Clearwater Paper Corporation
Shareholder Annual Meeting in a DEF 14A on 04/06/2021   Download
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SEC Filing
DEF 14A 1 clw-def14a_20210513.htm DEF 14A clw-def14a_20210513.htm

 

 

SCHEDULE 14A INFORMATION

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 Pursuant to § 240.14a-11(c) or § 240.14a-12

 

CLEARWATER PAPER CORPORATION

 

(Name of Registrant as Specified In Its Charter)

 

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

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Clearwater Paper Corporation 2021

 


 

CLEARWATER PAPER CORPORATION

ANNUAL MEETING OF STOCKHOLDERS

May 17, 2021

 

NOTICE OF ANNUAL MEETING

AND

PROXY STATEMENT

 

 

 

 

 

Clearwater Paper Corporation 2021

 


 

 

 

 

 

 

 

Clearwater Paper Corporation

601 West Riverside, Suite 1100

Spokane, WA 99201

 

 

 

Dear Clearwater Paper stockholders and stakeholders:

As the COVID pandemic spread across our country, we at Clearwater Paper focused on two key priorities: keeping our people healthy and safe, and meeting the significant increase in demand for our essential products that were rapidly becoming in short supply. We managed to do both. I could not be prouder of our team of over 3,300 people across the country who made this happen – through their vigilance, commitment, and hard work. We took several steps to protect, support and thank our people during this time, including enhanced benefits, product distributions, and a discretionary bonus for more than 2,800 of our people.  

While focusing on our people and customers, we delivered solid operational and financial results. We strengthened our balance sheet by reducing net debt by $200 million, re-financing our 2023 notes, and improving liquidity. You can read more about our 2020 accomplishments in the Business Highlights section.

2020 was certainly a challenging year, but we believe that we are well-positioned to benefit from key trends in the long run:

 

Our products are inherently renewable.

 

o

The primary raw material we use is wood that we procure from sustainable sources.

 

o

As the world’s growing population places greater demands on scarce resources, the need to rely on renewable ones is growing.

 

As a leading provider of private-brand tissue products, we are positioned to benefit from consumers shift away from major brands.

 

Our expertise in tissue manufacturing, supply chain, and transportation is a key differentiator.

 

As a producer of high-quality paperboard, we are well-positioned to support the trend towards more sustainable packaging and foodservice products.

 

We operate well-invested paperboard assets, with a geographic footprint enabling us to efficiently service our customers.

 

We have a strong governance foundation, a gender-diverse leadership team, a diversity, equity and inclusion program, a wide array of employee benefits, and an ethics-based culture.

 

We are delivering strong business results that position us to continue to innovate and grow.

We seek your voting support for the items described in this proxy statement and encourage you to participate in our annual meeting. I am truly honored and humbled to lead such a strong team and am grateful for your investment and trust in all of us.

Sincerely,

 

 

Arsen Kitch

Chief Executive Officer

Clearwater Paper Corporation 2021

i


 

PROXY STATEMENT TABLE OF CONTENTS

 

 

1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

PROXY STATEMENT SUMMARY

 

2

 

 

 

BUSINESS HIGHLIGHTS AND SUSTAINABILITY

 

4

 

 

 

 

 

 

 

 

 

 

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

CORPORATE GOVERNANCE

 

8

 

 

 

Corporate Governance Guidelines; Code of Business Conduct and Ethics

 

8

Director Independence

 

8

Board Meetings

 

9

Communications with Directors

 

9

Nominees for Director

 

9

Committees of the Board

 

11

Board Leadership Structure

 

11

Board Role in Risk Oversight

 

11

Committee Membership

 

12

Compensation Committee Interlocks and Insider Participation

 

14

Transactions with Related Persons

 

15

 

 

 

BOARD OF DIRECTORS

 

16

 

 

 

Nominees for Election at this Meeting for a Term Expiring in 2024 (Class I)

 

16

Directors Continuing in Office until 2022 (Class II)

 

17

Directors Continuing in Office until 2023 (Class III)

 

18

 

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

20

 

 

 

 

 

 

 

COMPENSATION OF DIRECTORS

 

22

 

 

 

 

 

 

 

 

 

 

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

COMPENSATION COMMITTEE REPORT

 

25

 

 

 

EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

 

26

 

 

 

Executive Summary

 

27

Executive Compensation Practices

 

28

2020 Executive Compensation Practice

 

29

2020 Annual Incentives

 

33

2020 Long-Term Incentives

 

35

Other Compensation Related Matters

 

38

 

 

 

EXECUTIVE COMPENSATION TABLES

 

43

 

 

 

2020 Compensation

 

43

Post-Employment Compensation

 

49

Potential Payments Upon Termination or Change of Control

 

52

 

 

 

 

 

 

 

 

 

 

4

AUDIT COMMITTEE REPORT

AUDIT COMMITTEE REPORT

 

59

 

 

 

Fees Paid to Independent Registered Public Accounting Firm

 

59

 

 

 

 

 

 

 

 

 

 

Clearwater Paper Corporation 2021

ii


 

 

 

 

Clearwater Paper Corporation 2021

iii


 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

Date:

Monday, May 17, 2021

 

Time:

9:00 a.m. Pacific

 

Place:

601 West Riverside Avenue, Spokane, WA  99201

Via webcast: https://register.proxypush.com/CLW

Record Date:

March 18, 2021

 

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting of Stockholders, we urge you to vote and submit your proxy in order to ensure the presence of a quorum.  Each attendee must present the proper form of documentation (as described in the section “Annual Meeting Information”) to be admitted.

 

 

 

 

 

 

 

 

 

You may vote your shares in one of four ways:

 

 

 

MAIL

Return the proxy card by mail in the postage paid envelope

 

INTERNET

go to www.proxyvote.com

 

TELEPHONE

call the toll free number

1-800-690-6903

 

IN PERSON

Attend the annual meeting with your ID.

Meeting Agenda / Proposals

We are holding this meeting to:

 

elect three directors to the Clearwater Paper Corporation Board of Directors;

 

ratify the appointment of our independent registered public accounting firm for 2021;

 

hold an advisory vote to approve the compensation of our named executive officers; and

 

transact any other business that properly comes before the meeting.

Financial and other information concerning Clearwater Paper is contained in our Annual Report to Stockholders for the fiscal year ended December 31, 2020. This proxy statement and our 2020 Annual Report to Stockholders are available on our website at www.clearwaterpaper.com by selecting “Investor Relations” and then “Financial Information & SEC Filings.” Additionally, and in accordance with SEC rules, you may access our proxy materials at www.proxyvote.com which does not have “cookies” that identify visitors to the site.

 

Notice Regarding the Availability of Proxy Materials

By Order of the Board of Directors,

On or about April 6, 2021 we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our stockholders containing instructions on how to access our 2021 Proxy Statement and 2020 Annual Report to Stockholders. Some of our stockholders, including stockholders that hold shares in one of our Clearwater Paper 401(k) Savings Plans, were not mailed the Notice and instead were mailed paper copies of our 2021 Proxy Statement and 2020 Annual Report on or about April 6, 2021.

MICHAEL S. GADD

Senior Vice President, General Counsel

and Corporate Secretary

 

 

Clearwater Paper Corporation 2021

1


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1. PROXY SUMMARY AND BUSINESS HIGHLIGHTS

 

 

 

CLEARWATER PAPER CORPORATION

PROXY STATEMENT

for the

2021 ANNUAL MEETING OF STOCKHOLDERS

This proxy statement is being furnished to stockholders of Clearwater Paper Corporation in connection with the solicitation of proxies by our Board of Directors for use at our 2021 Annual Meeting of Stockholders, which is described below. References to “Clearwater Paper,” “the company,” “we,” “us” or “our” throughout this proxy statement mean Clearwater Paper Corporation.

 

Proxy Statement Summary

This summary highlights important information you will find elsewhere in this Proxy Statement. It is only a summary and you should review the entire Proxy Statement before you vote.

Meeting Information

Date and Time

Location

Record Date

Mailing Date

Monday, May 17, 2021
9:00 a.m. Pacific

601 West Riverside Avenue, Spokane, WA  99201

March 18, 2021

On or about
April 6, 2021

Via webcast: https://register.proxypush.com/CLW

Meeting Agenda / Proposals

Proposal

Board of Directors’ Recommendation

1. Elect three directors to the Clearwater Paper Corporation Board of Directors

FOR each nominee

2. Ratify the appointment of our independent registered public accounting firm for 2021

FOR

3. Hold an advisory vote to approve the compensation of our named executive officers

FOR

4. Transact any other business that properly comes before the meeting

 

Information regarding our executive compensation program can be found under the “Executive Compensation Discussion and Analysis” section found later in this proxy.

Clearwater Paper Corporation 2021

2


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Board Composition and Diversity

Average tenure 5.2 years

 

             

 

The above charts reflect information for all nominees and continuing directors.

 

Three independent directors have been added to the Board in the past two years.  

Director Nominees

This table provides a summary of information regarding our three director nominees.  For more information regarding these nominees and our other directors see the “Board of Directors” section later in this Proxy Statement.

Name

Age

Director Since

Current Principal Occupation

Independent

Current Committee Memberships

Other Public Boards

Audit

Compensation

Nominating and Corporate Governance

 

John J. Corkrean

55

2019

CFO of H.B. Fuller

Yes

*

*

 

0

Arsen S. Kitch

39

2020

President & CEO of Clearwater Paper Corporation

No

 

 

 

0

Alexander Toeldte

61

2016

Retired CEO

Yes

 

*

*

0

 

Clearwater Paper Corporation 2021

3


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business highlights and sustainability

Corporate Governance Highlights

Independence

Our Board currently has 8 members, 7 of whom are independent.

There are three standing committees made up entirely of independent directors.

Independent directors regularly meet without management present.

Board Practices

Our Board and its standing committees perform self-evaluations on an annual basis.

Each standing committee operates under a committee charter.

Our Board oversees risk management practices, including sound and effective ESG and human capital management practices.

Our Board regularly received information concerning, and provides input on, succession planning.

Our Board has adopted an insider trading policy, a related person policy, corporate governance guidelines, a code of business conduct and ethics, and a code of ethics for senior officers.

Our Board is committed to diversity and the pursuit of board refreshment and balanced tenure.

Our Board and its committee met 28 times in 2020.

Leadership Structure

     The Chair of our Board and the CEO are separate.

Majority Vote

     There is majority voting in uncontested director elections and M&A transactions.

Stock Ownership Requirements

We have a comprehensive insider trading policy that covers directors, officers and other employees.

