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

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Filed by a Party other than the Registrant ☐

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CTS CORPORATION

(Name of Registrant as Specified In Its Charter)

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Table of Contents

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CTS Corporation, 4925 Indiana Avenue, Lisle, Illinois 60532

NOTICE OF THE 2021 ANNUAL MEETING OF SHAREHOLDERS

To Be Held On May 13, 2021

To CTS Shareholders:

The 2021 Annual Meeting of Shareholders of CTS Corporation will be held on Thursday, May 13, 2021, at 9:30 a.m. Central Time, at the Hotel Arista, 2139 City Gate Lane, Naperville, Illinois 60563. To obtain directions to the meeting location, please call (630) 577- 8800, or see the map on page 33 of the 2021 Proxy Statement.

Only CTS shareholders of record at the close of business on March 15, 2021, may vote at this meeting or any adjournments that may take place. At the meeting, shareholders will vote on the following items:

Your Board of Directors recommends that you vote in favor of the director nominees, in favor of the advisory approval of CTS’ named executive officer compensation, and in favor of the ratification of the appointment of Grant Thornton LLP.

April 1, 2021

As part of our contingency planning regarding the coronavirus (or COVID-19) pandemic, we are preparing for the possibility that the Annual Meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance through a public filing with the Securities and Exchange Commission, and details will be available at http://www.ctscorp.com.

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This 2021 Proxy Statement (“Proxy Statement”) is furnished in connection with the solicitation by the Board of Directors (“Board”) of CTS Corporation (“CTS”, “we”, “us”, “our” or the “Company”) of proxies to be voted at the 2021 Annual Meeting of Shareholders (“Annual Meeting”). CTS will bear the cost of this solicitation. On or about April 1, 2021, the Company mailed to its shareholders the Notice of Internet Availability of Proxy Materials, and made available this Proxy Statement, the accompanying proxy card, and its Annual Report on Form 10-K.

PROPOSAL 1: ELECTION OF DIRECTORS

CTS’ Articles of Incorporation provide that the number of directors will be between three and fifteen, as fixed from time to time by the Board. As part of the succession planning and search process, the Nominating and Governance Committee and the Board regularly assesses the Board’s size. The Board has established the number of authorized directors at seven. Ms. Collawn has not been nominated for re-election and will be leaving the Board immediately following the Annual Meeting. On February 11, 2021, the Board, based on the recommendation of an executive officer of the Company, appointed Donna M. Costello to serve as a director, temporarily increasing the number of directors to eight.  There are seven director nominees for election and the number of authorized directors will remain at seven effective immediately following the Annual Meeting. Detailed information on each director nominee is provided below. All directors are elected annually and serve one-year terms, or until their successors are elected and qualified.

Nominees for the Board of Directors. Each director nominee named below is currently a director of CTS. The ages shown are as of April 1, 2021, the date of this Proxy Statement. Each director nominee has agreed to serve as a director if elected. If one or more of the nominees becomes unavailable for election, the remaining members of the Board will, in their sole discretion and pursuant to authority granted by the CTS Bylaws, nominate and vote for a replacement director or reduce the authorized number of directors.

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Your Board recommends a vote FOR each of these director nominees.

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COMMITTEES OF THE BOARD OF DIRECTORS

Directors are assigned to committees by the full Board each year following their election at the Annual Meeting.

Committee Membership in 2020

MemberC Chairman *Member until her departure on May 14, 2020.

Audit Committee

The Audit Committee is a standing committee of the Board. Directors Johnson, Hunter and Zulueta are the current members of the Audit Committee and each is financially literate and meets the independence standards applicable to audit committee members under the NYSE Corporate Governance Listing Standards, as well as the CTS Corporation Corporate Governance Guidelines and the Audit Committee Charter. Mr. Johnson is the Chairman of the Audit Committee. The Board has determined that Mr. Johnson, Mr. Hunter, and Mr. Zulueta each qualifies as an audit committee financial expert under the criteria set forth in Item 407(d)(5)(ii) of Regulation S-K.

The Audit Committee held eight meetings in 2020. A copy of the Audit Committee Charter may be obtained free of charge from CTS’ website at http://www.ctscorp.com/wp-content/uploads/ACC.pdf.

The Audit Committee is responsible for appointing the independent auditor, approving engagement fees and non-audit engagements, and reviewing the independence and quality of the independent auditor. The Audit Committee reviews audit plans, audit reports, systems of internal accounting controls, audit results, and recommendations of the independent auditor and the internal audit department. The Audit Committee also reviews and discusses with management CTS’ financial statements, earnings releases and earnings guidance. In addition, the Audit Committee reviews CTS’ compliance with public-company regulatory requirements and with the CTS Code of Ethics.

Compensation Committee

The Compensation Committee is a standing committee of the Board. Directors Collawn, Profusek, and Zulueta are the current members of the Compensation Committee and each is an independent director as defined by the NYSE Corporate Governance Listing Standards and the CTS Corporation Corporate Governance Guidelines. Ms. Collawn is the Chairman of the Compensation Committee. The Compensation Committee held three meetings in 2020. A copy of the Compensation Committee Charter may be obtained free of charge from CTS’ website at http://www.ctscorp.com/wp-content/uploads/CC.pdf.

The Compensation Committee establishes executive compensation policies and reviews and approves senior executive compensation, as further described in the Compensation Discussion and Analysis section of this Proxy Statement. The Chief Executive Officer recommends the form and level of compensation for each named executive officer other than himself to the Compensation Committee. The Compensation Committee reviews and approves corporate goals and objectives relevant to the named executive officers, including the Chief Executive Officer, evaluates the Chief Executive Officer’s performance against those objectives, and makes recommendations to the Board regarding the Chief Executive Officer’s compensation. The Compensation Committee does not delegate authority to perform any of the foregoing functions with respect to the compensation of any named executive officer. The Compensation Committee also administers the CTS Corporation 2018 Equity and Incentive Compensation Plan and the 2014 Performance and Incentive Compensation Plan, including the annual equity and non-equity performance programs, and has delegated to management the oversight of those programs for participants who are not named executive officers. In addition, the Compensation Committee reviews director compensation annually and makes recommendations regarding director compensation to the Board for approval. The Compensation Committee also conducts an annual evaluation of its own performance.

