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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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to Be Held on April 20, 2022.   Our Notice of Annual Meeting, Proxy Statement, and 2021 Annual Report are available online at www.proxyvote.com.

Table of Contents

 

 

As used in this Proxy Statement, the terms “Sherwin-Williams,” “the Company,” “we,” and “our” refer to The Sherwin-Williams Company. All share, restricted stock unit, and per share or per restricted stock unit information included in this Proxy Statement has been adjusted to reflect our three-for-one stock split effected on March 31, 2021.

This Proxy Statement includes website addresses and references to additional materials found on those websites or in other reports filed with the Securities and Exchange Commission (the SEC). These websites and materials are not incorporated into this Proxy Statement by reference.

Cautionary Statement Regarding Forward-Looking Information. This Proxy Statement contains certain “forward-looking statements,” as defined under U.S. federal securities laws. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” “target,” “potential,” “seek,” “intend,” “aspire,” or “anticipate,” or the negative thereof, or comparable terminology. These statements are based upon current expectations, predictions, estimates, assumptions, and beliefs concerning future events and conditions. Readers are cautioned not to place undue reliance on any forward-looking statements as they are necessarily subject to risks, uncertainties, and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements and from the Company’s historical results, performance, and experience. These risks, uncertainties, and other factors are more fully described in the Company’s most recently filed Annual Report on Form 10-K and subsequent filings with the SEC. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Proxy Summary

This summary highlights certain Company information and information contained elsewhere in this Proxy Statement. It does not contain all of the information you should consider in connection with voting your shares. Please carefully read the entire Proxy Statement and our Annual Report to Shareholders for the fiscal year ended December 31, 2021 (2021 Annual Report) before voting.

2022 Annual Meeting of Shareholders

 

 

Date and Time		Record Date		Location		Who Can Attend and Vote
Wednesday   April 20, 2022   9:00 a.m. EDT		February 22, 2022		Online only at www.virtualshareholdermeeting.com/SHW2022		Shareholders of record at the close of business on February 22, 2022

Proposals and Board Recommendations

 

 

Item		Proposal		Board Recommendation		Page
1		Election of 11 directors		FOR each nominee		21
2		Advisory approval of the compensation of the named executives		FOR		30
3		Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm		FOR		62

 

 

							1

Our Company

Purpose and Values

Our Purpose. Since our Company was founded in 1866, we believe we have created benefits and delivered consistent value for multiple stakeholders. Our Board is entrusted with oversight for the long-term health and sustainability of the Company. It is within this context that the Board issued a Statement of Purpose during 2021 to provide guidance not only to management, but to relevant stakeholders, regarding the following Board-determined purpose of the Company.

We inspire and improve the world by coloring and protecting what matters.

Our Board formulated the Statement of Purpose based on information provided by management through its extensive stakeholder engagement process, the Company’s prior reporting, and our Board’s independent business judgment.

Our Stakeholders. We fulfill this purpose through the development, manufacture, distribution, and sale of innovative paint and coatings products, striving to deliver benefits for all major stakeholders. Through our integrated approach to the stakeholders we serve, including our employees, customers, shareholders, and communities, we seek to inspire and improve society as a whole.

 

Employees   Our employees participate in an inclusive and diverse environment that provides extensive opportunities for professional development and personal wealth- building.		Customers   Our customers benefit from a solutions-driven approach emphasizing application- specific expertise, industry leading innovation, value- added service, and differentiated distribution.		Shareholders   Our shareholders can expect an experienced management team to remain focused on long-term value creation.		Communities   Our communities where we operate prosper through job creation, direct financial support, in-kind gifts, employee volunteerism, and civic engagement.

Our Guiding Values. Embedded in our corporate purpose are our seven guiding values that serve as the foundation of our Culture of Excellence and influence how we act in fulfilling our purpose.

 

 

2		2022 PROXY STATEMENT

Financial and Operating Performance

2021 Performance Results. Our full year results were impacted by unprecedented supply chain disruptions and raw material cost inflation primarily resulting from two natural disasters that occurred during 2021—Winter Storm Uri and Hurricane Ida. These extreme weather events caused raw material shortages that significantly hindered the Company’s ability to manufacture the products needed to fully meet robust customer demand.

Our dedicated employees responded with determination and demonstrated remarkable resilience in navigating the supply chain challenges experienced during 2021. Through these challenges, we worked tirelessly and creatively to identify and make adjustments throughout our business to reduce the impacts to our customers and improve raw material availability, while continuing to invest in growth initiatives. We more fully describe these efforts in responding to the adverse impacts of the natural disasters in the Compensation Discussion and Analysis (CD&A) section of this Proxy Statement.

Despite the challenges of the past year, consolidated net sales increased 8.6% to a record $19.94 billion in 2021—marking our eleventh consecutive year of growth. Net income and diluted net income per share for the year were $1.86 billion and $6.98, respectively, and we generated net operating cash of $2.24 billion.

The following graphs show our Company’s performance for key financial measures over the past three-year period.

 

 

 

1

2021 includes after-tax acquisition-related amortization expense of $223 million and an after-tax loss on the divestiture of the Wattyl business of $89 million. 2020 includes after-tax acquisition-related amortization expense of $230 million. 2019 includes after-tax acquisition-related costs of $300 million, after-tax non-cash trademark impairment charges of $93 million, a tax credit investment loss of $74 million, and after-tax pension settlement expense of $25 million, partially offset by an after-tax Brazil indirect tax credit of $33 million and an after-tax benefit from the resolution of the California litigation of $26 million.

 

2

2021 includes charges of $0.83 per share for acquisition-related amortization expense and a $0.34 per share loss on the divestiture of the Wattyl business. 2020 includes a charge of $0.83 per share for acquisition-related amortization expense. 2019 includes charges of $1.07 per share for acquisition-related costs, $0.33 per share for non-cash trademark impairment charges, a tax credit investment loss of $0.26 per share, and pension settlement expense of $0.09 per share, partially offset by a Brazil indirect tax credit of $0.12 per share and a benefit from the resolution of the California litigation of $0.09 per share.

Returning Significant Value to Shareholders. In 2021, we continued driving significant shareholder value and executing on our disciplined capital allocation strategy. We returned approximately $3.34 billion to our shareholders in the form of dividends and share repurchases, an increase of approximately 14% over the prior year. We also increased our annual dividend to $2.20 per share, extending our string of dividend increases to 43 consecutive years. In February 2022, the Board increased the quarterly cash dividend to $0.60 per share, an increase of approximately 9% over the dividend paid in the same quarter in 2021.

 

Sherwin-Williams has returned approximately $7.47 billion to shareholders over the three-year period		Total Shareholder Return, including reinvestment of dividends

 

							3

Sustainability and Environmental, Social, and Governance

We believe that, as we seek to inspire and improve the world by coloring and protecting what matters, we have an opportunity and responsibility to contribute to a more sustainable future. We also believe that leadership in sustainability and environmental, social, and governance (ESG) matters will enable us to continue creating and driving value for our stakeholders.

Sustainability Framework. During 2021, we announced a new, integrated framework for our sustainability strategy that includes the following three pillars and focus areas.

 

		Environmental Footprint – Doing Our Part for the Planet. We recognize the global significance of climate change and responsible consumption and production. We are committed to reducing the environmental footprint of our global operations in the near term, while enhancing our longer-term environmental footprint reduction strategy. Throughout the Company, we continue to identify and implement initiatives to assist in reducing our carbon emissions, energy use, and waste and expanding our renewable energy use and recycling methods.
		Product Blueprint – Driving Sustainability Through Innovation. Through our Sustainability by Design initiative, we are formalizing our approach to incorporating sustainability attributes, such as life cycle thinking, throughout our innovation and product development processes and enhancing our long-standing commitments to product stewardship, chemicals management, and compliance excellence. Also through this initiative and our continuous improvement culture, we strive to further develop and expand our portfolio of “sustainably advantaged products,” which are products that achieve a level of third-party green chemistry, ecolabel, or similar recognition or can be shown to be more sustainable than what is currently the norm for the industry.
		Social Imprint – Elevating a Culture of Safety, Inclusion, and Community. Supporting our people is embedded in our values and the strength of our workforce is critical to the Company’s success.   ●  The safety of our employees is a top priority for the Company, and we have a continued focus on enhancing process safety, advancing occupational health, and reducing workplace injuries and safety risks.   ●  We are committed to fostering a culture of inclusion where differences are welcomed, appreciated, and celebrated to positively impact our people and business. Our culture and commitment to our people and inclusion, diversity, and equity (ID&E) are important factors in driving employee engagement and attracting, retaining, developing, and progressing a diverse pipeline of talent.   ●  We care deeply about the communities in which we live and work—supporting them as a Company, through The Sherwin-Williams Foundation, and by encouraging and providing opportunities for our employees to be engaged and give back to their communities.

Sustainability Governance. Our approach to sustainability and ESG performance is managed within a governance structure that enables broad engagement across the organization, while providing for appropriate oversight throughout the Company. Our Sustainability Council consists of subject matter experts responsible for leading working groups that manage various initiatives, policies, and programs addressing focus areas across our sustainability framework and our governance structure. The Sustainability Steering Committee, composed of members of senior management and other senior leaders, seeks to ensure a holistic approach to developing and overseeing our sustainability and ESG strategies and initiatives and to drive alignment across the organization to address emerging risks and opportunities. Members of the Sustainability Steering Committee provide periodic updates to the full Board and its committees. We provide more information about the Board’s and each committee’s oversight of specific sustainability- and ESG-related risks under the heading “Board and Committee Oversight” in this Proxy Summary and in the Corporate Governance section.

