Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Harley-Davidson, Inc.
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Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
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Table of Contents
Annual Meeting of
Shareholders
and Proxy
Statement
April 29, 2017
Harley-Davidson Museum
400 West Canal
Street
Milwaukee, Wisconsin
Table of Contents
NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT Harley-Davidson, Inc.
3700 West Juneau Avenue Milwaukee, Wisconsin 53208 (414) 342-4680 |
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Dear Fellow Shareholder: |
March 20,
2017 |
On behalf of the Board of Directors and
management of Harley-Davidson, Inc., we invite you to attend the 2017 Annual
Meeting of Shareholders to be held at 10:00 a.m., Central Daylight Time, on
Saturday, April 29, 2017, at the Harley-Davidson Museum, 400 West Canal Street,
Milwaukee, Wisconsin.
The accompanying Notice of Annual Meeting
of Shareholders and Proxy Statement describe the formal business that the
shareholders will transact at the Annual Meeting. During the Annual Meeting,
there will also be brief reports on operations. When the business of the Annual
Meeting is concluded, shareholders will have an opportunity to ask
questions.
We are furnishing proxy materials to our
shareholders via the internet. This process expedites the delivery of proxy
materials, ensures that proxy materials remain easily accessible to shareholders
and provides clear instructions for receiving materials and voting.
On March 20, 2017, we mailed our Notice of
Internet Availability of Proxy Materials, which contains instructions for use of
this process, including how to access our Proxy Statement and 2016 Annual Report
on Form 10-K and how to vote via the internet, mail or telephone, or in person
at our 2017 Annual Meeting of Shareholders. The Notice of Internet Availability
of Proxy Materials contains instructions on how you may receive a printed copy
of the Proxy Statement and 2016 Annual Report on Form 10-K.
We sincerely hope you will be able to
attend our Annual Meeting. However, whether or not you are personally present,
it is important that you vote your shares.
If you own shares through a broker, bank
or other nominee, please vote your shares by providing your broker, bank or
nominee with your voting instructions.
Thank you for your ongoing support of
Harley-Davidson, Inc.
Sincerely yours,
Michael J. Cave
Chairman of the Board
Matthew S. Levatich
President and Chief Executive Officer
HARLEY-DAVIDSON.COM i
Table of Contents
Notice of
Annual Meeting of Shareholders |
April 29,
2017
The 2017 Annual Meeting of Shareholders of
Harley-Davidson, Inc. will be held at the Harley-Davidson Museum, 400 West Canal
Street, Milwaukee, Wisconsin, on Saturday, April 29, 2017, at 10:00 a.m.,
Central Daylight Time, to vote on the items listed below.
ITEMS TO BE VOTED: |
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HOW TO VOTE YOUR SHARES: |
1 To elect ten directors to the Board of
Directors;
2 To approve, by advisory vote, the
compensation of our named executive officers;
3 To consider the frequency of the
advisory vote on compensation of our named executive officers;
and
4 To ratify the selection of Ernst &
Young LLP, independent registered public accounting firm, to be our
auditors for the fiscal year ending December 31, 2017.
We will also take action upon any
other business as may properly come before the 2017 Annual Meeting and any
adjournments or postponements of that meeting.
The Board of Directors unanimously
recommends a vote FOR items 1 and 2, EVERY YEAR for item 3, and FOR
item 4. The Board of Directors or proxy holders will use their discretion
on other matters that may arise at the 2017 Annual Meeting. |
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February 23, 2017 is the record date
for determining shareholders entitled to notice of and to vote at the 2017
Annual Meeting and any adjournments or postponements of that meeting. If
you held your shares as of the close of business on February 23, 2017, you
can vote using one of the following methods: |
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INTERNET You can vote your shares online at www.proxyvote.com. |
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TELEPHONE In the U.S. or Canada, you can vote your shares toll-free. Check
your proxy card or voting instruction form for the toll-free
number. |
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MAIL You can vote by mail by marking, dating, and signing your proxy
card or voting instruction form and returning it in the postage-paid
envelope provided. |
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ATTENDING THE
MEETING If you plan to attend our
meeting, you will need to request a ballot to vote your shares. In
addition, if you own your shares through a bank, broker or other nominee,
you will need to obtain a legal proxy from your bank, broker or other
nominee to attend and to vote at the
meeting. |
We urge you to submit your proxy as soon
as possible. If the records of our transfer agent, Computershare Investor
Services LLC, show that you own shares in your name, or you own shares in our
Dividend Reinvestment Plan, then you can submit your proxy for those shares via
the internet. Alternatively, after first requesting a printed copy of this Proxy
Statement, proxy card and Annual Report on Form 10-K, you can mark your votes on
the proxy card, sign and date it, and mail it in the postage-paid envelope we
provided with it. You may vote your shares by telephone by requesting a printed
copy of the Proxy Statement and Annual Report on Form 10-K or by viewing the
proxy materials at http://www.proxyvote.com at which time
a toll-free number will be provided. You will need a touch tone telephone to
vote by telephone. Instructions for using these convenient services are set
forth on the Notice of Internet Availability of Proxy Materials.
If you own shares in street name, we
encourage you to provide voting instructions to your bank, broker or other
nominee. Street name holders may also vote via telephone or the internet if
their bank, broker or other nominee makes those methods available, in which case
the bank, broker or other nominee will enclose the instructions along with this
Proxy Statement. Street name holders who wish to vote at the meeting cannot vote
in person at the 2017 Annual Meeting unless they first obtain a proxy issued in
their name from their broker, bank or other nominee.
By Order of the Board of
Directors,
Harley-Davidson,
Inc.
Paul J. Jones
Secretary
Milwaukee, Wisconsin
March 20,
2017
ii HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
This overview of voting items provides
information that you should consider before voting on the items presented at
this years Annual Meeting of Shareholders. This overview of voting items does
not contain all of the information that you should consider, and you should read
the entire Proxy Statement carefully before voting.
Item 1 To elect ten directors to the Board of
Directors
✓ Our Board unanimously recommends that you vote FOR the
election of all director nominees. |
Director
Nominees
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Age |
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Director Since |
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Independent |
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Other Public
Directorships |
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Board Committees |
AFC* |
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HRC |
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NCGC |
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SC |
Troy
Alstead |
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53 |
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2017 |
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x |
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Levi Strauss & Co. (1) |
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x |
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x |
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Founder, Harbor O5, LLC |
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R.
John Anderson |
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65 |
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2010 |
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x |
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x |
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x |
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x |
Retired Chief Executive Officer of |
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Levi Strauss & Co. |
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Michael J. Cave |
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56 |
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2012 |
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x |
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Aircastle Limited |
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x |
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Chairman of the
Board |
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Ball Corporation |
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Retired Senior Vice President of |
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Esterline Technologies |
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The
Boeing Company |
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Corporation |
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Allan Golston |
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50 |
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2017 |
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x |
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Stryker Corporation |
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x |
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x |
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President, United States Program
for |
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the
Bill & Melinda Gates Foundation |
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Matthew S. Levatich |
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52 |
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2015 |
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Emerson Electric Co. |
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President and Chief Executive |
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Officer, Harley-Davidson, Inc. |
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Sara
L. Levinson |
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66 |
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1996 |
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x |
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Macys, Inc. |
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x |
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x |
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x |
Co-founder and Director, Katapult |
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N.
Thomas Linebarger |
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54 |
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2008 |
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x |
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Cummins Inc. |
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x |
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x |
Chairman and Chief Executive |
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Officer, Cummins Inc. |
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Brian R. Niccol |
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42 |
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2016 |
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x |
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x |
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x |
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x |
Chief Executive Officer, Taco Bell |
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Maryrose T. Sylvester |
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51 |
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2016 |
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x |
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x |
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x |
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President and Chief Executive |
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Officer, Current by GE |
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Jochen Zeitz |
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53 |
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2007 |
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x |
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Wilderness Holdings |
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x |
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x |
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Co-Founder and Executive |
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Limited (2) |
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Chairman, B Team |
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AFC: Audit and Finance Committee
HRC:
Human Resources Committee
NCGC: Nominating and Corporate Governance
Committee
SC: Sustainability Committee
- Member and Committee Chair
X -
Member
(1) Levi Strauss & Co. has
publicly-traded debt, but privately-held equity.
(2) Equity is traded on the Johannesburg
Stock Exchange.
* The current Chair of the
Audit and Finance Committee is James A. Norling, who is not standing for
re-election as a director. |
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HARLEY-DAVIDSON.COM iii
Table of Contents
PROXY SUMMARY
Director Nominee
Highlights
REFRESHED
BOARD
We have significantly refreshed our Board
in the last year. Four of our director nominees - Ms. Sylvester and Messrs.
Alstead, Golston and Niccol - became directors after the 2016 Annual Meeting of
Shareholders.
Item 2 To approve, by advisory vote, the compensation of our
named executive officers
✓ Our Board unanimously recommends that you vote FOR
this proposal. |
EXECUTIVE COMPENSATION
GOALS AND GUIDING PRINCIPLES
● |
The compensation program should
create and reinforce pay for performance. Exceptional performance should result in increased compensation,
but missing performance goals should result in reduced or no incentive
pay. |
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The compensation program should
encourage both the desired results and the right behaviors. It should strike a balance so the company delivers
near-term results that drive long-term performance, while incorporating
risk-mitigating features to ensure the compensation program does not
encourage excessive risk taking. |
● |
The compensation program should
align the interests of management with the interests of
shareholders. A significant portion of
executive compensation should be equity-based, with required minimum stock
ownership guidelines designed to appropriately focus our management on
long-term, sustainable growth. |
● |
The compensation program should
ensure our performance goals align with our strategy and operating
plan. These performance goals should be
challenging, yet achievable during the applicable performance
period. |
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The compensation program should
provide a target total compensation opportunity that keeps us competitive
in our industry for the size and scale of our company, so we can attract
top executive talent. Our compensation
program includes a base salary, market competitive employee benefits,
targeted short-term incentive awards and long-term incentive awards valued
as of their grant date. Although we have target compensation levels, we
employ flexibility and discretion so the company can attract and retain a
highly-qualified and strong leadership
team. |
iv HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
PROXY SUMMARY
EXECUTIVE COMPENSATION
HIGHLIGHTS
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HARLEY-DAVIDSON COMPENSATION
MIX
2015 LONG-TERM
INCENTIVES HARLEY-DAVIDSON
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Base
Salary
●Paid in cash
●Market Competitive |
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Short-Term
Incentives
●Paid in cash
●Based on performance measures |
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Long-Term
Incentives
●Comprised of:
- 33%
restricted stock units
- 67%
performance shares
●Beginning in 2016, we eliminated stock options and
cash-based long-term incentives and replaced them with performance shares
to provide a more direct connection between performance relative to key
measures and the rewards that result from that performance. We also
updated our stock ownership guidelines to be more reflective of the
competitive market. |
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2016 LONG-TERM
INCENTIVES |
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* See Peer Group and Executive
Compensation Benchmarking in our Compensation Discussion and Analysis
section for a list of these companies. |
STRENGTHENING THE LINK
BETWEEN PAY AND PERFORMANCE
Beginning in 2016 and continuing for 2017,
we moved to further strengthen the link between compensation and performance. In
2016, we modified several elements of our executive compensation program by
increasing the amount of compensation that is classified as performance-based
and reconfigured our long-term incentive plan to better align long-term
executive rewards with long-term shareholder value. Examples include eliminating
the use of stock options and our cash-based long-term incentives and introducing
performance shares, which only create value to the executive when, at a minimum,
we attain threshold performance over a three-year performance period. Currently,
each named executive officer receives 67% of their long-term incentive award in
the form of performance shares. For 2017, we set the maximum payout under the
performance share awards at 200% of target rather than the maximum 300% of
target that we used in 2016.
HARLEY-DAVIDSON.COM v
Table of Contents
PROXY SUMMARY
Item 3 To consider the frequency of the advisory vote on the
compensation of our named executive officers
✓ Our Board unanimously recommends a vote in favor of
submitting the advisory vote on the compensation of our named executive
officers to shareholders EVERY YEAR. |
In accordance with the executive
compensation disclosure rules contained in Item 402 of Securities and Exchange
Commission (SEC) Regulation S-K, a say-when-on-pay vote must be submitted to
shareholders every six years. Therefore, we are asking shareholders whether the
advisory vote on our named executive officer (NEO) compensation should occur
every year, once every two years or once every three years. You may also abstain
from voting on this proposal.
After considering the benefits and
consequences of each option for the frequency of submitting the advisory vote on
the compensation of our NEOs to shareholders, our Board recommends submitting
the advisory vote on the compensation of our NEOs to our shareholders every
year.
Item 4 To ratify the selection of Ernst & Young LLP, an
independent registered public accounting firm, to be the auditors for the
fiscal year ending December 31, 2017.
✓ Our Board unanimously recommends a vote FOR ratifying
the selection of Ernst & Young LLP, an independent registered public
accounting firm, to be the auditors for the fiscal year ending December
31, 2017. |
We will also take
action upon any other business as may properly come before the 2017 Annual
Meeting and any adjournments or postponements of that meeting.
The Board of Directors or proxy
holders will use their discretion on other matters that may arise at the
2017 Annual Meeting. |
vi HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
Table of Contents
PROXY STATEMENT |
|
3700 West Juneau
Avenue Milwaukee, Wisconsin
53208
|
March 20, 2017
The Board of Directors of Harley-Davidson,
Inc. requests the proxy accompanying this Proxy Statement for use at the 2017
Annual Meeting of Shareholders to be held on April 29, 2017 and at any
adjournment or postponement of that meeting (the Annual Meeting).
We first mailed the Notice of Internet
Availability of Proxy Materials to shareholders on March 20, 2017. The Notice of
Internet Availability of Proxy Materials instructs shareholders and beneficial
owners of our Common Stock on how they may access our proxy materials, which
include our Proxy Statement and 2016 Annual Report on Form 10-K, via the
internet. You will not receive a printed copy of the proxy materials unless you
request to receive these materials by following the instructions we provide
later in this Proxy Statement and in the Notice of Internet Availability of
Proxy Materials. Instead, the Notice of Internet Availability of Proxy Materials
will instruct you on how you may access and review all of the important
information contained in the proxy materials. The Notice of Internet
Availability of Proxy Materials also instructs how you may submit your proxy via
the internet, mail or telephone, or in person at the Annual Meeting. If you
received a Notice of Internet Availability of Proxy Materials by mail and would
like to receive a printed copy of our proxy materials, you should follow the
instructions we provide later in this Proxy Statement.
As used in this Proxy Statement, we,
our, the company or Harley-Davidson refers to Harley-Davidson, Inc. We
operate in two business segments: the motorcycles and related products segment
and the financial services segment. HDMC refers to our motorcycles and related
products segment subsidiaries, which include the companies that do business as
Harley-Davidson Motor Company. HDFS generally refers to our financial
services segment, which includes Harley-Davidson Financial Services, Inc. and
its subsidiaries.
HARLEY-DAVIDSON.COM 1
Table of Contents
PROPOSALS TO BE VOTED
ON
PROPOSAL 1:
ELECTION OF DIRECTORS |
Shareholders will elect ten directors at
the 2017 Annual Meeting. We refreshed our Board of Directors significantly in
the last year. Four of the director nominees - Ms. Sylvester and Messrs.
Alstead, Golston and Niccol - became directors after the 2016 Annual Meeting of
Shareholders.
Our Restated Articles of Incorporation
provide for a Board of Directors that has between six and fifteen members. The
Board determines the size from time to time by the vote of a majority of the
directors then in office. The entire Board is elected annually. The Board
currently consists of thirteen members with terms that expire at the Annual
Meeting. However, current directors Donald A. James, George L. Miles, Jr. and
James A. Norling will not stand for re-election at the Annual Meeting.
Accordingly, on February 23, 2017, the Board acted to decrease its size from
thirteen to ten directors, effective as of the commencement of the Annual
Meeting.
Our By-laws have a majority vote standard
for the election of directors. Because this is an uncontested election, the
number of votes cast favoring each director nominees election must exceed 50%
of the total number of votes cast with respect to that nominees election,
including any votes withheld, for shareholders to elect the nominee. Any shares
not voted, whether due to abstentions or broker non-votes, will not have an
impact on the election of directors.
Unless you specify otherwise in your
proxy, the persons you appointed will vote your shares FOR the Board of
Directors nominees that we name below. If any nominee becomes unable to serve,
the persons you appointed may vote your shares for another person that the Board
designates.
Identified on the
following pages are the ten director candidates that the Board of
Directors has nominated. All ten nominees have advised us that they will
serve if elected. We provide the following information for each nominee of
the Board of Directors: |
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name; |
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age as of February 23,
2017; |
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principal occupations for at least
the past five years; |
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the names of any other public
companies or relevant private companies where the nominee or director
currently serves as a director or has served during the past five years;
and |
● |
the particular experience,
qualifications, attributes or skills that led the Board to conclude that
the person should serve as a director for the
company. |
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THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE
FOLLOWING TEN NOMINEES OF THE BOARD
OF DIRECTORS. |
2 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1: ELECTION OF
DIRECTORS
Nominees of the Board of
Directors
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TROY
ALSTEAD
Age:
53 Director since February 2017
Mr. Alstead is the founder of Harbor
O5, LLC, which is developing a new restaurant and social concept scheduled
to open in 2017. In February 2016, Mr. Alstead retired from Starbucks
Corporation, an American coffee company and coffeehouse chain, after 24
years with the company, having most recently served as Chief Operating
Officer. He served as Chief Operating Officer beginning in 2014. From 2008
to 2014, he served as that companys Chief Financial Officer and Chief
Administrative Officer. Additionally, he served as Group President, Global
Business Services from 2013 until his promotion to Chief Operating
Officer. Mr. Alstead joined Starbucks in 1992 and over the years served in
a number of operational, general management, and finance roles. Mr.
Alstead spent a decade in Starbucks international business, including
roles as Senior Leader of Starbucks International, President Europe/Middle
East/Africa headquartered in Amsterdam, and Chief Operating Officer of
Starbucks Greater China, headquartered in Shanghai. Mr. Alstead is also a
member of the board of directors of Levi Strauss & Co. and Topgolf
International, Inc. Mr. Alsteads extensive background as an executive for
an international corporation with strong brand recognition makes him a
valuable asset to our Board. |
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R. JOHN
ANDERSON
Age:
65 Director since 2010
Mr. Anderson served as the President
and Chief Executive Officer of Levi Strauss & Co., a company that
designs and markets jeans, casual wear and related accessories, from 2006
to 2011. Mr. Anderson has wide-ranging expertise in international business
matters, merchandising, marketing and operations. Among other leadership
positions in his 30-year career with Levi Strauss & Co., he served as
President of the Companys Asia Pacific Division; President of its Global
Sourcing Organization; President of Levi Strauss Canada and Latin America;
interim President of Levi Strauss Europe; and Vice President of
Merchandising and Product Development for the U.S. Mr. Anderson is
chairman of the board of directors of True Religion Apparel, Inc., which
designs, manufactures and distributes True Religion Brand Jeans and other
sportswear and licensed accessories. Mr. Andersons significant experience
with companies that develop and market consumer products and apparel is
extremely helpful to the Board in light of the nature of our
businesses. |
HARLEY-DAVIDSON.COM 3
Table of Contents
PROPOSAL 1: ELECTION OF
DIRECTORS
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MICHAEL J.
CAVE
Chairman of the
Board Chair of Human Resources Committee
Age:
56 Director since 2012
Mr. Cave has been our Chairman of
the Board since April 30, 2016. He served as a Senior Vice President of
The Boeing Company, the worlds leading aerospace company and the largest
manufacturer of commercial jetliners and military aircraft, from 2010 to
2014. He also served as President of Boeing Capital Corp., a wholly owned
Boeing subsidiary that is primarily responsible for arranging, structuring
and providing financing for Boeings commercial airplane and space and
defense products, from 2010 to 2014. Mr. Cave had served as Senior Vice
President of Business Development and Strategy for Boeing, as Senior Vice
President/Chief Financial Officer of Boeing Commercial Airplanes and as
Vice President, Finance for Boeing Information, Space & Defense
Systems from 1998 through 2010. Prior to 1998, Mr. Cave held a variety of
other assignments across Boeings defense and commercial businesses. He
also serves as a director of AirCastle Ltd., Ball Corporation and
Esterline Technologies, and served as a director of Boeing Capital Corp.
from 2010 to 2014. He holds a bachelors degree in engineering from Purdue
University. Mr. Caves skills, expertise and experience in engineering and
financial services make him an extremely valuable member of the
Board. |
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ALLAN
GOLSTON
Age:
50 Director since February 2017
Mr. Golston has been President of
the United States Program for the Bill & Melinda Gates Foundation, a
private foundation that supports initiatives in education, world health
and population, and community giving in the Pacific Northwest, since 2006.
Mr. Golston served as Chief Financial and Administrative Officer for that
foundation from 2000 to 2006. He is a certified public accountant and has
held positions as a finance executive with Swedish Health Services in
Seattle, Washington, and with the University of Colorado Hospital. Mr.
Golston is also a member of the board of directors of Stryker Corporation
and has served on that companys audit committee. Mr. Golstons expertise
in financial and audit matters makes him a very significant contributor to
our Board and particularly to our Audit and Finance
Committee. |
|
|
|
|
|
MATTHEW S.
LEVATICH
Age:
52 Director since 2015
Mr. Levatich is our President and
Chief Executive Officer. Mr. Levatich joined Harley-Davidson in 1994 and
served as President and Chief Operating Officer of HDMC from 2009 until
May 2015, when he became our President and Chief Executive Officer. Mr.
Levatich previously served as President and Managing Director of MV
Agusta, a former subsidiary of Harley-Davidson, from 2008 to 2009, General
Manager of Parts and Accessories and Custom Vehicle Operations from 2007
to 2008, and Vice President of Materials Management from 2003 to 2007. Mr.
Levatich holds an undergraduate degree in mechanical engineering from
Rensselaer Polytechnic Institute. He received his graduate degree in
engineering management and an MBA from Northwestern University. Mr.
Levatich also serves on the board of directors of Emerson Electric Co. Mr.
Levatichs years of experience within our organization and in the
motorcycle manufacturing industry provide the Board with a deep
familiarity and a wealth of knowledge to utilize in decision-making with
respect to all facets of the company. |
4 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 1: ELECTION OF
DIRECTORS
|
|
SARA L.
LEVINSON
Age:
66 Director since 1996
Ms. Levinson is a co-founder and a
director of Katapult, a digital entertainment company making products for
todays creative generation, since 2013. She had served as the
Non-Executive Chairman of ClubMom, Inc., an internet-based consumer
relationship company, a position she held from 2002 to 2008. She
previously served as Chairman and Chief Executive Officer of ClubMom, Inc.
from 2000 to 2002. Ms. Levinson previously served as President of the
Womens Group of Rodale, Inc., the worlds leading publisher of
information on healthy, active lifestyles, a position she held from 2002
to 2005. Ms. Levinson was President of NFL Properties, Inc., a trademark
licensing company for the National Football League, from 1994 to 2000.
Prior to that time, Ms. Levinson served as President and Business Director
of MTV: Music Television, a cable television network. Ms. Levinson holds a
masters degree of business administration from Columbia University and
has expertise in marketing and licensing. She is also a member of the
board of directors for Macys, Inc. Ms. Levinsons experience as an
executive of a trademark licensing company and as a director of a retail
merchandising company allow her to bring insightful guidance to the Board
regarding our company and the industry in which it operates. Her service
on another board of directors enables her to provide insight into broader
markets and corporate governance trends affecting public
companies. |
|
|
|
|
|
N. THOMAS
LINEBARGER
Chair of Nominating and Corporate
Governance Committee
Age:
54 Director since 2008
Mr. Linebarger is Chairman and Chief
Executive Officer of Cummins Inc., which designs, manufactures,
distributes and services diesel and natural gas engines, electric power
generation systems and engine-related component products, a position he
has held since 2012. Mr. Linebarger had served as President and Chief
Operating Officer of Cummins from 2008 to 2012. Mr. Linebarger served as
Executive Vice President of Cummins and President of Cummins Power
Generation from 2005 to 2008, as Cummins Vice President and President of
Cummins Power Generation from 2003 to 2005 and as Cummins Chief Financial
Officer from 2000 to 2003. Mr. Linebarger has a masters degree of
business administration from the Stanford Graduate School of Business and
a masters degree of manufacturing systems engineering from Stanford
University. He has expertise in finance, engineering, international
business matters and operations. Mr. Linebarger is also a director of
Cummins Inc. He was a director of Pactiv Corporation from 2005 to 2010
(when it was acquired by Reynolds Group Holdings). Mr. Linebargers
background, experience and expertise in finance, engineering,
international business matters and operations are extremely valuable to
the Board. |
HARLEY-DAVIDSON.COM 5
Table of Contents
PROPOSAL 1: ELECTION OF
DIRECTORS
|
|
BRIAN R.
NICCOL
Age:
42 Director since July 2016
Mr. Niccol has served as Chief
Executive Officer of Taco Bell, a division of Yum! Brands, Inc., since
2015. Taco Bell is a distinctive brand and the global leader in the
Mexican-style fast food restaurant category. He joined Taco Bell in 2011
as Chief Marketing and Innovation Officer and served as President of Taco
Bell from 2013 to 2014. Prior to his service at Taco Bell, from 2005 to
2011, he served in various executive positions at Pizza Hut, another
division of Yum! Brands, including General Manager and Chief Marketing
Officer. Before joining Yum! Brands, Mr. Niccol spent ten years at Procter
& Gamble Co., serving in various brand management positions. Mr.
Niccol holds an undergraduate degree from Miami University and an MBA from
the University of Chicago Booth School of Business. His extensive
experience in brand management, marketing and operations makes him a
valuable resource to our Board given the nature of our
business. |
|
|
|
|
|
MARYROSE T.
SYLVESTER
Age:
51 Director since July 2016
Maryrose T. Sylvester has served as
President and Chief Executive Officer of Current, powered by GE, since
2015. Current is a digital power service business that delivers integrated
energy systems combining LEDs, solar, storage and onsite power. Prior to
her role at Current, Ms. Sylvester served as President and CEO of GE
Lighting, a subsidiary of General Electric Company (GE), from 2011 to
2015. GE Lighting manufactures, sources and sells a variety of
energy-efficient lighting solutions. She has been employed by GE since
1988. At GE, she held positions of increasing responsibility with
divisions of that company, including President and CEO of GE Lighting
Systems (2000 to 2002), President of GE Quartz (2002 to 2006) and CEO of
GE Intelligent Platforms (2006 to 2011). Ms. Sylvester holds an
undergraduate degree in Procurement and Production Management from Bowling
Green State University and an MBA from Cleveland State University. Her
executive experience in manufacturing, operations and finance are
extremely valuable to the Board. |
|
|
|
|
|
JOCHEN
ZEITZ
Chair of Sustainability
Committee
Age:
53 Director since 2007
Mr. Zeitz is Co-founder and
Executive Chair of the B Team, a not-for-profit initiative that supports
sustainable business practices. He also serves as a member of the board of
directors of Wilderness Holdings Limited and Cranemere Group Limited. He
served as a director of Kering and chairman of the sustainable development
committee of the board of directors of Kering from 2012 to 2016. Kering
(formerly known as PPR) is a world leader in apparel and accessories that
develops an ensemble of powerful brands. He served as PPRs CEO of the
Sport and Lifestyle division and Chief Sustainability Officer from 2010
until 2012 and as a Member of the PPR Executive Committee from 2007 until
2012. Additionally, he served as chairman of the Administrative Board of
PUMA SE, which develops and markets a broad range of sport and lifestyle
products including footwear, apparel and accessories, from 2011 to 2012.
