason other than Death, Disability or Retirement to exercise any Option, to the extent exercisable at the time of such termination.

In the event of the Participant’s Death, Disability, or Retirement prior to the payment of an Award of Restricted Stock or Restricted Stock Units, the Award will vest immediately (unless the Committee, or the CEO, if applicable, determines otherwise with respect to Retirement), except in the case of an Award based upon the Company’s achievement of Performance Goals. In that case, the Award will vest based upon the Company’s achievement of Performance Goals at the time the Award would have otherwise vested had the Participant’s employment continued. If the Participant’s Death, Disability, or Retirement occurred prior to the completion of the Performance Period, the Award may be pro-rated (unless the Committee determines otherwise with respect to Retirement).

Notwithstanding the foregoing, the HCM Committee retains the right to revoke or revise the terms of any unearned, unvested, or unexercised Award in the event of a Participant’s termination for Cause.

Change in Control. If the outstanding Awards under the Omnibus Plan are assumed or converted into awards under another plan of a successor entity or business in the event of a Change in Control and the Participant is terminated other than for Cause or resigns for Good Reason within two (2) years after such Change in Control, then the vesting shall fully accelerate, other restrictions applicable to such Award shall terminate, and any performance criteria shall be deemed satisfied, either on an absolute basis or at the pre-established target level as applicable. If the Award is assumed or converted in connection with a Change in Control and the Participant’s employment is not terminated or is terminated by the Company for Cause or by the Participant for reasons other than for Good Reason, then the otherwise applicable terms of this Plan and the Award continue to apply.

If an Award is not assumed or converted into awards under another plan of a successor entity or business, in the event of the Change in Control, the vesting of the Award shall fully accelerate, other restrictions applicable to such Award shall terminate, and any performance criteria shall be deemed satisfied, either on an absolute basis or at the pre-established target level as applicable.

For purposes of the Omnibus Plan, “Change in Control” is defined in Section 2.6 of the plan document, presented as Exhibit A hereto.

Effective Date, Amendments, and Termination of the Omnibus Plan. The amendment and restatement of the Omnibus Plan will be effective upon its approval by the Company’s stockholders. The Board has the authority to amend or terminate the Omnibus Plan at any time. However, stockholder approval is required for any amendment which:

 

 

increases the number of shares available for Awards under the Omnibus Plan (other than to reflect a change in the Company’s capital structure);

 

   

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constitutes a repricing or exchange of any Awards, or involves the buy-out, whether in cash or otherwise, of any previously granted Award with an exercise price that is greater than Fair Market Value;

 

 

makes changes to the amendment provisions of the Omnibus Plan that require stockholder approval; or

 

 

as otherwise required by applicable law, regulation, or rules of any stock exchange or automated quotation system on which the Common Stock may then be listed or quoted.

Unless earlier terminated by the Board, the Omnibus Plan will terminate and expire on the date which is ten years after the most recent stockholder approval of the Plan, or upon the date on which all outstanding Awards have expired, terminated, been paid or otherwise provided for, and no Awards under the Omnibus Plan shall thereafter be granted.

Certain Federal Income Tax Considerations

The following discussion is a summary of certain federal income tax considerations that may be relevant to Participants in the Omnibus Plan. The discussion is for general informational purposes only and is not intended to address specific federal income tax considerations that may apply to a Participant based on his or her particular circumstances, nor does it address state or local income tax, or other tax considerations that may be relevant to a Participant.

Participants are urged to consult their own tax advisors with respect to the particular federal income tax consequences to them of participating in the Omnibus Plan, as well as with respect to any applicable state or local income tax or other tax considerations.

Non-Qualified Options

A Participant realizes no taxable income and the Company is not entitled to a deduction when a Non-Qualified Option is granted. Upon exercise of a Non-Qualified Option, a Participant will realize ordinary income equal to the excess of the Fair Market Value of the shares received over the exercise price of the Non-Qualified Option, and, subject to Section 162(m) of the Code, the Company will be entitled to a corresponding deduction. A Participant’s tax basis in the shares of Common Stock received upon exercise of a Non-Qualified Option will be equal to the Fair Market Value of such shares on the exercise date, and the Participant’s holding period for such shares will begin at that time. Upon sale of the shares of Common Stock received upon exercise of a Non-Qualified Option, the Participant will realize short-term or long-term capital gain or loss, depending upon whether the shares have been held for more than one year. The amount of such gain or loss will be equal to the difference between the amount realized in connection with the sale of the shares, and the Participant’s tax basis in such shares.

Under the Omnibus Plan, Non-Qualified Options may, with the consent of the HCM Committee, be exercised in whole or in part with shares of Common Stock held by the Participant. Payment in Common Stock will be treated as a tax-free exchange of the shares surrendered for an equivalent number of shares of Common Stock received, and the equivalent number of shares received will have a tax basis equal to the tax basis of the surrendered shares. The Fair Market Value of shares of Common Stock received in excess of the number of shares surrendered will be treated as ordinary income and such shares have a tax basis equal to their Fair Market Value on the date of the exercise of the Non-Qualified Option.

Restricted Stock

Restricted Stock received pursuant to Awards will be considered subject to a substantial risk of forfeiture for federal income tax purposes. If a Participant who receives such Restricted Stock does not make the election described below, the Participant realizes no taxable income upon the receipt of Restricted Stock and the Company is not entitled to a deduction at such time. When the forfeiture restrictions with respect to the Restricted Stock lapse, the Participant will realize ordinary income equal to the Fair Market Value of the shares at that time, and, subject to Section 162(m) of the Code, the Company will be entitled to a corresponding deduction. A Participant’s tax basis in Restricted Stock will be equal to the Fair Market Value when the forfeiture restrictions lapse, and the Participant’s holding period for the shares will begin when the forfeiture restrictions lapse. Upon sale of the shares, the Participant will realize short-term or long-term gain or loss, depending upon whether the shares have been held for more than one year at the time of sale. Such gain or loss will be equal to the difference between the amount realized upon the sale of the shares and the tax basis of the shares in the Participant’s hands.

 

   

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Section 83(b) Elections. Participants receiving Restricted Stock may make an election under Section 83(b) of the Code with respect to the shares. By making a Section 83(b) election, the Participant elects to realize compensation income with respect to the shares when the shares are received rather than at the time the forfeiture restrictions lapse. The amount of compensation income will be equal to the Fair Market Value of the shares when the Participant receives them (valued without taking the restrictions into account), and the Company will be entitled to a corresponding deduction at that time.

 

By making a Section 83(b) election, the Participant will realize no additional compensation income with respect to the shares when the forfeiture restrictions lapse and will instead recognize gain or loss with respect to the shares when they are sold. The Participant’s tax basis in the shares will be equal to their Fair Market Value when received by the Participant, and the Participant’s holding period for such shares begins at that time. If, however, the shares are subsequently forfeited to the Company, the Participant will not be entitled to claim a loss with respect to the shares to the extent of the income realized by the Participant upon the making of the Section 83(b) election. To make a Section 83(b) election, a Participant must file an appropriate form of election with the Internal Revenue Service and with the Company, each within 30 days after shares of Restricted Stock are granted, and the Participant must also attach a copy of his or her election to his or her federal income tax return for the year in which the shares are granted.

 

 

Generally, during the restriction period, dividend equivalents and distributions paid with respect to Restricted Stock will be treated as compensation income (not dividend income) received by the Participant. Dividend payments received with respect to shares of Restricted Stock for which a Section 83(b) election has been made will be treated as dividend income, assuming the Company has adequate current or accumulated earnings and profits.

