UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.    )

 

Check the appropriate box:

 

BENCHMARK ELECTRONICS, INC.

(Name of Registrant as Specified in Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

BENCHMARK ELECTRONICS, INC.

 

4141 N. Scottsdale Road, Suite 301

Scottsdale, Arizona 85251

 

NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON WEDNESDAY, MAY 16, 2018

 

Shareholders of Benchmark Electronics, Inc.:

 

The 2018 annual meeting of shareholders of Benchmark Electronics, Inc. (the “Company”) will be held at the Company headquarters located at 4141 N. Scottsdale Road, Suite 301, Scottsdale, Arizona 85251, on Wednesday, May 16, 2018, beginning at 8:00 a.m. MST, for the following purposes:

 

1.    to elect eight directors to serve on the Board of Directors until the 2019 annual meeting of shareholders and until their successors are duly elected and qualified;

 

2.       to approve the compensation of the Company’s named executive officers;

 

3.       to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2018; and

 

4.       to transact such other business as may properly come before the meeting or any adjournment thereof.

 

Shareholders of record at the close of business on March 19, 2018 are entitled to notice of and to vote at the meeting and any adjournment thereof.  You are cordially invited to attend the meeting.

 

 

 

  

 

Scottsdale, Arizona

March 30, 2018

 

YOUR VOTE IS IMPORTANT

 

Regardless of whether you plan to attend the meeting, please act promptly to vote your shares.  You may vote in person or by using a proxy as follows:

 

·        By internet: Go to www.proxyvote.com.  Please have the Notice of Availability of Proxy Materials (the “Notice”) we sent to you in hand because it has your personal control number(s) needed for your vote.

·        By telephone: Call 1-800-690-6903 on a touch-tone phone.  Please have the Notice we sent to you in hand because it has your personal control number(s) needed for your vote.

·        By mail: Please request written materials as provided in the Notice; then complete, sign and date the proxy card and return it to the address indicated thereon.

 

Your proxy is revocable at any time before it is voted at the meeting.

 

BENCHMARK ELECTRONICS, INC.

4141 N. Scottsdale Road, Suite 301

Scottsdale, AZ 85251

(623) 300-7000

 

March 30, 2018

 

________________________

 

PROXY STATEMENT

FOR

2018 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON WEDNESDAY, MAY 16, 2018

 

________________________

 

INTRODUCTION

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Company’s Board of Directors (the “Board”) for use at the Company’s 2018 annual meeting of shareholders to be held on Wednesday, May 16, 2018 beginning at 8:00 a.m. MST, and any adjournment thereof (the “Meeting”) for the purposes set forth in this Proxy Statement and the accompanying Notice.  It is anticipated that this Proxy Statement, the Notice and the enclosed form of proxy will be sent to shareholders on or about March 30, 2018.

 

Proxies

 

Proxies properly submitted by internet, telephone or otherwise properly executed and received by the Company before or at the Meeting and not revoked will be voted in accordance with the directions set forth therein.  If no direction is made, a proxy that is properly submitted and received by the Company and not revoked will be voted:

-    FOR the election of all nominees for director named herein to serve on the Board until the 2019 annual meeting of shareholders and until their successors are duly elected and qualified,

 

-    FOR the resolution approving the named executive officer compensation (“Say-on-Pay”) for 2017 as disclosed in this Proxy Statement; and

 

-    FOR the ratification of the appointment of KPMG LLP (“KPMG”) as the independent registered public accounting firm of the Company for the year ending December 31, 2018.

 

The proxy also confers on the persons named therein discretionary authority to vote with respect to any other matter that properly comes before the Meeting.

 

Proxies may be revoked by written notice received by the Company’s Secretary at any time before they are voted at the Meeting by delivering a signed notice of revocation to the Secretary, or a later dated signed proxy, or by attending the Meeting and voting in person by ballot.

 

 

 

Shareholders Entitled to Vote

 

Shareholders of record at the close of business on March 19, 2018 are entitled to notice of and to vote at the Meeting.  As of March 19, 2018, there were 47,569,430 shares of common stock, $0.10 par value per share (“Common Shares”), issued, outstanding and entitled to vote at the Meeting.  Each Common Share is entitled to one vote on all matters that may properly come before the Meeting.  However, shares held at your broker, bank or other nominee for which you do not submit voting instructions will not be voted and will be deemed not entitled to vote with regard to certain proposals.

 

How to Vote If You Are a Registered Holder of Common Stock

 

If you are a registered holder of shares, you may vote them either by proxy as set forth in the Notice and/or proxy card in advance of the Meeting or by voting in person at the Meeting. By submitting a proxy, you are legally authorizing another person to vote your shares on your behalf.

 

How to Vote If You Hold Your Shares in “Street Name”

 

Most shareholders do not have their shares registered directly with the Company in their name; instead their shares are held in their brokerage account or by a bank or other custodian who votes the shares according to the instructions submitted to them by the beneficial owner of the shares.  If you do not submit voting instructions to your broker, bank or other nominee, they will not be permitted to vote your shares on any proposal, unless the proposal constitutes a “discretionary” item and your broker, bank or other nominee is a member of the New York Stock Exchange (“NYSE”) and permitted by NYSE rules to vote on “discretionary” items.  The election of directors and the Say-on-Pay vote are “nondiscretionary” items.  Without your instructions, your shares may be represented at the Meeting, but as to nondiscretionary items, they may not be voted, resulting in “broker non-votes” on those items.  Because they cannot be voted on those matters, they are not deemed to be “entitled to vote” on those matters and will not be included in the calculation of voting results for those matters (neither in the numerator nor the denominator).

 

Accordingly, we urge you to promptly give instructions to your broker to vote FOR  each of the proposals contained in this Proxy Statement by using the voting instruction card provided to you by the custodian.  Please note that if you intend to vote your street name shares in person at the Meeting, you must obtain a “legal proxy” from your broker, bank or other nominee and present it at the Meeting.

 

Quorum, Voting Requirements and Other Matters

 

               The presence at the Meeting, in person or represented by proxy, of the holders of a majority of the outstanding Common Shares is necessary to constitute a quorum for the conduct of business.  Common Shares represented by a proxy that is properly submitted by internet or telephone, or otherwise properly completed, signed and returned, will be counted as present at the Meeting for purposes of determining a quorum, without regard to whether the proxy is marked as withholding authority, casting a vote or abstaining or lacks instructions as to any “discretionary” item.

 

All matters specified in the notice of the Meeting require the approval of the affirmative vote of a majority of the outstanding Common Shares entitled to vote and present, in person or represented by proxy, at the Meeting. An abstention on any matter, or withholding authority to vote with respect to the election of directors, will have the effect of a vote against the proposal.  Proxies granted by shareholders holding their shares in “street name” to their broker, board or other nominee and left uninstructed with respect to any “nondiscretionary” items are deemed to be not “entitled to vote” on those items, as “broker non-votes”, and will not be included in the calculation of voting results for those matters (either in the numerator or the denominator).

 

An Inspector of Election appointed by the Company will tabulate votes at the Meeting.

 

The Board is not aware of any matters to come before the Meeting other than those referred to in this Proxy Statement.  If any other matter properly comes before the Meeting, the proxies will be voted in accordance with the discretion of the person or persons voting the proxies.

  

 

 

PROPOSAL 1

 

ELECTION OF DIRECTORS

 

Nominees for Election

 

The following table sets forth information with respect to each nominee for election as a director of the Company nominated by the Board.  Each nominee was proposed to the Board for re-election by its Nominating/Governance Committee, and the Board determined to nominate these candidates for election by the shareholders at the Meeting.  The Board has reviewed the qualifications of each nominee and has determined that, other than Mr. Tufano, each satisfies the (i) independence standards promulgated by the NYSE and applicable regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (ii) “non-employee director” standards set forth in such regulations, and (iii) “outside director” requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable regulations.  The information as to age, principal occupation and directorships has been furnished by the nominees.

 

The Board unanimously recommends a vote FOR  the election of each of the following nominees.