We have an anti-hedging and anti-pledging policy for our stock.

Directors and executive officers are all required to satisfy minimum stock ownership requirements.

Stockholder Protection

     There is only one vote for each share.

     We do not have a “poison pill” in place.

 


Clearwater Paper Corporation 2021

4


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020 Business Highlights

We are a premier private brand tissue manufacturer and producer of high-quality paperboard products. Our products can provide more sustainable alternatives to products made from non-renewable resources.

 

Company

Implemented risk mitigation plan to protect employees and continue serving customers during the COVID-19 pandemic

Enhanced benefits to support employees through COVID-19

Awarded bonuses to approximately 2,800 front-line workers

Appointed President & Chief Executive Officer - Arsen Kitch, Senior Vice President & Chief Financial Officer - Mike Murphy and Senior Vice President and Consumer Products General Manager - Joanne Shufelt

Ratified Lewiston contracts with United Steelworkers & International Brotherhood of Electrical Workers

Reduced net debt by $200 million

Repaid $160.8 million of term loan and refinanced 2023 notes with 2028 notes

Established the Diversity, Equity, and Inclusion steering committee

Consumer Products Division

Met or exceeded customer expectations in spite of unprecedented volatility in consumer buying patterns

Adjusted business operations to support unprecedented tissue demand

Achieved Shelby, North Carolina paper machine ramp-up, new paper machine reached full production run rate

Expanded retailers’ capacity to grow their private brands through innovation of quality products

Received awards for outstanding support, execution, partnership, and distribution from major customers

Pulp and Paperboard Division

Maintained strong and stable performance during COVID-19 pandemic

Introduced ReMagine™ premium folding carton paperboard with 30% recycled content

Received industry awards for paperboard packaging innovation and sustainability

 


Clearwater Paper Corporation 2021

5


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sustainability and Human Capital Management

We believe in careful utilization of our limited natural resources and understand our role in conserving and protecting the planet’s air, water, and land, and in managing climate change risk:

oThe primary raw material in both our tissue and paperboard products is wood, which is 100% renewable and a commonly recycled resource.

o100% of our wood comes from sustainably managed forests either controlled or certified by fiber sourcing standards, including Forest Stewardship Council (FSC®) Chain of Custody, Sustainable Forestry Initiative (SFI®), and Programme for the Endorsement of Forest Certification (PEFCTM).

oOur paperboard products enable our customers to use renewable packaging rather than plastics.

Since 2012, we have reduced our costs and our environmental impact by designing out waste and pollution:

oReduced our greenhouse gas emissions intensity by 3%.

oReduced purchased energy intensity by 6%.

oImproved water usage intensity by 11%.

oIntroduced two new products with recycled content. NuVo®, cupstock with up to 35% post-consumer recycled fiber, and ReMagine™, a folding carton board with up to 30% post-consumer recycled fiber.

oSignificantly reduced our waste-to-landfill intensity by 68%.

We support the principles of a circular economy and apply a management systems approach in each of our focus areas to support priorities and goals.

We utilize Global Reporting Initiative (GRI) Reporting Principles as the framework for our reporting and are committed to sharing our Environmental, Social and Governance (ESG) performance results and encourage open dialogue and feedback that helps make us better.

Our ESG reporting is both Sustainability Accounting Standards Board (SASB) and Task Force on Climate Related Financial Disclosure (TCFD) aligned.  Our Environmental disclosures include:

oWood Source Type,

oWood Source Location,

oTotal Energy and Energy Intensity,

oEnergy Use by Source,

oElectricity Use and Electricity Intensity,

oPercentage Renewable Energy,

oTotal CO2 Emissions and Emissions Intensity, and

oWater Use and Water Intensity.


Clearwater Paper Corporation 2021

6


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We were recognized in 2020 for our safety and innovation efforts.

oPulp & Paper Safety Association - Safety Innovator Award

Awarded for the development and implementation of an enclosed process that allows employees to safely sample chemical lines.

oRISI - Packaging Innovation Award

Awarded for our NuVo® Cup Stock which has increased levels of post-consumer recycled fiber content while providing a hot cup print surface that allows for high-definition graphic design with less ink usage.

We believe that a sustained commitment to diversity, equity, and inclusion makes us a stronger organization. We are dedicated to fostering and sustaining an environment where our teammates, who stand beside us and work with us, are valued for their unique backgrounds, knowledge, skills, and experiences.

We maintain a human capital policy that supports a diverse and energized workforce with career advancement, role mobility opportunities, and strong health, safety, and wellness initiatives. Our values guide us beyond producing financial returns to serving our communities and developing our people.

We offer competitive benefits, including market-competitive compensation, healthcare, paid time off, parental leave, retirement benefits, tuition assistance, employee skills development, and leadership development, to attract and retain the best available talent.

We aspire to achieve zero workplace injuries and provide a safe, open, and accountable work environment for our employees. We provide several channels for all employees to speak up, ask for guidance, and report concerns related to ethics or safety violations. We address employee concerns and take appropriate actions that uphold our Clearwater Paper values, which include:

oCommitment

oCollaboration

oCommunication

oCourage

oCharacter

 

 

 

 

Clearwater Paper Corporation 2021

7


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2. CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

 

 

CORPORATE GOVERNANCE

Corporate Governance Guidelines; Code of Business Conduct and Ethics

We have established a corporate governance program to help guide our company and our employees, officers and directors in carrying out their responsibilities and duties as well as to set standards for their professional conduct. Our Board has adopted Corporate Governance Guidelines, or Governance Guidelines, which provide standards and practices of corporate governance that we have designed to help contribute to our success and to assure public confidence in our company. Our Governance Guidelines may be found on our website at www.clearwaterpaper.com under “Investors,” then “Governance.” In addition, all standing committees of the Board operate under charters that describe the responsibilities and practices of each committee.

We have adopted a Code of Business Conduct and Ethics, or Ethics Code, which provides ethical standards and corporate policies that apply to all our directors, officers and employees. Our Ethics Code requires, among other things, that our directors, officers and employees act with integrity and the highest ethical standards, comply with laws and other legal requirements, engage in fair competition, avoid conflicts of interest, and otherwise act in our best interests. We have also adopted a Code of Ethics for Senior Officers that applies to senior management and provides for accurate, full, fair and timely financial reporting and the reporting of information related to significant deficiencies in internal controls, fraud and legal compliance.

We have established procedures for confidentially and anonymously reporting concerns and potential violations regarding accounting, internal controls and auditing matters, as well as concerns regarding, or potential violations of, our ethics codes and other matters.

Director Independence

The role of our Board is to oversee and provide policy guidance on our business and affairs. The Board believes that it will best serve our stockholders if the majority of its members are independent. As of April 6, 2021, our Board had eight members, seven of whom are outside (non-employee) directors. The Independent Executive Chair of our Board, Alexander Toeldte, is an outside director. With the exception of Linda K. Massman, who served as our President and Chief Executive Officer until April 1, 2020, and Arsen S. Kitch who began serving as President and Chief Executive Officer on April 1, 2020, the Board has determined that none of our directors or their immediate family members have a material relationship with the company (either directly or as a partner, stockholder or officer of an organization that has a relationship with us), and none of our directors or their immediate family members are employees of our independent registered public accounting firm, KPMG LLP. All our outside directors are independent within the meaning of the New York Stock Exchange, or NYSE, listing standards and our Director Independence Policy.

Our Board meets regularly in executive session without members of management present and as the Board or its individual members deem necessary. Mr. Toeldte, as the Independent Executive Chair, presides over these sessions. Each standing committee of the Board also meets in executive session regularly and as the committee or its individual members deem necessary. Our directors are also invited to attend the meetings of committees of which they are not members, and regularly do so.

Clearwater Paper Corporation 2021

8


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Board Meetings

Our Board and its committees met a total of 28 times in 2020. All directors serving in 2020 attended all Board meetings and all Board committees meetings for which they were a committee member during 2020. The Board does not have a policy requiring director attendance at annual meetings of our stockholders. However, all our directors attended our 2020 annual stockholders meeting by webcast and we anticipate that all will attend our 2021 annual stockholders meeting by webcast as well.

Communications with Directors

Stockholders and interested parties may contact our directors to provide comments, to report concerns, or to ask a question, by mail at the following address:

Corporate Secretary

Clearwater Paper Corporation

601 West Riverside Ave., Suite 1100

Spokane, Washington 99201

Stockholders and interested parties may also communicate with our directors as a group by using the form on our website at www.clearwaterpaper.com, by selecting “Investors,” then “Governance” and “Contact the Board.” All communications received will be processed by our Corporate Secretary. We forward all communications, other than those that are unrelated to the duties and responsibilities of the Board, to the intended director(s).

Our Audit Committee has established procedures to address concerns and reports of potential irregularities or violations regarding accounting, internal controls and auditing matters. Reports may be made on a confidential and anonymous basis. All such reports are directed through an independent, third-party hotline provider and are routed directly to the Chair of the Audit Committee. The procedures and hotline number are available by going to our public website at www.clearwaterpaper.com, and selecting “Investors,” then “Governance,” and “Procedures for the Reporting of Questionable Accounting and Auditing Matters.” Reports may also be made via the hotline provider’s website that is accessed through our website or intranet site.

Nominees for Director

Our Nominating and Governance Committee, or Nominating Committee, is responsible for identifying, evaluating, recruiting and recommending qualified candidates to our Board for nomination or election. The Board nominates directors for election at each annual meeting of stockholders and elects new directors to fill vacancies if they occur.

Our Board strives to find directors who are experienced and dedicated individuals with diverse backgrounds, perspectives and skills. Our Governance Guidelines contain membership criteria that call for candidates to be selected for their character, judgment, diversity of experience, business acumen and ability to act on behalf of and in the best interest of all stockholders. While we do not have a formal policy or requirement with respect to director diversity, we value members who represent diverse backgrounds and viewpoints and strive towards a board composition that encompasses such diversity. We added a new female Director in 2020 and the Nominating Committee is focused in the near term on identifying and nominating additional qualified female director candidates for the Board. To the extent it is able to do so in a manner consistent with our bylaws and Governance Guidelines, the Board seeks to have at least two female members before year-end 2021. The Nominating Committee will continue to review all measurable objectives for achieving diversity on the Board and recommend them to the Board for consideration. In addition, we expect each director to be committed to enhancing stockholder value and to have sufficient time to effectively carry out his or her duties as a director. Our Nominating Committee also seeks to ensure that a majority of our directors are independent under NYSE rules as well as our policies, and that one or more of our directors is an “Audit Committee Financial Expert” under SEC rules.