Restricted Stock Units

A Participant typically realizes no taxable income and the Company is not entitled to a deduction when Restricted Stock Units payable in the future and subject to conditions such as the passage of time or achievement of Performance Goals are granted. When Restricted Stock Units vest and become payable as a result of the satisfaction of the terms and conditions on such Award, including, if applicable, achievement of Performance Goals, the Participant will realize ordinary income equal to the amount of cash received or the Fair Market Value of the shares received minus any amount paid for the shares, and, subject to Section 162(m) of the Code, the Company will be entitled to a corresponding deduction.

A Participant’s tax basis in shares of Common Stock received upon payment will be equal to the Fair Market Value of such shares when the Participant receives them. Upon sale of the shares, the Participant will realize short-term or long-term capital gain or loss, depending upon whether the shares have been held for more than one year at the time of sale. Such gain or loss will be equal to the difference between the amount realized upon the sale of the shares and the tax basis of the shares in the Participant’s hands.

The HCM Committee may, but need not, permit a Participant to defer receipt of payment in satisfaction of Restricted Stock Units, provided that any such deferral shall be administered in compliance with Section 409A of the Code and the guidance thereunder. The HCM Committee is authorized to take such action as it deems necessary and reasonable to avoid the application of the additional tax described in Section 409A(a)(1)(B) of the Code to any Award deferred hereunder.

Section 162(m) Limitations

Section 162(m) of the Code limits the deductibility of compensation paid to certain executive officers.

Withholding

The Company is entitled to deduct from the payment of any Award (whether made in stock or in cash) all applicable income and employment taxes required by federal, state, local or foreign law to be withheld, or may require the Participant to pay such withholding taxes to the Company as a condition of receiving payment of the Award. The HCM Committee may allow a Participant to satisfy his or her withholding obligations by directing the Company to retain the number of shares necessary based on the maximum individual federal and state statutory tax rates in the applicable jurisdiction to satisfy the withholding obligation, or by delivering shares held by the Participant to the Company in an amount necessary to satisfy the withholding obligation.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

53


 

    Proposal 4: Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees    

 

 

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of June 30, 2022, regarding the number of shares of Common Stock that may be issued under the Company’s equity compensation plans:

 

Equity Compensation Plan
Information
                       
Plan category   

Number of securities to be

issued upon exercise of

outstanding options,

warrants and rights

(a)

    

Weighted-average

exercise price of

outstanding options,

warrants and rights

(b)

    

Number of securities

remaining available for

future issuance under equity
compensation plans

(excluding securities

reflected in column(a))(1)

(c)

 

Equity compensation plans approved by security holders

     1,962,589      $ 42.96        2,807,832  

Equity compensation plans not approved by security holders

     -        -        -  

Total

     1,962,589      $ 42.96        2,807,832  

 

(1)

Includes 2,547,507 shares available for issuance under the Omnibus Plan for Officers and Key Employees (which provides for the issuance of stock options, restricted stock, and restricted stock units) and 260,325 shares available under the Director Stock Plan (which provides for issuance of stock options, stock and units).

New Plan Benefits

Because our HCM Committee has discretion to grant future equity awards of a type and amount determined in its discretion, it is not possible at present to determine the persons to whom awards will be granted under the Omnibus Plan for the fiscal year ending June 30, 2023, or the amounts and types of any such individual grants. Alternatively, because the amendment and restatement of the Omnibus Plan, if approved, would be similar to the Omnibus Plan’s terms now in effect, the below table instead sets forth the grants made in the fiscal year ended June 30, 2022, under the Omnibus Plan.

 

   

54

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Proposal 4: Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees    

 

 

Stock-Based Incentive Compensation Plan for Officers and Key Employees

 

Name and Position   

Number of

Time-Based

Restricted

Stock Units

    

Number of

Performance-
Based

Restricted

Stock Units(1)

    

Number of

Stock
Options

 

Thene, Tony R.

President and

Chief Executive Officer

     45,970        91,940        -  

Lain, Timothy

Sr. Vice President

and Chief Financial Officer

     11,545        23,090        -  

Dee, James D.

Sr. Vice President,

General Counsel and Secretary

     6,298        12,596        -  

Malloy, Brian J.

Sr. Vice President

and Group President—SAO

     9,096        18,192        -  

Graf, David

Vice President

and Group President—PEP

     6,298        12,596        -  

Executive Group (NEOs)

     79,207        158,414        -  

Non-Executive Director

Group

     -        -        -  

Non-Executive Officer

Employee Group

     37,158        32,892        -  

All employees as a group who are not part of the executive group (NEOs) or the non-executive officer employee group

     165,599        65,380        -  

 

(1)

Represents the maximum (200% of Target) number of units the Participant could have received based upon attainment of Performance Goals approved at the time the Award was granted.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

  

55


 

    Proposal 4: Approval of the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees    

 

 

In accordance with SEC rules, the following table lists all Options granted to the individuals and groups indicated below since the adoption of the Omnibus Plan, through June 30, 2022. The option awards listed below for the covered executives include the Options listed in the executive compensation tables beginning on page 81 of this Proxy Statement and are not additional awards. As of June 30, 2022, the closing price of a share of our Common Stock was $27.91 per share.

 

Name and Position    Number of Stock Options  

Thene, Tony R.

President and Chief Executive Officer

     510,817  

Lain, Timothy

Sr. Vice President and Chief Financial Officer

     64,621  

Dee, James D.

Sr. Vice President, General Counsel and Secretary

     122,040  

Malloy, Brian J.

Sr. Vice President and Group President—SAO

     85,390  

Graf, David

Vice President and Group President—PEP

     6,586  

Executive Group (NEOs)

     789,454  

Non-Executive Director Group

     -  

Non-Executive Officer Employee Group

     163,280  

All employees as a group who are not part of the executive group (NEOs) or the non-executive officer employee group

     9,905,211  

Vote Required for Approval

The affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on such proposal is required to approve the proposed amendment and restatement of the Omnibus Plan. If not approved, the Omnibus Plan will continue in its pre-amended form.

 

 

 

 

 

LOGO

 

 

 

 

 

 

 

 

FOR

  

 

 

The Board of Directors recommends that you vote FOR Proposal 4 to approve the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees.

 

 

 

   

56

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes our compensation philosophy and the key criteria the Human Capital Management Committee (formerly the Compensation Committee) (“Committee”) uses to set compensation levels, determine actual compensation, and establish future compensation opportunities for our executives. In implementing the fiscal year 2022 executive compensation program, the Committee considered prior say-on-pay votes, stockholder feedback, and advice from the Committee’s independent compensation consultant.

 

Our Named Executive Officers

 

Our Named Executive Officers (“NEOs”) for fiscal year 2022 are:

Tony R. Thene,

 

President and Chief Executive Officer

 

Timothy Lain,

 

Senior Vice President and Chief Financial Officer

  

James D. Dee,

 

Senior Vice President, General Counsel and Secretary

 

Brian J. Malloy,

 

Senior Vice President and Group President – Specialty Alloys Operations (SAO) (effective April 25, 2022)

 

David Graf,

 

Vice President and Group President – Performance Engineered Products (PEP) (effective April 25, 2022)

 

Table of Contents

Executive Summary

    58  

Stockholder Engagement

    60  

Incentive Program – Changes Made to Fiscal Year 2022

    60  

Executive Compensation Philosophy and Framework

    60  

Elements of our Fiscal Year 2022 Compensation Program

    63  

Annual Compensation

    65  

Omnibus Plan

    67  

Compensation Program Risk Assessment

    70  

Fiscal Year 2022 NEO Compensation

    71  

Executive Compensation Practices

    73  

Tax Policies

    79  

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

57


Executive Summary

The Committee is committed to ensuring the Carpenter Technology executive compensation program promotes the alignment of executives’ and stockholders’ interests. We have designed the program to attract and retain outstanding leaders, to motivate and reward them for achieving specified business and financial goals, and to support the creation of sustainable stockholder value. The Committee believes the fiscal year 2022 executive compensation decisions reward Carpenter Technology executives appropriately for their performance during the fiscal year and encourage them to focus on long-term value creation.