Mr. Zeitz formerly served as Chairman and Chief Executive Officer of PUMA
AG, from 1993 to 2011. Having joined PUMA in 1990, he was also its chief
financial officer from 1993 to 2005. Mr. Zeitzs extensive accounting and
finance background and his expertise in international business matters,
sustainability, marketing and consumer products and apparel are extremely
valuable in light of the nature of our
businesses. |
6 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
Directors Not Standing for
Re-election
We would like to recognize Messrs. James,
Miles, and Norling, who are not standing for re-election this year, after
serving on our Board for many years. We thank each of them for their dedicated
service to Harley-Davidson and our family of riders around the world.
|
|
DONALD A. JAMES
Director
since 1991
Mr. James is a co-founder, majority
owner, and Chairman and Chief Executive Officer of Fred Deeley Imports
Ltd., which conducted business as Deeley Harley-Davidson Canada-the
largest independent motorcycle distributorship in Canada and the exclusive
distributor of our motorcycles in Canada until August 2015. In the 26
years Mr. James has served on our Board, he brought invaluable insight
through his expertise in international distribution in the motorcycle
industry. He is an avid and passionate motorcyclist who provided
visibility to the role of the customer and dealer. For these reasons and
for his many other contributions, Mr. James will leave a lasting legacy on
the company and in our business. |
|
|
|
|
|
GEORGE L. MILES, JR.
Director
since 2002
Mr. Miles is the Chairman Emeritus
of Chester Engineers, Inc., a provider of water and wastewater engineering
solutions. Mr. Miles has held this position since 2012, and from 2010 to
2012, he served as that companys Executive Chair. Mr. Miles has also
served on multiple boards of directors, including Chester Engineers, Inc.,
American International Group, Inc., EQT Corporation, HFF, Inc., and WESCO
International, Inc. Mr. Miles leveraged his finance, accounting, and
extensive corporate governance experience to provide our Board with more
than 15 years of immeasurable guidance and advice, passion, and commitment
to our customers and shareholders. |
|
|
|
|
|
JAMES A. NORLING
Director
since 1993
Mr. Norling served as Chairman of
the board of STATS ChiPAC, Ltd., a semiconductor manufacturing company,
from 2013 until August 2015. He also served on the boards of directors for
two other semiconductor manufacturing companies. Mr. Norling retired as
Executive Vice President of Motorola, Inc. During 24 years of service on
our Board, his expertise in engineering, international business matters,
and operations and finance - particularly as Chair of the Audit and
Finance Committee - made Mr. Norling an invaluable contributor. His expert
counsel and dedication to the importance of our riders in our business has
played a critical role in the success of
Harley-Davidson. |
HARLEY-DAVIDSON.COM 7
Table of Contents
PROPOSAL 2:
APPROVAL, BY ADVISORY VOTE, OF THE COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS |
Our shareholders may approve, on a
non-binding, advisory basis, our named executive officer (NEO) compensation as
disclosed in accordance with the executive compensation disclosure rules
contained in Item 402 of SEC Regulation S-K. Accordingly, we are seeking input
from shareholders with this advisory vote on the compensation of our NEOs. The
vote on this proposal is not intended to address any specific element of
compensation; rather, the vote relates to the compensation of our NEOs as
disclosed in the Compensation Discussion and Analysis section and the
accompanying executive compensation tables and narrative discussion contained in
this Proxy Statement. The company asks that you support the compensation of our
NEOs as so disclosed. Because your vote is advisory, it will not be binding on
the Human Resources Committee, the Board or the company. However, the Board will
review the voting results and consider them when making future decisions
regarding executive compensation.
Our executive compensation goals and
guiding principles emphasize pay-for-performance. We base several elements
of our compensation upon delivering high levels of performance relative to
performance measures that the Human Resources Committee has approved. For
example, (i) the annual Financial Short-Term Incentive Plan (STIP) and the
performance shares that we granted for the first time in 2016 require that
we achieve significant financial performance before recipients are
entitled to this compensation; (ii) the equity component of our
compensation program provides greater financial benefits when our stock
price is increasing; and (iii) the Leadership STIP generates payouts
correlated to driving measurable improvements in key capabilities that we
believe are necessary for improved performance and competitive advantage
over time. Our goals and guiding principles are as
follows: |
● |
The compensation program should
create and reinforce pay for performance.
Exceptional performance should result in increased compensation, but
missing performance goals should result in reduced or no incentive
pay. |
● |
The compensation program should
encourage both the desired results and the right behaviors. It should strike a balance so the company delivers
near-term results that drive long-term performance, while incorporating
risk-mitigating features to ensure the compensation program does not
encourage excessive risk taking. |
● |
The compensation program should
align the interests of management with the interests of
shareholders. A significant portion of
executive compensation should be equity-based, with required minimum stock
ownership guidelines designed to appropriately focus our management on
long-term, sustainable growth. |
● |
The compensation program should
ensure our performance goals align with our strategy and operating
plan. These performance goals should be
challenging, yet achievable during the applicable performance
period. |
● |
The compensation program should
provide a target total compensation opportunity that keeps us competitive
in our industry for the size and scale of our company, so we can attract
top executive talent. Our compensation
program includes a base salary, market competitive employee benefits,
targeted short-term incentive awards and long-term incentive awards valued
as of their grant date. Although we have target compensation levels, we
employ flexibility and discretion so the company can attract and retain a
highly-qualified and strong leadership team. Our target compensation
should be: |
● |
at the 50th percentile of companies
in similarly-sized businesses, subject to differences by individuals
within a range of plus or minus 20%; and |
● |
based upon a calculation of that
percentile in which we weight the values for our Manufacturing/Engineering
Peer Group at 60% and the values for our Brand Name/Consumer Goods Peer
Group at 40% or, in the event values from the peer groups are unavailable
or inadequate, a calculation of that percentile using values from the Aon
Hewitt 2016 U.S. Total Compensation Measurement
database. |
8 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 2: APPROVAL, BY ADVISORY VOTE, OF THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS
We describe the individual elements that
make up our total compensation more fully in the Compensation Discussion and Analysis section of this Proxy Statement.
We believe our executive compensation programs are structured to best support
our company and our business objectives.
● |
Our compensation programs are
substantially tied to our key objectives and delivering shareholder value.
If the value we deliver to our shareholders declines, so does the
compensation we deliver to our executives. For example, our 2016 full-year
results adversely impacted executive compensation for 2016 because our
compensation is focused on pay-for-performance. Our failure to meet
certain performance targets resulted in executives receiving payouts below
target under our STIP program and our cash-based long-term incentive
awards. |
● |
We maintain the highest level of
oversight over our executive compensation
programs. |
● |
We closely monitor the compensation
programs and pay levels of executives from other companies that we believe
to be similar to the company in business characteristics and
economics. |
Accordingly, for the reasons we discuss
above, the Board recommends that shareholders vote in favor of the compensation
of our NEOs as disclosed pursuant to Item 402 of Regulation S-K, including the
Compensation Discussion and Analysis, compensation tables and narrative
discussion.
The votes cast for this proposal must exceed the votes cast
against this proposal for approval of the compensation of our NEOs, assuming
that a quorum is present. For purposes of determining the vote regarding this
proposal, abstentions and broker non-votes do not constitute a vote for or
against the proposal and will be disregarded in the calculation of votes
cast. Proxies solicited by the Board will be voted FOR approval of the
compensation unless a shareholder specifies otherwise.
|
|
THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE
COMPENSATION DISCUSSION AND ANALYSIS SECTION AND THE ACCOMPANYING
COMPENSATION TABLES AND NARRATIVE DISCUSSION CONTAINED IN THIS PROXY
STATEMENT. |
HARLEY-DAVIDSON.COM 9
Table of Contents
PROPOSAL 3:
TO CONSIDER THE FREQUENCY OF THE ADVISORY VOTE ON COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS |
At our 2011 Annual Meeting, our
shareholders approved, on an advisory vote basis, holding an annual advisory
vote on our named executive officer (NEO) compensation. In accordance with the
executive compensation disclosure rules contained in Item 402 of SEC Regulation
S-K, this say-when-on-pay vote must be submitted to shareholders every six
years.
After considering the benefits and
consequences of the frequency of submitting the advisory vote on the
compensation of our NEOs to shareholders, the Board believes it is in the best
interests of the company and its shareholders to continue with our current
practice by submitting the advisory vote on the compensation of our NEOs to our
shareholders every year.
Therefore, the Board recommends that
shareholders vote in favor of holding an advisory vote on the compensation of
our NEOs at an annual meeting of shareholders every year. Shareholders should be
aware that they are not voting for or against the Boards recommendation
regarding the frequency of the advisory vote on NEO compensation. Rather,
shareholders will be casting votes to recommend to our Board an advisory vote on
the compensation of our NEOs every year, once every two years or once every
three years, or they may abstain entirely from voting on the
proposal.
The option on the frequency of the
advisory vote on the compensation of our NEOs that receives the most votes from
shareholders will be considered by the Board and Human Resources Committee as
the shareholders recommendation as to the frequency of future advisory votes on
the compensation of our NEOs. While the outcome of this advisory vote is not
binding on us or the Board, the Board will review and consider the outcome of
this vote when making determinations as to when the advisory vote on the
compensation of our NEOs will again be submitted to shareholders for approval at
our annual meeting of shareholders.
|
|
THE BOARD OF
DIRECTORS RECOMMENDS A VOTE TO SUBMIT THE ADVISORY VOTE ON THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS TO SHAREHOLDERS EVERY
YEAR. |
10 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
PROPOSAL 4:
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM |
Ernst & Young LLP, an independent
registered public accounting firm, performed an audit of our consolidated
financial statements for the fiscal year ended December 31, 2016 and the
effectiveness of our internal control over financial reporting as of December
31, 2016. The Audit and Finance Committee is responsible for the appointment,
compensation, retention and oversight of the independent external auditors
retained to audit our financial statements. The Audit and Finance Committee
selected Ernst & Young LLP to serve as our independent registered public
accounting firm for the 2017 fiscal year, and the committee is presenting this
selection to shareholders for ratification. Ernst & Young LLP has been
retained as our external auditor since prior to our initial public offering in
1986. Representatives of Ernst & Young LLP will be present at the Annual
Meeting to respond to shareholders questions.
If, prior to the Annual Meeting, Ernst
& Young LLP declines to act as our independent registered public accounting
firm or the Audit and Finance Committee does not want to use Ernst & Young
LLP as our independent registered public accounting firm, the Audit and Finance
Committee will appoint another independent registered public accounting firm.
The Audit and Finance Committee will present any new independent registered
public accounting firm for the shareholders to ratify at the Annual Meeting. If
the shareholders do not ratify the engagement of Ernst & Young LLP at the
Annual Meeting, then the Audit and Finance Committee will reconsider its
selection of Ernst & Young LLP.
To ratify the selection of Ernst &
Young LLP as our independent registered public accounting firm for the fiscal
year ending December 31, 2017, the votes cast for this proposal must exceed
the votes cast against it. For purposes of determining the vote regarding this
proposal, abstentions and broker non-votes (if any) do not constitute a vote
for or against the proposal and will be disregarded in the calculation of
votes cast. Unless you specify otherwise in your proxy, the persons you have
appointed will vote your shares FOR ratification of the selection of Ernst
& Young LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2017.
We entered into an engagement letter with
Ernst & Young LLP for its work in 2016. The engagement letter contains
provisions that subject the company to alternative dispute resolution. The
arbitration panel has the power to make an award or impose a remedy if such
award could be made or remedy imposed by a court deciding the matter in the same
jurisdiction. The arbitration panel has no power to award non-monetary or
equitable relief or to make an award or impose a remedy that is inconsistent
with any applicable agreement between the parties. We expect that the audit work
that Ernst & Young LLP performs for 2017 will be subject to a similar
engagement letter.
During the fiscal year ended December 31,
2016, we hired Ernst & Young LLP to perform the annual audit and to provide
audit-related and tax services. The Audit and Finance Committee Charter requires
that the Audit and Finance Committee pre-approve all Ernst & Young LLP
services. The Audit and Finance Committee also pre-approved all fees that we
incurred for services that Ernst & Young LLP provided. The fees we incurred
for services that Ernst & Young LLP provided during the past two years are
listed in the following table.
Fees Paid to Ernst & Young
LLP |
|
2016 |
|
2015 |
Audit fees |
|
$2,697,700 |
|
$2,927,300 |
Audit-related fees |
|
$375,800 |
|
$315,900 |
Tax
fees |
|
$494,500 |
|
$262,700 |
All
other fees |
|
|
|
|
|
|
$3,568,000 |
|
$3,505,900 |
HARLEY-DAVIDSON.COM 11
Table of Contents
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Audit fees included fees for the audit of
our consolidated financial statements and our internal control over financial
reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002. This
category also includes fees for audits provided in connection with government
filings or services that generally only the principal auditor can reasonably
provide to a client, such as comfort letters, procedures related to debt
financing, consents and reviews of documents that we file with the SEC.
Audit-related services included audits of employee benefit plans, procedures
related to securitization transactions and consultation on accounting and
internal control matters. Tax services included tax advice, planning, compliance
and transaction consulting.
To assure continuing external auditor
independence, the Audit and Finance Committee and its Chair considers whether
there should be a regular rotation of the independent external audit firms,
reviews and evaluates the lead audit partner and his or her team, and ensures
the rotation of the lead audit partner and other audit personnel as required
applicable laws and regulations. The Audit and Finance Committee negotiates and
has procedures for pre-approving all audit and non-audit services that the
independent registered public accounting firm provides. These procedures include
reviewing and approving a budget for audit and permitted non-audit services. The
budget includes a description of, and a budgeted amount for, particular
categories of non-audit services that are recurring in nature and that we
anticipate at the time we prepare the budget. In addition, the Audit and Finance
Committee has established a policy that the fees we pay for non-audit services
must be less than the fees we pay for audit and audit-related services. Audit
and Finance Committee approval is required to exceed the budget amount for a
particular category of non-audit services and to engage the independent
registered public accounting firm for any non-audit services not included in the
budget. For both types of pre-approval, the Audit and Finance Committee
considers whether the services are consistent with the SECs rules on auditor
independence. The Audit and Finance Committee also considers whether the
independent registered public accounting firm is best positioned to provide the
most effective and efficient service. The Audit and Finance Committee may
delegate pre-approval authority to one or more members of the Audit and Finance
Committee. The Audit and Finance Committee monitors the services that our
independent registered public accounting firm provides and the actual fees we
paid to the independent registered public accounting firm to ensure that the
services are within the parameters that the Audit and Finance Committee has
approved.
The members of the Audit and Finance
Committee and the Board believe the continued retention of Ernst & Young LLP
as our independent registered public accounting firm is in the best interests of
the company and its shareholders.
|
|
THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF ERNST
& YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM. |
12 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
OTHER
MATTERS TO COME BEFORE THE ANNUAL
MEETING |
The Board of Directors and management do
not intend to bring any matters before the Annual Meeting other than those to
which we referred in the Notice of Annual Meeting and this Proxy Statement. If
any other matters come before the Annual Meeting, the persons named in the proxy
cards intend to vote the shares that shareholders have authorized those persons
to vote in accordance with their judgment on those matters. To bring business
before an annual meeting, a shareholder must give written notice to our
Secretary before the meeting and comply with the terms and time periods that our
Restated Articles of Incorporation specify, as supplemented by our By-laws (see
Shareholder Proposals). No shareholder has given written notice to our
Secretary of his or her desire to bring business before the Annual Meeting in
compliance with the terms and time periods in our Restated Articles of
Incorporation and By-laws.
HARLEY-DAVIDSON.COM 13
Table of Contents
CORPORATE
GOVERNANCE PRINCIPLES AND BOARD MATTERS |
Independence of
Directors
The Board has affirmatively determined
that Mses. Levinson and Sylvester and Messrs. Alstead, Anderson, Cave, Golston,
Linebarger, Miles, Niccol, Norling and Zeitz qualify as independent directors
under New York Stock Exchange rules. For additional information, please see the
Certain Transactions section of this Proxy Statement.
Board
Committees
The Board has four standing committees:
the Audit and Finance Committee, the Human Resources Committee, the Nominating
and Corporate Governance Committee and the Sustainability Committee. The
Corporate Governance link on our investor relations website located at
http://investor.harley-davidson.com
contains the charter for each of the committees.
AUDIT
AND FINANCE COMMITTEE |
|
|
|
Members: |
|
James A. Norling, Chair (not
standing for re-election) Troy Alstead (effective February 23, 2017)
Richard I. Beattie (through April 30, 2016) Allan Golston
(effective February 23, 2017) N. Thomas Linebarger George L. Miles Jr. (not standing for re-election)
Maryrose T. Sylvester (effective September 7, 2016) Jochen
Zeitz |
|
|
|
Number
of Meetings in 2016: |
|
7 |
|
|
|
Audit and Finance Committee
responsibilities identified in its Charter include:
●oversight of the integrity of our financial statements
and the financial reporting process;
●oversight of the systems of internal control over
financial reporting;
●maintenance of the Financial Code of Ethics;
●oversight of the internal audit function;
●retention, compensation and termination of the
independent registered public accounting firm;
●oversight of the annual independent audit of our
financial statements;
●independent registered public accounting firms
qualifications and independence;
●oversight of liquidity, hedging and risk management
matters;
●oversight of capital structure matters;
●review of matters within the responsibility of the
companys Retirement Plans Committee; and
●oversight of compliance with legal and regulatory
requirements. |
14 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
CORPORATE GOVERNANCE PRINCIPLES AND BOARD
MATTERS
In November 2016, the Audit Committee
reviewed its charter and recommended to the Board certain changes to the
charter, including adding responsibilities associated with finance and capital
structure matters and changing the name of the Committee from the Audit
Committee to the Audit and Finance Committee.
The Board has determined that all members
of the Audit and Finance Committee are independent and financially literate
pursuant to New York Stock Exchange rules. The Board has also determined that
Messrs. Alstead, Golston, Linebarger, Miles and Zeitz are audit committee
financial experts within the meaning of SEC rules. The section below under the
heading Audit and Finance Committee Report discusses the functions of the
Audit and Finance Committee and its activities during fiscal year
2016.
HUMAN
RESOURCES COMMITTEE |
|
|
|
Members: |
|
Michael J. Cave, Chair R. John
Anderson George H. Conrades (through April 30, 2016) Sara L.
Levinson Brian R. Niccol (effective September 7, 2016) |
|
|
|
Number
of Meetings in 2016: |
|
4 |
|
|
|
Human Resources Committee
responsibilities identified in its Charter include:
●establish goals and objectives with the CEO and evaluate
at least annually the performance of the CEO in light of these goals and
objectives;
●review and approve the total compensation of the CEO on
an annual basis, including base pay, with input from all of the
independent directors on the Board (who comprise the Nominating and
Corporate Governance Committee) on the performance of the CEO in meeting
his or her goals and objectives and concerning the CEOs total
compensation;
●review overall compensation policies and plans for
executive officers and other employees and, if necessary, recommend plans
to shareholders;
●produce a report on compensation for inclusion in our
proxy statement in accordance with applicable rules and regulations and
review the Compensation Discussion and Analysis that we must include in
our proxy statement;
●exercise the authority of the Board to adopt and amend
compensation plans for executive officers and other employees and
recommend plans to shareholders;
●evaluate company management performance overall and
provide recommendation regarding management successors;
●make recommendations regarding stock ownership levels of
our executive officers and senior leaders as set forth in our Stock
Ownership Guidelines and monitor such levels;
●review potential conflicts of interest and any other
potential Code of Business Conduct violations by any of our executive
officers (other than the CEO);
●review the disclosure of any waivers of such conflicts
or other Code of Business Conduct violations for executive officers (other
than the CEO);
●make determinations regarding shareholder advisory votes
on compensation of named executive officers; and
●review our policies applicable to executive officers
regarding trading and hedging involving company
securities. |
HARLEY-DAVIDSON.COM 15
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MATTERS
In November 2016, the Human Resources
Committee reviewed the Human Resources Committee Charter and recommended to the
Board certain changes to the charter, specifically to add language regarding
approval of performance-based compensation.
The Board of Directors has determined that
all members of the Human Resources Committee are independent under New York
Stock Exchange rules.
The Human Resources Committee has overall
responsibility for reviewing total direct compensation (consisting of base
salaries, short-term incentive compensation and long-term incentive
compensation) for our senior leaders. In addition, the Human Resources Committee
reviews other aspects of compensation, such as deferred compensation plans,
retirement plans, and health and welfare plans.
The Human Resources Committee
has the authority to engage the services of outside advisors, experts and others
to assist it in performing its responsibilities. Since 2010, the Human Resources
Committee has retained the services of Meridian Compensation Partners, LLC.
Representatives of Meridian report to the Chair of the Human Resources
Committee. On an annual basis, the Human Resources Committee reviews and
approves the scope of Meridians services regarding executive compensation,
Meridians performance and the fees related to work Meridian performed for the
Human Resources Committee. The Human Resources Committee retains the right to
terminate Meridians services at any time. Meridians primary responsibilities
to the Human Resources Committee include providing:
● |
independent competitive market data and
advice related to our CEOs compensation level and incentive
design; |
● |
a review of our compensation levels,
performance goals and incentive designs for the named executive officers;
and |
● |
benchmark data on executive
compensation. |
The Human Resources Committee has
considered all factors relevant to Meridians independence from management and
determined that Meridian is independent and that Meridians performance of
services raises no conflict of interest. The Committees conclusion was based in
part on a report that Meridian provided to the Committee intended to reveal any
potential conflicts of interest.
The Human Resources Committee annually
approves several Short-Term Incentive Plans (STIPs) to motivate and reward the
performance of employees of Harley-Davidson and its subsidiaries. Our STIPs have
broad-based participation and provide an opportunity to earn annual cash awards
based upon performance during the course of our fiscal year relative to
financial goals or other performance objectives. Prior to the beginning of each
year, the Human Resources Committee reviews and approves STIP performance
measures and goals. The Human Resources Committee also reviews and approves
target STIP opportunities for the Harley-Davidson Leadership Team (HDLT),
which includes the companys CEO and his direct reports. Upon the completion of
the fiscal year, the Human Resources Committee determines the extent to which
actual performance satisfies the defined performance goals for STIPs.
In general, we grant equity-based
long-term incentives annually in February. The Human Resources Committee
approves grants of awards to the HDLT, and the CEO approves grants to other
employees within parameters that the Committee has approved. The Human Resources
Committee has authorized the CEO to make equity grants to employees in certain
other instances, including to help recruit a new employee or retain a current
employee or to reward an employee for exceptional service or such other instance
that the CEO believes is in our best interest. The CEO may not grant equity
awards to members of the HDLT.
The Human Resources Committee has adopted
a number of policies, practices and agreements to further the goals of the
executive compensation program and to strengthen the alignment of interests of
executives with the long-term interests of shareholders, which include
guidelines around stock ownership described later in this Proxy Statement in
Compensation Discussion and Analysis - Stock Ownership Guidelines.
In
addition, the Human Resources Committee periodically reviews aspects of programs
that provide benefits to our executives that are the same benefits received by
salaried employees in general. They include, for example, medical and dental
benefits, retirement plans, employee savings plans, death benefits and deferred
compensation plans for eligible employees. Management reviews these programs
periodically, generally with the aid of an outside consultant and revises them
when necessary.
16 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD
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NOMINATING AND
CORPORATE GOVERNANCE COMMITTEE |
|
|
|
Members: |
|
N. Thomas Linebarger, Chair
(effective April 30, 2016) Troy Alstead (effective February 23,
2017) R. John Anderson Richard I. Beattie (through April 30,
2016) Michael J. Cave George H. Conrades (through April 30,
2016) Allan Golston (effective February 23, 2017) Sara L.
Levinson George L. Miles, Jr. (not standing for re-election) Brian
R. Niccol (effective September 7, 2016) James A. Norling (not standing
for re-election) Maryrose T. Sylvester (effective September 7,
2016) Jochen Zeitz |
|
|
|
Number
of Meetings in 2016: |
|
4 |
|
|
|
Nominating and Corporate
Governance Committee responsibilities identified in its Charter
include:
●identify and make recommendations to the Board on
individuals qualified to serve as Board members consistent with the
criteria that the Board has approved;
●review the companys management overall to develop a CEO
succession plan for recommendation to the Board;
●review and recommend the renomination of current
directors;
●review and recommend committee
appointments;
●lead the Board in its annual review of the Boards and
its committees performance;
●provide input on the performance of the CEO in meeting
his or her goals and objectives and concerning the CEOs total
compensation;
●maintain our Code of Business Conduct;
●maintain a process for review of potential conflicts of
interest;
●review potential conflicts of interest and other
potential Code of Business Conduct violations by our CEO or
directors;
●review the disclosure of any waivers of conflicts of
interest or other Code of Business Conduct violations by our CEO or
directors;
●review and reassess annually our Corporate Governance
Policy and recommend any proposed changes to the Board for
approval;
●exercise the authority of the Board to review,
establish, amend and revise Board compensation levels, plans and policies
and, to the full extent permitted by rules of the New York Stock Exchange
and applicable laws, regulations and rules, exercise the authority of the
Board to adopt, administer and amend compensation plans for directors and
recommend such plans to shareholders, as appropriate and
required;
●make recommendations regarding and monitor stock
ownership levels of the members of the Board as set forth in our Stock
Ownership Guidelines;
●review our policies applicable to directors regarding
trading and hedging involving company securities; and
●perform other related tasks, such as studying and making
recommendations to the Board concerning the size and committee structure
of the Board. |
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In November 2016, the Nominating and
Corporate Governance Committee reviewed the Nominating and Corporate Governance
Committee Charter and recommended certain changes to its Charter to conform with
amendments made to the Audit and Finance Committee Charter.
The Board has determined that all members
of the Nominating and Corporate Governance Committee are independent under New
York Stock Exchange rules.