Clearwater Paper Corporation 2021

9


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prior to our annual meeting of stockholders, our Nominating Committee identifies director nominees by first evaluating the current directors whose terms will expire at the annual meeting and who are willing to continue in service. These candidates are evaluated based on the criteria described above, the candidate’s prior service as a director, and the needs of the Board for any particular talents and experience. If a director no longer wishes to continue in service, if the Nominating Committee decides not to re-nominate a director, or if a vacancy is created on the Board because of a resignation or an increase in the size of the Board or other event, then the committee considers whether to replace such director or to decrease the size of the Board. If the decision is to replace a director, then the Nominating Committee considers various candidates for Board membership, including those suggested by committee members, by other Board members, a director search firm engaged by the committee, or our stockholders. Prospective nominees are evaluated by the Nominating Committee based on the membership criteria described above and set forth in our Governance Guidelines.

A stockholder who wishes to recommend a prospective nominee to the Board for consideration by the Nominating Committee must notify our Corporate Secretary in writing at our principal executive office located at 601 West Riverside Avenue, Suite 1100, Spokane, WA 99201. Each notice must include the information about the prospective nominee as would be required under our Amended and Restated Bylaws, or bylaws. Such notice must be delivered to our offices by the deadline relating to stockholder proposals to be considered for inclusion in our proxy materials, as described under “General Information—Stockholder Proposals for 2022” in this proxy statement.

Each notice delivered by a stockholder who wishes to recommend a prospective nominee to the Board for consideration by the Nominating Committee generally must include the following information about the prospective nominee:

 

the name, age, business address and residence address of the person;

 

the principal occupation of the person;

 

the number of shares of Clearwater Paper common stock owned by the person;

 

a statement whether the person, if elected, intends to tender an irrevocable resignation effective upon (i) such person’s failure to receive the required vote for re-election and (ii) acceptance of such resignation by the Board;

 

a description of all compensation and other relationships during the past three years between the stockholder and the person;

 

any other information relating to the person required to be disclosed pursuant to Section 14 of the Exchange Act, and

 

the person’s written consent to serve as a director if elected.

The Nominating Committee may require any prospective nominee recommended by a stockholder to furnish such other information as the Nominating Committee may reasonably require to determine the eligibility of such person to serve as an independent director or that could be material to a stockholder’s understanding of the independence, or lack thereof, of such person.

The foregoing is only a summary of the detailed requirements set forth in our bylaws regarding director nominations by stockholders that would apply when a stockholder wishes to recommend a prospective nominee to the Board for consideration by the Nominating Committee. A more detailed description of the information that must be provided as to a prospective nominee is set forth in Article 3 of our bylaws, which are available on our website at www.clearwaterpaper.com by selecting “Investors” and then “Governance.”

Clearwater Paper Corporation 2021

10


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Committees of the Board

Our Board currently has three standing committees, as described below. The current charters of each of these committees are available on our website at www.clearwaterpaper.com by selecting “Investors” and then “Governance.”

Board Leadership Structure

Traditionally, the Board has elected to appoint one of its independent members to serve as Chair. In that role, Alexander Toeldte, acts as the lead independent director and, among other responsibilities, provides an independent contact to allow the other directors to communicate their views and concerns to management as well as presides over non-management executive sessions of Board meetings. Beginning on March 1, 2020, the Board appointed Mr. Toeldte to serve as the Independent Executive Chair on an interim basis to perform additional services to help facilitate the leadership change in our CEO position. Additionally, in that role Mr. Toeldte mentors and advises our new CEO, Arsen S. Kitch, and other senior management and assists with major stockholder engagement and management in their role in strategic planning when requested by the CEO. Our Board believes that an independent Chair with prior corporate governance experience combined with a President and CEO who manages the day-to-day operations of our company while also serving as a director, provides our Board with an optimal balance in terms of leadership structure at this point in time.

In the future, the Board may elect to have the role of Board Chair and CEO performed by the same person, as other companies in our industry do. If we were to adopt that structure, the Board would appoint one of its independent members to serve as Vice Chair, who would act as the lead independent director and, among other responsibilities, provide an independent contact to allow the other directors to communicate their views, and concerns to management as well as preside over non-management executive sessions of Board meetings.

Board Role in Risk Oversight

One of the responsibilities of our Board is to provide oversight of our risk management practices in order to ensure appropriate risk management systems are employed throughout the company. Management, which is responsible for the day-to-day assessment and mitigation of our risks, utilizes an enterprise risk management, or ERM, program, which is an enterprise-wide program designed to enable effective and efficient identification and management of critical enterprise risks and to facilitate the incorporation of risk considerations into decision making. To assist and strengthen management’s risk assessment and mitigation efforts, we have a Risk Management Committee whose management members represent a company-wide perspective and provide subject matter expertise as part of our ERM process. Through the ERM process, management identifies, monitors and mitigates risks and regularly reports to the Board or a committee of the Board as to the assessment and management of those risks.

The Board’s standing committees support the Board by regularly addressing various issues within their respective areas of oversight. The Audit Committee’s responsibilities include reviewing and overseeing major financial risk exposures and the steps management has taken to monitor and control these exposures. Management, on a regular basis, provides the committee with its assessment and mitigation efforts in regard to particular risks facing the company that have been identified through the ERM process or other processes. Our Audit Committee also reviews with our independent auditors the adequacy and effectiveness of our internal controls over financial reporting. Additionally, our Vice President, Internal Audit provides the Audit Committee with regular updates on our systems of internal controls over financial reporting, and our General Counsel reviews with the committee significant litigation, claims and regulatory and legal compliance matters.

Clearwater Paper Corporation 2021

11


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Compensation Committee assists the Board in fulfilling its risk management oversight responsibilities associated with risks arising from our compensation policies and programs. Each year management and the Compensation Committee review whether risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on the company. The Nominating Committee assists the Board in fulfilling its risk management oversight responsibilities associated with risks related to corporate governance structures and processes. Each of the committee chairs, as appropriate, reports to the full Board at regular meetings concerning the activities of the committee, any significant issues it has discussed, and the actions taken by the committee.

The Board’s role in risk oversight is consistent with its leadership structure. We believe that our Board’s leadership structure facilitates its oversight of our risk management practices by combining the day-to-day knowledge of our business possessed by our President and CEO as a member of the Board, with the independence provided by our Independent Executive Chair and independent Board committees.

Committee Membership

The following table shows the membership of each committee as of April 6, 2021:

 

 

 

 

 

 

 

Nominating

 

 

Audit

 

Compensation

 

and Governance

Name

 

Committee

 

Committee

 

Committee

John J. Corkrean

 

X (Chair)

 

X

 

 

Kevin J. Hunt

 

X

 

X (Chair)

 

 

Arsen S. Kitch

 

 

 

 

 

 

William D. Larsson

 

X

 

 

 

X

Joe W. Laymon

 

 

 

X

 

X

Ann C. Nelson

 

X

 

 

 

X

John P. O'Donnell

 

X

 

 

 

X (Chair)

Alexander Toeldte (Independent Executive Chair of the Board)

 

 

 

X

 

X

Meetings in Fiscal 2020

 

8

 

6

 

5

Clearwater Paper Corporation 2021

12


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Audit Committee  

Current Members:

John J. Corkrean* (Chair) (since May 2019 and Chair since September 2019)
Kevin J. Hunt* (since September 2018)
William D. Larsson* (since December 2009 and Chair May 2017 – September 2019)
Ann C. Nelson* (since May 2020)
John P. O’Donnell* (since May 2020)

* Audit Committee financial expert as defined by NYSE and SEC rules.

Each member has been determined by the Board to be independent within the meaning of the NYSE listing standards and our Director Independence Policy.

Description and Key Responsibilities:

     Assists the Board in its oversight of our accounting, financial reporting and internal accounting control matters.

     Reviews the quarterly and audited annual financial statements (as more fully described in its charter.)

     Exercises sole authority to select, compensate and terminate our independent registered public accounting firm as well as the committee’s own consultants and advisors.

     Oversees the appointment, compensation and replacement of our Vice President, Internal Audit.

     Reviews our Related Person Transactions Policy and considers any related person transactions. See “Transactions with Related Persons”.

     Pre-approves the independent registered public accounting firm’s audit fees and non-audit services and fees in accordance with criteria adopted by the committee.

 

Compensation Committee

Current Members:

Kevin J. Hunt (Chair) (since January 2013 and Chair since May 2016)
John J. Corkrean (since May 2020)
Joe W. Laymon (since May 2019)
Alexander Toeldte (since May 2017)

Each member has been determined by the Board to be independent within the meaning of the NYSE listing standards and our Director Independence Policy.

Description and Key Responsibilities:

     Oversees our executive compensation and benefits programs, including establishing the performance measurements and targets for executive officers’ incentive pay.

     Annually reviews and approves executive compensation.

     Coordinates with our Board Chair the annual performance review of our Chief Executive Officer.

     Reviews the “Executive Compensation Discussion and Analysis” contained in this proxy statement and recommends its inclusion to the full Board for approval.

     Exercises sole authority to select, compensate and terminate its own compensation consultants or other advisors.

Clearwater Paper Corporation 2021

13


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Nominating and Governance Committee

Current Members:

John P. O’Donnell (Chair) (since May 2018 and Chair since May 2020)
William D. Larsson (since January 2019)
Joe W. Laymon (since May 2019)
Ann C. Nelson (since May 2020)
Alexander Toeldte (since April 2016 and Chair from September 2018 to May 2020)

Each member has been determined by the Board to be independent within the meaning of the NYSE listing standards and our Director Independence Policy.

Description and Key Responsibilities:

     Identifies, evaluates, recruits and recommends to the Board nominees for election as directors.

     Develops and recommends to the Board corporate governance principles.

     Oversees the evaluation of the Board and assists in the evaluation of management.

     Director succession planning is also a focus of the Nominating Committee with striking a balance between Board refreshment and the need for new or additional skill sets with maintaining the institutional knowledge about our business and operating history.

     Exercises sole authority to select, compensate and terminate its own consultants and advisors.

Compensation Committee Interlocks and Insider Participation

John J. Corkrean, Kevin J. Hunt, Joe W. Laymon, John P. O’Donnell, and Alexander Toeldte each served as a member of our Compensation Committee during 2020. All are outside directors, and none of our named executive officers served as a director or as a member of a Compensation Committee of any business entity employing any of our directors during 2020.  