 

 

David W. Scheible has been a director of the Company since 2011 and has served as non-executive Chairman of the Board since March 2016.  He serves on the Compensation and the Nominating/Governance Committees.  Since June 2016, he has been an Operating Advisor to the funds of Clayton, Dubilier & Rice, a private investment firm.  From 1998 to December 2015, Mr. Scheible held increasingly senior-level executive roles at Graphic Packaging Holding Company, a global manufacturer of custom packaging, paperboard, laminations and coatings, systems and machinery and provider of contract packaging services to multinational companies.  He served as its Chairman of the Board (May 2013-May 2016), Chief Executive Officer (2007-December 2015), and previously as Chief Operating Officer and Executive Vice President of Commercial Operations.  From 1986 to 1998, he was an executive with Avery Dennison Corporation, a global manufacturer of self-adhesive products, office products and specialized label systems. Mr. Scheible received an MBA in Finance and a Bachelor of Science in Biochemistry from Purdue University.

 

With his experience as chairman, chief executive officer and as a senior executive of global manufacturing, including contract manufacturing, companies over his 30-year career, Mr. Scheible brings highly relevant leadership skills and international operations expertise to the Board.

 

Bruce A. Carlson has been a director of the Company since 2017 and is a member of the Audit and the Nominating/Governance Committees.  He retired as an Air Force General in 2009 after 37 years of service.  During his final Air Force assignment, he commanded Air Force Materiel Command at Wright-Patterson AFB, Ohio from 2005 to 2008.  He also served as Commander, Eighth Air Force at Barksdale AFB, Louisiana from 2003 to 2005; Director for Force Structure, Resources and Assessment (J-8) for the Joint Staff from 2000 to 2003; Director of Operational Requirements at U.S. Air Force Headquarters from 1996 to 2000; and Commander, 49th Fighter Wing (the Air Force’s first stealth fighter wing) at Holloman AFB, New Mexico from 1995 to 1996.  Following his Air

Force career, Mr. Carlson served as the 17th Director of the National Reconnaissance Office from 2009 to 2012.  Mr. Carlson has been Chairman of the Space Dynamics Laboratory’s Guidance Council since 2013 and has served as an advisor on space activities to the Johns Hopkins University’s Applied Physics Lab since June 2016.  In addition, he serves as the Chairman of the Utah State Research Foundation Board of Trustees.  Mr. Carlson received a BA in Accounting from the University of Minnesota, Duluth, and an MA in Business Management from Webster University.

 

Douglas G. Duncan has been a director of the Company since 2006, is a member of the Audit Committee and chairs the Nominating/Governance Committee.  He is the retired President and Chief Executive Officer of FedEx Freight Corporation, a provider of regional and interregional less-than-truckload freight services.  He was founding CEO of this stand-alone, wholly owned subsidiary corporation of FedEx Corporation and served in that capacity from 2001 to 2010.  He also served on the Strategic Management Committee of FedEx Corporation.  Before the formation of FedEx Freight, Mr. Duncan served as President and Chief Executive Officer of Viking Freight.  Mr. Duncan has also held management positions in operations, sales and marketing with Caliber System and Roadway Express.  He served on the Executive Committee of the American Trucking Associations and as Chairman of the American Transportation Research Institute.  He graduated from Christopher Newport University, where he served on the Board of Visitors. He also serves on the board of directors of J.B. Hunt Transport Services, Inc.

 

Mr. Duncan brings to the Board not only his experience as a chief executive officer, but also his skills and insight into operational logistics, which he developed over the course of his 30-year career in the transportation industry.  His ability to develop and execute corporate strategy at an organizational level is evidenced by his leadership as President and Chief Executive Officer at FedEx Freight, which under his stewardship became a leading less-than-truckload freight service operation in the United States.  The Board has determined that he qualifies as an “audit committee financial expert” under the SEC’s rules. 

 

Robert K. Gifford has been a director of the Company since 2016 and serves on the Audit and Compensation Committees.  Since March 2017, he has served as the President and Chief Operating Officer of BeachBody LLC, a fitness company.  From June 2016-February 2017, he was the Head of Operations and Quality for the Ultrasound Division of Siemens Healthineers, a medical technology company.  From 2010 to June 2015, he held increasingly senior roles at Ingram Micro Inc., a global technology distributor and technology sales, marketing and logistics company, most recently serving as Senior Executive Vice President and President of Supply Chain Solutions and previously as Executive Vice President of Global Logistics.  Mr. Gifford also previously served as Senior Vice President of Global Supply Chain at Ecolab Inc., a provider of cleaning and sanitizing products to healthcare and food and beverage industries worldwide, and as Vice President of its North America Chemical Supply Chain & Global Equipment Supply Chain.  Prior to that, Mr. Gifford progressed from early management roles beginning in 1996 at Compaq Computer Corporation prior to its acquisition by Hewlett-Packard Company (n/k/a HP Inc.), to serving as Vice President of Worldwide Logistics and Program Manager of HP, Inc.  He received his MBA from Texas A&M University in 2006 and his BS in Manufacturing Management from San Jose State University in 1996.

 

Mr. Gifford brings to the Board his experience and expertise leading global supply chain systems for Fortune 100 companies in the technology industry.

 

Kenneth T. Lamneck has been a director of the Company since 2013, chairs the Audit Committee and is a member of the Nominating/Governance Committee.  Since 2010, he has been the President and Chief Executive Officer of Insight Enterprises, Inc., a global provider of information technology hardware, software and service solutions to businesses and public sector clients in over 190 countries.  He also serves as a director of Insight.  From 2004 to 2009, he was President, the Americas, at Tech Data Corporation, a wholesale distributor of technology products, where he led operations in the United States, Canada and Latin America.  From 1996 to 2003, he held various executive management positions at Arrow Electronics, including President of Arrow/Richey Electronics and President of Arrow’s Industrial Computer Products business.  Following five years of service in the United States Army, he began his civilian career at IBM as an engineer.  Mr. Lamneck received an MBA from the University of Texas at El Paso and a Bachelor of Science from the United States Military Academy at West Point.

 

Mr. Lamneck’s wide-ranging industry experience over 30 years, both as a chief executive officer of a global technology provider role and in other leadership roles at multiple global hardware, software and services companies, enables him to bring to the Board a strong international operations background and depth of

understanding into the operation and management of companies in the technology industry.  The Board has determined that he qualifies as an “audit committee financial expert” under the SEC’s rules.

 

Jeffrey S. McCreary has been a director of the Company since 2016 and serves on the Audit and Compensation Committees.  He served as a member of the board of directors (2006-2017) of Isola Group, a leading global material sciences company that designs, develops, manufactures and markets laminate materials used to fabricate advanced multilayer printed circuit boards, and previously served as its Interim President and CEO.  Mr. McCreary also served as a director and Interim President and Chief Executive Officer of Integrated Device Technology, Inc., which develops system-level solutions that optimize customers’ applications.  In addition, he previously served as a director of MIPS Technologies, Inc., a leading provider of industry-standard processor architectures and cores for digital home, networking and mobile applications, and as a director of the Gennum Corporation, a provider of semiconductor solutions and intellectual property cores.  Mr. McCreary is a former Senior Vice President at Texas Instruments, where he also served as Manager of Worldwide Sales and Marketing and in a number of other executive positions, including General Manager of Advanced Logic Products and General Manager of Worldwide Military Semiconductors.  He is an NACD Board Leadership Fellow and received a B.S.in Electrical Engineering from the Rose-Hulman Institute of Technology in 1979 and an Honorary Doctorate of Engineering from Rose-Hulman in 2004.

 

Mr. McCreary brings to the Board his technology expertise, together with his experience as an executive and director of technology companies.