The Nominating and Corporate Governance
Committee Charter outlines the criteria for identifying and recommending new
candidates to serve on the Board. In considering any potential candidate for the
Board, the Nominating and Corporate Governance Committee considers the following
qualifications:
● |
principal
employment; |
● |
expertise relevant to the
companys business; |
● |
whether the potential
candidate will add diversity to the Board, including whether the potential
candidate brings complementary skills and
viewpoints; |
● |
time
commitments, particularly the number of other boards on which the
potential candidate may serve; |
● |
independence and
absence of conflicts of interest under New York Stock Exchange rules and
other laws, regulations and rules; |
● |
financial literacy and expertise; and |
● |
personal qualities including strength of character, maturity of
thought process and judgment, values and ability to work with
collegiality. |
The Nominating and Corporate Governance
Committees Charter has long required the committee to consider diversity in its
process of selecting director nominees. Specifically, the Nominating and
Corporate Governance Committee evaluates each candidate for director on, among
other things, the basis of the diversity that he or she would bring to the
Board, including with respect to business and professional experiences, skills,
ethnicity and gender. We believe this policy has been effective in the creation
of a Board comprised of diverse members and that the composition of the current
Board reflects the Nominating and Corporate Governance Committees consideration
of diversity in its evaluation and nomination process.
During 2016, the Nominating and Corporate
Governance Committee reviewed its succession planning process in light of
certain directors who were approaching the retirement age specified in our
Bylaws. A third-party search firm assisted the Committee with its recruitment
efforts. The search firm recommended candidates that satisfied the Boards
criteria. The search firm also provided research and pertinent information
regarding candidates, as the Committee requested. In July 2016, the Board
elected two directors, Brian R. Niccol and Maryrose T. Sylvester, whom the
third-party search firm recommended. In February 2017, the Board elected two
additional directors, Troy Alstead and Allan Golston. The same third-party
search firm recommended those candidates.
The Nominating and Corporate Governance
Committee will consider candidates that shareholders recommend. Shareholders may
recommend candidates for the Nominating and Corporate Governance Committee to
consider by writing to the Nominating and Corporate Governance Committee in care
of our Secretary, 3700 West Juneau Avenue, P.O. Box 653, Milwaukee, Wisconsin
53201-0653. The Nominating and Corporate Governance Committees policy regarding
director candidates that shareholders recommend and the process for evaluating
the nominees are as follows:
● |
If a shareholder has complied
with procedures to recommend director candidates that the Nominating and
Corporate Governance Committee has established, then the Nominating and
Corporate Governance Committee will consider director candidates that the
shareholder has recommended for available seats on the
Board. |
18 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD
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● |
In making recommendations to
the Board of one or more candidates to serve as a director, the Nominating
and Corporate Governance Committee will examine each director candidate on
a case-by-case basis regardless of who recommended the candidate. The
Nominating and Corporate Governance Committee evaluates candidates in the
same manner whether a shareholder or the Board has recommended the
candidate. |
● |
In general, for each candidate
that any person or group brings to the attention of the Nominating and
Corporate Governance Committee for consideration for nomination as a
director, the Chair of the Nominating and Corporate Governance Committee
will first make a determination whether the Nominating and Corporate
Governance Committee should consider the candidate at that time based on
factors the Chair deems relevant, including our current need for qualified
candidates and the Chairs view as to whether the candidate has sufficient
qualifications for further consideration for nomination as a
director. |
● |
If the Chair makes a
determination that the Nominating and Corporate Governance Committee
should consider the candidate, then the Chair will report that
determination to the Nominating and Corporate Governance Committee and
communicate all relevant information to the Nominating and Corporate
Governance Committee. |
● |
Each Nominating
and Corporate Governance Committee member is responsible for sending
feedback on a candidate to the Chair. The Nominating and Corporate
Governance Committee may take any additional steps it deems necessary to
determine whether to recommend the candidate to the full
Board. |
To enable the Nominating and Corporate
Governance Committee to consider a shareholder recommendation in connection with
the 2018 annual meeting of shareholders, we must receive the recommendation on
or before November 20, 2017.
Submitting a shareholder recommendation to
the Nominating and Corporate Governance Committee does not ensure that
shareholders will have an opportunity to vote on the shareholders candidate
because the Nominating and Corporate Governance Committee may determine not to
recommend the candidate to the full Board or the full Board may determine not to
recommend the candidate to shareholders. Any shareholder who wants to ensure
that shareholders will have an opportunity to vote on the shareholders
candidate may nominate the director candidate for the shareholders to vote on at
the 2018 annual meeting of shareholders, in addition to recommending the
candidate to the Nominating and Corporate Governance Committee, by giving
written notice to our Secretary in advance of the 2018 annual meeting. To give
that notice, a shareholder must comply with the terms and time periods of our
Restated Articles of Incorporation as supplemented by our By-laws. Our Restated
Articles of Incorporation state that a shareholder must give written notice that
complies with the Restated Articles of Incorporation and By-laws to our
Secretary not less than 60 days before the date in 2017 corresponding to the
date we released this Proxy Statement to our shareholders. Because we anticipate
mailing the Notice of Internet Availability of Proxy Materials on March 20,
2017, we must receive notice of a nomination for a director candidate for
shareholders to consider at the 2018 annual meeting of shareholders no later
than January 19, 2018. Even if a shareholder delivers a timely notice and
otherwise complies with the terms and time periods of our Restated Articles of
Incorporation and By-laws, we will not be obligated to name the shareholders
candidate in our proxy materials.
The Nominating and Corporate Governance
Committee is responsible for establishing, reviewing and revising compensation
we pay to our directors. The Nominating and Corporate Governance Committee,
working with management and third party compensation consultants and reviewing
benchmarked data from a comparator group of companies, determines director
compensation that it believes is competitive with these companies. The
Nominating and Corporate Governance Committee periodically reviews and revises,
when necessary, the Director Compensation Policy, generally with the aid of a
compensation consultant. The Nominating and Corporate Governance Committee last
revised this policy in April 2016. At that time, the committee approved the
following changes, effective April 30, 2016: (1) an increase to the
HARLEY-DAVIDSON.COM 19
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD
MATTERS
annual retainer paid for service as the
Chair of the Nominating and Corporate Governance Committee to $15,000 and (2) an
increase to the annual retainer paid for service as the non-executive Chairman
of the Board to $160,000 (inclusive of the annual retainer, if any, for
concurrent service as chair of a committee). The non-executive Chairman receives
this retainer amount in addition to his or her $110,000 Board member annual
retainer.
|
SUSTAINABILITY COMMITTEE |
|
|
|
|
|
Members: |
|
Jochen Zeitz, Chair
R. John Anderson (effective September 7, 2016)
Michael J. Cave (through April 30, 2016)
Donald A. James (not standing for re-election)
Sara L. Levinson
N. Thomas Linebarger
Brian R. Niccol (effective September 7, 2016) |
|
|
|
|
|
Number of |
|
|
|
|
Meetings in |
|
|
|
|
2016: |
|
3 |
|
|
|
|
|
Sustainability
Committee responsibilities identified in its Charter include: |
|
|
|
|
|
● |
monitor the social, political,
environmental, public policy, legislative
and regulatory trends, issues and concerns that could affect the companys sustainable business model, processes, resources, activities, strategies, and
other capabilities, and make
recommendations to the Board and management
regarding how the company should respond to
social and environmental trends, issues and concerns to more effectively achieve its sustainable business
goals; |
|
|
● |
assist management in setting
strategy, establishing goals and
integrating social and environmental shared value creation and inclusion into daily business activities across
the company consistent with sustainable
growth; |
|
|
● |
review new technologies and other
innovations that will permit the company to
achieve sustainable growth; |
|
|
● |
consider the impact that the
companys sustainability policies,
practices and strategies have on employees, customers, dealers, suppliers, the environment and the communities in which the company operates; |
|
|
● |
consider and make recommendations
regarding support provided by the company
or its charitable foundation for charitable, civic, educational and business organizations
that impact the companys initiatives and
efforts for social and environmental shared
value creation and inclusion; |
|
|
● |
review the companys periodic
sustainability strategy reports, corporate
social responsibility reports, and other similar reports and provide direction regarding the companys participation in sustainability-related trade groups
and reporting organizations; and |
|
|
● |
review and make
recommendations to the Board regarding shareholder proposals submitted for inclusion in the companys annual proxy materials relating to the
companys sustainability policies,
practices or strategies. |
|
In November 2016, the Sustainability
Committee reviewed the Sustainability Committee Charter and recommended to the
Board that it was not necessary to make changes to it.
20 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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CORPORATE GOVERNANCE PRINCIPLES AND BOARD
MATTERS
Board Meetings, Attendance,
Executive Sessions and Annual Meeting Attendance
In 2016, there were four regularly
scheduled meetings of the Board. All director nominees attended at least 75% of
the meetings of the Board and the committees on which they served during
2016.
The Board met in executive sessions during
all regularly scheduled in-person meetings, without management present, and
plans to continue that practice going forward. The non-executive Chairman of the
Board presided over these executive sessions.
Mr. Beattie was our non-executive Chairman
of the Board at the beginning of 2016. Mr. Cave became our non-executive
Chairman of the Board at the 2016 Annual Meeting of Shareholders, following Mr.
Beatties retirement as a director.
Unless a director has a conflict in his or
her schedule, we expect all directors to attend the Annual Meeting of
Shareholders. All of our directors other than Mr. Zeitz attended our 2016 Annual
Meeting of Shareholders and were available to answer any shareholder
questions.
Leadership
Structure
Currently, our Board leadership structure
includes a non-executive Chairman of the Board who is an independent director.
Our Corporate Governance Policy gives the Board the flexibility and authority to
modify this leadership structure as and when appropriate to best address the
companys current circumstances and to advance the best interests of all
shareholders. As a result of action taken by the Board on February 3, 2016, and
subsequent to our shareholders re-electing Mr. Cave as a director at the 2016
Annual Meeting of Shareholders, Mr. Cave serves as our non-executive Chairman of
the Board.
The Board currently believes that
separating the CEO and Chairman roles will enable our CEO, Mr. Levatich, to
focus on the business strategy and operations of the company, while an
independent Chairman will provide the continuity of leadership of the Board
necessary for the Board to fulfill its responsibilities.
The Boards Role in the
Oversight of Risk
While the Board has the ultimate
responsibility for oversight of the risk management process, various committees
of the Board have a role in the oversight of risk management. In particular, the
Audit and Finance Committee focuses on financial risk, including internal
controls and a periodic review of risks related to cybersecurity, and receives
an assessment of the companys systems to monitor and manage business risk from
our independent registered public accounting firm. Internal audit regularly
reviews risk management processes and internal controls with the Audit and
Finance Committee. The Audit and Finance Committee also receives a report at
each regular Audit and Finance Committee meeting on legal and compliance
matters. In addition, the Human Resources Committee reviews our compensation
programs for compensation risk as we describe further in the Compensation
Discussion and Analysis section of this Proxy Statement. Risk management is an
integral part of our annual strategic planning process. The entire Board reviews
the strategic risk management plan at least annually.
Shareholder Communication
with the Board
Shareholders and other parties interested
in communicating with the Chairman of the Board or with non-management
directors, including committee chairs, may do so by writing to such director, in
care of our Secretary, 3700 West Juneau Avenue, P.O. Box 653, Milwaukee,
Wisconsin 53201-0653. The Corporate Governance link on our investor relations
website located at http://investor.harley-davidson. com
lists the current members of the Board of Directors. We open and forward all
mail to the director or directors specified in the communication.
HARLEY-DAVIDSON.COM 21
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Policies and Procedures Governing Related Person
Transactions
In December 2002, our Nominating and
Corporate Governance Committee adopted a written policy regarding transactions
with related persons. The committee amended this policy, which we refer to as
our Conflict of Interest Process, in December 2003.
Under the policy, the Chair of the
Nominating and Corporate Governance Committee reviews any potential conflict
that arises and is reported for our CEO or a director. If the Chair of the
Nominating and Corporate Governance Committee determines that an actual conflict
of interest issue exists, then the entire Nominating and Corporate Governance
Committee reviews the potential conflict of interest. If our Nominating and
Corporate Governance Committee determines that an actual conflict exists, the
Committee decides whether to waive the conflict or require the CEO or director
to remove the conflict. Any conflicts that are waived by our Nominating and
Corporate Governance Committee are promptly disclosed to our
shareholders.
Our Vice President and Chief Legal Officer
reviews any potential conflict that arises for any executive officer (other than
our CEO and the Vice President and Chief Legal Officer). Our CEO reviews any
potential conflict that arises for our Vice President and Chief Legal Officer.
If the Vice President and Chief Legal Officer or CEO determines that an actual
conflict of interest issue exists, the Chair of the Human Resources Committee
reviews the potential conflict. If the Chair of the Human Resources Committee
determines that an actual conflict of interest issue exists, the entire Human
Resources Committee reviews the potential conflict of interest. If our Human
Resources Committee determines that an actual conflict exists, the Committee
decides whether to waive the conflict or require the officer to remove the
conflict. Any conflicts that are waived by our Human Resources Committee are
promptly disclosed to our shareholders.
Any conflict of interest issue involving
any other employee is reviewed by an attorney in our Legal Department. If the
attorney believes that an actual conflict of interest issue exists, then the
attorney submits the conflict of interest issue to our Vice President and Chief
Legal Officer. If our Vice President and Chief Legal Officer determines that an
actual conflict exists, then he decides what steps should be taken to resolve
the conflict.
Certain
Transactions
Mr. Linebarger, a director, is the
Chairman and Chief Executive Officer of Cummins Inc. During 2016, we continued a
modest commercial relationship with Cummins, a relationship that existed before
Mr. Linebarger joined the Board of Directors, under which we purchased exhaust
parts and components from subsidiary companies of Cummins Inc. The transactions
were negotiated on an arms-length basis and were well below the applicable
threshold under New York Stock Exchange rules. Accordingly, the relationship
does not prevent Mr. Linebarger from qualifying as an independent director and
the Board considers Mr. Linebarger to be an independent director. Because Mr.
Linebarger is the current Chair of the Nominating and Corporate Governance
Committee, the entire Nominating and Corporate Governance Committee (excluding
Mr. Linebarger) considered this relationship under our Conflict of Interest
Process, and it determined that no actual conflict of interest issue exists as a
result of the relationship.
22 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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CERTAIN TRANSACTIONS
Mr. James, a director that is not standing
for re-election at our Annual Meeting, is Director and President and an equity
owner of Fred Deeley Imports Ltd. (Deeley Imports), which was the exclusive
distributor of the companys motorcycles in Canada until August 2015. Due to
Deeley Imports relationship with the company, the Board does not consider Mr.
James to be an independent director.
In April 2015, the company and Deeley
Imports entered into an asset purchase agreement that resulted in the companys
acquisition of certain assets from Deeley Imports on August 4, 2015 and the
termination of the exclusive distribution agreement between the company and
Deeley Imports. Pursuant to the asset purchase agreement, in 2015, the company
made a termination payment to Deeley Imports and acquired certain assets of
Deeley Imports. The company also entered into certain office and warehouse
leases and transition services agreements with Deeley Imports and Fred Deeley
Investments Ltd., an affiliate of Deeley Imports that is controlled by Mr.
James, that became effective on August 4, 2015. In 2016, the company paid
approximately $864,940 CAD in lease payments under the office and warehouse
leases, and there were no payments under the transition services agreement. The
parties are continuing to address post-closing adjustments and similar matters
under the asset purchase agreement, including reimbursement during 2016 from the
company to Deeley Imports under the agreement for $978,892 CAD relating to
severance payments. On the basis that the company negotiated the transactions
contemplated by the asset purchase agreement, including the leases and
transition services agreements, on an arms-length basis and such transactions
were reviewed and approved by a special committee of the Board of Directors
consisting of directors who had no interest in the transactions, the Chair of
the Nominating and Corporate Governance Committee considered these related party
relationships under our Conflict of Interest Process, and he determined that no
actual conflict of interest issue existed as a result of the
relationships.
Upon the termination of the distribution
agreement between the company and Deeley Imports, the company entered into
dealer agreements with approximately 66 dealers in Canada, all of which had
preexisting dealer agreements with Deeley Imports. These new Canadian dealer
agreements included an agreement with Trev Deeley Motorcycles for the operation
of a Harley-Davidson dealership located in Richmond, British Columbia. Trev
Deeley Motorcycles is owned by the Darren James 2014 Trust, of which Mr. James
is the sole trustee and his son, Darren James, is the sole beneficiary. In 2016,
we recorded motorcycles and related products revenue from Trev Deeley
Motorcycles of $606,934 CAD and financial services revenue of $1,230 CAD. The
terms of the dealer agreement with Trev Deeley Motorcycles were negotiated in
the ordinary course of business and contain terms and conditions that are
substantially similar to all of the companys other Canadian dealer agreements.
The Chair of the Nominating and Corporate Governance Committee has considered
this related party relationship under our Conflict of Interest Process, and he
determined that no actual conflict of interest issue exists as a result of the
relationship.
HARLEY-DAVIDSON.COM 23
Table of Contents
COMPENSATION DISCUSSION AND
ANALYSIS
2016 Company Performance |
|
|
|
|
|
Net income decreased 8.0% to $692.2 million |
|
Revenue remained flat at $6.0 billion |
|
Diluted earnings per share increased 3.8% |
|
|
|
|
|
Dividends per
share increased by 13% |
|
Financial Services operating
income decreased by 1.7% to $275.5
million |
|
Discretionary company share repurchases $459.1 million versus
$1.5
billion* in
2015 |
* Funded by $750 million debt issuance in
2015
In 2016, Harley-Davidson achieved several
milestones in its strategy to drive demand by growing new ridership in the U.S.,
increasing product and brand awareness and access, and accelerating the cadence
and impact of new products. Among these milestones, we retained and improved
upon our #1 market share position in the U.S.; maintained leading market shares
in critical international markets; added 40 new dealerships to our international
dealer network; trained more than 65,000 riders in the U.S. through the
Harley-Davidson Riding Academy; and launched the powerful new
Milwaukee-Eight® engine on our touring motorcycles. Our investments
in driving demand and product innovation generated positive responses and helped
offset the full effects of the intense global competitive environment, including
the unexpected decline in the U.S. motorcycle industry. While we expect the
current competitive environment will continue, we believe we are well positioned
to navigate through it and deliver on our long-term strategy to build the next
generation of Harley-Davidson riders and grow share and profit
globally.
Our 2016 full-year results adversely
affected executive compensation for 2016 because our compensation is focused on
pay for performance. In 2016, we did not fully meet our specific financial goals
and performance objectives. As a result, payouts to executives were below target
under our short-term incentive plan and our cash-based long-term incentive
awards.
2016 EXECUTIVE
COMPENSATION SUMMARY
To further strengthen the link between
executive compensation and our strategic objectives, for 2016 we revised our
approach to executive compensation by increasing the level of compensation that
is at risk and dependent on performance.
Of particular note, in 2016, we
reconfigured our long-term incentive plan by placing a greater portion of
compensation at risk to better align long-term rewards with long-term value that
shareholders realize. Our changes included eliminating the use of stock options
and cash-based long-term incentive awards as elements of our long-term incentive
plan, which we replaced with performance shares to provide a more direct
connection between performance relative to key measures and the rewards that
result from that performance. We continue to use restricted stock units for
one-third of our long-term incentive plan and use performance shares for the
remaining two-thirds.
24 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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EXECUTIVE COMPENSATION
Under our long-term incentive plan, the
amounts that executives will earn through performance shares that we granted in
2016 will depend on our performance relative to certain performance objectives
over a three-year period. Importantly, for 2016, we factored a new performance
measure into our long-term incentive plan through the performance shares -
increasing the percentage of first-time motorcycle purchasers in the U.S. buying
new Harley-Davidson motorcycles (weighted at 15%) - while retaining measures
based on net income and return on invested capital (weighted at 42.5%
each).
The Short-Term Incentive Plan, or STIP,
remained relatively unchanged. Our Financial STIP, which is formula-based,
provides most of our approximately 6,000 employees, including our NEOs and
senior leaders, the opportunity to earn annual cash awards based upon
achievement of specified performance measures, which for 2016 included Corporate
Net Income, HDMC Asset Productivity and HDFS Return on Assets. Our Leadership
STIP provides senior leaders the opportunity to earn annual cash awards in
addition to the cash awards that they could earn under the Financial STIP. For
2016, we based our Leadership STIP upon achievement of specified goals relating
to strengthening the organizations development of lasting capabilities that can
give our company a long-term competitive advantage.
Our approach to base salaries and employee
benefits remained relatively unchanged. We benchmark executive base salaries to
market and base them on individual performance. We generally provide executive
benefits in a manner similar to our salaried employee population except as we
discuss below.
The following table provides an executive
summary of our 2016 executive compensation programs:
2016 Executive
Compensation Summary Table
Annual Base Salary |
We establish base salaries for our
employees, including executives in a group of approximately the top 35
senior leaders in the company, by starting with market reference points
that approximate the competitive market 50th percentile and making
adjustments based upon individual performance, experience, market practice
and the potential for advancement. |
Provides fixed compensation, in line
with our market peer groups. |
Financial Short-Term Incentive
Plan (Financial STIP) |
Our Financial STIP, which is
formula-based, provides most of our approximately 6,000 employees,
including our senior leaders, the opportunity to earn annual cash awards
based upon achievement of specified performance measures. |
Provides incentive to achieve
short-term financial goals and other performance objectives that
management and the Board determine to be important at the beginning of the
year. |
Leadership Short-Term Incentive
Plan (Leadership STIP) |
Our Leadership STIP provides our
senior leaders the opportunity to earn annual cash awards in addition to
the cash awards that they could earn under the Financial STIP. For 2016,
we based our Leadership STIP upon achievement of specified goals relating
to Project Management Excellence. |
Provides incentive to achieve goals
designed to develop lasting company capabilities that give us a
competitive advantage. |
Long-Term Incentive Plan |
Our long-term incentive plan
provides our senior leaders the opportunity to earn stock-based
compensation based on achievement of specified performance measures. In
2016, we granted performance shares and restricted stock units to our
senior leaders. Performance shares vest after completion of a three-year
performance period and only if performance merits the vesting of the
award. Restricted stock units vest ratably over a three-year
period. |
Provides long-term incentives that
are a key component of total compensation the purposes of which are to:
(1) focus key employees on our long-term financial success and growth; (2)
align the interests of senior leaders with those of shareholders; and (3)
encourage retention of senior leaders. |
Employee Benefits |
We provide the following additional
benefits to our senior leaders, which are available to all employees:
medical, dental, retirement benefits, deferred compensation, life
insurance, employee savings plans (401(k)), disability, paid time off,
employee purchase plan, clothing allowance and relocation benefits. For
senior leaders, we also provide a supplemental retirement plan, executive
physical plan participation, a limited financial planning benefit, pay in
lieu of retiree life insurance and in very limited instances personal use
of the company aircraft. |
Provides a competitive level of
health, welfare and retirement
benefits. |
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We believe we have structured our
compensation programs to support our company strategy, to attain our business
objectives, and to deliver significant shareholder value. The results of the
shareholder advisory vote on executive compensation at our 2016 Annual Meeting
of Shareholders were favorable, with 96.2% of the votes cast supporting our
compensation programs. Based upon this high level of shareholder support, the
Human Resources Committee believes we have strong support from, and alignment
with, our shareholders.
Again, because we did not fully meet
specific performance measures in 2016, executive payouts were below target under
our short-term incentive plan (STIP) and our cash-based long-term incentive
awards. Based on our performance in 2016:
● |
The Financial STIP payout was 87.1%
of target; |
● |
The Leadership STIP payout was 95.4%
of target; |
● |
The payout under cash-based
long-term incentive awards relating to performance in 2014 through 2016
was 86.0% of target (we eliminated cash-based long-term incentive awards
from our executive compensation program beginning in 2016);
and |
● |
We currently project that the payout
for performance shares that we granted in 2016 will be 89.3% of target at
the end of the three-year performance period in
2018. |
In 2017, we will continue to evaluate the
effectiveness and alignment of our executive compensation programs to ensure
they continue to support our purpose, align to our strategy and support creation
of shareholder value. We discuss our executive compensation philosophy,
policies, practices programs, and performance in greater detail
below.
EXECUTIVE COMPENSATION
PHILOSOPHY
This Compensation Discussion and Analysis
describes our executive compensation philosophy, policies, practices, programs
and performance for fiscal year 2016 and how they applied to our senior leaders,
including the following named executive officers, or NEOs, in 2016:
● |
Matthew S. Levatich, President and
Chief Executive Officer, Harley-Davidson, Inc. |
● |
John A. Olin, Senior Vice President
and Chief Financial Officer, Harley-Davidson,
Inc. |
● |
Lawrence G. Hund, President and
Chief Operating Officer, Harley-Davidson Financial
Services |
● |
Michelle A. Kumbier, Senior Vice
President, Motor Company Product and Operations, Harley-Davidson Motor
Company |
● |
Paul J. Jones, Vice President and
Chief Legal Officer, Harley-Davidson, Inc. |
Our executive compensation goals and
guiding principles emphasize pay-for-performance. We base several elements of
our compensation upon delivering high levels of performance relative to
performance measures that the Human Resources Committee has approved. For
example, (i) the annual Financial Short-Term Incentive Plan (STIP) and the
performance shares that we granted for the first time in 2016 require that we
achieve significant financial performance before recipients are entitled to this
compensation; (ii) the equity component of our compensation program provides
greater financial benefits when our stock price is increasing; and (iii) the
Leadership STIP generates payouts correlated to driving measurable improvements
in key capabilities that we believe are necessary for improved performance and
competitive advantage over time. Our goals and guiding principles are as
follows:
● |
The compensation
program should create and reinforce pay for performance.
Exceptional performance should result in increased
compensation, but missing performance goals should result in reduced or no
incentive pay. |
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● |
The compensation
program should encourage both the desired results and the right
behaviors. It should strike a
balance so the company delivers near-term results that drive long-term
performance, while incorporating risk-mitigating features to ensure the
compensation program does not encourage excessive risk
taking. |
● |
The compensation
program should align the interests of management with the interests of
shareholders. A significant portion
of executive compensation should be equity-based, with required minimum
stock ownership guidelines designed to appropriately focus our management
on long-term, sustainable growth. |
● |
The compensation
program should ensure our performance goals align with our strategy and
operating plan. These performance
goals should be challenging, yet achievable during the applicable
performance period. |
● |
The compensation
program should provide a target total compensation opportunity that keeps
us competitive in our industry for the size and scale of our company, so
we can attract top executive talent. Our compensation program includes a base salary, market competitive
employee benefits, targeted short-term incentive awards and long-term
incentive awards valued as of their grant date. Although we have target
compensation levels, we employ flexibility and discretion so the company
can attract and retain a highly-qualified and strong leadership team. For
additional detail regarding our methodology for benchmarking our
compensation with other companies, see the below section entitled Peer
Group and Executive Compensation
Benchmarking. |
EXECUTIVE COMPENSATION
POLICIES AND PRACTICES
The Human Resources Committee has overall
responsibility for approving the compensation of our Harley-Davidson Leadership
Team, which we refer to as the HDLT. Our HDLT is a subset of our senior leaders
comprised of our CEO and executives who report directly to the CEO, including
all NEOs. During 2016, the Human Resources Committee consisted of the following
independent directors: R. John Anderson, Michael J. Cave (Chair), George H.
Conrades (through April 30, 2016), Sara L. Levinson and Brian R. Niccol
(effective September 7, 2016).