Transactions with Related Persons

Securities laws require us to disclose certain business transactions that are considered related person transactions. In order to comply with these requirements, our Board has adopted a Related Person Transactions Policy that applies to our directors and executive officers, any beneficial owner of more than 5% of our voting stock, any immediate family member of any of the foregoing persons, and any entity that employs any of the foregoing persons, or in which any of the foregoing persons is a general partner, principal or 10% or greater beneficial owner. Transactions covered by this policy are those in which (a) we or any of our subsidiaries participate, (b) the amount involved exceeds $120,000, and (c) any related person had, has or will have a direct or indirect material interest, as defined in the policy.

Any proposed related person transaction is reviewed by our Audit Committee at its next regularly scheduled meeting, unless our General Counsel and Corporate Secretary determines that it is not practicable or desirable to wait until the next scheduled meeting for a particular transaction, in which case the Chair of the Audit Committee has the authority to review and consider the proposed transaction. Only those transactions determined to be fair and in our best interests are approved, after taking into account all factors deemed relevant by the Audit Committee, or its Chair, as the case may be. If the Chair

Clearwater Paper Corporation 2021

14


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

approves any related person transaction, then that approval is reported to the Audit Committee at its next regularly scheduled meeting.

We did not conduct any transactions with related persons in 2020 that would require disclosure in this proxy statement or that required approval by the Audit Committee pursuant to the policy described above.

 

Clearwater Paper Corporation 2021

15


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BOARD OF DIRECTORS

Our Board of Directors is divided into three classes serving staggered three-year terms. The average tenure of our directors is 5.2 years.  At the Annual Meeting, our stockholders will be asked to elect three individuals to serve as directors until the 2024 Annual Meeting. See “Proposal No. 1—Election of Directors.” Our bylaws require our directors to be elected by a majority vote of the shares of common stock present or represented by proxy and entitled to vote at the Annual Meeting.

Below are the names and ages of our eight directors as of the date of this proxy statement, the year each became a director, each director’s principal occupation or employment for at least the past five years, and other public company directorships held by each director during the past five years. Unless authority is withheld, the persons named as proxies in the voting materials made available to you or in the accompanying proxy will vote for the election of the nominees listed below. We have no reason to believe that any of these nominees will be unable to serve as a director. If any of the nominees becomes unavailable to serve, however, the persons named as proxies will have discretionary authority to vote for a substitute nominee.

Nominees for Election at this Meeting for a Term Expiring in 2024 (Class I)

John J. Corkrean  

Biography: Mr. Corkrean (age 55) has been a director since May 2019.  Mr. Corkrean currently serves as executive vice president and chief financial officer for H.B. Fuller Company (NYSE:FUL), a global adhesive, sealants and chemical products manufacturer, a position he has held since 2016. Prior to that he was employed by Ecolab for 17 years in a series of financial leadership roles concluding from 2014-2016 as senior vice president, finance for the global energy service division.

Qualifications: Our Nominating Committee believes Mr. Corkrean’s financial and public company expertise and leadership background make him an asset to our Board.  

Arsen S. Kitch

Biography: Mr. Kitch (age 39) has been a director since April 1, 2020.  He has served as the company’s president and CEO since April 1, 2020.  He served as the company’s senior vice president, general manager, consumer products division from May 2018 to April 2020 and served as vice president, general manager, consumer products division from January 2018 to May 2018. He served as the company’s vice president, finance and vice president financial planning and analysis from January 2015 through December 2017, and served as senior director, strategy and planning from August 2013 through December 2014.

Qualifications: Our Nominating Committee believes as the CEO, Mr. Kitch’s knowledge of our day-to-day operations and effectiveness of our business strategies provides a valuable perspective to the Board. Additionally, Mr. Kitch’s experience, knowledge, skills and expertise acquired having served as CEO, senior vice president of a major division and vice president in the financial and strategical planning aspects of the company, add significant value to the Board.

Clearwater Paper Corporation 2021

16


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alexander Toeldte

Biography: Mr. Toeldte (age 61) has been a director since April 2016.   Mr. Toeldte has served as the chairman of Jitasa, Inc., a privately held provider of accounting and financial management services for non-profit organizations, since 2014 and is a member of its compensation committee.  He served as a director of Xerium Technologies, Inc. (NYSE:XRM), a global provider of industrial consumable products and services from 2016 until the company’s sale in 2018 and was a member of its compensation committee and governance committee. He served as an operating director at Paine & Partners, LLC, a private equity firm from 2015 to 2016. Mr. Toeldte served as president, CEO and a director of Boise Inc., a paper manufacturer, from February 2008 to 2013 and at Boise Cascade and as its executive vice president, paper, packaging and newsprint segments from October 2005 to 2008.  Mr. Toeldte’s previous experience includes serving as executive vice President of Fonterra Co-operative Group from 2001 to 2003, a New Zealand based global dairy company, and CEO of Fonterra Enterprises.  Mr. Toeldte served in various capacities with Fletcher Challenge Limited Group from 1999 to 2001, a New Zealand based group with holdings in paper, forestry, building materials, and energy, including as CEO of Fletcher Challenge Building from 2000 to 2001 and Fletcher Challenge Paper from 1999 to 2000, as well as Group CFO in 1999.  He also served as chair of the board of Fletcher Challenge Canada. Mr. Toeldte served in 2012 as chairman and is currently a member of the board of the American Forest & Paper Association.

Qualifications: Our Nominating Committee believes Mr. Toeldte’s experience in the consumer products and paper industries, financial expertise, and leadership and board experience make him an asset to our Board

Directors Continuing in Office until 2022 (Class II)

Kevin J. Hunt  

Biography: Mr. Hunt (age 69) has been a director since January 2013. From January 2013 to January 2014, he served as a consultant to ConAgra Foods, Inc., which acquired Ralcorp Holdings Inc. in January 2013. Mr. Hunt served as president, CEO and a director of Ralcorp Holdings Inc., a producer of private-brand foods and food service products from January 2012 to January 2013. He served as co-CEO and president of Ralcorp from 2003 until 2012 and as a director from 2004 until the company’s acquisition in 2013. Prior to that period, Mr. Hunt was corporate vice president and president of Bremner Food Group. Mr. Hunt served as an advisory director of Berkshire Partners LLC, a private equity firm, from 2013 to 2015. He served as a director of Vi Jon, a manufacturer of private label personal care products owned by Berkshire Partners, from 2012 to 2017. Since August 2018, he has served as a senior advisor for C.H. Guenther and Son, Inc., a leading producer of branded and private-label food products.

Current Public Directorships: Mr. Hunt has served as a director of Energizer Holdings, Inc. (NYSE: ENR), a manufacturer of primary batteries and portable lighting products since its spin-off from Edgewell Personal Care Company (NYSE: EPC) in July 2015. He is a member of Energizer’s human capital committee and serves as chairman of its finance and oversight committee.

Qualifications: Our Nominating Committee believes his experience with private label consumer product companies, financial expertise, strategic planning and both management and board experience make him an asset to our Board.

Clearwater Paper Corporation 2021

17


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

William D. Larsson

Biography: Mr. Larsson (age 75) has been a director since December 2008. Mr. Larsson served as senior vice president and CFO of Precision Castparts Corp., an industrial manufacturing company, from August 2000 until his retirement in December 2008.

Current Public Directorships:  Mr. Larsson has served as a director and chair of the nominating and corporate governance committee and is a member of the audit committee of Schnitzer Steel Industries, Inc. (NASDAQ: SCHN), a manufacturer of recycled metal products.  Mr. Larsson served as lead director of Schnitzer Steel from 2008 to 2014.

Qualifications: Our Nominating Committee believes his experience as a founding director, as a financial expert, and experience as a lead independent director of another public company make him an asset to our Board.

Ann C. Nelson

Biography: Ms. Nelson (age 61) has been a director since May 2020.  Ms. Nelson served as a lead audit partner of KPMG, LLP., an audit services firm, from August 1982 until her retirement in September 2019.  Prior to that she served in various positions with KPMG including lead client partner.  

Current Public Directorships:  Ms. Nelson has served as a director and chair of the audit committee and is a member of the nominating and corporate governance committee of Rayonier, Inc. (NYSE: RYN), a timber REIT since 2020.  

Qualifications: Our Nominating Committee believes Ms. Nelson’s leadership capabilities, knowledge of the paper industry as well as experience as a financial expert, and experience as a chair of the audit committee of another public company make her an asset to our Board.

Directors Continuing in Office until 2023 (Class III)

Joe W. Laymon

Biography: Mr. Laymon (age 68) has been a director since May 2019.  Mr. Laymon served as vice president, human resources and corporate services at Chevron Corporation (NYSE:CVX), a leading global integrated energy company from 2008 until his retirement in 2017.  

 

Current Public Directorships:  Mr. Laymon has served on the board of directors for Peabody Energy (NYSE:BTU), a global coal company, since 2017 and serves as the chair of the compensation committee as well as is a member of the health, safety, security & environmental committee.  

 

Qualifications: Our Nominating Committee believes Mr. Laymon’s leadership and executive compensation and human resources experience and experience as a chair of the compensation committee of another public company make him an asset to our Board.

John P. O’Donnell

Biography: Mr. O’Donnell (age 60) has been a director since April 2016.  Mr. O’Donnell served as president and CEO of Neenah, Inc. (NYSE: NP), a global specialty materials company, from May 2011 and as a director from November 2010 until his retirement in July 2020. He served as Neenah

Clearwater Paper Corporation 2021

18


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Inc.’s COO from June 2010 to May 2011 and as president, Fine Paper from 2007 to June 2010. Mr. O'Donnell was employed by Georgia-Pacific Corporation from 1985 until 2007 and held increasingly senior management positions in the consumer products division where he served as president of the north american retail business from 2004 through 2007, and as president of the north american commercial tissue business from 2002 through 2004.

Qualifications: Our Nominating Committee believes Mr. O’Donnell’s leadership, strategic planning and consumer product paper industry experience make him an asset to our Board.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF THE THREE NOMINEES FOR DIRECTOR.


Clearwater Paper Corporation 2021

19


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This table shows the number of shares of common stock beneficially owned, by each owner of more than 5% of our common stock, each of our directors, each executive officer for whom compensation is reported in this proxy statement, and all directors and executive officers as a group. Except for our 5% holders, the table shows beneficial ownership as of March 18, 2021. The number of shares reported is based on data provided to us by the beneficial owners of the shares. The percentage ownership data is based on 16,678,422 shares of common stock outstanding as of March 18, 2021. Under SEC rules, beneficial ownership includes shares over which the person or entity exercises voting or investment power and also any shares that the person or entity has the right to acquire within 60 days of March 18, 2021. Except as noted, and subject to applicable community property laws, each owner has sole voting and investment power over the shares shown in this table.