The COVID-19 pandemic continued to have an impact on our fiscal year 2022 financial results, the overall economy, and the end-use markets we serve. Similar to fiscal year 2021, the impact of COVID-19 on Carpenter Technology’s operations and business conditions was carefully considered in the Committee’s executive compensation decisions and strategy for fiscal year 2022. In fiscal year 2021, the Committee adjusted the long-term incentive (LTI) design to use a three-year average measurement period, with individual year’s targets established at the beginning of each fiscal year, rather than a three-year cumulative period with targets set at the beginning of the measurement period, as it had done prior to the pandemic. A detailed description of our fiscal year 2022 executive compensation program can be found below under “Executive Compensation Philosophy and Framework,” “Elements of our Fiscal Year 2022 Compensation Program,” and “Annual Compensation.” In addition, due to the continuing market uncertainty caused by the pandemic, the Committee continued with the modified long-term incentive design for fiscal year 2023 described above (individual year’s targets set at the beginning of each fiscal year and using a three-year average measurement period as opposed to a three-year cumulative measurement period) as a temporary measure. The Committee continues to closely monitor the impact of the COVID-19 pandemic on the business and reserves the right to re-evaluate compensation decisions as the situation evolves.

Summary of Fiscal Year 2022 Performance

Fiscal year 2022 has been a challenging but successful year for Carpenter Technology. We navigated several disruptive conditions including an unplanned outage of our Reading press, continued COVID-19 isolations, a difficult hiring environment, and other supply chain challenges. But in addressing each of them, we are emerging from it stronger and well-positioned for growth. As we head into fiscal year 2023, we have significant momentum and extremely strong market conditions. Our backlog of customer orders increased 191% year-over-year, and we have seen customer orders continue to increase in each of the last 6 consecutive quarters as we have come out of the height of the COVID-19 pandemic. In navigating the pandemic, we have strengthened our Company to best capitalize on the demand recovery that we are seeing now.

Operating loss in fiscal year 2022 was $24.9 million, or a loss of $34.0 million adjusted to exclude COVID-19 costs, the release of an acquisition-related contingent liability, COVID-related employee retention credits, and a historical environmental site charge. Operating loss was $248.6 million in fiscal year 2021, or $105.5 million when adjusted to exclude non-cash LIFO decrement charges, COVID-19 costs, goodwill impairment charges, and restructuring and asset impairment charges. Free cash flow was negative $122.3 million as compared to positive $132.0 million for the same period a year prior. Operating cash flow in the current fiscal year reflects the impact of higher earnings after non-cash adjustments to net income, offset by increases in inventory compared to the year prior.

Our core business was strong prior to the COVID-19 pandemic, and the long-term outlook for our markets remains robust. We have meaningfully expanded and strengthened key customer relationships and have worked closely with our customers to address their changing material needs and production schedules. We have demonstrated that Carpenter Technology is both a critical solution provider as well as a valued business partner. Our manufacturing teams also continue to implement the Carpenter Technology Operating Model across the entire organization to enhance production efficiencies. We also expect to benefit from our Athens, AL facility and the incremental capacity it offers the Aerospace market as production levels rise and industry capacity begins to tighten.

Carpenter Technology is and will remain a trusted solutions provider of critical applications. Both demand recovery from the pandemic, as evidenced by our record order backlogs, and positive macro trends in the end-use markets we serve, have positioned our material solutions for both near-term and long-term growth. While maintaining our focus on our core business, we also continued to strengthen our growing leadership position in emerging areas such as electrification and additive manufacturing.

 

   

58

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Compensation Discussion and Analysis    

 

 

Financial Metrics

 

 

LOGO

 

*

Fiscal year 2022 excludes impact of special items ($5.9 million of COVID-19 costs; $2.4 million for a historical environmental charge; $30.0 million of Reading press outage/COVID-19 production impacts; $12.7 million benefit for employee retention credits; $4.7 million benefit for release of acquisition-related contingent liability). Fiscal year 2021 excludes impact of special items ($52.2 million of non-cash LIFO decrement charges; $17.3 million of COVID-19 costs; $4.2 million of inventory write-downs from restructuring; $16.6 million of restructuring and asset impairment charges; $52.8 million of goodwill impairment charges).

**

Fiscal year 2022 excludes $5.9 million of COVID-19 costs and $47.2 million of IRS tax refunds. Fiscal year 2021 excludes $8.0 million of COVID-19 costs and $20.0 million of proceeds from sale of the Amega West business.

***

Excludes impact of special items excluded from operating income and net pension benefit.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

59


 

    Compensation Discussion and Analysis • Stockholder Engagement    

 

 

Stockholder Engagement

Stockholder Engagement on Compensation and Advisory Vote on Executive Compensation (“Say-on-Pay”)

Carpenter Technology has provided stockholders with an annual say-on-pay advisory vote on the compensation of its NEOs since 2012. Additionally, we have an active stockholder outreach program, and the Board has tasked the General Counsel and Chief Governance Officer and VP, Corporate Development and Investor Relations with communicating with stockholders throughout the year about governance and compensation matters. They also solicit feedback from stockholders throughout the year and disseminate that information to the Committee and management to keep them apprised of stockholder views and to arrange direct interactions between stockholders and the CEO, management and directors. The Committee considers the results of the annual say-on-pay advisory vote, as well as input received from stockholders, when designing our executive compensation program.

At the 2021 Annual Meeting of Stockholders, approximately 97% of the votes cast were in favor of the say-on-pay advisory vote to approve the executive compensation program. In light of the stockholder feedback received, and in consideration of prior 2021 say-on-pay advisory vote results, the Committee made limited changes to the Company’s compensation programs for fiscal year 2022 as discussed below.

At the 2022 Annual Meeting of Stockholders, Carpenter Technology will again hold an annual advisory vote to approve executive compensation. We will continue to engage with our stockholders throughout the year and consider the results from this year’s and future advisory say-on-pay votes on executive compensation, as well as feedback from our stockholders.

Incentive Program – Changes made to Fiscal Year 2022

As described in the “Summary of Fiscal Year 2022 Performance” section, the COVID-19 pandemic continued to have an impact on the Company’s operations and fiscal year 2022 financial performance. Aerospace, our largest end-use market, has been severely impacted by COVID-19 and has not yet returned to pre-pandemic levels. The aerospace industry is in the early stages of recovering to pre-pandemic levels, which impacts our ability to reasonably predict goals for a three-year cumulative measurement period. The pandemic has also adversely impacted global economic conditions creating more uncertainty. We had to balance the unpredictability of the pandemic’s impact on the Company’s performance, particularly over a three-year timeframe, against the need to provide reasonable incentives with attainable goals that will reward executives when the pandemic subsides and stability returns to our end-use markets. As noted in the prior year, we continued to believe that changes to our long-term incentive compensation program were required to properly fulfill our compensation philosophy, and our decisions help to align executive’s interests with those of stockholders.

Specifically, as previously disclosed during fiscal years 2020 and 2021, we modified the measurement of all outstanding performance-based RSUs by switching from a three-year cumulative measurement period to a three-year average measurement period. This was done without adjusting any of the already achieved attainment for the past fiscal years. The metrics for each new fiscal year are established at the beginning of that fiscal year. The average of the attainment over a three-year period is used to determine the total payout percentage. We buttressed this approach by applying a 100% cap on the fiscal year 2020 awards such that the performance share attainment average percentage for a given three-year period does not exceed 100%. For the fiscal year 2022 and 2021 performance-based restricted stock unit awards, we continued to use a three-year average measurement period but did not apply the 100% cap. Thus, the 100% cap was in place for awards that were previously three-year awards that were modified to move to awards with targets set each fiscal year. The 100% cap was not applied to any new awards. More details on this approach are in the “Goals for Performance-Based RSUs” section.

