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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D.R. Horton, Inc.

(Name of Registrant as Specified In Its Charter)

 

 

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Message to Our Stockholders:

We are extremely proud of the D.R. Horton team’s performance in fiscal 2022. We completed our 21^st consecutive year as the largest homebuilder in the United States by closing 83,518 homes in our homebuilding and single-family rental operations during fiscal 2022. Our consolidated revenues and pre-tax income were 21% and 42% higher than fiscal 2021, respectively. Over the last five years, we have grown our revenues by 138% and our earnings per share by 503%, while also generating $7.5 billion of homebuilding cash from operations, more than doubling our book value per share, maintaining homebuilding leverage below 20% and significantly increasing our returns on inventory and equity to greater than 30%. Our strong balance sheet, ample liquidity and low leverage provide us with significant financial flexibility. We are committed to maintaining our disciplined approach to investing capital to enhance the long-term value of our Company, including returning capital to our stockholders through both dividends and share repurchases on a consistent basis.

During the first half of fiscal 2022 and for most of the third quarter, demand for our homes remained strong. In June 2022, we began to see a moderation in housing demand that persisted through the end of our fiscal year as mortgage interest rates increased substantially and inflationary pressures remained elevated. The supply of homes at affordable price points remains limited across most of our markets, and disruptions in the supply chains for certain building materials and tightness in the labor market have caused our construction cycle to lengthen. Although these pressures may persist for some time, we believe we are well-positioned to meet these changing market conditions with our affordable product offerings and lot supply, and we will manage our home pricing, sales incentives and number of homes in inventory based on the level of homebuyer demand.

Our purpose as a Company is to enable our customers to achieve the American Dream of homeownership. We achieve this by ensuring that our homes remain affordable for entry-level and first-time homebuyers – the average selling price of our homes is one of the lowest in the homebuilding industry – and we are honored to have provided new homes to more individuals and families than any other builder in the country. We continue to strive to offer compelling value across our broad product offerings to serve a diverse customer base and provide homes for every stage in life.

As a Board, we remain committed to providing robust oversight of management as the Company implements its vision and strategic plans to create sustainable stockholder value. In fiscal 2022, the Board also reiterated its commitment to stockholder engagement – the feedback gained in conversations with stockholders serves as a key input to Board and Committee discussions and decisions. The following proxy statement outlines the significant executive compensation actions taken by the Board and Compensation Committee to address and align with stockholder feedback received over the course of the past year. We are also proud to have been named the Best Investor Relations Program in the Homebuilders and Building Products sector by Institutional Investor multiple times in its annual survey, including in each of the most recent three consecutive years.

During fiscal 2022, the Company made significant strides in our Environmental, Social and Governance (ESG) efforts related to our commitment to improve our ESG transparency. We published human capital data for the first time highlighting the demographic composition of our workforce and our homebuyers, and we subsequently appended that data with our first public disclosure of our EEO-1 reporting, sharing our 2021 report that was submitted to the Equal Employment Opportunity Commission (EEOC). Additionally, we published our first vendor spotlight, which highlights the environmental impacts of certain vendors and product categories within our homes, and how together with our building product partners, we are building a better, more energy efficient home for our homebuyers. This year, we also conducted a formal ESG materiality assessment, in which we gathered responses and feedback from a variety of stakeholders to understand the ESG topics of importance to each stakeholder type and the areas in which D.R. Horton should consider focusing our ESG efforts and disclosure.

As a culmination of these efforts, we plan to publish our inaugural ESG report in early fiscal 2023. This ESG report will include discussion and metrics around the energy efficiency and environmental impacts of our homes, the importance of the people who work for D.R. Horton, our impacts on the communities in which we work, overall business ethics and several other important ESG topics . This report and future ESG Reports, as well as any new information, will be accessible on the Policy & ESG Documents section of our Investor Relations website.

Our employees continue to be the primary strength of our Company, ensuring the resilience of our business going forward. Our employees share in our success on both an annual and long-term basis through participation in numerous incentive compensation and stock ownership plans. We remain committed to hiring, developing and supporting a positive, productive, diverse and inclusive workplace by attracting and retaining talented and experienced individuals to manage and support our operations. We continually work to improve the quality of our workforce, work environments and customer experiences. Our Company’s culture is centered on accountability, integrity and providing growth opportunities for our employees based on competence, effort and character, which provides a long-term focus and continuity to our operations.

We operate in 106 markets and 33 states across the country in a highly decentralized manner. Our team of employees in each market strive to have a positive influence on their local communities, not only by providing new homes to their neighbors, but also by supporting local organizations that enhance the well-being of the community and help those in need. This support is demonstrated through numerous efforts including team volunteering projects, support of individual employee volunteer efforts, natural disaster recovery assistance to municipalities, various types of donations, contributions and cooperation with our trade partners in supporting various charitable causes. Homebuilding is a local business, and we are proud to support the local communities where our employees and customers live and work.

 

		Board of Directors: Donald R. Horton, Chairman Barbara K. Allen Brad S. Anderson Michael R. Buchanan Benjamin S. Carson, Sr. Maribess L. Miller

    

 

 

 

Notice of Annual Meeting of Stockholders

 

Stockholders are being asked to vote on the following matters at the 2023 Annual Meeting of Stockholders.

 

		Our Board’s Recommendation
Proposal 1: Election of Directors: To elect the six directors named in our proxy statement		✓  FOR
Proposal 2: Advisory Vote to Approve Executive Compensation: To seek an advisory vote on the approval of our executive compensation		✓  FOR
Proposal 3: Ratification of Auditors: To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2023		✓  FOR

 

 

Table of Contents

 

 

PROXY STATEMENT SUMMARY

 

 

Proxy Statement Summary

Key Operating and Financial Highlights

The D.R. Horton team, led by our executive officers, delivered outstanding operating and financial results during fiscal 2022. D.R. Horton, Inc. is referred to as “D.R. Horton,” the “Company,” “we,” and “our” in this Proxy Statement. Our results reflect the strength of our experienced operational teams, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.

We closed 83,518 homes in our homebuilding and single-family rental operations during fiscal 2022, completing our 21^st consecutive fiscal year as the largest homebuilder in the United States. Over the prior five fiscal years, we have grown our revenues by 138% and our earnings per share by 503%, while also generating $7.5 billion of cash flows from homebuilding operations, more than doubling our book value per share, maintaining homebuilding leverage below 20% and significantly increasing our returns on inventory and equity to greater than 30%. We have also delivered strong total stockholder returns of 264% and 79% for the last ten years and five years, respectively.

Key Performance Highlights

 

 

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      1

PROXY STATEMENT SUMMARY

 

 

		As of and for the Fiscal Year Ended September 30,																											% Change
																													2022 vs 2021					2022 vs 2018
Stock Price and Other Data		2022					2021					2020					2019					2018
Common stock price			$	67.35				$	83.97				$	75.63				$	52.71				$	42.18							(20	)%				60	%
Total equity market capitalization (in millions)			$	23,165				$	29,895				$	27,529				$	19,420				$	15,871							(23	)%				46	%
Book value per common share			$	56.39				$	41.81				$	32.53				$	27.20				$	23.88							35	%				136	%
Diluted earnings per common share			$	16.51				$	11.41				$	6.41				$	4.29				$	3.81							45	%				333	%
Cash dividends paid per common share			$	0.90				$	0.80				$	0.70				$	0.60				$	0.50							13	%				80	%

Board Responsiveness and Commitment to Stockholder Engagement

Over the last few years, our Board and Compensation Committee, alongside our Investor Relations team, has embarked on a robust stockholder outreach program. The success of the engagement program is evidenced by the significant changes to our executive compensation program that were adopted as a direct result of the feedback received as outlined in the table below.

Our advisory vote on executive compensation (Say on Pay) received a lower than expected vote at the 2022 Annual Meeting. In response, the Compensation Committee made significant changes to our executive compensation program and remains committed to understanding and being responsive to stockholder sentiment. As a result, the Compensation Committee and Investor Relations team reached out to investors, in some instances multiple times, prior to and following the 2022 Annual Meeting to ensure that any actionable feedback received could be better incorporated into Compensation Committee discussions and decisions for fiscal 2022 and beyond.

Throughout fiscal 2022, we contacted stockholders collectively representing 57% of outstanding shares and had substantive conversations with stockholders representing 53% of outstanding shares to discuss executive compensation, corporate governance and ESG matters. The Compensation Committee Chair led the discussions with several of our largest stockholders.

 

Stockholder Feedback (“What We Heard”) Strong stockholder preference for:				Action (“What We Did”)						Impact of Action (“Why This is Important”)
Short-term Incentive		Cap on short-term incentive payout		Established dollar cap						✓  Limits total short-term award size
		Lower pre-tax income (PTI) percentage		Reduced PTI payout percentage:						✓  Reduces earned short-term incentive
				Executive		From		To
				Chairman		0.60%		0.20%
				CEO		0.40%		0.20%
				Co-COOs		0.15%		0.10%
Balance of Short- and Long-term Incentives		Equity incentives over cash		Split earned annual incentive payouts to Chairman and CEO equally between cash and equity, with the equity being subject to a further 2-year holding period						✓  Strengthens alignment of executives’ interests with stockholders by utilizing equity with a multi-year holding period
		Long-term over short-term incentives		Committed that long-term incentives, with vesting schedule of no shorter than 3 years, will be a higher percentage of target compensation for fiscal 2022 and beyond						✓  Aligns outcomes with long-term stockholder value creation   ✓  Increases performance and retentive value of incentives
Above-median Performance Targets		Above-median targets for relative metrics		Increased threshold performance level for the ROI, SG&A and GP portions of Performance RSUs to require 6th rank out of 10   Increased target performance level for the ROI, SG&A and GP portions of Performance RSUs to require 3rd rank out of 10						✓  Requires greater outperformance of our peers to earn threshold and target payouts   ✓  Increases from 9th and 5th rank out of 10, respectively, in historical grants
Risk Mitigation		Adoption of clawback policy		Adopted clawback policy that applies to cash and equity incentives and that is triggered by either a financial restatement or other material harm to the Company						✓  Minimizes compensation risk   ✓  Ensures alignment of interests

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      2

PROXY STATEMENT SUMMARY

 

 

Corporate Governance Highlights

Our governance structures predicated on our Corporate Governance Principles ensure robust independent oversight of management and accountability to stockholders.

 

Governance Principles		Corporate Governance Practice
Accountability to our Stockholders		✓  Our common stock is our only class of stock, with one vote per share.   ✓  Our stockholders elect directors for one-year terms by a majority vote standard.   ✓  Our Bylaws permit stockholder proxy access.   ✓  We do not have a “poison pill” or similar anti-takeover provision in place.
Board Independence		✓  Five of our six director nominees are independent.   ✓  We have a separate chairman and chief executive officer and an independent presiding director.   ✓  Our independent directors regularly meet in executive sessions.   ✓  All the members of our three standing Board committees—Audit, Compensation and Nominating and Governance—are independent.
Board Diversity		✓  Two of our six directors are women, and one director is ethnically diverse.   ✓  Director gender and ethnic diversity is supported by our candidate recruitment policy.   ✓  All of the key Board committee chairs and our Presiding Director are either female or ethnically diverse.
Board Policies and Practices		✓  Our Board annually reviews its performance, as well as the performance of each of its standing committees.   ✓  Our Board actively engages in chief executive officer succession planning and reviews succession plans for our other executives annually.   ✓  Our Nominating and Governance Committee oversees risks associated with overall governance and Board succession planning and ESG.   ✓  Our Compensation Committee evaluates our CEO’s performance annually.   ✓  Our Audit Committee oversees cybersecurity risk.
Risk Mitigation and Alignment of Interests		✓  We have robust stock ownership guidelines for executive officers and directors.   ✓  In fiscal 2022, we adopted a clawback policy that applies to both cash and equity incentives and is triggered by either a financial restatement or other material harm to the Company.   ✓  Our directors and executive officers may not engage in pledging or hedging transactions or other transactions designed to hedge or offset any decrease in the market value of our Company stock.   ✓  No executive officer or director has any shares of Company stock pledged or hedged.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      3

PROXY STATEMENT SUMMARY

 

 

Executive Compensation Highlights

Our Compensation Committee strives to design a fair and competitive compensation program for executive officers using incentives based on Company performance that emphasize the creation of sustainable long-term stockholder value and that will attract, motivate and retain highly qualified and experienced executives.