 

 

Amount and Nature of

Common Stock

Beneficially Owned

 

 

 

 

 

Number of

Shares

Beneficially

Owned

 

Percent of

Class

 

Common

Stock

Units (1)

 

Stockholders Owning More Than 5%

 

 

 

 

 

 

 

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

 

2,551,890

(2)

15.30%

 

 

 

T. Rowe Price Associates, Inc.

100 E. Pratt Street

Baltimore, MD 21202

 

1,776,885

(3)

10.65%

 

 

 

Dimensional Fund Advisors LP

6300 Bee Cave Road, Building One

Austin, TX 78746

 

1,354,725

(4)

8.12%

 

 

 

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA  19355

 

1,080,073

(5)

6.48%

 

 

 

Directors and Named Executive Officers

 

 

 

 

 

 

 

John J. Corkrean

 

-

 

*

 

9,278

 

Kevin J. Hunt

 

-

 

*

 

22,585

 

Arsen S. Kitch

 

34,129

(6)

 

 

 

 

William D. Larsson

 

1,000

 

*

 

65,892

 

Joe W. Laymon

 

-

 

 

 

9,278

 

Linda K. Massman

 

25,500

(7)

*

 

 

 

Ann C. Nelson

 

3,000

(8)

 

 

4,053

 

John P. O'Donnell

 

-

 

*

 

17,034

 

Alexander Toeldte

 

-

 

*

 

17,034

 

Steve M. Bowden

 

3,269

 

*

 

 

 

Michael S. Gadd

 

91,624

(9)

*

 

 

 

Robert G. Hrivnak

 

1,098

(10)

 

 

 

 

Kari G. Moyes

 

38,516

(11)

*

 

 

 

Michael J. Murphy

 

2,376

(12)

*

 

 

 

Directors and Executive Officers as a Group

 

 

 

 

 

 

 

(13 persons)

 

340,559

 

2.01%

 

259,217

 

*

Less than 1%

Clearwater Paper Corporation 2021

20


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Represents vested common stock units as of March 18, 2021, as well as 4,053 common stock units for each director that will vest within 60 days of March 18, 2021. These stock units are not actual shares of common stock and have no voting power. In the case of our non-employee directors, these stock units are credited, along with any accrued dividend equivalents, on a one-for-one basis with common stock pursuant to our Deferred Compensation Plan for Directors (see “Compensation of Directors”). The annual deferred awards to non-employee directors are converted to cash and paid upon separation from service as a director.

(2)

Based on the stockholders’ Schedule 13G filed on January 25, 2021 with the SEC, the stockholder serves as a parent holding company registered under the Investment Advisors Act, with sole dispositive power over all of these shares and sole voting power over 2,520,592 of these shares of common stock as of December 31, 2020. The Schedule indicates that sole dispositive power over all these shares is held as of December 31, 2020, by the following subsidiaries of Blackrock, Inc.: BlackRock Advisors, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock Investment Management (Australia) Limited; BlackRock (Netherlands) B.V.; BlackRock Fund Advisors; BlackRock Asset Management Ireland Limited; BlackRock Institutional Trust Company, National Association; BlackRock Financial Management, Inc.; BlackRock Asset Management Schweiz AG, and BlackRock Investment Management, LLC. BlackRock Fund Advisors beneficially owns 5% or more of the total shares owned by BlackRock, Inc.  More than 5% of the total outstanding shares are held in the interest of iShares Core S&P Small-Cap ETF.

(3)

Based on the stockholders’ Schedule 13G/A filed jointly on February 16, 2021 with the SEC. T. Rowe Price Associates, Inc. serves as an investment advisor with sole voting power over 636,817 and sole dispositive power of 1,776,885 of these shares as of December 31, 2020, and T. Rowe Price Small-Cap Value Fund, Inc. serves as an investment company registered under the Investment Advisors Act, with sole voting power over 1,074,479 of these shares and sole dispositive power over none of these shares as of December 31, 2020.  The schedule indicates that these shares are held as of December 31, 2020, by various individual and institutional clients. For the purpose of the reporting requirements of the Securities Exchange Act of 1934, T. Rowe Price Associates, Inc. and T. Rowe Small-Cap Value Fund, Inc. are deemed to be beneficial owners of such securities; however, each expressly disclaims that it is, in fact, the beneficial owner of such securities.

(4)

Based on the stockholder’s Schedule 13G/A filed on February 12, 2021 with the SEC, the stockholder serves as an investment advisor registered under the Investment Advisors Act, with sole dispositive power over all of these shares, and sole voting power over 1,301,558 of these shares as of December 31, 2020 (subject to the provisions of Note 1 of such 13G/A), however, Dimensional Fund Advisors LP disclaims beneficial owner of such securities.

(5)

Based on the stockholders’ Schedule 13G/A filed on February 10, 2021 with the SEC, the stockholder serves as an investment advisor registered under the Investment Advisors Act, with sole dispositive power over 1,046,803 of these shares, shared dispositive power over 33,270 of these shares, and shared voting power over 18,314 of these shares as of December 31, 2020. The Schedule indicates that all these shares are held by various individuals and institutional investors including Vanguard Asset Management, Limited; Vanguard Fiduciary Trust Company; Vanguard Global Advisors, LLC; Vanguard Group (Ireland) Limited; Vanguard Investments Australia Ltd; Vanguard Investments Canada Inc.; Vanguard Investments Hong Kong Limited; and Vanguard Investments UK, Limited as of December 31, 2020.

(6)

Mr. Kitch became President and CEO on April 1, 2020.  Includes 19,932 shares of common stock exercisable under vested stock options and 6,490 restricted stock units that will vest on April 1, 2021.

(7)

Ms. Massman served as President and CEO through May 31, 2020.

(8)

Ms. Nelson joined the Board on May 13, 2020.

(9)

Includes (i) 28 shares of common stock held in Mr. Gadd’s individual account under our 401(k) employee savings plan, and (ii) 42,630 shares of common stock exercisable under vested stock options.

(10)

Mr. Hrivnak served as CFO through April 8, 2020.

(11)

Ms. Moyes shares includes 29,169 shares of common stock exercisable under vested stock options.

(12)

Mr. Murphy joined the Company as Senior Vice President, CFO on April 13, 2020.  Includes 2,376 restricted stock units that will vest on April 13, 2021.  

Clearwater Paper Corporation 2021

21


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPENSATION OF DIRECTORS

Our Nominating Committee reviews and makes recommendations to our Board concerning director compensation. Similar to our philosophy regarding executive compensation, our philosophy regarding director compensation is to provide our directors a fair compensation package that is tied to the services they perform as well as to the performance of the company, with the objective of recruiting and retaining an outstanding group of directors.

The Nominating Committee, pursuant to the authority granted under its charter, engaged Semler Brossy Consulting Group to advise it on director compensation matters for 2020. Semler Brossy’s assessment was taken into consideration in establishing our current director compensation, which is targeted to be at the median of compensation paid by comparable companies.

2020 Compensation of Non-Employee Directors 

 

Name

 

Fees

Earned or

Paid in

Cash ($)(1)

 

 

Stock

Awards

($)(2)

 

All Other

Compensation ($)

 

Total

($)

John J. Corkrean

 

$108,750

 

 

$114,714

 

-

 

$223,464

Kevin J. Hunt

 

$110,500

 

 

$114,714

 

-

 

$225,214

William D. Larsson

 

$94,000

 

 

$114,714

 

-

 

$208,714

Joe L. Laymon

 

$83,500

 

 

$114,714

 

 

 

$198,214

Ann C. Nelson

 

$57,692

(3)

 

$114,714

 

-

 

$172,406

John P. O'Donnell

 

$92,250

 

 

$114,714

 

-

 

$206,964

Alexander Toeldte

 

$278,167

 

 

$114,714

 

-

 

$392,881

 

(1)

Represents annual retainers for 2020, as well as any amounts earned for service as Chair or committee Chair as well as committee membership retainers.

(2)

This column shows the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of stock units granted in 2020. In accordance with FASB ASC Topic 718, the grant date fair value reported for all stock units was computed by multiplying the number of stock units by the closing price of our stock on the grant date. The aggregate number of vested and unvested phantom common stock units credited for service and deferred fees as a director outstanding as of December 31, 2020 for each non-employee director was as follows: Mr. Corkrean— 9,278 units; Mr. Hunt—22,585 units; Mr. Larsson—65,892 units; Mr. Laymon— 9,278 units; Ms. Nelson— 4,053 units; Mr. O’Donnell—17,034 units and Mr. Toeldte—17,034 units.

(3)

Ms. Nelson joined the company on May 1, 2020.  

During 2020, one of our directors, Arsen S. Kitch, also served as our CEO. As a result, he did not receive compensation for his services as a director during 2020. The compensation received by Mr. Kitch is shown in the “2020 Summary Compensation Table” provided elsewhere in this proxy statement.

 

 

 


Clearwater Paper Corporation 2021

22


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retainer and Fees

Our outside directors cash compensation in 2020 was at the following rates:

 

Annual retainer fee

 

$70,000

Annual retainer fee for Audit Committee membership

 

$15,000

Annual retainer fee for Compensation Committee membership

 

$7,500

Annual retainer fee for Nominating & Governance Committee membership

 

$6,000

Annual retainer fee for Chair (if not CEO)

 

$75,000

Annual Retainer Fee for Independent Executive Chair

 

$200,000

Annual retainer fee for Chair of the Audit Committee

 

$20,000

Annual retainer fee for Chair of the Compensation Committee

 

$15,000

Annual retainer fee for Chair of the Nominating and Governance Committee

 

$10,000

Attendance fee for each Board or Committee meeting in excess of 12 meetings, respectively

 

$1,500

 

We also reimburse directors for their reasonable out-of-pocket expenses for attending Board and committee meetings as well as educational seminars and conferences.

Directors may defer receiving all or any portion of their fees under the terms of our Deferred Compensation Plan for Directors, or Directors Plan. When a director elects to defer fees, he or she must elect a payment date or dates for the deferred amount and elect to have the deferred fees converted into phantom common stock units or, if not converted, then credited with annual interest at 120% of the long-term applicable federal rate published by the Internal Revenue Service, with quarterly compounding. The common stock units are credited with amounts in common stock units equal in value to any dividends that are paid on the same amount of common stock. Upon separation from service as a director, the common stock units credited to the director are converted to cash based upon the then market price of the common stock and paid to the director according to the plan the shares were deferred under.

