What is the primary purpose of the new Officer Annual Cash Incentive Plan (Officer ACIP)?

The Officer ACIP is designed to motivate and reward executive officers by making a portion of their cash compensation dependent on the achievement of specific performance goals. It aims to further align executive incentives with key company financial and strategic objectives.

How are payouts determined under the Officer ACIP?

Payouts are based on achieving performance goals across three metrics: segment operating income (weighted 40%), sales revenue (weighted 20%), and cash flow (weighted 40%). Performance is evaluated at threshold, target, and maximum levels, with payouts interpolated for performance between these levels. An additional 'Performance Multiplier' of up to +/- 20% can be applied based on ESG and strategic goals, though the total payout cannot exceed 200% of the target opportunity.

What is the Parker-Hannifin Deferred Compensation Plan (DCP) and who is eligible?

The DCP, effective January 1, 2023, allows executive officers and certain other key employees to elect to defer a portion of their compensation on a pre-tax basis. This includes up to 50% of base salary and up to 80% of cash-based incentive or bonus payments. The plan also allows for potential discretionary company matching and retirement contributions.

What happens to existing deferred compensation plans with the introduction of the DCP?

The new DCP will replace the existing Parker-Hannifin Corporation Savings Restoration Plan and Parker-Hannifin Corporation Executive Deferral Plan. No further contributions will be made to these prior plans after the DCP becomes effective.

PH 8-K: Leadership Changes

Summary

Parker-Hannifin Corporation (PH) has filed an 8-K report detailing changes to its executive compensation structure, primarily focusing on the adoption of a new Officer Annual Cash Incentive Plan (Officer ACIP) and a Deferred Compensation Plan (DCP). The Officer ACIP, effective July 1, 2022, replaces prior incentive programs and bases annual cash payouts on performance metrics including segment operating income, sales revenue, and cash flow, with potential adjustments for ESG and strategic initiatives. This aims to further align executive compensation with key business performance indicators and company objectives. The accompanying Deferred Compensation Plan, effective January 1, 2023, will allow executive officers and other key employees to defer a portion of their compensation, including salary and incentive payments. The company may provide discretionary matching and retirement contributions under this new plan, which replaces existing restoration and executive deferral plans. These changes indicate a strategic focus on executive motivation and retention by enhancing the structure and incentives within their compensation packages.

Key Highlights

1Adoption of the Parker-Hannifin Corporation Officer Annual Cash Incentive Plan (Officer ACIP) effective July 1, 2022.
2Officer ACIP performance metrics include segment operating income (40%), sales revenue (20%), and cash flow (40%).
3Potential for up to a 20% 'Performance Multiplier' based on ESG and strategic imperatives under the Officer ACIP.
4Fiscal year 2023 target opportunities under the Officer ACIP are materially consistent with prior incentive plans for participating NEOs.
5Approval of the Parker-Hannifin Deferred Compensation Plan (DCP) effective January 1, 2023.
6DCP allows deferral of up to 50% of base salary and 80% of cash incentive/bonus payments.
7Company may provide discretionary matching contributions and 'Excess RIA Contributions' under the DCP.
8The DCP replaces the existing Savings Restoration Plan and Executive Deferral Plan.

Parker-Hannifin Corp 8-K Report, Executive Changes (Aug 23, 2022)

Summary

Key Highlights

Frequently Asked Questions