 

Paul J. Tufano has been President and Chief Executive Officer of the Company since September 2016 and a director of the Company since March 2016.  He served as the Chief Financial Officer of Alcatel-Lucent, a global telecommunications equipment company, from 2008 to September 2013 and Chief Operating Officer from January 2013 to September 2013.  He was Executive Vice President of Alcatel-Lucent from 2008 to September 2013 and served as a consultant to Alcatel-Lucent from September 2013 to April 2014.  Mr. Tufano was the Executive Vice President and Chief Financial Officer of Solectron Corporation, an electronics manufacturing company for original equipment manufacturers, from 2006 to 2007 and served as Interim Chief Executive Officer during 2007.  Prior to joining Solectron, he was President and Chief Executive Officer of Maxtor Corporation, a manufacturer of computer hard disks, from 2003 to 2004, Executive Vice President and Chief Operating Officer from 2001 to 2003, and Chief Financial Officer from 1996 to 2003.  From 1979 to 1996, Mr. Tufano held management positions in finance, operations and logistics at IBM.  He has served on the board of directors of Teradyne, Inc., a global supplier of automatic test equipment, since 2005, and on the board of directors of EnerSys, a global manufacturer, marketer and distributor of industrial batteries and related equipment, since 2015.  He also served on the board of directors of International Manufacturing Services, Inc., an electronics manufacturing services provider, from 1996 to 1998.  He holds a Bachelor of Science in Economics from St. John’s University and a Masters of Business Administration, Finance, Accounting and International Business from Columbia University.

 

Mr. Tufano brings to the Board extensive leadership, operational and financial experience from his service as an executive at prominent technology and electronics manufacturing companies as well as his service on boards of several companies.

 

Clay C. Williams has been a director of the Company since 2008, chairs the Compensation Committee and is a member of Nominating/Governance Committee. Since May 2014, he has been Chairman of the Board, President and CEO of National Oilwell Varco, Inc., a global service provider and manufacturer of equipment for oil and gas producers.  From February to May 2014, he was a director, President and CEO of National Oilwell Varco, Inc., and from December 2012 to February 2014, he served as President and Chief Operating Officer. Prior to December 2012, he was their Executive Vice President and Chief Financial Officer and also served as the Chief Financial Officer of Varco International, Inc. prior to its merger with National-Oilwell.  Mr. Williams began his career at Shell Oil Company in 1985, and has held various positions in the energy industry for 30 years. In 2012, he was voted CFO of the Year in a poll conducted by Institutional Investor magazine.  He received a Bachelor of Science degree in Civil/Geological Engineering from Princeton University and an MBA from the University of Texas at Austin.

 

Mr. Williams’ experience as an officer of a publicly traded company active in strategic mergers and acquisitions, occupying positions of increasing seniority up to President and CEO for a leading global oilfield equipment and technology provider, in addition to his service as a director, brings to the Board extensive experience and leadership at the highest levels of public manufacturing company strategy and operations, as well as knowledge of cyclical end-markets such as those of the Company.

 

The officers of the Company are elected by, and serve at the discretion of, the Board.

 

Election Procedures; Term

 

              Directors will be elected by the affirmative vote of the holders of a majority of the outstanding Common Shares present, in person or represented by proxy, at the Meeting.  Unless authority to vote for the election of directors is withheld as to any or all of the nominees, all Common Shares represented by proxy will be voted for the election of the nominees.  If the authority to vote for the election of directors is withheld as to any but not all of the nominees, all Common Shares represented by any such proxy will be voted for the election of the nominees as to whom such authority is not withheld.  If a nominee becomes unavailable to serve for any reason before the election, the shares represented by proxy will be voted for such other person, if any, as may be designated by the Board.  The Board, however, has no reason to believe that any nominee will be unavailable to serve as a director.

 

              The Board is currently comprised of eight members.  Any vacancy on the Board occurring after the election may be filled (1) by election at any annual or special meeting of the shareholders called for that purpose, or (2) by a majority of the remaining directors.  However, the remaining directors may not fill more than two such vacancies during the period between any two successive annual meetings of shareholders.  A director elected to fill a vacancy will be elected for the unexpired portion of the term of his or her predecessor.

 

              All directors will be elected to serve until the 2019 annual meeting of shareholders and until their successors are duly elected and qualified.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR  THE ELECTION OF EACH OF THE NOMINEES TO THE BOARD OF DIRECTORS.

 

Executive Officers

 

The executive officers of the Company are Paul J. Tufano, Roop K. Lakkaraju, Michael D. Buseman, Nathalie Carruthers, Scott M. Hicar, Jan M. Janick and Lisa K. Weeks.  See “Election of Directors — Nominees for Election” for information regarding Mr. Tufano’s age, Company service and business experience.

 

Roop K. Lakkaraju, 47, has been Executive Vice President and Chief Financial Officer since January 2018.  From February 2017 to January 2018, he served as Chief Financial Officer of Maana, Inc., an enterprise software company that has pioneered an Artificial Intelligence-driven knowledge platform.  From October 2013 to February 2017, he served as Chief Operating Officer and Chief Financial Officer of Support.com (NASDAQ:SPRT), a provider of cloud-based software and services for technology support.  From July 2011 to October 2013, he was Chief Financial Officer of Quantros, Inc., a provider of enterprise SaaS-based solutions and information services that advance healthcare quality and safety performance.  Prior to that he held senior financial and operational roles at 2Wire, Solectron Corporation (NYSE:SLR), and Safeguard Scientifics (NYSE:SFE).  He began his career in 1993 as an auditor with Grant Thornton before joining PricewaterhouseCoopers in their Audit and Business Advisory Services.  Mr. Lakkaraju holds a B.S. in Business Administration from San Jose State University.

 

Michael D. Buseman, 56, has been Executive Vice President of Global Operations since July 2017.  He served as Chief Global Logistics and Operations Officer of Avnet, Inc., a global electronics components company, from November 2013 to July 2017.  From 2007 until November 2013, he was Executive Vice President of Global Manufacturing Operations of Plexus Corp., an electronics manufacturing services provider, having served as its Vice President of Global Technology, Quality and Facilities since 2006.  Mr. Buseman previously served as Vice President and General Manager of Operations of Celestica, Inc., as well as its Director, Operations, Engineering, and Technology.  He began his career in 1983 with Unisys, Inc., holding positions of increasing responsibility, including Principal Process Engineer and Director of Advanced Design Manufacturing Services.  Mr. Buseman holds a BS in Mechanical Engineering from South Dakota State University and an MBA from the University of St. Thomas, Minnesota.

 

Nathalie Carruthers, 48, has been Vice President, Chief Human Resources Officer since March 1, 2018, having previously served as Vice President Human Resources, Worldwide Operations from September 2017 to February 2018.  From 2015 to 2017, she was Chief Human Resources Officer for Lumileds, an LED lighting

solutions company. Prior to this role, she served at Flextronics International, an electronics manufacturing services company, from 2006 to 2015 where she held a number of senior leadership HR roles.  Prior to Flextronics International, Ms. Carruthers held progressive HR roles with Solectron and General Dynamics.  Ms. Carruthers holds a Bachelor of Commerce Degree from the University of Ottawa, Canada.

 

Scott M. Hicar, 51, has been Vice President of Business Process Improvement and Chief Information Officer since September 2017.  Previously he worked for TwentyEighty, a corporate learning and performance management company focused on sales growth, leadership and strategy execution.  From 2009 to 2014, he was Senior Vice President and Chief Information Officer (“CIO”) for DigitalGlobe, a public digital information products company focused on Aerospace and Defense.  Prior to that, from 2006 to 2008, Mr. Hicar was Senior Vice President and CIO at Solectron Corporation, an electronics manufacturing services provider.  From 1997 to 2006, he served as CIO for Maxtor Corporation, a public provider of storage products.  Mr. Hicar has more than 25 years of technology leadership experience in transformational roles, and previously held management positions in the Supply Chain/ERP practice at Price Waterhouse, as well as serving as an internal consultant to chemical, pharmaceutical, and agriculture businesses within ICI Americas.  Mr. Hicar received his Bachelor’s degree in business administration, with a concentration in management information systems, from Ohio University.

 

Jan M. Janick, 59, has been with the Company since 2015.  He has been Chief Technology Officer since January 2018; previously he served as Vice President, Global Engineering from 2015 to 2018.  He joined the Company from IBM, a global technology company, where he served as Vice President Flash Systems and Technology from 2012 to 2015, Vice President Modular and Blades Server Development from 2009 to 2012 and Vice President Modular Server and Storage Development from 2006 to 2009.  From 2005 to 2006, he served as Vice President Operations and Software Development for Lenovo.  He earned both his Bachelor and Master of Science in electrical engineering from the University of Wisconsin-Madison.

 

Lisa K. Weeks, 50, has been Vice President of Strategy and Investor Relations since 2012.  She joined the Company in August 1999 and during her tenure has held numerous leadership positions in account management, operations and business development.  Prior to joining the Company in 1999, she worked for AVEX Electronics from 1997 to 1999 and for Teledyne Brown from 1989 to 1997.  Ms. Weeks holds both a Bachelor’s degree in aerospace engineering from Auburn University and a Master’s degree in business administration from Vanderbilt University.

 

Corporate Governance, Committee Charters, Shareholder Communications

 

The Company places integrity first and foremost, which has long been a part of our corporate identity.  The Company’s practices reflect corporate governance compliant with existing standards of the NYSE and requirements of the SEC, as well as other best practices, including:

 

●       The Company’s Code of Conduct applies to all directors, officers and employees;

●       The Company has a system in place to encourage and facilitate confidential and anonymous reports of compliance concerns, including to the Audit Committee of the Board;

●       Executive officers are subject to a clawback policy relating to performance-based compensation earned during periods for which a financial restatement is required under SEC reporting rules;

●       Directors and executives are prohibited from pledging, hedging, selling short or otherwise engaging in speculative practices regarding the Company’s securities;

●       All of our directors are independent, except for Mr. Tufano who serves as CEO;

●       The independent directors meet regularly without the presence of management;

●       The Board operates under a set of published corporate governance guidelines;

●       Any director that does not receive the affirmative vote of the holders of a majority of the outstanding Common Shares entitled to vote in the election of directors and represented, in person or by proxy, at any meeting during which an uncontested election occurs must tender his or her resignation to the Board for its consideration in accordance with the corporate governance guidelines;

●       Two members of the Board’s Audit Committee qualify as “audit committee financial experts” as defined by the SEC;

●       KPMG, our independent registered public accounting firm, reports directly to the Audit Committee; and

●       The Company’s internal audit group reports directly to the Audit Committee periodically during the year.

 

The Board will continue to enhance the Company’s governance practices as value-enhancing new ideas and best practices emerge.  You may access our current committee charters, Code of Conduct and Corporate Governance Guidelines, on our website at www.bench.com  under “Investors—Corporate Governance,” or obtain copies by writing to the Corporate Secretary at Benchmark Electronics, Inc., 4141 N. Scottsdale Road, Suite 301, Scottsdale, Arizona 85251.

 

Shareholders and other interested parties may send communications to the Board, the nonemployee directors as a group or to individual directors, in each case, care of Benchmark Electronics, Inc., 4141 N. Scottsdale Road, Scottsdale, Suite 301, Arizona 85251.

 

Operation of Board of Directors and Committees; Attendance, Director Independence

 

The Board is responsible for establishing broad corporate policies, setting the strategic direction, setting capital allocation plans, and monitoring the Company’s overall performance.  The Board’s primary responsibility is to oversee management and, in so doing, promote the best interests of the Company and its shareholders.  The Board oversees the succession of key management employees, and the selection and appointment of the Chief Executive Officer (the “CEO”) and, subject to shareholder election, directors.  It reviews and approves corporate objectives and strategies, and evaluates significant policies and proposed major commitments of corporate resources.  It participates in decisions having a potential major economic impact on the Company.  Management keeps the directors informed of Company activity through regular written and oral reports and through presentations at Board and committee meetings.

 

Directors are elected annually by the shareholders and hold office until their successors are duly elected and qualified.  Our Amended and Restated Bylaws (the “Bylaws”) provide for a Board of Directors comprised of five to nine members as determined from time to time by the Board.  The Board has set the number of current directors at eight.  All current directors are nominees for election at the Meeting.

 

NYSE rules require the Company to have a majority of independent directors.  No director qualifies as independent under the rules unless the Board affirmatively determines they have no material relationship with the Company or its subsidiaries—directly, or as a partner, shareholder or officer of an organization that has a relationship with the Company.  In evaluating each director’s independence, the Board considers the NYSE rules as well as all facts and circumstances deemed relevant.  As of the date of this Proxy Statement, the Board has determined that each nominee, other than Mr. Tufano, our President and CEO, is independent.  The Board determined that no independent director had a material relationship with the Company or management, other than as a director or shareholder, and that none of the express disqualifications contained in the NYSE rules apply to any of them.  In making this determination, the Board considered any relevant transaction, relationship and arrangement as required by the NYSE listing requirements.

 

The Board oversees an enterprise-wide approach to risk management.  The Board seeks not only to understand the risks facing the Company and management’s approach to address them, but also actively decides on the levels of risk appropriate for the Company when designing and implementing its business strategy.  In achieving this objective, the full Board participates in an annual enterprise risk assessment.  In this process, risk is assessed throughout the business, focusing on six primary areas: financial, legal/compliance, operational/transactional, customer services/reputation, information technology/security and inherent (other) risks.  In addition to reviewing risk with the full Board at least annually, the independent directors discuss risk management during non-management executive sessions led by the Chairman of the Board.

 

While the Board has the ultimate oversight responsibility for the risk management process, committees of the Board have also been entrusted with responsibility for risk management.  In particular, the Audit Committee focuses on assessing and mitigating financial reporting risk, including internal controls, and receives an annual risk assessment report from the Company’s internal auditor and quarterly reports on identified risk areas.  In setting compensation, the Compensation Committee also strives to create incentives that encourage a level of risk taking consistent with the Company’s business strategy.

 

The Board held 4 meetings during 2017.  Each director attended at least 75% of the total meetings of the Board and committees on which he served during his tenure thereon.  Mr. Tufano, who serves as President and CEO of the Company, does not vote in committee meetings or participate in portions of Compensation Committee

meetings that determine, or Board meetings that ratify, his compensation.  The nonemployee directors regularly meet in executive session without members of management present, including Mr. Tufano.  These sessions are typically held either before or after the Board’s regularly scheduled Board and committee meetings.  Additional executive sessions can be scheduled at the request of the nonemployee directors.

 

The Board has Audit, Compensation and Nominating/Governance Committees.  The members of these committees, and the number of committee meetings held in 2017, are as follows:

 

 

The principal function of the Audit Committee is to assist the Board in fulfilling its responsibility to oversee (i) management’s conduct of the Company’s financial reporting process (including management’s development and maintenance of systems of internal accounting and financial controls), (ii) the integrity of the Company’s financial statements, (iii) the Company’s compliance with legal and regulatory requirements and ethical standards, (iv) the qualifications and independence of the Company’s outside auditors, and (v) the performance of the Company’s internal audit function and the outside auditors.  The committee also prepares the Report of the Audit Committee required by the rules of the SEC and included later in this Proxy Statement.  Additional information regarding the functions performed by the committee is set forth below in such report.  The Board has determined that Mr. Lamneck, who chairs the committee, and Mr. Duncan qualify as “audit committee financial experts” under the rules of the SEC.  An “audit committee financial expert” is defined as a person who has the following attributes: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves; (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to the breadth and complexity of issues that can reasonably be expected in the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal controls and procedures for financial reporting; and (v) an understanding of audit committee functions.

 

The principal functions of the Compensation Committee are to (i) oversee the administration of the Company’s compensation plans, in particular the incentive compensation and equity-based plans (and, to the extent appropriate, plans of the Company’s subsidiaries), (ii) discharge the Board’s responsibilities relating to the compensation of the Company’s executives, (iii) review and make recommendations on director compensation, and (iv) prepare the annual report on executive compensation included later in this Proxy Statement.  Additional information regarding the functions performed by the committee is set forth below in the “Role of Compensation Committee.”

 

The principal functions of the Nominating/Governance Committee are to (i) identify individuals qualified to become Board members and recommend such individuals to the Board for nomination for election to the Board, (ii) make recommendations to the Board concerning committee appointments, (iii) develop, recommend and annually review corporate governance guidelines for the Company, (iv) oversee corporate governance matters, and (v) coordinate an annual evaluation of the Board, which includes an evaluation of each committee and each member of the Board.   The committee operates under a written charter approved by the Board.

 

To be considered by the Nominating/Governance Committee, a director nominee should have experience as a board member or senior executive of a public company or nationally recognized private company.  In addition to these requirements, the committee will also evaluate whether the nominee’s skills are complementary to those of incumbent Board members and the Board’s needs for operational, management, financial, international, technological or other expertise.  Although there is no specific policy on considering diversity, the Board and the committee believe that the Board membership should reflect diversity in its broadest sense, including geography,

gender, ethnicity, viewpoint, education, skills and professional experience.  The committee has an independent search firm to identify and screen candidates, perform reference checks, prepare a biography for each candidate for the committee’s review and coordinate interviews.  The committee, the Chairman of the Board and executive officers interview candidates that meet the criteria, and the committee selects nominees who it determines are best-suited to actively engage in the oversight of the Company’s strategy and drive sustainable value creation for all shareholders.  The committee will consider recommending for nomination to the Board candidates suggested by shareholders, taking into account all the factors and qualities described above, provided that recommendations are submitted and received by us at our principal executive offices at 4141 N. Scottsdale Road, Suite 301, Scottsdale, Arizona 85251, with an appropriate biographical summary, in accordance with the requirements described below under “Date of Submission of Shareholder Proposals and Director Nominations.”

 

The Board does not have a written policy requiring members to attend annual shareholders meetings, although the Company expects that all of its directors will attend the Meeting.

 

Certain Transactions

 

There were no Related-Party Transactions (as defined below) since the beginning of last year.  The Board would review any proposed Related-Party Transaction to which the Company would be a party to determine if it were in the best interests of our shareholders and the Company.  Financial transactions, arrangements, relationships or any series of similar transactions, arrangements or relationships beyond the compensation described elsewhere in this Proxy Statement relating to Board service or employment and exceeding $120,000 in which a Related Party (as defined below) would have a direct or indirect material interest (“Related-Party Transactions”) are subject to Board review.  “Related Parties” are directors, director nominees, executive officers, holders of 5% or more of our Common Shares and their immediate family members.  Immediate family members are children, stepchildren, spouses, parents, siblings, stepparents, mothers-in-law, fathers-in-law, brothers-in-law, sisters-in-law, daughters-in-law, sons-in-law and any person, other than a tenant or domestic employee, in the household of a director, director nominee, executive officer or holder of 5% or more of our Common Shares.

 

The Board does not have a written policy regarding Related-Party Transactions and does not believe such a policy is necessary because the Board has not approved, and does not expect to approve, the Company’s engagement in any Related-Party Transactions other than in rare circumstances.  Any Related-Party Transaction would be considered based on facts and circumstances at the time.  After review, the Board would decide in good faith whether to approve the transaction.

 

Compensation Committee Interlocks and Insider Participation

 

The members of the Compensation Committee during 2017 were Messrs. Williams (Chair), Scheible, Gifford and McCreary.  Each member of the committee is independent, and no member was ever employed by the Company.  None of our directors has interlocking or other relationships with other boards, compensation committees or our executive officers that require disclosure under Item 407(e)(4) of Regulation S-K.

COMPENSATION DISCUSSION AND ANALYSIS

 

Fiscal year 2017 represented a year of repositioning and realignment of Benchmark.  We made significant progress in our stated priorities of driving revenue growth at the appropriate mix and profitability, improving operational excellence, elevating customer satisfaction and extending the Company’s rich technical capabilities and customer value proposition.

 

This progress translated to strong financial operating results.  Our revenue grew 7% year-over-year and we continued our focus on targeted higher-value markets with three of our four segments achieving or nearly achieving 10% year-over-year revenue growth.  We attained an expansion of our non-GAAP gross margin of 10 bps to 9.3% and an improvement of 12 days of our cash conversion cycle to an average of 66 days.

 

Our compensation philosophy is designed to deliver total compensation aligned with the level of Company performance.  In accordance with our compensation philosophy, in 2017:

 

·        We reviewed base salaries and maintained all but one at the same level, while providing a modest increase to the salaries of one Named Executive Officer (defined below) based on market data, performance and internal reviews;

·        Our Named Executive Officers earned annual incentives above target consistent with our financial results;

·        We maintained our practice of granting median level grants with a combination of PSUs and RSUs to align the compensation of our Named Executive Officers with the creation of shareholder value and maintain our targeted level of at risk compensation; and

·        The Company issued no shares under the 2014 PSU awards, for which the performance period ended in December 2017, because the 2014 PSU award metrics were not achieved.

 

Philosophy and Objectives

 

Our executive compensation program is designed to:

 

·        attract, retain and reward the performance of our management talent;

·        incentivize the achievement of the Company’s strategic plan, and both short- and long-term operating objectives;

·        be transparent, fair and objective;

·        encourage the taking of prudent business risks for appropriate potential long-term benefits while avoiding excessive, unnecessary or unwise risk; and

·        encourage smart investment and prudent deployment of capital.

 

At-risk, incentive compensation commits our executives to delivering positive results over both the short- and longer-terms by rewarding the achievement of those results and aligning their interests with the financial interests of our shareholders.  The Company’s total targeted compensation opportunity is generally set in the median range of market compensation survey data and a peer group of companies (our “Peer Group” is further detailed below), which was refined by the Compensation Committee in 2015 and reviewed annually to ensure an appropriate representative peer group.  Our compensation program is designed to deliver above-median total compensation if above-median performance is achieved and below-median total compensation for below-median performance.

 

 

 

In order to more closely align the financial interests of our executive officers with those of our shareholders, we have (i) share ownership guidelines requiring our executives to acquire a long-term ownership stake in the Company (see “Share Ownership Guidelines” below), (ii) a practice of making all board-level compensation decisions (base salary adjustments, annual bonuses, and long-term equity-based incentives) on a single day to reinforce performance feedback to the executives (see “Timing of Compensation Decisions” below), and (iii) a performance-based restricted stock unit (“PSU”) component in our compensation program, to more closely tie pay to performance.  Any vesting of PSUs depends on the Company’s achievement of financial goals set by the Compensation Committee and derived from the Company’s overall financial objectives, which for PSUs awarded in 2017 with a performance period ending in December 2019, included goals relating to:

 

·        revenue growth;

·        increasing operating income margin (operating income for the final year of the performance period excluding one-time, non-recurring, non-operational gains or charges, divided by the revenue for such year, “Adjusted Operating Margin”); and

·        increasing return on invested capital (“Adjusted ROIC”), which is defined as operating income for the final year of the performance period excluding one-time, non-recurring, non-operational gains or charges, adjusted for taxes, divided by the quarterly average of Invested Capital employed by the Company through such year.  “Invested Capital” is defined as shareholder equity plus long term debt minus cash as of the date of each balance sheet.  “Quarterly average of Invested Capital” equals the average of Invested Capital employed on each of five quarterly consolidated balance sheets for the Company from the first day of the final year of the performance period through the last day of such year.

 

The Committee believes that revenue growth, operating margin and earnings and the efficient use of capital are key long-term determinants of shareholder value.  The PSU targets are designed to enhance focus on performance across these areas ensuring alignment between management’s compensation and the creation of shareholder value.

 

The foregoing financial goals are measured at the end of the performance cycle (see “Long-Term Equity-Based Incentive Compensation” below).

 

The primary components of our executive compensation program, described in more detail below, are (i) base salary, (ii) annual performance-based incentive compensation, and (iii) long-term incentive compensation comprised of restricted stock units (“RSUs”) and PSUs; prior to 2016, stock options were also awarded:

·        Base Salary, which pays a set level of cash income to the executive, generally within the median range of the Peer Group.

·        Annual Performance-Based Incentive Award, which pays a variable cash award to reward achievement of short-term operational performance goals, which in 2017 was based on (i) total revenue, (ii) Adjusted Operating Income (as defined below), and (iv) improvements in our cash conversion cycle.

·        RSUs, which typically vest over a four-year period, are awarded to retain management and permit each executive to steadily build an ownership stake in the Company to encourage the creation of long-term shareholder value.

·        PSUs, designed to encourage the creation of long-term shareholder value and reward performance, subject to the achievement of specific long-term financial objectives over a specified performance period, which in 2017 was a three-year performance cycle.

 

Four of the five components are “at-risk” in that they have value only if the Company’s financial objectives are achieved or the value of the Common Shares rises.  The Company believes that the design of these at-risk components closely aligns executive pay with performance beneficial to the Company and its shareholders over the immediate and longer terms.

 

 

 

Role of Compensation Committee

 

The Compensation Committee is responsible for reviewing and approving all salary and annual incentive compensation paid to officers of the Company who are subject to Section 16 of the Exchange Act (“Section 16”), including our CEO and the other executive officers named below in the Summary Compensation Table (collectively with the CEO, the “Named Executive Officers”).  The committee recommends and the Board of Directors approves the CEO’s compensation.  The committee also approves the equity incentives provided to our executives, as well as most other employees (except for certain employees not subject to Section 16 for whom the CEO has delegated authority to make limited awards).

 

The committee annually reviews and approves operating and financial goals for the CEO, as well as evaluates the CEO’s performance against goals set for the period year.  The CEO’s performance against pre-determined goals is a significant factor in the Committee’s and the Board of Director’s setting of the CEO’s compensation package.

 

Additional information with respect to the authority of the committee is set forth above under “Operation of Board of Directors and Committees; Attendance”.

 

Pursuant to its authority under its written charter approved by the Board, the Compensation Committee may form and delegate authority to subcommittees of the committee.  Under its charter, the committee may also delegate its authority with respect to equity awards to the extent permitted by the Texas Business Organizations Code, except that the committee shall approve all awards of equity-based compensation to any officer subject to Section 16 of the Exchange Act.

 

The Compensation Committee has retained Pearl Meyer & Partners, LLC to serve as its independent compensation consultant (the “Consultant”) and perform reviews from time to time of our executive compensation practices, as well as the compensation of our Board of Directors.  The Consultant advised the committee on certain compensation matters relating to 2017 compensation and has performed such a review in connection with the committee’s decisions relating to 2018 compensation.  The Consultant does not provide any services on behalf of management and does not have any potential business conflicts with its role as an independent advisor.

 

Role of Management

 

Regarding most compensation matters, including executive and director compensation, management provides recommendations to the Compensation Committee; however, the committee does not delegate any of its responsibilities to others in setting compensation for the executive officers.  The CEO annually reviews the performance of the other executive officers and presents his conclusions and recommendations as to salary adjustments and annual equity awards to the committee for its consideration.  The committee exercises its discretion in determining any adjustments or awards to the Company’s officers, including the Named Executive Officers.  The committee does not take into account any recommendations from the CEO regarding his own compensation.

 

Evaluation of Say-on-Pay Advisory Vote

 

At our 2017 annual meeting, shareholders voted 95% in favor of approving the Named Executive Officer compensation described in the 2017 proxy statement.  Based on the Say-on-Pay vote at the annual meeting, the Compensation Committee determined not to change its compensation philosophy or to significantly alter our compensation practices in 2018.

 

 

 

Competitive Market Review

 

In setting executive compensation, the Compensation Committee considers all factors it deems relevant.  The committee also considers data and recommendations presented by the Consultant or management based on market data that provide information on the level of the total target compensation (i.e., salary, annual incentive and long-term incentive compensation) paid to similarly positioned executives at companies in the Peer Group.  To determine the amount of compensation to be paid to each of our executives, the committee performs an evaluation, including a review of the following (without assigning specific weight to each factor):

 

·        each executive’s performance, responsibilities and time in role;

·        market survey data;

·        relativity in pay among the Company’s executive officers;

·        comparability of each executive’s role to executives named in Peer Group proxy statements;

·        general compensation trends;

·        the Company’s financial position; and

·        for executives other than the CEO, the recommendations of the CEO.

 

The Compensation Committee has not established a set formula or other quantitative policy for allocating between long-term and immediately payable compensation, cash and noncash compensation, establishing the amount of equity awards or allocating equity awards between stock options, RSUs and PSUs, rather, the committee considers compensation in total for each individual, and may, accordingly, weight components differently from year to year.

 

Each year, the Compensation Committee evaluates peers from publicly traded companies that are major competitors or customers.  The committee seeks to select peer companies that are comparable to Benchmark based on various criteria, including revenue, market capitalization, similar industry affiliation, scope of global operations and a belief that these companies compete for similar executive talent.  The companies in the Peer Group for 2017 included entities with revenues between $0.9 billion and $6.8 billion  and median revenue of $2.4 billion, manufacturers and companies in the electrical components, systems software, semiconductor components and electronics manufacturing services industries.

 

The Peer Group for the fiscal year 2017 compensation decisions consisted of the following companies:

 

 

Timing of Compensation Decisions

 

In order to reinforce performance feedback through compensation and to comply with certain regulations impacting performance-based awards, the Compensation Committee makes executive compensation decisions in the first quarter of each year.  This allows for an assessment based on a focal point affording the opportunity to consider the relative contribution of each of the executives.  The committee reviews and approves equity awards to all eligible employees, including executive officers, once a year, on the date of the committee’s regularly scheduled first quarter meeting.  When used, stock options have an exercise price equal to the closing price of the Common Shares on the date of award.  The Company believes that the practice of granting stock-based awards in the first quarter of each year is reasonable when followed on a consistent basis each year and reduces the risk of inadvertently timing the grant of such awards with the release of material nonpublic information.

 

2017 Compensation

 

Base Salary Compensation

 

The Compensation Committee reviews base salaries of the Named Executive Officers annually.  In making salary determinations, the committee considers salary norms for persons in comparable positions in the Peer Group, the executive’s experience and scope of responsibility, the committee’s assessment of the executive’s individual past and potential future contribution to the Company’s results (without assigning a specific weight to each factor) as well as the recommendations of the CEO (as to executive officers other than the CEO).  During its review of base salaries for executives for 2017, the committee primarily considered market data provided by the Consultant, the results of a review of the executive’s compensation relative to the Company’s other executive officers, and the executive’s individual performance.  Based on this review, the committee granted a base salary increase effective March 1, 2017 of 6.0% to Mr. Peterson equating to a $370,000 base salary.  Messrs. Tufano, Adam and King base salaries remained at $1,000,000, $420,000 and $395,000, respectively.  Mr. Buseman joined the Company in August 2017 with an annual base salary of $400,000.

 

Annual Cash-Based Incentive Compensation

 

The purpose of the executive annual incentive compensation plan is to align the interests of executive officers with shareholders by motivating the achievement of superior financial and operational performance that increases shareholder value.  Incentive bonuses are generally granted based on a percentage of each executive officer’s base salary earned during the year.  Targets under the executive annual incentive plan for 2017 were set by the Compensation Committee in the first quarter of 2017.  Our practice is to award cash incentive bonuses based on the attainment of corporate performance goals.  The following table sets forth the threshold, target and maximum performance goals, which are weighted equally and assessed independently with respect to 2017 financial results of the Company for each of the executive officers:

 

                              

 

⁽¹⁾            Operating income excludes restructuring charges and other costs, customer insolvency and amortization of intangible assets (“Adjusted Operating Income”). 

⁽²⁾            Represents the average of the cash conversion cycle (accounts receivable days plus inventory days less accounts payable and customer deposit days) calculated as of the end of each of the four quarters ended December 31, 2017.

 

The following table sets forth the potential 2017 threshold, target and maximum cash incentive payment levels, as a percentage of salary, for the Named Executive Officers based on the Company’s achievement of the performance goals above.  Below the threshold, no award is earned; achievements between the different levels are paid ratably:

  

 

The total incentive award is determined according to the level of achievement of the aggregate corporate performance goals.  The maximum incentive bonus for these executive officers was 200% of target, or 230% of based salary for Mr. Tufano and 150% of base salary for the other executive officers.

 

At its regular first quarter 2018 meeting, the Compensation Committee determined the extent to which the 2017 performance goals were achieved and approved the amount to be paid to each executive.  The committee determined that the Company had exceeded the threshold Adjusted Operating Income goal and exceeded both the revenue and cash conversion cycle targets.  The table below sets forth the incentive award earned and the corresponding percentage of 2017 salary that the amount represented.

  

                              

 

⁽¹⁾            Mr. Tufano’s incentive payment consisted of the following percentages of base salary for each performance goal: 29.79% for Adjusted Operating Income, 57.50% for cash conversion cycle and 50.14% for revenue.

⁽²⁾            Messrs. Adam, Buseman (pro-rated for a partial year), King and Peterson’s incentive payments consisted of the following percentages of base salary for each performance goal: 19.43% for Adjusted Operating Income, 37.50% for cash conversion cycle and 32.70% for revenue.

 

Long-Term Incentive Compensation

 

The Compensation Committee believes that our long-term incentive compensation, which is equity-based, is critical to motivate increases in shareholder value over the longer term because it focuses executive attention on share price as the primary measure of the Company’s overall performance.  In 2017, the committee awarded executive officers a combination of RSUs and PSUs under our 2010 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) (in each case, as further described below).  To determine the awards for each executive officer, the committee evaluated each executive officer’s performance and responsibilities, and also considered market data, relative pay among the Company’s executive officers and other factors (without assigning a specific weight to each factor).  The evaluation was made with input from our CEO, and also factored in the future potential contribution from each executive officer.  Although management recommended the number of shares to be covered by equity awards granted to employees, the committee approved the grant of all equity awards and did not delegate the timing of such grants.  Equity award grants to our CEO and other executive officers are not made automatically each year.  The amount and terms of equity awards already held by executives generally are not significant factors in the committee’s determination of whether and how many equity awards should be granted to the executive officers.

 

RSUs - Long-term equity-based incentive compensation awards include time-based awards, which typically vest over four years, to improve retention of executive officers and to enable a steadily growing ownership stake in the Company that encourages long-term strategic performance.

 

PSUs – The committee believes the PSUs, which are subject to the achievement of measurable, absolute financial goals, can enable management to build a meaningful ownership stake in the Company to encourage long-term strategic thinking and the avoidance of unnecessary or excessive risk taking.  The financial goals for the 2017 grants were set by the committee and relate to the achievement of performance related revenue, Adjusted Operating Income and Adjusted ROIC goals as outlined in the Company’s 3 year strategic plan, which will be assessed at the end of the performance period.  Each metric will be weighted and assessed equally and independently.  The number of PSUs that will ultimately be earned will not be determined until the end of the corresponding performance periods, and may vary from as low as zero to as high as 2.5 times the target number depending on the level of achievement of the performance goals.

 

The long-term equity-based incentive compensation awards made in the first quarter of 2017 consisted of approximately 50% of the total value awarded in PSUs and 50% in RSUs.  Pursuant to his employment agreement

entered into in September 2016, Mr. Tufano received PSUs in 2017 with a grant date fair value of $1,800,000 and vesting based on a single two-year performance period ending on December 31, 2018.

 

Deferred Compensation Benefits

 

In order to attract and retain key employees, the Company established the Benchmark Electronics, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”), which allows certain designated employees, including our Named Executive Officers, the opportunity to defer, on a pretax basis, their salary, bonus awards, and other specified compensation and to receive the deferred amounts, together with an investment return (positive or negative), either at a predetermined time in the future or upon termination of employment with the Company.  The Company intends that the Deferred Compensation Plan will at all times be maintained on an unfunded basis for federal income tax purposes under the Code and be administered as a nonqualified ‘‘top-hat’’ plan exempt from the substantive requirements of the Employee Retirement Income Security Act.  All contributions by employees to the Deferred Compensation Plan, as well as any contributions by the Company, are fully vested upon contribution.

 

Retirement Benefits

 

All employees in the United States, including the executive officers, are eligible to participate in the Company’s 401(k) Employee Savings Plan (the “Savings Plan”).  The Savings Plan is a defined contribution tax-qualified retirement savings plan pursuant to which employees are able to contribute a portion of their eligible cash compensation to the Savings Plan and the Company provides matching cash contributions up to 4% of the employees’ eligible compensation upon completion of one year of service.  All contributions by employees to the Savings Plan, as well as any matching contributions by the Company, are fully vested upon contribution.

 

Perquisites and Personal Benefits

 

The Company historically has offered only minimal perquisites or other personal benefits to executive officers, consisting primarily of a portion of the cost of financial planning services, health club memberships and annual physical exams.  As disclosed in the Summary Compensation Table, Mr. Peterson was also provided relocation services during 2017 when he transferred to the Company’s headquarters in Arizona.

 

Other Matters

 

Share Ownership Guidelines

 

Our Named Executive Officers are subject to a share ownership requirement implemented in 2008.  During their term of employment with the Company, these officers are expected to directly own Common Shares having a market value of at least 3x annual base salary for the CEO and 2x annual base salary for the other Named Executive Officers.  Any such officers who have not yet achieved this ownership requirement are expected to retain 20% of their stock awards.  Once achieved, the officer remains in compliance despite any decrease in the market value of the Common Shares or any increase in base salary.  Mr. Adam has met the ownership requirement, and the other officers are in compliance with the policy.

Analysis of Compensation Risk

 

Periodically our Compensation Committee analyzes the potential risks posed by the Company’s compensation programs to determine whether the programs might encourage the executive officers to take unnecessary or excessive risks, or whether the programs might encourage the manipulation of reported earnings.  As part of its analysis the committee also considers mitigating factors and controls:

 

 

Based on its analysis, the Compensation Committee has determined that our compensation program is unlikely to motivate inappropriate risk-taking.

Limits on Deductibility of Compensation

 

In 2017, an income tax deduction under Section 162(m) of the Code will generally be available for annual compensation in excess of $1 million paid to certain executive officers only if that compensation is “performance-based” and complies with certain other requirements.  Although the Compensation Committee considers deductibility issues when approving executive compensation elements, we believe that other compensation objectives, such as attracting, retaining and providing incentives to qualified leaders, are important and may supersede the goal of maintaining deductibility.  Consequently, the committee may decide to pay compensation that is not deductible when it believes it is in the best interests of the Company and shareholders to do so.  Section 162(m) of the Code was amended by the Tax Cuts and Jobs Act (“2017 Tax Reform Law”), which was enacted on December 22, 2017.  Effective for taxable years beginning on or after January 1, 2018, the 2017 Tax Reform Law eliminates the Section 162(m) exception for performance-based compensation (other than with respect to payments made pursuant to certain “grandfathered” arrangements entered into prior to November 2, 2017) and expands the definition of “covered employee” to include a company’s chief financial officer.  Once an individual is treated as a “covered employee”, the individual remains a covered employee for all future years including after termination, retirement or death.  In the absence of any rulemaking at this time, the full impact of the 2017 Tax Reform Law’s changes to Section 162(m) of the Code on the Company’s executive compensation program is not yet known.

  

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee operates under a written charter approved by the Board of Directors. As required by the charter, each member of the committee is independent, and no member of the committee has any interlocking or other relationships with the Company.

 

The committee administers the Company’s executive compensation program. Among other things, the committee is responsible for:

 

·        establishing the compensation of our CEO, which is then ratified by the full Board;

·        determining the compensation of the Named Executive Officers other than the CEO; and

·        administering the Company’s employee benefit plans.

 

The committee has reviewed and discussed the Compensation Discussion and Analysis for the year ended December 31, 2017 and other compensation disclosures in this Proxy Statement with management. Based on such reviews and discussions, the committee recommended to the Board that the compensation-related disclosures made in this Proxy Statement be included herein and incorporated by reference into the Company’s annual report on Form 10-K for the year ended December 31, 2017.

 

Respectfully submitted,

 

Compensation Committee

 

Clay C. Williams, Chair

Robert K. Gifford

Jeffrey S. McCreary

David W. Scheible

COMPENSATION TABLES AND NARRATIVES

 

The following tables, narratives and footnotes describe the total compensation and benefits of our CEO and our other Named Executive Officers for 2017.

 

Summary Compensation Table

 

The following table sets forth information concerning the compensation and benefits of our Named Executive Officers during the fiscal years ended December 31, 2017, 2016 and 2015.

  

                              

 

⁽¹⁾           The amounts reflect the aggregate grant date fair value of RSU and PSU grants pursuant to the Company’s equity plans during the fiscal years ended December 31, 2017, 2016 and 2015, respectively, computed in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718.  Stock awards were valued using the closing market price of the Common Shares on the grant date.  A portion of the awards listed above are subject to performance conditions, with the grant date fair value calculated for purposes of the Stock Awards column assuming a target level of achievement.  Assuming the performance conditions will be achieved at a maximum level of 250% for grants in 2017, the grant date fair value of stock awards for each of our Named Executive Officers would be as follows:

 

 

⁽²⁾            The amounts reflect the aggregate grant date fair value of stock option grants pursuant to the Company’s equity plans during the year ended December 31, 2015 computed in accordance with the provisions of FASB ASC Topic 718.  Assumptions used in the calculation of this amount are included in footnote 1(l) to the Company’s audited financial statements for the year ended December 31, 2017, included in the Company’s Annual Report on Form 10−K filed with the SEC on March 1, 2018.

⁽³⁾            The amounts shown in this column reflect cash incentive bonuses earned by our Named Executive Officers pursuant to the Company’s annual executive incentive compensation plan.  The amounts include cash bonuses earned in year of service regardless of when paid.

⁽⁴⁾            For the year ended December 31, 2017, the “All Other Compensation” column includes (a) $10,600 paid by the Company pursuant to the Company’s Savings Plan to Messrs. Tufano, Adam, King and Peterson (under the Savings Plan, the Company is obligated to make matching contributions to the Savings Plan in an amount equal to 100% of each participant’s elective contributions, to the extent that such elective contributions do not exceed 4% of such participant’s eligible compensation and IRS limits), (b) payments by the Company to Messrs. Tufano, Adam, Buseman, King and Peterson pursuant to the Company’s Deferred Compensation Plan as elective contributions, and (c) payments by the Company of premiums for term life insurance on behalf of each of our Named Executive Officers.  In addition, Mr. Tufano received $11,452 of perquisites during 2017, which included $5,000 for financial planning services, $3,500 for his annual executive physical and $2,952 for a health club membership. Mr. Peterson also received $98,048 of perquisites during 2017, which included $68,458 for relocation costs, $18,738 for applicable taxes, $4,152 for financial planning services, $3,500 for his annual executive physical and $3,200 for a health club membership.

⁽⁵⁾            Mr. Adam resigned as Vice President and Chief Financial officer effective December 31, 2017.

⁽⁶⁾            Mr. Buseman became an Executive Officer in August 2017.

⁽⁷⁾            Mr. King resigned as Executive Vice President of Worldwide Operations in August 2017.

⁽⁸⁾            Mr. Peterson resigned as Vice President, General Counsel and Secretary effective December 31, 2017.

 

Employment and Other Agreements

 

The Company has entered into an employment agreement with Mr. Tufano and a severance agreement with Mr. Buseman.  These agreements are automatically extended by successive one-year terms, unless terminated by the Company or the executive, except in the case of Mr. Tufano whose agreement was subject to a single one-year extension.  In February 2018, the Company amended Mr. Tufano’s employment agreement to extend the term through December 31, 2019.

 

In addition, Mr. Tufano’s agreement provides for payment of a cash incentive if the Company attains or exceeds its corporate performance goals, which are specified each year by the Compensation Committee.  A more detailed discussion of the corporate performance goals and these bonuses, including the percentage of base salary and the mechanism by which the bonuses are paid and determined by the committee is set forth in “Compensation Discussion and Analysis—2017 Compensation — Annual Cash-Based Incentive Compensation”.

 

Each agreement also provides for severance payments if the applicable Named Executive Officer’s employment is terminated under certain qualifying circumstances.  A more detailed discussion of the severance terms is set forth in “—Potential Payments upon Termination or Change in Control”.

 

Each agreement contains restrictive covenants that prohibit the applicable Named Executive Officer from competing with the Company or soliciting its customers or service providers during the term of the agreement and for two years thereafter, as well as a confidentiality covenant of indefinite length.

 

In addition to the restrictive covenants described in the preceding sentence, Messrs. Tufano and Buseman may not, during their periods of employment and for two years thereafter, make disparaging remarks about the Company, its subsidiaries or products and services or divert customers of the Company to its competitors.

 

On May 15, 2017, the Company entered into an agreement with Mr. King pursuant to which he will remain employed in a part-time capacity.  The agreement became effective August 7, 2017.  Except as noted below, the agreement superseded and replaced Mr. King’s prior employment agreement with the Company, dated December 1, 2005.  The agreement will remain in effect until Mr. King’s scheduled retirement in October 2020.  Mr. King received his current base salary for 2017, as well as his annual bonus.  Commencing January 1, 2018, his annual base salary is $144,000, and he will not be eligible to receive an annual bonus or any additional equity-based incentive compensation.  Mr. King’s outstanding equity awards will continue to vest in accordance with their terms so long as he continues his employment.  Mr. King will remain subject to the non-competition, non-solicitation and confidentiality covenants set forth in Mr. King’s prior employment agreement.

 

On December 7, 2017, the Company entered into a Transition Agreement and Release of All Claims with Mr. Peterson.  In accordance with the agreement, Mr. Peterson resigned as Vice President, General Counsel and Secretary on December 31, 2017 and served in a transitional role through March 16, 2018.  Mr. Peterson received the pro-rated portion of his annualized salary of $371,000 during the transition period beginning January 1, 2018 and ending March 16, 2018, and his restricted stock unit awards and nonqualified stock option awards that vest solely based on the passage of time continued to vest through March 16, 2018.  In addition, Mr. Peterson will be paid severance consisting of the pro-rated portion of his annualized salary during the period beginning March 16, 2018 and ending December 31, 2018 totaling $294,767, and will receive continued health insurance coverage during this time period.  Per the agreement, Mr. Peterson received his bonus for the 2017 calendar year in accordance with the existing terms of the Company’s executive annual incentive compensation plan.

 

On December 18, 2017, the Company entered into a Transition Agreement and Release of All Claims with Mr. Adam.  In accordance with the agreement, Mr. Adam resigned as Vice President and Chief Financial Officer effective December 31, 2017 and served in a transitional role through March 9, 2018.  Mr. Adam received a reduced annualized salary of $104,000 during the transition period beginning January 1, 2018 and ending March 9, 2018, and his restricted stock unit awards and nonqualified stock option awards that vest solely based on the passage of time continued to vest through March 9, 2018.  The agreement further provided that Mr. Adam would receive his bonus for the 2017 calendar year in accordance with the existing terms of the Company’s executive annual incentive compensation plan.

 

Grants of Plan-Based Awards

 

The Benchmark Electronics, Inc. 2000 Stock Awards Plan (the “2000 Plan”) authorized, and the Omnibus Plan authorizes, the Company, upon approval of the Compensation Committee, to grant a variety of types of awards, including stock options, restricted shares, RSUs, stock appreciation rights, performance compensation awards, including PSUs, phantom stock awards and deferred share units, or any combination thereof, to any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of the Company.  The 2000 Plan expired in 2010 and no additional grants can be made under that plan.  The Omnibus Plan was approved by the Company’s shareholders in 2010 and replaced the 2000 Plan.  As of December 31, 2017, the Company had equity awards outstanding with respect to 1.5 million Common Shares under the Company’s 2000 and Omnibus Plans, and 3.1 million additional Common Shares are available for issuance under the Omnibus Plan.

 

The following table sets forth information concerning grants of RSUs and PSUs to the Named Executive Officers during 2017 under the Omnibus Plan, as well as estimated possible payouts under cash and equity incentive plans. The Company did not grant any stock option awards during 2017; accordingly these columns have been omitted.

 

 

 

2017 Grants of Plan-Based Awards

 

 

⁽¹⁾    The information included in the “Threshold”, “Target” and “Maximum” columns represents the range of potential payout under the 2017 annual executive incentive compensation plan for the Named Executive Officers in 2017.

⁽²⁾       The information included in the “Threshold”, “Target” and “Maximum” columns represents the range of potential shares that may be earned in respect of PSUs granted under the Omnibus Plan for the Named Executive Officers in 2017.  The number of PSUs that will ultimately be earned will not be determined until the end of the performance period, which is December 31, 2019.  Shares earned will be proportionately increased in the event of attainment of performance goals at levels between “Threshold” and “Target” or “Target” and “Maximum”.

⁽³⁾       The amounts shown in this column reflect the grant date fair value of the RSU and PSU awards granted in 2017, as computed in accordance with FASB ASC Topic 718.  The RSUs and PSUs were valued using the closing market price of the Common Shares on the grant date.

2017 Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information concerning stock options and stock awards held by our Named Executive Officers at December 31, 2017.