For purposes of attainment of the annual cash incentive program, the Committee excluded the impact of certain unplanned items on operating income and free cash flow described in detail below.

Executive Compensation Philosophy and Framework

Our Guiding Principles

The overarching goal of our executive compensation program is to drive long-term high performance and stockholder value creation through our pay programs. As a result, there are strong ties to performance in many aspects of the compensation program, including pay levels, incentive payouts and pay opportunities.

 

   

60

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Compensation Discussion and Analysis • Executive Compensation Philosophy and Framework    

 

 

The Committee structures the executive compensation program to reward our NEOs when performance achieves or exceeds goals. A significant component of our incentive structure is weighted towards overall leadership team performance against targeted goals (rather than individual performance), so that if we meet or exceed our goals, the team earns target or above awards. Conversely, if the team fails to meet the minimum thresholds, components of performance-based compensation will not be awarded.

In general, the Committee targets total NEO compensation at the median of market practices.

Goals

We design our compensation program to achieve the following:

 


    

  

 

1

 

Motivate and reward our executives to achieve or exceed Carpenter Technology’s financial and operating performance objectives.

 

 

  

  

 

2

 

Propel our business forward through a focus on operational excellence and execution of our business strategy.

 

  

  

 

3

 

Link executives’ compensation with specific business objectives that are designed to drive stockholder value in both the short- and long-term.

      

 

              
    

 

4

 

Link executives’ compensation with the interests of our stockholders by tying a significant portion of total compensation opportunity to the value of our stock.

 

 

    

 

5

 

Reward individual performance and accomplishments while reinforcing accountability and collaboration.

    

 

6

 

Ensure we retain a deep and talented leadership team that can successfully drive and implement our growth and operational excellence strategies.

   

Our Compensation Policies and Practices

Our executive compensation program reflects the Board’s strong commitment to good governance practices with respect to executive compensation. During fiscal year 2022, we continued with the practices described below.

 

       

What We Do

       

Balanced portfolio: The Committee ensures a balanced mix of cash and equity, annual and long-term incentives, and performance metrics, including operating income, free cash flow, safety, Adjusted ROIC, Adjusted EBITDA and TSR.

 

Double-trigger benefits: We have a double-trigger for change-in-control separation benefits. This means that a change in control of Carpenter Technology alone does not trigger any severance obligations to our NEOs under our Change-in-Control Severance Plan or vesting of awards.

 

Clawback policy: We have a clawback policy that applies to both annual cash bonuses and short- and long-term cash incentives, as well as equity awards for NEOs and other senior executives.

 

Key practices: The Committee analyzes performance against robust and diversified performance metrics, ensures substantial equity ownership guidelines, annually reviews compensation peer groups, and provides and oversees limited perquisites.

 

    

Equity ownership guidelines: We maintain equity ownership guidelines that require Corporate Vice Presidents and above to achieve an equity ownership level, over a five-year period, equal to a certain multiple of base salary. For the CEO, the level is 5x base salary; for Senior Vice Presidents, 3x base salary; and for Corporate Vice Presidents, 2x base salary.

 

Independent compensation consultants: We engage independent compensation consultants who provide information to support the Committee’s work, including a peer group analysis, market compensation data, and an analysis of various compensation instruments and metrics. The Committee retains its own compensation consultant.

 

Risk assessment: The Committee reviews an annual assessment by an independent compensation consultant to confirm that metrics and goals are appropriate to drive high performance without encouraging risk-taking beyond established risk parameters.

 

  

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

61


 

    Compensation Discussion and Analysis • Executive Compensation Philosophy and Framework    

 

 

       

What We Don’t Do

       

Excise tax gross-ups: The compensation program does not include any change in control tax gross-ups to our executives.

 

Dividend payments or accruals on unearned restricted stock units (RSUs): We do not pay or accrue dividends on unearned restricted stock units. Dividend equivalents are paid on time-based RSU awards granted prior to October 8, 2019, and will only be paid upon satisfaction of the terms and conditions applicable to the underlying RSUs on time-based RSU awards granted on or after October 8, 2019. Additionally, no dividend equivalent rights are granted on shares underlying stock options.

 

Excessive perquisites: We do not provide excessive perquisites to our NEOs. Those offered are primarily financial and tax counseling, tax preparation, medical examinations, individual disability income protection plans, relocation expenses and parking fees at our Philadelphia headquarters.

 

    

Hedging/pledging of Company stock: Our policy prohibits hedging or pledging of Carpenter Technology stock by NEOs.

 

Option repricing: Our long-term incentive program does not permit repricing of stock options without stockholder approval. Additionally, the program does not permit Carpenter Technology to offer a cash buyout of underwater options.

 

Employment contracts: We do not provide any employment contracts to our NEOs.

  

 

   

62

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Compensation Discussion and Analysis • Elements of our Fiscal Year 2022 Compensation Program    

 

 

Elements of our Fiscal Year 2022 Compensation Program

Our compensation program is designed to be competitive and to align the interests of our executive officers and other senior leaders with Company performance and stockholder returns. For our NEOs, this is accomplished through a mix of base salary and time- and performance-based rewards, including cash incentives and equity awards. We also provide minimal perquisites, retirement plans, and post-employment benefits that are not intended to be the focus of the program. Performance-based compensation (annual and long-term) continues to constitute a significant portion of total compensation. A brief overview of each element of compensation is provided in the chart below, with further details provided later in this CD&A.

Overview of Key Compensation Elements

 

      Compensation Element

 

  

Description

 

  

Rationale

 

  LOGO     

 

Base Salary

  

 

  Fixed component of pay targeted at the median of the market.

 

  

 

  Provides fixed compensation for executive to perform job functions.

 

  

 

Annual Cash Incentive

  

 

  Delivered in cash annually.

 

  Tied to achievement of financial and operational goals (operating income, free cash flow and safety metrics).

 

  Executives can earn 0-200% of their target award based on achievement of pre-established targets.

 

  

 

  Rewards achievement of key drivers of our annual operating plan.

 

  Provides tangible, achievable goals and reinforces key priorities of the organization.

  LOGO  

  

 

Adjusted ROIC-Based

Restricted Stock Units

 

(25% of LTI)

  

 

  Executives can earn 0-200% (in response to COVID-19, this has been capped at 100% for FY20 awards) of their target award based upon Adjusted ROIC achieved vs. target over a three-year period with a TSR modifier of +/- 20%.

 

  Vests at the end of the three-year period, if earned.

 

  Dividend equivalents are not accrued or paid on these RSUs.

 

  

 

  Critical to incent management to invest and manage assets to deliver the greatest return.

 

  Vesting period is consistent with market practice and assists with retention.

  

 

Adjusted EBITDA-Based

Restricted Stock Units

 

(25% of LTI)

  

 

  Executives can earn 0-200% (in response to COVID-19, this has been capped at 100% for FY20 awards) of their target award based upon Adjusted EBITDA achieved vs. target over a three-year period with a TSR modifier of +/- 20%.

 

  Vests at the end of the three-year period, if earned.

 

  Dividend equivalents are not accrued or paid on these RSUs.

 

  

 

  Focuses executives on achievement of our Adjusted EBITDA goal, which is strongly tied to stockholder value creation.

 

  Provides tangible, achievable goal as senior leaders have the greatest ability to drive Adjusted EBITDA.

