Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

 

 

 

Winnebago Industries, Inc. (Winnebago Industries or the Company) will hold its 2021 annual meeting of shareholders (Annual Meeting) on Tuesday, December 14, 2021 at 4:00 p.m. Central Standard Time. The Annual Meeting will be completely virtual. The proxy materials were either made available to you over the Internet or mailed to you on or about November 1, 2021. At the Annual Meeting, shareholders will be asked to:

Only shareholders of record at the close of business on October 19, 2021 may vote at the Annual Meeting or any adjournment thereof.

By Order of the Board of Directors

 

Stacy L. Bogart

Eden Prairie, MN

November 1, 2021

Only holders of record of our common stock at the close of business on October 19, 2021 will be entitled to vote at the Annual Meeting. On the record date, we had outstanding 33,460,085 shares of common stock that were eligible to vote.

Your Vote Is Important

Whether or not you expect to attend the Annual Meeting, please vote via the Internet or telephone or request a paper proxy card to complete, sign and return by mail so that your shares may be voted. A prompt response is helpful and your cooperation is appreciated.

The table below summarizes the vote required to approve each proposal, the voting options for each proposal and other important information regarding voting:

 

 

Corporate responsibility is integrated with our enterprise strategy and our commitment to Be Great, Outdoors.

In 2020, we released our second annual Corporate Responsibility Report, highlighting the environmental, social and governance (ESG) issues that impact our world and most directly affect the long-term sustainability of our business. This report is available in the “Responsibility” section of our website at www.winnebagoind.com.

As an outdoor lifestyle company, we care deeply about our world. The long-term sustainability of our business is linked to the environment. Winnebago Industries is committed to doing our part to ensure that the outdoor destinations we love are accessible for generations.

From product innovation to operational efficiencies, we have implemented leading practices throughout our history. As we continue to grow and transform, we leverage data to establish meaningful sustainability goals while staying focused on managing energy and greenhouse gas emissions, minimizing waste, reducing reliance on fresh water, and ensuring product sustainability.

In 2021, we joined the United Nations Global Compact and committed to the Business Ambition 1.5C on a journey to net-zero greenhouse gas emissions and zero waste by 2050.

Enabling extraordinary outdoor experiences for our customers begins with our team, our culture, and our communities. We seek talented people with diverse backgrounds and perspectives who work together to deliver results.

Responding to the ongoing challenges of COVID-19 and the national racial justice reckoning, Winnebago Industries has centered on employee safety, diversity and inclusion, and community partnerships. In 2021 we conducted safety walks and listening sessions with our Chief Executive Officer and welcomed our first full-time Head of Diversity, Equity and Inclusion. We expanded the impact of our COVID-19 immediate response hardship fund, launching a year-round GO Together Fund supporting employees facing unforeseen crises. Our partnership with the National Park Foundation advanced outdoor equity with support of service corps programs that provided employment opportunities for outdoor enthusiasts from underrepresented communities. We remain committed to the CEO Action for Diversity & Inclusion goals.

Our CommunityGO employee volunteers participated in a variety of giving activities to strengthen our hometown communities. From outdoor education to mentoring, disaster response to hunger relief, CommunityGO volunteers made a difference.

Our Board of Directors oversees the company’s ESG performance, and our cross-functional Corporate Responsibility Advisory Team informs ESG strategy and implementation throughout our enterprise. We live by our Code of Conduct, which is foundational to our efforts to be the trusted leader in outdoor lifestyle solutions by conducting our business with the utmost integrity. We expect our employees to share this commitment and require that all employees complete training on our Code of Conduct on a regular basis.

We are committed to a strong corporate governance structure that promotes long-term value for our shareholders. Our Board of Directors (Board) believes that having a mix of directors with complementary qualifications, experience and expertise strengthens its oversight ability, provides diverse perspectives, and represents the best interests of our shareholders.

 

 

 

Our bylaws and corporate governance policy delegate to the Board the right to exercise its discretion to either separate or combine the offices of Board Chair and Chief Executive Officer (CEO). This decision is based upon the Board’s determination of what is in the best interests of the Company and our shareholders, in light of then-current and anticipated future circumstances and taking into consideration succession planning, the skills and experience of the individual(s) filling those positions, and other relevant factors.

The Board, as part of its continuing obligation to determine the appropriate role for the Chair, has concluded that at this time the Company should have an independent Chair. The Board concluded that this structure provides us with a strong governance and leadership structure that is designed to exercise independent oversight of members of our management team and key issues related to strategy and risk. Mr. David W. Miles, an independent director, has served as Chair since June 2019.

The Board recognizes that, depending on the specific characteristics and circumstances of the Company, other leadership structures might also be appropriate. We are committed to reviewing this determination on an annual basis.

During fiscal 2021, the Board met seven times. Each director who served on the Board during fiscal 2021 attended at least 75% of the meetings of the Board and the committees on which he or she served that were held during his or her tenure on the Board or relevant committee. It is the Board’s policy that directors are encouraged, but are not required, to attend the annual meeting. All of our then-serving directors attended the 2020 annual meeting. During the year, our independent directors held executive sessions without the CEO or other management as a routinely scheduled agenda item for every regular Board meeting.