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The Compensation Committee may, from time to time, direct senior functionaries of the Company’s human resources department to research specific issues and make recommendations to the Compensation Committee. In addition, for 2020 and currently 2021, the Compensation Committee directly engaged Compensation Strategies, Inc. (“Compensation Strategies”) as its compensation consultant. The Compensation Committee has assessed the independence of Compensation Strategies, as required under the NYSE Corporate Governance Listing Standards. The Compensation Committee has also considered and assessed all relevant factors, including those required by the Securities and Exchange Commission (“SEC”), that could give rise to a potential conflict of interest with respect to Compensation Strategies. Based on this review, the Compensation Committee did not identify any conflict of interest raised by the work performed by Compensation Strategies. For more information regarding the role of Compensation Strategies in determining or recommending the amount or form of executive compensation, see the Compensation Discussion and Analysis section of this Proxy Statement.

Compensation Committee Interlocks and Insider Participation. Directors Collawn, Profusek, Zulueta, Hunter and Murphy served on the Compensation Committee during 2020. During 2020, no executive officer of CTS served as a director of any other entity for which any CTS director was an executive officer.

Nominating and Governance Committee

The Nominating and Governance Committee is a standing committee of the Board. Directors Profusek, Collawn, and Li are the current members of the Nominating and Governance Committee and each is an independent director as defined by the NYSE Corporate Governance Listing Standards and the CTS Corporation Corporate Governance Guidelines. Mr. Profusek is the Chairman of the Nominating and Governance Committee.

The Nominating and Governance Committee held two meetings in 2020. A copy of the Nominating and Governance Committee Charter may be obtained free of charge from CTS’ website at http://www.ctscorp.com/wp-content/uploads/NGCC.pdf.

The Nominating and Governance Committee reviews and makes recommendations to the Board concerning committee assignments and director nominees for election at the Annual Meeting of Shareholders and oversees director recruitment efforts. The Nominating and Governance Committee reviews and makes recommendations to the full Board regarding CTS officers for election and succession, including succession planning for the Chief Executive Officer. The Nominating and Governance Committee also develops the CTS Corporation Corporate Governance Guidelines for the approval of the Board, makes recommendations on matters of corporate governance and oversees CTS’ Environmental, Social and Governance initiatives and performance. CTS does not have a formal policy concerning whether the Nominating and Governance Committee will consider director nominees submitted by shareholders. CTS did not receive any shareholder director nominees for election at the Annual Meeting. At this time, the Board does not believe a formal policy regarding shareholder director nominees is necessary since CTS’ Bylaws provide a process for nomination of directors and no shareholder nominations for director have been received in past years.

The Nominating and Governance Committee reviews with the Board, on an annual basis, the requisite skills and director characteristics of any new members as well as the composition of the Board as a whole. This review includes an assessment of whether each non-management director qualifies as independent and an assessment of the diversity, age, skills, and experience of the directors in the context of the needs of the Board. Although the Nominating and Governance Committee has not established any specific minimum criteria or qualifications that a candidate must possess, the Nominating and Governance Committee seeks a diverse selection of candidates who possess the experience necessary to make a valuable contribution to the Board. The Board does not have a formal diversity policy; it construes the notion of diversity broadly, considering differences in viewpoint, professional experience, education, skills, and other individual qualities, in addition to race, gender, and national origin. The Board believes that its efforts to foster a diverse board have been effective; while all directors are skilled in business, a variety of points of view, educational backgrounds, and experiences are represented on the Board. The Nominating and Governance Committee may retain and pay search firms for the purpose of identifying and evaluating director candidates.

Technology and Transactions Committee

The Technology and Transactions Committee reviews and makes recommendations to management regarding CTS’ technology strategy, new product development programs, and performance in the context of targeted market segments and strategic goals, as well as the Company’s organic development of technology and opportunities to acquire technology directly or through business acquisition or combination transactions. The Technology and Transactions Committee also reviews, on a preliminary basis, possible acquisitions, divestitures or other transactions identified by management for possible consideration by the full Board, assesses existing and future trends and threats in technology that may impact the Company’s strategy, and reports activities of the Committee to the full Board.

Directors Hunter, O’Sullivan, Johnson and Li are the current members of the Technology and Transactions Committee with Mr. Hunter as the Chairman. The Technology and Transactions Committee held two meetings in 2020. A copy of the Technology and Transactions Committee Charter may be obtained free of charge from CTS’ website at https://www.ctscorp.com/wp-content/uploads/2015/12/CTS-Technology-Transactions-Committee-Charterb.pdf.

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FURTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS

Attendance

During 2020, the Board held four meetings and took no action by unanimous written consent. In 2020, all of the directors attended at least 75% of the regular meetings of the Board and the standing committees of which they were then members, either in person, by telephone or by video conference. It is the policy of the Board that each director endeavor to attend each Annual Meeting of Shareholders, unless exigent circumstances arise. Each director standing for re-election at the 2020 Annual Meeting of Shareholders attended that meeting.

Director Independence

In addition to the NYSE Corporate Governance Listing Standards, the CTS Corporation Corporate Governance Guidelines govern the determination of whether a director is independent. A copy of the CTS Corporation Corporate Governance Guidelines may be obtained free of charge from CTS’ website at http://www.ctscorp.com/wp-content/uploads/CGG.pdf.

The Board has determined that each non-management director that served in 2020 and each director nominee is or was an independent director and has or had no material relationship with CTS, apart from his or her service as a director. For purposes of determining whether a director has a material relationship with CTS apart from his or her service as a director, the Board has determined that CTS’ purchase of regulated electric and gas service from a utility company does not constitute a material relationship and that any transaction that is not required to be disclosed pursuant to Item 404(a) of Regulation S-K shall be deemed categorically immaterial.

The CTS Corporation Corporate Governance Guidelines provide that the Nominating and Governance Committee shall review any transaction that might be construed to disqualify a director as independent (including any transactions that are required to be reported under Item 404(a) of Regulation S-K) and, if appropriate, make a recommendation that the Board approve such transaction. The Board would then review and, if appropriate, approve such transaction. The Nominating and Governance Committee Charter further provides that the Nominating and Governance Committee shall review any potential director conflict of interest and recommend appropriate action to the Board.

Meetings of Non-Management Directors

It is the policy of the Board to hold an independent session excluding management directors at each regularly scheduled Board meeting. In 2020, an independent session was held at each regular Board meeting. The Lead Independent Director of the Board presides over the independent sessions.