 

  Vesting period is consistent with market practice and assists with retention.

  

 

Time-Based Restricted Stock

Units

 

(50% of LTI)

  

 

  Vests in one-third annual increments over three years, subject to continued employment on the vesting date.

 

  Dividend equivalents are accrued on awards granted on or after October 8, 2019, and will only be paid upon satisfaction of the terms and conditions applicable to the underlying RSUs.

 

  

 

  Vesting period is consistent with market practice and assists with retention.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

63


 

    Compensation Discussion and Analysis • Elements of our Fiscal Year 2022 Compensation Program    

 

 

Target Compensation Strategy and Pay Mix

The Committee developed fiscal year 2022 compensation levels through a framework that aligns the long-term interests of our leadership with those of our stockholders. The Committee benchmarked against the Comparator Group and survey data.

NEO pay is generally targeted to be within a competitive range around market median.

Pay Mix

A substantial portion of target total compensation is delivered through variable performance-based incentives that are at risk. Variable performance-based incentives constitute 50% of our CEO compensation mix and 44% of our compensation mix for our other NEOs.

Target Direct Compensation Mix - CEO

 

 

LOGO

Target Direct Compensation Mix - NEOs*

 

 

LOGO

 

*

Represents target pay mix for Messrs. Dee, Graf, Lain and Malloy.

CEO Target Total Direct Compensation

The Committee targets CEO total direct compensation (salary plus target annual incentive and target long-term incentives) at the market median. The Committee sets pay by taking into account a number of factors, such as experience in the position, Company performance, individual performance and future potential.

In setting target total direct compensation for the CEO, the Committee considers peer group data and supplements this information with CEO pay data from compensation surveys using revenue and industry comparators appropriate for Carpenter Technology. The Committee believes the blend of proxy data with survey data more accurately reflects CEO market pay levels.

The Committee determined that Mr. Thene’s base salary was within competitive range of the market.

The Committee took the following actions regarding Mr. Thene’s pay in fiscal year 2022:

 

 

Base salary was increased 3.1% based on market data and performance;

 

 

Annual bonus under the Executive Bonus Compensation Plan was paid at 50.0% of Target, consistent with operating results and other executives; and

 

 

Annual long-term incentive award was increased by 13%. The annual long-term incentive award was denominated 50% in time-based RSUs, 25% in Adjusted ROIC-based RSUs, and 25% in Adjusted EBITDA-based RSUs. This is consistent with other executives and balances the goals of driving retention, absolute operational performance, relative stock price performance, and alignment with stockholders.

 

   

64

 

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT


 

    Compensation Discussion and Analysis • Annual Compensation    

 

 

Target Total Direct Compensation

The Committee believes that a compensation program that targets market median positioning, but delivers a significant portion of that compensation through performance-based compensation elements, ensures proper alignment with our stockholders and ties the ultimate value delivered to NEOs (above/below target) to Company performance.

The Committee may further differentiate the compensation of individual NEOs through multiple mechanisms. The Committee retains discretion to adjust performance-based cash and performance-based equity payouts, in appropriate circumstances.

Annual Compensation

Base Salaries

The Committee reviews base salaries annually and may also do so in connection with a promotion or other major change in responsibilities. In performing such a review, the Committee usually considers, among other factors, the person’s job duties, critical skills, performance and achievements, and the level of pay relative to comparable individuals at relevant companies reviewed by the Committee. This review includes our Comparator Group.

Executive Incentive Bonus Compensation Plan

Carpenter Technology maintains an Executive Incentive Bonus Compensation Plan (“EIBCP”) because we believe that a significant portion of our NEOs’ potential compensation should be contingent on Company business results and successful leadership of our business. This is what will ultimately drive long-term value for our stockholders. The Committee oversees the EIBCP and establishes the metrics that will be used each year, with input from management and outside compensation consultants. For fiscal year 2022, the metrics, the respective weightings, and the rationale for the selection of each metric for the NEOs are detailed in the following table.

Executive Bonus Compensation Plan Metrics Summary

 

Metric    Definition    Rationale

Operating Income

Weighting: 45%

 

LOGO

  

Net Sales minus Operating Expenses

 

includes:

 

  cost of sales, and selling, general and administrative expenses.

  

  Focuses management on driving top line growth and managing expenses.

 

  Drives tangible goal achievement and focuses on factors most in the organization’s control.

 

  When considered in conjunction with Adjusted EBITDA (used for long-term incentive), focuses management on the overall profitability of the organization.

 

Free Cash Flow

Weighting: 45%

 

LOGO

  

Cash flows provided from operating activities,

 

less:

 

  cash paid for purchases of property, plant, equipment and software, acquisitions of businesses and dividends paid.

 

plus:

 

  cash received from the disposal of property, plant and equipment.

  

  Focuses management on achievement of positive free cash flow through increased earnings and management of working capital levels and capital expenditures.

Safety Metrics

Weighting: 10%

 

LOGO

  

  Measured using a Human Performance Rate metric* (prior years were measured using TCIR).

  

  Emphasizes that our employees’ safety is our top priority.

 

*

Human Performance Rate (HPR) metric is comprised of closed Bradley Actions and STOPS per 100 full-time workers during a one-year period.

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

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    Compensation Discussion and Analysis • Annual Compensation    

 

 

Executive Incentive Bonus Compensation Plan Opportunity

The Committee sets performance goals for each metric at threshold, target and maximum levels. The NEOs’ potential annual incentive awards for overall achievement toward these goals are expressed as a percentage of their respective base salaries, as follows:

 

 

LOGO

 

 

The overall attainment is based on the total weighted attainment of all of the individual metrics.

In order to verify EIBCP awards, the Audit/Finance Committee reviews the performance data relative to Carpenter Technology’s operating results for financial reporting purposes. The Committee then makes its award determinations.

Executive Incentive Bonus Compensation Plan Metrics and Attainment

The primary objective for setting the fiscal year 2022 annual incentive metrics was to encourage cash flow generation and optimized operating performance as we navigated and recovered from the challenges of the pandemic. The Committee selected these specific targets after an in-depth review of our operating plan and the industry within which Carpenter Technology operates, including certain external analysis as well as peer company practices. After reviewing all available information and analysis, the Committee applied judgment to define appropriate targets to align the relationship between pay and performance.

Targets are based on Carpenter Technology’s fiscal year 2022 annual operating plan, and the annual operating plan is set each year based on certain assumptions. The following assumptions were considered in developing the fiscal year 2022 annual operating plan:

 

 

A bottoms-up assessment of the timing and speed of market growth recovery from the impacts of the pandemic was considered for each end-use market. Targets were provided for each market related to expectations for price increases, net share gains, and new product sales. As a result of the overall assessment, net sales were expected to increase 19% in fiscal year 2022 compared to actual fiscal year 2021 results.

 

 

Operating cost savings were targeted both as a result of specific portfolio restructuring and cost savings initiatives undertaken by the Company as well aggressive deployment of the Carpenter Operating Model to increase efficiency and productivity and drive capacity enhancements.

 

 

Approved spending was reduced related to certain investments in strategic areas such as commercial, research and development, and information technology in order to preserve cash flow and enhance liquidity during the pandemic.

 

 

A decrease in free cash flow in fiscal year 2022 resulting from slight increases to inventory compared to targeted reductions in inventory in fiscal year 2021.

 

   

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    Compensation Discussion and Analysis • Omnibus Stock Plan    

 

 

For fiscal year 2022, the achievement targets for the Operating Income, Free Cash Flow, and Safety metrics, and actual year-end attainment adjusted as described below, were as follows:

 

 

EIBCP Metrics and Attainment

 

LOGO

 

 

Certain unplanned developments throughout the year, including the operating income and free cash flow impacts of COVID-19 related costs, historical environmental charges, charges related to the Reading press outage/COVID-19 production impacts, a benefit for employee retention credits, and a benefit for the release of an acquisition-related contingent liability were considered by the Board’s Audit/Finance Committee to determine adjustments to a particular bonus metric attainment. These adjustments were reviewed and approved by the Committee.