The Board has established the Audit, Human Resources, Nominating and Governance, and Finance Committees to assist it in discharging its responsibilities. Each committee operates under a written charter, each of which is available in the "Investors" section of our website at www.winnebagoind.com. The current membership of each committee and its primary responsibilities, as well as the number of meetings held by each of these committees during fiscal 2021, are described below.

Under our corporate governance policy and NYSE rules, the Board must have a majority of directors who meet the standards for independence. The Board must determine, based on a review of the relevant facts and circumstances, whether each director satisfies the criteria for independence. The Board undertook an annual review of director and director nominee independence. During this review, the Board considered a variety of relevant facts and circumstances, including a review of all transactions and relationships between each director and director nominee or any member of his or her immediate family and the Company and its subsidiaries and affiliates known to the Company. The Board also considered whether there were any transactions or relationships between directors, director nominees or any member of their immediate family (or any entity of which a director, director nominee or an immediate family member is an executive officer, general partner or significant equity holder).

The Board affirmatively determined that all non-employee directors are independent. Mr. Happe is the only employee director and is not independent.

As part of the Board’s independence assessment and determination, the Board specifically considered that Mr. Murabito serves as an executive officer of Cigna, from which we purchased medical insurance benefits for the Chris-Craft business during fiscal 2021. Because the amount involved in these transactions was less than 1% of both the Company’s and Cigna’s annual revenues, and Mr. Murabito was not personally involved in these transactions and he receives no particular benefit related to these transactions, the Board concluded that these transactions did not impair Mr. Murabito’s independence.

The Board has responsibility for overseeing Winnebago Industries' overall approach to risk management and is actively engaged in addressing the most significant risks facing the Company, including financial, technological, operational, strategic and competitive risks. The Board manages its risk oversight function both as a full Board and through delegation to Board committees, which meet regularly and report back to the Board. The Board and these

committees receive information used in fulfilling their oversight responsibilities through our executive officers and other advisors, including our legal counsel, our independent registered public accounting firm, our consulting firm for internal controls over financial reporting, and the compensation consultants we engage from time to time.

While the Board and its committees oversee risk management, the Company's management is responsible for the day-to-day management of risks we face. The Board reviews and monitors our processes for identification, management and mitigation of risk by our management and assesses whether our processes are adequate and functioning as designed. At meetings of the Board, management makes presentations to the Board regarding our business strategy, operations, financial performance, annual budgets, technology and other matters. Many of these presentations include information relating to the challenges and risks to our business and the Board and management actively engage in discussion on these topics. Each of the Board committees also receives reports from management regarding matters relevant to the work of that committee. These management reports are supplemented by information relating to risk from our advisors. Following committee meetings, the Board receives reports by each committee chair regarding the committee’s considerations and actions. In this way, the Board also receives additional information regarding the risk oversight functions performed by each of the Board committees.

 

 

The Nominating and Governance Committee is responsible for identifying individuals qualified to become Board members and making recommendations on director nominees to the Board. The committee considers potential new candidates that may be proposed by current directors, management, professional search firms, and shareholders. The committee retains third-party search firms from time to time to assist in identifying potential Board members who have expertise and experience that would complement the current Board.

The Nominating and Governance Committee considers the then-current composition of the Board, the operating requirements of the Company and the long-term interests of all shareholders in its assessment of potential director candidates. The committee seeks directors who have the skills and experience to guide management in the operation of the Company’s business given the then-current and anticipated future needs of the Board and the Company while maintaining a balance of perspectives, qualifications, qualities and skills on the Board. The Board does not have a specific diversity policy but understands and fully appreciates the value of diversity and inclusion and has added four independent, diverse directors to the Board in the last four years.

Jacqueline D. Woods and Kevin E. Bryant were appointed to the Board effective March 17, 2021. The Nominating and Governance Committee led the process for selecting the director nominees and recommending the selected nominees to the Board. A third-party search firm, Russell Reynolds Associates, assisted the committee with its recruitment efforts and identified Ms. Woods and Mr. Bryant as candidates. Ms. Woods was identified and recommended as a candidate due to a number of factors, including her substantial experience in strategy, branding, and technology. Mr. Bryant was identified and recommended as a candidate because he brings significant experience in operations, strategy, and financial leadership to the Board.

To promote Board refreshment and effectiveness, the Board and its committees engage in an annual self-assessment process. The Nominating and Governance Committee leads the Board’s annual self-evaluation to assess the performance of the Board and its committees. The assessment focuses on the Board’s contribution to the Company and specifically focuses on areas where the Board or management believes that the Board could improve.

We have adopted a Code of Conduct applicable to all of our directors, officers, employees and business partners. A copy of the Code of Conduct is available on our website.

In April 2020, we published our inaugural human rights policy. This policy, which applies to all of our directors, officers, employees and business partners, describes our commitment to upholding and promoting fundamental human rights, including with respect to maintaining a safe and healthy workplace, a respectful work environment, diversity and inclusion, and fair labor practices.