Board Leadership Structure

CTS does not have a policy as to whether the role of Chief Executive Officer and Chairman of the Board should be separate or combined, or whether the Chairman should be a management or non-management director. In the recent past, the Board has been structured with an independent or non-management director as Chairman and alternatively structured with a combined Chairman/Chief Executive or Executive Chairman and Chief Executive Officer. Currently, Mr. O’Sullivan serves as Chairman of the Board, President and Chief Executive Officer and Mr. Profusek serves as Lead Independent Director. Mr. O’Sullivan is the only CTS director who is not independent. He does not receive any additional compensation for his service on the Board.

The Lead Independent Director is the leader of the independent directors, and leads all sessions of independent directors, which normally occur at the end of each Board meeting. A full description of his duties is as follows:

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The General Counsel and Corporate Secretary’s Office provides support to the Lead Independent Director in fulfilling his role. The Lead Independent Director receives an annual retainer of $20,000 in addition to his ordinary director compensation, for the additional services the Lead Independent Director provides. The Board believes this leadership structure is effective, efficient, appropriate to CTS’ size and complexity, and represents a cost-effective allocation of responsibilities.

Contrasting with the cost and efficiency benefits is the desire to ensure that control over both management and corporate governance is not overly invested in one person. The Board is confident that, as currently constituted, it will provide ample counterbalance to a combined Chairman and Chief Executive Officer and that it continues to provide suitable independent oversight of management. The independent directors on the Board are all accomplished professionals possessing substantial business and business-related experience as set forth in the chart below. Additionally, most have served on the Board for a number of years. As discussed above, the independent directors meet in separate session excluding management at each regular meeting of the Board. Further, any director has the right to submit items to be heard at any Board meeting. Lastly, the independent directors outnumber the one non-independent director, the combined Chairman and Chief Executive Officer, by a large supermajority.

*Not standing for re-election at the Annual Meeting.

Board of Directors’ Role in Risk Oversight

As a part of its oversight function, the Board monitors how management operates the Company. Risk is an important part of deliberations at the Board and committee levels throughout the year. Committees consider risks associated with their particular areas of responsibility. The Board conducts periodic reviews of corporate risk management policies and procedures and annually reviews risk assessments prepared by management as a part of CTS’ enterprise risk management process. The enterprise risk management process evaluates CTS’ major risk exposures and the steps management has taken to monitor and mitigate these exposures. Therefore, the Board and its committees consider among other items, the relevant risks to CTS when granting authority to management and approving business strategies. The Board has utilized this risk management structure for a number of years. Although the Board retains the right to make changes in risk oversight responsibilities from time-to-time, the Board anticipates that the risk management responsibilities will continue in a substantially similar manner as described above, whether or not the Board’s leadership structure changes.

Director Education

The CTS Corporation Corporate Governance Guidelines encourage all directors to participate in director continuing education programs. CTS reimburses directors for attendance at such programs. In addition, management monitors and reports to the directors regarding significant corporate governance initiatives. The directors also receive a presentation on new developments in corporate governance at least annually.

Stock Ownership Guidelines for Executives and Directors

The Board has adopted stock ownership guidelines that apply to non-employee directors and executives in order to increase the alignment of their interests with those of shareholders and promote enduring shareholder value. The guidelines are administered by the Compensation Committee. A copy of the guidelines may be obtained free of charge from CTS’ website at https://www.ctscorp.com/wp-content/uploads/2015/10/StockOwnershipGuidelines.pdf.

Director Resignation Policy

The CTS Corporate Governance Guidelines designate the circumstances under which a director must offer his or her resignation to the Board in connection with a change of employment or a majority “against” or “withheld” vote by the shareholders. The Guidelines also require that a director tender his or her resignation effective as of the next occurring Annual Meeting of Shareholders after the date on which he or

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she reaches the age of 75. The Nominating and Governance Committee may recommend to the full Board that an exception be made to this policy. The Board will evaluate the best interest of CTS and its shareholders and may consider any factors it deems relevant in deciding whether to accept a director’s resignation.

Code of Ethics

CTS has adopted a Code of Ethics that applies to all CTS employees, including the principal executive officer, the principal financial officer, the principal accounting officer and/or controller, and all other executive officers and non-employee directors. The Code of Ethics includes ethical standards concerning conflicts of interest and potential conflicts of interest. With respect to executive officers and other employees, potential conflicts of interest must be reported to management. The Audit Committee is responsible for reviewing compliance with the Code of Ethics and reviews any potential conflict of interest involving an executive officer. A copy of the Code of Ethics may be obtained free of charge from the Corporate Secretary upon request or from CTS’ website at http://www.ctscorp.com/wp-content/uploads/CE.pdf.

Additional Information Regarding Company Policies

CTS collects and reports information regarding Environmental, Social and Governance matters under “Corporate Governance” on the CTS website. In addition to overall governance and policies, the Nominating and Governance Committee oversees CTS’ Environmental, Health and Safety performance metrics. The General Counsel’s office collects information relating to these metrics and reviews such information with the Nominating and Governance Committee. Additional information regarding CTS’ policies and guidelines with respect to Environmental, Social and Governance matters can be found on the CTS website at https://www.ctscorp.com/investors/corporate-governance/.

Communications to Directors

Shareholders and other interested parties may address written communications to individual directors, including non-management directors, or to the Board, by writing to the Corporate Secretary at CTS’ executive offices located at 4925 Indiana Avenue, Lisle, Illinois 60532. All communications from shareholders must include the name and address of the shareholder as it appears on the record books of CTS and the name and address of the beneficial owner, if any, on whose behalf the communication is submitted. The Corporate Secretary will compile such communications and forward them to the directors on a periodic basis. However, the Corporate Secretary has authority to disregard any communication that is primarily an advertisement or solicitation or is threatening, obscene, or similarly inappropriate in nature. Communications that have been disregarded for these reasons may be reviewed by any non-management director upon request.

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STOCK OWNERSHIP INFORMATION

Five Percent Owners of CTS Common Stock

The table below lists information about the persons known by CTS to beneficially own at least 5% of the outstanding shares of CTS common stock as of December 31, 2020. There were 32,276,787 shares of CTS common stock issued and outstanding as of December 31, 2020. The shareholding information below is derived solely from the most recent Schedules 13F or 13G, and amendments thereto, filed with the SEC and the percentage ownership is based on the number of shares outstanding as reported herein and may vary from the percentage reported in the applicable Schedules 13F or 13G.

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Directors’ and Officers’ Stock Ownership

The following table shows the number of shares of CTS common stock each named executive officer, director, and director nominee beneficially owned as of March 15, 2021 (the “Record Date”), including shares of CTS common stock covered by stock options exercisable within 60 days of March 15, 2021. Please note that, as reported in this table, beneficial ownership includes those shares of CTS common stock a director or officer has the power to vote or transfer, as well as shares of CTS common stock owned by immediate family members that reside in the same household with the director or officer.