We describe the responsibilities and
functions of the Human Resources Committee more fully in the Corporate
Governance Principles and Board Matters-Human Resources Committee section. In
addition, the Human Resources Committee has adopted the following policies,
practices and agreements to further the goals of the executive compensation
program and to strengthen the alignment of interests of executives with the
long-term interest of shareholders:
Use of Advisors and
Advisor Independence
The Human Resources Committee has the sole
authority to engage the services of outside advisors, experts and others to
assist in performing its responsibilities. Since 2010, the Committee has
retained Meridian Compensation Partners LLC as its outside executive
compensation advisor. We describe the independent advisors primary
responsibilities and reporting obligations more fully in the Corporate
Governance Principles and Board Matters-Human Resources Committee section.
During 2016, Meridian performed no services for the company beyond its
engagement with the Human Resources Committee.
Pursuant to the Human Resources
Committees Charter, if the Committee chooses to use a compensation consultant,
the consultant must be independent. We consider an advisor to be independent if
the advisory firm does not provide services or products of any kind to the
company or any of its subsidiaries, the advisory firm does not derive more than
1% of its gross revenues from the company and the advisory firm is precluded
from providing any other services to the company.
The Committee assessed Meridians
independence, based in part on assurances and confirmation from Meridian as to
its independent status. The Committee has concluded that Meridian had no
conflicts and believes that Meridian has remained independent throughout its
engagement by the Committee.
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Anti-Hedging and
Pledging
Directors and employees may not engage in
hedging or pledging transactions with respect to company securities. Certain
forms of hedging transactions, such as zero-cost collars and forward sale
contracts, allow a shareholder to lock in the value of his or her shareholdings,
often in exchange for all or a portion of any future appreciation in the stock.
The shareholder is then no longer exposed to the full risks of stock ownership
and may no longer have the same alignment as the companys other shareholders.
Therefore, we prohibit such hedging transactions. Likewise, we prohibit pledging
of the companys securities.
Stock
Ownership
In February 2016, the Committee modified
the Stock Ownership Guidelines applicable to senior leaders to define the
minimum ownership requirements by reference to a percent of annual base salary.
The Committee made the change to better align our requirements with those of
companies in our peer groups. The new guidelines, effective May 1, 2016, are as
follows:
Senior Leader Title |
Percent of Base Salary |
Chief Executive Officer |
600% |
President/Chief Operating Officer -
HDFS |
400% |
Senior Vice President |
300% |
Vice President or General
Manager |
200% |
The Committee monitors each senior
leaders members progress toward, and continued compliance with, the Stock
Ownership Guidelines. Restricted stock, restricted stock units, performance
shares, shares held in 401(k) accounts, vested unexercised stock options and
stock appreciation rights, and shares of common stock that senior leaders hold
directly count toward satisfying the guidelines. As of December 31, 2016, each
NEO had met his or her stock ownership guideline requirement.
The Committee believes the Stock Ownership
Guidelines are appropriate, market competitive and provide for significant
alignment of the interests of senior leaders with those of
shareholders.
Tally
Sheets
To inform its decision-making process, the
Committee reviews tally sheets that management and the outside executive
compensation advisor prepare. Tally sheets provide a comprehensive picture of
the current and historical compensation of each NEO by recounting in detail the
dollar value of the total compensation that we paid to each NEO for the past
three years. The total dollar value includes base salary and short-term and
long-term incentive compensation that we actually paid, and the costs we incur
to provide various health and insurance benefits and perquisites to our NEOs.
The tally sheets also reflect each NEOs accumulated realized and unrealized
stock option gains, any vested and unvested restricted stock or restricted stock
unit awards and stock options at various stock values, and any outstanding
long-term cash awards at target value and the amounts our NEOs will receive if
they leave the company under various circumstances, such as retirement or
termination in connection with a change of control. The Committee believes that
annual review of the tally sheets is helpful as part of its process to oversee
the design of our executive compensation program.
Clawbacks
In 2010, Congress passed the Dodd-Frank
Act, which requires many public companies to adopt clawback policies. Although
the SEC has not yet issued the final regulations under the Act, the Committee
implemented a clawback policy in 2014 in anticipation of such SEC action. In the
event that any fraud or intentional misconduct by an executive officer was a
contributing factor to the company having to restate any financial statements
filed with the SEC due to the companys material noncompliance with any
financial reporting requirement under the securities laws, then the Board or the
Committee may, in its discretion and to the extent permitted by governing law,
require the
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company to seek reimbursement or
forfeiture of any eligible compensation paid or credited to or earned by such
executive officer. The amount of eligible compensation subject to forfeiture is
any eligible compensation in excess of the amounts that would have been paid or
credited to or earned by such executive officer during the three-year period
preceding the date on which the company is required to prepare the restatement
based directly on the restated financial results. For the purposes of this
policy, the term executive officer means any officer (i) designated as a
Section 16 officer under the federal securities laws or (ii) who has been
designated an executive officer by the Board, and the term eligible
compensation means any bonuses paid or credited to or any other incentive
compensation earned by an executive officer.
Once final regulations for the Dodd-Frank
Act are published, the Committee intends to revise the clawback policy as
necessary to comply with the Act and the final regulations.
Equity Award
Grants
We make equity awards, such as restricted
stock units and performance shares to certain employees and directors, pursuant
to a process that the Committee has approved and under a stock plan that our
shareholders have approved. Annual equity awards to employees historically have
taken place in February after the release of fourth quarter earnings at which
time the window for effecting transactions in our stock is generally open for
those employees who may, through their job responsibilities, have access to
material non-public information. Off-cycle equity award grants may only be
effective on dates during an open window period and occur after the CEO
determines that an individual is deserving of an award because (i) an eligible
employee is a recent hire; (ii) an employee has excelled in his/her role, (iii)
an eligible employee is promoted to a new position (which is stock eligible);
(iv) an eligible employee is highly valued and management wants to retain the
individual; or (v) an eligible employee was inadvertently omitted from the
annual award list. For senior leaders located outside the United States, we
adjust our long-term incentives in a manner consistent with our overall
compensation philosophy to address local market tax, regulatory and competitive
practices.
Tax
Deductibility
Section 162(m) of the Internal Revenue
Code limits the tax deductibility of compensation that we pay to NEOs (other
than the chief financial officer) to $1,000,000 in any year. This limitation
does not apply to performance-based compensation if certain conditions are met.
The Human Resources Committee generally intends to maximize the extent of the
tax deductibility of executive compensation under the provisions of Section
162(m). The Committee believes, however, that shareholders interests are best
served by not restricting its discretion and flexibility in structuring
compensation programs, even though such programs may result in certain
non-deductible compensation expenses.
Shareholder Advisory
Vote - Say on Pay
At our 2016 Annual Meeting of
Shareholders, the Board requested and received shareholder approval, on an
advisory basis, of our 2015 executive compensation. We include this say on pay
vote in our proxy statement on an annual basis. The results of the shareholder
advisory vote on executive compensation at our 2016 Annual Meeting of
Shareholders were favorable, with 96.2% of the votes cast voted in support of
our compensation program. Prior to the date of that vote, we had already made
compensation decisions that impacted executive pay for 2016. Based on the high
level of shareholder support for our 2015 compensation program, the Committee
kept in place for 2017 many of the same executive compensation elements that it
had disclosed to shareholders in our proxy statement for the 2016 Annual Meeting
of Shareholders.
Employment and
Transition Agreements
We generally do not enter into employment
contracts with executives that provide for ongoing terms of employment. However,
we have transition agreements with Messrs. Levatich, Hund and Olin that become
effective upon a change of control of Harley-Davidson, Inc. as defined in their
transition agreements. In the agreements with these NEOs, to the extent that
payments to these executives
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under these agreements would be considered
excess parachute payments as defined in Section 280G of the Internal Revenue
Code, the payments will be reduced to a point at which they are no longer
considered excess parachute payments, or the executive will receive the full
payment and be personally liable for the excise tax, whichever produces the
larger after-tax benefit to the executive. There are no provisions for an excise
tax gross up or any provision for payment of benefits in the event the executive
voluntarily terminates his employment for any reason after a change of control.
There is no immediate vesting of equity awards upon a change of control for NEOs
who are parties to transition agreements.
We believe the circumstances that entitle
an individual to payments upon termination of employment following a change of
control strike the appropriate balance between protecting the interests of our
shareholders and our executives. The table in the Payments Made Upon
Termination - Change of Control section provides estimates of the amounts of
compensation payable to each eligible NEO, if any, upon a change of control and
termination of the executive. The assumptions we used to calculate those amounts
accompany the Change of Control table.
Under the transition agreements, a change
of control of Harley-Davidson means any one of the following:
● |
the total number of directors either
serving on the date of the agreement or approved by those serving on the
date of the agreement or successors they have approved no longer
constitutes at least two-thirds of the Board; or
|
● |
any person becomes the owner,
directly or indirectly, of 20% or more of our outstanding common stock or
voting power; or |
● |
the consummation of a merger or
consolidation with another company, a sale of most of our assets, or a
liquidation or dissolution, unless, in the case of a merger or
consolidation, the total number of directors serving on the date of the
agreement or approved by those serving on the date of the agreement or
successors they have approved will constitute at least two-thirds of the
board of the surviving company after the transaction; or at least
two-thirds of the total number of directors either serving on the date of
the agreement or approved by those serving as of the date of the agreement
or successors they have approved determines immediately before a proposed
action is taken that the action will constitute a change of control event
(and the action is subsequently taken). |
Executive
Severance
Senior leaders, including the CEO and the
other NEOs, are covered under our Executive Severance Policy that provides for a
cash severance benefit that varies between 12 and 24 months of base pay and 18
months continuation of certain employee benefits, such as life insurance,
medical benefits, and limited outplacement benefits if we terminate employment
for reasons other than for cause. To receive a severance payment under this
policy, the executive must agree to a number of restrictive covenants and
execute a general release of claims against the company.
Group |
Cash Severance (months of base pay) |
Harley-Davidson Leadership Team
(HDLT) |
24
months |
Non-HDLT Senior Leaders |
12
months |
Compensation Risk
Assesment
The Human Resources Committee considers,
among other things in establishing and reviewing our executive compensation
program, whether the program pays the executives for performance and whether the
program encourages unnecessary or excessive risk taking. The Committee reviews
annually the principal components of executive compensation. Base salaries are
reviewed annually and adjusted as appropriate based on our pay-for-performance
philosophy. Annual Financial STIP incentive pay is focused on achievement of
certain financial goals and is determined using multiple performance criteria.
Our annual Leadership STIP in 2016 rewarded our executives for
achievement
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of progress towards and attainment of
specific goals relating to delivery of large scale projects on time and on
budget. The annual cash incentive plans provide that the Committee may reduce
awards that executives would otherwise earn by up to 50%, and there is a cap on
all maximum cash payouts. The Committee believes these cash incentive plans
appropriately balance risk, payment for performance and the desire to focus
executives on specific financial and leadership measures and that they do not
encourage unnecessary or excessive risk taking.
The other major component of our executive
compensation program is long-term incentives through a mix of performance shares
and restricted stock units that the Committee believes are important to help
further align executives interests with those of our shareholders. The
Committee believes these awards do not encourage unnecessary or excessive risk
taking. The value of the equity-based awards is tied to our stock price and
performance shares are subject to maximum payouts (expressed as a multiple of
the original award). In addition, grants are subject to long-term,
performance-based vesting schedules, and executives are subject to stock holding
requirements in the Stock Ownership Guidelines, to help ensure that executives
always have significant value tied to long-term performance.
The Human Resources Committee believes
that the structure of the Financial STIP, which focuses behaviors on broad-based
financial performance of the company as a whole, and the structure of the
long-term incentive plan, which rewards individuals for share price appreciation
and performance relative to strategic goals, achieve an appropriate balance of
important objectives. The Committee also believes that the structures of these
plans do not create risks that are reasonably likely to have a material adverse
effect on the company.
Peer Group and
Executive Compensation Benchmarking
The Committee used two peer groups in
benchmarking executive compensation practices and levels for 2016: (i) one peer
group consists of companies for whom manufacturing and engineering are key
attributes (Manufacturing/Engineering Peer Group) and (ii) a second peer group
consists of companies for whom the maintenance of a strong product brand is a
key attribute (Brand Name/ Consumer Goods Peer Group). The Committee uses
blended compensation data from these two peer groups to reflect the companys
unique emphasis on both the maintenance of the Harley-Davidson brand and on
manufacturing and engineering excellence. In addition, the Committee believes
this use of blended compensation data is necessary to appropriately reflect the
significantly different compensation philosophies and practices of Brand
Name/Consumer Goods companies and Manufacturing/Engineering companies. The
Committee selected peer companies for each of the two peer groups based on
revenues and because Harley-Davidson competes for executive talent with these
companies.
The Committee reviews compensation levels
and reward practices of the companies within the peer groups. When determining
the competitive market using comparator company data, we weight data from the
Manufacturing/Engineering Peer Group 60% and data from the Brand Name/Consumer
Goods Peer Group 40%. If data from the peer groups is unavailable or inadequate,
then we determine the competitive market by using data obtained through the Aon
Hewitt 2016 U.S. Total Compensation Measurement (TCM) survey; you can find a
list of all of the companies in this survey by clicking on the Compensation
Survey Participants link at http://investor.harley-davidson.com/phoenix.zhtml?c=87981&p=irol-govhighlights&locale=en_
US&bmLocale=en_US.
We size-adjust reported data, using
regression analysis to normalize to a revenue and/or asset size of the
appropriate business unit. We benchmarked NEO compensation versus competitive
50th percentiles based upon proxy statement data from the peer group companies.
The Committee believes that the regressed, weighted data derived from the two
peer groups accurately reflects the competitive market for executive
compensation for our NEOs.
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The composition of each of our peer groups
is shown below.
|
Manufacturing/Engineering Peer
Group |
● |
BorgWarner Inc. |
|
● |
Navistar International
Corporation |
● |
Cooper-Standard Holdings
Inc. |
|
● |
Oshkosh
Corporation |
● |
Cummins Inc. |
|
● |
Paccar Inc. |
● |
Dana Holding
Corporation |
|
● |
Pentair, Inc. |
● |
Eaton
Corporation |
|
● |
Rockwell Automation
Inc. |
● |
Federal-Mogul
Corporation |
|
● |
Rockwell Collins,
Inc. |
● |
Flowserve
Corporation |
|
● |
Stanley Black &
Decker, Inc. |
● |
Genuine Parts
Company |
|
● |
Tenneco Inc. |
● |
Illinois Tool Works
Inc. |
|
● |
Terex
Corporation |
● |
Johnson Controls
Inc. |
|
● |
Textron Inc. |
● |
Joy Global Inc. |
|
● |
Visteon
Corporation |
● |
Meritor Inc. |
|
|
|
|
|
Brand Name/Consumer Goods Peer
Group |
● |
3M Company |
|
● |
Mastercard
Incorporated |
● |
Avon Products,
Inc. |
|
● |
Mattel, Inc. |
● |
Brown-Forman
Corporation |
|
● |
McDonalds
Corporation |
● |
Campbell Soup
Company |
|
● |
Molson Coors Brewing
Company |
● |
Coach, Inc. |
|
● |
Nordstrom,
Inc. |
● |
Colgate-Palmolive
Company |
|
● |
Polaris Industries
Inc. |
● |
Edgewell Personal Care
Co. |
|
● |
Scotts Miracle-Gro
Company |
● |
Fortune Brands Home &
Security, Inc. |
|
● |
Sherwin-Williams
Company |
● |
Harman International
Industries, Incorporated |
|
● |
Starbucks
Corporation |
● |
Hasbro, Inc. |
|
● |
The Hershey
Company |
● |
Kimberly-Clark
Corporation |
|
|
|
|
We recognize that mergers and acquisitions
or other business transactions may impact a number of peer group companies,
which we take into consideration as we determine our peer groups for future
years.
OUR EXECUTIVE
COMPENSATION PROGRAMS AND PERFORMANCE
We believe our employees and our culture
of leadership make our company great. We are in competition to attract and
retain talent primarily with companies for whom engineering, manufacturing and
the development of a strong global product brand and marketing focus are
critical to their businesses. The executive compensation program we developed
and implemented enables us to attract, retain, motivate and align our talent in
a competitive talent marketplace.
The compensation packages of our senior
leaders, and more specifically our NEOs, consist of four key elements. These
primary elements are base salary, short-term incentives, long-term incentives
and employee benefits. In certain circumstances, such as newly-hired executives
or for special recognition or retention, we may provide compensation outside of
these regular executive compensation elements. Also, for senior leaders located
outside the United States, we customize our compensation and benefits to meet
local market, tax, regulatory and competitive practices.
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Base
Salary
We set base salaries by starting with
salary midpoints that are generally at the competitive market 50th percentile.
We then make adjustments to base salaries as appropriate and on a subjective
basis by individual, generally within a range of plus or minus 20%, based upon
individual performance, experience, market practices and potential for
advancement. We also take overall general business and economic conditions,
including market practices, into account in determining base salaries. We review
base salaries for NEOs annually using the peer group and benchmarking data that
we discuss above.
The CEO recommends base salary changes for
the Harley-Davidson Leadership Team to the Human Resources Committee for final
approval. The Human Resources Committee reviewed and approved the salary
increase recommendations of Mr. Levatich for the HDLT, excluding the CEO. We
believe the increases to base salaries, which were effective March 2016, were
appropriate based upon the positioning of the executives base salaries in
relation to the competitive market 50th percentile and their individual
performance, all in the manner that we describe above.
Effective March 2016, we increased the
base salary for our CEO based upon his individual performance, accomplishment of
key initiatives and positioning of the CEOs base salary in relation to the
competitive market 50th percentile, as determined by the Human Resources
Commitee. The Human Resources Committee believes the difference that exists
between the base salary of the CEO and the base salaries of the other NEOs is
supported by competitive market data and is appropriate based upon the level of
accountability for his position.
Short-Term Incentive
Plan (STIP)
Our Short-Term Incentive Plan has
broad-based employee participation and provides an opportunity to most of our
approximately 6,000 employees to earn annual cash awards based upon performance
during the course of our fiscal year relative to financial goals or other
performance objectives that we generally establish prior to the start of the
year. Our senior leaders, including the NEOs, have the opportunity to earn two
types of annual incentive compensation. We based one type on quantifiable,
objective factors. We refer to this type of annual incentive compensation
opportunity as our Financial STIP. In addition, our senior leaders, including
the NEOs, have the opportunity to receive payments under an annual incentive
plan that we refer to as our Leadership STIP, which is based upon driving
measurable improvement in key capabilities that we believe are necessary for
improved performance and competitive advantage over time.
The Human Resources Committee approved the
Financial STIP and a Leadership STIP for 2016 under the Harley-Davidson, Inc.
Short-Term Incentive Plan for Senior Executives, which shareholders approved in
2011. Actual payments under the Financial STIP can range from 0% to 200% of an
individuals Financial STIP target opportunity based on actual company
performance. Combined payouts under the Financial and Leadership STIPs cannot
exceed 200% of a participants Financial STIP target.
2016 Financial
STIP
In December 2015, the Human Resources
Committee approved the 2016 Financial STIP consisting of a single plan that
covered all eligible employees rather than separate plans for Harley-Davidson
Motor Company, or HDMC, and Harley-Davidson Financial Services, or HDFS. The
Committee did this to reinforce our One Company, One Team, One Direction
philosophy, by aligning all eligible employees on the same plan. The Committee
reviewed and approved the 2016 performance measures and goals under that
plan.
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The Human Resources Committee also
reviewed and approved the target STIP opportunities for all NEOs for 2016. The
target STIP opportunity is the amount of STIP compensation that we would pay to
a NEO, expressed as a percentage of his or her annual base salary, assuming that
the actual performance resulted in a payout at target. Based upon a review of
competitive market data and our compensation philosophy of targeting
compensation at the 50th percentile plus or minus 20% based on individual
performance and experience, Mr. Levatich recommended the target STIP
opportunities for each NEO other than himself. The Financial STIP target
opportunity for Ms. Kumbier was increased from 60% to 70%. For all other NEOs,
the Committee approved 2016 STIP targets that were the same as in
2015.
The Human Resources Committee determined
the target STIP opportunity for the CEO based upon a review of external market
compensation data with input from the outside executive compensation advisor.
Based on that review and input, the Committee approved an increase in the CEOs
Financial STIP target opportunity from 115% of base salary to 125% of base
salary.
The key financial measures for the 2016
Financial STIP were the following:
● |
Consolidated Net Income
(weighted at 75%): consolidated net income from
continuing operations, excluding the loss on debt extinguishment, the
reinstatement of the Research and Development tax credit and
reorganization costs |
● |
HDMC Asset Productivity
(weighted at 12.5%): revenue from HDMC divided by
the sum of HDMC average property, plant and equipment, net and average
HDMC Net Working Capital |
● |
HDMC Net Working
Capital: consolidated accounts receivables plus the sum of HDMC
current assets consisting of inventories and other current assets
(excluding tax assets) less the sum of current liabilities consisting of
accounts payable (excluding negative book cash balances) and accrued
liabilities (excluding dividends payable and tax
liabilities) |
● |
HDFS Return on Assets (weighted
at 12.5%): HDFS operating income
divided by HDFS average finance receivables,
net |
These measures are derived from our
financial results as presented in our consolidated financial statements and
notes, except that we use monthly information to calculate averages and our
financial statements and notes may not disclose detailed amounts for the
excluded items because the details are not required for financial statement
reporting purposes.
The rationale for using HDMC Asset
Productivity and HDFS Return on Assets in conjunction with Consolidated Net
Income is to provide incentives relating to both the balance sheet and the
income statement. These measures take into account the level of return on
investment and net income, which involve the magnitude and quality of earnings.
The Committee believed the goals it established based on HDMC Asset
Productivity, HDFS Return on Assets and Consolidated Net Income were appropriate
and balanced and provided adequate incentive for participants to strive to
achieve our objectives for 2016.
For the 2016 Financial STIP, we set the
Consolidated Net Income target at $758.4 million, the HDMC Asset Productivity
target at 5.06 and the HDFS Return on Assets target at 4.13%. Meeting all three
targets would result in a payout under the plan equal to 100% of the target STIP
opportunity. The Committee approved potential payout percentages ranging from 0%
to 200% of the target STIP opportunity for various levels of performance against
these performance targets. A participant would have been eligible to receive the
maximum potential payout if our performance met or exceeded Consolidated Net
Income of $834.2 million, HDMC Asset Productivity of 5.46 and HDFS Return on
Assets of 4.67%.
34 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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Under the 2016 Financial STIP, if we did
not achieve net income of at least $530.9 million in 2016, then we would not
make any payouts, regardless of performance under other financial measures. In
addition, the minimum payout could be 0% and the maximum payout could not exceed
200% of a participants Financial STIP target opportunity, nor could such payout
exceed $6 million per executive.
Upon the completion of the fiscal year,
the Committee reviews the extent to which actual performance compares to the
defined performance goals for the Financial STIP. We typically pay STIP awards
in February after the prior years financial statement audit is complete and the
Committee reviews and approves earned amounts. The Committee has the right to
reduce awards that senior leaders would otherwise earn under the
STIPs.
Based on 2016 performance, during which we
achieved Consolidated Net Income (as defined above) of $701.8 million, HDMC
Asset Productivity of 4.53 and HDFS Return on Assets of 3.85%, Financial STIP
participants, including the NEOs, earned incentive payments equal to 87.1% of
their target Financial STIP opportunity.
2016
Leadership STIP
In December 2015, the Human Resources
Committee approved the Leadership STIP for 2016 that covered our senior leaders,
including our NEOs. The Leadership STIP provided the opportunity to earn an
incentive payment above amounts that a senior leader could earn under the 2016
Financial STIP. For 2016, the maximum Leadership STIP opportunity for each NEO,
other than Mr. Levatich, was 30% of that executives base salary. The Leadership
STIP opportunity for Mr. Levatich was 40% of his base salary. For 2016, the
maximum STIP payment under both the Financial STIP and the Leadership STIP could
not exceed 200% of an executives Financial STIP target opportunity. This change
was made to ensure that in no event could the Financial STIP and Leadership STIP
pay out in excess of 200% of the executives Financial STIP target opportunity,
which we determined is in line with market practice, nor could such payout
exceed $6 million per executive.
Each NEO, including Mr. Levatich, was able
to earn a Leadership STIP payment based upon performance towards a predetermined
set of measures relating to project management excellence. For 2016, the
Leadership STIP utilized three measures, each weighted equally, which
were:
● |
Completion of project management
training |
● |
Project health of strategic
projects |
● |
Capital investment per
plan |
The Human Resources Committee reviewed the
aggregate performance of the organization relating to the three Leadership STIP
measures and determined that that performance equated to 95.4% of the target.
Therefore, each participant earned a Leadership STIP equal to 95.4% of his or
her Leadership STIP target opportunity.
The following table illustrates the
relationship among the Leadership STIP target opportunity, the Financial STIP
target opportunity and the maximum STIP payout (as a percentage of base
salary):
Named Executive Officer |
|
2016 Financial STIP
Target Opportunity |
|
2016 Leadership STIP
Target Opportunity |
|
2016 Maximum STIP Opportunity* |
Matthew S. Levatich |
|
125% |
|
40% |
|
250% |
Lawrence G. Hund |
|
80% |
|
30% |
|
160% |
John A. Olin |
|
80% |
|
30% |
|
160% |
Michelle A. Kumbier |
|
70% |
|
30% |
|
140% |
Paul J. Jones |
|
70% |
|
30% |
|
140% |
*Combined payouts under the Financial and
Leadership STIPs cannot exceed 200% of the NEOs Financial STIP target
opportunity. For example, in the case of Mr. Levatich, his Financial STIP target
opportunity is 125%, for a maximum payment of 250% of his base
salary.
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2017 Short-Term
Incentive Plan Design
In November 2016, the Committee approved
the companys 2017 Financial STIP consisting of a single annual plan for all
eligible employees.
The key financial measures for the 2017
Financial STIP are the following, in each case subject to certain adjustments
that the Committee may approve, with the relative weightings that the Committee
assigned to each:
● |
Consolidated Net Income (weighted
at 75%): consolidated net income from
continuing operations |
● |
HDMC Asset Productivity (weighted
at 12.5%): revenue from HDMC divided by
the sum of HDMC average property, plant and equipment, net and average
HDMC Net Working Capital |
● |
HDMC Net Working
Capital: consolidated accounts
receivables plus the sum of HDMC current assets consisting of inventories
and other current assets (excluding tax assets) less the sum of current
liabilities consisting of accounts payable (excluding negative book cash
balances) and accrued liabilities (excluding dividends payable and tax
liabilities) |
● |
HDFS Return on Assets (weighted
at 12.5%): HDFS operating income
divided by HDFS average finance receivables,
net |
These measures are derived from our
financial results as presented in our consolidated financial statements and
notes except that we use monthly information to calculate averages and our
financial statements and notes may not disclose detailed amounts for the
excluded items because the details are not required for financial statement
reporting purposes.