2021 Recognition. We are proud of our achievements and progress on our sustainability and ESG initiatives and honored to be recognized for our efforts during 2021.

 

●   Newsweek® America’s Most Responsible Companies   ●   Investor’s Business Daily® Best ESG Companies   ●   MSCI® ESG Rating of “A,” up from “BBB”   ●   Yahoo! Finance® Best ESG Stocks		●   Forbes® 2021 America’s Best Employers for Diversity, Women, Veterans, and New Graduates   ●   Forbes® 2021 Green Growth 50   ●   Human Rights Campaign Foundation, 2022 Best Places to Work for LGBTQ+ Equality

 

 

4		2022 PROXY STATEMENT

Our Director Nominees

The following table provides summary information about each of our director nominees. Directors are elected annually by a majority of votes cast.

 

COMMITTEES

Name and Principal Occupation

Director Since

Independent

AC

CMDC

NCGC

Other Public Company Boards

Kerrii B. Anderson Retired, Former CEO & President, Wendy’s International, Inc.

2019

●

C

●

3

Arthur F. Anton Retired, Former Chairman & CEO, Swagelok Company

2006

●

F

3

Jeff M. Fettig Retired, Former Chairman & CEO, Whirlpool Corporation

2019

●

C,F

●

1

Richard J. Kramer Chairman, CEO & President, The Goodyear Tire & Rubber Company

2012

●

F

C

1

John G. Morikis Chairman & CEO, The Sherwin-Williams Company

2015

1

Christine A. Poon Retired, Former Vice Chairman, Johnson & Johnson

2014

●

●

2

Aaron M. Powell CEO, Pizza Hut Division, Yum! Brands, Inc.

2021

●

F

0

Marta R. Stewart Retired, Former Executive VP & CFO, Norfolk Southern Corporation

2021

●

F

1

Michael H. Thaman Retired, Former Chair & CEO, Owens Corning

2017

●

●

0

Matthew Thornton III Retired, Former Executive VP & COO, FedEx Freight, FedEx Corporation

2014

●

●

1

Steven H. Wunning Retired, Former Group President, Caterpillar Inc.

2015

● L

●

●

2

AC = Audit Committee

C = Committee Chair

CMDC = Compensation and Management Development Committee

F = Financial Expert

NCGC = Nominating and Corporate Governance Committee

L = Lead Independent Director

 

							5

Board Composition

Our Board utilizes a thoughtful approach to board composition to ensure a proper balance between the addition of new directors who bring fresh and diverse perspectives and the stability of the Board as a whole. Our director nominees reflect the Board’s efforts and commitment to achieving diversity, including with respect to age, gender, race, and ethnicity, and the need for periodic refreshment to maintain this commitment. It is the Board’s policy to include, and to request that any search firm it engages include, women and racially or ethnically diverse persons in the pool of candidates from which director nominees are chosen.

 

 

Balanced Mix of Skills and Experience

Our director nominees also reflect the Board’s efforts to ensure our directors have the variety of experiences, qualifications, attributes, and skills necessary to make significant contributions to the Board, Sherwin-Williams, and our shareholders. Our Board believes this mix contributes to a well-balanced Board and enables the Board to provide effective oversight of our management and business. These experiences, qualifications, attributes, and skills are reviewed regularly in considering the composition of the full Board and each director nominee.

 

 

 

6		2022 PROXY STATEMENT

Corporate Governance

The Board and management have recognized for many years the importance of sound corporate governance practices in fulfilling their respective duties and responsibilities. We also believe effective corporate governance is essential for maximizing long-term value for our shareholders.

Our Board and Committees

Under our Corporate Governance Guidelines, each director is expected to attend, absent unusual circumstances, all meetings of the Board and each committee on which he or she serves. Each director is also expected to attend, absent unusual circumstances, all annual and special meetings of shareholders.

 

		Members		Independence		Meetings Held During 2021
Board of Directors		11		10 of 11		6
Audit Committee		6		100%		5
Compensation and Management Development Committee		4		100%		4
Nominating and Corporate Governance Committee		4		100%		4

Each of our directors attended at least 75% of the 2021 Board and committee meetings that occurred while he or she served as a member.

Sound Corporate Governance Practices

Our corporate governance practices are designed to enable the Board to set objectives and monitor performance and to strengthen the accountability of the Board and management. We actively monitor our corporate governance practices to ensure we continue to manage our business in accordance with high standards of ethics, business integrity, and corporate governance. The following table highlights some of our corporate governance practices and policies.

 

●   Annual election of all directors   ●   Majority voting standard and resignation policy for directors in uncontested elections   ●   Director overboarding policy   ●   Proxy access rights available to 3 year, 3% shareholders, for up to 20% of the Board   ●   10 of 11 director nominees are independent   ●   Robust independent lead director role and governance responsibilities   ●   Board committees are entirely composed of independent directors   ●   Board oversight of risk management   ●   Board and committee oversight of key sustainability and ESG policies and strategies		●   Mandatory retirement age of 72 for directors   ●   Orientation program for new directors   ●   Annual board and committee self-assessments   ●   Executive sessions of independent directors are held with each regularly scheduled board meeting   ●   Directors have complete access to management   ●   Prohibition on hedging and pledging of our securities   ●   Significant director and executive stock ownership guidelines   ●   Policy to include women and racially or ethnically diverse persons in the pool of candidates from which director nominees are chosen   ●   Director matrix that includes consideration of self-identified diversity characteristics, such as gender, race, and ethnicity

 

							7

Board and Committee Oversight

While management is responsible for assessing and managing our exposure to various risks, the Board has responsibility for the oversight of risk management. Each Board committee reviews specific risk areas to assist the Board with its overall risk oversight responsibility. The following table highlights select areas of Board and committee oversight.

 

		Audit Committee		Compensation Committee		Nominating Committee		Full Board of Directors
Enterprise Risk Management		●						●
Cybersecurity		●						●
Financial		●						●
COVID-19 Response		●		●				●
Compensation Policies and Practices				●				●
Management Development and Succession				●				●
Attraction, Retention, and Development of Talent				●				●
Inclusion, Diversity, and Equity				●				●
Board Succession						●		●
Corporate Governance						●		●
Environmental (including the impacts of climate change)						●		●
Product Stewardship						●		●
Health and Safety						●		●
Sustainability						●		●
Corporate Social Responsibility						●		●
Public Policy and Political Engagement								●

 

8		2022 PROXY STATEMENT

Executive Compensation

Our Compensation Objectives

We design and manage our Company-wide compensation programs to align with our overall business strategy and to focus our employees on delivering sustained financial and operating results and creating value for our shareholders on a consistent, long-term basis. We believe it is important that our compensation programs: (a) be competitive; (b) maintain a performance- and achievement-oriented culture; and (c) align the interests of our executives with those of our shareholders.

Our Compensation Mix

A significant percentage of our executives’ compensation opportunity is variable, at-risk, and tied to Company or business unit performance, including stock price appreciation. For 2021, 90% of total direct compensation (base salary, annual incentive, and long-term incentive) for our Chief Executive Officer (CEO) and an average of 79% for our other named executives was at-risk and tied to performance.

 

Our Responsible Compensation Practices

Our compensation programs, practices, and policies demonstrate our commitment to responsible pay and governance principles. The following table highlights some of the more significant best practices we have adopted, and the practices we have avoided, to maintain our commitment.

 

●   Annual say-on-pay vote   ●   Independent Compensation Committee   ●   Independent compensation consultant   ●   Peer group benchmarking to median pay   ●   Emphasis on performance-based pay   ●   Responsibly administered incentive compensation programs   ●   Balanced compensation structure   ●   Diversified performance metrics tied to financial and operating performance   ●   Significant stock ownership guidelines for our directors and executives		●   Clawback and recapture policy   ●   No excessive or unnecessary risk-taking in compensation policies   ●   No excessive perquisites   ●   No payment of dividend equivalents on unvested restricted stock units   ●   Double-trigger vesting of long-term equity incentive awards upon change in control   ●   No repricing or replacing of underwater stock options without shareholder approval   ●   No above-market earnings on deferred compensation   ●   No employment agreements with named executives

 

							9

Corporate Governance

Board Leadership Structure

Combined Chairman and Chief Executive Officer Role

Our Corporate Governance Guidelines provide that the same person should hold the positions of Chairman of the Board (Chairman) and CEO, except in unusual circumstances such as during a period of transition in the office of the CEO. The Board believes this structure provides the most efficient and effective leadership model for the Company and clear insight and direction of business strategies and plans to both the Board and management. The Board also believes we can most effectively execute our business strategies and plans if our Chairman is a member of our management team, providing unified leadership and focus.

Lead Director

Under our Corporate Governance Guidelines, if the Chairman is not an independent director, the independent directors of the Board, considering the recommendation of the Nominating and Corporate Governance Committee, annually will elect an independent director who has served as a member of the Board for at least one year to serve as Lead Director. Although annually elected, the Lead Director is generally expected to serve for more than one year. Steven H. Wunning currently serves as the Company’s Lead Director and has held this position since 2019. The Board believes a Lead Director improves the Board’s overall performance by enhancing the efficiency of the Board’s oversight and governance responsibilities and by supporting the relationship between the Chairman and CEO and the independent directors.

The Lead Director has a significant role, with robust governance responsibilities that were recently enhanced and are clearly described in our Corporate Governance Guidelines. These responsibilities are as follows:

 

•

Chair meetings of the Board at which the Chairman is not present.

 

•

Chair executive sessions of the independent directors. Meet separately with the Chairman after executive sessions to review the matters discussed during the executive sessions.

 

•

Authority to call meetings of the independent directors.

 

•

Review with the Chairman and approve the schedule for meetings of the independent directors and set the agenda for such meetings.