Our Code of Conduct, human rights policy, committee charters, and other governance documents are available in the “Investors” section of our website at www.winnebagoind.com. This website and the materials available through it are not incorporated by reference into this proxy statement.

We have adopted a written policy for review of transactions involving more than $120,000 in any calendar year in which Winnebago Industries is a participant and in which any executive officer, director, nominee for director, greater than 5% shareholder or any immediate family member of any of these persons has a direct or indirect material interest. Our Nominating and Governance Committee must review and approve any such transaction before it is entered into, except that the Human Resources Committee reviews and approves the compensation of any employee who is an immediate family member of a director or executive officer and whose compensation exceeds $120,000. If advance approval by the Nominating and Governance Committee is not possible, then the related-party transaction will be considered and, if the committee determines it to be appropriate, ratified by the committee.

In determining whether to approve or ratify any potential related-party transaction, the Nominating and Governance Committee considers the relevant facts and circumstances, including (if applicable) but not limited to:

whether the transaction is on terms no less favorable to the Company than terms generally available to unrelated parties and the extent of the related person’s interest in the transaction. No director may participate in any review, approval, or ratification of any transaction if the director, or the director’s immediate family member, has a direct or indirect material interest in the transaction. The committee will not approve any related person transaction that is inconsistent with the interests of the Company and its shareholders.

During fiscal 2021, the only related party transactions involved Donald Clark, one of our executive officers, and the brother-in-law of Matthew Miller, who served as an executive officer during fiscal 2021. Mr. Clark has a 20% ownership interest in Three Oaks, LLC (Three Oaks), an entity which owns certain land and buildings that Grand Design RV, LLC (Grand Design) leases in order to operate its business. Grand Design paid $900,000 to Three Oaks under its existing lease with Three Oaks, which was entered into on October 2, 2016 and amended on October 4, 2019. In addition, Mr. Clark held equity interests in Barletta Boat Company, LLC and Three Limes, LLC (together, Barletta), which the Company acquired in August 2021. The Company paid approximately $255,000,000 as an upfront payment for Barletta, consisting of $230,000,000 of cash and $25,000,000 of the Company's common stock. The purchase agreement also provides for contingent consideration of up to $50,000,000 in cash and $15,000,000 in the Company's common stock based on achievement of certain financial performance metrics over the next few years. Mr. Clark also entered into a lock-up letter agreement pursuant to which he has agreed that for one year from closing, he will not transfer his shares of the Company's common stock, and he entered into a standstill agreement that prohibits him from taking any hostile actions with respect to the Company. Mr. Clark is entitled to approximately 24% of the total net proceeds from the sale of Barletta, except that Mr. Clark is not entitled to any portion of the $50,000,000 contingent cash consideration. Although Mr. Clark is a member of the Company's executive leadership team, he was excluded from the Company's initial consideration and proposal to acquire Barletta and did not participate in negotiation of the purchase agreement. Mr. Miller’s brother-in-law owns John Mast Construction, a construction business that provided services to Newmar during fiscal 2021. The construction services provided by John Mast Construction were for a construction project that was underway at the time of our acquisition of Newmar. In fiscal 2021, the Company paid a total of $524,378 to John Mast Construction for these construction services. Each of these transactions with Three Oaks, Barletta and John Mast Construction was approved or ratified by the Nominating and Governance Committee.

Shareholders and other interested parties seeking to communicate with our directors or a particular director may write to: Winnebago Industries, Inc., Attn: Senior Vice President, General Counsel, Secretary and Corporate Responsibility, 13200 Pioneer Trail, Suite 150, Eden Prairie, MN 55347 or email: SLBogart@winnebagoind.com. All communications must be accompanied by the following information: (a) if the person submitting the communication is a shareholder, a statement of the number of shares of common stock that the person holds; (ii) if the person submitting the communication is not a shareholder and is submitting the communication to the non-employee directors as an interested party, the nature of the person’s interest in the Company; (iii) any special interest, meaning an interest not in the capacity of a shareholder, of the person in the subject matter of the communication; and (iv) the address, telephone number and e-mail address, if any, of the person submitting the communication. All communications received from shareholders and other interested parties will be reviewed by the Senior Vice President, General Counsel, Secretary and Corporate Responsibility, or such other person designated by all non-employee directors of the Board, and if they are relevant and appropriate, they will be forwarded to the Board Chair or applicable Board member or members as soon as reasonably practicable.

We adopted a policy that prohibits employees and directors from engaging in transactions intended to hedge or offset the market value of any Winnebago Industries securities owned by them. This policy also prohibits employees and directors from holding Winnebago Industries securities in a margin account or otherwise pledging Winnebago Industries securities as collateral for a loan. These restrictions also apply to family members of employees and directors and anyone designated to engage in securities transactions on their behalf.