 

Executive Compensation Principles		Executive Compensation Objectives
Business Resilience		✓  Achieve long-term sustainability of our business
Alignment of Interests		✓  Align our executives’ interests with stockholders’ interests with the goal of maximizing long-term stockholder value
Pay-for-Performance		✓  Award compensation that recognizes valuable short- and long-term individual performance as well as the Company’s overall performance
Attract and Retain		✓  Motivate and retain highly qualified and experienced executives

Our executive compensation design ensures performance alignment and protects stockholder interests.

 

Design Feature		Rationale and Impact		Business Resilience		Alignment of Interests		Pay for Performance		Attract and Retain
Emphasize At-Risk and Performance-based Compensation		•  89% of fiscal 2022 CEO Target Pay at risk		✓		✓		✓
Balance Short- and Long-Term Incentives		•  Reward executives for actions that will create short- and long-term stockholder value		✓		✓		✓		✓
Equity Pay Mix		•  Significant majority of equity granted as Performance RSUs		✓		✓		✓		✓
Annual Cash and Equity Incentive Tied to Profitability		•  Reward executives for increased profitability, which creates stockholder value   •  No guaranteed bonuses		✓		✓		✓		✓
Stock Ownership Guidelines		•  Ensure alignment of executive interests with those of long-term stockholders				✓		✓
Clawback and Anti-hedging and Pledging Policies		•  Mitigate compensation risk and ensure strong alignment with stockholder interests		✓		✓		✓

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      4

PROXY STATEMENT SUMMARY

 

 

ESG Initiatives & Progress

Environmental, Social and Governance (ESG) information, including environmental metrics that may assist with understanding and mitigating the Company’s impacts on the climate, are a focus of the Company’s management team and Board of Directors.

As the largest homebuilder in the United States, we recognize that our business activities, including the acquisition and development of land and the construction and sale of residential homes, may impact the environment. We consider our impact on the environment in each phase of constructing our homes, beginning with the performance of environmental studies during site selection, all the way to the completion of our homes by including or offering energy efficient or energy-saving options.

During fiscal 2022, we made progress on our ESG initiatives, which included conducting an ESG materiality survey and assessment to understand, confirm and prioritize the topics our stakeholders believe are of importance to our Company.

 

		Date		Key Achievements
		July 2021		Began internal tracking of various ESG metrics
		July 2021		Adopted Human Rights Policy, Political Contributions Policy Statement, Performance of Initial ESG Materiality Assessment
		January 2022		Published Human Capital Document with quantitative demographic metrics
		April 2022		Refined internal reporting process for ESG metrics and engaged sustainability firm to assist with GHG emissions calculation
		August 2022		Published additional ESG fact sheets to website
		September 2022		Disclosed EEO-1 Report Data
		October 2022		Performed formal ESG Materiality Assessment
		Early Fiscal 2023		Will publish our inaugural ESG Report   The key topics that we plan to address in our upcoming inaugural ESG report include, but are not limited to:   •  board oversight, ethics, diversity and independence;   •  home affordability and community impact;   •  home energy efficiency, quality and safety;   •  workplace health and safety;   •  talent retention and employee well-being;   •  diversity, equity and inclusion;   •  responsible land development; and   •  greenhouse gas emissions.
		Ongoing		Continued improvement and assessment of metrics and disclosures around ESG topics

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      5

PROPOSAL ONE – ELECTION OF DIRECTORS

 

 

Proposal One – Election of Directors

Our Board of Directors currently consists of six directors. All of our directors were elected by our stockholders at the 2022 Annual Meeting. Our directors will serve until the 2023 Annual Meeting and until his or her successor has been elected and qualified.

The Nominating and Governance Committee recommended to the Board of Directors our six directors as director nominees, each of whom is listed under the heading “Director Nominees” on page 8.

After review and consideration by the Board of Directors, as recommended by the Nominating and Governance Committee, the Board nominated the following six nominees for election to our Board of Directors:

 

Donald R. Horton   Barbara K. Allen   Brad S. Anderson		Michael R. Buchanan   Benjamin S. Carson, Sr.   Maribess L. Miller

Unless otherwise specified in the accompanying proxy, the shares voted by proxy will be voted for each of the persons named as a director nominee for election as a director. Each director nominee elected as a director will be elected for a one-year term and will serve until the next annual meeting of stockholders and his or her successor has been elected and qualified. We do not know of any reason why any of the nominees would be unable to serve. However, if any of the nominees is unable to serve or for good cause will not serve as a director at the time of the 2023 Annual Meeting, the Board may designate a substitute nominee or reduce the size of the Board. If the Board designates a substitute nominee, the persons named as proxies may vote “FOR” that substitute nominee.

 

				The Board of Directors Unanimously Recommends that Stockholders Vote “FOR” Each of our Six Nominees for Director.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      6

PROPOSAL ONE – ELECTION OF DIRECTORS

 

 

Information Regarding the Director Nominees

The following table, matrix and biographical descriptions set forth certain information with respect to the nominees for election as directors at the 2023 Annual Meeting, based upon information furnished by each director.

The matrix below also represents some of the key skills that our Board has identified as particularly valuable to the effective oversight of the Company and the execution of our strategy. This matrix highlights the depth and breadth of skills of our current directors.

Board of Directors Summary

 

Skills, Experience and Attributes

Nominees and Primary Occupation

Independent

Committee Membership (C = Chair)

Real Estate/ Home-    building

Leadership & Strategy

Finance, Accounting and/or Investment

Outside Board Experience

Gender/ Ethnic Diversity

Donald R. Horton Executive Chairman, D.R. Horton, Inc.

Executive (C)

✓

✓

✓

Barbara K. Allen Retired Partner, Avondale Partners

✓

Compensation (C), Nominating and Governance

✓

✓

✓

✓

Brad S. Anderson Vice Chair, Cushman & Wakefield

✓

Audit, Compensation

✓

✓

✓

✓

Michael R. Buchanan Retired Sr. Advisor, Banc of America Securities

✓

Nominating and Governance

✓

✓

✓

✓

Benjamin S. Carson, Sr. Former Secretary of U.S. HUD

✓

Audit, Nominating and Governance (C)

✓

✓

✓

✓

✓

Maribess L. Miller Retired Partner, PwC

✓

Audit (C)*, Compensation

✓

✓

✓

✓

 

*	Audit Committee Financial Expert

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      7

PROPOSAL ONE – ELECTION OF DIRECTORS

 

 

Director Nominees

 

Age: 72   Director Since: 1991   Term Expires: 2023   Committees: Executive (Chair)
		Donald R. Horton Executive Chairman of the Board   Mr. Horton is founder, sole or principal stockholder, director and president of each of D.R. Horton’s predecessor companies since their respective organization, which date from 1978 to 1990. He has been involved in the real estate and homebuilding industries since 1972.   •  Executive Chairman, D.R. Horton, Inc. (1991 to present)   Mr. Horton, his family and their affiliated entities, beneficially own a significant number of shares of the Company’s common stock as set forth in the Beneficial Ownership tables beginning on page 56.     Real Estate/Homebuilding      Leadership & Strategy    Financial, Accounting and/or Investment				Key Qualifications:   •  Mr. Horton’s over 40 years of leadership experience in the homebuilding industry provides valuable perspective and expertise to the Board and to the Company.   •  As founder of the Company and a continuing active member of the management team, Mr. Horton has a unique understanding of all aspects of the homebuilding business, and his leadership and strategic vision provide the Board and the Company with distinct advantages in the homebuilding industry.

 

Age: 76   Director Since: 2014   Term Expires: 2023   Committees: Compensation (Chair), Nominating and Governance
		Barbara K. Allen Retired Partner, Avondale Partners   Ms. Allen has significant experience researching, analyzing and making investment decisions related to housing-related companies.   •  Partner and Analyst of Housing, Construction and Retailing, Avondale Partners (2004 until retirement in 2006)   •  Home Construction, Building Materials, Home Furnishing and DIY Retailing Analyst for Natexis Bleichroeder, Inc. (1997–2004)   •  Vice President, Equity Research for Donaldson, Lufkin & Jenrette (1993–1996)     Real Estate/Homebuilding      Leadership & Strategy    Financial, Accounting and/or Investment				Key Qualifications:   •  Ms. Allen’s extensive experience as an analyst and consultant to homebuilding-related companies provides valuable investor perspective to the Board, enhancing the Board’s ability to oversee important strategic decisions related to investment, operating and financing matters.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      8

PROPOSAL ONE – ELECTION OF DIRECTORS

 

 

Age: 61   Director Since: 1998   Term Expires: 2023   Committees: Audit, Compensation
		Brad S. Anderson Vice Chair of Cushman & Wakefield   Mr. Anderson has significant experience in leadership roles in homebuilding and real estate industries.   •  Vice Chair of Cushman & Wakefield, a global real estate services firm (2021 to present)   •  Executive Vice President of CBRE Group, Inc., an international  real estate brokerage company (2009–2021)   •  Various leadership positions, CB Commercial Real Estate Group, Inc., (1987–2009)   •  Director, KS StateBank (2016 to present)   •  Interim Chair of the Board of Continental Homes Holding Corp. (1997–1998 when it merged with D.R. Horton)     Real Estate/Homebuilding      Leadership & Strategy    Financial, Accounting and/or Investment    Public Company Board/ Corporate Governance				Key Qualifications:   •  Mr. Anderson’s extensive real estate industry experience and his current active leadership role with an international real estate services firm brings beneficial insight and perspective to the Board, as many factors that affect the real estate brokerage industry also affect the homebuilding industry.