The overall attainment of 50.0% for fiscal year 2022 reflects maximum attainment of safety performance and a partial attainment for operating income. Free cash flow performance lagged primarily as a result of an inventory build to support the growing demand conditions.

Omnibus Stock Plan

Long-Term Equity Incentives (LTI)

We use the Omnibus Plan to provide equity compensation to NEOs and other key personnel. The Omnibus Plan uses a combination of time-based and performance-based equity vehicles to attract and retain executives who can drive our performance and to create alignment between our executives and our stockholders. The Committee believes such awards focus executives on Carpenter Technology’s longer-term interests and strategic business decisions and encourage retention.

To determine the mix of equity vehicles for the long-term incentive program, the Committee considered current industry trends, practice among our Comparator Group, and the behaviors the awards are intended to promote. The overall mix of incentive vehicles under the Executive Stock Plan for fiscal year 2022 is shown below:

Fiscal Year 2022 NEO Target LTI Opportunities

For fiscal year 2022, the Committee relied on benchmarking and each executive’s contributions toward corporate goals to determine the following target values of incentives under the LTI program:

 

NEO   

Total LTI

Opportunity

    

Time-Based RSU

50% of LTI

    

3-Year Performance-

Based RSU
(Adjusted ROIC)

25% of LTI

    

3-Year Performance-

Based RSU
(Adjusted EBITDA)

25% of LTI

 

Tony R. Thene

     $3,285,000        $1,642,500        $821,250        $821,250  

Timothy Lain

     $   825,000        $   412,500        $206,250        $206,250  

James D. Dee

     $   450,000        $   225,000        $112,500        $112,500  

Brian J. Malloy

     $   650,000        $   325,000        $162,500        $162,500  

David Graf

     $   450,000        $   225,000        $112,500        $112,500  

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

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    Compensation Discussion and Analysis • Omnibus Stock Plan    

 

 

Goals for Performance-Based RSUs

We have two types of performance-based RSUs: those tied to achievement of Adjusted ROIC goals over a three-year performance period, and those tied to achievement of Adjusted EBITDA goals over a three-year performance period. The performance-based RSUs include a Total Stockholder Return (“TSR”) modifier. The number of shares to be awarded under both Adjusted ROIC and Adjusted EBITDA measures may be modified up to 20% either positively or negatively depending on TSR performance relative to the Russell RSCC Materials & Processing Growth Index over the three-year performance period. TSR is used as a modifier to continue to promote alignment with stockholder value. The goals and attainment results for these fiscal year 2022 awards will conclude at the end of fiscal year 2024.

Before modifications approved by the Committee in fiscal year 2021, the Adjusted ROIC targets for our historical performance-based RSUs were based on the cumulative three-year Adjusted EBITDA noted hereafter with no changes in long-term debt or capital structure. Moreover, the Adjusted EBITDA targets for our historical performance-based RSUs were based on a cumulative three-year compound annual growth rate based on a bottoms-up assessment of market growth potential for each end-use market over a three-year period, which included expected price increases, net share gains, and new product sales.

Due to difficulties in setting three-year performance goals during the COVID-19 pandemic and the need to motivate our executives with attainable goals that will reward them when the pandemic subsides and stability returns to our industry sectors, we temporarily modified the measurement of performance-based RSUs to drive high performance and, in the process, better align executive compensation with the interests of our stockholders. Instead of measuring RSUs for fiscal years 2020. 2021 and 2022 on a three-year cumulative basis, we measure the awards one year at a time with individual years targets set at the beginning of each fiscal year and measure the average over three years for a total payout percentage. To strengthen alignment with stockholders, we have capped the performance share attainment percentage for the given three-year period at 100% for the fiscal year 2020 awards. We have not applied this cap to the fiscal year 2021 or 2022 awards. In fiscal year 2021 and going forward, we establish performance goals for each fiscal year balancing the significant market volatility due to COVID-19 while continuing to drive the Company’s performance.

As an example, the measurement period for fiscal year 2021 performance-based RSUs is fiscal years 2021, 2022 and 2023. We established the targets for fiscal years 2021, 2022 and 2023 at the beginning of each fiscal year, factoring into the analysis the impact of the pandemic. We then average the performance share attainment for fiscal years 2021, 2022, and 2023. The fiscal year 2021 awards have a maximum payout potential of 200% of Target.

The measurement period for fiscal year 2022 performance-based RSUs is fiscal years 2022, 2023 and 2024. Following the same approach, we set the established targets for fiscal years 2022 and 2023 at the beginning of each fiscal year, factoring into the analysis the current status of the pandemic. We will establish performance goals for fiscal year 2024 at the beginning of that fiscal year. We will then average the performance share attainment for fiscal years 2022, 2023 and 2024. The fiscal year 2022 awards have a maximum payout potential of 200% of Target.

Aerospace, our largest end-use market, has been severely impacted by COVID-19 and has not yet returned to pre-pandemic levels. The aerospace industry is in the early stages of recovering to pre-pandemic levels which impacts our ability to reasonably predict goals for a three-year cumulative measurement period.

We believe these modifications to performance-based RSUs that were made in fiscal year 2020 will allow this compensation to be calibrated more accurately to our volatile industry sector that has been impacted by the COVID-19 pandemic while still encouraging strong, focused performance within reasonably attainable levels. This is consistent with our overarching goal of rewarding executives for achieving corporate growth, aligns executive’s interests with those of stockholders, and fulfills our compensation philosophy.

 

   

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    Compensation Discussion and Analysis • Omnibus Stock Plan    

 

 

Results of the Fiscal Year 2020-2022 Program

The goals and attainment results for the three-year performance-based RSU awards granted in fiscal year 2020, with a three-year performance cycle concluding at the end of fiscal year 2022, are detailed below. As stated above, no adjustments were made to the attainment for fiscal year 2020; however, the targets for fiscal years 2021 and 2022 were established at the beginning of those fiscal years, factoring into the analysis the impact of the pandemic. In addition, actual results for fiscal years 2021 and 2022 were adjusted for attainment purposes consistent with the adjustments approved for the annual EIBCP. The attainment for fiscal years 2020, 2021 and 2022 were averaged to determine the attainment for the three-year performance period.

The three-year performance-based RSU metrics resulted in a payout of 35.5% of Target for these awards with a cycle concluding in fiscal year 2022. Each of the equity awards carries performance-based criteria, and payouts were commensurate with financial performance. We believe the performance periods are appropriate to motivate longer-term thinking while not so remote as to stagnate performance incentives in the immediate term.

 

               

Adjusted

ROIC

($ in millions)

       30%   50%   100%   200%   Result     Attainment    

  Total Attainment  

 

FY20-22

  FY20   N/A   7.5%   7.9%   8.3%   4.9%   0%   36%
  FY21   (3.3%)   (2.9%)   (2.0%)   0.0%   (3.3%)   30%
 

FY22

 

 

(0.9%)

 

 

(0.6%)

 

 

0.2%

 

 

0.9%

 

 

(0.1%)

 

 

79%

 

               
               

Adjusted

EBITDA

($ in millions)

       30%   50%   100%   200%   Result     Attainment    

Total Attainment
FY20-22

 

  FY20   N/A   $368   $383   $396   $294   0%   35%
  FY21   $23   $37   $72   $142   $24   31%
 

FY22

 

 

$115

 

 

$126

 

 

$152

 

 

$173

 

 

$138

 

 

74%

 

 

   

CARPENTER TECHNOLOGY 2022 PROXY STATEMENT

 

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    Compensation Discussion and Analysis • Compensation Program Risk Assessment     

 

 

Compensation Program Risk Assessment

The Committee retains an independent compensation consultant to confirm that Carpenter Technology’s compensation policies and practices do not encourage excessive or unnecessary risk taking and assess whether the executive compensation program contains a reasonable amount of risk. In its most recent review of Carpenter Technology’s compensation program, the compensation consultant concluded that it was not reasonably likely that our compensation policies and practices would have a materially adverse effect on the Company.