Our bylaws provide that our Board is comprised of between three and fifteen directors. Ms. Jacqueline D. Woods was elected as a Class I director and Mr. Kevin E. Bryant was elected as a Class II director at a regular meeting of the Board on March 17, 2021, at which time the size of the Board was increased to eleven.

The Board adopted a majority voting policy for the election of directors in uncontested elections. Under this policy, in any uncontested election of directors, if any nominee receives less than a majority of the votes cast for the nominee, that nominee will still be elected, but must tender his or her resignation to the full Board for consideration at the next regularly scheduled meeting of the Board. The Board will only not accept the tendered resignation for, in its judgment, a compelling reason. If the Board, with the affected director not participating, does not accept the resignation at the regularly scheduled meeting following the election, then the nominee will be considered elected and may serve out the term to which he or she was elected. In any contested election of directors where the number of nominees exceeds the number of available positions, strict plurality voting will apply.

Based on the recommendation of the Nominating and Governance Committee, our Board has nominated Ms. Maria F. Blase, Mr. Christopher J. Braun, Mr. David W. Miles and Ms. Woods for election to serve as Class I directors for three-year terms expiring at the annual meeting following fiscal 2024 and Mr. Bryant for election to serve as a Class II director for a one-year term expiring at the annual meeting following fiscal 2022 to coincide with the expiration of the term of the other Class II directors.

  

 

The Board approves non-employee director compensation based on recommendations of the Human Resources Committee. Beginning in fiscal 2018 and continuing through fiscal 2021, the Human Resources Committee has engaged Semler Brossy to analyze the total compensation paid to the Board. Semler Brossy assisted the committee in reviewing the market data and made recommendations regarding the types and amounts of compensation we pay our non-employee directors. Based on the committee's review of our director compensation program with Semler Brossy, the committee recommended and the Board approved, an increase to the non-employee directors’ compensation, effective September 1, 2021, as described below.

Employee directors receive no additional compensation for serving on the Board or its committees. Non-employee directors receive the following for their service on the Board:

Director equity awards are granted prospectively for the upcoming year. This means that any new directors will receive a prorated award at the next regularly scheduled Board meeting, if the next regularly scheduled Board meeting is not the meeting at which annual awards are granted. Directors who joined the Board before we began prospectively granting equity awards will receive an award of the annual grant prior to separation of service from the Board.

The following table sets forth the total compensation paid to each non-employee director for fiscal 2021, other than reimbursement for travel expenses:

As of August 28, 2021, our non-employee directors held the restricted stock awards and stock units set forth below. The stock units in the right column were granted under the Directors’ Deferred Compensation Plan described below.

Our corporate governance policy requires us to maintain guidelines encouraging non-employee director stock ownership. Our current guidelines require non-employee directors to hold common stock, stock units or other equity equivalents having a market value of at least 500% of their annual cash retainer of $90,000 (as well as any additional cash retainer amounts earned relating to his or her chair positions), and that they attain this level of stock ownership within five years of becoming a director. Based on the holdings noted above, all non-employee directors have met this goal, or are on track to meet this goal, within the prescribed five-year time frame.

We maintain the Winnebago Industries, Inc. Directors’ Deferred Compensation Plan (the Directors’ Deferred Compensation Plan) for all non-employee directors. A non-employee director can defer all or a portion of the retainer and fee payments that would otherwise be paid to him or her in cash and can defer taxes on such compensation.

A participant may elect to apply either 50% or 100% of his or her annual cash retainer amounts to either, but not both, money credits or Winnebago stock units and 100% of his or her equity award as deferred compensation in the form of Winnebago stock units.

Money credits are units credited in the form of dollars to a participant’s account established by the Company. The money credits accrue interest from the credit date. Presently, the interest rate to be applied to money credits is the 30-year Treasury bond yield as of the first business day of the plan year.

Winnebago stock units are units credited in the form of the Company's common stock. The shares of our common stock issued in connection with our Directors’ Deferred Compensation Plan consist of our treasury shares and like all of our common stock, generally, will accrue dividends, if any, paid by us on our common stock. Winnebago stock units will be recorded in a participant’s account based on the closing price of a share of our common stock on the NYSE on the date upon which the account is credited.

The Winnebago stock units credited to a participant’s account are included in the “Security Ownership of Certain Beneficial Owners and Management” table in this proxy statement. The directors, however, do not have any rights to vote or dispose of any shares of common stock underlying the Winnebago stock units until their service as a director ends or when he or she reaches the age 69-1/2 while serving as a director.

In the event of a “change of control” of the Company, as defined in the Directors’ Deferred Compensation Plan, a participant generally will receive a lump-sum distribution of his or her account within 30 days following his or her termination of service as a director after such change in control.

The fiscal 2021 equity awards granted in October 2020 were made pursuant to the Winnebago Industries, Inc. 2019 Omnibus Incentive Plan, which limits the aggregate grant date fair value of all equity awards to a non-employee director during a calendar year to not more than $300,000, excluding awards granted at a director’s request in lieu of cash retainers or other fees payable in cash.