 

Age: 75   Director Since: 2003   Term Expires: 2023   Committees: Nominating and Governance
		Michael R. Buchanan Retired Sr. Advisor, Banc of America Securities   Mr. Buchanan has significant commercial banking experience with several banking institutions serving the real estate and homebuilding sectors.   •  Senior Advisor, Banc of America Securities (2002–2003)   •  Managing Director, Head of National Real Estate Banking Group, Bank of America (1998 until retirement in 2002)   •  Executive Vice President of NationsBank, which later merged with Bank of America (1990–1998)   •  Director, Piedmont Office Realty Trust (NYSE: PDM) (2015–2021)     Real Estate/Homebuilding      Leadership & Strategy    Financial, Accounting and/or Investment    Public Company Board/ Corporate Governance				Key Qualifications:   •  Mr. Buchanan is a highly experienced commercial banker who served the real estate and homebuilding sectors. His experience in these areas provides the Board with a broad understanding of the key drivers of the credit markets and financing considerations through multiple economic cycles, including their effects on the homebuilding industry.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      9

PROPOSAL ONE – ELECTION OF DIRECTORS

 

 

Age: 71   Director Since: 2021   Term Expires: 2023   Committees: Audit, Nominating and Governance (Chair)
		Benjamin S. Carson, Sr. Former Secretary of U.S. HUD   Dr. Carson has significant leadership experience in governmental, regulatory and medical roles.   •  17th Secretary of the U.S. Department of Housing and Urban Development (HUD) (2017–2021)   •  Led programs focused on advancing economic opportunity; providing safe, fair and affordable housing; spurring reinvestment in communities; reducing homelessness; assisting self-sufficiency to underserved and vulnerable populations; and helping disaster victims   •  Led the collaboration of eight federal agencies to establish the White House Council on Eliminating Regulatory Barriers to Affordable Housing   •  Distinguished career in the field of medicine including:   •  Director of the Division of Pediatric Neurosurgery at the Johns Hopkins Medical Institutions (1984–2013)   •  Professor of Neurological Surgery, Oncology, Plastic Surgery and Pediatrics at the Johns Hopkins Medical Institutions (1999–2013)   •  Director, Sinclair Broadcast Group, Inc. (NYSE: SBGI) (June 2022 to present)   •  Director, Covenant Logistics Group, Inc. (NASDAQ: CVLG) (2021 to present)   •  Director, Costco Wholesale Corporation (NASDAQ: COST) (1999–2015)   •  Director, Kellogg Company (NYSE: K) (1997–2015)     Real Estate/Homebuilding      Leadership & Strategy    Financial, Accounting and/or Investment    Public Company Board/ Corporate Governance				Key Qualifications:   •  Dr. Carson gained extensive management and leadership experience during both his service as HUD Secretary and his many contributions to the medical field.   •  His leadership positions, particularly in overseeing significant capital investments, developing multiple housing initiatives, emphasizing fiscal responsibility and the reduction of regulatory barriers while at HUD, enable Dr. Carson to provide valuable perspective to the Board and its Committees.   •  Dr. Carson also contributes governance expertise having served on the boards of directors of other S&P 500 companies.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      10

PROPOSAL ONE – ELECTION OF DIRECTORS

 

 

Age: 69   Director Since: 2019   Term Expires: 2023   Committees: Audit (Chair and Financial Expert), Compensation
		Maribess L. Miller Retired Partner, PricewaterhouseCoopers   Ms. Miller, a certified public accountant, has significant experience with both public and private companies gained from leading auditing and consulting engagements.   •  Practice Partner, PricewaterhouseCoopers (PwC) (1984 until retirement in 2009)   •  Managing Partner, North Texas Market (2002 to 2009)   •  Practice Leader, the Southwest Region Consumer, Industrial and Energy practice (1998 to 2002)   •  Managing Partner of PwC’s US Healthcare Audit Practice (1995 to 1998)   •  Director, Triumph Financial, Inc., formerly Triumph Bancorp, Inc., (NYSE: TFIN) (2014–present)   •  Director, Zix Corporation (2010 until acquisition by OpenText in 2021)     Real Estate/Homebuilding      Leadership & Strategy    Financial, Accounting and/or Investment    Public Company Board/ Corporate Governance				Key Qualifications:   •  Ms. Miller gained extensive experience in the auditing and business consulting fields, knowledge of public and private companies across multiple industries, and significant leadership experience as a managing partner for PwC in several key positions throughout her 34-year career.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      11

CORPORATE GOVERNANCE AND BOARD MATTERS

 

 

Corporate Governance and Board Matters

Our governance structures predicated on our Corporate Governance Principles ensure robust independent oversight of management and accountability to stockholders.

 

Governance Principles		Corporate Governance Practice
Accountability to our Stockholders		✓  Our common stock is our only class of stock, with one vote per share.
		✓  Our stockholders elect directors for one-year terms by a majority vote standard.
		✓  Our Bylaws permit stockholder proxy access.
		✓  We do not have a “poison pill” or similar anti-takeover provision in place.
Board Independence		✓  Five of our six director nominees are independent.
		✓  We have a separate chairman and chief executive officer and an independent presiding director.
		✓  Our independent directors regularly meet in executive sessions.
		✓  All the members of our three standing Board committees—Audit, Compensation and Nominating and Governance—are independent.
Board Diversity		✓  Two of our six directors are women, and one director is ethnically diverse.
		✓  Director gender and ethnic diversity is supported by our candidate recruitment policy.
		✓  All of the key Board committee chairs and our Presiding Director are either female or ethnically diverse.
Board Policies and Practices		✓  Our Board annually reviews its performance, as well as the performance of each of its standing committees.
		✓  Our Board actively engages in chief executive officer succession planning and reviews succession plans for our other executives annually.
		✓  Our Nominating and Governance Committee oversees risks associated with overall governance and Board succession planning and ESG.
		✓  Our Compensation Committee evaluates our CEO’s performance annually.
		✓  Our Audit Committee oversees cybersecurity risk.
Risk Mitigation and Alignment of Interests		✓  We have robust stock ownership guidelines for executive officers and directors.
		✓  In fiscal 2022, we adopted a clawback policy that applies to both cash and equity incentives and is triggered by either a financial restatement or other material harm to the Company.
		✓  Our directors and executive officers may not engage in pledging or hedging transactions or other transactions designed to hedge or offset any decrease in the market value of our Company stock.
		✓  No executive officer or director has any shares of Company stock pledged or hedged.

 

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Board Refreshment and Diversity

Our Nominating and Governance Committee evaluates potential director nominees based on the following qualifications, experiences and characteristics.

The Nominating and Governance Committee utilizes a variety of methods for identifying nominees for director, including considering potential director candidates who come to the Committee’s attention through current officers, directors, professional search firms, stockholders or other persons. Once a potential nominee has been identified, the Nominating and Governance Committee evaluates whether the nominee has appropriate qualifications, experiences and characteristics to become a director in light of the current makeup of the Board of Directors. We believe that appropriate director qualifications and characteristics include having directors with diverse backgrounds, education, experiences, expertise and perspectives.

Gender and Ethnically Diverse Candidates. The Company’s Board and the Nominating and Governance Committee are committed to using refreshment opportunities to consider new gender and ethnically diverse director candidates to the Board of Directors. The Company’s Corporate Governance Principles require the Board and Nominating and Governance Committee to include gender and ethnically diverse candidates in its initial list of director candidates. Also, when recruiting a new CEO from outside the Company, the Board will include gender and ethnically diverse candidates in its initial list of CEO candidates. Further, the Board and Nominating and Governance Committee will require third-party search consultants engaged by the Board or Nominating and Governance Committee to include gender and ethnically diverse candidates on their initial list of director candidates or CEO candidates from outside the Company. Our Board believes our refreshment policy related to gender and ethnic diverse candidates is very effective, as reflected by our current nominees.

Key Qualifications and Experiences. We believe the qualifications and experiences listed below are important to the overall composition of our Board. We do not require that each director possess each of these qualifications, but rather we ensure our Board as a whole possesses these qualifications.

 

Real Estate		Business, Management, Accounting and Finance		Strategic Vision and Leadership
We seek to have directors with expertise or key experience in the real estate industry, which includes experience in homebuilding, land development, real estate brokerage and sales, commercial development and leasing, financing and banking in the real estate industry or experience in analyzing or consulting in these key areas.   Real estate industry experience enables our Board to understand key operational aspects of our national homebuilding business and provides important perspective from their relevant expertise.		We seek to have directors with expertise or key experience in business, management, accounting, finance or similar positions.   Relevant business and financial experience is important to the Board as it oversees risks related to the Company’s operations, financing and reporting.		We seek to have directors with expertise or key experiences in positions that require strategic vision, leadership and decision making. We believe directors acquire these key qualifications through experience as executives, managers, entrepreneurs, business owners, directors, consultants, analysts or advisors.   We believe these key qualifications are important to the Board, as directors with these attributes provide sound business judgment, leadership and strategic vision to the Board and the Company.

Key Characteristics. In addition to the key qualifications and experiences discussed above, we also believe each member of the Board of Directors should have the following characteristics:

 

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high personal and professional ethical standards, integrity and values;

 

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commitment to representing the long-term interests of the stockholders;

 

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practical wisdom, mature judgment and collegiality;

 

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objectivity and inquisitiveness; and

 

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willingness to offer his or her resignation in the event of any significant change in personal circumstances that could affect the discharge of his or her responsibilities as a director, including a change in his or her principal job responsibilities.

Corporate Governance Standards

Our Board of Directors has adopted a number of standards to comply with requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the New York Stock Exchange (NYSE) and Securities and Exchange Commission (SEC) rules relating to the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and other corporate governance matters. Our

 

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Board has adopted the D.R. Horton Corporate Governance Principles, which contain a number of corporate governance initiatives designed to comply with the NYSE listing standards (the “NYSE Rules”) and the rules and regulations of the SEC (the “SEC Rules”) relating to corporate governance. The significant corporate governance initiatives adopted by the Board of Directors are discussed below.

Corporate Governance Website

The Corporate Governance Principles, Board Committee Charters, Codes of Ethics and Conduct, Complaint Procedures and other Corporate Governance documents discussed in this Proxy Statement have been posted to our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.

Majority Vote Standard and Resignation Policy

The D.R. Horton Bylaws require that to be elected, a director nominee must receive a majority of the votes cast with respect to such nominee in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). In a contested election, where the number of nominees exceeds the number of directors to be elected (which is not the case for the 2023 Annual Meeting), the directors will be elected by a plurality of the shares present in person or by proxy and entitled to vote on the election of directors. Under the Corporate Governance Principles of the Company, any director who is not elected is required to tender his or her resignation to the Chairman of the Board within a reasonable time following certification of the vote. The Nominating and Governance Committee, which is composed of only independent directors, will consider the resignation offer and make a recommendation to the Board as to whether to accept or reject the resignation offer or whether other action should be taken. The Board will act on the Nominating and Governance Committee’s recommendation within 90 days following certification of the election results. Thereafter, the Board will promptly publicly disclose in a report filed with the SEC its decision regarding the director’s resignation offer (including the reason(s) for rejecting the resignation offer, if applicable).

Procedures for Nominating or Recommending for Nomination Candidates for Director

Our Bylaws provide, outside of the proxy access process, that any stockholder may make nominations for the election of directors if notice of such nominations is delivered to the principal executive offices of D.R. Horton not later than the close of business on the 90th calendar day or earlier than the close of business on the 120th calendar day prior to the first anniversary of the preceding year’s annual meeting. However, in the event that the date of the annual meeting is changed by more than 30 calendar days from the anniversary date of the preceding year’s meeting, for notice by the stockholder to be timely, it must be so delivered not earlier than the close of business on the 120th calendar day prior to such meeting and not later than the close of business on the later of the 90th calendar day prior to such meeting or the 10th calendar day following the day on which public disclosure of the date of such meeting is made. Such public disclosure is defined to mean a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or a document publicly filed by the Company with the SEC pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the notice must include information specified in our Bylaws, including information concerning the nominee, the stockholder and the beneficial owner, as the case may be. Because no such nominations have been made in accordance with our Bylaws, only the nominations of the Board of Directors may be voted for at the 2023 Annual Meeting.

The Board of Directors has adopted proxy access, which allows a stockholder or group of up to 20 stockholders owning in the aggregate 3% or more of D.R. Horton’s outstanding shares continuously for at least three years to nominate and include in the proxy materials director nominees constituting up to 20% of the number of directors in office, provided the stockholder(s) and nominee(s) satisfy the requirements in our Bylaws. In order for a stockholder or group of stockholders to nominate a director candidate to be included in D.R. Horton’s proxy materials, notice of such nomination must be delivered to the principal executive offices of D.R. Horton not later than the close of business on the 120th calendar day or earlier than the close of business on the 150th calendar day prior to the first anniversary of the date that the definitive proxy statement was first released to stockholders in connection with the preceding year’s annual meeting, and the nomination must otherwise comply with our Bylaws. However, in the event that the date of the annual meeting is changed by more than 30 calendar days from the anniversary date of the preceding year’s annual meeting, for notice by the stockholder to be timely, it must be so delivered not earlier than the close of business on the 150th calendar day prior to such meeting and not later than the close of business on the later of the 120th calendar day prior to such meeting or the 10th calendar day following the day on which public disclosure of the date of such meeting is made.