Consultant Analysis of Risk Concepts in Carpenter Technology Compensation Design

 

Compensation Element    Balanced Approach   Balance Achieved
 

Performance Metrics  

 

 

 

Growth  

 

 

Profitability

  Compensation program does not inappropriately emphasize performance along one metric.
 

 

Returns  

 

 

 

Stockholders’ Experience    

 

Target Setting  

 

 

 

Internal  

Perspective  

 

 

 

 

External

Perspective

 

 

Objectives are meaningful and appropriate.

 

Pay outcomes make sense.

Measurement Approach  

  Absolute  

Performance  

 

Relative

Performance

 

Enables executive team to unite behind shared absolute goals and performance standards.

 

Recognizes external conditions impacting industry.

Form of Compensation  

 

 

 

 

 

Cash  

 

 

 

 

 

Equity

 

 

  Individual pay mix balances an executive’s (group’s) impact on Company results, link to stockholders’ experience, and risk/reward profile.
   
 

 

 

Annual  

 

 

 

 

 

 

Long-Term

 

 

 

         

Time Horizon  

 

 

 

  Short-term

(1 year)

  Intermediate (2 to 4 years)    Long-term
(>5 years)
 

Less emphasis on attaining short-term goals.

 

Varying time horizons help mitigate risk.

  LOGO
    Sustainable Performance

 

Additionally, the Committee considers the following features of our compensation program and our Company generally to be important in discouraging excessive risk:

 

 

Code of Business Conduct and Ethics

We are a performance-based company and hold each other accountable to high standards of excellence in all that we do. Our Code of Business Conduct and Ethics reflects our corporate culture. The Committee believes that Carpenter Technology’s values-oriented culture is a key factor in reducing risky behavior.

 

 

Performance Goals and Variable Pay Mix

We set our performance goals at levels that are high enough to encourage strong performance, but within reasonably attainable levels to discourage risky business strategies or actions. Consistent with market practices, the NEO total pay program has a heavy emphasis on long-term incentives that encourage our executives to engage in business strategies or actions that promote long-term growth over actions that may produce risky short-term outcomes. In addition, incentive awards are capped.

 

   

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    Compensation Discussion and Analysis • Fiscal Year 2022 NEO Compensation    

 

 

 

Stock Ownership Guidelines

Our NEOs are required to hold substantial amounts of equity. We believe that stock ownership encourages appropriate decision-making that aligns with the long-term interests of our stockholders.

 

 

Peer Group Compensation Benchmarking

Annual benchmarking of compensation program target levels ensures consistency with our peer group.

Fiscal Year 2022 NEO Compensation

Pay-for-Performance Framework

Our executive compensation program includes strong ties between pay and performance, spurring team accomplishment and attracting and retaining executives who can drive overall Company performance. Each NEO’s total compensation is targeted to the market median while actual compensation is linked to performance. Carpenter Technology’s performance-driven compensation program has maintained a strong alignment between Company performance, as measured by stockholder value creation and key financial metrics, and total direct compensation.

How our Pay Supports our Strategy

Our compensation program is one of the most powerful tools for shaping our executives’, as well as our organization’s, behavior and influencing our company performance. Our system is designed to drive performance, retain top performers, promote responsible behavior and impact our return to stockholders. Our articulated philosophy provides the ability to react to the changing circumstances of our markets and serves as an asset to Carpenter Technology.

Our system promotes the type of executive behavior we need to meet our overall vision in an efficient way. It can contribute to our organizational objectives through our mix of base pay and performance pay and the specific ways we deliver these components. Our pay structure drives behavior consistent with our values and the business challenges we face in our operating environment. It recognizes our rapidly changing business environment with complex technologies and sources that differentiate us from our competitors. The pay program for our executives provides for common goals via a mix of team-based, individual, and company-wide components.

As detailed in other sections, we proactively assess and adjust our reward system to ensure that it continues to support our human resources and business strategies in the most efficient and effective way.

Individual and Company Pay-for-Performance Criteria

Our incentive programs take into account both individual and Company performance, and actual pay will fluctuate above and below target pay based upon performance.

 

 

INDIVIDUAL PERFORMANCE CRITERIA

 

   Successful execution of key strategic goals

 

   Leadership capability

 

   Individual contribution to both short- and long-term business results

 

   Ethical conduct and regulatory compliance

 

 

    

  

 

COMPANY PERFORMANCE METRICS

 

   Operating Income

 

   Free Cash Flow

 

   Safety (HPR)

 

   Adjusted ROIC

 

   Adjusted EBITDA

 

   TSR

 

We believe that Carpenter Technology’s fiscal year 2022 incentive programs were aligned with our operational performance as well as our total stockholder return performance.

Compensation Decisions

Fiscal Year 2022 Base Salary Compensation Decisions

Changes to NEO base salary compensation in fiscal year 2022 consisted of the following:

 

 

Mr. Thene’s base salary increased by 3.1% based on market data and performance (see explanation under “CEO Target Total Direct Compensation”).

 

 

   

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    Compensation Discussion and Analysis • Fiscal Year 2022 NEO Compensation    

 

 

 

Mr. Lain’s base salary increased by 7.0%, based on market data, performance and a stepped increase strategy to recognize additional experience gained in the role of Senior Vice President and Chief Financial Officer.

 

 

Mr. Dee’s base salary increased by 4.0% based on market data.

 

 

Mr. Malloy’s base salary increased by 6.5% to recognize performance and increased job responsibilities.

 

 

Mr. Graf’s base salary increased by 15.0% based on market data and a material change of job responsibilities when he assumed the role of Vice President and Group President – Specialty Alloys Operations (SAO) effective July 1, 2021. Mr. Graf is now Vice President and Group President – Performance Engineered Products (PEP) effective April 25, 2022.

Fiscal Year 2022 Annual and Long-Term Incentive Decisions

 

Pay Element    Fiscal Year 2022 Compensation Decisions

Annual Incentives

   Executive Incentive Bonus Compensation Plan resulted in attainment at 50.0% of Target incentive.

Long-Term Incentives (“LTI”)

   LTI with a performance cycle concluding at the end of fiscal year 2022 resulted in attainment at 35.5% of Target for performance-based RSUs.

 

   

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    Compensation Discussion and Analysis • Executive Compensation Practices    

 

 

Executive Compensation Practices

Our Process

We have a rigorous review process for determining executive compensation using both internal and external resources. The various roles in our compensation process are detailed below.

 

 

Role of Human Capital Management Committee

 

The Human Capital Management Committee assists the Board of Directors in its overall responsibility for oversight of compensation matters. To that end, the Human Capital Management Committee:

 

   reviews and approves goals and objectives relevant to compensation of the CEO, evaluates the CEO’s performance in light of those goals and objectives, and sets the CEO’s compensation level based on such evaluation;

 

   reviews and approves corporate goals, objectives and awards relevant to compensation of the NEOs;

 

   administers Carpenter Technology’s incentive compensation programs and plans;

 

   reviews benchmarking and pay recommendations from the outside compensation consultant(s);

 

   approves compensation plans and related targets for any management-proposed changes in benefits or perquisites;

 

   oversees activities relative to incentive stock plans; and

 

   ensures executive compensation programs are properly coordinated and achieving their intended purpose.