Beginning with the fiscal 2019 annual equity awards, we began to grant restricted stock units rather than restricted stock to our non-employee directors. Each director equity award, awarded in the form of restricted stock units, will vest approximately one year from the date of the applicable grant, provided that participants are restricted from selling, pledging or transferring the common stock underlying the vested restricted stock units until the date the participant separates from service on the Board. If a participant terminates his or her service as a director prior to the vesting of the underlying restricted stock unit award, the award will be forfeited by the director. Directors also may elect to defer settlement of their vested restricted stock units until the director’s service to the Company terminates.

 

The Dodd-Frank Act requires the Board to provide our shareholders with the opportunity to vote, on a non-binding, advisory basis, on the compensation of our named executive officers (NEOs) as set forth in this proxy statement in accordance with the compensation disclosure rules of the SEC. This proposal is also referred to as the “Say on Pay” vote. At the 2017 annual meeting, the shareholders determined that the Say on Pay vote would be held annually.

As described in the “Compensation Discussion and Analysis” section of this proxy statement, the primary objectives of our executive compensation programs are to attract and retain key executives critical to us; to align the interests of our management with those of our shareholders; to integrate compensation with our business plans; and to reward for both business and individual performance, such that a substantial portion of each executive officer's total compensation potential is a function of performance incentives. The Board believes the compensation of the NEOs outlined in this proxy statement is appropriate based upon the performance of the Company.

While the Board and especially the Human Resources Committee intend to carefully consider the results of the voting on this proposal when making future decisions regarding executive compensation, the vote is not binding on the Company or the Board and is advisory in nature.

 

The following Compensation Discussion and Analysis describes the material elements of our executive compensation program. Throughout this discussion, we refer to NEOs. The following individuals are our NEOs for fiscal 2021:

The Human Resources Committee believes that the most effective compensation program is one that is designed to reward the achievement of our specific annual, long-term and strategic goals, and which aligns executives’ interests with those of our shareholders by rewarding performance above established thresholds, with the ultimate objective of improving shareholder value. The committee evaluates both performance and compensation to ensure that we maintain our ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of our compensation peer group. Accordingly, the committee believes executive compensation packages provided to our executives, including the NEOs, should include both cash and stock-based compensation that reward performance as measured against established goals.

The committee has worked with management and its independent compensation consultant, Semler Brossy, to design the current executive compensation programs, following the belief that compensation should reflect the value created for our shareholders while furthering our strategic goals. In doing so, we instituted our compensation programs to achieve the following goals:

These objectives emphasize pay for performance by providing an incentive opportunity for performance that meets or exceeds Company objectives.

The compensation of our NEOs in fiscal 2021 was directly impacted by our financial performance and total shareholder returns:

Based on our performance as measured against predefined goals, the 2019-2021 LTIP paid out at 67.9% of target, and the fiscal 2021 Annual Incentive Plan paid out as follows for all NEOs, except for Mr. Clark: 160.0% of target for Mr. Happe, 159.2% of target for Mr. Hughes, 156.0% of target for Mr. Bower, and 159.1% of target for Mr. Hazelton.

Mr. Clark received a cash and stock incentive award of $10,119,403 for fiscal 2021, of which $9,107,463 was paid in cash and $1,011,940 was paid in restricted stock units for fiscal 2021 performance. This represents an 83% increase compared to fiscal 2020, based on the strong performance of Grand Design during fiscal 2021. The cash incentive was paid in four quarterly installments with respect to fiscal 2021, and the restricted stock units were issued in October 2021.

The PSUs paid out at 200% of target based on achievement of Incentive EPS performance results.

The Company has adopted the following key programs, policies and practices to respond to evolving good governance practices in executive compensation and enhance the alignment of our executive compensation programs and shareholder interests:

At our 2020 annual meeting of shareholders, our shareholders voted to approve on an advisory basis the compensation of our NEOs. 98.3% of the votes cast with respect to this proposal were cast for approval of our NEOs’ compensation. The Human Resources Committee determined that our current executive compensation philosophy and compensation elements continued to be appropriate. We conduct regular investor outreach in the form of investor calls, attendance at investor conferences, execution of non-deal roadshows, and hosting of quarterly earnings calls with open Q&A. We continue to evaluate and refine our compensation programs on a regular basis and view the advisory vote as a helpful gauge of our compensation design.

The table below lays out the fiscal 2021 compensation elements for all NEOs other than Mr. Bower and Mr. Clark, neither of whom were eligible for the PSUs specific to fiscal 2021.

In connection with our acquisition of Grand Design, we entered into an employment agreement with Mr. Clark in November 2016, which expired per its terms on August 31, 2019. On June 19, 2019, we entered into an amended and restated employment agreement with Mr. Clark which extended his employment term to August 31, 2023. Under both the previous and current employment agreements, Mr. Clark is paid an annual base salary of $400,000, and is eligible to receive an incentive bonus pursuant to the pre-existing Grand Design Management Incentive Plan (the Grand Design MIP). Payment under the Grand Design MIP is 100% dependent on pretax net income performance of the Grand Design business, a part of our Towable segment. Any incentive bonus earned under the Grand Design MIP is payable as follows: 95% in cash and 5% in restricted stock units of the Company (fiscal 2020); 90% in cash and 10% in restricted stock units (fiscal 2021); and 85% in cash and 15% in restricted stock units (fiscal 2022). Any restricted stock units issued under the Grand Design MIP are subject to a 3-year vesting schedule. Mr. Clark is not eligible to participate in any other Winnebago Industries cash or stock incentive program.