In addition, the Nominating and Governance Committee has adopted a policy permitting stockholders to recommend candidates for director for consideration by the committee. The Nominating and Governance Committee will consider candidates recommended by stockholders on the same basis as candidates identified through other means. Stockholders wishing to recommend candidates for election must give notice to the Nominating and Governance Committee by following the same deadlines for notice to submit a nomination outlined in our Bylaws and described above. Each notice must set forth the same information required by our Bylaws to submit a nomination. All recommended candidates shall, at a minimum, possess the characteristics for directors discussed above. The Nominating and Governance Committee may request additional information to assist in the evaluation of the candidacy of such person.

 

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Director Independence

Our Board of Directors is composed of a majority of independent directors in accordance with the NYSE Rules. Our Board made the independence determination of its members based on the “Independence Standards” discussed below.

Our Board has adopted a set of “Independence Standards,” consistent with the NYSE Rules, to aid it in determining whether a member of the Board is independent under the NYSE Rules. In accordance with these Independence Standards, a director must not have a direct or indirect material relationship with the Company or its management, other than as a director. The Independence Standards specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate family members with respect to past employment or affiliation with the Company, its management or its independent auditor.

The Independence Standards include the following:

 

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A director who is an employee or whose immediate family member is an executive officer of D.R. Horton is not independent until three years after the end of such employment relationship.

 

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A director who receives, or whose immediate family member receives, more than $120,000 per year in direct compensation from D.R. Horton, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), is not independent until three years after he or she ceases to receive more than $120,000 per year in compensation. Compensation received by an immediate family member for service as a non-executive employee or non-member of senior management of D.R. Horton will not be considered in determining independence under this test.

 

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A director is not independent if (i) the director or an immediate family member is a current partner of D.R. Horton’s external audit firm, (ii) the director is a current employee of such firm, (iii) the director’s immediate family member is a current employee of such firm and personally works on D.R. Horton’s audit, or (iv) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such firm and personally worked on D.R. Horton’s audit within that time.

 

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A director who is employed, or whose immediate family member is employed, as an executive officer of another company where any of D.R. Horton’s present executives serve on that company’s compensation committee is not independent until three years after the end of such service or employment relationship.

 

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A director who is an executive officer or an employee or whose immediate family member is an executive officer of a company that makes payments to or receives payments from D.R. Horton for property or services in an amount that in any single fiscal year exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues, is not independent until three years after falling below such threshold.

 

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If a director serves as an executive officer, director or trustee of a charitable or educational organization and D.R. Horton’s contributions to the organization are less than $500,000, then the relationship will not be considered to be a material relationship that would impair a director’s independence.

For purposes of these Independence Standards, an “immediate family member” includes a director’s spouse, parents, children, siblings, mother and father-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares the director’s home.

Audit Committee Independence, Financial Literacy and Audit Committee Financial Expert

In addition to being independent based on the Independence Standards, the NYSE Rules require that each member of an audit committee satisfy additional independence and financial literacy requirements and at least one of these members must satisfy the additional requirement of having accounting or related financial management expertise. This additional requirement can be satisfied by the Board determining that at least one Audit Committee member is an “audit committee financial expert” within the meaning of the SEC Rules. Accordingly, the Corporate Governance Principles contain a set of standards that relate to audit committee independence, financial literacy and audit committee accounting and financial management expertise. Generally, the additional independence standard provides that (i) a member of the Audit Committee is prohibited from receiving any direct or indirect compensation or fee from the Company, its subsidiaries or its affiliates, other than in his or her capacity as a member of the Audit Committee, the Board or any other committee of the Board, and (ii) he or she may not be an affiliated person of the Company or any of its subsidiaries. Generally, the financial literacy standard provides that the Board, in its business judgment, shall determine if each member is financially literate, taking into account factors such as the member’s education, experience and ability to read and understand financial statements of public companies.

Audit Committee Financial Expert Attributes: Audit committee financial experts must have five additional attributes, which are (i) an understanding of generally accepted accounting principles and financial statements, (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves, (iii) experience preparing, auditing, analyzing or evaluating

 

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financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities, (iv) an understanding of internal control over financial reporting and (v) an understanding of audit committee functions. Altogether, attributes (i) through (v) are referred to as the “Financial Expert Attributes.” The audit committee Financial Expert Attributes are set forth in the Corporate Governance Principles.

Compensation Committee Independence

In addition to being independent based on the Independence Standards, the NYSE Rules require that each member of a compensation committee satisfy additional independence requirements. The NYSE Rules require that the Board consider all factors specifically relevant to determining whether a director has a relationship to the Company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to (i) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the Company to such director and (ii) whether such director is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company.

Board Determinations

Independence and Financial Literacy. Based on the independence and financial literacy standards discussed above, the Board has determined that Barbara K. Allen, Brad S. Anderson, Michael R. Buchanan, Benjamin S. Carson, Sr. and Maribess L. Miller are (i) independent for purposes of serving as independent members of the Board of Directors and the Nominating and Governance Committees, (ii) independent for purposes of serving as independent members on the Audit Committee and the Compensation Committee and (iii) financially literate for purposes of serving on the Audit Committee. Mr. Hewatt, who served as a director during a portion of fiscal 2022, was also determined to be independent for purposes of serving on the Board and the committees on which he served.

Audit Committee Financial Expert. Based on the Audit Committee Financial Expert Attributes discussed above, the Board has determined that Ms. Miller has the Financial Expert Attributes to qualify as the Audit Committee Financial Expert.

The Board also determined that Mr. Horton, a director nominee, is not independent because he is an executive officer.

Retirement Age Policy

On January 25, 2007, our Board adopted a retirement policy for directors. Under the policy, directors may not stand for re-election after they have reached the age of 75. Directors serving on the Board on January 25, 2007, which include Mr. Anderson and Mr. Buchanan, are exempt from this policy. In fiscal 2022, the Board again determined to waive this retirement age policy for Ms. Allen in the interest of promoting and maintaining gender and tenure diversity and leadership on our Board of Directors and its Committees.

Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers

In accordance with SEC Rules, the Audit Committee and the Board have adopted the Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers. The Board believes that these individuals must set an exemplary standard of conduct for D.R. Horton, particularly in the areas of accounting, internal accounting control, auditing and finance. The ethics code sets forth ethical standards the designated officers must adhere to and other aspects of accounting, auditing and financial compliance. Information relating to any amendment to or waiver of a provision of the Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers will be, if required, disclosed on our website within four business days of such amendment or waiver. This Code of Ethical Conduct for the CEO, CFO and Senior Financial Officers has been posted to our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.

Corporate Code of Business Conduct and Ethics

The Board of Directors has adopted a Corporate Code of Business Conduct and Ethics (Corporate Code of Conduct) for employees and directors of D.R. Horton in accordance with the NYSE Rules. The Board adopted the Corporate Code of Conduct to provide guidance to the Board and management in areas of ethical business conduct and risk and to provide guidance to employees and directors by helping them recognize and deal with ethical issues including, but not limited to, (i) conflicts of interest, (ii) corporate opportunities, (iii) confidentiality, (iv) fair dealing, (v) protection of corporate assets, (vi) compliance with rules and regulations, including insider trading of securities, and (vii) confidential reporting of unethical behavior and hotline telephone numbers. The Corporate Code of Conduct is reviewed at least annually to determine the need for any updates or revisions. The Corporate Code of Business Conduct and Ethics has been posted to our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.

Complaint Procedures for Accounting, Internal Control, Auditing and Financial Matters

In accordance with SEC Rules, the Audit Committee has established procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal control, auditing or financial matters (collectively, “Accounting Matters”) and (ii) the confidential, anonymous

 

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submission by employees of concerns regarding questionable Accounting Matters. The Audit Committee oversees treatment of complaints and concerns in this area. The Complaint Procedures for Accounting, Internal Control, Auditing and Financial Matters have been posted to our website at investor.drhorton.com under the Policy & ESG Documents link within the ESG section.

Executive Sessions of the Board of Directors

Our non-employee members of the Board of Directors hold regularly scheduled executive sessions of these independent directors. Dr. Carson, Chair of the Nominating and Governance Committee, serves as Presiding Director of these executive sessions, at which the Chairman of the Board is not present. During fiscal 2022, the non-employee directors met four times in executive session, without members of management present.

Active Stockholder Engagement and Feedback from Investors

Throughout fiscal 2022, the Company contacted stockholders collectively representing 57% of outstanding shares and had substantive conversations with stockholders representing 53% of outstanding shares to discuss executive compensation, corporate governance and ESG matters. The Compensation Committee Chair led the discussions with several of the Company’s largest stockholders.

In addition, during fiscal 2022, the Company’s management and investor relations professionals attended investment conferences and participated in investor meetings and conference calls with hundreds of institutional investors. The Company’s investor relations team strives to be very responsive to investor requests for information and discussions. The Company has been named the Best Investor Relations Program in the Homebuilders and Building Products sector by Institutional Investor multiple times in its annual survey, including the most recent three consecutive years.

The Company values feedback from its stockholders, and management, the Board and applicable Committees regularly discuss and evaluate the feedback received regarding the Company’s performance, ESG reporting, executive compensation and other matters. When investors or stockholders ask our management team to share an observation, question or comment with our Board, they do, so that the Board can then consider the matter as part of its governance responsibilities. For a more fulsome discussion of actions taken in response to stockholder feedback in fiscal 2022, please see the section titled “Board Responsiveness and Commitment to Stockholder Engagement” on page 2 above.

Communications with the Board of Directors and the Company

Stockholders and others who wish to contact any member of our Board may send their correspondence to the Chair of the Nominating and Governance Committee, who also serves as the Presiding Director. Send communications to: Presiding Director, c/o Thomas B. Montaño, Vice President, Corporate Compliance Officer and Corporate Secretary, D.R. Horton, Inc., 1341 Horton Circle, Arlington, Texas 76011 or email at tbmontano@drhorton.com. Communications will be promptly forwarded to such Board member(s) or the Presiding Director, as applicable. Stockholders and others who wish to contact our Investor Relations team may send communications to Jessica Hansen, Vice President of Investor Relations, D.R. Horton, Inc., 1341 Horton Circle, Arlington, Texas 76011 or email at InvestorRelations@drhorton.com. Further information may be obtained through our website at investor.drhorton.com under the Policy  & ESG Documents link within the ESG section.

Board Leadership Structure, Board’s Role in Risk Oversight and Board and Committee Meetings

Board Leadership Structure

Our Board of Directors and the Nominating and Governance Committee regularly review and evaluate the Board’s leadership structure. Currently, our Board leadership structure consists of an Independent Presiding Director and an Executive Chairman, supported by independent and diverse key Board committee chairs. The Board believes that our structure delivers independent Board leadership and engagement while offering the benefit of having our Executive Chairman, given his extensive experience in the homebuilding industry, to provide valuable insight and leadership to both the Board and the Company.

Mr. Horton has been Executive Chairman of the Board of the Company and its predecessor companies since 1978, and we have had a separate Chairman of the Board and CEO since 1998. Our CEO does not currently serve on our Board of Directors as our Board believes that one non-independent director on the Board is sufficient at this time, and that this allows our CEO to focus on the implementation of the Company strategy and management of the Company’s day-to-day operations.