Long-Term Incentive Awards.  In May 2020, each of our outside directors received an annual equity award that vests in May 2021. These annual awards were granted in the form of phantom common stock units. The number of phantom common stock units actually awarded was determined by dividing $100,000 by the average closing price of a share of our common stock over a twenty-day period that ended on the date of the grant. The common stock units awarded are credited with additional common stock units equal in value to any dividends that are paid on the same amount of common stock. Upon separation from service as a director, the common stock units credited to the director are converted to cash based upon the then market price of the common stock and paid to the director according to the plan the shares were granted under.

Other Benefits.  Directors and their spouses are also eligible to participate in our Matching Gifts to Education Program, which matches contributions of up to $1,500 per year to eligible educational institutions. In 2020 we made one matching donation for $1,500 on behalf of outside directors under this program.

Clearwater Paper Corporation 2021

23


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director Stock Ownership Guidelines and Limitations on Securities Trading.  In the interest of promoting and increasing equity ownership by our directors and to further align our directors’ long-term interests with those of our stockholders, we have adopted stock ownership guidelines. Each director must acquire and hold within five years of becoming a director, Clearwater Paper Corporation stock with a value of at least $350,000. Directors are expected to achieve their ownership guideline within a five-year period from their appointment as a director.  Shares held in a brokerage account, an account with our transfer agent, or in the form of vested common stock units owned as a result of deferred director fees or annual equity awards paid under our company plans, all count towards the ownership requirement. The value of the shares held by a director will be measured by the greater of the value of the shares at (i) the time acquired or vested or (ii) the applicable annual measurement date, based on the twenty-day average closing price of our stock before that measurement date. Each of our directors is in compliance with his or her current equity ownership requirement. The stock ownership of all our directors as of March 18, 2021 is presented in this proxy. See “Security Ownership of Certain Beneficial Owners and Management.”

Annually a report is presented to the Board detailing each director’s stock ownership and progress toward meeting these guidelines.

Pursuant to our Insider Trading Policy, directors, officers and other employees, are prohibited from engaging in short sales of company securities, pledging company securities, purchasing company securities on margin and engaging in transactions in puts, calls or other derivatives trading on an exchange in regards to company securities.

 

 

Clearwater Paper Corporation 2021

24


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. EXECUTIVE COMPENSATION DISCUSSION AND TABLES

 

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board of Directors has reviewed and discussed the Executive Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the committee recommended to the Board that the Executive Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our 2020 Annual Report on Form 10-K.

 

The Compensation Committee Members:

 

Kevin J. Hunt, Chair

John J. Corkrean

Joe W. Laymon

Alexander Toeldte


Clearwater Paper Corporation 2021

 

25


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

The following portion of our proxy statement discusses and analyzes the 2020 compensation programs and decisions applicable to the following executive officers of the company, which we sometimes refer to as the “named executive officers” or “NEOs”:

Named Executive Officer

 

Title

Arsen S. Kitch*

 

President and Chief Executive Officer

Linda K. Massman*

 

Former President and Chief Executive Officer

Michael J. Murphy**

 

Senior Vice President, Finance and Chief Financial Officer

Robert G. Hrivnak**

 

Former Senior Vice President, Finance and Chief Financial Officer

Steve M. Bowden

 

Senior Vice President, General Manager, Pulp and Paperboard Division

Michael S. Gadd

 

Senior Vice President, General Counsel and Corporate Secretary

Kari G. Moyes

 

Senior Vice President, Human Resources

* Mr. Kitch was elected President and Chief Executive Officer and Ms. Massman resigned those offices and ceased being an employee, both effective as of April 1, 2020.

** Mr. Hrivnak departed the company effective April 10, 2020, and Mr. Murphy joined the company April 13, 2020.

TABLE OF CONTENTS

EXECUTIVE SUMMARY

27

Company Performance

27

2020 CEO Compensation

27

 

 

LISTENING TO OUR STOCKHOLDERS

27

 

COMPENSATION PRACTICE

28

 

 

 

 

2020 EXECUTIVE COMPENSATION PRACTICE

29

Compensation Philosophy

29

Compensation Element Summary Table

30

2020 Executive Compensation Peer Group

30

2020 NEO Incentive-Based Compensation

32

 

 

2020 ANNUAL INCENTIVES

33

2020 AIP Design

33

2020 AIP Payout

34

 

 

2020 LONG-TERM INCENTIVES

35

2020 LTIP Design

35

2020 Retention and Inducement RSUs

36

2018-2020 LTIP Performance Share Payout

37

 

 

OTHER COMPENSATION RELATED MATTERS

38

Compensation Committee Process

38

Other Compensation Matters

40

 

 

EXECUTIVE COMPENSATION TABLES

43

2020 Compensation

43

CEO Pay Ratio

46

Post-Employment Compensation

49

Potential Payments Upon Termination or Change of Control

52

 

 

 

Clearwater Paper Corporation 2021

 

26


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Summary

2020 was a year of change. On April 1, 2020, Mr. Kitch was promoted to President and CEO replacing Ms. Massman. During 2020, we had strong financial results due to significantly greater than expected demand in tissue products due to the COVID-19 pandemic, strong operational performance, and favorable cost trends, and saw our stock price grow. During this extraordinary time, we prioritized the health and safety of our people while safely operating our facilities to meet the needs of our customers. We continued to strengthen our commitment to our communities, our customers, our planet, and the sustainability of our products. Below are performance and compensation highlights for 2020 at a glance.

Company Performance

During 2020, we delivered strong performance due to elevated demand for tissue products, steady demand for paperboard, and solid operational execution. We delivered these results while prioritizing the health and safety of our employees and meeting the needs of our customers. Our performance highlights were as follows:

 

2020 EBITDA – up 69% from 2019; and

 

Share price – strong recovery in absolute share price in 2020 – up 76% from 2019.

2020 CEO Compensation

 

On April 1, 2020, Mr. Kitch was promoted to President and CEO replacing Ms. Massman. The table below reflects the difference in target Compensation between Ms. Massman and Mr. Kitch.

 

 

The Salary, AIP and LTIP shown above are the target amounts, and are different from the amounts reported in the Summary Compensation Table for such years. Mr. Kitch was also granted, in connection with the CEO leadership change, a one-time retention RSU in April of 2020 with a target value of $1,000,000.  

Listening to Our Stockholders

The Compensation Committee relies on regular stockholder outreach and engagement activities as well as more formal channels to communicate with stockholders, including the opportunity for stockholders to cast a non-binding advisory vote regarding executive compensation at the annual meeting of our stockholders. In 2020, our proposal to approve our executive compensation program received majority support from our stockholders with approximately 93.5% voting in favor.

 

In evaluating our compensation practices in 2020, the Compensation Committee was mindful of the support our stockholders expressed for the company’s executive compensation program and the practice

Clearwater Paper Corporation 2021

 

27


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of linking compensation to operational objectives and the enhancement of stockholder value. The Compensation Committee will continue to monitor our executive compensation program to ensure compensation is aligned with company performance.

Executive Compensation Practices

Our executive compensation programs have strong governance components that further strengthen our pay-for-performance compensation philosophy, including the following:

 

Compensation Practice

Independent Compensation    

Committee

The Compensation Committee consists entirely of independent directors.

 

 

 

 

Independent Compensation Consultant

The Compensation Committee utilizes an independent compensation consultant, Semler Brossy, which is retained directly by the Compensation Committee and provides no other services to the company’s management.

 

 

 

 

Pay for Performance

The Compensation Committee is committed to oversee, evaluate, and improve our executive compensation pay design and administration. The executive compensation mix is targeted to favor performance-based compensation and executive compensation targets are determined based on a case-by-case basis using competitive market data with a range of opportunities above and below target to reflect actual performance.

 

 

 

 

Risk Assessment

The Compensation Committee performs an annual review of the risks related to our compensation programs.

 

 

 

 

Performance Goals

We utilize key measures tied to operational, financial, and share   performance.

 

 

 

 

Stock Ownership Guidelines

We require stock ownership by executives to further align our executives’ and stockholders’ interests.

 

 

 

 

Recoupment Policy

We provide for clawbacks in stock incentive and annual incentive plans.

 

 

 

 

Caps on Incentive Compensation

There is a maximum limit on the amount of annual cash incentive and performance share payouts.

 

 

 

 

No Hedging or Pledging

Under our insider trading policy, all employees (including officers) are prohibited from short selling, purchasing on margin, pledging of company stock or other securities, and buying or selling puts or calls in company stock or other company securities.

 

 

 

 

No Perks

We do not provide perks to executive officers.

 

 

 

 

No Gross Ups

We do not provide for excise tax gross ups in our executive compensation plans

 

 

 

 

No Change in Control Vesting Acceleration

We do not provide for outstanding equity awards to payout after a change in control absent a termination of employment (PSUs, RSUs, and option awards require a “double trigger”).

 

 

 

 

No Repricing

Our 2017 Stock Incentive Plan expressly prohibits repricing or repurchasing equity awards that are underwater without stockholder approval

 

 

 

 

 

 

Clearwater Paper Corporation 2021

 

28


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020 Executive Compensation Practice

Compensation Philosophy

Our compensation philosophy remains consistent and straightforward—pay our executives competitive and fair compensation that is linked to individual and company performance. The objectives of our executive compensation program are to attract, retain, motivate, and reward executives in order to enhance the long-term profitability of the company, foster stockholder value creation, and align executives’ interests with those of our stockholders.

 

Our Compensation Committee works with its independent compensation consultant, Semler Brossy, Consulting Group LLC or Semler Brossy, and management, and uses its judgement, in the design of and selection of performance metrics used in our executive compensation program.  The committee strives to identify the financial and operational levers that will help us achieve our overall business strategy and direction as well as align with stockholders’ interests.  We have consistently included distinct financial metrics in both our cash-based compensation programs and in our equity-based compensation programs to link our compensation to company performance.