Consistent with the committee’s commitment to a strong, positive link between our business objectives, our performance and our executive compensation practices, we have placed a significant emphasis on pay “at risk,” based on the achievement of established business objectives and shareholder value creation. In fiscal 2021, 85% of our CEO’s total target compensation and 77% of the average total target compensation of our other NEOs was performance-based pay, including annual incentive compensation and annual equity grants, with a significant emphasis on long-term performance and shareholder value creation. The following charts illustrate the components of our CEO’s fiscal 2021 total target compensation, as well as the components of the average total target compensation for our other NEOs in fiscal 2021, excluding Mr. Clark. Total target compensation includes current fiscal 2021 annualized base salary, target annual incentive compensation, and the grant date fair value of our annual equity grants made in fiscal 2021, as reported in the Summary Compensation Table (and excludes benefits and other compensation).

 

 

The Human Resources Committee is responsible for reviewing and approving, on an annual basis, the corporate goals and objectives with respect to the compensation of all of our executive officers, as described in the committee's charter. The committee relies on its own review and the advice of its independent compensation consultant in establishing executive officer pay. The committee seeks the input of the CEO in making executive officer pay decisions for all executives other than himself, but the committee makes all decisions.

In October 2020, the committee approved annual incentive performance objectives for fiscal 2021 based upon the business plan for the year. In October 2020, the committee granted long-term incentive awards to our executive officers under the 2019 Omnibus Incentive Plan (the 2019 Plan), which was approved by the shareholders at the 2018 annual meeting, including annual LTIP performance share units, stock options, and restricted stock units, as well as certain PSUs specific to fiscal 2021. After the completion of fiscal 2021, the committee (i) approved 2021 annual incentive for our NEOs based on achievement of the performance objectives established at the beginning of the year, (ii) certified achievement of performance objectives with respect to the LTIP performance share awards granted to then-current executives in fiscal 2019 that had a performance period running from fiscal 2019-2021 and (iii) certified achievement of performance objectives for the PSUs specific to fiscal 2021.

The Human Resources Committee retained Semler Brossy as its independent executive compensation consultant for fiscal 2021.

Retained by and reporting directly to the committee, Semler Brossy provided the committee with assistance in evaluating our executive compensation programs and policies, and, where appropriate, assisted with the revision of elements of the programs. Additionally, Semler Brossy performed the following activities to support the committee:

Semler Brossy did not provide any services to us other than those detailed above. The committee determined that no conflicts of interest exist with respect to Semler Brossy serving as an advisor to the committee. In making this determination, the committee considered various factors, including those set forth in the SEC’s and NYSE’s rules.

Our CEO and our other executive officers do not set their own compensation nor are they present when the committee sets their specific individual compensation. Our CEO provides his evaluation of each executive officer’s performance to the committee, and makes recommendations with respect to base salary and target incentives, incentive awards and equity awards for each executive officer other than himself. This recommendation is considered by the committee, which makes its own ultimate determinations.

Our human resources department provides additional analysis and guidance as requested by the committee related to NEO compensation, including the following:

When setting fiscal 2021 compensation, the Human Resources Committee focused on trying to set pay levels, in the aggregate, within a competitive range of the market median. Some roles may be higher or lower in the competitive range based on performance, tenure in role, or other internal considerations. Competitive market data is only one of several resources made available to the committee to assist it in setting executive compensation levels. The committee does not use the median as a formula to determine compensation or as a fixed target.

The committee establishes an individual annual bonus and equity incentive target opportunity for each NEO based on the committee’s evaluation of the executive’s experience, level and scope of responsibility and individual performance. Actual cash compensation may be more or less than the target opportunity as a result of performance under the incentive plan. Realized compensation from our equity-based awards may be more or less than the target opportunity as a result of our performance relative to the LTIP measures and our stock price performance.

In setting compensation, the committee compares base salaries, annual incentive opportunities and long-term compensation for the NEOs to a peer group of similarly sized companies (which we refer to collectively as our compensation peers). For fiscal 2021, the committee used the following set of companies that were determined to have similarly sized revenues and market values.

Based on a review conducted by Semler Brossy, the committee made the following changes to the peer group for setting compensation levels for fiscal 2022 with the intent to better reflect our current business dynamics:

In addition to peer group data, Semler Brossy collected market data from compensation surveys for executive positions where the scope of responsibilities for the Company’s executives was not comparable to the peer group named executive officers and where general industry survey data provided a better match for comparable positions in the market.