 

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The Board does not have a policy that requires a specific board leadership structure, including whether the roles of the Chairman and CEO should be separated. The Board believes the current separation of the two roles provides an effective leadership structure that facilitates robust and frequent communication between the Chairman, the Board’s independent directors and management, which has supported the Company’s enhancement of stockholder value.

 

Executive Chairman—Mr. Horton		Presiding Director—Dr. Carson
Primary responsibilities include:   •  developing overall Company vision, direction and strategy;   •  leading the Board in overseeing key risk areas related to the Company; and   •  providing perspective and direction to the CEO and executive officers and overseeing the accountability of management to implement Board-approved strategies and oversight functions.		Primary responsibilities include:   •  presiding at meetings of independent directors;   •  calling meetings of independent directors as needed;   •  serving as a liaison between independent directors and Company executives including the Executive Chairman; and   •  working with key Board committee chairs to provide independent oversight of management.

Board’s Role in Risk Oversight

Our Board and Board Committees have oversight responsibility of the Company’s risk management. The risk management process implemented by our executive officers and key managers addresses risks related to the Company’s operations, financing and liquidity needs, ESG matters, cybersecurity, financial reporting, internal control and regulatory compliance. Risk oversight is reviewed in the risk areas of the Company listed below.

Land and Lots. Our ability to build and sell homes that meet buyer demand is heavily impacted by our ability to control, buy and develop land and lots in a cost-effective manner. As a result, we use substantial financial resources to control, buy and develop land and lots. We control the amount of financial resources used in the acquisition of land and lots through a process which requires divisional, regional and corporate approval before financial resources are authorized for this purpose. Corporate approval includes review by corporate legal and accounting personnel and approval by our executive officers. Our executive team reports to the Board regarding our process of reviewing, approving and funding land and lot acquisitions. We believe this process adequately manages the risk related to our land and lot acquisitions.

Financing and Liquidity. Our financing and liquidity position may fluctuate due to changes in the homebuilding industry and home sales demand. Our Board oversees financing and liquidity risk to ensure we maintain the financial resources needed to fund our homebuilding operations. At each quarterly meeting, management reviews the Company’s financial and liquidity position with the Board, which includes projected short- and long-term financing and liquidity needs. To further manage risk in this area, the Board approves a limit on the amount of debt and equity that may be repurchased. Additionally, public debt or equity issuances are approved by the Board. We believe these measures provide adequate oversight of the Company’s financing and liquidity risk.

ESG Matters. Key ESG matters, including environmental and climate-related risks and human capital risks such as diversity, equity and inclusion and employee health and safety, could have an adverse impact on our company. Our Board oversees these risks via regular presentations to the Nominating and Governance Committee on these and other ESG matters by both internal and external personnel with responsibilities and expertise in ESG. The Board also supports and regularly inquires about progress in the Company’s reporting of ESG policies, metrics and related disclosures.

During fiscal 2021, the Board approved policies that enhance the Company’s commitments to respect human rights and to transparency of political contributions, and the Board reviewed an initial enterprise-level ESG risk assessment to identify and understand specific risks within the ESG realm that could have a material impact on the Company.

In fiscal 2022, in line with the Company’s commitment to improve our ESG transparency, we published human capital data for the first time highlighting the demographic composition of our workforce and our homebuyers. We subsequently appended that data with our first public disclosure of our EEO-1 reporting, sharing our 2021 report that was submitted to the EEOC earlier this year. In fiscal 2022, the Board also reviewed a formal ESG materiality risk assessment that the Company performed with the assistance of a third-party sustainability firm. Key risks discussed include those pertaining to environmental law, building codes, land identification and development activities, the impacts of extreme weather events, risks of health and safety incidents, diversity and economic risks that could arise. This risk assessment and similar exercises will be performed on a regular basis so the Board can stay abreast of both emerging and material ESG risks. We believe this provides adequate risk oversight of ESG matters affecting the Company.

Cybersecurity. Our company is largely reliant on information technology (IT), and potential IT failures and data security breaches could harm our business. IT and cybersecurity risk is managed by the IT Cyber Security Risk Officer and Chief Information Officer (CIO), and our Board oversees this risk via regular discussions with and presentations to the Audit Committee as part of Internal Audit, the CFO’s or the CIO’s

 

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materials, paired with periodic formal presentations by the CIO and IT Cyber Security Risk Officer. The most recent formal presentation included highlights around the Company’s process to maintain IT security and discussed the mix of preventative and defensive approaches for IT Security and the formal incident response procedures in place. The Board also regularly inquires about changes, updates and potential issues in our strategy and execution of IT security risk management and has had other informal reviews with the CIO. Internal Audit also conducts cybersecurity reviews as part of its audit procedures and presents any findings to the Board on a quarterly basis. Additionally, we have implemented cybersecurity training for all employees at least annually. The Company has not had a material cybersecurity breach within the last three years. We believe these measures provide adequate risk oversight of information technology and cybersecurity matters that could affect the Company.

Financial Reporting, Internal Control and Regulatory Compliance

Audit Committee Risk Oversight. The Audit Committee of the Board provides risk oversight with respect to financial reporting, internal control over financial reporting, internal audit and related regulatory compliance matters. Each quarter, our Audit Committee discusses with our independent auditor its review of our interim financial information and, after our fiscal year-end, discusses its audit of our annual consolidated financial statements, including our procedures on internal control over financial reporting. Also, during the fiscal year, our Audit Committee meets in private session (without the presence of management) with our independent auditor to discuss any matters related to the audit of our annual consolidated financial statements and review of our internal control over financial reporting.

Each quarter, our Audit Committee meets with our director of internal audit and reviews the results of the internal audits of the Company’s operating divisions and other matters that may affect the Company’s key controls. Each year, the Audit Committee reviews and approves the internal audit plan for the forthcoming fiscal year. The internal audit plan is designed using a risk-based approach focusing on key risk areas in the Company’s homebuilding, financial services, IT and other operations. During the fiscal year, the Audit Committee meets in private session (without the presence of management) with our internal audit director.

Throughout the fiscal year, our Audit Committee invites guest speakers to give presentations on a variety of topics related to recent or anticipated changes to accounting rules and regulations, tax laws and regulations, corporate governance and financial reform rules and regulations. By staying informed, the Audit Committee is able to oversee the Company’s compliance with regulatory issues in these areas and to discuss with management any actions necessary to maintain or become compliant with such regulatory matters.

Compensation Risk Oversight. The Compensation Committee provides risk oversight with respect to compensation of the Company’s employees, including the named executive officers and other key officers, with the assistance of the Board. We regularly review the Company’s compensation policies and practices and believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. For a comprehensive compensation risk analysis, see page 43 below.

Board Meetings

During our fiscal year ended September 30, 2022, our Board of Directors held six meetings and acted three times by written consent. Each director attended all of the Board and committee meetings for the committees on which he or she served during fiscal 2022. Executive sessions of our non-employee directors, all of whom are independent, are held regularly. The sessions are scheduled and chaired by the Chair of the Nominating and Governance Committee, who also acts as our Presiding Director. Although we do not have a policy with respect to director attendance at our annual meeting of stockholders, the 2022 Annual Meeting was attended virtually, due to COVID-19 precautions, by each of our directors serving at that time.

Committees of the Board

Our Board is composed of five independent directors and one management director. Our independent directors meet regularly throughout the year in executive session to encourage open communication and discussion among the independent directors without the presence of management. The Presiding Director chairs these meetings, serves as liaison between the Chairman and the independent directors and has the authority to call meetings of the independent directors.

The Board has designated four primary committees that are responsible for various duties of the Board or its Committees, as applicable. The four committees of the Board are the Nominating and Governance Committee, Audit Committee, Compensation Committee and Executive Committee. The Board of Directors has adopted governing Charters for each of the Nominating and Governance Committee, the Compensation Committee and the Audit Committee. Each of the committee chairs, the Presiding Director and Executive Chairman discuss agendas for the Board and Committees.

Executive Committee

The Executive Committee, while the Board is not in session, possesses all of the powers and may carry out all of the duties of the Board of Directors in the management of the business of D.R. Horton that by state or federal law or the NYSE Rules may be delegated to it by the Board of Directors. During fiscal 2022, the Executive Committee was composed of Donald R. Horton.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      19

CORPORATE GOVERNANCE AND BOARD MATTERS

 

 

		Nominating and Governance Committee
Committee Members:   Barbara K. Allen   Michael R. Buchanan   Benjamin S. Carson, Sr. (Chair and Presiding Director)   Committee Independence: 100% Committee Meetings: 6		The Nominating and Governance Committee’s primary purposes are to:   •  identify individuals qualified to become directors consistent with criteria approved by the Board and recommend to the Board the qualified candidates for directorships to be filled by the Board or by the stockholders;   •  oversee the evaluation of the Board and key management;   •  develop and recommend to the Board a set of corporate governance principles applicable to the Company; and   •  oversee the Company’s ESG practices and overall strategy as it pertains to:   •  workforce health and safety;   •  human capital management, including diversity and inclusion;   •  energy efficiency and the environmental impact of our homebuilding process;   •  home affordability, business ethics and compliance; and   •  data privacy and protection.   The Board has determined each member of the Nominating and Governance Committee to be “independent” in accordance with NYSE Rules.
		Compensation Committee
Committee Members:   Barbara K. Allen (Chair)   Brad S. Anderson   Maribess L. Miller   Committee Independence: 100% Committee Meetings: 10		The Compensation Committee’s primary purposes are to:   •  determine corporate goals and objectives relevant to the Executive Chairman, CEO and other executive officers;   •  determine the compensation of the Executive Chairman, CEO and other executive officers based on their performance relative to the established goals and objectives;   •  monitor incentive and equity-based compensation plans; and   •  prepare an annual report on executive compensation.   The Board has determined each member of the Compensation Committee to be “independent” in accordance with NYSE Rules.
		Audit Committee
Committee Members:   Brad S. Anderson   Benjamin S. Carson, Sr.   Maribess L. Miller (Chair)   Committee Independence: 100% Committee Meetings: 4		The Audit Committee’s primary purposes are to:   •  assist the Board in fulfilling its oversight responsibilities relating to the:   •  integrity of the Company’s financial statements;   •  Company’s compliance with legal and regulatory requirements;   •  independent auditor’s qualifications and independence; and   •  performance of the Company’s internal audit function and independent auditor; and   •  prepare an Audit Committee report to be included in the Company’s annual proxy statement.   The Board has determined each member of the Audit Committee to be “independent” and “financially literate” in accordance with NYSE Rules, the SEC Rules, and the corporate governance and independence standards adopted by the Board. Also, for fiscal 2022, the Board has determined that Ms. Miller is an “audit committee financial expert” under such rules, regulations and standards as set forth in the Company’s Corporate Governance Principles posted on our website.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      20

CORPORATE GOVERNANCE AND BOARD MATTERS

 

 

Compensation of Directors

Our Board of Directors approves the annual compensation and fees paid to our non-employee directors, each of whom is listed in the “Director Compensation for Fiscal 2022” table. The Board’s goal is to set non-employee director compensation at a reasonable level of cash and equity compensation. The total annual compensation of directors has varied primarily due to the timing of awarding retainer restricted stock unit awards every three years. Our Chairman, a member of executive management, does not receive any additional compensation for serving on the Board of Directors.

Director Fees Paid in Cash. Non-employee directors are paid cash compensation based on the number of meetings attended in person, by telephone conference or virtually, the number of committees on which they serve and the number of committees for which they serve as Chair. In fiscal 2022, compensation for attending the meetings was $15,000 for the first quarterly meeting and $17,500 for each of the subsequent three meetings, not to exceed $70,000 for a calendar year. Additional compensation of $5,000 annually is paid for each committee on which a director serves, and $2,500 annually is paid to each committee chair. All compensation is paid quarterly and on a pro-rata basis if the composition of the committees changes during the year.