Under the 2017 Financial STIP, if we do
not achieve net income of at least $480 million in 2017, then we would not make
any payouts, regardless of performance under other financial measures. In
addition, the minimum payout could be 0%, the payout at the threshold level of
performance is 50% of a participants Financial STIP target opportunity, and the
maximum payout would not exceed 200% of a participants Financial STIP target
opportunity, nor would such payout exceed $6 million per executive. The
Committee determined that there was a reasonable likelihood that employees could
achieve the goals and earn incentive compensation at the target performance
level.
The Committee also approved the 2017
Leadership STIP. NEOs are able to earn the 2017 Leadership STIP based upon
improvement in project management along with goals to improve organizational
effectiveness and performance to plan on key strategic initiatives. Combined
payouts under the Financial STIP and Leadership STIP cannot exceed 200% of a
participants Financial STIP target opportunity.
Long-Term Incentive
Plan
The Human Resources Committee believes
that long-term incentives are a key component of total compensation for
participating executives. The purpose of long-term incentives is to: (i) enhance
the growth and profitability of our company by focusing the senior leaders and
other key employees on our long-term financial success and growth in value,
providing balance and perspective to annual goals and incentives; and (ii)
further align the interests of shareholders and executives. In addition, the
Committee believes that long-term incentives provide a valuable tool to retain
and attract key employees. We use objective market data that our outside
executive compensation advisor provides to assign to each key position,
including each NEO, that is eligible to participate in the 2014 Incentive Stock
Plan a target value of long-term incentive opportunity.
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2016 Long-Term
Incentive Plan
In December 2015, the Committee approved
changes to the design of our long-term incentive awards to:
● |
Eliminate the granting of stock
options (previously 33% of total award); |
● |
Eliminate the granting of cash-based
long-term incentive awards (previously 33% of total
award); |
● |
Grant long-term performance share
awards that vest according to our three-year performance period goal
achievement (67% of total award); and |
● |
Continue to grant time-vested
restricted stock unit awards which will vest one-third per year over each
of the subsequent three years (33% of total
award). |
We implemented these changes to increase
the focus on achievement of our long-term goals by significantly increasing the
portion of this compensation, such that executives will not receive value
without performance and directly tying the value they receive to
performance.
In February 2016, we provided long-term
incentive compensation under our 2014 Incentive Stock Plan, which gives the
Human Resources Committee the flexibility to grant equity instruments, including
stock options, stock appreciation rights, restricted stock, restricted stock
units and performance shares. The long-term incentive awards that we granted to
certain senior leaders, including all NEOs, used the design of our long-term
incentive awards that the Committee approved in December 2015.
Performance
Shares
The performance shares that we granted in
2016 allow the executive to earn a specified number of shares of our common
stock at the end of the three-year performance period (2016 through 2018) that
will range between 0% and 300% of the initial award amount. Each executives
2016 performance share award involves a stated number of performance shares. The
number of shares of our stock that a NEO will earn will be determined at the end
of a three-year performance period. As a result, the amount of performance
shares a NEO earns is based on performance, and the value that the NEO realizes
is based on our stock price at that time. To the extent that these awards vest,
the participant will receive the accumulated dividends which have accrued over
the performance period in direct proportion to the number of performance shares
that actually vest.
The performance measures applicable to the
performance shares that we granted in 2016 are:
● |
Cumulative Net Income (weighted
at 42.5%): cumulative consolidated net
income from continuing operations over the performance
period |
● |
HDMC Average Return on Invested
Capital (ROIC) (weighted at 42.5%): the
sum of the quotient obtained by, dividing (i) HDMC Net Operating Income
After Tax by (ii) HDMC Invested Capital for each year in the performance
period, divided by the number of years in the performance
period |
● |
HDMC Net Operating Income After
Tax: the amount of HDMC operating
income reduced for taxes for the relevant year in the performance
period |
● |
HDMC Invested Capital:
the average amount of HDMC debt plus the average
amount of HDMC shareholders equity, excluding accumulated other
comprehensive income or loss for pension and postretirement benefit plans,
for the relevant year in the performance
period |
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● |
New Riders (weighted at
15%): the percentage of sales to new
riders buying new Harley-Davidson motorcycles in the U.S. compared to
total new U.S. Harley-Davidson sales for the preceding 12-month period
ending November 1, 2018 |
The Committee believes the structure of
this approach is in the best interest of our shareholders and focuses behaviors
on the realization of long-term strategic goals of the organization and the use
of shareholder capital to drive value creation and strong returns.
Restricted Stock
Units
The Committee believes that restricted
stock unit awards complement our use of performance shares by providing an
effective and valuable tool to attract and retain senior leaders.
Restricted stock unit awards allow senior
leaders, including our NEOs, to receive shares of our common stock in the future
only after the awards vest, which will occur only if the individual remains an
employee or certain other circumstances apply. The restricted stock unit awards
vest in three equal annual installments beginning one year after the grant date.
During the vesting period, the recipient is eligible to receive dividend
equivalents on a current basis on each restricted stock unit of the same value
as dividends that are declared and paid quarterly on each share of stock. Under
the vesting rules of our restricted stock unit awards, a recipient who has
attained the age of 55 and eligibility for retirement and who retires from the
company will have all awards that were granted 12 or more months prior to the
date of retirement vested upon retirement.
Equity Award Grant
Process
The Human Resources Committee uses a
methodology to calculate an individuals potential aggregate long-term incentive
award value that provides for a target value of long-term incentive opportunity
that we express as a percentage of base salary. In February 2016, the Committee
reviewed competitive market data that Meridian prepared relating to the HDLT
with Mr. Levatich. Based upon our compensation philosophy of targeting
compensation at the 50th percentile plus or minus 20% and based upon individual
performance and experience, the Committee approved target values of long-term
incentive opportunities for NEOs. Target values for Messrs. Hund, Jones and Olin
were unchanged from 2015. We increased Ms. Kumbiers target value of long-term
incentive opportunity from 130% in 2015 to 170% in 2016. Based upon a review of
the competitive market and with input from Meridian, the Committee approved an
increase in the amount of Mr. Levatichs target value of long-term incentive
opportunity from 425% to 450%.
For 2016, we converted the target value of
long-term incentive opportunity for each NEO into an award of performance shares
and an award of restricted stock units. For this conversion, we valued each
performance share and each restricted stock unit at an amount equal to the
closing price of a share of our stock on the date of grant. We grant restricted
stock units to a senior leader in a year only if he or she met or exceeded
objective and subjective performance standards that applied to him or her in the
preceding year. For purposes of 2016 grants, the Committee determined that all
NEOs met or exceeded applicable performance standards in 2015. In 2016, there
were no special grants to any NEO.
We describe the process and restrictions
on granting long-term incentives more fully in the Corporate Governance
Principles and Board Matters - Human Resources Committee
section.
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2014 through 2016 Cash-Based Long-Term Incentive Awards
(Program discontinued December 31,
2015)
In years prior to 2016, we granted
cash-based long-term incentive awards relating to a three-year performance
period. In 2014, we granted this type of award to each NEO relating to
performance over 2014, 2015 and 2016. The payout was based on performance
relative to goals relating to average return on invested capital (ROIC) for
HDMC. Payouts could range from 0% to 200% of a NEOs target value attributable
to cash-based long-term incentive awards based upon results over the performance
period. The ROIC performance calculation that we used in these cash-based
long-term incentive awards was as follows:
● |
HDMC Average Return on Invested
Capital (ROIC): the sum of the quotient
obtained by dividing (i) HDMC Net Operating Income After Tax by (ii) HDMC
Invested Capital for each year in the performance period, divided by the
number of years in the performance
period |
● |
HDMC Net Operating Income After
Tax: the amount of HDMC operating
income reduced for taxes for the relevant year in the performance
period |
● |
HDMC Invested
Capital: the average amount of HDMC
debt plus the average amount of HDMC shareholders equity, excluding
accumulated other comprehensive income or loss for pension and
postretirement benefit plans and the cumulative effect of share
repurchases above or below levels that we reflected in our strategic plan
at the time of the award, for the relevant year in the performance
period |
These measures are derived from our
segment financial results as presented in the notes to our consolidated
financial statements, except that we do not disclose all of the information
necessary to make the calculation relating to share repurchase
levels.
The performance period for the cash-based
long-term incentive awards that we granted in 2014 ended on December 31, 2016.
We paid those awards in February 2017 based upon ROIC for HDMC compared to the
goals that the Committee approved at the time of grant. The target ROIC goal for
compensation purposes was 27.1% and actual ROIC performance was 22.9%, yielding
a payment of 86% of each NEOs target value.
2017 Long-Term Incentive
Plan Design
In November 2016, the Committee approved
the design for long-term incentive awards to our NEOs that was similar to the
design for 2016 awards as follows:
● |
Grant long-term performance share
awards (67% of total award) with the potential to earn 0% to 200% (for
2016, the upside limit was 300%); and |
● |
Grant restricted stock unit awards
(33% of total award). |
We used this mix to create substantial
focus on achievement of the long-term success of the company by having a
significant portion of the compensation at risk such that executives will not
receive value without performance and to directly tie the value they receive to
financial performance. The performance shares that we granted in 2017 allow the
executive to earn a specified number of shares of our common stock at the end of
the three-year performance period (2017 through 2019) that will range between 0%
and 200% of the initial award amount.
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The performance measures applicable
to the 2017 awards of performance shares are as follows, in each case defined in
a manner substantially similar to 2016:
● |
Cumulative Net Income (weighted
at 50%) |
● |
HDMC Average Return on Invested
Capital (ROIC) (weighted at
50%) |
● |
HDMC Net Operating Income After
Tax |
● |
HDMC Invested
Capital |
Employee Benefits
We provide other benefits to our senior
leaders that we generally offer in similar form and manner to our other salaried
employees, including medical and dental benefits, life insurance-related
benefits, deferred compensation, retirement plans, employee savings plan, and
relocation benefits. The goal of these programs is to provide benefits that are
competitive in the marketplace where we compete for executives at the senior
leadership level. In general, these benefits have been in place for a number of
years.
Medical and Dental
Benefits
We provide medical and dental benefit
plans that are available to substantially all employees, including the senior
leaders. Benefits-eligible HDMC U.S. salaried employees are also eligible to
participate in our Health Care Account Program. We do not provide any
supplemental medical or dental benefits to our NEOs.
Life Insurance-Related
Benefits
We provide life insurance-related benefits
to the senior leaders that are available only in the event of their death during
active employment with the company. The amount of life insurance-related
benefits ranges from one and one-half to three times a senior leaders annual
base salary, depending on salary band. We also reimburse executives for taxes on
income that tax law imputes to executives related to the provision of life
insurance in excess of $50,000. For non-executive salaried employees, we provide
life insurance-related benefits in the amount of one and one-half times base
salary.
Retirement
Plans
HDMC Salaried Defined
Contribution Retirement Plan
For HDMC, we maintain a qualified defined
contribution plan that covers HDMC U.S. salaried employees who were hired on or
after August 1, 2006. Under our Non-Qualified Deferred Compensation Plan, we pay
participants amounts that would have been accrued or payable under this defined
contribution plan if statutory limits that apply to this defined contribution
plan as a qualified plan under the Internal Revenue Code had not been
applicable. Mr. Jones is a participant in this plan.
HDFS Defined Contribution
Retirement Plan
For HDFS, we maintain a qualified defined
contribution plan that covers HDFS U.S. employees. Mr. Hund is a participant in
this plan.
40 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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EXECUTIVE COMPENSATION
Harley-Davidson Employee Savings
Plans
We have qualified section 401(k) savings
plans for employees, which we believe are competitive with other similar
companies. Eligible participants can make contributions to the plan up to the
Internal Revenue Code limits. We provide participants with matching
contributions of up to either 4.5%, for defined contribution eligible employees,
or 3%, for defined benefit eligible employees, of their eligible compensation
based upon the extent to which they make elective deferrals and based upon their
date of hire. Under our Non-Qualified Deferred Compensation Plan, we pay
participants amounts that we would have provided as matching contributions under
the Savings Plan if statutory limits that apply to the Savings Plan as a plan
qualified under the Internal Revenue Code had not been applicable. All NEOs
participate in this plan.
Harley-Davidson Retirement Annuity
Plan
HDMC has long maintained a qualified
non-contributory, defined benefit pension plan which covers HDMC U.S. salaried
employees who were hired prior to August 1, 2006. Beginning August 1, 2006, we
have not allowed new participants into this plan. Messrs. Levatich and Olin and
Ms. Kumbier participate in this plan.
HDMC Restoration Plan
HDMC has long maintained a non-qualified
Pension Benefit Restoration Plan pursuant to which we pay participants amounts
that would have been accrued under or payable from the Harley-Davidson
Retirement Annuity Plan if statutory limits that apply to the Harley-Davidson
Retirement Annuity Plan as a plan qualified under the Internal Revenue Code had
not been applicable. Beginning August 1, 2006, we have not allowed new
participants into this plan. Messrs. Levatich and Olin and Ms. Kumbier
participate in this plan.
Deferred Compensation
Plan
We maintain a Non-Qualified Deferred
Compensation Plan for salaried employees in which a group of highly-compensated
employees (as defined by the Internal Revenue Code) are eligible to participate,
including the senior leaders. Under the terms of this plan, participants can
defer a portion of their base salary and a portion of their annual STIP payment.
If a participant in this plan makes an election to defer eligible compensation
and there are statutory limits on such participants ability to defer at least
6% of eligible compensation into the qualified employee Retirement Savings Plan,
then the participant will also receive company matching contributions in this
plan that would have been made in the qualified plan if no statutory limit had
been applicable. We believe earnings on amounts deferred reflect the returns
available in the market as investment options in the Deferred Compensation Plan
that are participant-directed are similar to those that exist in our 401(k)
plan. This plan is structured to comply with Section 409A of the Internal
Revenue Code. Each of our NEOs is eligible to participate in the Deferred
Compensation Plan.
Other Employee
Programs
We provide the opportunity for
substantially all employees, including the senior leaders, to purchase eligible
Harley-Davidson products (including motorcycles, Parts and Accessories, and
General Merchandise) and receive a reimbursement from the company for a portion
of the purchase price paid. Executives also participate in other employee
benefit programs, such as our employee stock purchase program, paid time off,
retiree healthcare account accrual (closed effective 1/1/2017) and disability
insurance. We have standard compensation packages applicable to relocations and
overseas assignments.
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EXECUTIVE COMPENSATION
Other Senior
Leaders Programs
Historically, we provided certain senior
leaders, including the NEOs, who retire after reaching age 55 and after
attaining five or more years of service a benefit in lieu of providing post
retirement life insurance consisting of payment equal to two years base salary
at retirement. The executive is responsible for all taxes associated with this
payment. This benefit is not available to individuals that we hired after 2015.
Currently, Messrs. Olin and Hund are eligible to receive this benefit upon their
retirement. In the case of the remaining NEOs, they become eligible for this
benefit after reaching age 55 and upon their retirement from the
company.
We provide senior leaders, including all
NEOs, with a limited financial planning and tax preparation benefit. The senior
leader is responsible for all taxes associated with this payment. The NEOs are
eligible to receive an annual executive physical.
We permit limited use of our corporate
aircraft by NEOs. We have entered into time sharing agreements with executive
officers, including the NEOs, to provide terms governing personal use of
corporate aircraft and to require the executive officers to pay for each
personal flight. The amount that an executive officer pays for each personal
flight is equal to the greater of the aggregate incremental cost to the company
for such flight and the Standard Industry Fare Level (SIFL) valuation used to
impute income for tax purposes. In all cases, the CEO must approve all personal
use, and any business use for our corporate aircraft takes priority over a NEOs
request for personal use.
Additionally, to further promote the
Harley-Davidson brand and the recognition of senior leaders as representatives
of the company at rallies and other industry events, senior leaders receive an
annual allowance for the purchase of MotorClothes® apparel of $3,000.
The senior leader is responsible for all taxes associated with this clothing
allowance.
42 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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Summary Compensation Table
Name and Principal Position (a) |
Year (b) |
Salary
($) (c) |
Bonus ($) (d) |
Stock Awards ($) (1) (e) |
Option Awards ($) (f) |
Non-Equity Incentive
Plan Compensation ($) (2) (g) |
Change in Pension Value
and Nonqualified Deferred Compensation Earnings
($) (3) (h) |
All
Other Compensation ($) (4) (i) |
Total
($) (j) |
Matthew S. Levatich President
and Chief Executive Officer |
2016 |
$1,041,667 |
$ |
$4,725,030 |
$ |
$2,083,161 |
$1,394,000 |
$106,445 |
$9,350,303 |
2015 |
$901,500 |
$307,495 |
$1,500,015 |
$968,462 |
$1,455,144 |
$1,285,000 |
$52,432 |
$6,470,048 |
2014 |
$669,167 |
$220,825 |
$641,313 |
$474,134 |
$1,481,473 |
$1,508,000 |
$439,057 |
$5,433,969 |
John A. Olin Senior Vice
President and Chief Financial Officer |
2016 |
$651,500 |
$ |
$1,566,057 |
$ |
$1,021,118 |
$1,612,000 |
$44,446 |
$4,895,121 |
2015 |
$626,667 |
$150,400 |
$504,999 |
$326,053 |
$798,007 |
$636,000 |
$49,711 |
$3,091,837 |
2014 |
$585,000 |
$140,400 |
$442,668 |
$327,254 |
$937,118 |
$750,000 |
$62,213 |
$3,244,653 |
Lawrence G. Hund President
and Chief Operating Officer - HDFS |
2016 |
$596,668 |
$ |
$1,290,070 |
$ |
$913,325 |
$86,000 |
$25,766 |
$2,911,829 |
2015 |
$571,673 |
$137,202 |
$415,669 |
$268,370 |
$731,351 |
$190,000 |
$26,119 |
$2,340,384 |
2014 |
$525,000 |
$126,000 |
$380,026 |
$280,930 |
$902,154 |
$110,000 |
$45,593 |
$2,369,703 |
Michelle A. Kumbier Senior Vice
President, Motor Company Product and Operations -
HDMC |
2016 |
$560,000 |
$ |
$961,035 |
$ |
$666,250 |
$466,000 |
$48,396 |
$2,701,681 |
Paul J. Jones Vice
President and Chief Legal Officer |
2016 |
$546,667 |
$ |
$908,026 |
$ |
$707,339 |
$ |
$95,359 |
$2,257,391 |
2015 |
$495,833 |
$104,125 |
$274,975 |
$177,547 |
$490,280 |
$ |
$90,731 |
$1,633,491 |
2014 |
$456,667 |
$95,900 |
$252,997 |
$187,042 |
$592,377 |
$ |
$104,010 |
$1,688,993 |
(1) We
calculated the compensation related to stock (restricted stock units and
performance shares) based on the grant date fair value of an award. We based the
grant date fair value of restricted stock unit and performance share awards on
the market price of the underlying stock as of the date of grant (which
considers the value of dividend equivalents that the holder is entitled to
receive). The performance share award value included in the summary compensation
table is based on achieving the performance objectives at target. The maximum
performance share award value, based on the grant date fair value per
performance share, is 300% of the target amount, which equates to the following
amounts based on our stock price on the date of grant: Mr. Levatich -
$9,497,301, Mr. Olin - $3,147,716, Mr. Hund - $2,593,017, Ms. Kumbier -
$1,931,669 and Mr. Jones - $1,825,137.
(2) NEOs
earned a Financial STIP award for 2016, a Leadership STIP award for 2016 and a
cash-based long-term incentive award for the performance period of 2014 through
2016, and they received payment for these awards in 2017. We disclose this
compensation in the table for the year in which it was earned.
(3) The amounts in this column represent
the aggregate change in the actuarial present value of each named executive
officers accumulated benefit under all defined benefit and actuarial pension
plans (including supplemental plans) from the plan measurement date used for
financial statement reporting purposes with respect to our audited financial
statements for 2015 to the plan measurement date used for financial statement
reporting purposes with respect to our audited financial statements for 2016.
Refer to the narrative to the Pension Benefits Table for further
information.
HARLEY-DAVIDSON.COM 43
Table of
Contents
EXECUTIVE COMPENSATION
(4) All other compensation consists
of the following:
|
Financial Planning |
Harley- Davidson Motor- Clothes |
Life Insurance |
Life Insurance Tax Gross Up (a) |
401(k)
Plan Contribution |
Deferred Compensation Plan Contribution |
Healthcare Account Contribution |
Total |
Matthew S. Levatich |
$12,000 |
$2,923 |
$14,891 |
$2,171 |
$7,950 |
$64,010 |
$2,500 |
$106,445 |
John A. Olin |
$ |
$ |
$1,080 |
$1,793 |
$7,950 |
$31,623 |
$2,000 |
$44,446 |
Lawrence G. Hund |
$ |
$ |
$14,031 |
$1,985 |
$9,750 |
$ |
$ |
$25,766 |
Michelle A. Kumbier |
$12,000 |
$183 |
$5,400 |
$567 |
$7,950 |
$19,796 |
$2,500 |
$48,396 |
Paul J. Jones |
$1,790 |
$1,238 |
$5,062 |
$410 |
$24,250 |
$60,109 |
$2,500 |
$95,359 |
(a) Reimbursement for income taxes on
income that tax law imputes to executives related to the provision of life
insurance in excess of $50,000.
44 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of
Contents
EXECUTIVE COMPENSATION
Grants of Plan Based Awards for 2016
|
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
(1) |
Estimated
Future Payouts Under Equity Incentive Plan Awards
(2) |
All other Stock Awards: Number of Shares of
Stock or Units (#) (3) (i) |
All other Option Awards: Number of Securities Underlying Option (#) (j) |
Exercise or Base Price
of Option Awards ($/sh) (k) |
Grant Date Fair Value of
Stock and Option Awards (l) |
Name (a) |
|
Grant Date (b) |
Threshold ($) (c) |
Target ($) (d) |
Maximum ($) (e) |
Threshold (#) (f) |
Target (#) (g) |
Maximum (#) (h) |
Matthew S. |
Financial STIP |
11/29/16 |
$696,719 |
$1,393,438 |
$2,786,875 |
|
|
|
|
|
|
|
Levatich |
Leadership STIP |
11/29/16 |
$ |
$428,750 |
$ |
|
|
|
|
|
|
|
|
Performance |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
2/2/16 |
|
|
|
40,073 |
80,146 |
240,438 |
|
|
|
$3,165,767 |
|
RSUs |
2/2/16 |
|
|
|
|
|
|
39,475 |
|
|
$1,559,263 |
John A. |
Financial STIP |
11/29/16 |
$267,458 |
$534,917 |
$1,069,833 |
|
|
|
|
|
|
|
Olin |
Leadership STIP |
11/29/16 |
$ |
$200,594 |
$ |
|
|
|
|
|
|
|
|
Performance |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
2/2/16 |
|
|
|
13,282 |
26,563 |
79,689 |
|
|
|
$1,049,239 |
|
RSUs |
2/2/16 |
|
|
|
|
|
|
13,084 |
|
|
$516,818 |
Lawrence |
Financial STIP |
11/29/16 |
$245,000 |
$490,000 |
$980,000 |
|
|
|
|
|
|
|
G. Hund |
Leadership STIP |
11/29/16 |
$ |
$183,750 |
$ |
|
|
|
|
|
|
|
|
Performance |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
2/2/16 |
|
|
|
10,941 |
21,882 |
65,646 |
|
|
|
$864,339 |
|
RSUs |
2/2/16 |
|
|
|
|
|
|
10,778 |
|
|
$425,731 |
Michelle A. |
Financial STIP |
11/29/16 |
$207,958 |
$415,917 |
$831,833 |
|
|
|
|
|
|
|
Kumbier |
Leadership STIP |
11/29/16 |
$ |
$178,250 |
$ |
|
|
|
|
|
|
|
|
Performance |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
2/2/16 |
|
|
|
8,151 |
16,301 |
48,903 |
|
|
|
$643,890 |
|
RSUs |
2/2/16 |
|
|
|
|
|
|
8,029 |
|
|
$317,146 |
Paul J. |
Financial STIP |
11/29/16 |
$196,510 |
$393,021 |
$786,042 |
|
|
|
|
|
|
|
Jones |
Leadership STIP |
11/29/16 |
$ |
$168,438 |
$ |
|
|
|
|
|
|
|
|
Performance |
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
2/2/16 |
|
|
|
7,701 |
15,402 |
46,206 |
|
|
|
$608,379 |
|
RSUs |
2/2/16 |
|
|
|
|
|
|
7,586 |
|
|
$299,647 |
(1) In
November 2016, the Human Resources Committee approved the Financial STIP and
Leadership STIP relating to 2017 performance. Under these plans, each NEO has
the potential to earn the estimated future payouts that we disclose above during
2017, which we would pay out in February 2018. The maximum Leadership STIP is
equal to the target; however, the maximum combined payouts under the Financial
STIP and the Leadership STIP cannot exceed the participants maximum Financial
STIP target. Therefore, we have not included a separate maximum amount for the
Leadership STIP.
We include
further details regarding these plans, including information on performance
criteria, in the Compensation Discussion and Analysis-Our Executive
Compensation Programs and Performance section.
(2) The amounts shown represent the
threshold, target and maximum payouts under performance shares that we granted
to NEOs in 2016. The performance shares allow NEOs to earn a specified number of
shares of our common stock at the end of the three-year performance period that
will range between 0% and 300% of the initial award amount. Each executives
2016 performance share award involves a stated number of performance shares,
which is the target amount in the table. The number of shares of our stock that
the NEO will earn will be determined at the end of a three-year performance
period. The performance measures applicable to the performance shares that we
granted in 2016 are based on Cumulative Net Income (weighted at 42.5%), HDMC
Average Return on Invested Capital (ROIC) (weighted at 42.5%) and sales to New
Riders (weighted at 15%). These measures are discussed in more detail under
Long-Term Incentive Plan in the Compensation Discussion and Analysis. The
amount of shares the NEO earns is based on performance and the value that the
NEO realizes is based on our stock price when earned shares are delivered. To
the extent that these awards vest, the participant will receive the accumulated
dividends that have accrued over the performance period in direct proportion to
the number of performance shares that actually vest.
HARLEY-DAVIDSON.COM 45
Table of
Contents
EXECUTIVE COMPENSATION
(3) Restricted stock unit awards
allow NEOs to receive shares of our common stock in the future only after the
awards vest, which will occur only if the individual remains an employee or
certain other circumstances apply. The restricted stock unit awards vest in
three equal annual installments beginning one year after the grant date. During
the vesting period, the recipient is eligible to receive dividend equivalents on
a current basis on each restricted stock unit of the same value as dividends
that are declared and paid quarterly on each share of stock. Under the vesting
rules of our restricted stock unit awards, a recipient who is at least 55 years
old, eligible for retirement, and retires from the company will have all awards
that were granted 12 or more months prior to the date of retirement vest upon
retirement.
NARRATIVE TO SUMMARY
COMPENSATION TABLE AND GRANTS OF
PLAN-BASED AWARDS TABLE
For 2016, we maintained the following
executive compensation plans and programs for our NEOs:
● |
Base
salary; |
● |
Annual cash incentive compensation
consisting of a Leadership STIP and a Financial
STIP; |
● |
Long-term incentive stock
awards; |
● |
Retirement
benefits; |
● |
Non-qualified deferred compensation
plan; and |
● |
Life insurance-related benefits,
including payments in lieu of post-retirement life insurance, and other
non cash compensation. |
We include further details regarding these
plans and programs, including information on performance criteria and vesting
provisions, in the Compensation Discussion and AnalysisOur Executive
Compensation Programs and Performance section.
46 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of
Contents
EXECUTIVE COMPENSATION
Outstanding Equity Awards at December 31, 2016
Name (a) |
Number
of Securities Underlying Unexercised Options
(#) Exercisable (b) |
Number
of Securities Underlying Unexercised Options
(#) Unexercisable (1) (c) |
Equity Incentive Plan Awards: Number
of Securities Underlying Unexercised Unearned Options
(#) (d) |
Option Exercise Price ($) (e) |
Option Expiration Date (f) |
Number of Shares or Units of Stock That Have
Not Vested (#) (2) (g) |
Market
Value of Shares or Units of Stock That Have Not Vested
($) (h) |
Equity Incentive Plan Awards: Number
of Unearned Shares, Units or Other Rights That Have
Not Vested (#) (3)(i) |
Equity Incentive Plan Awards: Market
or Payout Value of Unearned Shares, Units or Other Rights That
Have Not Vested ($) (3)(j) |
Matthew S. |
25,200 |
50,402 |
|
$63.49 |
02/03/25 |
|
|
|
|
Levatich (4) |
21,950 |
10,976 |
|
$62.33 |
02/04/24 |
|
|
|
|
|
34,567 |
|
|
$51.78 |
02/04/23 |
|
|
|
|
|
32,198 |
|
|
$45.32 |
02/06/22 |
|
|
|
|
|
26,247 |
|
|
$41.33 |
02/09/21 |
|
|
|
|
|
19,447 |
|
|
$39.04 |
02/13/18 |
|
|
|
|
|
9,149 |
|
|
$68.91 |
02/14/17 |
|
|
|
|
|
|
|
|
|
|
58,656 |
$3,421,991 |
|
|
|
|
|
|
|
|
|
|
80,146 |
$4,675,718 |
John A. |
8,484 |
16,969 |
|
$63.49 |
02/03/25 |
|
|
|
|
Olin (5) |
15,150 |
7,576 |
|
$62.33 |
02/04/24 |
|
|
|
|
|
22,825 |
|
|
$51.78 |
02/04/23 |
|
|
|
|
|
20,194 |
|
|
$45.32 |
02/06/22 |
|
|
|
|
|
13,059 |
|
|
$41.33 |
02/09/21 |
|
|
|
|
|
44,465 |
|
|
$22.63 |
02/10/20 |
|
|
|
|
|
30,000 |
|
|
$28.54 |
10/19/19 |
|
|
|
|
|
12,587 |
|
|
$12.30 |
02/12/19 |
|
|
|
|
|
28,760 |
|
|
$39.04 |
02/13/18 |
|
|
|
|
|
6,111 |
|
|
$68.91 |
02/14/17 |
|
|
|
|
|
|
|
|
|
|
20,755 |
$1,210,847 |
|
|
|
|
|
|
|
|
|
|
26,563 |
$1,549,685 |
Lawrence |
6,983 |
13,967 |
|
$63.49 |
02/03/25 |
|
|
|
|
G. Hund (6) |
13,006 |
6,503 |
|
$62.33 |
02/04/24 |
|
|
|
|
|
25,073 |
|
|
$22.63 |
02/10/20 |
|
|
|
|
|
40,053 |
|
|
$18.92 |
07/17/19 |
|
|
|
|
|
|
|
|
|
|
17,176 |
$1,002,048 |
|
|
|
|
|
|
|
|
|
|
21,882 |
$1,276,596 |
Michelle A. |
3,494 |
6,990 |
|
$63.49 |
02/03/25 |
|
|
|
|
Kumbier (7) |
6,548 |
3,275 |
|
$62.33 |
02/04/24 |
|
|
|
|
|
10,980 |
|
|
$51.78 |
02/04/23 |
|
|
|
|
|
2,934 |
|
|
$68.91 |
02/14/17 |
|
|
|
|
|
|
|
|
|
|
21,237 |
$1,238,967 |
|
|
|
|
|
|
|
|
|
|
16,301 |
$951,000 |
Paul J. |
4,620 |
9,240 |
|
$63.49 |
02/03/25 |
|
|
|
|
Jones (8) |
8,659 |
4,330 |
|
$62.33 |
02/04/24 |
|
|
|
|
|
11,536 |
|
|
$51.78 |
02/04/23 |
|
|
|
|
|
11,039 |
|
|
$45.32 |
02/06/22 |
|
|
|
|
|
|
|
|
|
|
11,827 |
$689,987 |
|
|
|
|
|
|
|
|
|
|
15,402 |
$898,553 |
(1) We granted all options ten years prior
to the expiration date. Each grant vests ratably over a three year period
beginning with the first 33% vesting one year after the date of grant, the
second 33% vesting two years after the date of grant and the third 33% vesting
three years after the date.
(2) The number of shares or share units
that have not vested include restricted stock units (RSUs) and restricted stock.
The RSUs provide a benefit that is equivalent to restricted stock and upon
vesting are settled through the issuance of a share of our common stock for each
vested restricted stock unit.
HARLEY-DAVIDSON.COM 47
Table of Contents
EXECUTIVE COMPENSATION
(3) On February 2, 2016, the Committee
awarded performance shares to each NEO which remained outstanding and unvested
at December 31, 2016. The performance shares will be earned (vest) on December
31, 2018 and be settled with the issuance of a share of our common stock for
each performance share earned. The number of performance shares that a recipient
will ultimately earn is contingent on the achievement of performance objectives
during the three-year performance period. The number and value of unvested
performance shares presented above assume performance at target.
(4) |
Mr. Levatichs restricted stock and restricted
stock units vest as follows: |
|
13,158 shares on February 2, 2017 7,875
shares on February 3, 2017 3,430 shares on February 4, 2017 13,158
shares on February 2, 2018 7,876 shares on February 3, 2018 13,159
shares on February 2, 2019 |
(5) |
Mr. Olins restricted stock and restricted
stock units vest as follows: |
|
4.361 shares on February 2, 2017 2,651
shares on February 3, 2017 2,368 shares on February 4, 2017 4.361
shares on February 2, 2018 2,652 shares on February 3, 2018 4,362
shares on February 2, 2019 |
(6) |
Mr. Hunds restricted stock and restricted
stock units vest as follows: |
|
3,592 shares on February 2, 2017 2,182
shares on February 3, 2017 2,033 shares on February 4, 2017 3,593
shares on February 2, 2018 2,183 shares on February 3, 2018 3,593
shares on February 2, 2019 |
(7) |
Ms. Kumbiers restricted stock and restricted
stock units vest as follows: |
|
2,676 shares on February 2, 2017 1,092
shares on February 3, 2017 1,024 shares on February 4, 2017 2,676
shares on February 2, 2018 1,092 shares on February 3, 2018 10,000
shares on February 4, 2018 2,677 shares on February 2,
2019 |
(8) |
Mr. Jones restricted stock and restricted
stock units vest as follows: |
|
2,528 shares on February 2, 2017 1,444
shares on February 3, 2017 1,353 shares on February 4, 2017 2,529
shares on February 2, 2018 1,444 shares on February 3, 2018 2,529
shares on February 2, 2019 |
48 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
EXECUTIVE COMPENSATION
Option Exercises and Stock
Vested in 2016
Name (a) |
Number of Shares Acquired on Exercise (#)
(b) |
Value Realized on Exercise ($)
(c) |
Number of Shares Acquired on Vesting (#)
(d) |
Value Realized on Vesting
($) (e) |
Matthew S. Levatich |
|
$ |
14,906 |
$603,848 |
John A. Olin |
|
$ |
7,396 |
$301,374 |
Lawrence G. Hund |
40,808 |
$662,648 |
6,407 |
$261,234 |
Michelle A. Kumbier |
26,667 |
$108,758 |
3,259 |
$132,905 |
Paul J. Jones |
|
$ |
3,998 |
$162,897 |
Pension
Benefits
Name (a) |
Plan Name (b) |
Number of Years Credited Service
(#) (c) |
Present Value of Accumulated Benefit
($) (d) |
Payments During Last Fiscal Year
($) (e) |
Matthew S. Levatich |
Harley-Davidson Retirement Annuity
Plan |
22.4 |
$838,000 |
$ |
|
Restoration Plan |
22.4 |
$6,321,000 |
$ |
John A. Olin |
Harley-Davidson Retirement Annuity
Plan |
13.7 |
$606,000 |
$ |
|
Restoration Plan |
13.7 |
$2,723,000 |
$ |
|
Cash in lieu of life insurance |
|
$1,039,000 |
$ |
Lawrence G. Hund |
Cash in lieu of life insurance |
|
$1,144,000 |
$ |
Michelle A. Kumbier |
Harley-Davidson Retirement Annuity
Plan |
19.2 |
$676,000 |
$ |
|
Restoration Plan |
19.2 |
$1,724,000 |
$ |
Paul J. Jones |
Not applicable |
|
$ |
$ |
NARRATIVE TO PENSION BENEFITS
TABLE
We maintain the Harley-Davidson Retirement
Annuity Plan which is a noncontributory defined benefit pension plan. Under this
plan, our salaried employees (excluding employees of HDFS and certain other
subsidiaries, such as Mr. Hund), including Messrs. Levatich and Olin and Ms.
Kumbier, are generally eligible to retire with unreduced benefits at age 62 or
later. Mr. Jones is not eligible to participate as the plan was closed to new
participants in 2006.
Benefits are based upon monthly final
average earnings as defined in the Harley-Davidson Retirement Annuity Plan. The
monthly benefit is 1.2% of the final average earnings plus 0.4% of the final
average earnings in excess of Social Security covered compensation multiplied by
years of service.
For each eligible named executive officer,
final average monthly earnings equal one-twelfth of the highest average annual
total compensation (consisting of base salary, annual bonus and annual
non-equity incentive compensation as shown in the Summary Compensation Table)
paid over five highest total compensation years within the last ten years of
service prior to the participants retirement or other date of termination.
Compensation under any long-term incentive plan that we maintain, including
equity or cash plans, is not eligible compensation for purposes of the pension
or pension benefit restoration plans.
HARLEY-DAVIDSON.COM 49
Table of Contents
EXECUTIVE COMPENSATION
Vesting under the Harley-Davidson
Retirement Annuity Plan occurs upon the earlier of five years of service or age
65. An employee who retires after age 55 and before age 62 with a minimum of
five years of service will receive an actuarially reduced benefit under the
Harley-Davidson Retirement Annuity Plan. The surviving spouse of an employee who
is eligible for early retirement or who is vested at death is also entitled to
certain benefits under the Harley-Davidson Retirement Annuity Plan.
We adopted the Pension Benefit Restoration
Plan pursuant to which we will pay participants amounts that exceed certain
limitations the Internal Revenue Code imposes on benefits payable under the
Harley-Davidson Retirement Annuity Plan as a plan qualified under the Internal
Revenue Code and to counteract the effect of participation in the
Harley-Davidson deferred compensation plan. Approximately 100 employees
participate in the Restoration Plan. Executives in the plan as of December 31,
2008 made an irrevocable election to receive their benefit from the Restoration
Plan as either a single lump sum payment or a monthly payment.
We computed the present value of each
NEOs accumulated benefit using the same assumptions and measurement date that
we used for financial reporting purposes for our 2016 financial statements. For
each active named executive officer that was eligible to receive benefits as of
the end of the year, we assumed a retirement age of 62, which is the earliest
age at which a NEO may retire under the relevant plans without any reduction to
benefits.
Certain executives who retired prior to
January 1, 2016 were entitled to receive a lump sum payment equal to one years
salary plus applicable taxes upon retirement at or after age 55 with 5 years of
service. For retirements after January 1, 2016, certain executives are entitled
to receive a lump sum payment equal to two years salary upon retirement at or
after age 55 and 5 years of service with no provision for taxes. We adopted this
defined benefit in lieu of providing post-retirement life insurance. Mr. Hund
and Mr. Olin were the only NEOs who were eligible to receive this benefit as of
December 31, 2016. The other NEOs were not entitled to this benefit as of
December 31, 2016 because they would not have satisfied the eligibility
requirements as of that date.
Non-qualified Deferred
Compensation
Name (a) |
Executive Contribution in Last FY ($)
(1) (b) |
Registrant Contributions in Last FY ($)
(2) (c) |
Aggregate Earnings in Last FY ($)
(3) (d) |
Aggregate Withdrawals/ Distributions
($) (e) |
Aggregate Balance at Last FYE ($)
(4) (f) |
Matthew S. Levatich |
$140,417 |
$64,010 |
$41,960 |
$170,165 |
$682,823 |
John A. Olin |
$156,250 |
$31,623 |
$194,939 |
$ |
$2,263,218 |
Lawrence G. Hund |
$477,370 |
$ |
$317,240 |
$ |
$2,775,926 |
Michelle A. Kumbier |
$38,000 |
$19,796 |
$11,229 |
$75,183 |
$173,053 |
Paul J. Jones |
$43,505 |
$60,109 |
$57,015 |
$ |
$589,636 |
(1) Executive contributions to these plans
represent compensation that NEOs earned but elected to defer. The entire
executive contribution is therefore included in the NEOs compensation reported
in the Summary Compensation Table.
(2) Employees of HDMC hired prior to
August 1, 2006, including Messrs. Levatich and Olin and Ms. Kumbier, receive a
company matching contribution of up to 50% of their deferred compensation plan
contributions (including contributions to the companys 401(k) plans and its
non-qualified deferred compensation plans) on the first 6% of cash compensation
(salary and non-equity incentive plan pay) that was deferred. Employees of HDMC
hired after August 1, 2006, including Mr. Jones, receive a matching contribution
of up to 75% of their deferred compensation plan contributions (including
contributions to the companys 401(k) plans and its non-qualified deferred
compensation plans) on the first 6% of cash compensation (salary and short-term
incentive plan pay) that was deferred. In addition, employees with a date of
hire or rehire on or after August 1, 2006 and who are not covered under the
Harley-Davidson Retirement Annuity Plan during the same period may receive an
additional employer contribution of 4% of their eligible pay. The total amount
of such employer contributions that is included in the non-qualified deferred
compensation plan is equal to the total contribution less the amount contributed
50 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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EXECUTIVE COMPENSATION
to the named executive officers 401(k)
account. All amounts shown as registrant contributions are included in the NEOs
compensation reported in the Summary Compensation Table. Employees of
Harley-Davidson Financial Services, including Mr. Hund, do not receive a
matching contribution on deferred compensation plan contributions.
(3) Executives have the option of
allocating their deferred compensation balances across several different
independent third-party investment vehicles. No amounts of aggregate earnings
for the last fiscal year or for prior years have been included in the Summary
Compensation Table.
(4) Amounts included in the aggregate
balance that have been reported in the Summary Compensation Table for previous
years for each NEO are as follows: Mr. Levatich - $546,479, Mr. Olin - $958,916,
Mr. Hund - $1,636,585, and Mr. Jones - $382,186. We have not previously reported
any deferred compensation amounts for Ms. Kumbier in our Summary Compensation
Table for years prior to 2016.
Payments Made Upon
Termination
Regardless of the manner in which a NEOs
employment terminates, he or she may be entitled to receive amounts earned
during his or her term of employment. Such amounts may include:
● |
non-equity incentive compensation
earned during the fiscal year; |
● |
amounts contributed under our
Deferred Compensation Plan; |
● |
unused vacation pay; and
|
● |
amounts accrued and vested through
our 401(k) savings plan and pension and similar
plans. |
CHANGE OF CONTROL
We have transition agreements with Messrs.
Levatich, Olin and Hund. Each agreement provides that, if we terminate the
individuals employment for any reason (other than for cause) within two years
after a change of control, then such individual will receive a cash payment and
certain other benefits. In addition, among other events, voluntary termination
by the executive of his or her employment for good reason within two years
after a change of control would entitle the executive to the benefits under the
agreement. We describe the transition agreements more fully in the section
Compensation Discussion and Analysis-Employment and Transition Agreements.
That section also outlines the definition of a change of control under the
transition agreements.
Our incentive stock plans also contain
provisions that apply if there is a change of control. Equity awards that we
made under our 2009 and 2014 Incentive Stock Plans to an executive who was then
a party to a transition agreement do not become fully vested upon a change of
control (but may become vested if we terminate the individuals employment for
any reason other than cause within two years after a change of control). All
other restricted stock awards, performance share awards, restricted stock units
and option grants that we made under our 2009 and 2014 Incentive Stock Plans and
predecessor plans that are unvested become fully vested upon a change of
control.
HARLEY-DAVIDSON.COM 51
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EXECUTIVE COMPENSATION
The table below presents estimates of the
amounts of compensation payable to each NEO upon a change of control and
termination of the executive in a manner that entitles the executive to cash
severance. The amounts shown assume that such change of control and termination
were both effective as of December 31, 2016. The actual amounts to be paid can
only be determined at the time of a change of control or the executives
termination. These amounts are in addition to amounts that a NEO would be
entitled to receive under our pension plans as well as vested amounts of
deferred compensation that are fully disclosed for each NEO in the Pension
Benefits and Non-Qualified Deferred Compensation tables,
respectively.
Benefit |
Mathew S. Levatich |
John A. Olin |
Lawrence G. Hund |
Michelle A. Kumbier |
Paul J. Jones |
UNEARNED COMPENSATION |
|
|
|
|
|
(payment contingent on
termination) |
|
|
|
|
|
Cash Severance (a) |
$7,087,500 |
$4,407,437 |
$4,165,454 |
$ |
$ |
Interrupted Bonus (b) |
$1,312,500 |
$615,637 |
$561,612 |
$ |
$ |
Retirement Benefits: (c) |
|
|
|
|
|
Pension Plans
(d) |
$1,842,000 |
$1,148,000 |
$ |
$ |
$ |
Savings
Plans/Deferred |
|
|
|
|
|
Compensation Plan
(e) |
$ |
$ |
$27,000 |
$ |
$ |
Retiree
medical |
$ |
$ |
$ |
$ |
$ |
Subtotal for Retirement
Benefits |
$1,842,000 |
$1,148,000 |
$27,000 |
$ |
$ |
Other Benefits: (c) |
|
|
|
|
|
Health &
Welfare |
$73,978 |
$71,187 |
$103,598 |
$ |
$ |
Outplacement |
$30,000 |
$30,000 |
$30,000 |
$ |
$ |
Tax
Gross-Ups |
$ |
$ |
$ |
$ |
$ |
Subtotal for Other Benefits |
|
|
|
|
|
Equity: (f)(g) |
$103,978 |
$101,187 |
$133,598 |
$ |
$ |
Long-term
performance shares |
$4,675,718 |
$1,549,685 |
$1,276,596 |
$ |
$ |
Restricted
Stock |
$3,421,991 |
$1,210,847 |
$1,002,048 |
$ |
|
Subtotal |
$8,097,709 |
$2,760,532 |
$2,278,644 |
$ |
$ |
Total |
$18,443,687 |
$9,032,793 |
$7,166,308 |
$ |
$ |
EARNED
COMPENSATION |
|
|
|
|
|
(payment not contingent on
termination) |
|
|
|
|
|
Long-term
Incentives (g)(h) |
|
|
|
|
|
Long-term
Cash |
$1,500,000 |
$505,000 |
$415,667 |
$ |
$ |
Restricted
Stock |
$ |
$ |
$ |
$1,238,967 |
$698,987 |
Unexercisable Options |
$ |
$ |
$ |
$ |
$ |
Total |
$1,500,000 |
$505,000 |
$415,667 |
$1,238,967 |
$698,987 |
GRAND TOTAL |
$19,943,687 |
$9,537,793 |
$7,581,975 |
$1,238,967 |
$698,987 |
(a) For each NEO that is a party to a
transition agreement, the cash severance reflects the product of three times the
sum of the NEOs highest annual base pay in the preceding five years plus the
higher of the NEOs bonus opportunity (at target) for the year in which the
change of control event occurs or the highest annual bonus in the preceding five
years. Under the transition agreements, to the extent that payments to
executives would be considered excess parachute payments as defined in Section
280G of the Internal Revenue Code, the payments will be reduced to a point at
which they are no longer considered excess parachute payments, or the executive
will receive the full payment and be personally liable for the excise tax,
whichever produces the larger after-tax benefit to the executive. In these
agreements, there are no provisions for an excise tax gross up. Amounts in the
table assume that the executives received the full payments that the transition
agreements contemplate without reduction.
52 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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EXECUTIVE COMPENSATION
(b) For each NEO that is a party to a
transition agreement, the interrupted bonus reflects the higher of the NEOs
target STIP opportunity for 2016 or the actual bonus earned in 2015 on the
assumption that the actual bonus for 2016 would not have been determined had the
change of control occurred December 31, 2016. Without the benefit of a
transition agreement, there is no entitlement to any amount under the STIP upon
a change of control.
(c) Pursuant to our transition agreements,
upon a termination following a change of control in a manner that entitles the
executive to cash severance, a NEO is entitled to receive three years of pension
service credit for those who participate in the pension plan (but not beyond age
65) based on assumed compensation, three years of continued coverage in our
health and welfare benefit programs and up to three years of outplacement
services. We estimated the amounts in the table relating to continued coverage
in our health and welfare benefit programs and outplacement services.
(d) Pursuant to our transition agreements,
upon a termination following a change of control in a manner that entitles the
executive to cash severance, Messrs. Levatich and Olin would be entitled to
three years of pension service credit (but not beyond age 65) based on assumed
compensation. We calculated the present values of qualified and nonqualified
pension plan benefits for Messrs. Levatich and Olin using the same actuarial
assumptions that we used for the Pension Benefits Table.
(e) Pursuant to the transition agreement
with Mr. Hund, because he is not eligible to participate in our defined benefit
pension plan, he would be entitled to certain other retirement-related benefits
upon a termination following a change of control in a manner that entitles him
to cash severance. Mr. Hund would be entitled to the value of three years of the
company contribution to the Harley-Davidson Financial Services 401(k) Plan,
which is the maximum of $9,000 per year.
(f) For each NEO, amounts reflect the
value of restricted stock, restricted stock units and unvested options awards
that become vested upon a termination following a change of control. The
definition of change of control under our stock plans is essentially the same as
in the transition agreements.
(g) We calculated the value of the
unvested stock options based upon the difference between the aggregate market
value of the shares of common stock underlying the unvested stock options and
the aggregate exercise price that the named executive officer would be required
to pay upon exercise of those stock options. We calculated the value of the
unvested shares of restricted stock and unvested restricted stock units held by
each NEO based upon the aggregate market value of the related shares. We used a
price of $58.34 per share to determine market value in both of these
calculations, which was the closing price of our common stock on December 30,
2016, as reported by the New York Stock Exchange.
(h) For each named executive officer,
amounts reflect the target value of cash-based long-term incentive awards,
performance share awards and the value of restricted stock, restricted stock
units and unvested options awards that become vested upon a change of control
regardless of whether the executives employment is actually terminated. Without
the benefit of a transition agreement, there is no entitlement to any amount
under the cash long-term incentive awards upon a change of control. Equity
awards that we made to Messrs. Levatich, Olin and Hund under our 2009 and 2014
Incentive Stock Plans do not vest upon a change of control (but may become
vested if we terminate the executives employment for any reason other than
cause within two years after a change of control). Because Ms. Kumbier and Mr.
Jones are not parties to a transition agreement, equity awards that we made to
them under our 2009 and 2014 Incentive Stock Plans will vest upon a change of
control without regard to termination of employment resulting from such change
of control.
EXECUTIVE SEVERANCE
Our Executive Severance Policy, which
applies to a subset of the senior leaders, including the CEO and the other NEOs,
provides for a cash severance benefit of between 12 and 24 months of base pay
and 18 months continuation of certain employee benefits, such as life insurance,
medical benefits, and limited outplacement benefits if we terminate employment
for reasons other than for cause. To receive a severance payment under this
policy, the executive must agree to a number of restrictive covenants and
execute a general release of claims against the company.
HARLEY-DAVIDSON.COM 53
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EXECUTIVE COMPENSATION
The table below presents estimates of the
amounts of compensation payable to each NEO under the Executive Severance Policy
assuming a termination absent a change of control for any reason other than
cause, death or disability. The amounts shown assume that such termination was
effective as of December 31, 2016. The actual amounts to be paid can only be
determined at the time of the executives termination.
Executive Benefits Upon Termination Absent a Change in
Control |
Matthew S. Levatich |
John A. Olin |
Lawrence G. Hund |
Michelle A. Kumbier |
Paul J. Jones |
Cash Severance |
$2,100,000 |
$1,310,000 |
$1,200,000 |
$1,130,000 |
$1,100,000 |
Other Benefits |
|
|
|
|
|
Health and
Welfare |
$27,350 |
$26,150 |
$30,929 |
$23,600 |
$31,321 |
Continuation of
Life Insurance |
$9,639 |
$9,444 |
$20,871 |
$2,960 |
$3,771 |
Total |
$2,136,989 |
$1,345,594 |
$1,251,800 |
$1,156,560 |
$1,135,092 |
VESTING OF RESTRICTED STOCK AND RESTRICTED
STOCK UNITS
We awarded restricted stock and restricted
stock units to NEOs, and NEOs earn the related shares when the restrictions on
the awards lapse, but only if the individual remains an employee or certain
other circumstances apply. In some circumstances, a pro-rata portion of the
shares will vest based on a ratio of actual service to the requisite service
period. This is the case for all awards if the NEO dies or becomes disabled. For
certain awards, if the NEO is 55 years of age or older and elects to retire more
than one year after the date of the grant of the award, all unvested shares or
units under that award will automatically vest upon retirement. In addition,
other awards vest fully if we terminate the NEO other than for cause. In
general, cause means conviction of or plea of no contest to a felony, willful
misconduct that is materially and demonstrably detrimental to the company,
willful refusal to perform duties consistent with the NEOs office, position or
status with the company or other conduct or inaction that the Human Resources
Committee determines constitutes cause. Finally, as we disclose in the table
above that presents the amounts payable to each NEO upon a change of control,
certain restricted stock and restricted stock unit awards also vest fully on a
change of control.
The following table reflects, for each
NEO, the value of restricted stock and restricted stock unit awards that become
vested upon a termination of the NEOs employment for each of the reasons
indicated in the table assuming that such termination occurred on December 31,
2016. The value is based upon the aggregate market value of the shares that
would vest in each instance. We used a price of $58.34 per share to determine
market value, which was the closing price of our common stock on December 30,
2016, as reported by the New York Stock Exchange. Amounts that we reflect in
this table are in addition to any amounts the NEO may be entitled to receive
under the Executive Severance Policy.