We provide NEOs with base salary to compensate them for services rendered during the fiscal year. Base salary ranges for NEOs are determined for each executive based on the individual’s position and responsibilities. The base salaries of our executives are also determined by considering such factors as:

In general, base salary determinations are considered each year as part of the committee’s review process as well as upon a promotion or other change in job responsibility. Base salary is also used as the basis for calculating annual and long-term incentive awards and in calculating payments that may be paid upon a change in control, as described below.

In October 2020, as a result of a review of performance, consideration of the above referenced factors, and with input from the independent compensation consultant and our CEO, the committee recommended and approved the following increases for fiscal 2021:

The OICP is designed to motivate and reward the successful completion of our annual performance goals as set by the Human Resources Committee. The amount of the participants’ incentive compensation earned for a given fiscal year is calculated under the OICP to be in direct proportion to our financial performance expressed as a percentage (financial factor) against compensation targets for each participant as determined by the committee. OICP awards are earned to the extent we meet or exceed annual financial targets as well as business unit and individual performance goals.

Each NEO, except for Mr. Clark, is eligible for a target award, denominated as a percentage of fiscal 2021 base salary. NEOs may earn from 0% of the target award under the OICP up to a maximum of 200% of the target award. In setting the target award percentages for the NEOs, the committee considers competitive data in the compensation peer studies, individual performance evaluations, and internal equity factors.

Net sales, operating income, net working capital, and individual objectives related to each NEO’s particular responsibilities were chosen by the committee as the performance measurements under the OICP for fiscal 2021. The committee selected these as key performance metrics because they are closely aligned with the business strategy. These metrics are described further below.

Enterprise-wide financial performance metrics (65% of OICP for Messrs. Happe and Hughes):

Business unit financial performance metrics (65% of OICP for Messrs. Bower and Hazelton):

Given the uncertainty associated with COVID-19, the committee approved structuring the fiscal 2021 OICP into two 6-month financial performance periods and one 12-month financial performance period representing the full fiscal year 2021. The OICP for the two 6-month financial performance periods were each weighted at 30% of the total OICP weighting, and the 12-month financial performance period was weighted at 40% of the total OICP weighting. The payout for each of the 6-month financial performance periods was “banked” and paid out following the end of the fiscal year, along with the payout results for the 12-month financial performance period. Employees had to be employed on the date of payment, following the end of the fiscal year, in order to receive any OICP payments.

For corporate NEOs, Messrs. Happe and Hughes, the OICP financial metrics were measured against enterprise-wide performance. For business unit heads, including Messrs. Bower and Hazelton, the OICP financial metrics were measured against specific business unit performance. Mr. Clark does not participate in the OICP.

Individual objectives (35% of the OICP for Messrs. Happe, Hughes, Bower and Hazelton) provide actionable and measurable objectives controllable by the individual to achieve financial and non-financial goals. The individual objectives were established for the full 12-month performance period.

Individual goals for our NEOs during fiscal 2021 included the following:

For Mr. Happe, to continue to strengthen an inclusive, high-performance culture, build exceptional outdoor lifestyle brands, create a lifetime of customer loyalty, drive operational excellence and portfolio synergy, and use technology and information to drive business growth.

For Mr. Hughes, to continue to build and grow the enterprise finance function, progress the strategic planning cycle, oversee process improvement and business intelligence opportunities and develop the information technology organization and vision.

For Mr. Bower, to oversee the restructuring of the motor home and towables businesses, develop strategic frameworks to evaluate the adjacency growth landscape, establish connectivity and electrification programs, and promote diversity, equity and inclusion.

For Mr. Hazelton, to drive brand and channel synergies for the motor home and towables businesses, optimize and automate business processes, enhance product strategy for the towables business and establish dedicated core teams and near-term objectives to support connectivity and electrification programs.

In October of 2021, the committee evaluated performance against the established OICP financial performance metrics and determined that the net sales and operating income metric thresholds were exceeded and that the net working capital metric was achieved, resulting in a 187% payout for these metrics.

The tables below reflect the fiscal 2021 OICP financial metric payout thresholds and targets for each period as well as our performance against these metrics ($ in thousands):

Enterprise-Wide Financial Performance Metrics (65% of the OICP for Messrs. Happe, Hughes, Bower and Hazelton) for the Full 12-Month Fiscal Year Period^(1)(2)(3)

Enterprise-Wide Financial Performance Metrics (65% of the OICP for Messrs. Happe, Hughes, Bower and Hazelton) for the First Six-Month Fiscal Year Period^(1)(2)(3)

Enterprise-Wide Financial Performance Metrics (65% of the OICP for Messrs. Happe, Hughes, Bower and Hazelton) for the Second Six-Month Fiscal Year Period^(1)(2)(3)

Enterprise-Wide Financial Performance Metrics (65% of the OICP for Messrs. Happe, Hughes, Bower and Hazelton) for all Three Performance Periods - Total Financial Results^(1)(2)(3)

The committee then considered and reviewed the CEO’s evaluation of each eligible NEO’s performance, other than himself. It determined that each of the participating NEOs outperformed expectations and earned his individual performance goal opportunity at a level of 105% of target for Mr. Bower, 110% of target for Mr. Hazelton and 107.5% of target for Mr. Hughes. The committee also determined, in its sole discretion, that Mr. Happe’s level of achievement of his individual objectives was 110% of target.