Director Retainer Fees Paid in Restricted Stock Units. In addition to the cash fees described above, every three years our non-employee directors receive grants of restricted stock units that vest annually in equal installments over three years. In January 2022, each of our non-employee directors received a retainer grant of 5,244 restricted stock units as reflected in the Director Compensation table that follows. Prior to these 2022 awards, such retainer grants were made in January of 2019.

Restricted Stock Units. Our non-employee directors are also granted restricted stock units on an annual basis at the time Board and the Committee grant restricted stock units to a broad group of Company employees. Each of Ms. Allen, Mr. Anderson, Mr. Buchanan, Dr. Carson, Mr. Hewatt and Ms. Miller received a grant of 1,120 restricted stock units in March 2022 as reflected in the Director Compensation table that follows. These restricted stock units vest ratably over five years. In addition, when a new non-employee director joins our Board, the Board of Directors may award restricted stock units to the new non-employee director.

Expenses and Health Care Plan. Each non-employee director is entitled to reimbursement for reasonable expenses relating to his or her service on the Board and any committee, including travel, meals and other related expenses. Each non-employee director is also eligible to participate in the Company’s broad-based health care plan, and Ms. Allen, Mr. Anderson, Mr. Buchanan and Mr. Hewatt each elected to participate in the plan in fiscal 2022.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      21

CORPORATE GOVERNANCE AND BOARD MATTERS

 

 

Director Compensation for Fiscal 2022

 

Name(1)		Fees Earned or Paid in Cash(2)					Stock Awards(3)					Total
Barbara K. Allen			$	80,000				$	519,909				$	599,909
Brad S. Anderson			$	72,500				$	519,909				$	592,409
Michael R. Buchanan			$	72,500				$	519,909				$	592,409
Benjamin S. Carson, Sr.			$	72,500				$	519,909				$	592,409
Michael W. Hewatt(4)			$	75,000				$	519,909				$	594,909
Maribess L. Miller			$	85,000				$	519,909				$	604,909

 

(1)	The Company pays director fees to only non-employee directors.

 

(2)	Amounts represent fees paid in cash during fiscal 2022.

 

(3)

The amounts represent the grant date fair value of $83.20 per unit for the 5,244 restricted stock units granted to each non-employee director on January 26, 2022, which restricted stock units vest ratably over three years, and $74.65 per unit for the 1,120 restricted stock units granted to each non-employee director on March 30, 2022, which restricted stock units vest ratably over five years.

 

The grant date fair value of the restricted stock units was determined in accordance with the accounting guidance for share-based payments. The Company recognizes expense for these awards over the respective vesting period.

 

(4)	Mr. Hewatt served as a director until his death in August 2022 at which time all of his unvested restricted stock units automatically vested.

As of September 30, 2022, each non-employee director held the following number of unvested restricted stock units:

 

Name		Unvested Restricted Stock Units
Barbara K. Allen			9,933
Brad S. Anderson			9,933
Michael R. Buchanan			9,933
Benjamin S. Carson, Sr.			8,540
Maribess L. Miller			14,190

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      22

PROPOSAL TWO – ADVISORY VOTE ON THE APPROVAL OF EXECUTIVE COMPENSATION

 

 

Proposal Two – Advisory Vote on the Approval of Executive Compensation

As required pursuant to Section 14A of the Securities Exchange Act, our stockholders are being asked to approve a non-binding advisory resolution on the compensation of our named executive officers, as disclosed in this Proxy Statement. Although this “say-on-pay” resolution is non-binding, our Board of Directors and Compensation Committee welcome your opinion and will consider the result of the vote when making future compensation decisions. Our Board has determined to hold an annual advisory vote on executive compensation, and we anticipate our next advisory vote on executive compensation after our 2023 Annual Meeting of Stockholders will be held at our 2024 Annual Meeting of Stockholders.

We encourage you to read the Compensation Discussion and Analysis beginning on page 25 of this Proxy Statement, which describes in detail how our executive compensation policies and procedures are designed and operate to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables, notes and narrative, which provide detailed information on the compensation of our named executive officers and the changes we made to our fiscal 2022 compensation programs in direct response to stockholder feedback.

We believe that our current executive compensation program achieves an appropriate balance of short-term and long-term compensation incentives, reinforces the link between executive pay and the Company’s long-term performance and stock value, and thereby aligns the interests of our named executive officers with those of our stockholders.

In accordance with Section 14A of the Exchange Act, we are asking our stockholders to approve the following advisory resolution at the 2023 Annual Meeting:

RESOLVED, that the stockholders of D.R. Horton, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2023 Annual Meeting of Stockholders.

 

				The Board of Directors Unanimously Recommends that Stockholders Vote “FOR” Approval of the Advisory Resolution on Executive Compensation.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      23

EXECUTIVE OFFICERS

 

 

Executive Officers

Our executive officers for fiscal 2022 are:

 

Donald R. Horton Executive Chairman		David V. Auld President and Chief Executive Officer		Michael J. Murray Executive Vice President and Co-Chief Operating Officer		Paul J. Romanowski Executive Vice President and Co-Chief Operating Officer		Bill W. Wheat Executive Vice President and Chief Financial Officer

Non-Director Executive Officers

David V. Auld

President and Chief Executive Officer

 

Mr. Auld, age 66, is President and Chief Executive Officer of D.R. Horton, positions he has held since 2014. Mr. Auld was Executive Vice President and Chief Operating Officer from 2013 to 2014. Mr. Auld was Region President overseeing the Company’s homebuilding operations in Florida, North and South Carolina, Georgia and Alabama from 2005 to 2013. From 1988 to 2005, Mr. Auld served as the Division President of the Company and its predecessor’s Orlando Division. During his tenure at D.R. Horton, Mr. Auld has been recognized multiple times as Best CEO in the Homebuilders & Building Products sector of Institutional Investor’s All-America Executive Team, including the most recent three consecutive years.   Prior to 1988, Mr. Auld worked for Texas American Bank and General Dynamics.   Mr. Auld graduated from Texas Tech University in 1978 with a bachelor of business administration degree in accounting.

Michael J. Murray

Executive Vice President and Co-Chief Operating Officer

 

Mr. Murray, age 56, is Executive Vice President and Co-Chief Operating Officer of D.R. Horton, positions he has held since 2014. Mr. Murray served as Senior Vice President of Business Development from 2012 to 2014. From 2004 to 2012, Mr. Murray served as the Company’s Vice President and Controller after joining the Company in 2002 as the Director of Internal Audit.   He began his career at Price Waterhouse LLP (now PwC) and then worked at several other companies in finance and accounting roles prior to joining the Company.   Mr. Murray graduated from the University of Texas at Arlington in 1988 with a bachelor of business administration degree in accounting.

Paul J. Romanowski

Executive Vice President and Co-Chief Operating Officer

 

Mr. Romanowski, age 52, is Executive Vice President and Co-Chief Operating Officer of D.R. Horton, positions he has held since October 1, 2021. Mr. Romanowski was Region President overseeing the Company’s homebuilding operations in Florida and the Gulf Coast from 2014 to 2021, and in 2019 his oversight responsibilities were expanded to also include the Company’s operations in five Mid-Atlantic states. From 1999 to 2014, Mr. Romanowski served as the Division President of the Company’s South Florida Division.   Prior to joining the Company, Mr. Romanowski worked for Metrostudy and in land acquisition for M/I Homes, another public homebuilder.   Mr. Romanowski graduated from Butler University in 1992 with a bachelor of business administration degree in marketing.

Bill W. Wheat

Executive Vice President and Chief Financial Officer

 

 

Mr. Wheat, age 56, is Executive Vice President and Chief Financial Officer of D.R. Horton, positions he has held since 2003. Mr. Wheat was the Company’s Senior Vice President and Controller from 2000 through 2003, after joining the Company in 1998 as an Accounting Manager. Mr. Wheat also served as a member of the Board of Directors of the Company from 2003 to 2011. During his tenure at D.R. Horton, Mr. Wheat has been recognized multiple times as Best CFO in the Homebuilders & Building Products sector of Institutional Investor’s All-America Executive Team, including the most recent three consecutive years.   Mr. Wheat began his career at Price Waterhouse LLP (now PwC) and then worked at The Bombay Company in several financial and accounting roles prior to joining the Company.   Mr. Wheat graduated from Baylor University in 1988 with a bachelor of business administration degree in accounting and finance.

 

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      24

EXECUTIVE COMPENSATION

 

 

Executive Compensation

Compensation Discussion and Analysis

Overview

Our Compensation Committee strives to design a fair and competitive compensation program for executive officers that will attract, motivate and retain highly qualified and experienced executives, reward superior performance and provide incentives that are based on the performance of the Company, with an overall emphasis on maximizing long-term stockholder value. This compensation discussion and analysis provides information regarding our compensation objectives and the relationship between executive performance and executive compensation. Our named executive officers (NEOs) for fiscal 2022 are:

 

Donald R. Horton		Executive Chairman
David V. Auld		President and Chief Executive Officer
Michael J. Murray		Executive Vice President and Co-Chief Operating Officer
Paul J. Romanowski		Executive Vice President and Co-Chief Operating Officer
Bill W. Wheat		Executive Vice President and Chief Financial Officer

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      25

EXECUTIVE COMPENSATION

 

 

Roles and Responsibilities of our Named Executive Officers
Donald R. Horton Executive Chairman   Primary responsibilities include:   •   developing overall Company vision, direction and strategy;   •   leading the Board in overseeing key risk areas related to the Company; and   •   providing perspective and direction to the CEO and executive officers and overseeing the accountability of management to implement Board-approved strategies and oversight functions.		David V. Auld President & Chief Executive Officer   Primary responsibilities include:   •   day-to-day implementation of Company strategies and oversight functions;   •   direct responsibility for executive oversight of operations and financial performance of the Company’s homebuilding, financial services, rental, Forestar and other businesses; and   •   direct oversight of the Co-Chief Operating Officers, Chief Financial Officer and the leaders of the Company’s financial services, rental, Forestar and other businesses.
Michael J. Murray Executive Vice President & Co-Chief Operating Officer   Primary responsibilities include:   •   direct oversight of six of the Company’s eleven internal homebuilding operating regions, including approval of investments in land and lots;   •   shared executive coordination with the Company’s financial services, rental and Forestar businesses; and   •   shared executive oversight of the corporate purchasing, marketing, legal and risk functions.		Paul J. Romanowski Executive Vice President & Co-Chief Operating Officer   Primary responsibilities include:   •   direct oversight of five of the Company’s eleven internal homebuilding operating regions, including approval of investments in land and lots;   •   shared executive coordination with the Company’s financial services, rental and Forestar businesses; and   •   shared executive oversight of the corporate purchasing, marketing, legal and risk functions.
Bill W. Wheat Executive Vice President & Chief Financial Officer   Primary responsibilities include:   •   coordination with executive team to implement and communicate operational and financial strategies, monitor performance and allocate capital across the Company’s businesses;   •   direct oversight of accounting, financial and management reporting, investor communications, internal audit and controls, finance and treasury, tax, information technology and human resources functions; and   •   shared executive oversight and coordination with the Company’s financial services, rental and Forestar businesses and corporate purchasing, marketing, legal and risk functions.

Board Responsiveness and Commitment to Stockholder Engagement

Over the last few years, our Board and Compensation Committee has embarked on a robust stockholder outreach program. The success of the engagement program is evidenced by the significant changes to our executive compensation program that were adopted as a direct result of the feedback received as outlined in the table below.

