DEF 14A: Fortive Outlines Executive Compensation and Governance Proposals in 2024 Proxy Statement

Fortive's 2024 proxy statement details key proposals for the annual shareholder meeting, including director elections, executive compensation, and amendments to corporate governance.

Summary

• Fortive Corporation has released its 2024 proxy statement, outlining key proposals for the upcoming annual meeting of shareholders.
• The meeting, scheduled for June 4, 2024, will address the election of nine director nominees, an advisory vote on executive compensation, and proposed amendments to the company's Restated Certificate of Incorporation.
• Shareholders will also vote on the ratification of Ernst & Young LLP as the independent registered public accounting firm for the year ending December 31, 2024, and a shareholder proposal seeking to amend the company's bylaws regarding director compensation.
• The proxy statement provides detailed information on corporate governance, director compensation, executive compensation, and sustainability initiatives.
• Fortive's executive compensation program is designed to align pay with long-term value creation for shareholders, with a significant portion of compensation being performance-based.
• The company has engaged in shareholder outreach to gather feedback on executive compensation and corporate governance practices, leading to program improvements.
• Fortive's Board of Directors recommends voting FOR the election of director nominees, the advisory vote on executive compensation, the amendments to the Certificate of Incorporation, and the ratification of the independent accounting firm.
• The Board recommends voting AGAINST the shareholder proposal seeking to amend the bylaws regarding director compensation.

Sentiment

Score: 8

Explanation: The document presents a positive outlook for Fortive, highlighting strong financial performance, shareholder engagement, and commitment to sustainability. The Board's recommendations and the detailed information provided suggest a well-managed and transparent company.

Positives

• The executive compensation program is heavily weighted towards performance-based compensation, aligning with long-term value creation for shareholders.
• The company has a history of shareholder engagement and has made program improvements based on shareholder feedback.
• The Board has taken actions to increase shareholder rights and board accountability, such as declassifying the Board and providing proxy access.
• The company has a strong commitment to sustainability, with over 60% of revenue generated from sales of products and services that enable sustainability-related outcomes.
• The company has reduced its absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 25.6% from 2019 levels.

Negatives

• The Board recommends voting AGAINST the shareholder proposal seeking to amend the bylaws regarding director compensation, which could be viewed negatively by some shareholders.
• The company's relative TSR ranking for the 2021-2023 performance period was at the 34.71 percentile, narrowly missing the threshold payout level.

Risks

• The proposed bylaw amendment regarding director compensation, if approved, could impair the company's ability to recruit and retain directors with diverse skills, backgrounds, and experience.
• The company faces risks related to cybersecurity and product security, which are overseen by the Audit Committee.
• The company's performance is subject to general economic and capital markets conditions, which could impact its ability to achieve its financial targets.

Future Outlook

The company is focused on accelerating progress in workplace safety, engineering, and healthcare, and incorporating sustainability into its business strategy.

Management Comments

• The Compensation Committee uses a rigorous, ongoing process to align executive pay with long-term value creation for shareholders and all stakeholders.
• Our programs are designed to ensure the actual pay realized by our executives reflects the shareholder experience.
• We have taken further actions to strengthen and improve our executive compensation programs to ensure strong alignment with our performance, business strategy and shareholders.

Industry Context

Fortive operates in the essential technologies market, providing connected workflow solutions across various industries. The company's performance is compared to a peer group of companies in relevant industries, such as electrical equipment, healthcare equipment, and software.

Comparison to Industry Standards

• The company benchmarks its executive compensation practices against a peer group of 17 companies, including Ametek Inc, IDEX Corporation, Illinois Tool Works Inc., Rockwell Automation Inc., Danaher Corp., Mettler-Toledo International Inc., STERIS plc, Stryker Corporation, 3M Company, Ecolab, Inc., Honeywell International Inc., Roper Technologies, Inc, Trimble Inc., Zebra Technologies Corporation, Autodesk, Inc., ServiceNow, Inc., and Synopsys, Inc.
• The company's security framework is based on the National Institute of Security and Technology (NIST) Frameworks, Generally Accepted Privacy Program (GAPP) guiding principles, and ISO 27001/2 standards.

Corporate Governance

Related Party Transactions

• Mr. Rejji P. Hayes, a director, is an Executive Vice President and Chief Financial Officer of CMS Energy Corporation, a publicly-traded power and energy company. Fortive subsidiaries sold approximately $300,000 of products to CMS Energy in 2023.
• Mr. Wright Lassiter III, a director, is the CEO of CommonSpirit Health, a private, not-for-profit health system. Fortive subsidiaries sold approximately $6 million of products to CommonSpirit in 2023.

Stakeholder Impact

• Shareholders: The proxy statement provides information relevant to voting decisions and outlines the company's commitment to long-term value creation.
• Employees: The company's human capital management practices and commitment to inclusion, diversity, and equity impact employee experience and opportunities.
• Customers: The company's focus on innovation and sustainability impacts the products and services offered to customers.
• Suppliers: The company's commitment to responsible sourcing impacts its relationships with suppliers.

Next Steps

• Shareholders are encouraged to vote on the proposals outlined in the proxy statement.
• The company will hold its Annual Meeting of Shareholders on June 4, 2024.
• The company will continue to engage with shareholders to gather feedback on corporate governance and executive compensation practices.

Key Dates

Keywords

executive compensation, corporate governance, proxy statement, director compensation, shareholder engagement, sustainability, board of directors, annual meeting, Fortive