PROPOSAL 2: APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF CTS’ NAMED EXECUTIVE OFFICERS

As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934 (“Exchange Act”), our Board of Directors is submitting a “Say-on-Pay” proposal for shareholder consideration. The Compensation Discussion and Analysis section of this Proxy Statement describes CTS’ executive compensation program and the compensation decisions made by the Compensation Committee and the Board in 2020 with respect to our named executive officers. CTS is asking shareholders to cast an annual advisory shareholder vote approving the compensation of CTS’ named executive officers (commonly referred to as a “Say-on-Pay” vote). We currently hold a Say-on-Pay vote on an annual basis. Our next Say-on-Pay vote is expected to be held at the 2022 Annual Meeting of Shareholders.

CTS’ executive compensation program is designed to attract, retain, and motivate high quality executive talent, to provide executives with strong incentives to maximize CTS’ performance, and to align executives’ interests with those of our shareholders.

CTS remains committed to the use of broad-based metrics such as earnings per share, operating earnings, sales growth, and relative total shareholder return in measuring corporate performance.

For these reasons, the Board is asking shareholders to vote FOR the following resolution:

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“RESOLVED, that the compensation of the named executive officers as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables, and any related material disclosed in the CTS 2021 Proxy Statement, is hereby approved.”

While the advisory vote we are asking you to cast is non-binding, the Compensation Committee and the Board value the views of our shareholders and expect to take into account the outcome of the vote when considering future compensation decisions for our named executive officers.

Your Board recommends a vote FOR the advisory approval of CTS’ named executive officer compensation.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides details about CTS’ compensation practices for its named executive officers. The information provided in this section should be read together with the tables and narratives that accompany the information presented.

The following current and former executive officers are CTS’ named executive officers for 2020, as that term is defined by the SEC:

CTS had no other executive officers during 2020.

Managing the Business During the COVID-19 Pandemic

The COVID-19 pandemic has been a challenging crisis throughout the world.  Similar to CTS’ investors, our employees have felt the impact of the illness, death and social disruption caused by the COVID-19 pandemic, which has also had a significant impact on our business and our operations.  Extraordinary and wide-ranging actions have been taken by public health and governmental authorities to mitigate the impact of COVID-19, including quarantines, stay-at-home orders and business closure mandates requiring that individuals restrict daily activities and that businesses modify, curtail, or cease normal operations.  CTS manufacturing operations in Asia, Europe and North America have been adversely impacted by these governmental restrictions.  CTS employees, their families, and local communities have felt the effects of the COVID-19 pandemic and these government mitigation efforts. Despite these challenges, CTS’ management team and employees have worked diligently to continue to successfully manage the business.

To help manage the COVID-19 pandemic’s impact on CTS, we implemented safety procedures to protect our employees. These procedures include complying with social distancing and other health and safety standards as required by country, state and local government agencies. In addition, we modified the way we conduct many aspects of our business to reduce the number of in-person interactions. For example, we significantly expanded the use of virtual interactions in all aspects of our business, including customer facing activities. Many of our non-manufacturing functions during this time have required modification as well, including most of our workforce working remotely.

CTS also implemented temporary measures to reduce operating expenses and conserve our cash position to mitigate the impact of the COVID-19 pandemic including a temporary 15% reduction to Mr. O’Sullivan’s base salary, temporary 10% reduction to certain other employees’ base salaries (including the base salaries of the other named executive officers), a temporary 10% reduction in cash retainer fees for the Board, mandatory furloughs (where permitted), and headcount reductions. We also suspended the employer match for the CTS Corporation Retirement Savings Plan, referred to as the CTS 401(k) Plan.

Diligent action by CTS early in the COVID-19 pandemic was key to helping spur the business recovery during the third and fourth quarters of 2020.  

Executive Summary

CTS’ executive compensation program is designed to attract, retain, and motivate high-quality executive talent, to provide executives with strong incentives to maximize CTS’ performance, and to align executives’ interests with those of our shareholders. Our executive compensation structure consists of base salary, annual cash incentives, performance-based equity compensation, service-based equity compensation, health and welfare benefits, retirement benefits and limited perquisites. Our named executive officers are required to comply with various good governance policies, such as CTS’ stock ownership guidelines, insider trading restrictions, and an anti-hedging/pledging policy. Additionally, various compensation elements contain “clawback” features, which permit CTS to recoup compensation paid for improperly earned incentives. CTS believes that our executive compensation program provides the best means of attracting, retaining, and motivating executives with the skills and experience necessary to achieve our business goals and maximize shareholder value. CTS has

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remained committed to its fundamental compensation structure and philosophy over a period of many years, including during the current COVID-19 pandemic and other recent periods of economic volatility.

Recent Governance Activity. We hold “Say-on-Pay” votes every year. At our 2020 Annual Meeting of Shareholders, we received approximately 96.3% approval, based on the total votes cast, for our advisory “Say-on-Pay” proposal to approve the compensation of our named executive officers. The Compensation Committee believes the voting results demonstrate significant continuing support for our overall executive pay program. After reviewing the 2020 Say-on-Pay vote results, the Committee did not make any changes as a direct result of the vote and decided to continue to apply the same general philosophy, compensation objectives, and governing principles that it used in 2019 regarding named executive officer compensation decisions and policies. The Committee remains dedicated to aligning executive pay with Company performance both in the existing executive pay programs and the governance environment surrounding the overall program.

2020 Performance. We experienced market softness in 2020 due to the COVID-19 pandemic, which had an unfavorable impact on sales and earnings for the year. Sales declined 10% to $424.1 million in 2020. GAAP earnings per diluted share were $1.06 in 2020 compared to $1.09 in 2019. Adjusted earnings per diluted share, which is used as a target for compensation as described below, was $1.12 in 2020, down 23% from $1.45 in 2019. Cash flow from operations was $76.8 million in 2020 versus $64.4 million in 2019.

Implications of 2020 Results for Compensation. For the 2020 Management Incentive Plan (or MIP), which is our annual performance-based cash incentive plan, our named executive officers were each granted award opportunities based on the following weighted quantitative financial performance metrics: 60% on the Company’s adjusted fully diluted net earnings per share (“Adjusted EPS”); 30% on sales; and 10% on controllable working capital as a percentage of sales.  The minimum threshold for the Adjusted EPS performance metric was not achieved, and no MIP award was paid in respect of 2020 performance.

The Compensation Committee also continued the 2018-2020 Performance Restricted Stock Unit Plan, which is a three-year performance-based equity award program that is operated under the CTS Corporation 2014 Performance and Incentive Compensation Plan. This program measures three-year performance based on the following weighted criteria: 35% on relative total stockholder return (or RTSR); 35% on sales growth; and 30% on operating cash flow.  RTSR is a comparison of the total stockholder return of the Company during the three-year measurement period, relative to the total stockholder return of a designated peer group of companies (as described below) over that same period (including aggregated dividends and adjusted for stock splits over the period).  Sales growth is determined by calculating the change in the Company’s net sales set forth in its consolidated statement of earnings as of the end of the fiscal year immediately preceding the first year of the three-year measurement period as against the net sales set forth in its consolidated statement of earnings as of the end of the last fiscal year of the three-year measurement period.  Operating cash flow is the sum of the Company’s operating cash flow calculated in accordance with GAAP for each year of the three-year measurement period. As a result of the Company’s three-year performance based on these metrics, Messrs. O’Sullivan and Agrawal received resulting payments of 31,369 and 11,216 performance-based RSUs, respectively, in 2021. Awards under the 2018-2020 Performance Restricted Stock Unit Plan were paid in 2021 and were reported in the named executive officer’s compensation when granted in 2018. Mr. Machado’s unvested awards under the 2018-2020 Performance Restricted Stock Unit Plan were forfeited upon his departure from the Company effective July 10, 2020.

In each of February 2019 and 2020, the Compensation Committee established a new three-year performance-based equity compensation program for the 2019-2021 and 2020-2022 periods respectively. The 2019-2021 plan uses the same metrics as the 2018-2020 plan described above but has different goal levels and RTSR peer companies.  The 2020-2022 plan uses the same metrics as the 2018-2020 plan described above but applies different weightings (25% for RTSR, 40% for sales growth, and 35% for operating cash flow), goal levels and RTSR peer companies. Grants made to named executive officers under each year’s program are reported as compensation in our Summary Compensation Table at grant date fair value in the year the grant is made.

Compensation Objectives

CTS designs its named executive officer compensation program to achieve three main objectives:

Additionally, the elements of total compensation are designed to reward the named executive officers for: (1) their core competencies, skills, experience, and contributions to CTS (in the form of base salary, retirement benefits, health and welfare benefits and limited perquisites); (2) achievement of annual corporate goals (in the form of annual performance-based cash incentives); and (3) achievement of long-term objectives that are beneficial to CTS and its shareholders (in the form of performance-based and service-based equity awards).  The first compensation element helps CTS offer competitive compensation, while the second and third compensation elements help CTS link compensation to performance and align compensation with shareholder interests. Decisions on specific elements of compensation do not generally affect the Committee’s decisions regarding the other elements of compensation except to the extent that these categories of compensation are structured to provide a substantial portion of total compensation that is based on performance and at-risk each year.

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Compensation Philosophy

CTS’ executive compensation philosophy is to initially target potential total compensation for each named executive officer at approximately the fiftieth percentile of the compensation for similar positions at similarly situated companies based on market survey data provided by Compensation Strategies, the Compensation Committee’s independent compensation consultant (discussed in more detail below). This philosophy operates as only an initial, general guideline for CTS’ compensation decisions, rather than as a fixed rule or final determining factor. By initially targeting median compensation levels for its named executive officers, CTS believes it strikes the right balance between motivating named executive officers with market competitive factors and providing the compensation necessary to recruit and retain top executive talent.

CTS does not use a specific formula for allocating total compensation between current and long-term compensation or between cash and non-cash compensation. The amount allocated to each element of compensation generally reflects allocation percentages in Compensation Strategies’ market survey data for comparable positions, based on the analysis described below. Additionally, relevant factors such as an executive’s specific level of experience, responsibilities, demonstrated performance, length of service with the Company, achievement of individual and corporate goals, risk, and retention considerations also may affect compensation structure for a particular named executive officer.

Our named executive officers have a substantial percentage of their total compensation opportunities based on at-risk, variable elements of compensation. CTS believes that this practice is appropriate because CTS’ named executive officers have the greatest ability to drive performance and, therefore, should have the most to gain or lose in terms of compensation opportunities based on performance. It is possible for CTS’ named executive officers to earn above-market compensation in any year, but they may earn below-market compensation as well, depending on individual and corporate performance for that year.

CTS believes that named executive officers will consider the impact of decisions in both the short term and long term and will exercise careful judgment, so that while attempting to enhance shareholder value they will not take actions that pose unnecessary risk to the overall long-term well-being of the Company. As a result, CTS has determined that, for the named executive officers and for all of its other employees, CTS’ compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on CTS.

The amount of total compensation realized or potentially realizable from prior compensation awards does not directly influence the level of compensation paid in the current year or future pay opportunities.

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How 2020 Named Executive Officer Compensation was Determined

Mr. O’Sullivan recommended a total 2020 compensation package to the Compensation Committee for each named executive officer other than himself using, among other factors, data provided by Compensation Strategies that aligned each named executive officer's total compensation opportunity at approximately the fiftieth percentile of similarly situated executives based upon the peer group of companies identified in the section below describing the 2019-2021 and 2020-2022 Performance Restricted Stock Unit Plans.

At its February 2020 meeting, the Compensation Committee reviewed the data provided by Compensation Strategies and considered the recommendations of Mr. O’Sullivan, ultimately deciding on a total compensation package for each of the named executive officers. For named executive officers other than Mr. O’Sullivan, total compensation packages for the year were finalized when approved by the Compensation Committee. The Compensation Committee also reviewed information provided by Compensation Strategies based on the same peer group of companies as described above to assess and recommend a total compensation package for Mr. O’Sullivan to the Board, which was discussed by the Board in Independent Session at its February 2020 meeting, and became final upon its ratification.

Elements of 2020 Named Executive Officer Compensation

Base Salary. Base salary is included as an element of total compensation to ensure that each named executive officer receives a base level of cash compensation and is rewarded for his service to the Company. A sufficient base salary also helps to ensure that named executive officers do not become unduly focused on achievement of shorter-term incentive awards that may be to the detriment of the overall long-term health of CTS.

The base salaries for the named executive officers that were set in February 2020 (to be effective in April 2020) were as follows:  Mr. O’Sullivan, $758,000; Mr. Agrawal, $387,188; and Mr. Machado, $338,738.  These base salary levels would have reflected no change to Mr. O’Sullivan’s base salary and an increase for Messrs. Agrawal and Machado of 5% and 3.5%, respectively.  However, the new base salary levels for 2020 for Messrs. Agrawal and Machado were never implemented because as part of our response to the COVID-19 pandemic, in March 2020, the Board approved a temporary 15% reduction to Mr. O’Sullivan’s base salary and a temporary 10% reduction to the base salaries of certain other employees, including each other named executive officer (in each case as against their 2019 base salary level as of December 31, 2019), until the restoration and reinstatement of those base salaries which occurred in October 2020 (after Mr. Machado’s departure from the Company).  In the case of Messrs. O’Sullivan and Agrawal, their base salaries were restored to their 2019 base salary level (as of December 31, 2019) in October 2020.  The base salary levels described in this paragraph are not directly comparable to the amounts listed in the “Salary” column for 2020 in the Summary Compensation Table because the Summary Compensation Table discloses actual base salary earned during the applicable fiscal year rather than any particular base salary rate.

Annual Performance-Based Cash Incentive Plan (MIP). The MIP provides for annual cash payments to named executive officers based on achievement of certain quantitative financial performance goals. A named executive officer’s ultimate award is determined under a formula that provides for payment of zero to 200% of a target award based on CTS’s actual performance versus the established quantitative financial performance goals. In addition, the Compensation Committee reserves the right to adjust awards guided by the named executive officer’s actual performance or the effects of unusual conditions, factors or events.

In February 2020, the Compensation Committee established a target award opportunity as a percentage of base salary and quantitative financial performance goals for each named executive officer. In setting target award opportunities, the Compensation Committee took into consideration the median percentile target awards in the Compensation Strategies reports described above, as well as internal parity.

The quantitative financial performance goals were based on CTS’ established business plan for 2020. Each year, the Board reviews a business plan prepared by members of management that includes projections for revenues, earnings, key balance sheet metrics, and cash flow. The Compensation Committee generally may use any of the metrics set out in the business plan to establish the quantitative financial performance goals for the annual MIP.

In 2020, the Compensation Committee set quantitative financial performance goals for participants who are named executive officers using targets for Adjusted EPS, CTS’ annual sales and controllable working capital as a percentage of sales. CTS chose Adjusted EPS as a metric because it takes into consideration overall financial performance and provides a quantitative measurement from which CTS is able to assess the performance of its named executive officers. CTS chose sales as a metric because it places an emphasis on CTS’ annual sales growth goals. Controllable working capital as a percentage of sales was chosen as a metric because it is an objective measure of the efficiency with which CTS manages its short-term capital needs. Each of the Adjusted EPS, sales and controllable working capital metrics are set forth in the table below. As shown in the table below, the Compensation Committee set the performance levels for each metric and established a minimum performance level that had to be reached before MIP awards were paid with respect to that metric. The MIP also includes a minimum threshold for Adjusted EPS that must be met for any portion of the MIP award to pay out. Failure to reach the MIP’s minimum threshold for Adjusted EPS results in no payment for the entire MIP award.

Adjusted EPS is calculated by using the Company’s fully diluted net earnings per share as reported in the Company’s consolidated statement of earnings for the applicable fiscal year, which, for purposes of the MIP, may be adjusted for unusual conditions, factors or

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events as determined by the Compensation Committee.  Sales are calculated using the net sales as reported in the Company’s audited financial statements for the applicable fiscal year, which, for purposes of the MIP, may be adjusted for unusual conditions, factors or events as determined by the Compensation Committee.  Controllable working capital as a percentage of sales is derived by dividing accounts receivable plus inventory minus accounts payable by annualized quarterly sales, adjusted to exclude temporary inventory safety stock during plant transition and supplier transition in excess of $1 million.  The controllable working capital metric is calculated on a quarterly basis using an annualized sales figure, and the overall annual calculation is determined by computing the simple average of the four quarterly measurements for the applicable fiscal year.  

Determination of Actual MIP Awards. Actual MIP award payments are based on a formula and can vary from zero to 200% of the target award opportunity based on achievement of the quantitative financial performance goals.  If actual performance fails to meet the minimum or required threshold for a quantitative financial goal, the payout under the MIP for that goal is zero.  On the upside, payout increases linearly up to 200% as performance exceeds the threshold performance goals.  If actual performance equals the minimum or required threshold for a quantitative financial goal, the payout under the MIP for that goal is 50% of the target award opportunity, and if actual performance equals the target quantitative financial goal, the payout under the MIP for that goal is 100% of the target award opportunity.  The Company uses straight line mathematical interpolation to calculate results between the minimum threshold and target and target and the maximum level.  One consequence of this cliff threshold and payout performance formula is that a named executive officer’s risk of receiving no award is greater than the named executive officer’s opportunity to obtain an award that is substantially above target. Another consequence is that payouts above target represent a fraction of the expected return to the Company from “better than plan” performance. Since payments are capped, a named executive officer cannot increase MIP awards beyond a fixed amount, counterbalancing the incentive to pursue outsized short-term rewards at the expense of the long-term health of the Company. While actual awards will vary above and below target from year to year, CTS expects that over a period of several years, payouts under the MIP will average about 100% of target. Over the past five years, payouts under the MIP based on corporate metrics averaged 96.8% of target.

How 2020 MIP Awards Were Calculated. For CTS’ named executive officers, performance measurements were weighted 60% for the Adjusted EPS goal, 30% for the sales goal, and 10% for the controllable working capital goal. The target award opportunity which was based on base salary and unchanged from the prior year, was 100% for Mr. O’Sullivan, 65% for Mr. Agrawal, and 55% for Mr. Machado. Mr. Machado’s award under the MIP was forfeited upon his departure from the Company effective July 10, 2020.  For purposes of the 2020 MIP Plan, base salary is generally the named executive officer’s annual base salary level in effect on the last day of the applicable calendar year. These target award opportunities were derived in part from the data obtained from the Compensation Strategies report and in part by the Compensation Committee’s judgment on internal equity of the positions, their relative value to CTS, and the desire to maintain a consistent annual target award incentive for named executive officers of CTS and other key employees.

For 2020, the minimum threshold for the Adjusted EPS metric was $1.35, the target was $1.50 and the maximum was $1.65. The minimum threshold for Company sales was $450 million with a target of $475 million and a maximum of $513 million. The minimum threshold for controllable working capital as a percentage of sales was 14%, with a target of 12.7% and a maximum of 11.4%.  Actual results are shown in the table below. The minimum threshold for Adjusted EPS was not achieved resulting in no payment under the MIP for 2020.

Despite these 2020 MIP results, in early 2021, the Compensation Committee determined to award Mr. Agrawal a discretionary bonus of $75,000 to specifically reward his individual performance during 2020 in addressing the unique challenges posed by the COVID-19 pandemic and other headwinds faced by CTS.  This amount was determined on a subjective basis by the Compensation Committee, based upon a recommendation by Mr. O’Sullivan.

Performance-Based Equity Compensation. Named executive officers may earn RSUs based upon, and thus are rewarded for, achievement of financial objectives that CTS believes are beneficial to the Company and its shareholders, or based upon CTS’ overall performance relative to peers over a longer term.

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2018-2020 Performance Restricted Stock Unit Plan.  In February 2018, the Compensation Committee established the 2018-2020 Performance Restricted Stock Unit Plan. Depending upon CTS’ achievement of sales growth, operating cash flow, and CTS’ RTSR compared to the peer group of companies described below over a three-year performance period (through December 31, 2020), a named executive officer is eligible to earn an RSU award of zero to 200% of a target award opportunity established for his position. Awards are weighted 35% for achievement of the RTSR metric, 35% for achievement of the sales growth metric and 30% for achievement of the operating cash flow metric. Awards are settled on the basis of one share of CTS common stock for each earned RSU on the settlement date.

In February 2018, the Compensation Committee established a target award opportunity for each named executive officer in the form of a specific number of RSUs. The target RSU award opportunities for Messrs. O’Sullivan, Agrawal, and Machado were: 31,820; 11,377; and 9,316 respectively.

The Compensation Committee selected RTSR as a performance goal because it is a meaningful measure of CTS’ overall relative performance in comparison to its designated peers. Three-year sales growth was selected to reinforce senior management’s focus on increasing sales over the long-term. Three-year operating cash flow was selected to focus management’s attention on operational efficiency. The Compensation Committee selected a three-year performance measurement period to encourage sustained performance beneficial to shareholders over more than just an annual period.

The Compensation Committee also determined the various performance levels that had to be achieved in order to earn an RSU award which are shown in the graphs below.

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Payouts with respect to each metric are interpolated between the established levels set forth in the graphs above.  However, there is no interpolation for performance below the applicable threshold levels.

The award utilized a peer group consisting of the companies identified in this paragraph whose total stockholder return performance is compared to CTS’ performance over the three-year performance period for the RTSR measurement. A peer company may be removed from the list if it is delisted from its exchange or ceases to exist as a business entity for certain reasons not involving poor performance.  If a peer company is acquired, merged or otherwise assumed by another business entity and the resulting entity is substantially the same in size and nature of business, then it will remain in the peer group; otherwise, the peer company may be removed from the peer group.  

The peer group of companies noted above originally included AVX Corporation and KEMET Corporation, but each was subsequently removed from the peer group due, in each case, to their acquisition by other companies.

Participants must remain continuously employed by CTS through the end of the three-year performance period to receive an award, subject to limited exceptions. The Compensation Committee can, in its discretion, adjust a participant’s payout of an award after consideration of other factors, including overall CTS performance and the individual participant’s contribution to CTS performance. The Compensation Committee can also adjust a payout of an award in its discretion to prevent the enlargement or dilution of the award because of extraordinary events or circumstances as determined by the Compensation Committee.

Three-year Performance Restricted Stock Unit Plans. In each of February 2019 and February 2020, the Compensation Committee established a new three-year performance-based equity compensation program in which named executive officers participate. The 2019-2021 plan uses the same metrics and weightings as the 2018-2020 plan described above but has different goal levels and RTSR peer companies.  The 2020-2022 plan uses the same metrics as the 2018-2020 plan described above but applies different weightings (25% for RTSR, 40% for sales growth, and 35% for operating cash flow), goal levels and RTSR peer companies.

The peer group of companies utilized for purposes of the 2019-2021 and 2020-2022 Performance Restricted Stock Unit Plans consists of the following companies:

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The peer group noted above originally included AVX Corporation, Electro Scientific Industries, Inc., KEMET Corporation and Maxwell Technologies, Inc., but each was subsequently removed from the peer group due, in each case, to their acquisition by other companies.

We do not disclose the specific, forward-looking goals that we established for the 2019-2021 and 2020-2022 performance-based RSUs in this Proxy Statement because (1) these goals relate to executive compensation to be earned and/or paid in future years and do not affect a fair understanding of the named executive officers’ compensation for 2020 and (2) we believe that disclosure of such goals while the applicable performance period is ongoing would cause us competitive harm.  However, we intend to disclose such goals in future proxy statements once the applicable performance periods have ended as part of our discussion and analysis about the amounts earned by the named executive officers under these awards. In setting the applicable target levels, the Compensation Committee considered how achievement of the performance goals could be impacted by events expected to occur in the coming years. We believe that the threshold goals have been established at levels that should be appropriately difficult to attain, and that the target goals will require considerable and increasing collective effort on the part of our employees, including our named executive officers, to achieve. Achievement of the maximum goal is considered to be a stretch goal given current market conditions.

The Compensation Committee established a target award opportunity for each participating named executive officer in the form of a specific number of RSUs for each three-year performance plan targeting consistent value based on the compensation metrics described above while accounting for changes in grant date share value. The target RSU award opportunities under the 2019-2021 Performance Restricted Stock Unit Plan are: Mr. O’Sullivan, 27,782; Mr. Agrawal, 11,048; and Mr. Machado, 9,958; and under the 2020-2022 Performance Restricted Stock Unit Plan are: Mr. O’Sullivan, 34,727; Mr. Agrawal, 10,557; and Mr. Machado 9,515. Mr. Machado’s unvested performance-based equity awards were forfeited upon his departure from the Company effective July 10, 2020.

Performance Vesting Stock Option Plan. In May 2015, the Compensation Committee established a special five-year performance-based equity compensation program called the Performance Vesting Stock Option Plan in which all of the named executive officers participate. The plan employs achievement of $600 million in revenue in any trailing four quarters within the five-year window as a performance vesting trigger. The Compensation Committee established a target award opportunity for Mr. O’Sullivan of 100,000 options; Mr. Agrawal of 35,000 options; and Mr. Machado of 30,000 options, each with a strike price of $18.37, in the form of performance stock options. The performance vesting trigger for the Performance Vesting Stock Option Plan was not achieved during the five-year window therefore the options did not vest and were forfeited on the expiration date of May 26, 2020.