 

•

Facilitate communications and serve as the principal liaison on Board-related issues between the Chairman and the independent directors. Each director, however, is free to communicate directly with the Chairman.

 

•

Review with the Chairman and approve the schedule for meetings of the Board to help assure that there is sufficient time allocated for discussion of all agenda items.

 

•

Suggest to the Chairman agenda items for meetings of the Board and approve the agenda, as well as the substance and timeliness of information sent to the Board.

 

•

Authorize the retention of independent legal advisors, or other independent consultants and advisors, as necessary, who report directly to the Board on Board-related issues.

 

•

If requested by major shareholders, ensure that he or she is available for consultation and direct communication.

 

•

Act as a resource for, and counsel to, the Chairman.

Other Leadership Components

Our strong leadership structure ensures the Board effectively carries out its responsibility to oversee management, and the Board has full access to our management team at all times. We also believe this leadership structure, with Mr. Morikis serving as Chairman and CEO, enhances the Board’s effectiveness in fulfilling its risk oversight responsibility due to his extensive knowledge of our operations and the paint and coatings industry.

All Board committees are entirely composed of independent directors and assist the Board with its overall oversight responsibility. In addition, the Board, the Lead Director, and any committee may retain independent legal, financial, compensation, or other consultants and advisors to advise and assist the Board or committee in discharging their responsibilities.

 

10		2022 PROXY STATEMENT

Board Meetings

2021 Board Meetings

The Board held six meetings during 2021. Each incumbent director attended at least 75% of the Board and committee meetings that occurred while he or she served as a member. Under our Corporate Governance Guidelines, each director is expected to attend, absent unusual circumstances, all meetings of shareholders. All current directors serving at the time of the 2021 annual meeting attended the 2021 annual meeting.

Executive Sessions of Non-Management Directors

The independent, non-management members of the Board meet in executive session following every regularly scheduled Board meeting. Additional executive sessions may be scheduled by the Lead Director or the independent directors, as appropriate. The Lead Director chairs these sessions.

Board Committees

The Board has established three committees: the Audit Committee, the Compensation and Management Development Committee (the Compensation Committee), and the Nominating and Corporate Governance Committee (the Nominating Committee). Each committee has adopted a written charter describing the committee’s purpose and responsibilities. Each committee reviews and evaluates the adequacy of its charter at least annually.

Committee Membership

The following table sets forth the current membership and Chair of each committee of the Board.

 

Name		Audit Committee		Compensation Committee		Nominating Committee
Kerrii B. Anderson				Chair		✓
Arthur F. Anton		✓
Jeff M. Fettig		Chair				✓
Richard J. Kramer		✓				Chair
Christine A. Poon				✓
Aaron M. Powell		✓
Marta R. Stewart		✓
Michael H. Thaman				✓
Matthew Thornton III		✓
Steven H. Wunning				✓		✓

Audit Committee

The purpose of the Audit Committee is to assist the Board in fulfilling its oversight responsibilities on matters relating to:

 

•

the integrity of the Company’s financial statements and effectiveness of our internal control over financial reporting;

 

•

the independence, qualifications, and performance of the independent registered public accounting firm;

 

•

the performance of the Company’s internal audit function;

 

•

the Company’s compliance with legal and regulatory requirements;

 

•

the Company’s risk exposures relating to cybersecurity; and

 

•

other matters as may from time to time be specifically delegated to the Audit Committee by the Board.

The Audit Committee met five times during 2021 and made regular reports to the Board. Each member of the Audit Committee is independent under applicable SEC rules, New York Stock Exchange (NYSE) listing standards, and our Director Independence Standards. The Board has determined that each member of the Audit Committee is financially literate and Ms. Stewart and Messrs. Anton, Fettig, Kramer, and Powell are “audit committee financial experts,” as such term is defined under SEC rules.

 

							11

Compensation and Management Development Committee

The purpose of the Compensation Committee is to assist the Board in fulfilling its oversight responsibilities on matters relating to:

 

•

compensation for our independent directors and management, which includes our executive officers and operating management;

 

•

the Company’s management development and succession planning process;

 

•

the Company’s key policies and strategies regarding the attraction, retention, and development of talent, including ID&E initiatives; and

 

•

other matters as may from time to time be specifically delegated to the Compensation Committee by the Board.

The Compensation Committee met four times during 2021 and made regular reports to the Board. Each member of the Compensation Committee meets the independence requirements under applicable SEC rules, NYSE listing standards, and our Director Independence Standards.

Process for Determining Director and Executive Compensation.    The Compensation Committee annually reviews and approves the form and amount of compensation for our independent directors and management, which includes our executive officers and operating management, and reports to the Board on all such compensation matters. The Compensation Committee does not generally delegate any of its authority to other persons, although it has the power to delegate authority to subcommittees and executive officers. The Compensation Committee relies upon several members of management and their teams, as well as an independent compensation consultant, for assistance in performing its duties.

The Compensation Committee has directly engaged Compensation Advisory Partners as its outside compensation consultant reporting directly to the Compensation Committee. The Compensation Committee evaluated the independence of Compensation Advisory Partners, taking into account all factors relevant to its independence from management under applicable SEC rules and NYSE listing standards. Based upon that evaluation, the Compensation Committee determined Compensation Advisory Partners is independent. The Compensation Committee also conducted an assessment to evaluate whether the work performed by Compensation Advisory Partners raises a conflict of interest. Based upon that assessment, the Compensation Committee determined that no conflict of interest exists. Compensation Advisory Partners did not provide any services to Sherwin-Williams during 2021 other than those matters for which it was engaged by the Compensation Committee.

Role of the Compensation Consultant.    The compensation consultant performs services for the Compensation Committee relating to director and executive compensation, including the following:

 

•

attends Compensation Committee meetings to present and offer independent recommendations, insights, and perspectives on compensation matters;

 

•

assesses the appropriateness of our peer group used for compensation decisions;

 

•

assesses how our executive compensation program aligns with pay for performance;

 

•

reviews compensation levels for executives and non-management directors relative to our peer group and published survey data, and recommends compensation pay levels;

 

•

reviews targeted pay levels and the mix of principal compensation components;

 

•

prepares CEO pay recommendations;

 

•

advises on annual and long-term incentive design and plan structure, performance goals, award opportunities, and vesting conditions;

 

•

conducts an annual risk assessment of our compensation programs to guard against excessive risk-taking; and

 

•

provides information on current executive compensation trends and new developments.

The Compensation Committee meets multiple times throughout the year with the compensation consultant in executive session without management present.

Role of Management.    Several members of management participate in the Compensation Committee’s executive compensation process. The Compensation Committee relies upon our Senior Vice President – Human Resources (SVP – HR) and his team for input related to director and executive compensation matters. With regard to executive compensation, management plays a more active role in the compensation process and makes recommendations with respect to:

 

•

the development of compensation plans and programs, and changes to existing plans and programs;

 

•

the evaluation of executive performance;

 

•

salary increases;

 

•

the alignment of incentive compensation plans and programs with our business goals and strategies;

 

12		2022 PROXY STATEMENT

•

the performance goals (and weightings) for annual cash incentive compensation;

 

•

the financial performance goals for equity grants and the results attained; and

 

•

the number of stock options and restricted stock units granted.

Prior to providing recommendations to the Compensation Committee at its meetings, our SVP – HR will meet with our CEO to review the recommendations, except those concerning our CEO’s compensation. Our CEO and SVP – HR also meet with the Compensation Committee Chair and the compensation consultant prior to meetings to review the agenda for the meetings and the compensation recommendations. Our CEO and SVP – HR generally attend all Compensation Committee meetings, with our SVP – HR serving as secretary for the meetings. Our CEO does not have the ability to call Compensation Committee meetings, and he is excused from the part of the meeting during which the Compensation Committee discusses his annual performance evaluation and compensation.

Nominating and Corporate Governance Committee

The purpose of the Nominating Committee is to assist the Board in fulfilling its oversight responsibilities on matters relating to:

 

•

the identification of individuals qualified to become members of the Board;

 

•

the composition of the Board and its committees;

 

•

our Corporate Governance Guidelines and practices;

 

•

the annual evaluation of the performance of the Board;

 

•

the Company’s key environmental (including the impacts of climate change), product stewardship, health and safety, sustainability, and corporate social responsibility policies and strategies; and

 

•

other matters as may from time to time be specifically delegated to the Nominating Committee by the Board.

The Nominating Committee met four times in 2021 and made regular reports to the Board. Each member of the Nominating Committee is independent under NYSE listing standards and our Director Independence Standards.

Director Identification and Evaluation.    The Nominating Committee seeks a diverse group of candidates who possess the appropriate experiences, qualifications, attributes, and skills to make a significant contribution to the Board, our Company, and our shareholders. From time to time, the Nominating Committee receives input from senior management and other members of the Board to identify and evaluate potential director candidates. The Nominating Committee may also employ a professional search firm (for which it would be paid a fee) to assist the Nominating Committee in identifying potential members of the Board. When identifying candidates for Board membership, the Nominating Committee will include, and will request that any search firm it engages include, a diverse pool of qualified candidates, including women and racially or ethnically diverse persons, from which director nominees are chosen.

The Nominating Committee does not have specific minimum qualifications that a candidate must meet to be eligible for election to the Board. Instead, each candidate is evaluated in the context of the Board as a whole, with the objective that the Board can best perpetuate our Company’s success and represent shareholders’ interests through the exercise of sound business judgment using the directors’ diversity of experiences, qualifications, attributes, and skills, including directors’ self-identified diversity characteristics, such as gender, race, ethnicity, religion, national origin, sexual orientation, disability, military service, or other socio-economic or demographic characteristics. Each candidate shall have the highest personal and professional character and integrity and shall have demonstrated exceptional ability and judgment in their respective endeavors. Candidates must possess sufficient time to effectively carry out their duties and responsibilities.