Named Executive Officer |
Retirement |
Death or Disability |
Termination by Company (1) |
Matthew S. Levatich |
$ |
$1,486,202 |
$ |
John A. Olin |
$447,643 |
$564,814 |
$ |
Lawrence G. Hund |
$373,259 |
$469,728 |
$ |
Michelle A. Kumbier |
$ |
$561,942 |
$ |
Paul J. Jones |
$ |
$319,342 |
$ |
(1) While terms for certain awards provide
that the individual will forfeit any shares that are not vested if we terminate
the individual, upon such a termination the individual could elect to treat the
termination as a qualified retirement if he or she were eligible. There is no
pro-rata vesting based on performance or, in the first year after grant, due to
retirement. As a result, the awards give the NEO a strong incentive to remain
with the company.
54 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
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EXECUTIVE COMPENSATION
PAYMENTS MADE UPON DEATH OR
DISABILITY
If a NEO dies while employed, in addition
to the benefits to which we refer immediately following the heading Payments
Made Upon Termination above and the amounts we disclose above relating to
restricted stock and restricted stock unit awards, the NEO will receive payments
under our death benefits. Our death benefits provide that each NEO is entitled
to three times annual base salary in the event of his or her death while
actively employed, which we would generally satisfy out of proceeds of life
insurance that we maintain. For each NEO, we report premiums that we paid for
this life insurance as part of All Other Compensation in the Summary
Compensation Table. In addition, we maintain long-term disability plans in
which NEOs may participate on a voluntary basis on the same terms as other
salaried employees. There is no company contribution toward the cost of this
benefit.
Under the form of our transition
agreement, if the NEOs death occurs during employment, then no benefits are
payable under the agreement. In addition, under all forms of our transition
agreement, if a NEO dies after a termination that entitles the NEO to a cash
payment, or if a NEOs death during active employment after a change of control
entitles the NEOs estate to a cash payment, then health benefit coverage for
the NEOs eligible dependents will continue until the earlier to occur of one
year following the executives death or three years following the executives
termination. All other welfare benefit coverage will cease at the date of the
NEOs death.
TREATMENT OF CERTAIN BENEFITS UPON
RETIREMENT
For compensation purposes, we generally
define retirement as separation from service on or after attainment of age 55
with at least five years of service. When an individual who satisfies these
criteria leaves service, we consider him or her a retiree for purposes of
certain compensation and benefit programs. An executive who has received a
cash-based long-term incentive award or a performance share award will receive a
payout on a pro-rata basis for each award that we granted to the executive
before his or her retirement date. The payment amount under each of these awards
is based upon the actual months of employment since the date of the award
divided by the 36-month life of the award. Actual payments will only be made
upon the completion of the performance period. An executive will receive a
payout in respect of a STIP award relating to the year in which he or she
retires on a pro-rata basis based upon their actual pay during the year in which
they retire and the actual STIP performance of the company. Equity awards
granted at least 12 months prior to the date of retirement vest on the date of
retirement. These benefits are in addition to those that we disclose above under
Pension Benefits.
As of December 31, 2016, two of our NEOs,
Messrs. Olin and Hund, were eligible to retire and would receive certain
benefits (as described above) upon retirement. Assuming that they had retired
effective that date, they would have been entitled to receive (1) payment in
lieu of retiree life insurance as reflected in the table that appears above
under Pension Benefits, (2) value in respect of the vesting of restricted
stock and restricted stock units as reflected in the table that appears above
under Vesting of Restricted Stock and Restricted Stock Units and (3) pro-rata
payout under the cash-based long-term incentive awards relating to 2015 through
2017 and 2016 performance share awards (assuming target performance for the 2015
through 2017 and the 2016 through 2018 performance cycles). For Mr. Olin, these
amounts would be $334,967 paid in February 2018 and $511,408 paid in February
2019. For Mr. Hund, these amounts would be $275,712 paid in February 2018 and
$421,258 paid in February 2019.
HARLEY-DAVIDSON.COM 55
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EXECUTIVE COMPENSATION
Director
Compensation
Name (a) |
Fees Earned or Paid in Cash
($)(1) (b) |
Stock Awards ($)(2)(3) (c) |
Option Awards ($) (d) |
Non-Equity Incentive Plan
Compensation (e) |
Change in Pension Value and Nonqualified
Deferred Compensation Earnings (f) |
All Other Compensation (g) |
Total (h) |
R. John Anderson |
$110,000 |
$125,000 |
$ |
$ |
$ |
$ |
$235,000 |
Michael J. Cave |
$270,000 |
$125,000 |
$ |
$ |
$ |
$ |
$395,000 |
Donald A. James |
$110,000 |
$125,000 |
$ |
$ |
$ |
$ |
$235,000 |
Sara L. Levinson |
$110,000 |
$125,000 |
$ |
$ |
$ |
$ |
$235,000 |
N. Thomas Linebarger |
$130,000 |
$125,000 |
$ |
$ |
$ |
$ |
$255,000 |
George L. Miles, Jr. |
$115,000 |
$125,000 |
$ |
$ |
$ |
$ |
$240,000 |
Brian R. Niccol |
$110,000 |
$135,503 |
$ |
$ |
$ |
$ |
$245,503 |
James A. Norling |
$130,000 |
$125,000 |
$ |
$ |
$ |
$ |
$255,000 |
Maryrose T. Sylvester |
$115,000 |
$135,503 |
$ |
$ |
$ |
$ |
$250,503 |
Jochen Zeitz |
$125,000 |
$125,000 |
$ |
$ |
$ |
$ |
$250,000 |
(1) Non-employee directors have the option
of receiving all or a portion of their fees in the form of stock. The portion of
fees received at the election of the non-employee director in the form of stock
in 2016 was $110,000 for R. John Anderson; $270,000 for Michael J. Cave;
$130,000 for N. Thomas Linebarger; $110,000 for Brian R. Niccol; and $115,000
for Maryrose T. Sylvester.
(2) In August 2002, the Board of Directors
approved stock ownership guidelines which the Board revised most recently in
February 2016. In February 2016, the Board approved a change in the director
stock ownership guidelines to require a non-employee director to hold 500% of
the value of his or her annual cash retainer in the form of stock or stock
equivalents. This change was effective May 1, 2016. Each non-employee director
has until May 2021 to accumulate the appropriate number of shares.
(3) Non-employee directors receive an
annual grant of share units, each representing the value of one share of our
stock. The payment of share units is deferred, at the election of each
non-employee director, until the first anniversary of each respective grant date
or the time a non-employee director ceases to serve as a director, and share
units are payable at that time in actual shares of our stock. The compensation
related to share unit awards has been calculated based on the grant date fair
value of the award. The fair value of a share unit is based on the market price
of a share of stock on the date of grant.
NARRATIVE TO DIRECTOR COMPENSATION
TABLE
Directors who are our employees (currently
Mr. Levatich) do not receive compensation for their services as directors.
Directors who are not employees received an annual retainer fee of $110,000 in
fiscal 2016. Mr. Cave received an additional $160,000 for his service as the
non-executive Chairman of the Board. For serving as the Chair of the Nominating
and Corporate Governance Committee, a non-employee director is entitled to
receive an additional retainer fee of $15,000. For serving as the Chair of the
Sustainability Committee, a non-employee director is entitled to receive an
additional annual retainer fee of $10,000. The Chair of the Audit and Finance
Committee and the Chair of the Human Resources Committee are each entitled to
receive an additional $20,000 annual retainer fee. Other members of the Audit
and Finance Committee are entitled to receive an additional $5,000 annual
retainer fee.
56 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of
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EXECUTIVE COMPENSATION
Pursuant to our Director Stock Plan, a
non-employee director may elect to receive 0%, 50%, or 100% of the annual
retainer fee to be paid in each calendar year in the form of shares of our
common stock based upon the fair market value of common stock at the time of our
annual meeting of shareholders. In addition, non-employee directors receive an
annual grant of share units, each representing the right to receive one share of
our common stock and therefore having the value of one share of our common
stock.
Also pursuant to our Director Stock Plan,
directors may choose to defer the receipt of their annual retainer fees payable
in cash or shares of common stock. Deferrals of fees payable in shares of common
stock are credited to a share account, are treated as if invested in common
stock, and ultimately will be paid in common stock. Deferrals of fees payable in
cash are credited to a cash account and will earn a return based on investment
options that we make available to the director and that the director selects. A
director will receive his or her deferred compensation following cessation of
his or her service on the Board in compliance with applicable rules regarding
deferred compensation plans.
The purpose of our Director Stock Plan is
to further align the interests of outside directors with shareholders by
providing for a portion of annual compensation for the directors services in
shares of common stock or share units.
In addition, we provide to non-employee
directors a clothing allowance of $1,500 to purchase Harley-Davidson
MotorClothes® apparel and accessories, along with a discount on our
products that is the same discount available to all U.S. employees of HDMC. We
may also provide a director with the use of a motorcycle where doing so may
further our business objectives.
HARLEY-DAVIDSON.COM 57
Table of Contents
SECTION
16(a) BENEFICIAL OWNERSHIP
REPORTING
COMPLIANCE |
Section 16(a) of the Securities Exchange
Act of 1934 requires our directors, executive officers and holders of more than
10% of our common stock to file with the SEC reports regarding their ownership
and changes in ownership of our securities. To our knowledge, there are no
holders of more than 10% of our common stock. Based on our review of the copies
of Forms 3 and 4 (and any amendments) filed with the SEC and the written
representations of our directors and executive officers, we believe that during
fiscal year 2016 our directors and executive officers complied with all Section
16(a) filing requirements.
58 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of
Contents
COMMON
STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT |
The following table sets forth certain
information, as of February 23, 2017, with respect to the ownership of our
common stock by each director, our named executive officers, all directors and
executive officers as a group, and each person or group of persons that we know
to own beneficially more than 5% of our stock.
Beneficial Ownership Table
|
|
Amount and Nature of Beneficial Ownership
(1) |
Name of Beneficial Owner |
|
Number of Shares (2) |
|
|
Percent of Class |
|
Shares Issuable Upon Exercise of Stock Options (3) |
|
Restricted Stock Units
(4) |
Troy Alstead |
|
|
|
|
|
|
|
|
|
R. John
Anderson |
|
29,400 |
|
|
* |
|
|
|
|
Michael J.
Cave |
|
22,071 |
|
|
* |
|
|
|
|
Allan
Golston |
|
|
|
|
|
|
|
|
|
Lawrence G.
Hund |
|
108,880 |
(5) |
|
* |
|
98,601 |
|
17,084 |
Donald A.
James |
|
251,184 |
(6) |
|
* |
|
|
|
|
Paul J.
Jones |
|
46,403 |
|
|
* |
|
44,804 |
|
11,932 |
Michelle A.
Kumbier |
|
28,404 |
|
|
* |
|
27,792 |
|
33,346 |
Matthew S.
Levatich |
|
265,575 |
|
|
* |
|
195,786 |
|
62,750 |
Sara L.
Levinson |
|
29,599 |
|
|
* |
|
|
|
|
N. Thomas
Linebarger |
|
41,772 |
|
|
* |
|
|
|
|
George L. Miles,
Jr. |
|
30,514 |
|
|
* |
|
|
|
|
Brian R.
Niccol |
|
27,362 |
|
|
* |
|
|
|
|
James A. Norling,
Jr. |
|
27,752 |
(7) |
|
* |
|
|
|
|
John A.
Olin |
|
248,858 |
|
|
* |
|
211,584 |
|
20,375 |
Maryrose T.
Sylvester |
|
4,830 |
|
|
* |
|
|
|
|
Jochen
Zeitz |
|
22,541 |
|
|
* |
|
|
|
|
All Directors and
Officers as a Group |
|
1,237,975 |
|
|
* |
|
620,119 |
|
173,658 |
The Vanguard Group,
Inc. |
|
16,881,765 |
(8) |
|
9.5 |
|
|
|
|
Massachusetts
Financial Services Company |
|
11,174,960 |
(9) |
|
6.3 |
|
|
|
|
BlackRock,
Inc. |
|
10,482,985 |
(10) |
|
5.9 |
|
|
|
|
Dodge &
Cox |
|
8,885,423 |
(11) |
|
5.0 |
|
|
|
|
* The amount shown is less than 1% of the
outstanding shares of our common stock.
(1) Except as otherwise noted, all persons
have sole voting and investment power over the shares listed. In all cases,
information regarding such power is based on information that the individual
beneficial owners provide to us.
(2) Includes, but is not limited to,
shares of common stock issuable upon the exercise of stock options exercisable
within 60 days of February 23, 2017 and shares of common stock held in our
401(k) Plan and our Dividend Reinvestment Plan as of February 23,
2017.
(3) Includes only stock options
exercisable within 60 days of February 23, 2017.
HARLEY-DAVIDSON.COM 59
Table of Contents
COMMON STOCK OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
(4) Amounts shown in this column are not
included in the columns titled Number of Shares or Percent of Class. Amounts
shown in this column represent restricted stock units (RSUs) that we awarded
under our 2014 Incentive Stock Plan on February 3, 2015, February 2, 2016 and
February 1, 2017. Each restricted stock unit represents a contingent right to
receive one share of stock. One-third of the total number of units granted on
each of February 3, 2015, February 2, 2016 and February 1, 2017 vest on each of
the first three anniversaries of the date of grant. The RSUs are subject to
forfeiture until vested. Further, the RSUs described in this footnote do not
carry the right to vote. In each case, amounts are distributable in the form of
shares of our common stock on a one-for-one basis; however, any distribution
would not be within 60 days of February 23, 2017.
(5) Mr. Hunds spouse, Jane L. Hund, holds
1,619 shares in the Jane L. Hund Revocable Trust. Mrs. Hund serves as Trustee of
the Trust and has sole voting power over the shares.
(6) 211,788 shares of common stock are
held by entities controlled by Mr. James who has sole voting power over the
shares.
(7) Heritage Ventures, Ltd. held 8,000
shares of common stock. Mr. Norling has sole voting power over the shares.
(8)
We derived the information from a Schedule 13G/A that The Vanguard Group, Inc.,
an investment adviser, filed with the company and the SEC on February 13, 2017.
As of December 31, 2016, The Vanguard Group, Inc. was deemed to be the
beneficial owner of 16,881,765 shares and had sole voting power over 279,223
shares, shared voting power over 34,254 shares, sole investment power over
16,571,876 shares and shared investment power over 309,889 shares. The Vanguard
Group, Inc. is located at 100 Vanguard Blvd., Malvern, PA 19355.
(9) We derived the information from a
Schedule 13G/A that Massachusetts Financial Services Company (MFS) filed with
the company and the SEC on February 7, 2017. As of December 31, 2016, MFS was
deemed to be the beneficial owner of 11,174,960 shares and had sole voting power
over 10,115,743 shares, shared voting power over zero shares, sole investment
power over 11,174,960 shares and shared investment power over zero shares. MFS
is located at 111 Huntingdon Avenue, Boston, MA 02199.
(10) We derived the information from a
Schedule 13G/A that BlackRock, Inc. filed with the company and the SEC on
January 24, 2017. As of December 31, 2016, BlackRock, Inc. was deemed to be the
beneficial owner of 10,482,985 shares and had sole voting power over 8,900,500
shares, shared voting power over zero shares, sole investment power over
10,482,985 shares and shared investment power over zero shares. BlackRock, Inc.
is located at 55 East 52nd Street, New York, NY 10055.
(11) We derived the information from a
Schedule 13G/A that Dodge & Cox filed with the company and the SEC on
February 14, 2017. As of December 31, 2016, Dodge & Cox was deemed to be the
beneficial owner of 8,885,423 shares and had sole voting power over 8,363,401
shares, shared voting power over zero shares, sole investment power over
8,885,423 shares and shared investment power over zero shares. Dodge & Cox
is located at 555 California Street, 40th Floor, San Francisco, CA
92104.
60 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of
Contents
HUMAN
RESOURCES COMMITTEE REPORT ON EXECUTIVE
COMPENSATION |
The Human Resources Committee has reviewed
and discussed with management the Compensation Discussion and Analysis that
appears in this Proxy Statement. Based on such review and discussions, the Human
Resources Committee recommended to the Board that we include the Compensation
Discussion and Analysis in this Proxy Statement.
2016 Human Resources Committee of the Board
of Directors |
|
Michael J.
Cave, Chair |
Sara L.
Levinson |
R. John Anderson |
Brian R. Niccol |
HARLEY-DAVIDSON.COM 61
Table of Contents
NOMINATING
AND CORPORATE GOVERNANCE COMMITTEE REPORT |
The Board has empowered the Nominating and
Corporate Governance Committee to continuously review our corporate governance
practices and to make recommendations to the Board. The Nominating and Corporate
Governance Committee regularly reviews our Corporate Governance Policy,
encourages the continuing education of Board members, provides Board members
with access to senior management and defines each Board members responsibility
to attend meetings and review all pre-meeting materials.
As part of our global compliance and
ethics program, we have a Code of Business Conduct that applies to all of our
employees, officers and Board members. We also have a Supplier Code of Conduct
that applies to our suppliers and their agents who do work on behalf of
Harley-Davidson. The Code of Business Conduct reporting helpline, website and
telephone numbers are designed to provide employees and suppliers with the
opportunity to ask Code-related questions or report a potential Code violation
throughout the world (where legally allowable). Our Chief Legal Officer reports
to the Nominating and Corporate Governance Committee on matters relating to the
companys global compliance and ethics program. We also have in effect the
Conflict of Interest Process that the Nominating and Corporate Governance
Committee has approved. The Code of Business Conduct, Supplier Code of Conduct,
Conflict of Interest Process, Corporate Governance Policy and each of the four
committee Charters appear on the Corporate Governance page of our website at
http://investor.harley-davidson.com
In addition, the Corporate Governance page
of our website contains information about how our shareholders can contact Board
members if they have questions or issues of concern for the Board and other
information relating to the companys corporate governance. We are not including
the information available through our website as a part of this Proxy
Statement.
As set forth in its Charter, the
Nominating and Corporate Governance Committee leads the Board in an annual
review of the performance of the Board, the Boards committees and the
Directors. Annually, the Nominating and Corporate Governance Committee reviews
the independence of each director and examines all relationships, if any, a
director has with the company to determine if that relationship is material. The
Nominating and Corporate Governance Committee has determined that two current
directors (Messrs. James and Levatich) are not independent and has reviewed the
very limited business relationships that one other director has with the
company. We disclose this relationship in the Certain Transactions section.
All members of the Nominating and Corporate Governance Committee are independent
in accordance with New York Stock Exchange rules.
2016 Nominating and Corporate Governance
Committee of the Board of Directors |
|
N. Thomas
Linebarger, Chair |
Brian R.
Niccol |
R. John
Anderson |
James A.
Norling |
Michael J.
Cave |
Jochen
Zeitz |
Sara L.
Levinson |
Maryrose T.
Sylvester |
George L. Miles, Jr. |
|
62 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of
Contents
AUDIT AND
FINANCE COMMITTEE REPORT |
During 2016, the Audit and Finance
Committee (formerly the Audit Committee) was comprised of six members, five of
whom are current directors and three of whom (Messrs. Linebarger, Miles and
Zeitz) the Board determined to be audit committee financial experts within the
meaning of SEC rules. All Audit and Finance Committee members are independent
and financially literate pursuant to New York Stock Exchange rules.
The Audit and Finance Committee Charter
provides that the independent auditor is accountable to the Audit and Finance
Committee and to the Board. The Audit and Finance Committee has the ultimate
authority and responsibility to appoint, retain, evaluate and, where
appropriate, replace the independent registered public accounting firm serving
as the companys independent auditor. However, the Audit and Finance Committee
will seek shareholder ratification of its choice of independent auditor at
Harley-Davidsons annual meeting of shareholders.
The Audit and Finance Committee has
reviewed and discussed with management its assessment of the effectiveness of
Harley-Davidsons internal control system over financial reporting as of
December 31, 2016. Management has concluded that the internal control system was
effective. Additionally, Harley-Davidsons internal control over financial
reporting as of December 31, 2016 was audited by Ernst & Young LLP,
Harley-Davidsons independent auditor for the 2016 fiscal year.
The Audit and Finance Committee has
reviewed and discussed Harley-Davidsons audited financial statements for the
2016 fiscal year with management as well as with representatives of Ernst &
Young LLP. The Audit and Finance Committee has also discussed with Ernst &
Young LLP matters required to be discussed under Public Company Accounting
Oversight Board (PCAOB) Auditing Standard No. 16, Communications with Audit
Committees. The Audit and Finance Committee has received written disclosures
from Ernst & Young LLP regarding their independence as required by PCAOB
Ethics and Independence Rule 3526, Communication with Audit Committees
Concerning Independence, and has discussed with representatives of Ernst &
Young LLP the independence of Ernst & Young LLP.
Based on the review and discussions
referred to above, the Audit and Finance Committee has recommended to the Board
that the audited financial statements for the 2016 fiscal year be included in
Harley-Davidsons Annual Report on Form 10-K for the 2016 fiscal year for filing
with the SEC.
2016 Audit and Finance Committee of the
Board of Directors |
|
James A.
Norling, Chair |
Maryrose T.
Sylvester |
N. Thomas
Linebarger |
Jochen
Zeitz |
George L. Miles, Jr. |
|
HARLEY-DAVIDSON.COM 63
Table of Contents
If a shareholder intends to present a
proposal at the 2018 annual meeting of shareholders and desires to have us
include that proposal in our proxy materials for that meeting under Rule 14a-8
under the Securities Exchange Act of 1934, then the shareholder must ensure that
we receive the proposal by November 20, 2017. A shareholder who otherwise
intends to present business at the 2018 annual meeting of shareholders must
comply with the requirements set forth in our Restated Articles of Incorporation
as supplemented by our By-laws. Our Restated Articles of Incorporation and
By-laws contain specific requirements with which a shareholder must comply. For
example, our Restated Articles of Incorporation state that a shareholder must
give written notice that complies with the Restated Articles of Incorporation as
supplemented by our By-laws to our Secretary not less than 60 days before the
date in 2018 corresponding to the date we released this Proxy Statement to our
shareholders. Because we anticipate mailing the Notice of Internet Availability
of Proxy Materials on March 20, 2017, we must receive notice of a proposal for
shareholders to consider at the 2018 annual meeting of shareholders that a
shareholder submits other than pursuant to Rule 14a-8 no later than January 19,
2018.
If we receive the notice after January 19,
2018, then we will consider the notice untimely and we will not have an
obligation to present the proposal at the 2018 annual meeting of shareholders.
If the Board chooses to present a proposal that a shareholder submits other than
under Rule 14a-8 at the 2018 annual meeting of shareholders, then the persons
named in the proxies that the Board requests for the 2018 annual meeting of
shareholders may exercise discretionary voting power with respect to the
proposal.
64 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING |
Q: |
|
What is the purpose of the Annual
Meeting? |
|
A: |
|
(1) To elect ten directors to the Board of Directors;
(2) to approve, by advisory vote, the compensation of our named executive
officers; (3) to consider the frequency of the advisory vote on
compensation of our named executive officers; (4) to ratify the selection
of Ernst & Young LLP, independent registered public accounting firm,
to be the auditors for the fiscal year ending December 31, 2017; and (5)
to take action upon any other business as may properly come before the
Annual Meeting and any adjournments or postponements of the meeting. The
Notice of Annual Meeting of Shareholders and this Proxy Statement describe
these matters in more detail. In addition, members of management will
report on our 2016 performance and, once the shareholders conclude the
business of the Annual Meeting, respond to shareholders questions as time
permits. |
|
Q: |
|
Who can attend the Annual
Meeting? |
|
A: |
|
All shareholders of Harley-Davidson, Inc., or
individuals that shareholders have duly appointed as their proxies, may
attend the Annual Meeting. Appointing a proxy in response to this request
will not affect a shareholders right to attend the Annual Meeting and to
vote in person. To attend the Annual Meeting, please follow these
instructions: |
|
|
|
If shares you own are registered in your name or if you
own shares through our Dividend Reinvestment Plan, to enter the Annual
Meeting, please bring a form of photo identification and either (1) proof
of your ownership of our common stock or (2) the Notice of Internet
Availability of Proxy Materials; or if you hold your shares in street
name (that is, through a broker, bank or other nominee), to enter the
Annual Meeting, please bring a copy of a brokerage statement reflecting
your ownership of our common stock or other proof of ownership through
such broker, bank or nominee and a form of photo
identification. |
|
Q: |
|
What constitutes a
quorum? |
|
A: |
|
A majority of the 175,627,299 shares of our stock
outstanding on February 23, 2017 must be present, in person or by proxy,
to provide a quorum at the Annual Meeting. If you vote, your shares will
count toward satisfying the quorum requirement. If you return a proxy card
or otherwise submit a proxy marked ABSTAIN or without voting
instructions, your shares of common stock will also count toward
satisfying the quorum requirement. Also, in those instances where banks,
brokers or other nominees who hold shares on behalf of others have
returned a proxy but could not vote the shares on particular matters
without receiving voting instructions from the beneficial owners (broker
nonvotes), those shares will count toward satisfying the quorum
requirement. If you own shares in street name, we encourage you to provide
voting instructions to your broker, bank or other nominee. Once a share is
counted as present at the Annual Meeting, it will count as present for
quorum purposes throughout the Annual Meeting (including any adjournment
or postponement of that meeting unless a new record date is or must be set
for the adjournment or postponement). |
|
Q: |
|
Who is entitled to vote? |
|
A: |
|
Only holders of the 175,627,299 shares of our common
stock outstanding as of the close of business on February 23, 2017, can
vote at the Annual Meeting. Each of these shareholders has one vote for
each share of our stock held on that date. |
|
HARLEY-DAVIDSON.COM 65
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE
MEETING
Q: |
|
How do I
vote? |
|
A: |
|
If the records of our transfer
agent show that you own shares in your name or if you own shares through
our Dividend Reinvestment Plan at the close of business on February 23,
2017, then you may vote (1) via the internet at http://www.proxyvote.com, (2) in
person at the Annual Meeting, (3) by mail or telephone after first
requesting a printed copy of this Proxy Statement, proxy card and Annual
Report on Form 10-K and following the instructions set forth on the proxy
card, or (4) by telephone after reviewing the Proxy Statement and Annual
Report on Form 10-K at http://www.proxyvote.com. If you
own shares in street name, you may vote via telephone or the internet if
your bank, broker or other nominee makes those methods available, in which
case your bank, broker or other nominee will provide instructions with
your Proxy Statement. The telephone and internet voting procedures will
authenticate your identity, allow you to give your voting instructions and
confirm that we properly recorded your instructions. If you vote via the
internet, you should understand that there might be costs associated with
electronic access that you must bear, such as usage charges from internet
access providers and telephone companies. |
|
Q: |
|
What is the effect of not
voting at the Annual Meeting? |
|
A: |
|
The consequences of not voting at
the Annual Meeting will depend on how you own your shares. If the records
of our transfer agent, Computershare Investor Services LLC, show that you
own shares in your name or if you own shares through our Dividend
Reinvestment Plan and you do not vote, we cannot consider those shares
present at the meeting and they will not count toward satisfying the
quorum requirement. |
|
|
|
If you own shares in street name
and do not vote, your broker, bank or other nominee may vote your shares
at the meeting. If you do not give voting instructions for your shares,
your broker, bank or other nominee may or may not be able to vote your
shares in its discretion depending on the proposals before the meeting.