Our advisory vote on executive compensation (Say on Pay) received a lower than expected vote at the 2022 Annual Meeting. In response, the Compensation Committee made significant changes to our executive compensation program and remains committed to understanding and being responsive to stockholder sentiment. As a result, the Committee reached out to investors, in some instances multiple times, prior to and following the 2022 Annual Meeting to ensure that any actionable feedback received could be better incorporated into Compensation Committee discussions and decisions for fiscal 2022 and beyond.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      26

EXECUTIVE COMPENSATION

 

 

Throughout fiscal 2022, we contacted stockholders collectively representing 57% of outstanding shares and had substantive conversations with stockholders representing 53% of outstanding shares to discuss executive compensation and corporate governance matters. The Compensation Committee Chair led the discussions with several of the Company’s largest stockholders.

 

Stockholder Feedback (“What We Heard”) Strong stockholder preference for:				Action (“What We Did”)						Impact of Action (“Why This is Important”)
Short-term Incentive		Cap on short-term incentive payout		Established dollar cap						✓  Limits total short-term award size
		Lower pre-tax income (PTI) percentage		Reduced PTI payout percentage:						✓  Reduces earned short-term incentive
				Executive		From		To
				Chairman		0.60%		0.20%
				CEO		0.40%		0.20%
				Co-COOs		0.15%		0.10%
Balance of Short- and Long-term Incentives		Equity incentives over cash		Split earned annual incentive payouts to Chairman and CEO equally between cash and equity, with the equity being subject to a further 2-year holding period						✓  Strengthens alignment of executives’ interests with stockholders by utilizing equity with a multi-year holding period
		Long-term over short-term incentives		Committed that long-term incentives, with vesting schedule of no shorter than 3 years, will be a higher percentage of target compensation for fiscal 2022 and beyond						✓  Aligns outcomes with long-term stockholder value creation   ✓  Increases performance and retentive value of incentives
Above-median Performance Targets		Above-median targets for relative metrics		Increased threshold performance level for the ROI, SG&A and GP portions of Performance RSUs to require 6th rank out of 10						✓  Requires greater outperformance of our peers to earn threshold and target payouts
				Increased target performance level for the ROI, SG&A and GP portions of Performance RSUs to require 3rd rank out of 10						✓  Increases from 9th and 5th rank out of 10, respectively, in historical grants
Risk Mitigation		Adoption of clawback policy		Adopted clawback policy that applies to cash and equity incentives and that is triggered by either a financial restatement or other material harm to the Company						✓  Minimizes compensation risk   ✓  Ensures alignment of interests

2022 Key Compensation Actions Explained

Establishing a dollar cap for pre-tax income (PTI) incentive payout. While appreciating that the PTI-based annual incentive (PTI Bonus) is only earned in line with the Company’s profit generation, stockholders expressed a strong preference that the incentive payout be capped. For the PTI Bonus earned for fiscal 2021, the Compensation Committee placed a $10 million limit on the portion of PTI Bonus that could be paid in cash to Mr. Horton and Mr. Auld, with the remaining earned incentive to be paid in shares of the Company’s common stock. Following stockholder input, for the PTI Bonus earned for fiscal 2022, the Compensation Committee further limited the amount payable in cash to Mr. Horton and Mr. Auld to $7 million, and instituted a matching $7 million limit on the value of earned PTI Bonuses that could be paid in shares of the Company’s common stock, effectively capping the maximum award payable under the PTI Bonus to $14 million for each of Mr. Horton and Mr. Auld. For fiscal 2022, the Compensation Committee limited the amount payable in cash for the PTI Bonus to Mr. Murray and Mr. Romanowski to $10 million.

Reducing the PTI percentage for all eligible NEOs. Based on feedback received from stockholders, the Compensation Committee revised the PTI Bonus program to implement a significant reduction to the PTI payout percentage for each of Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski. For the PTI Bonus earned for fiscal 2022, Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski will be eligible to earn 0.20%, 0.20%, 0.10%, and 0.10% respectively, of the Company’s PTI, a significant reduction from the fiscal 2021 PTI payout percentages of 0.60%, 0.40%, 0.15% and 0.15%, respectively. The reduced payouts remain subject to the maximum dollar caps adopted by the Compensation Committee, as discussed above.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      27

EXECUTIVE COMPENSATION

 

 

Increasing emphasis on equity incentives. Any equity granted to Mr. Horton or Mr. Auld under the PTI Bonus program is subject to a further 2-year holding period after the award is earned. In addition, the Compensation Committee has committed that long-term incentives, with a minimum vesting period of 3 years, would comprise a higher percentage of target NEO compensation for fiscal 2022 and beyond. The Compensation Committee believes that this action will increase the retentive value of the incentives as well as further align pay outcomes with long-term stockholder value creation. For fiscal 2022, 74% of each of our Chairman’s and CEO’s total target compensation opportunities were in the form of equity incentives.

Enhancing performance thresholds and targets. Stockholders expressed a strong preference that performance-based equity incentives should target above-median performance levels in order to earn the targeted payout. In response, the Compensation Committee increased both the threshold and target performance levels required for payouts under the Company’s performance-based equity plan. For the return on investment (ROI), selling, general and administrative expense (SG&A) and gross profit (GP) portions of the performance based RSUs granted in fiscal 2022, the threshold performance requires a ranking of at least the 6^th out of 10 (an increase from the 9^th rank previously required), and target performance requires a ranking of at least 3^rd out of 10 (an increase from the 5^th rank previously required). The Compensation Committee believes these increases further strengthen the pay-for-performance link, requiring superior performance for target payouts.

Adopting a clawback policy. In direct response to stockholder feedback, the Compensation Committee adopted a clawback policy that applies to both cash and equity incentives, with the clawback being triggered by any financial restatement as well as other material harm to the Company. The Compensation Committee believes that the clawback policy, in conjunction with our existing stock ownership guidelines and policy that prohibits the hedging and pledging of the Company’s common stock, will further minimize compensation risk and strengthen the alignment of executives’ interests with those of long-term stockholders.

Our Executive Compensation Principles Drive our Compensation Design

Our Board and its Compensation Committee strongly believe that it is in the best interests of stockholders to incentivize executives to take actions that create sustainable stockholder value and reward executives accordingly. To achieve that, the Compensation Committee has designed a compensation structure that is grounded in robust compensation principles which in turn drive our executive compensation objectives.

 

Executive Compensation Principles		Executive Compensation Objectives
Business Resilience		✓ Achieve long-term sustainability of our business
Alignment of Interests		✓ Align our executives’ interests with stockholders’ interests with the goal of maximizing long-term stockholder value
Pay-for-Performance		✓ Award compensation that recognizes valuable short- and long-term individual performance as well as the Company’s overall performance
Attract and Retain		✓ Motivate and retain highly qualified and experienced executives

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      28

EXECUTIVE COMPENSATION

 

 

Our executive compensation design ensures performance alignment and protects stockholder interests.

 

Design Feature		Rationale and Impact		Business Resilience		Alignment of Interests		Pay for Performance		Attract   and Retain
Emphasize At-Risk and Performance-based Compensation		•  89% of fiscal 2022 CEO Target Pay at risk		✓		✓		✓
Balance Short- and Long-term Incentives		•  Reward executives for actions that will create short- and long-term stockholder value		✓		✓		✓		✓
Equity Pay Mix		•  Significant majority of equity granted as Performance RSUs		✓		✓		✓		✓
Annual Cash and Equity Incentive Tied to Profitability		•  Reward executives for increased profitability which creates stockholder value		✓		✓		✓		✓
		•  No guaranteed bonuses
Stock Ownership Guidelines		•  Ensure alignment of executive interests with those of long-term stockholders				✓		✓
Clawback and Anti-hedging and Pledging Policies		•  Mitigate compensation risk and ensure strong alignment with stockholder interests		✓		✓		✓

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      29

EXECUTIVE COMPENSATION

 

 

Key Performance Highlights

 

 

 

		As of and for the Fiscal Year Ended September 30,																											% Change
																													2022 vs 2021					2022 vs 2018
Stock Price and Other Data		2022					2021					2020					2019					2018
Common stock price			$	67.35				$	83.97				$	75.63				$	52.71				$	42.18							(20	)%				60	%
Total equity market capitalization (in millions)			$	23,165				$	29,895				$	27,529				$	19,420				$	15,871							(23	)%				46	%
Book value per common share			$	56.39				$	41.81				$	32.53				$	27.20				$	23.88							35	%				136	%
Diluted earnings per common share			$	16.51				$	11.41				$	6.41				$	4.29				$	3.81							45	%				333	%
Cash dividends paid per common share			$	0.90				$	0.80				$	0.70				$	0.60				$	0.50							13	%				80	%

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      30

EXECUTIVE COMPENSATION

 

 

Fiscal 2022 Compensation Highlights

Pay Mix

Chairman

 

		87% At-Risk
3%  Base  Salary		23% PTI Bonus (Cash Portion)				23% PTI Bonus (Equity Portion)		41% Performance Units		10%  Time RSUs
26% Cash						74% Long-Term Equity

CEO

 

		89% At-Risk
2%  Base  Salary		24% PTI Bonus (Cash Portion)				24% PTI Bonus (Equity Portion)		41% Performance Units		9%  Time RSUs
26% Cash						74% Long-Term Equity

Other Named Executive Officers (average)

 

		85% At-Risk
5%  Base  Salary		54% PTI/Other Bonus				31% Performance Units		10%  Time RSUs
59% Cash						41% Long-Term Equity

 

Executive		Fixed1					At-Risk1					Cash2					Equity2
Donald R. Horton				13	%				87	%				26	%				74	%
David V. Auld				11	%				89	%				26	%				74	%
Michael J. Murray				14	%				86	%				60	%				40	%
Paul J. Romanowski				14	%				86	%				60	%				40	%
Bill W. Wheat				21	%				79	%				51	%				49	%

 

(1)

The fixed portion of compensation includes the executive’s base salary and time-based restricted stock units that vest based on continued employment with the Company. The at-risk compensation includes the annual PTI Bonus and the discretionary performance bonuses for Mr. Wheat, in addition to performance-based equity awards which are at-risk if the performance goals or criteria are not achieved.

 

(2)

Cash compensation includes the executive’s base salary and PTI Bonuses paid in cash (for Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski) and discretionary performance bonuses for Mr. Wheat. Equity compensation includes the portion of the PTI Bonuses paid in common stock (for Mr. Horton and Mr. Auld) and the grant date fair value of performance-based restricted stock units and time-based restricted stock units for each named executive officer.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      31

EXECUTIVE COMPENSATION

 

 

Prior to approving the final amounts of compensation to be paid to our executive officers, including the PTI Bonuses, the Compensation Committee reviewed the key operating and financial results achieved in fiscal 2022, which included a record level of $7.6 billion in consolidated pre-tax income earned by the Company, and determined that the mix of cash bonus and equity bonus was appropriate based on the results achieved. (See “2022 Fiscal Year—Pre-Tax Income Performance Bonus Results and Payout” on page 36.