The following table reflects the fiscal 2021 year-end salary, target OICP percentage and dollar amounts, and actual OICP percentage and dollar amounts earned by the NEOs, each as approved by the committee. The calculated portion of the OICP payout related to achievement of the metrics set at the beginning of the fiscal year is reported in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.

We recognize long-term incentive opportunity as an important element of the total executive compensation program for NEOs. Long-term incentives are intended to retain and motivate executives and to encourage a strong link between management objectives and shareholder long-term interests.

In fiscal 2021, we awarded long-term incentives under our 2019 Plan. We awarded equity in the form of annual LTIP performance share units, restricted stock units and stock options, as well as certain PSUs specific to fiscal 2021.

Each year, the committee establishes a three-year performance plan to promote our long-term growth and profitability and to attract and retain executives by providing the officers an opportunity for an incentive award consisting of performance shares of the Company’s common stock. The amount of an NEO’s performance share incentive compensation for the three-year period is calculated to be in direct linear proportion to our measured financial performance expressed as a percentage against compensation targets as approved by the committee.

In general, the awards are based upon our financial performance as measured against the specific three-year plan established by the committee. The committee has established financial measurements and weightings for each specific three-year plan (as set forth in the following chart).

For the fiscal 2021-2023 LTIP performance share units, the committee selected the following Company performance metrics for Messrs. Happe, Hughes, Bower, and Hazelton⁽¹⁾:

For the fiscal 2021-2023 LTIP performance share units, the committee selected the following Winnebago-brand RV performance metrics for Mr. Hazelton⁽¹⁾:

To calculate the cumulative Incentive EPS for the fiscal 2021-2023 LTIP, the after-tax impact of certain non-recurring expenses is added to the Company’s net income, and the resulting number is divided by the weighted average number of shares. The cumulative Incentive EPS for fiscal 2021 was adjusted to exclude the following: (i) the pretax transaction costs associated with the acquisition of Barletta, (ii) non-cash interest expense, (iii) the dilution impact of convertible notes which is economically offset by a call/spread overlay that was put in place upon issuance, and (iv) the tax effect of all of the foregoing adjustments, as applicable.

Given the financial challenges of establishing a three-year performance plan in a cyclical industry, the challenge of which has been enhanced given the uncertain COVID-19 environment, the committee decided to split the fiscal 2021-2023 LTIP into four measurement periods. Each of these four measurement periods have the financial performance metrics described above. The measurement periods and associated plan weighting are indicated below:

Following the completion of each of these measurement periods, the results are computed and the payout results are "banked" until the end of the fiscal 2023 performance period. Employees must be employed by the Company on the date of payout, following the end of the fiscal 2021-2023 performance period, to receive any payout. The number of performance shares that may be earned range from 0% to 200% of the target share amount.

NEOs were granted restricted stock units in fiscal 2021 that vest in three equal annual installments, beginning on the first anniversary of the grant date.

NEOs were granted stock options in fiscal 2021 that vest over three years in equal installments, beginning on the first anniversary of the grant date, and can be exercised over ten years.

For fiscal 2021, the committee made certain PSU grants to promote and reward executives for the achievement of fiscal 2021 Incentive EPS goals and to retain executives by providing the officers an opportunity for an incentive award consisting of PSUs, which vest over a two-year period, with 50% vesting in October 2021 and 50% vesting in October 2022. The amount of an NEO's performance stock unit incentive compensation for the period is calculated to be in direct linear proportion to our measured financial performance expressed as a percentage against compensation targets as approved by the committee.

For the PSU grants, the committee selected the following Company performance metric for Messrs. Happe, Hughes, and Hazelton (Messrs. Bower and Clark did not receive PSU grants)⁽¹⁾:

To calculate the Incentive EPS for the PSUs, the after-tax impact of certain non-recurring expenses is added to the Company’s net income, and the resulting number is divided by the weighted average number of shares. The Incentive EPS for fiscal 2021 was adjusted to exclude the following: (i) the pretax transaction costs associated with the acquisition of Barletta, (ii) non-cash interest expense, (iii) the dilution impact of convertible notes which is economically offset by a call/spread overlay that was put in place upon issuance and (iv) the tax effect of all of the foregoing adjustments, as applicable.

The target value of the equity incentive awards granted to the NEOs in fiscal 2021 was as follows:

For the fiscal 2019-2021 LTIP performance share units, the committee used the metrics of average Incentive ROIC and cumulative Incentive EPS, which are additional financial metrics separate from the metrics utilized under the OICP, as they provide another measurement of NEO effectiveness. The awards were determined based on our performance against these metrics. The payout scale provided for a minimum award of 0% of the shares granted and a maximum award of 200% of the shares granted. The table below reflects our performance against these metrics and the amount paid to eligible NEOs under the fiscal 2019-2021 LTIP performance share units: