ESCO TECHNOLOGIES INC.
HUMAN RESOURCES AND COMPENSATION
(LAST REVISED FEBRUARY 6, 2013)
The Board of Directors (the “Board”) of ESCO TECHNOLOGIES INC. (the “Company”) hereby adopts this charter to govern the composition of its Human Resources and Compensation Committee (the “Committee”) and the scope of the Committee’s duties and responsibilities, and to set forth specific actions the Board expects the Committee to undertake to fulfill those duties and responsibilities.
I. STATEMENT OF COMMITTEE PURPOSE
The Committee’s basic responsibility is to review the performance and development of Company management in achieving corporate goals and objectives and to assure that senior officers and key executives of the Company are compensated effectively in a manner consistent with the strategy of the Company, competitive practice, and the requirements of the appropriate regulatory bodies. Toward that end, the Committee is responsible for (1) the overall design, approval and implementation of the compensation plans, policies and programs for senior officers and key executives of the Company and its subsidiaries and divisions; (2) the overall approval and recommendation of material additions or changes to benefit programs including new programs; (3) all plans, policies and programs for the Company’s Directors; and (4) other responsibilities as set forth herein or delegated by the Board from time to time.
II. COMPOSITION OF THE COMMITTEE
- The Committee will consist of not less than two directors, all of whom shall be “independent” as required by the New York Stock Exchange listing standards, “non-employee directors” within the meaning of Rule 16b-3 issued by the Securities and Exchange Commission (“SEC”) and “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code, as amended. Each appointed Committee member will be subject to annual reconfirmation and may be removed by the Board at any time.
- Prior to each appointment or annual reconfirmation of a director as a Committee member, the Board shall affirmatively determine that the director is “independent” as described in Section 303A.02 of the New York Stock Exchange Listed Company Manual. In making such determination, the Board shall consider all factors specifically relevant to determining whether the director has a relationship to the Company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including but not limited to (1) the source of such director’s compensation, including any consulting, advisory or other compensatory fee paid by the Company to such director, and (2) whether the director is affiliated with the Company, a subsidiary of the Company, or an affiliate of a subsidiary of the Company.
- When assessing the materiality of a director's relationship with the Company, the Board shall broadly consider all relevant facts and circumstances. In particular: (1) when assessing the materiality of a director’s relationship with the Company, the Board should consider the issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation; (2) when considering the sources of a director’s compensation, the Board should consider whether the director receives compensation from any person or entity that would impair his ability to make independent judgments about the Company’s executive compensation; and (3) when considering any affiliate relationship a director has with the Company, a subsidiary of the Company, or an affiliate of a subsidiary of the Company, the Board should consider whether the affiliate relationship places the director under the direct or indirect control of the Company or its senior management, or creates a direct relationship between the director and members of senior management, in each case of a nature that would impair his ability to make independent judgments about the Company’s executive compensation.
III. MEETINGS OF THE COMMITTEE
- The Committee will meet as often as necessary to carry out its responsibilities within its jurisdiction under this Charter. Meetings may be called by the Chairman of the Committee, the Chairman of the Board, or the President and/or Secretary of the Company.
- A majority of the total number of members of the Committee will constitute a quorum at all Committee meetings. A majority of the members of the Committee acting will be empowered to act on behalf of the Committee.
- The Committee may meet by telephone and may take action by unanimous written consent.
- Minutes will be kept of each meeting of the Committee and will be duly filed in the Company records. Reports of meetings of the Committee will be made to the Board at its next regularly scheduled meeting following the Committee meeting accompanied by recommendations, if any, to the Board approved by the Committee.
IV. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
- The duties and responsibilities of the Committee shall include the following:
- Annually review and approve the Company’s compensation strategy to ensure that employees of the Company are rewarded appropriately for their contributions to Company growth and profitability.
- Annually review and approve corporate goals and objectives relevant to Chief Executive Officer (“CEO”) and other executive officer compensation and evaluate their performance in light of those goals and objectives. The Committee, either by itself or together with the other independent directors (as directed by the Board), shall determine and approve the CEO’s and the other executive officers’ compensation levels based on said evaluation. In determining the long-term incentive component of CEO compensation, the Committee shall consider the Company’s performance and relative shareholder return, the value of similar incentive awards to CEOs at comparable companies, and the awards given to the Company’s CEO in past years.
- Annually review, determine and approve in light of corporate goals and objectives, the individual elements of total compensation including base, bonus, incentive and equity compensation, for the CEO and other executive officers, and produce the annual Committee report on executive compensation as required by the Securities and Exchange Commission, including the factors and criteria on which the CEO’s and all other executive officers’ compensation for the last year was based.
- Design, formulate, and, subject to required Board or shareholder approvals, implement, amend and administer compensation programs and plans for the Company’s executive officers and other executives. The Committee shall have and shall exercise all authority of the Board with respect to the administration of such plans.
- Recommend to the Board for submission to the Company’s shareholders stock option and other equity incentive plans and material amendments requiring shareholder approval.
- Annually make recommendations to the Board with respect to non-CEO compensation, incentive compensation plans and equity-based plans.
- Approve all special perquisites, special cash payments and other special compensation and benefit arrangements for the Company’s executive officers.
- Annually review and approve the base salaries and other compensation for corporate, subsidiary and division senior officers and key executives.
- Establish and periodically review the salary limit above which Committee approval/ratification is required for salary increases or new hires.
- Review periodically the appropriate level of compensation for non-employee Board and committee members and make recommendations to the Board as necessary.
- Approve grants of stock options and other discretionary awards under the Company’s stock option and other equity or incentive plans to eligible individuals in the Company’s service. The Committee may delegate to one or more officers designated by the Committee the authority to make grants to eligible individuals (other than any such officer) who are not executive officers, provided that the Committee shall have fixed the price (or a formula for determining the price) and the vesting schedule for such grants, approved the form of documentation evidencing such grants, and determined the appropriate number of shares or the basis for determining such number of shares by position, compensation level or category of personnel. Any officer(s) to whom such authority is delegated shall regularly report to the Committee the grants so made. Any such delegation may be revoked at any time by the Committee.
- Oversee and periodically review the operation of all of the Company’s employee benefit plans, including but not limited to the Section 401(k) Plan, the Employee Stock Purchase Plan, and the Pension Plan. Adopt, amend or terminate plans which are not the prerogative of management. Day-to-day administration, including the preparation and filing of all government reports and the preparation and delivery of all required employee materials and communications, will be performed by Company personnel.
- Ensure that the annual incentive compensation plans are administered in a manner consistent with the Company’s compensation strategy and the terms of such plans, including but not limited to the following: participation, target annual incentive awards, subsidiary and corporate financial goals, actual awards paid to executive officers and other participants, and total funds reserved for payment under the plan.
- Review matters related to management performance, compensation and succession planning and executive development for executive staff.
- Approve and amend employment agreements, separation packages, and severance benefits for executive officers.
- Annually review and approve the Company’s charitable contributions program.
- Annually review the Company’s Communication Plan.
- Perform any other activities consistent with this Charter, the Company’s Bylaws and governing law as the Committee or the Board deems necessary or appropriate.
- Review the Committee Charter from time to time and recommend any changes to the Board.
- Report to the Board on the major items covered at each Committee meeting.
- Annually review and evaluate the Committee’s own performance, including the adequacy, quality and appropriateness of the information and recommendations presented by the Committee to the Board. The Committee will report to the Board the results of its evaluation including any recommended amendments to the Charter and any recommended changes to the Company’s or the Board’s policies and procedures.
- The Committee shall have the authority to delegate responsibility for the day-to-day management of the Company’s executive compensation and benefit plans, policies and programs, and other administrative or management responsibilities which are the Committee’s prerogative.
- The Committee may, in its sole discretion, obtain such data or other resources as it deems necessary to perform its duties, including but not limited to obtaining external reports or published salary surveys, and retain or obtain advice from compensation consultants, independent legal counsel and other advisers as it determines necessary to discharge its duties and responsibilities. The Committee shall be directly responsible for the appointment, compensation, retention terms and oversight of the work of any such consultant, counsel or adviser retained by the Committee. Nothing herein shall require the Committee to implement or act consistently with the advice or recommendations of any such consultant, counsel or adviser.
- The Company shall provide appropriate funding, as determined by the Committee, for payment of reasonable compensation to any such consultant, counsel or adviser.
- Except as set forth below, the Committee may select a compensation consultant, independent legal counsel or other adviser to the Committee only after assessing the independence of such consultant, counsel or other adviser. Such assessment shall take into consideration all factors relevant to that person’s independence from management, specifically including, without limitation, the following:
- The provision of other services to the Company by the person that employs such consultant, counsel or adviser;
- The amount of fees received from the Company by the person that employs such consultant, counsel or adviser, as a percentage of the total revenue of such person;
- The policies and procedures of the person that employs such consultant, counsel or adviser that are designed to prevent conflicts of interest;
- Any business or personal relationship of such consultant, counsel or adviser with a member of the Committee;
- Any stock of the Company owned by such consultant, counsel or adviser; and
- Any business or personal relationship of such consultant, counsel or adviser or the person employing such consultant, counsel or adviser with an executive officer of the Company;
Nothing herein shall require a compensation consultant, legal counsel or other adviser to be independent, provided that the Committee conducts the foregoing independence assessment before retaining or receiving advice from such consultant, counsel or adviser. The foregoing independence assessment shall not be required with respect to (i) in-house legal counsel, or (ii) any compensation consultant, legal counsel or other adviser whose role is limited to either consulting on any broad-based plan that does not discriminate in scope, terms, or operation in favor of executive officers or directors of the Company and that is available generally to all salaried employees, or providing information that either is not customized for a particular company or that is customized based on parameters that are not developed by the consultant, and about which the consultant does not provide advice.