 

In addition, the Human Capital Management Committee reviews our compensation programs to ensure they do not incorporate practices that would encourage excessive risk.

 

       

Role of the Full Board

 

While the Human Capital Management Committee has the authority to make all decisions concerning executive compensation, it actively seeks input from and frequently discusses executive compensation matters with the full Board. The Board determines what drives long-term performance, and the Human Capital Management Committee considers input from the Board in linking performance to compensation.

 

The Human Capital Management Committee considers input from all directors, each of whom has a variety of experience and expertise, and from time-to-time will seek out those with expertise in the industry when determining what will drive long-term high performance or what might encourage excessive risk-taking. The Human Capital Management Committee may consult with one or more directors with particular expertise in certain areas when considering an executive’s performance (i.e., consult with Audit/Finance Committee members when considering CFO performance).

 

 

   

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    Compensation Discussion and Analysis • Executive Compensation Practices    

 

 

 

Role of Management

 

As part of its decision-making process, the Human Capital Management Committee invites and considers the input of certain officers (but not with respect to such officer’s own compensation), including the CEO, General Counsel, and Chief Human Resources Officer, particularly about how specific metrics and goals might drive high performance without encouraging undue risk-taking, or in negotiating compensation packages with prospective executives other than the CEO.

 

The Human Capital Management Committee also considers input from the CEO as to the performance of other executives and other executives’ contributions to overall performance. At times, the Human Capital Management Committee may request that senior management obtain information on its behalf to assist with decision-making relating to the compensation program. Pursuant to the Human Capital Management Committee’s charter, it may also delegate authority to members of management in appropriate circumstances.

 

In formulating recommendations, management reviews information from a variety of sources, including input provided by outside compensation consultants. During fiscal year 2022, Willis Towers Watson served as management’s outside compensation consultant. In this capacity, Willis Towers Watson provided market data and other information, including a pay level assessment for senior executives and a review of incentive plan design practices (overall approach, competitive target levels, and share utilization).

 

       

Roles of Compensation Consultants

 

The Human Capital Management Committee engaged Korn Ferry, an independent compensation consulting firm, to provide the following services relating to fiscal year 2022 compensation determinations:

 

   conduct a competitive assessment of our compensation program for the NEOs;

 

   make NEO compensation recommendations;

 

   update and review peer group member companies;

 

   conduct the annual risk assessment for our compensation programs and provide advice and information on compensation trends and regulatory developments in the market;

 

   analyze impact of the COVID-19 pandemic on executive compensation strategy; and

 

   provide ongoing advice as needed to the Human Capital Management Committee, including guidance on our CEO compensation package.

 

 

Compensation Consultants

For fiscal year 2022 executive compensation determinations, the Committee engaged Korn Ferry (“KF”), an outside compensation consulting firm, to conduct a competitive assessment of our executive compensation program for the NEOs and to make recommendations for the Committee’s review and approval. KF updated and reviewed peer group member companies and provided ongoing advice as needed to the Committee, including guidance on our CEO compensation package and our executive compensation program for the NEOs for fiscal year 2022. KF was also engaged to conduct an annual risk assessment of Carpenter Technology’s compensation programs. A representative from the outside compensation consulting firm also regularly attends Committee meetings to provide advice and guidance on Carpenter Technology’s executive compensation program. The Committee’s decision to engage KF in fiscal year 2022 was not made or recommended by management.

The Committee and management believe that there was no conflict of interest between Carpenter Technology and KF during fiscal year 2022. In reaching this conclusion, the Committee and management considered the factors set forth by the SEC and NYSE regarding compensation advisor independence. Specifically, the Committee analyzed whether the work of KF as compensation consultant raised any conflict of interest, taking into consideration the following factors:

 

 

Whether the consultant provides other services to Carpenter Technology;

 

 

The amount of fees Carpenter Technology paid to the consultant as a percentage of the consultant’s total revenue;

 

 

The policies and procedures of the consultant that are designed to prevent conflicts of interest;

 

 

Any business or personal relationship of the consultant or its individual compensation advisors with an executive officer of the Company;

 

   

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    Compensation Discussion and Analysis • Executive Compensation Practices    

 

 

 

Any business or personal relationship of the individual compensation advisors with any member of the Committee; and

 

 

Any Carpenter Technology stock owned by the consultant or its individual compensation advisors.

Additionally, Willis Towers Watson, an outside compensation consulting firm, was engaged by management to provide compensation market data, CEO pay ratio analyses and other information, including a pay level assessment for senior executives and a review of the stock plan and incentive plan design practices (overall approach, competitive target levels, and share utilization). This information was made available to the Committee.

How We Benchmark Compensation

In developing competitive compensation recommendations with respect to the NEOs, KF established a benchmark match for each position based on a broad perspective of the relevant market and detailed competitive survey data and proxy disclosures of peer companies, for each of the following elements of compensation:

 

 

Base salary;

 

 

Annual cash incentive;

 

 

Total cash compensation;

 

 

Long-term incentives; and

 

 

Total direct compensation.

The Committee accepted the consultants’ recommendation to use a comparator group for competitive compensation analysis that consists of fourteen public companies that manufacture and sell specialty metals and related products and that draw upon similar executive talent (the “Comparator Group”). The Comparator Group for fiscal year 2022 consisted of the public companies shown below. These companies operate in various parts of the world and have a median revenue of $2,439 million (compared to Carpenter Technology’s fiscal year 2022 revenue of $1,836 million).

Comparator Group

These companies were selected for inclusion in the Comparator Group based on industry, size, and US-based headquarters, with a particular focus on companies with which Carpenter Technology competes for executive talent, customers, or investor capital.

 

($ in millions)

 

       
Company Name    Revenue(1)        Market Cap as of June 30, 2022  

Avient Corporation

  

 

$  5,018

 

    

 

$  3,664

 

The Timken Company

  

 

$  4,323

 

    

 

$  3,933

 

Cabot Corporation

  

 

$  4,113

 

    

 

$  3,600

 

Valmont Industries, Inc.(2)

  

 

$  3,948

 

    

 

$  4,787

 

Kaiser Aluminum Corporation

  

 

$  3,460

 

    

 

$  1,252

 

Allegheny Technologies Incorporated

  

 

$  3,285

 

    

 

$  2,819

 

Century Aluminum Company

  

 

$  2,851

 

    

 

$     672

 

Minerals Technologies Inc.(3)

  

 

$  2,026

 

    

 

$  2,022

 

Kennametal Inc.

  

 

$  2,013

 

    

 

$  1,920

 

Materion Corporation(4)

  

 

$  1,680

 

    

 

$  1,512

 

SunCoke Energy, Inc.

  

 

$  1,674

 

    

 

$     568

 

Hexcel Corporation

  

 

$  1,478

 

    

 

$  4,397

 

Barnes Group Inc.

  

 

$  1,270

 

    

 

$  1,579

 

Rogers Corporation

  

 

$     969

 

    

 

$  4,928

 

Carpenter Technology Corp.

  

 

$  1,836

 

    

 

$  1,347

 

 

(1)

Reflects revenue for the period July 1, 2021, through June 30, 2022

(2)

Reflects revenue for the period June 27, 2021, through June 25, 2022

(3)

Reflects revenue for the period July 5, 2021, through July 3, 2022

(4)

Reflects revenue for the period July 3, 2021, through July 1, 2022

 

   

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    Compensation Discussion and Analysis • Executive Compensation Practices    

 

 

Peer Group for Fiscal Year 2022

Our peer group consisted of 14 companies who accurately reflect Carpenter Technology’s specialty metals business.