Your broker, bank or other nominee may vote your shares in its discretion
on routine matters such as Proposal 4, the ratification of the selection
of our independent registered public accounting firm, but may not vote
your shares in its discretion on the other Proposals. If you own shares in
street name, we encourage you to provide voting instructions to your
broker, bank or other nominee. |
|
Q: |
|
Can I change my vote after I
submit my proxy? |
|
A: |
|
Yes. You can change your vote at any time
before the Annual Meeting by submitting a new proxy or by providing
written notice to our Secretary and voting in person at the Annual
Meeting. Your presence at the Annual Meeting does not in and of itself
revoke your proxy. You also are invited to attend the Annual
Meeting in person. However, because a beneficial owner is not the
shareholder of record, you may not vote these shares in person at the
Annual Meeting unless you obtain a legal proxy from the bank, broker or
other nominee that holds your shares, giving you the right to vote the
shares at the Annual Meeting.
Unless you properly revoke your proxy, the
persons you have appointed will vote your shares at the Annual Meeting. If
you specify a choice by means of the proxy, the persons you have appointed
will vote your shares as you specify. If you do not specify a choice, the
persons you have appointed will vote your shares in accordance with the
recommendations of the Board of Directors. |
|
Q: |
|
Is my vote
confidential? |
|
A: |
|
We will handle all proxy
instructions, ballots and voting tabulations that identify individual
shareholders carefully to protect your voting privacy. No one will
disclose your vote either within Harley-Davidson or to third parties,
except: (1) as necessary to meet applicable legal requirements; (2) to
allow for the tabulation of votes and certification of the vote; and (3)
to facilitate a successful proxy solicitation. |
66 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE
MEETING
Q: |
|
Who will count the
vote? |
|
A: |
|
Broadridge Financial Solutions,
Inc. will count the vote. Its representative will serve as the inspector
of the election. |
|
Q: |
|
Who pays to prepare and
solicit the proxies? |
|
A: |
|
We pay the cost of soliciting the
proxies relating to the Annual Meeting, except for some costs that may
arise through your use of the telephone and internet. We may request
proxies in person, by telephone, internet and facsimile machine, as well
as through the mail. We also expect to ask banks, brokerage houses and
other custodians, nominees or fiduciaries to forward proxy materials to
their principals and to obtain proxies. We will reimburse these
institutions for their out-of-pocket expenses. |
|
Q: |
|
How can I obtain printed
copies of the proxy materials? |
|
A: |
|
If you are a shareholder, you may
receive a printed copy of the proxy materials by following the
instructions below, which also appear in the Notice of Internet
Availability of Proxy Materials. |
|
|
|
If you want to receive a printed
copy of this Proxy Statement, proxy card and/or Annual Report on Form
10-K, you must request one. There is NO charge by the company for
requesting a copy. Please choose one of the following methods to make your
request: |
|
1) |
|
BY INTERNET: |
|
www.proxyvote.com |
|
2) |
|
BY TELEPHONE: |
|
1-800-579-1639 |
|
3) |
|
BY EMAIL |
|
sendmaterial@proxyvote.com |
If you request printed materials by email,
please send a blank email that includes the control number that appears in your
Notice of Internet Availability of Proxy Materials in the email subject line. If
you access documents electronically, you should understand that there might be
costs to access materials electronically that you must bear, such as usage
charges from Internet access providers and telephone companies.
Requests, instructions and inquiries sent
to the email address above for purposes other than requesting a printed copy of
this Proxy Statement, proxy card and Annual Report on Form 10-K will NOT be
reviewed or accommodated. Please make the request as instructed above on or
before April 12, 2017, to facilitate delivery prior to the Annual Meeting. After
April 12, 2017, you may request printed copies of this Proxy Statement and/or
Annual Report on Form 10-K, but not a proxy card, by contacting the companys
Investor Relations Department directly by: (a) mail at Harley-Davidson, Inc.,
Attention: Investor Relations, 3700 West Juneau Avenue, P.O. Box 653, Milwaukee,
Wisconsin 53201-0653, (b) telephone at 877-HDSTOCK (toll-free) or (c) email
at
investor.relations@harley-davidson.com.
HARLEY-DAVIDSON.COM 67
Table of Contents
QUESTIONS AND ANSWERS ABOUT
THE COMPANY |
Q: |
|
How is management
structured? |
|
A: |
|
Harley-Davidson, Inc. operates in
two business segments- the motorcycles and related products segment and
the financial services segment. The motorcycles and related products
segment includes companies that do business as Harley-Davidson Motor
Company (HDMC). The financial services segment includes Harley-Davidson
Financial Services (HDFS). |
|
|
|
Our organizational structure
consists of the Harley-Davidson Leadership Team (HDLT) and a broad group
of our leaders representing key functions and key individuals of
Harley-Davidson that we refer to as senior leaders. |
|
|
|
The HDLT consists of the Chief
Executive Officer of Harley-Davidson, Inc., as well as the President of
HDFS and other senior officers who report directly to the Chief Executive
Officer. The members of the HDLT are responsible for making decisions on
business issues that impact our entire company, developing high-level
policies and advising our Chief Executive Officer. For Securities and
Exchange Commission (SEC) purposes, we consider the HDLT members our
executive officers. Among other things, the SEC requires executive
officers to disclose publicly their holdings of and transactions involving
our stock. |
|
Q: |
|
Who are our executive officers
for SEC purposes? |
|
A: |
|
As of February 23, 2017, our
executive officers for general SEC purposes were as follows: |
|
Name and Title |
|
|
Age |
Matthew S. Levatich,
President and Chief Executive Officer, Harley-Davidson, Inc. |
|
52 |
|
We have employed Mr. Levatich for approximately 22
years. Mr. Levatich became our President and Chief Executive Officer
effective May 1, 2015. |
|
|
John A. Olin, Senior Vice
President and Chief Financial Officer, Harley-Davidson, Inc. |
|
56 |
|
We have employed Mr. Olin for approximately 14
years. |
|
|
Lawrence G. Hund,
President and Chief Operating Officer, Harley-Davidson Financial
Services |
|
60 |
|
We have employed Mr. Hund for approximately 6 years and
previously employed him for approximately 5 years prior to
2008. |
|
|
Michelle A. Kumbier,
Senior Vice President, Motor Company Product and Operations, |
|
49 |
Harley-Davidson Motor
Company |
|
|
|
We have employed Ms. Kumbier for approximately 21
years. |
|
|
Paul J. Jones, Vice
President and Chief Legal Officer, Harley-Davidson, Inc. |
|
46 |
|
We have employed Mr. Jones for approximately 7
years. |
|
|
Sean J. Cummings, Senior
Vice President, Global Demand, Harley-Davidson Motor Company |
|
54 |
|
We have employed Mr. Cummings for approximately 3
years. |
|
|
Joanne M. Bischmann, Vice
President, Communications of Harley-Davidson, Inc. |
|
55 |
|
We have employed Ms. Bischmann for approximately 26
years. |
|
|
Tchernavia Rocker, Vice
President, Human Resources, Harley-Davidson, Inc. |
|
43 |
|
We have employed Ms. Rocker for approximately 17
years. |
|
|
68 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE
MEETING
|
|
Ms. Bischmann, Mr. Hund and Mr.
Olin have served in their respective current capacities for more than five
years. We have employed the executive officers identified below in their
respective current capacities for less than five years. The following is
additional biographical information for at least the last five years
relating to these executive officers: |
|
|
|
Mr. Levatich became our President
and Chief Executive Officer in 2015. Prior to that time, he served as
President and Chief Operating Officer of HDMC since 2009. |
|
|
|
Ms. Kumbier has been with
Harley-Davidson since 1997 and, since 2015, has been Harley-Davison Motor
Companys Senior Vice President, Motor Company Product and Operations.
From 2012 to 2015, she was Senior Vice President of Motorcycle Operations,
and from 2010 to 2012, she was our Senior Vice President, Product
Development. |
|
|
|
Mr. Jones became our Vice
President, Strategy and Sustainability and Chief Legal Officer in February
2016. He joined the company in 2010 as Vice President, General Counsel and
Secretary. |
|
|
|
Mr. Cummings has been with
Harley-Davidson since 2014 and has served as our Senior Vice President,
Global Demand since October 2015. From 2014 to 2015, he was our Vice
President, Latin America. Prior to joining our company, Mr. Cummings
served as President and COO of Milsco Manufacturing Company (a
manufacturer of seating products) from 2009 until he joined the company in
2014. |
|
|
|
Ms. Rocker has been with
Harley-Davidson since 2000 and, since July 2016, has been our Vice
President, Human Resources. From 2014 to 2016, she served as General
Manager Human Resources and from 2012 to 2014 she served as Senior
Director, Human Resources. |
|
|
|
In addition to the executive
officers listed above, Mark R. Kornetzke is our Chief Accounting Officer.
We have employed Mr. Kornetzke for approximately 20 years and he has
served in his current role since 2009. |
|
Q: |
|
Does Harley-Davidson have a
chief compliance officer? |
|
A: |
|
Yes. Our Board first appointed a
chief compliance officer in 2004. Paul J. Jones, our Vice President and
Chief Legal Officer, is our current Chief Compliance Officer. Appointing a
chief compliance officer was part of the Boards commitment to compliance
and its desire to promote compliance, education and reporting within our
company. This action formalized our continuing efforts to direct and
promote an effective compliance program. Among other things, under this
compliance program, management is required to report significant
compliance issues to the Legal Department when they occur. The compliance
program also includes training to employees, including senior management,
on corporate governance issues including anti-bribery, ethics, privacy,
insider trading restrictions and restrictions on disclosure of nonpublic
material information. The company has a global compliance and ethics
training program managed by an attorney from our Legal Department and
other employees who manage corporate governance, compliance and records
management. The Audit and Finance Committee and Nominating and Corporate
Governance Committee receive quarterly reports on legal and compliance
matters. |
HARLEY-DAVIDSON.COM 69
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE
MEETING
Q: |
|
Does Harley-Davidson have a
disclosure committee? |
|
A: |
|
Yes. In 2002, we established a
Disclosure Committee comprised of members of management responsible for
considering the materiality of information and making disclosure decisions
on a timely basis. If necessary, a subset of the Disclosure Committee
comprised of the Chief Financial Officer and the Chief Legal Officer is
authorized to fulfill the functions of the Disclosure Committee. Although
the following information and documentation are not provided along with
this Proxy Statement, the Disclosure Committee Guidelines provide that the
Disclosure Committee: (1) has access to all company books, records,
facilities and personnel, as well as our independent registered public
accounting firm and outside counsel; (2) designs, establishes and
maintains disclosure controls and procedures for the SEC reporting process
and modifies them from time to time, as appropriate; (3) creates and
reviews all financial press releases; (4) reviews SEC filings on Form 8-K
relating to quarterly earnings releases, Form 10-K and Form 10-Q and our
annual proxy statement; (5) suggests appropriate disclosures or provides
opinions on disclosure issues; (6) evaluates changes in SEC, New York
Stock Exchange and Financial Accounting Standards Board disclosure rules
and makes recommendations regarding their impact on the company; (7)
consults with management, internal auditors, independent accountants and
outside legal counsel; (8) discusses material items with employees in the
internal audit function, independent registered public accounting firm and
management to ensure appropriate disclosure; (9) arranges for necessary
training to ensure effective implementation of the disclosure controls and
procedures; and (10) annually reviews and reassesses the performance of
the Disclosure Committee and these guidelines. |
|
Q: |
|
Does Harley-Davidson have a
policy for communicating material non-public information? |
|
A: |
|
Yes. The companys Policy for
Managing Disclosure of Material Information describes the procedures
relating to communication with the public, the investment community and
third party business contacts. The policy can be found on the Corporate
Governance page of our website at http://investor.harley-davidson.com |
|
Q: |
|
Does Harley-Davidson have an
internal audit department? |
|
A: |
|
Yes. The head of the internal
audit function reports directly to both the Audit and Finance Committee
and our Chief Financial Officer. The Audit and Finance Committee Charter
specifically provides that the head of the internal audit function is
accountable to the Board of Directors and the Audit and Finance Committee
and that the Audit and Finance Committee has the ultimate authority and
responsibility to appoint, retain, evaluate and replace the head of the
internal audit function. For more information on the internal audit
function, please see the Audit and Finance Committee
Report. |
|
Q: |
|
Where can I find corporate
governance materials for Harley-Davidson? |
|
A: |
|
The Corporate Governance page of
our website at http://investor.harley-davidson.com contains our Corporate Governance Policy, our Conflict of Interest
Process for Directors, Executive Officers and Other Employees, our Code of
Business Conduct, our Financial Code of Ethics, our Policy for Managing
Disclosure of Material Information, the charters for the Audit and Finance
Committee, Nominating and Corporate Governance Committee, Human Resources
Committee and Sustainability Committee, our By-laws, a list of the Board
of Directors, our Statement on Conflict Minerals, California Transparency
in Supply Chain Act Disclosure, Political Contributions and Engagement and
the Clawback Policy. We are not including the information available
through our website as a part of this Proxy Statement. As a shareholder,
you can request paper copies of the documents found
on |
70 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE
MEETING
|
|
the Corporate Governance page of our website at any time
by contacting our Investor Relations Department by: (a) mail at
Harley-Davidson, Inc., Attention: Investor Relations, 3700 West Juneau
Avenue, P.O. Box 653, Milwaukee, Wisconsin 53201-0653, (b) telephone at
877-HDSTOCK (toll-free) or (c) email at investor.relations@harley-davidson.com. If you access documents electronically, you should understand
that there might be costs to access materials electronically that you must
bear, such as usage charges from internet access providers and telephone
companies. |
|
Q: |
|
Does the company have a code of business
conduct? |
|
A: |
|
The Board of Directors first adopted our Code of
Business Conduct in 1992 and the Board amended and restated it in each of
2003 and 2012. Our Code of Business Conduct applies to all of our
employees, including all executives and directors, and promotes honest and
ethical conduct and provides guidance in handling various business
situations. It is available worldwide to our employees on our intranet and
on the Corporate Governance page of our website at http://investor.harley-davidson.com. Where allowed by law, employees may anonymously report
possible violations of the Code of Business Conduct by calling a
third-party toll-free telephone number that is available 24 hours a day
and seven days a week, via a third-party internet website or by writing to
our Chief Legal Officer at the following address in care of our Secretary:
Harley-Davidson, Inc., 3700 West Juneau Avenue, P.O. Box 653, Milwaukee,
Wisconsin 53201-0653. Employees may also report possible violations to
their supervisor, their local human resources department, their local
legal department, or the Chief Legal Officer and Chief Compliance Officer
of Harley-Davidson, Inc. For more information, please see the Nominating
and Corporate Governance Committee Report. |
|
Q: |
|
Does the company have a financial code of
ethics? |
|
A: |
|
Employees in key senior management positions, including
the HDLT, and in areas that provide support to the finance and accounting
areas, sign our Financial Code of Ethics. The Financial Code of Ethics was
most recently revised in November 2015. Employees may report possible
violations of the Financial Code of Ethics via the Code of Business
Conduct reporting line or directly to the Chair of the Audit and Finance
Committee, in care of our Secretary: Harley-Davidson, Inc., 3700 West
Juneau Avenue, P.O. Box 653, Milwaukee, Wisconsin 53201-0653. Employees
may also report possible violations to their supervisor, their local human
resources department, their local legal department, or the Chief Legal
Officer and Chief Compliance Officer of Harley-Davidson, Inc. |
|
Q: |
|
How may I contact the members of the Board of
Directors? |
|
A: |
|
The Corporate Governance page of our website lists the
current members of the Board of Directors. Shareholders or other parties
interested in communicating with Michael J. Cave, our Chairman of the
Board (who is the contact for those who wish to communicate with
non-management directors), or any other director may do so by writing in
care of our Secretary, 3700 West Juneau Avenue, P.O. Box 653, Milwaukee,
Wisconsin 53201-0653. We open and forward all mail to the director or
directors specified in the communication. |
|
Q: |
|
Does the company have a chairman or a presiding
director? |
|
A: |
|
We currently have a non-executive Chairman of the Board.
Our By-Laws provide for a Presiding Director when the Chairman of the
Board is not an independent Director. |
HARLEY-DAVIDSON.COM 71
Table of Contents
QUESTIONS AND ANSWERS ABOUT THE
MEETING
Q: |
|
How may I recommend a
candidate to serve on the Board of Directors? |
|
A: |
|
Shareholders may recommend
candidates for consideration by the Nominating and Corporate Governance
Committee at any time by writing to the Chair of the committee in care of
our Secretary at the above address. To enable the committee to consider a
shareholder recommendation in connection with the 2018 annual meeting of
shareholders, we must receive the recommendation on or before November 20,
2017. Under Nominating and Corporate Governance Committee, we discuss
the criteria that the Nominating and Corporate Governance Committee
considers for identifying and recommending new candidates to serve on the
Board. |
By Order of the Board of
Directors,
Harley-Davidson,
Inc.
Paul J. Jones
Secretary
Milwaukee, Wisconsin
March 20,
2017
72 HARLEY-DAVIDSON, INC. 2017 PROXY STATEMENT
Table of Contents
Table of Contents
Table of Contents
*** Exercise
Your Right
to Vote ***
Important Notice Regarding the Availability of Proxy Materials for
the
Shareholder Meeting to Be Held on April 29, 2017
HARLEY-DAVIDSON,
INC.
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
HARLEY-DAVIDSON, INC.
3700 W.
JUNEAU AVENUE
MILWAUKEE, WI 53208
|
Meeting
Information |
|
|
Meeting Type: |
Annual
Meeting |
|
|
For
holders as of: |
February 23,
2017 |
|
|
Date: April 29,
2017 |
Time: 10:00 AM CDT |
|
|
Location: |
Harley-Davidson Museum 400 West Canal Street Milwaukee,
Wisconsin |
|
|
|
|
|
You are receiving this communication because you hold shares in the
company named above.
This is not
a ballot. You cannot use this notice to vote these shares. This communication
presents only an overview of the more complete proxy materials that are
available to you on the Internet. You may view the proxy materials online
at www.proxyvote.com or easily request a paper copy (see reverse side).
We encourage
you to access and review all of the important information contained in the proxy
materials before voting.
See the reverse side of this notice to obtain
proxy materials and voting
instructions. |
Table of Contents
Before You Vote
How to Access the
Proxy Materials
Proxy Materials Available to VIEW or RECEIVE:
NOTICE AND
PROXY STATEMENT
ANNUAL REPORT ON FORM 10-K
How to
View Online:
Have the information that is
printed in the box marked by the arrow ➔XXXX XXXX XXXX XXXX (located on
the following page) and visit: www.proxyvote.com.
How to
Request and Receive a PAPER or E-MAIL Copy:
If you want to receive a paper or e-mail copy of these documents, you
must request one. There is NO charge for requesting a copy. Please choose one of
the following methods to make your request:
|
1) |
BY
INTERNET: |
www.proxyvote.com |
|
2) |
BY
TELEPHONE: |
1-800-579-1639 |
|
3) |
BY
E-MAIL*: |
sendmaterial@proxyvote.com |
* If
requesting materials by e-mail, please send a blank e-mail with the information
that is printed in the box marked by the arrow ➔XXXX XXXX XXXX XXXX (located on
the following page) in the subject line.
Requests,
instructions and other inquiries sent to this e-mail address will NOT be
forwarded to your investment advisor. Please make the request as instructed
above on or before April 12, 2017 to facilitate timely
delivery.
How To Vote
Please Choose One of the
Following Voting Methods
Vote By Internet: To vote
now by Internet, go to www.proxyvote.com.
Have the information that is printed in the
box marked by the arrow ➔XXXX XXXX XXXX XXXX (located on
the following page) available and follow the instructions.
Vote By
Mail: You can vote by mail by requesting a
paper copy of the materials, which will include a proxy card.
Vote By
Phone: You may vote these shares by telephone
by requesting a paper copy of the materials or by viewing the proxy materials at
www.proxyvote.com at which time a toll-free number will be
provided.
Vote In
Person: You can use this Notice as your
admission ticket to the shareholders meeting. At the meeting, you will need to
request a ballot to vote these shares.
Table of Contents
The Board of Directors recommends you vote FOR
all the nominees listed below. |
1. |
Election of Directors |
|
|
|
|
Nominees: |
|
|
|
|
01) |
Troy
Alstead |
06) |
Sara L.
Levinson |
|
02) |
R. John
Anderson |
07) |
N. Thomas
Linebarger |
|
03) |
Michael J.
Cave |
08) |
Brian R.
Niccol |
|
04) |
Allan
Golston |
09) |
Maryrose T.
Sylvester |
|
05) |
Matthew S.
Levatich |
10) |
Jochen
Zeitz |
|
The Board of
Directors recommends you vote FOR Proposal 2. |
|
2. |
To
approve, by advisory vote, the compensation of our Named Executive
Officers. |
|
|
The Board of Directors recommends you vote EVERY YEAR on Proposal
3. |
|
3. |
To
consider the frequency of the advisory vote on the compensation of our
Named Executive Officers. |
|
|
The Board of Directors recommends you vote FOR Proposal
4. |
|
4. |
To ratify
the selection of Ernst & Young LLP, independent registered public
accounting firm, to be the auditors for the fiscal year ending December
31, 2017. |
NOTE: By submitting your proxy, you authorize John A. Olin and Paul J. Jones to
use their discretion when voting upon any other matter that may properly come
before the 2017 Annual Meeting of Shareholders.
Table of Contents
Table of Contents
HARLEY-DAVIDSON, INC.
ATTN:
STEPHEN W. BOETTINGER
3700 W. JUNEAU AVENUE
MILWAUKEE, WI
53208
Electronic Voting Instructions
You can vote by Internet or telephone
Available 24 hours a day, 7 days
a week
VOTE BY
INTERNET - www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time on April 28, 2017. Have your proxy
card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company
in mailing proxy materials, you can consent to receiving all future proxy
statements, proxy cards and annual reports electronically via e-mail or the Internet.
To sign up for electronic delivery, please follow the instructions above to vote
using the Internet and, when prompted, indicate that you agree to receive or
access proxy materials electronically in future years.
VOTE BY
PHONE - 1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on
April 28, 2017. Have your proxy card in hand when you call and then follow the
instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN
BLUE OR BLACK INK AS FOLLOWS: |
|
|
|
E18697-P86448 |
KEEP THIS PORTION FOR YOUR
RECORDS |
|
|
DETACH AND
RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY
WHEN SIGNED AND DATED. |
HARLEY-DAVIDSON, INC. |
|
For |
|
Withhold
|
|
For
All |
|
|
|
All |
|
All |
|
Except |
|
The Board of
Directors recommends you vote FOR all the nominees listed
below. |
|
|
|
|
|
|
|
1. Election of Directors |
|
☐ |
|
☐ |
|
☐ |
To withhold authority to vote for any individual nominee(s), mark
For All Except and write the number(s) of the nominee(s) on the line
below. |
|
|
|
|
Nominees: |
|
|
|
|
|
|
01) |
Troy
Alstead |
06) |
Sara L.
Levinson |
|
|
02) |
R. John
Anderson |
07) |
N. Thomas
Linebarger |
|
|
03) |
Michael J.
Cave |
08) |
Brian R.
Niccol |
|
|
04) |
Allan
Golston |
09) |
Maryrose T.
Sylvester |
|
|
05) |
Matthew S.
Levatich |
10) |
Jochen
Zeitz |
|
The Board of Directors recommends you vote FOR Proposal
2. |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
|
|
|
|
|
|
|
|
|
2. |
To approve, by advisory vote, the compensation of our
Named Executive Officers. |
|
|
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
The Board of Directors
recommends you vote EVERY YEAR on Proposal 3. |
|
Every Year |
|
Every 2 Years |
|
Every 3 Years |
|
Abstain |
|
|
|
|
|
|
|
|
|
|
|
|
3. |
To consider the frequency of the advisory vote on the
compensation of our Named Executive Officers. |
|
☐ |
|
☐ |
|
☐ |
|
☐ |
|
|
|
|
|
|
|
|
|
|
|
|
The Board of Directors
recommends you vote FOR Proposal 4. |
|
|
|
For |
|
Against |
|
Abstain |
|
|
|
|
|
|
|
|
|
|
|
|
4. |
To ratify the selection of Ernst & Young LLP,
independent registered public accounting firm, to be the auditors for the
fiscal year ending December 31, 2017. |
|
☐ |
|
☐ |
|
☐ |
|
For address changes and/or comments, please check this
box and write them on the reverse side of this
card where indicated. |
|
☐ |
|
|
|
|
|
Authorized Signatures
This section must be completed for your vote to be counted. Date and
Sign Below |
|
|
|
|
|
Please sign exactly
as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint
owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership
name by authorized officer. |
|
|
|
|
|
|
|
|
|
|
|
Signature
[PLEASE SIGN WITHIN BOX] |
|
Date |
|
Signature (Joint
Owners) |
|
Date |
|
Table of Contents
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Form 10-K are available at
www.proxyvote.com.
IF YOU HAVE NOT VOTED BY THE INTERNET
OR TELEPHONE, FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM
PORTION IN THE ENCLOSED ENVELOPE.
Proxy
Harley-Davidson, Inc. |
PROXY SOLICITED BY THE BOARD OF
DIRECTORS FOR THE APRIL 29, 2017 ANNUAL MEETING OF SHAREHOLDERS
The undersigned appoints John A. Olin
and Paul J. Jones and each of them as proxies for the undersigned, with full
power of substitution and resubstitution, to act and vote all the shares of
common stock of Harley-Davidson, Inc. held of record by the undersigned on
February 23, 2017 at the Annual Meeting of Shareholders of Harley-Davidson, Inc.
to be held on April 29, 2017 and at any adjournment or postponement of the
meeting (the "Meeting").
Without limiting the generality of this
Proxy Card, Messrs. Olin and Jones are each authorized to vote: (a) as specified
upon the proposals listed hereon and described in the Proxy Statement for the
Meeting; and (b) in their discretion upon any other matter that may properly
come before the Meeting.
The Board of Directors recommends a
vote FOR: (i) the listed director nominees (Proposal 1); (ii) approving, by
advisory vote, the compensation of our Named Executive Officers (Proposal 2);
(iii) "EVERY YEAR" regarding the frequency of the advisory vote on the
compensation of our Named Executive Officers (Proposal 3); and (iv) ratification
of the selection of Ernst & Young LLP, independent registered public
accounting firm, to be the auditors for the fiscal year ending December 31, 2017
(Proposal 4).
The shares represented by this
Proxy Card shall be voted as specified. If no specification is made, the shares
shall be voted as recommended by the Board of Directors.
|
Address
Changes/Comments: |
|
|
|
|
|
|
|
|
(If you noted any Address Changes/Comments above, please
mark corresponding box on the reverse
side.) |
Continued
and to be signed on reverse side
This regulatory filing also includes additional resources:
hog_courtesy-pdf.pdf
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