RPM 2020 Proxy Statement

EXECUTIVE COMPENSATION (CONTINUED) In determining the actual incentive compensation awards for fiscal 2020, the named executive would receive a portion of his or her award equal to: • Up to 50% of his or her target award if the Company achieved target gross margin as a percent of sales of 39.70%. The Company’s actual gross margin as a percent of sales in fiscal 2020 was 38.60%. In light of this result, the Compensation Committee elected to award 40% of each named executive officer’s target award relating to this metric; • Up to 30% of his or her target award if the Company’s SG&A as a percent of sales decreased when compared to the Company’s SG&A as a percent of sales of 27.70% in fiscal 2019. The Company’s SG&A as a percent of sales was 27.30% in fiscal 2020, and as a result the Compensation Committee elected to award all of this portion of each named executive officer’s award (i.e., 30% of his or her target award); • Up to 20% of his or her target award for working capital improvement equal or greater than one percent of sales. The Company’s working capital improvement was 0.5% of sales, and as a result the Compensation Committee elected not to award any of this portion of each named executive officer’s target award; and • Up to 50% of his or her target award relating to the Company’s performance relative to its peers, as well as achievement of non-financially measured management objectives which included such named executive officer’s involvement in, among other things, the Company’s (i) merger and acquisition transactions and (ii) capital markets transactions. Each named executive officer also earned a portion of his or her award based upon achievement of applicable individual objectives. As a result, Messrs. Frank C. Sullivan, Gordon, Moore and Michael H. Sullivan and Ms. Kastner were awarded incentive compensation equal to approximately 108%, 98%, 97%, 96% and 97% of their respective base salaries. Equity Compensation We use equity compensation to align our named executive officers’ interests with those of our stockholders and to attract and retain high-caliber executives through recognition of anticipated future performance. Under our 2014 Omnibus Plan, we can grant a variety of stock-based awards, including awards of restricted stock and stock appreciation rights. After reviewing executive compensation practices against our defined comparative framework, including reviewing equity awards for similarly situated officers at companies in the diversified chemicals and specialty chemicals industries which fall within a reasonable size range (in terms of sales) and operate businesses similar to that of the Company, our Chief Executive Officer makes annual recommendations to the Compensation Committee of the type and amount of equity awards for the Chief Executive Officer and the other executive officers. In determining the equity incentive compensation component of Chief Executive Officer compensation, the Compensation Committee considers, in addition to the factors used to determine salary and cash incentive compensation: • the value of similar incentive awards to chief executive officers in our peer group and other similar companies, and • awards given to the Chief Executive Officer in past years. In determining the equity incentive compensation of the other executive officers, the Compensation Committee reviews and approves a mix of business plan goals, with a significant amount of emphasis placed on the compensation recommendations of our Chief Executive Officer. After receiving the recommendations of our Chief Executive Officer, the Compensation Committee meets without our Chief Executive Officer present to consider his recommendations. The Compensation Committee must approve any recommended equity grants before they can be made. 32