Clearwater Paper Corporation 2021

 

29


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation Element Summary Table

2020 Element of Pay

 

Overview

 

Key Benchmarks/

Performance Metrics

 

 

 

 

 

 

 

Annual

Salary

 

Fixed Cash compensation meant to attract and retain executives by balancing at-risk compensation

 

•      The Compensation Committee targets base salaries with reference to our compensation peer group as well as level of experience, job performance, and long-term potential and tenure

 

 

 

 

 

 

 

 

Annual Incentive Plan (“AIP”)

 

Links executive

compensation to annual financial, operational, and strategic performance by awarding cash bonuses for achieving pre-defined targets

 

•       For executives with enterprise-wide responsibility:

-       75% company adjusted earnings before interest, taxes, debt and amortization (“EBITDA”)

-       25% company-wide Strategic Metrics

•       For executives in charge of a business unit:

-       40% company adjusted EBITDA

-       30% company-wide Strategic Metrics

-       30% division adjusted EBITDA

 

 

 

 

 

 

 

Long-Term Incentive Plan (LTIP)

Performance Shares

(70% of LTIP)

 

Intended to reward employees when the company performs in-line

with long-term strategic direction and achieves

total stockholder returns

that exceed those of our applicable comparator index

 

•       “Cliff” vest at end of three-year performance period, subject to performance and continued employment

-       70% Free Cash Flow (“FCF”)

-       30% Return on Invested Capital (“ROIC”)

Weighting of performance shares in the overall mix to 70%

•       Payout modifier is applied based on relative total stockholder return (“TSR”) compared to the S&P SmallCap 600 Index

-       target performance level of the rTSR modifier 55th percentile from median

-       -25% payout modification for performance at or below the 25th percentile

-       No payout modification for performance at 55th percentile

-       +25% modification for performance at or above the 75th percentile

-       Linear interpolation between percentile markers (i.e., performance at the 65th percentile results in a +12.5% payout modification)

 

 

 

 

 

 

 

 

Restricted Stock Units (“RSU”)

(30% of LTIP)

 

Intended to recruit and retain key employees while aligning interests of executives with long-term best interests of

our stockholders

 

•      Vest ratably over a three-year period, subject to continued employment

 

 

 

 

 

 

 

 

 

2020 Executive Compensation Peer Group

Semler Brossy annually reviews our compensation peer group based on objective criteria with the goal of ensuring that it is reflective of the size of our company and the competitive environment in which we operate. Peer companies are targeted with consideration to comparability in company size and industry (paper products and paper packaging) and adjacent industries, including metal, glass, and containers, and specialty chemicals.

Clearwater Paper Corporation 2021

 

30


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In 2020, we maintained the same peer group as in 2019, save for the removals of Bemis Company Inc., Multi-Color Corp., and OMNOVA Solutions Inc., due to M&A activity.  The changes have placed us near the median in terms of revenue and closer to more companies in market value.

The committee will continue to monitor pay for our executive officers with an emphasis on company performance and appropriate competitive benchmarks, including our updated peer group.

 

Company Name

 

GICS Sub-Industry

 

Revenue

(In millions)(1)

 

Market

Capitalization

(In millions)(2)

AptarGroup, Inc.

 

Metal and Glass Containers

 

$2,851

 

$8,860

Domtar Corporation

 

Paper Products

 

$4,658

 

$1,747

Ferro Corporation

 

Specialty Chemicals

 

$948

 

$1,204

Glatfelter Corporation

 

Paper Products

 

$912

 

$727

Graphic Packaging Holding Company

 

Paper Packaging

 

$6,428

 

$4,587

Greif, Inc.

 

Metal and Glass Containers

 

$4,515

 

$2,304

Innospec Inc.

 

Specialty Chemicals

 

$1,273

 

$2,230

Intertape Polymer Group Inc.

 

Metal and Glass Containers

 

$1,160

 

$1,424

Mercer International Inc.

 

Paper Products

 

$1,356

 

$674

Myers Industries, Inc.

 

Metal and Glass Containers

 

$490

 

$744

Neenah, Inc.

 

Paper Products

 

$799

 

$930

Resolute Forest Products Inc.

 

Paper Products

 

$2,699

 

$530

Schweitzer-Mauduit International, Inc.

 

Paper Products

 

$1,034

 

$1,260

Silgan Holdings Inc.

 

Metal and Glass Containers

 

$4,744

 

$4,101

Verso Corporation

 

Paper Products

 

$1,632

 

$405

75th Percentile

 

 

 

$3,683

 

$2,267

Median

 

 

 

$1,356

 

$1,260

25th Percentile

 

 

 

$991

 

$736

Clearwater Paper Corporation

 

Paper Products

 

$1,851

 

$626

Percentile Rank

 

 

 

59th percentile

 

12th percentile

 

(1)

Represents revenues for the most recent four quarters as reported by each company as of December 31, 2020.

(2)

Share price as of December 31, 2020, using the most recently disclosed shares outstanding.

 

 

Clearwater Paper Corporation 2021

 

31


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020 NEO Incentive-Based Compensation Consistent with our performance-based compensation philosophy, our CEO’s 2020 target compensation was weighted 74% in the form of incentive-based compensation, and the average of our other named executive officers’ 2020 total compensation was similarly weighted 62%. The components of this incentive-based target compensation are shown in the following charts:

 

 

 

Clearwater Paper Corporation 2021

 

32


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020 Annual Incentives

2020 AIP Design

Focus on Performance and Responsibilities. Because our executive officers are responsible for our overall financial and operational performance, 100% of their annual cash bonus was based on company and division performance for 2020. The Compensation Committee established the targets for these performance measures taking into consideration the nature of our capital equipment intensive business whereby our assets undergo periodically scheduled major maintenance and reorganization from time to time.

AIP Performance Measures.  For 2020, the company performance measures for executives with enterprise-wide responsibility were:

 

75% of Target - Based on Company Adjusted EBITDA $ Performance

25% of Target - Based on Strategic Objectives Performance

 

For executives in charge of a business unit, performance measures were:

 

40% of Target - Based on Company Adjusted EBITDA $ Performance

30% of Target - Based on Strategic Objectives Performance

30% of Target - Based on Division Adjusted EBITDA $ Performance

 

We used adjusted EBITDA to measure financial performance to focus participants on generating income and cash flow by both increasing revenues and controlling costs. We used company-wide strategic metrics to focus participants on achieving and delivering on strategic goals. The performance scales for the adjusted EBITDA components for 2020 annual cash bonuses and the corresponding performance modifiers as a percentage of target were as follows:

 

Company and Division Adjusted EBITDA $

Performance Level

 

Performance Modifier

(Percentage of Target Bonus)

At or Below Threshold

 

0% x Target Bonus

Target

 

100% x Target Bonus

Maximum

 

200% x Target Bonus

 

The performance modifiers increase or decrease depending on the payout ratio determined by the committee for performance between threshold and target levels and between target and maximum levels. There would have been no funding of the annual bonus plan if adjusted EBITDA performance was below the threshold level and therefore no annual award payment to participants. The most that could be paid out to participants in the annual incentive plan is 200% of target based on performance. This metric can be reduced but cannot be increased.

 

As determined by the Compensation Committee, 2020 company adjusted EBITDA goals were as follows:

 

 

 

 

Company

 

 

Adj. EBITDA $*

2020 Threshold

 

$150.7 Million

2020 Target

 

$188.4 Million

2020 Actual

 

$283.2 Million

2020 Maximum

 

$226.1 Million

Approved Percentage of Target

 

200.0%

Clearwater Paper Corporation 2021

 

33


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*The company’s target and actual 2019 adjusted EBITDA was $161.9 million and $167.3 million, respectively, which amounts include $24 million in estimated major maintenance charges for the 2019 target and $23.5 million in actual major maintenance charges for 2019 actual performance. During 2020, the company had no major maintenance charges.

 

For purposes of establishing 2020 company Target EBITDA, and the calculation of year-end results, the Compensation Committee adjusted for the same non-GAAP adjustments identified in our 10-K for determining adjusted EBITDA, which include expenses expected to be incurred by the company in connection with debt retirement costs, other operating charges, net, and other non-operating expenses. These non-GAAP adjustments and the company adjusted EBITDA of $283.2 million used for the 2020 annual incentives are consistent with those noted below. Our Compensation Committee has the discretion to reduce, but not increase bonuses calculated under our annual incentive plan for executive officers. The company did not make any subsequent adjustments to the 2020 company adjusted EBITDA goals in response to the COVID-19 pandemic.

2020 AIP Payout

AIP Performance 2020  

Company Adjusted EBITDA. During 2020, we achieved company adjusted EBITDA of $283.2 million. The 2020 adjusted EBITDA for the company and used in the AIP is presented in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the heading Non-GAAP Financial Measures, in our Annual Report on Form 10-K, filed on February 25, 2021.

Division Adjusted EBITDA. As determined by the committee, division adjusted EBITDA is as follows:

 

 

CPD

 

PPD

 

 

Adj. EBITDA $

 

Adj. EBITDA $

2020 Threshold

 

$  61.8 Million

 

$131.1 Million

2020 Target

 

$  77.2 Million

 

$163.9 Million

2020 Actual

 

$177.7 Million

 

$162.6 Million

2020 Maximum

 

$  92.7 Million

 

$196.7 Million

Approved Percentage of Target

 

200.0%

 

98.1%

Strategic Metrics (25% of target for executives with enterprise-wide responsibility, and 30% of target for executives in charge of a business unit).

The committee selected four components for the Strategic Metrics portion of the AIP performance metric for named executive officers and other senior managers:

 

 

Development of a company strategic plan

 

Refreshment of the company’s investor relations strategy

 

Continued ramp-up of the Shelby expansion to achieve network and sales optimization, and

 

Development of a deleverage strategy.

 

The committee evaluated the named executive officers’ performance with respect to the strategic objectives and determined that there was above target performance of 162.5% for those objectives.

 

CEO AIP Payout 2020. Mr. Kitch received a payout of 190.5% of target under our annual incentive plan. His AIP payout was prorated between his service as CEO since April 1 with a payout of 190.6% of target,

Clearwater Paper Corporation 2021

 

34


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

the same target payout percentage received by our other named executive officers with enterprise-wide responsibility, and a payout of 188.8% of target for his service as Senior Vice President, General Manager of the Consumer Products Division for the first 3 months of the year.