Service-Based Equity Compensation. CTS believes that stock ownership and equity-based compensation are valuable tools for motivating employees to improve, and rewarding them for improvements in, CTS’ long-term performance. In February 2020, the Compensation Committee awarded RSUs vesting over a three-year period to Messrs. Agrawal (7,040) and Machado (4,077) based on the recommendation of Mr. O’Sullivan. In making his recommendation, Mr. O’Sullivan analyzed the third-party market information provided by Compensation Strategies and subjectively considered retention and performance factors. Mr. O’Sullivan’s 2020 RSU award was recommended by the Compensation Committee and approved by the entire Board (other than Mr. O’Sullivan, who abstained in discussions and votes related to his own awards). Mr. O’Sullivan’s 2020 grant was for 22,320 RSUs based on benchmarking, retention, and performance factors. Each service-based RSU award is settled on a one-for-one basis with shares of CTS common stock upon vesting. Grants of equity awards made in 2020 are reported in the “Summary Compensation Table” and the “2020 Grants of Plan-Based Awards” table.  In connection with his departure from the Company effective July 10, 2020, Mr. Machado forfeited his unvested service-based equity awards.

Defined Contribution Plan. Substantially all U.S.-based CTS employees are eligible to participate in the CTS Corporation Retirement Savings Plan, referred to as the CTS 401(k) Plan. CTS matches an employee’s contributions dollar for dollar up to the first 3% of eligible pay, and thereafter at $0.50 for every dollar up to the next 2% of eligible pay, for a maximum matching contribution of 4%, subject to limitations under the Internal Revenue Code. All of the named executive officers participate in the 401(k) Plan.  As part of the Company’s response to the COVID-19 pandemic, the Company suspended matching contributions to the 401(k) Plan in May 2020.  In January 2021, the Company made a nonelective employer contribution of 1.3% of eligible pay up to $285,000 (which was accrued in 2020) to each CTS eligible participant in the 401(k) Plan.  This amount is included in the 2020 Summary Compensation Table.  In addition, the Company resumed making normal matching contributions to the 401(k) plan in February 2021.

Other Compensation. CTS provides a limited set of perquisites and other compensation in order to attract, retain, and motivate the named executive officers. For 2020, compensation for named executive officers included reimbursements for tax preparation services, financial planning services, and an annual executive physical. The reimbursement for tax preparation services is capped at $2,500 for each

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named executive officers. The reimbursement for financial planning services is capped at $5,000 for each named executive officer. The reimbursement for executive physicals is capped at $2,000 for each of the named executive officers and their respective spouses. The footnotes to the 2020 Summary Compensation Table delineate the various perquisites named executive officers received for 2020.

Health and Welfare Benefits. Named executive officers are also eligible to participate in a standard set of health and welfare benefits, including medical insurance, dental insurance, vision insurance, life insurance, accidental death and dismemberment insurance, disability insurance, dependent life insurance, an employee assistance plan, and health care and dependent care reimbursement accounts. The same terms of participation that apply to salaried employees generally govern the participation of named executive officers in these benefits.

Departure of Mr. Machado.  As noted above, Mr. Machado departed the Company effective July 10, 2020 and did not receive any severance compensation or enhanced benefits in connection with his departure.

Agreements and Arrangements with Named Executive Officers

Executive Severance Policy. In 2009, CTS enacted an Executive Severance Policy. This policy formalized and standardized CTS’ severance practices for certain officers and key employees. For more on the executive severance policy, please see the section of this Proxy Statement titled “Potential Payments Upon Termination or Change-in-Control” below.

Change-In-Control Severance Agreements. CTS has entered into change-in-control severance agreements with the named executive officers, the purpose of which is to help CTS retain named executive officers and encourage them to focus on corporate interests during times of change and uncertainty. As discussed in the “Potential Payments Upon Termination or Change-in-Control” section, these agreements reduced or eliminated certain payments, including an excise tax gross-up, and placed a cap on the total severance benefit. For more on the severance agreements, please see the section of this Proxy Statement titled “Potential Payments Upon Termination or Change-in-Control” below.

Stock Ownership Guidelines

See the section titled “Stock Ownership Guidelines for Executives and Directors” of this Proxy Statement for a discussion of CTS’ Stock Ownership Guidelines.

CTS Securities Hedging/Pledging Policy

CTS has adopted a policy prohibiting officers, directors and certain other employees who receive CTS securities from engaging in any transaction in which they may profit from short-term speculative swings in the value of those securities or from pledging CTS’ securities in lending transactions. These individuals may not trade in options, warrants, puts and calls or similar instruments relating to CTS securities, and may not engage in hedging or monetization transactions designed to minimize the risk in owning CTS securities, such as zero-cost collars and forward sale contracts. These individuals also may not pledge CTS’ securities as collateral for a loan, including, without limitation, in a margin account. The prohibitions described above do not apply to the exercise of stock options granted as a part of a CTS incentive plan.

Policy on Recovery of Awards

The CTS Corporation 2014 Performance and Incentive Compensation Plan under which various performance-based and service-based equity grants have been made includes a provision to address recoupment of incentive awards in the event of financial restatements. If the Board learns of any intentional misconduct by a plan participant that contributes to CTS’ having to restate its financial statements, the Board may require that individual to reimburse CTS for the difference between any award he or she received and the amount of the award he or she would have received based on the financial results as restated. The CTS Corporation 2018 Equity and Incentive Compensation Plan provides that any award agreement under the plan may reference a clawback policy of the Company or provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any gain related to an award, or other similar provisions, upon such terms and conditions as may be determined by the Compensation Committee, if a participant engages in detrimental activity. Further, any award agreement under the 2018 Equity and Incentive Compensation Plan or a clawback policy may also provide for the cancellation or forfeiture of an award or the forfeiture and repayment to the Company of any benefit related to an award, or other similar provisions, upon such terms and conditions as may be required by the Compensation Committee or under Section 10D of the Exchange Act. In addition, the Compensation Committee Charter provides that the Committee may adopt a clawback policy as may be required or advisable under any law or regulation. The Compensation Committee reviews its Charter and policies at least annually to ensure appropriate recoupment of compensation is available to the Company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and approved its inclusion in this Proxy Statement. Based on this review and discussion, the Compensation Committee recommended to

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the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and in CTS’ Annual Report on Form 10-K for the year ended December 31, 2020.

CTS Corporation 2020 Compensation Committee

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EXECUTIVE COMPENSATION

2020 Summary Compensation Table