 

		Why You Should Vote FOR the 2023 Advisory Vote on the Approval of Executive Compensation
✓		•  The Company and Compensation Committee Chair performed extensive stockholder outreach to better understand stockholders’ perspectives and elicit feedback that served as key input to Committee and Board discussions and decisions.   •  Significant changes were made to both annual and long-term incentives to better align executives’ interests with those of long-term stockholders and in response to the feedback received from our stockholders.   •  Our compensation program was designed based on our robust executive compensation philosophy and compensation objectives ensuring that executives are rewarded for actions that create, and that pay outcomes are in line with, long-term stockholder value.   •  Greater than 80% of executive target compensation remains at-risk, ensuring strong focus on both Company and individual performance.   •  Annual Performance Plan is 100% performance-based with 50% of short-term incentive payout to Chairman and CEO in equity which is subject to a further 2-year holding period that strengthens long-term alignment of interests.   •  Minimum of three-year vesting for both performance and time-based equity ensures long-term focus and stability of management.   •  Robust stock ownership guidelines and recoupment policies ensure alignment of executives’ interests while mitigating compensation risk.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      32

EXECUTIVE COMPENSATION

 

 

Components of Compensation

Based on the objectives discussed above, our executive compensation for fiscal 2022 was designed to include pay elements that focus executives on, and reward actions that create, sustainable stockholder value. Hence, our executive compensation includes what the Compensation Committee believes to be an appropriate mix of cash and equity compensation, with a significant focus on performance-based incentives that are earned when the Company achieves performance measured against preset goals.

For fiscal 2022, in line with its Executive Compensation principles and objectives, the Compensation Committee designed pay elements that it believes best serves the interests of stockholders as outlined in the table below:

 

Pay Element		At Risk?		Purpose of Pay Element		What the Pay Element Rewards		Actions in Fiscal 2022
Base Salary				Provide fixed compensation in line with peer group		Skills, experience, competence, performance, responsibility, leadership and contribution to the Company		✓ Base salaries unchanged for all NEOs
PTI Bonus (1)		✓		Achieve higher profitability that leads to increased stockholder value		Annual achievement of metrics that measure execution of strategic goals		✓ Established dollar cap for all NEOs   ✓ Significantly reduced PTI payout percentage   ✓ Split annual incentive payouts for Chairman and CEO equally into cash and equity components, with equity subject to a further 2-year holding period
Performance RSUs		✓		Focus on longer-term performance, create alignment with long-term stockholders		Achievement of multi-year financial performance goals and value creation		✓ Maintained 3-year performance period   ✓ Awarded increased portion of target fiscal 2022 compensation in Performance RSUs   ✓ Increased threshold performance to 6th rank out of 10   ✓ Increased target performance to 3rd rank out of 10
Time-based RSUs				Create alignment with stockholders by focusing efforts on longer-term stockholder returns		Long-term stockholder value creation		✓ Approved fiscal 2022 long-term incentive grants
Chairman Pay At Risk %		87%
CEO Pay At Risk %		89%
Other NEOs Pay At Risk %		85%

 

(1)	Given his role and the nature of his responsibilities, Mr. Wheat does not participate in the PTI Bonus program, but rather receives a cash bonus in an amount determined by the Compensation Committee based on performance of his responsibilities and overall Company performance.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      33

EXECUTIVE COMPENSATION

 

 

Cash Compensation: Base Salaries and Performance Bonuses

Base Salaries – Named Executive Officers

Base salaries for our executive officers provide a fixed or base level of compensation. When setting base salaries for our executives, we considered the following factors:

 

•

level of experience, responsibility and tenure;

 

•

national scope of the Company’s operations;

 

•

contributions to achievements of the Company’s objectives;

 

•

amount of fixed cash compensation considered appropriate to retain the executive’s services;

 

•

average and median base salaries of comparable executives in our peer group; and

 

•

recommendations of our Chairman and CEO, other than for themselves.

Base salaries for our named executive officers have remained unchanged for fiscal 2023, 2022 and 2021. The base salaries for our named executive officers are set forth in the following table:

 

		Base Salary
Name		2023					2022					2021
Donald R. Horton			$	1,000,000				$	1,000,000				$	1,000,000
David V. Auld			$	700,000				$	700,000				$	700,000
Michael J. Murray			$	500,000				$	500,000				$	500,000
Paul J. Romanowski			$	500,000				$	500,000					—
Bill W. Wheat			$	500,000				$	500,000				$	500,000

Based on the Compensation Committee’s analysis, Mr. Horton’s base salary is in line with comparable positions in our peer group, while the base salaries of our other named executive officers are below comparable positions within our peer group. We believe that these salaries provide a competitive level of fixed pay to incentivize and retain our executives.

When determining named executive officer base salaries, the Compensation Committee did not assign specific weight to the factors listed above, nor did they assign a specific ranking that base salaries should be within the peer group, nor use a percentage or ratio that the base salaries should be in relation to total compensation.

2022 Fiscal Year - Pre-Tax Income Performance Bonus

Chairman, Chief Executive Officer and Co-Chief Operating Officers. During fiscal 2022, in line with our compensation philosophy to award incentive bonuses based on performance, Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski each had the opportunity to earn a performance bonus (PTI Bonus) based on the Company’s pre-tax income earned during the year.

“Pre-tax income” or “PTI” means consolidated income before income taxes, as publicly reported by the Company in its consolidated financial statements prepared in accordance with generally accepted accounting principles.

The PTI Bonus focuses Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski on generating and increasing pre-tax income. We believe that increases in pre-tax income result in increases in the value of the Company, which benefits all of our long-term stockholders.

The maximum payout percentages for the PTI Bonus in fiscal 2022 are included in the table below. The Compensation Committee sets these percentages each year at the beginning of the fiscal year. The Compensation Committee has discretion to adjust the PTI Bonus downward, but not upward.

Background. To link pay and performance, the combined annual incentive bonus for the Company’s Chairman, CEO and Co-COOs has historically been based on a percentage of the Company’s pre-tax income. The Compensation Committee believes that strong profitability puts the Company in excellent position to achieve its long-term performance goals.

For fiscal 2022, the Compensation Committee believed that by using a percentage of pre-tax income, we would incentivize Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski to achieve higher levels of pre-tax income, which aligns their interests with those of our stockholders. The following PTI payout percentages were initially selected for the PTI Bonuses based on historical practices and a subjective Compensation Committee analysis, rather than any formulaic methodology: 0.60% for Mr. Horton, 0.40% for Mr. Auld, 0.15% for Mr. Murray and 0.15% for Mr. Romanowski. These maximum percentages were subjectively determined, and the Compensation Committee reserved the right to use its discretion to adjust downward, but not upward, the final earned PTI Bonus amounts.

 

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EXECUTIVE COMPENSATION

 

 

Recent Actions. In March 2022, based on feedback received from our stockholders, the Compensation Committee reduced the PTI percentage payout from 0.60%, 0.40%, 0.15% and 0.15% for Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski, respectively, to 0.20% for both Mr. Horton and Mr. Auld, and to 0.10% for both Mr. Murray and Mr. Romanowski, significantly reducing the annual incentive payout for the 2022 performance periods. In addition to reducing the PTI percentage payout, the Compensation Committee revised the maximum annual individual total payout cap for the PTI Bonus to $14 million for Mr. Horton and Mr. Auld and instituted a $10 million individual maximum annual payout cap for Mr. Murray and Mr. Romanowski. For Mr. Horton and Mr. Auld, the payout earned is equally split between cash and company stock, with the equity portion of the award being subject to a 2-year holding period.

Pre-Tax Income Performance Bonus Percentages

 

							Maximum Bonus Potential
Name		Fiscal 2022 Performance Goal					1st     Semi-Annual     Period					2nd     Semi-Annual     Period
Donald R. Horton				Pre-Tax Income					0.20	%				0.20	%
David V. Auld				Pre-Tax Income					0.20	%				0.20	%
Michael J. Murray				Pre-Tax Income					0.10	%				0.10	%
Paul J. Romanowski				Pre-Tax Income					0.10	%				0.10	%

The 1^st semi-annual period was the six months ended March 31, 2022 (first and second quarters of fiscal 2022) and the 2^nd semi-annual period was the six months ended September 30, 2022 (third and fourth quarters of fiscal 2022). The hurdle or threshold for achieving an annual incentive bonus was the attainment of pre-tax income. If no pre-tax income was attained, then no bonus would be paid under the PTI Bonus. The bonuses paid under the PTI Bonus program were paid as set forth in the tables on the next page.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      35

EXECUTIVE COMPENSATION

 

 

2022 Fiscal Year – Pre-Tax Income Performance Bonus Results and Payout

The tables below set forth the Company’s pre-tax income (PTI) and PTI Bonuses paid in cash and stock for fiscal 2022 to Mr. Horton, Mr. Auld, Mr. Murray and Mr. Romanowski:

 

Donald R. Horton — Chairman
							Maximum Bonus Percentage					Total Bonus Earned					Portion of Bonus Paid
Semi-Annual Period		PTI															Cash					Stock
1st Semi-Annual Period Ended March 31, 2022			$	3,380,609,289					0.20%				$	6,761,219				$	3,380,680				$	3,380,539
2nd Semi-Annual Period Ended September 30, 2022			$	4,249,139,719					0.20%				$	8,498,279				$	3,619,458				$	3,619,323
Annual Amount			$	7,629,749,008					0.20%				$	15,259,498				$	7,000,138				$	6,999,862
									Max Payout				$	14,000,000
David V. Auld — Chief Executive Officer
							Maximum Bonus Percentage					Total Bonus Earned					Portion of Bonus Paid
Semi-Annual Period		PTI															Cash					Stock
1st Semi-Annual Period Ended March 31, 2022			$	3,380,609,289					0.20%				$	6,761,219				$	3,380,680				$	3,380,539
2nd Semi-Annual Period Ended September 30, 2022			$	4,249,139,719					0.20%				$	8,498,279				$	3,619,458				$	3,619,323
Annual Amount			$	7,629,749,008					0.20%				$	15,259,498				$	7,000,138				$	6,999,862
									Max Payout				$	14,000,000
Michael J. Murray — Co-Chief Operating Officer
							Maximum Bonus Percentage					Total Bonus Earned					Portion of Bonus Paid
Semi-Annual Period		PTI															Cash					Stock
1st Semi-Annual Period Ended March 31, 2022			$	3,380,609,289					0.10%				$	3,380,609				$	3,380,609					—
2nd Semi-Annual Period Ended September 30, 2022			$	4,249,139,719					0.10%				$	4,249,140				$	4,249,140					—
Annual Amount			$	7,629,749,008					0.10%				$	7,629,749				$	7,629,749					—
									Max Payout				$	10,000,000
Paul J. Romanowski — Co-Chief Operating Officer
							Maximum Bonus Percentage					Total Bonus Earned					Portion of Bonus Paid
Semi-Annual Period		PTI															Cash					Stock
1st Semi-Annual Period Ended March 31, 2022			$	3,380,609,289					0.10%				$	3,380,609				$	3,380,609					—
2nd Semi-Annual Period Ended September 30, 2022			$	4,249,139,719					0.10%				$	4,249,140				$	4,249,140					—
Annual Amount			$	7,629,749,008					0.10%				$	7,629,749				$	7,629,749					—
									Max Payout				$	10,000,000

For fiscal 2022, the total PTI Bonus payable to Mr. Horton and Mr. Auld was limited to $14 million, with the payout earned equally split between cash and Company stock (PTI Bonus Stock), and the equity portion of the award being subject to a 2-year holding period. The number of shares issued was determined by dividing the portion of the PTI Stock Bonus by the Company’s stock price on the date the Compensation Committee approved the award payout. Amounts attributable to any fractional shares for the equity component were paid in cash. During the 2-year holding period, Mr. Horton and Mr. Auld are permitted to make transfers of stock for estate planning purposes as long as the shares of stock stay within their respective family’s beneficial ownership. The Compensation Committee believes the holding period further motivates the executives to deliver strong long-term stock performance, which we believe aligns them with the goals of our stockholders. For fiscal 2022, the total PTI Bonus payable to Mr. Murray and Mr. Romanowski was limited to $10 million.

 

D.R. HORTON, INC. 2023 PROXY STATEMENT      36