2020 Long-Term Incentives

2020 LTIP Design

Focus on Performance, Retention and Recruitment. In 2020, we continued to link long-term incentives directly to our strategic initiatives and related financial performance with the inclusion of FCF and ROIC performance. We focused on stockholder return by awarding performance shares and awarded RSUs to focus on stock price growth as well as for talent retention purposes. Weighting 70% of long-term-awards to performance shares aligns equity incentives with company performance and, ultimately, with stockholder value creation. Our named executive officers received their 2020 long-term incentive plan awards in the following proportions:

 

 

Percentage of LTIP Award

LTIP Participant

Performance Shares

RSUs

Executive Officers

70%

30%

 

Performance Measures.  For 2020, we used two metrics for performance shares granted for the 2020-2022 period to named executive officers and relative TSR as a modifier:

 

70% - Performance Share Award Based on Free Cash Flow Performance (1)(3)

30% - Performance Share Award Based on ROIC Performance (2)(3)

          Performance Modified on relative TSR (-25% / 0% / +25%) (3)

 

(1)

Cumulatively calculated as a GAAP operating cashflow less total capital expense, over the three-year Performance Period. Additional detail regarding the FCF performance metric will not be disclosed until the end of the performance period given that the goal detail is confidential and competitive in nature. Such disclosure could cause competitive harm. The target-level goals can be characterized as strong performance, meaning that based on historical performance, although attainment of this performance level is uncertain, it can be reasonably anticipated that target performance may be achieved, while the threshold goals are more likely to be achieved and the maximum goals represent more aggressive levels of performance.

(2)

Measured over the three-year period to focus on the delivery of financial results from our strategic initiatives and related capital expenditures. The final ROIC calculation will be the absolute basis points (bps) improvement starting January 1, 2020 and ending on December 31, 2022. Additional detail regarding the ROIC performance metric will not be disclosed until the end of the performance period given that the goal detail is confidential and competitive in nature. Such disclosure could cause competitive harm. The target-level goals can be characterized as strong performance, meaning that based on historical performance, although attainment of this performance level is uncertain, it can be reasonably anticipated that target performance may be achieved, while the threshold goals are more likely to be achieved and the maximum goals represent more aggressive levels of performance.

(3)

A twenty-five percent performance modifier shall be applied to the combined performance measures for relative total stockholder return, using as the selected comparison group the S&P SmallCap 600 to focus on delivery of value to our stockholders.  

Clearwater Paper Corporation 2021

 

35


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three-year performance period beginning January 1, 2020 and ending December 31, 2022, the relative TSR performance scale to apply the TSR modifier to the corresponding number of shares earned as a percentage of target were set by the Compensation Committee as follows:

 

Performance Level

 

Total Stockholder Return

Percentile Rank

Versus S&P SmallCap 600® Index

 

Award Payout

Modifier

Threshold

 

25th percentile

 

-25%

Target

 

55th percentile

 

0%

Maximum

 

75th percentile

 

+25%

 

For the performance that is intermediate, the percentage of annual payout modifier shall be determined by interpolation. For additional Long-Term Incentive Plan details see “Other Compensation Related Matters”, pages 38-42.

2020 Retention and Inducement RSUs

In April of 2020, the Compensation Committee deemed it desirable and in the best interest of the company to grant, in connection with the CEO leadership change, one-time retention RSUs to certain of our NEOs, including Mr. Kitch, as set forth below:

 

Name

 

Shares*

 

Target Value

Arsen S. Kitch

 

43,706

 

$1,000,000

Robert G. Hrivnak

 

15,297

 

$350,000

Steven M. Bowden

 

30,594

 

$700,000

Michael S. Gadd

 

15,297

 

$350,000

Kari G. Moyes

 

30,594

 

$700,000

      *Shares were calculated using a 20-day average closing stock price ending on March 26, 2020 ($22.88).

 

The award to Mr. Kitch will vest on April 1, 2024, subject to his continued employment with the company. The awards to each of the other NEOs will vest on April 1, 2022, subject to the NEO’s continued employment with the company. Upon his departure, Mr. Hrivnak’s award was forfeited pursuant to its terms.

In April of 2020, the Compensation Committee approved long-term incentive awards to Mr. Murphy consistent with the annual program described above. The Compensation Committee also approved a competitive new hire, inducement award of 17,875 RSUs (value of $350,000) to Mr. Murphy, which will fully vest on April 13, 2023, subject to his continued employment with the company.

 

Clearwater Paper Corporation 2021

 

36


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018-2020 LTIP Performance Share Payout

For performance share awards granted to NEOs in 2018 (for the 2018-2020 performance period), we used two metrics with 60% of the performance share award based on FCF performance, and the other 40% of the performance share award based on ROIC with a relative TSR modifier. For the FCF component, the threshold for the 3-year performance period was $370MM while the actual FCF performance fell short of that threshold.  For the ROIC component, the threshold, target, and maximum for the 3-year performance period was 5.0%, 6.0%, and 7.0%, respectively, while the actual ROIC performance was 6.6% resulting in ROIC above target and an unmodified payout of 160% of target for the performance shares in the aggregate. ROIC is calculated as the ratio of Adjusted Net Operating Profit After Tax to average invested capital. Average invested capital is defined as Cash, Receivables (excluding income tax receivables), Inventories, Property, plant and equipment, Goodwill and intangible assets, net less Trade payables, Accrued compensation, Other accrued liability and Cash in excess of $15 million and is calculated as the sum of current and prior year ending amounts divided by two. Adjusted Net Operating Profit is calculated as Net income (loss) before Interest expense, net, Other non-operating expense, income taxes, goodwill impairment, other operating charges, net, and debt retirement costs. Additionally, we reduce this amount for an interest shield which is calculated as interest expense, excluding amortization of deferred debt cost at a statutory tax rate of 26% and we further adjust this amount by Cash taxes refunds received, net of paid. ROIC for purpose of the performance share calculation is based upon the mathematical average of the three-year period ended December 31, 2020. For the TSR component, we had a -20.2% TSR (26.6% percentile rank), which equates to a modifier of   -23.4%. This performance of both FCF and ROIC with a TSR modifier resulted in a 40.6% payout for the performance shares for this performance period, the first payout for performance shares in four years.

 

The following graph shows the performance share payout for the past three years.

Performance Share Payout for Past Three Years

Clearwater Paper Corporation 2021

 

37


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Compensation Related Matters

Compensation Committee Process

Compensation Oversight. The Compensation Committee’s primary responsibility is the oversight of our executive compensation and benefits programs. The committee’s responsibilities include determining and approving annual performance measurements for our executive officers’ incentive pay and reviewing, determining and approving their compensation packages. As a part of the annual compensation decision process, the Compensation Committee considers overall company and individual performance as well as performance against specific pre-established financial goals, achievement of strategic initiatives, performance relative to financial markets, and a risk/control and compliance assessment.

 

Management Input. As part of our process for establishing executive compensation, our CEO and our Senior Vice President, Human Resources, or SVP-HR, provide information and make recommendations to the Compensation Committee. Our CEO and SVP-HR provide the Compensation Committee with a detailed review of the actual results for the company compared to the performance measures set at the beginning of the year under our annual incentive plan. Our CEO provides to the committee performance evaluations of the executives who report to him; and recommendations regarding (i) changes to base salaries as well as target amounts for annual cash bonuses and equity awards for each executive officer, excluding his own; (ii) compensation packages for executives being hired or promoted; and (iii) proposed company performance targets.

 

Recommendations regarding target and actual executive compensation components are based on the principal duties and responsibilities of each position, competitor pay levels within our industry in both regional and national markets and at comparable companies, and internal pay equity, as well as on individual performance considerations.

 

Compensation Consultant. The Compensation Committee has engaged Semler Brossy to advise the committee on executive compensation matters as well as the competitive design of the company’s long-term and annual incentive programs. The Nominating Committee has also engaged Semler Brossy to advise that committee on director compensation matters. Semler Brossy does not advise any of our executive officers as to their individual compensation and does not perform other compensation related services for the company.

 

The Compensation Committee’s independent consultant performs an annual competitive market assessment of each executive officer’s compensation package that the committee uses to analyze each component of such compensation as well as each executive officer’s compensation in the aggregate. The intent of these assessments is to evaluate the proper balance and competitiveness of our executive officers’ compensation, as well as the form of award used to accomplish the objective of each component. The committee is also advised, on an annual basis, as to target performance measures and other executive compensation matters by its compensation consultant.

 

Ultimately, decisions about the amount and form of executive compensation under our compensation program are made by the Compensation Committee alone and may reflect factors and considerations other than the information and advice provided by its consultant or management.

 

Clearwater Paper Corporation 2021

 

38


1

PROXY SUMMARY AND BUSINESS HIGHLIGHTS

2

CORPORATE GOVERNANCE AND BOARD OF DIRECTORS

3

EXECUTIVE COMPENSATION DISCUSSION AND TABLES

4

AUDIT COMMITTEE REPORT

5

ANNUAL MEETING INFORMATION

6

PROPOSALS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Establishing Compensation. At meetings held in the first quarter of each year, the Compensation Committee typically takes the following actions relating to the compensation for our executive officers, and in some cases other senior employees:

 

approves any base salary adjustments;

 

approves the payment of cash awards under our annual incentive plan for the prior year’s performance;

 

approves the settlement of any performance-based equity awards previously issued under our long-term incentive program;

 

establishes the performance measures and approves the target award opportunity for cash awards under our annual incentive plan for the current year;

 

establishes the performance measures for any performance-based equity awards under our long-term incentive program;

 

approves the threshold and maximum levels of performance under our annual and long-term incentive plans, including performance shares, as well as the payouts for achieving those levels of performance; and

 

approves the grant of performance shares and any other equity awards, such as options or restricted stock units that vest based on continued employment, under our long-term incentive program.

 

Competitive Market Assessments. The committee conducts an annual review of each of our executive officers’ compensation and, in connection with these assessments, analyzes competitive data provided by its compensation consultant. In the fourth quarter of 2020, Semler Brossy performed such an assessment for the committee. Consistent with their approach in prior years, Semler Brossy’s 2020 market assessments compared the compensation of our named executive officers with that of companies in the forest products industry as well as manufacturing companies of similar size in terms of revenue and market capitalization. They also utilized market data from relevant published survey sources, including surveys from Mercer, Aon Hewitt and Willis Towers Watson for market data on paper and allied products companies, manufacturing companies, and/or general industry companies of similar size. In its competitive assessments, Semler Brossy gathered competitive compensation data that was adjusted, where feasible and appropriate, to the revenues of the company. See “2020 Executive Compensation Peer Group” pages 30-31. The competitive assessments were based on executive positions that are comparable to those of our executive officers.  As part of the review and modification of our executive compensation program for 2020, Semler Brossy provided the Compensation Committee with analyses of our annual incentive plan and long-term incentive plan.

 

Individual Performance.  The committee adjusts compensation on a case-by-case basis taking into account competitive market data, job performance, long-term potential, experience, potential recruitment needs and retention. Total direct compensation (defined as base salary plus short- and long-term incentives) earned by our executives may vary based on these factors. However, individual performance is not relevant in determining performance under annual or long-term incentives.

Clearwater Paper Corporation 2021