In evaluating candidates, the Nominating Committee will make a preliminary review of a prospective candidate’s background, career experience, and qualifications based on available information. If the Nominating Committee determines that a particular candidate likely would contribute positively to the Board’s mix of skills and experiences, the Nominating Committee will conduct interviews with the candidate and may invite other directors or members of management to interview the candidate to assess the candidate’s overall qualifications. The Nominating Committee will consider the candidate in the context of the Board’s then-current composition and the needs of the Board and its committees and make a recommendation to the Board as to whether the candidate should be nominated for election. This procedure is the same for all candidates, including director candidates identified by shareholders.

Marta R. Stewart, who was appointed to the Board in August 2021 and is standing for election for the first time at this year’s Annual Meeting, was initially identified as a director candidate by an outside search firm. The Nominating Committee provided the search firm with guidance as to the skills, experiences, and qualifications sought by the Nominating Committee in potential candidates, and the search firm identified candidates for the Nominating Committee’s consideration. After evaluating Ms. Stewart in the manner described above, considering the composition of the Board (including its gender, racial, and ethnic diversity mix, as further described in this section), and considering input from our other independent directors and our CEO, the Nominating Committee identified Ms. Stewart as a director candidate and recommended that she be elected to the Board.

 

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Diversity of Directors and Director Nominees.    In considering the composition of the Board, the Nominating Committee seeks to strike a proper balance between the addition of new directors who bring fresh and diverse perspectives and the stability of the Board as a whole. To maintain this commitment to a well-balanced, diverse Board, the Nominating Committee utilizes a director matrix consisting of a diverse set of experiences, qualifications, attributes, and skills, including self-identified diversity characteristics, such as gender, race, and ethnicity. This matrix is set forth under the heading “Director Matrix and Composition” in the Proposal 1 — Election of 11 Directors section. The Nominating Committee utilizes the matrix when identifying, considering, and recommending director nominees, as well as potential director candidates as part of its process of identifying individuals qualified to become Board members. The Nominating Committee also regularly uses the matrix in reviewing the experiences, qualifications, attributes, and skills of current directors.

It is also the Board’s policy to include, and to request that any search firm it engages include, women and racially or ethnically diverse persons in the pool of candidates from which director nominees are chosen. In assessing its overall effectiveness in recommending a diverse group of director nominees, the Nominating Committee periodically evaluates the composition of the full Board (including its gender, racial, and ethnic diversity mix) utilizing reviews against the matrix, as well as its committee self-assessments.

Consideration of Candidates Recommended by Shareholders.    The Nominating Committee’s policy with respect to the consideration of director candidates recommended by shareholders is that the Nominating Committee will consider such candidates on the same basis and in the same manner as it considers all director candidates. Recommendations must include the following information:

 

•

the name and address of the shareholder;

 

•

the class and number of shares of common stock owned by the shareholder;

 

•

a description of all arrangements or understandings between or among any of (a) the shareholder, (b) each candidate, and (c) any other person or persons pursuant to which the recommendation is being made;

 

•

the candidate’s full name, address, and telephone number;

 

•

a statement of the candidate’s qualifications and experiences, and any other relevant qualities;

 

•

the information that would be required under the rules of the SEC in a proxy statement soliciting proxies for the election of the candidate as a director;

 

•

a statement, signed by both the shareholder and the candidate, (a) affirming that the shareholder and the candidate currently do not have, and in the prior three years have not had, directly or indirectly, any business, professional, or other relationship with each other, and the shareholder and the candidate do not have any agreement, arrangement, or understanding with each other with respect to the candidate’s proposed service as a director, or (b) if either of the foregoing statements is incorrect in any manner, describing in detail the relationship, agreement, arrangement, or understanding;

 

•

the candidate’s resume, a list of other boards of directors of public companies on which the candidate currently serves or has served in the past five years, educational information, and at least three references; and

 

•

a written statement signed by the candidate agreeing that if they are nominated by the Board, they will (a) be a nominee for election to the Board, (b) provide all information necessary to be included in Sherwin-Williams’ proxy statement under applicable SEC or NYSE rules, and (c) serve as a director if they are elected by shareholders.

You may find a complete description of these requirements on our Investor Relations website, investors.sherwin-williams.com. Shareholders may submit recommendations, along with proof of shareholder status, in writing to: Chair, Nominating and Corporate Governance Committee, c/o Corporate Secretary, The Sherwin-Williams Company, 101 West Prospect Avenue, Cleveland, Ohio 44115.

Ability of Shareholders to Nominate Directors via Proxy Access.    Our Regulations provide a “proxy access” right to permit any shareholder, or group of up to 20 shareholders collectively, owning 3% or more of our outstanding shares of common stock continuously for at least three years to nominate and include in our proxy materials director nominees for election to the Board. A shareholder or shareholders, as applicable, can nominate up to 20% of the total number of directors on the Board, rounding down to the nearest whole number, in accordance with the requirements set forth in our Regulations. Under our Regulations, requests to include shareholder-nominated candidates for director in our proxy materials must be received no earlier than 150 days and no later than 120 days before the anniversary of the date that we issued our proxy statement for the previous year’s annual meeting of shareholders. You may find a complete description of the requirements for nominating a director utilizing proxy access in our Regulations.

 

14		2022 PROXY STATEMENT

Board and Committee Oversight

The members of the Board serve as representatives for, and are accountable to, the Company’s shareholders. We believe effective Board oversight is critical to the long-term success of the Company and maximizing value for our shareholders.

While the Company’s business and day-to-day affairs are conducted by management and their teams under the direction of the CEO, the Board has oversight responsibility of management. In performing its oversight function, the Board is entitled to rely upon advice, reports, and opinions of management, counsel, independent auditors, and expert advisors.

 

 

Risk Management.    Overseeing the assessment and management of the Company’s exposure to various risks is a key oversight responsibility for the Board, and each Board committee reviews specific risk areas to assist with this responsibility. We have an enterprise risk management process to identify, assess, and manage the most significant risks facing us, including financial, operational, litigation, compliance, reputational, cybersecurity, and ESG risks. Management reviews significant risks with the Board throughout the year, as necessary and appropriate, and conducts a formal review of the most significant risks with the Board at least once per year.

Management Succession Planning.    In light of the importance of management development and succession planning to Sherwin-Williams’ success, the Board’s key oversight responsibilities include the selection and evaluation of our CEO, the election or appointment of other senior management, and the review of management succession planning, including for our CEO. Succession planning is reviewed by the Board at least once per year and may be reviewed more frequently as the Board deems appropriate.

Public Policy and Engagement.    Our Government Affairs team facilitates the Company’s global participation in the public policy-making process, including with respect to issues that affect our employees, customers, and business operations and objectives and the paint and coatings industry in general. This team is led by our Senior Vice President, General Counsel and Secretary, who provides regular reports to the Board regarding the Company’s key public policy activities, advocacy, and engagement efforts.

Other Key Areas of Oversight.    The Board’s oversight responsibility also includes overseeing:

 

•

long-term strategic plans and initiatives, and significant corporate actions;

 

•

performance against broad financial objectives, major strategies, and plans;

 

•

processes, procedures, and controls for maintaining the integrity and clarity of financial statements and reporting; and

 

•

processes and procedures relating to compliance with applicable laws and ethical business conduct.

 

Key Areas of Oversight   •  Enterprise risk management process   •  Cybersecurity, including reviewing the state of cybersecurity, emerging developments and threats, and monitoring and mitigation efforts   •  Financial risks, including the integrity of financial statements and effectiveness of internal control over financial reporting   •  Performance of the internal audit function   •  Compliance with legal and regulatory requirements, and proper business conduct and practices		Key Areas of Oversight     •  Director and executive compensation     •  Management development and succession planning     •  Key policies and strategies regarding the attraction, retention, and development of talent, including ID&E initiatives		Key Areas of Oversight     •  Corporate governance     •  Board and committee composition     •  Director recruitment     •  Related person transactions     •  Key environmental (including climate change), product stewardship, health and safety, sustainability, and corporate social responsibility policies and strategies

 

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Corporate Governance Practices and Policies

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines, which provide the framework for the governance of our Company. The Board reviews our Corporate Governance Guidelines at least annually. From time to time, the Board may revise our Corporate Governance Guidelines to reflect new regulatory requirements and evolving corporate governance practices and policies.

Code of Conduct

Our Code of Conduct applies to all directors, officers, and employees of Sherwin-Williams and our subsidiaries, wherever located. It contains the general guidelines and principles for conducting Sherwin-Williams’ business, consistent with the highest standards of business ethics. Our Code of Conduct also embodies our seven guiding values, which form the foundation of our Company: Integrity, People, Service, Quality, Performance, Innovation, and Growth. We encourage our directors, officers, and employees to report all violations of Company policies and applicable law, including incidents of harassment or discrimination. We will take appropriate steps to investigate all such reports and take appropriate action. Under no circumstances will directors, officers, or employees be subject to any disciplinary or retaliatory action for reporting, in good faith, a possible violation of our Code of Conduct or applicable law, or for cooperating in any investigation of a possible violation.

In addition to the ethical obligations set forth in the Code of Conduct, under our Code of Ethics for Senior Financial Management, our CEO, Chief Financial Officer, and senior financial management are required to adhere to the highest standards of honesty, integrity, objectivity, and independence, and comply with all applicable laws, governmental regulations, Company policies, rules and regulations, ethical requirements, and professional standards. They also are responsible for creating and maintaining a culture of high ethical standards and commitment to compliance throughout our Company to ensure the fair and timely reporting of Sherwin-Williams’ financial results and condition. Senior financial management includes our controller, treasurer, principal financial/accounting personnel in our operating groups and divisions, and all other financial/accounting personnel with staff supervision responsibilities in our corporate departments and operating groups and divisions.

Certain Relationships and Transactions with Related Persons

Review, Approval, and Ratification of Related Person Transactions.    As part of our Code of Conduct, directors, officers, and employees are expected to make business decisions and take actions based upon the best interests of Sherwin-Williams and not based upon personal relationships or benefits.

The Board recognizes that some transactions, arrangements, and relationships present a heightened risk of an actual or perceived conflict of interest and has adopted a written policy governing these transactions. This policy governs any transaction, arrangement, or relationship (or any series of similar transactions, arrangements, or relationships) in which Sherwin-Williams (including any of its subsidiaries) was during the last fiscal year, is, or will be a participant and the amount involved exceeds $120,000, and in which any of the following persons had, has, or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity):

 

•

our directors, director nominees, or executive officers;

 

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any person who is known to be the beneficial owner of more than 5% of any class of our voting securities;

 

•

any immediate family member of any of the foregoing persons; and

 

•

any entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

The Nominating Committee is responsible for reviewing, approving, and overseeing these transactions.

In response to an annual questionnaire, directors, director nominees, and executive officers are required to submit to the Corporate Secretary a description of any ongoing or proposed transactions. Directors and executive officers are expected to provide updates to the list of transactions during the year and submit any newly proposed transactions for review by the Nominating Committee. We will provide any similar information available with respect to any known ongoing or proposed transactions with beneficial owners of 5% or more of our voting securities. At each calendar year’s first regularly scheduled Nominating Committee meeting, management will provide information regarding ongoing transactions and those proposed to be entered into by Sherwin-Williams for that calendar year.

 

16		2022 PROXY STATEMENT

If management becomes aware of any transactions subsequent to that meeting, such transactions will be presented for approval at the next meeting or, in certain circumstances where it is not reasonable or practicable to wait until the next meeting, to the Chair of the Nominating Committee (who possesses delegated authority to act between meetings) subject to ratification by the Nominating Committee at its next meeting. In the event management becomes aware of any transaction that was not previously approved under the policy, management will present the transaction to the Nominating Committee as promptly as practicable for its action, which may include termination, amendment, or ratification of the transaction.

The Nominating Committee (or the Chair) will prohibit a transaction if it is determined to be inconsistent with the interests of Sherwin-Williams and its shareholders and will approve only those transactions that are in, or are not inconsistent with, the interests of Sherwin-Williams and its shareholders, as determined in good faith in accordance with its business judgment. In addition, the transaction must be on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party.

2021 Related Person Transaction.    Peter J. Ippolito serves as President and General Manager, Industrial Wood Division, Performance Coatings Group. Mr. Ippolito’s brother-in-law, Brian H. Schumann, is employed by Sherwin-Williams as a District Manager in The Americas Group. Mr. Schumann’s total compensation for 2021, consisting of salary, annual incentive compensation, an equity grant, and retirement benefits, was $254,521. His compensation is consistent with our compensation practices based upon his position, responsibility, experience, tenure, and performance. This related person transaction was reviewed and approved in accordance with our policy, as described above.

Director Independence

The Board has adopted categorical Director Independence Standards to assist the Board in determining the independence of each director. To be considered independent, the Board must affirmatively determine that the director has no material relationship with Sherwin-Williams. In each case, the Board broadly considers all relevant facts and circumstances, including the director’s commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, and such other criteria as the Board may determine from time to time. Our Director Independence Standards also include additional independence requirements for members of the Audit Committee and Compensation Committee.

During the Board’s annual review of director independence, the Board considers transactions, relationships, and arrangements between each director or an immediate family member of the director and Sherwin-Williams. The Board also considers transactions, relationships, and arrangements between each director or an immediate family member of the director and our senior management. Under our Director Independence Standards, the following relationships are not considered to be material relationships that would impair a director’s independence:

 

•

if the director is a current employee, or an immediate family member of the director is a current executive officer, of another company that has made payments to, or received payments from, Sherwin-Williams for property or services in an amount which, in any of the last three fiscal years, is less than $1 million or two percent of such other company’s annual consolidated gross revenues, whichever is greater;

 

•

if the director, or an immediate family member of the director, is an executive officer of another company which is indebted to Sherwin-Williams, or to which Sherwin-Williams is indebted, in an amount which is less than five percent of such other company’s total consolidated assets;

 

•

if the director, or an immediate family member of the director, serves as an officer, director, or trustee of a foundation, university, charitable, or other not-for-profit organization, and Sherwin-Williams’ or The Sherwin-Williams Foundation’s discretionary charitable contributions (excluding matching contributions by the Foundation) to the organization, in the aggregate, are less than $500,000 or five percent, whichever is greater, of that organization’s last publicly available annual consolidated gross revenues;

 

•

if the director serves as a director or executive officer of another company that also uses Sherwin-Williams’ independent auditor;

 

•

if the director is a member of, or associated with, the same professional association, or social, educational, civic, charitable, fraternal, or religious organization or club as another Sherwin-Williams director or executive officer; or

 

•

if the director serves on the board of directors of another company at which another Sherwin-Williams director or executive officer also serves on the board of directors (except for compensation committee interlocks).

Early this year, the Board performed its annual independence review. As a result of this review, the Board determined that 10 of our 11 current directors and 10 of our 11 director nominees are independent. All members of the Audit Committee, Compensation Committee, and Nominating Committee are independent. The Board determined that Mses. Anderson,

 

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Poon, and Stewart and Messrs. Anton, Fettig, Kramer, Powell, Thaman, Thornton, and Wunning meet these standards and are independent and, in addition, satisfy the independence requirements of the NYSE. The Board also previously determined that Susan J. Kropf, who served as a director until her retirement in April 2021, met these standards and was independent and satisfied the independence requirements of the NYSE. Mr. Morikis is not considered to be independent because of his employment with Sherwin-Williams.

Annual Board Self-Assessments

The Board and each committee complete an annual self-assessment to assist in determining whether the Board and its committees are functioning effectively. The Nominating Committee oversees this process.

 

 

Our Board and committee self-assessments address the following topics:

 

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Board and committee efficiency and overall effectiveness;

 

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Board and committee structure, size, and composition;

 

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Board and committee dynamics and culture;

 

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Board leadership structure;

 

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meeting agendas, format, frequency, and time allocated;

 

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the quality of Board and committee discussions;

 

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the quality and scope of meeting materials and management presentations;

 

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directors’ access to our CEO and other members of management; and

 

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the sufficiency of information regarding, and time spent discussing, various topics, including long-term and strategic objectives, operating plans and budgets, competitive factors and trends, acquisition and divestiture activities, management development and succession planning, shareholder perspectives, and key ESG policies and strategies.

Director Overboarding Policy

As provided in our Corporate Governance Guidelines, the Board has established an overboarding policy to help ensure a director’s service on other public company boards does not impair the director’s ability to effectively serve on our Board. To that end, the Board believes that directors who are executive officers of public companies should not serve on more than two public company boards (inclusive of our Board) and that all other Board members should not serve on more than four public company boards (inclusive of our Board).

 

18		2022 PROXY STATEMENT

Stock Ownership Guidelines

The Board has established minimum share ownership requirements for our directors and executives to encourage meaningful stock ownership in Sherwin-Williams and ensure their interests are aligned with the interests of our shareholders. The Compensation Committee reviews shareholdings on an annual basis to determine whether our directors and executives are meeting these requirements.

Each non-management director is required to acquire shares of Sherwin-Williams common stock equal in value to a minimum of seven times the annual Board cash retainer. For purposes of obtaining this requirement, time-based restricted stock units (RSUs) held by directors pursuant to our 2006 Stock Plan for Nonemployee Directors and equivalent shares of common stock held by directors pursuant to our Director Deferred Fee Plan are considered shares of common stock owned by such directors. Each director also is required to hold all shares of common stock received upon the vesting of RSUs until the minimum share ownership requirement is met.

Each executive is required to acquire, within five years of serving in such capacity, shares of Sherwin-Williams common stock equal in value to a multiple of their base salary. Minimum share ownership requirements are six times for our CEO, four times for our Chief Operating Officer (COO), and three times for all other executives. For purposes of meeting this requirement, each equivalent share of stock held under our benefit plans and each RSU is considered a share of stock. Stock options and performance-based restricted stock units (PRSUs) are not considered for purposes of meeting the minimum share ownership requirement.

At December 31, 2021, all executives and non-management directors had either met the guidelines or are expected to meet the guidelines within the prescribed time frame or in accordance with the requirements.

 

 

Majority Voting for Directors

As provided in our Amended and Restated Articles of Incorporation, for an individual to be elected to the Board in an uncontested election of directors, the number of votes cast in favor of the individual’s election must exceed the number of votes cast against the individual’s election.

Any incumbent nominee for director in an uncontested election who receives a greater number of “against” votes than “for” votes shall continue to serve on the Board pursuant to Ohio law, but is required to promptly tender his or her resignation to the Board under our Corporate Governance Guidelines. The Nominating Committee will promptly consider the tendered resignation and will recommend to the Board whether to accept the tendered resignation or to take some other action, such as rejecting the tendered resignation and addressing the apparent underlying causes of the vote result.

In making this recommendation, the Nominating Committee will consider all factors deemed relevant by its members. These factors may include the underlying reasons why shareholders voted against the director (if ascertainable), the length of service and qualifications of the director whose resignation has been tendered, the director’s contributions to Sherwin-Williams, whether by accepting the resignation Sherwin-Williams will no longer be in compliance with any applicable law, rule, regulation, or governing document, and whether accepting the resignation is in the best interest of Sherwin-Williams and our shareholders. In considering the Nominating Committee’s recommendation, the Board will consider the factors considered by the Nominating Committee and such additional information and factors the Board believes to be relevant. We will promptly publicly disclose the Board’s decision and process in a report filed with or furnished to the SEC.

Anti-Hedging and Anti-Pledging Policy

Directors and all employees, including our executive officers, are prohibited from engaging in hedging transactions with respect to Sherwin-Williams securities. “Hedging transactions” can be accomplished through a number of possible mechanisms, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars, and exchange funds or through other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of our securities. Because hedging transactions might permit a director or employee, including our executive officers, to continue to own our securities, whether obtained through our equity compensation plans or otherwise, without the full rewards and risks of ownership, such hedging transactions are prohibited.

 

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We also prohibit our directors, executive officers, and certain of our other employees that are subject to the preclearance procedures of our Insider Trading Policy from holding Sherwin-Williams securities in margin accounts or otherwise pledging our securities for a loan. Additionally, we prohibit our directors and employees, including our executive officers, from engaging in short sales of our securities and purchasing and selling put options, call options, or other such derivative securities relating to our securities.

Clawback and Recapture Policy

The Board has adopted a policy regarding the adjustment and recapture of compensation paid or payable to executives and key employees. Under this clawback and recapture policy, employees who participate in our 2007 Executive Annual Performance Bonus Plan are required to reimburse Sherwin-Williams for any award paid under this plan in the event:

 

•

the award was based upon the achievement of financial results that were subsequently the subject of an accounting restatement due to material noncompliance with any financial reporting requirement under federal securities laws;

 

•

the Board determines the employee engaged in knowing or intentional fraudulent or illegal conduct that caused or partially caused the need for the restatement; and

 

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a lower amount would have been paid to the employee based upon the restated financial results.

The reimbursement will be equal to the difference in the amount of the award prior to the restatement and the amount of the award determined using the restated financial results.

In addition, (a) all outstanding stock awards will be canceled and (b) the employee will be required to reimburse Sherwin-Williams for any economic gains received by the employee pursuant to a stock award during the one-year period preceding the Board’s determination that the employee engaged in the conduct described above.

Complaint Procedures for Accounting, Auditing, and Financial-Related Matters

The Audit Committee has established procedures for receiving, retaining, and treating complaints from any source regarding accounting, internal accounting controls, and auditing matters. The Audit Committee has also established procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Interested parties may communicate such complaints by following the procedures described below under the heading “How You May Communicate with Directors.” Employees may report such complaints by following the procedures outlined in our Code of Conduct. We do not permit any disciplinary or retaliatory action against any person who, in good faith, submits a complaint or concern under these procedures.

How You May Communicate with Directors

The Board has adopted a process by which shareholders and all other interested parties may communicate with the Lead Director, the Chairs of any of the committees of the Board, or the non-management directors as a group. You may send communications by regular mail to the attention of the: Lead Director; Chair, Audit Committee; Chair, Compensation and Management Development Committee; Chair, Nominating and Corporate Governance Committee; or, if to the non-management directors as a group, Non-Management Directors; each, c/o Corporate Secretary, The Sherwin-Williams Company, 101 West Prospect Avenue, Cleveland, Ohio 44115.

Sherwin-Williams’ management will review all communications received to determine whether the communication requires immediate action. Management will relay all appropriate and applicable communications received, or a summary of such communications, to the appropriate director or directors.

Availability of Corporate Governance Materials

You may access all committee charters and our Corporate Governance Guidelines, Director Independence Standards, Code of Conduct, and other governance materials on our Investor Relations website, investors.sherwin-williams.com.

 

20		2022 PROXY STATEMENT

Proposal 1 — Election of 11 Directors

Our Board currently has 11 members. Based upon the recommendation of the Nominating Committee, our Board has nominated all of the 11 current directors for election at the 2022 Annual Meeting to hold office until the next annual meeting and until their successors are elected or until their earlier resignation, removal from office, or death.

All of our director nominees were elected by our shareholders at the 2021 annual meeting, except for Ms. Stewart, who was elected as a director by unanimous action of the Board in August 2021. The Board has determined that all of the director nominees are independent, except for Mr. Morikis, who is not considered independent due to his position as our Chairman and CEO. There are no family relationships among any of the directors, director nominees, and executive officers.

Each nominee has agreed to serve, if elected. If any nominee declines or is unable to accept such nomination or is unable to serve, an event which we do not expect, the Board reserves the right in its discretion to substitute another person as a nominee or to reduce the number of nominees and the size of the Board. In this event, the proxy holders may vote, in their discretion, for any substitute nominee proposed by the Board.

We have presented below biographical information regarding each nominee. This biographical information is supplemented by additional information regarding the particular experiences, qualifications, attributes, and skills that led the Board to conclude each nominee should serve on the Board. This additional information is set forth under the heading “Director Matrix and Composition.”

 

 

Director Biographies

 

 

Retired, Former Chief Executive Officer and President, Wendy’s International, Inc.   Director since: 2019   Age: 64   Committees:   Compensation Committee (Chair) Nominating Committee		Kerrii B. Anderson   Ms. Anderson served as Chief Executive Officer and President of Wendy’s International, Inc. (restaurant operating and franchising company n/k/a The Wendy’s Company) from November 2006 until September 2008 when Wendy’s merged with a subsidiary of Triarc Companies, Inc. to form Wendy’s/Arby’s Group, Inc. Ms. Anderson joined Wendy’s in September 2000, serving as Interim Chief Executive Officer and President from April 2006 to November 2006, and Executive Vice President and Chief Financial Officer from September 2000 to April 2006. Prior to joining Wendy’s, Ms. Anderson served as Senior Vice President and Chief Financial Officer of M/I Schottenstein Homes, Inc. (n/k/a M/I Homes, Inc.) from September 1987 to September 2000. Ms. Anderson has been a private investor and board advisor since 2008. Ms. Anderson is a director of Laboratory Corporation of America Holdings (NYSE: LH), Worthington Industries, Inc. (NYSE: WOR), and Abercrombie & Fitch Co. (NYSE: ANF).   Qualifications:    Ms. Anderson has a strong record of leadership in operations, strategy, finance, and talent management as a result of her experience serving as Chief Executive Officer and President and Chief Financial Officer of Wendy’s. Ms. Anderson also has significant expertise in the areas of accounting and financial reporting, corporate finance, corporate governance, and executive compensation through her service on other large public company boards. This breadth of experience enables Ms. Anderson to advise our Board on a variety of matters relevant to Sherwin-Williams’ global operations and business strategy.

 

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Retired, Former Chairman and Chief Executive Officer, Swagelok Company   Director since: 2006   Age: 64   Committees: Audit Committee		Arthur F. Anton   Mr. Anton served as Chairman and Chief Executive Officer of Swagelok Company (manufacturer and provider of fluid system products and services) until his retirement in December 2019. Mr. Anton assumed the role of Chief Executive Officer in January 2004 and Chairman in October 2017. Mr. Anton joined Swagelok as Chief Financial Officer in August 1998 and held various other senior leadership positions during his tenure, including President from January 2001 to October 2017, Chief Operating Officer from January 2001 to January 2004, and Executive Vice President from July 2000 to January 2001. Mr. Anton is a director of Diebold Nixdorf, Incorporated (NYSE: DBD), non-executive Chairman of SunCoke Energy, Inc. (NYSE: SXC), and Lead Director of Olympic Steel, Inc. (Nasdaq: ZEUS). He is also Chair and a director of University Hospitals Health System, Inc. and a member of the Advisory Board of Union Home Mortgage Corp. Mr. Anton is a former director of Forest City Realty Trust, Inc.   Qualifications:    Mr. Anton brings significant domestic and international manufacturing and distribution experience to the Board. Mr. Anton gained significant financial expertise and experience in a manufacturing and distribution setting through serving on the audit committee of various other public company boards, as a former partner of Ernst & Young LLP and as the former Chief Financial Officer of Swagelok. This breadth of knowledge and experience provide him with a unique perspective on Sherwin-Williams’ business and operations.

 

Retired, Former Chairman of the Board and Chief Executive Officer, Whirlpool Corporation   Director since: 2019   Age: 65   Committees: Audit Committee (Chair) Nominating Committee		Jeff M. Fettig   Mr. Fettig served as Executive Chairman of the Board of Whirlpool Corporation (world’s leading major home appliance company) from October 2017 until his retirement in December 2018. Mr. Fettig served as Chairman of the Board and Chief Executive Officer of Whirlpool from July 2004 to October 2017. Mr. Fettig joined Whirlpool in June 1981 and held numerous leadership positions of increasing responsibility, including President and Chief Operating Officer from June 1999 to July 2004, and Executive Vice President, Whirlpool and President, Whirlpool Europe and Asia from 1994 to June 1999. Mr. Fettig is a director of Dow Inc. (NYSE: DOW) and a director of Kohler Company. Mr. Fettig also serves as a director of the Indiana University Foundation. Mr. Fettig is a former director of DowDuPont Inc., The Dow Chemical Company, and Whirlpool Corporation.   Qualifications:    Through his long tenure as Chairman and Chief Executive Officer and his experience in various other key leadership positions with Whirlpool over 37 years, Mr. Fettig gained significant knowledge of global business operations and end markets and the manufacturing, marketing, sales, and distribution of consumer products worldwide. This extensive experience and breadth of knowledge enable him to provide our Board with a unique, independent perspective on Sherwin-Williams’ business strategy, growth, and operations and the issues and opportunities facing complex, global companies.

 

22		2022 PROXY STATEMENT

Chairman of the Board, Chief Executive Officer and President, The Goodyear Tire & Rubber Company   Director since: 2012   Age: 58   Committees: Audit Committee Nominating Committee (Chair)		Richard J. Kramer   Mr. Kramer has served as Chief Executive Officer and President of The Goodyear Tire & Rubber Company (global manufacturer, marketer, and distributor of tires) since April 2010 and Chairman of the Board of Goodyear since October 2010. Mr. Kramer joined Goodyear in March 2000 and has held various positions at Goodyear, including Chief Operating Officer from June 2009 to April 2010, President, North American Tire from March 2007 to February 2010, Executive Vice President and Chief Financial Officer from June 2004 to August 2007, Senior Vice President, Strategic Planning and Restructuring from August 2003 to June 2004, Vice President, Finance – North American Tire from August 2002 to August 2003, and Vice President – Corporate Finance from March 2000 to August 2002. Prior to joining Goodyear, Mr. Kramer was with PricewaterhouseCoopers LLP for 13 years, including two years as a partner. Mr. Kramer is a director of Goodyear (Nasdaq: GT), The Cleveland Orchestra, and Cleveland Clinic and serves on the Executive Committee of the National Association of Manufacturers.   Qualifications:    Mr. Kramer has significant experience leading and managing a large multinational industrial company. As the former Chief Financial Officer of Goodyear, he brings extensive financial and risk management experience to our Board. Mr. Kramer’s diverse range of positions at Goodyear for more than 22 years provides him with significant knowledge of global markets, manufacturing, distribution, retail, finance, and technology, which enables him to advise our Board on a variety of strategic and business matters.

 

Chairman and Chief Executive Officer, Sherwin-Williams   Director since: 2015   Age: 58   Committees: None		John G. Morikis   Mr. Morikis has served as Chairman of Sherwin-Williams since January 2017 and Chief Executive Officer of Sherwin-Williams since January 2016. Mr. Morikis previously served as President of Sherwin-Williams from March 2021 to March 2022 and October 2006 to March 2019, Chief Operating Officer from October 2006 to January 2016, and President, Paint Stores Group from October 1999 to October 2006. Mr. Morikis joined Sherwin-Williams in 1984 as a management trainee in the Paint Stores Group and has held roles of increasing responsibility throughout his career. Mr. Morikis is a director of Fortune Brands Home & Security, Inc. (NYSE: FBHS). Mr. Morikis is also Chair and a director of the Policy Advisory Board of the Joint Center for Housing Studies of Harvard University and Vice Chair and a director of University Hospitals Health System, Inc.   Qualifications:    Mr. Morikis has been with Sherwin-Williams for 37 years, including nine years as Chief Operating Officer. He currently serves as Sherwin-Williams’ Chairman and Chief Executive Officer. His vast operating and leadership experience with Sherwin-Williams has provided him with significant, in-depth knowledge of the paint and coatings industry, as well as unique insight into the opportunities and challenges facing Sherwin-Williams. The Board benefits from his broad operating, manufacturing, retail, marketing, strategic planning, and international experience.

 

							23

Retired, Former Vice Chairman, Johnson & Johnson   Director since: 2014   Age: 69   Committees: Compensation Committee		Christine A. Poon   Ms. Poon served as Executive in Residence at The Max M. Fisher College of Business at The Ohio State University from September 2015 until March 2020. Ms. Poon joined Ohio State in April 2009, serving as Dean and John W. Berry, Sr. Chair in Business at The Max M. Fisher College of Business until October 2014 and as Professor of Management and Human Resources at The Max M. Fisher College of Business from October 2014 to September 2015. Prior to joining Ohio State, Ms. Poon spent eight years at Johnson & Johnson until her retirement in March 2009, most recently as Vice Chairman beginning January 2005 and Worldwide Chairman, Pharmaceuticals Group beginning August 2001. Ms. Poon also served as a director of Johnson & Johnson. Prior to joining Johnson & Johnson, Ms. Poon held various senior leadership positions at Bristol-Myers Squibb Company over a period of 15 years, most recently as President, International Medicines Group, and President, Medical Devices Group. Ms. Poon is Lead Independent Director of Prudential Financial, Inc. (NYSE: PRU) and a director of Regeneron Pharmaceuticals, Inc. (Nasdaq: REGN). She is a former director of Decibel Therapeutics, Inc. (Nasdaq: DBTX) and a former member and Vice-Chairwoman of the Supervisory Board of Koninklijke Philips N.V. (NYSE: PHG).   Qualifications:    Ms. Poon has extensive strategic and operational leadership skills due to her over 20 years of experience at Johnson & Johnson and Bristol-Myers Squibb. Ms. Poon brings significant sales and marketing expertise in domestic and international markets to the Board, providing a valuable perspective on Sherwin-Williams’ worldwide commercial operations.

 

Chief Executive Officer, Pizza Hut Division, Yum! Brands, Inc.   Director since: 2021   Age: 50   Committees: Audit Committee		Aaron M. Powell   Mr. Powell has served as Chief Executive Officer, Pizza Hut Division of Yum! Brands, Inc. (global restaurant company) since September 2021. Prior to joining Yum! Brands, Mr. Powell served as President, Asia-Pacific Consumer Business of Kimberly-Clark Corporation (global manufacturer and marketer of personal care, consumer tissue, and other household and professional products) from March 2020 to September 2021. Mr. Powell joined Kimberly-Clark in September 2007 and held various other leadership positions of increasing responsibility, including President, Kimberly-Clark Professional from May 2018 to February 2020, President, Kimberly-Clark Europe, Middle East & Africa (EMEA) from April 2018 to May 2018, President, Kimberly-Clark Professional, North America from December 2015 to April 2018, Vice President and Managing Director, Central & Eastern Europe from January 2014 to December 2015, and additional leadership roles within Kimberly-Clark’s EMEA and North Asia operations. Prior to joining Kimberly-Clark, Mr. Powell spent four years with Bain & Company (global management consulting firm), including as a Manager in its Consumer Practice, and eight years with The Procter & Gamble Company, where he began his career.   Qualifications:    Mr. Powell brings relevant leadership and international operations, sales, and marketing experience from a global consumer and professional products company to the Board. Through his broad range of leadership positions at Kimberly-Clark, Mr. Powell has gained significant knowledge of global markets and operations and extensive sales, marketing, and digital expertise in domestic and international markets. This breadth of experience will enable him to provide the Board with a valuable perspective on Sherwin-Williams’ global operations, sales and marketing, and other business matters.

 

24		2022 PROXY STATEMENT

Retired, Former Executive Vice President and Chief Financial Officer, Norfolk Southern Corporation   Director since: 2021   Age: 64   Committees: Audit Committee		Marta R. Stewart   Ms. Stewart served as Executive Vice President and Chief Financial Officer of Norfolk Southern Corporation (U.S. premier transportation company and major transporter of industrial products, forest and consumer products, chemicals, and metals, and construction materials) from November 2013 until her retirement in August 2017. Ms. Stewart joined Norfolk Southern in 1983 and held various additional accounting and finance positions of increasing responsibility, including Vice President and Treasurer from April 2009 to November 2013 and Vice President, Controller and Principal Accounting Officer from December 2003 to April 2009. Prior to joining Norfolk Southern, Ms. Stewart spent over four years at Peat Marwick (a predecessor to KPMG International Limited), where she began her career. Ms. Stewart is a director of Simon Property Group, Inc. (NYSE: SPG). She is a former director of Raytheon Company (formerly NYSE: RTN).   Qualifications:    Ms. Stewart brings extensive financial and strategic leadership experience to the Board. Through her 33-year career at a premier transportation and distribution company, Ms. Stewart gained extensive financial expertise and significant knowledge of strategic planning, capital markets, and accounting systems and controls that enable her to provide the Board with a meaningful perspective on matters relevant to Sherwin-Williams’ business strategy and operations.

 

Retired, Former Chair and Chief Executive Officer, Owens Corning   Director since: 2017   Age: 58   Committees: Compensation Committee		Michael H. Thaman   Mr. Thaman served as Executive Chair of Owens Corning (developer, manufacturer, and marketer of insulation, roofing, and fiberglass composites) from April 2019 to March 2020. Mr. Thaman joined Owens Corning in 1992 and held a variety of other senior leadership positions, including Chief Executive Officer of Owens Corning from December 2007 until April 2019, Chair of Owens Corning beginning in 2002, President of Owens Corning from December 2007 to August 2018, and Chief Financial Officer from April 2000 until December 2007. Mr. Thaman is a director of Kohler Company and UL, Inc. Mr. Thaman also served as Chief Executive Officer of UBQ Materials Inc. (provider of patented technology to convert organic household waste into thermoplastic composites) from March 2020 to December 2020. He is a former director of Owens Corning (NYSE: OC).   Qualifications:    Mr. Thaman brings relevant operational experience leading and managing a global manufacturing company to the Board. The Board benefits from Mr. Thaman’s deep and unique understanding of the residential, construction, and industrial markets. Through serving in a variety of leadership roles at Owens Corning during a 28-year career, Mr. Thaman gained significant knowledge of global markets, operations, finance, and business strategy, which enables him to advise our Board on a variety of matters relevant to Sherwin-Williams’ operations and business strategy.

 

							25

Retired, Former Executive Vice President and Chief Operating Officer, FedEx Freight, FedEx Corporation   Director since: 2014   Age: 63   Committees: Audit Committee		Matthew Thornton III   Mr. Thornton served as Executive Vice President and Chief Operating Officer of FedEx Freight, a subsidiary of FedEx Corporation (global transportation, business services, and logistics company), from May 2018 until his retirement in November 2019. Mr. Thornton joined FedEx Corporation in November 1978 and held various management positions of increasing responsibility with the company, including Senior Vice President, US Operations, FedEx Express from September 2006 to May 2018, Senior Vice President – Air, Ground & Freight Services, FedEx Express from July 2004 to September 2006, and Vice President – Regional Operations (Central Region), FedEx Express from April 1998 to July 2004. Mr. Thornton is a director of Crown Castle International Corp. (NYSE: CCI) and a member of the Boards of Directors/Trustees of registered investment companies in the Nuveen fund complex. Mr. Thornton is also a member of The Executive Leadership Council.   Qualifications:    Mr. Thornton brings extensive management and leadership experience from a large multinational company to the Board. Through his broad range of positions at FedEx Corporation during a career exceeding 41 years, Mr. Thornton gained significant strategic operations expertise and logistics management experience that allow him to provide the Board with a meaningful perspective on Sherwin-Williams’ operations and business matters.

 

Retired, Former Group President, Caterpillar Inc.   Lead Director since 2019   Director since: 2015   Age: 70   Committees: Compensation Committee Nominating Committee		Steven H. Wunning   Mr. Wunning served as Group President and member of the Executive Office of Caterpillar Inc. (world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives) from January 2004 until his retirement in February 2015. Mr. Wunning joined Caterpillar in 1973 and held a variety of positions with increasing responsibility, including Vice President, Logistics Division from January 2000 to January 2004, and Vice President, Logistics & Product Services Division from November 1998 to January 2000. Mr. Wunning is a director of Kennametal Inc. (NYSE: KMT), Summit Materials, Inc. (NYSE: SUM), and Black & Veatch Holding Company. Mr. Wunning serves on the Board of Trustees of Missouri University of Science and Technology.   Qualifications:    Through his broad range of assignments and experience gained during 41 years of service at Caterpillar, Mr. Wunning developed an in-depth understanding of manufacturing, quality, product support, and logistics at a leading global manufacturing company. Mr. Wunning’s extensive management experience provides the Board with a valuable, independent perspective on Sherwin-Williams’ global manufacturing and supply chain operations.

 

26		2022 PROXY STATEMENT

Director Matrix and Composition

In considering each director nominee and the composition of the Board as a whole, the Nominating Committee utilizes a director matrix consisting of a diverse set of experiences, qualifications, attributes, and skills, including self-identified diversity characteristics such as gender, race, and ethnicity, that it believes enables a director nominee to make significant contributions to the Board, Sherwin-Williams, and our shareholders. The Nominating Committee may consider additional experiences, qualifications, attributes, and skills, as it deems appropriate, given the then-current needs of the Board and Sherwin-Williams. The Nominating Committee regularly reviews the director matrix as part of its annual Board composition review, which includes a review of potential director candidates. The following table more fully describes the director matrix and provides additional demographic information regarding our director nominees.

 

 

 

*

Categories and information included based on director nominees’ self-identified diversity characteristics.

 

							27

2021 Director Compensation Table

The following table sets forth information regarding the compensation of our independent, non-management directors for 2021.

 

Name		Fees Earned or Paid in Cash ($)(2,3)					Stock Awards ($)(4,5)					All Other Compensation ($)(6)					Total ($)
Kerrii B. Anderson				140,986					157,931					-0-					298,917
Arthur F. Anton				132,624					157,931					-0-					290,555
Jeff M. Fettig				142,376					157,931					7,000					307,307
Richard J. Kramer				145,000					157,931					3,000					305,931
Susan J. Kropf (1)				45,132					157,931					4,000					207,063
Christine A. Poon				125,000					157,931					4,000					286,931
Aaron M. Powell				93,750					183,033					-0-					276,783
Marta R. Stewart				42,459					175,766					-0-					218,225
Michael H. Thaman				125,000					157,931					3,000					285,931
Matthew Thornton III				125,000					157,931					4,000					286,931
Steven H. Wunning				160,000					157,931					7,000					324,931

 

1	Ms. Kropf retired as a director at the end of her term at the 2021 annual meeting in accordance with the Board’s retirement policy. Her fees were prorated for the portion of the year she served on our Board.

 

2	Amounts reflect the annual Board retainer, the annual retainer for the Lead Director, and the annual retainers for committee Chairs.

 

3

Mses. Anderson, Kropf, and Poon and Messrs. Kramer, Thaman, and Wunning deferred the payment of fees under our Director Deferred Fee Plan. Cash amounts deferred into vested stock units under our Director Deferred Fee Plan during 2021 were as follows: Ms. Anderson ($35,247), Ms. Kropf ($45,132), Ms. Poon ($31,250), Mr. Kramer ($145,000), Mr. Thaman ($125,000), and Mr. Wunning ($160,000). These amounts were credited to either a common stock unit account or a shadow stock unit account under our Director Deferred Fee Plan.

 

4

Values reflect the following number of RSUs granted to our non-management directors under our 2006 Stock Plan for Nonemployee Directors during 2021: (a) 663 RSUs for Mses. Anderson, Kropf, and Poon and Messrs. Anton, Fettig, Kramer, Thaman, Thornton, and Wunning; (b) 678 RSUs for Mr. Powell; and (c) 575 RSUs for Ms. Stewart. The value of RSUs is equal to the aggregate grant date fair value computed in accordance with stock-based accounting rules (Stock Compensation Topic 718 of the Accounting Standards Codification (ASC)), excluding the effect of estimated forfeitures. The grant date fair value of RSUs is based on the fair market value of our common stock (the average of the highest and lowest reported sale prices per share) on the grant date.

 

5

The number of RSUs held by each non-management director at December 31, 2021 was as follows: (a) 1,587 for Ms. Anderson and Mr. Fettig; (b) 1,623 for Ms. Poon and Messrs. Anton, Kramer, Thaman, Thornton, and Wunning; (c) 678 for Mr. Powell; and (d) 575 for Ms. Stewart. Dividend equivalents on RSUs are deferred and paid upon vesting at the same rate as dividends are paid on our common stock.

 

6

Amounts include: (a) $4,000 for each of Mses. Kropf and Poon and Messrs. Fettig, Thornton, and Wunning for identity theft protection and cybersecurity services; and (b) $3,000 for each of Messrs. Fettig, Kramer, Thaman, and Wunning for charitable matching gifts under The Sherwin-Williams Foundation Matching Gifts Program.

 

28		2022 PROXY STATEMENT

Director Compensation Program

The Compensation Committee is responsible for reviewing and approving the form and amount of compensation for our non-management directors. All of our non-management directors are paid under the same compensation program. Any executive officer of Sherwin-Williams who also serves as a director does not receive any additional compensation for serving as a director.

Our director compensation program is designed to attract and retain highly qualified directors by ensuring director compensation is competitive relative to market practices, addresses the time, effort, expertise, and accountability required of active Board membership, and aligns directors’ interests with those of our shareholders through the equity component of the program.

Director Fees

During 2021, the cash and equity compensation program for our non-management directors consisted of the following.

 

•

An annual cash retainer of $125,000.

 

•

An additional annual cash retainer of $35,000 for the Lead Director, $25,000 for the Audit Committee Chair, $23,000 for the Compensation Committee Chair, and $20,000 for the Nominating Committee Chair.

 

•

A meeting fee of $1,750 for each Board or committee meeting attended in excess of twelve meetings during the calendar year. For purposes of calculating the number of meetings, any Board and committee meetings held within 24 hours constitute one meeting.

 

•

An annual grant of RSUs of approximately $160,000, valued over a prior 30-day period, under our 2006 Stock Plan for Nonemployee Directors. One RSU is equivalent in value to one share of Sherwin-Williams common stock. RSUs generally are paid out in common stock upon vesting and vest in annual increments of one-third over a period of three years. RSUs will immediately vest in the event of the death or disability of the director or in the event of a change in control of Sherwin-Williams. In the event of the retirement of the director, RSUs will continue to vest in accordance with the original three-year vesting schedule.

We reimburse all directors for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board and its committees. We do not provide retirement benefits to our non-management directors.

It is the Compensation Committee’s practice to engage its independent compensation consultant every other year to assess the competitiveness of our director compensation program relative to market practices, including the peer group we use for executive compensation purposes. During 2021, the Compensation Committee performed such assessment and, based upon its evaluation and the recommendation of the compensation consultant, approved the following increases effective January 1, 2022: (a) annual cash retainer to $130,000; (b) value of the annual grant of RSUs to approximately $170,000; (c) annual cash retainer for the Audit Committee Chair to $30,000; and (d) annual cash retainer for the Compensation Committee Chair to $25,000. Additional information regarding the role and independence of our compensation consultant is set forth under the heading “Compensation and Management Development Committee” in the Board Committees section.

Director Stock Ownership Requirements

The Board has established a minimum share ownership requirement to ensure the interests of our directors are aligned with the interests of our shareholders. Information about our director stock ownership requirements is included under the heading “Stock Ownership Guidelines” in the Corporate Governance Practices and Policies section.

Other Benefits

We also provide liability insurance and business travel accident insurance for all directors, including $500,000 accidental death and dismemberment coverage and $500,000 permanent total disability coverage, while the directors are traveling on Sherwin-Williams’ business.

Directors may also receive the same discounts as our employees on the purchase of products at Sherwin-Williams’ stores and are eligible to participate in The Sherwin-Williams Foundation’s Matching Gifts Program and Grants for Volunteers Program on the same basis as employees. For the Matching Gifts Program, the Foundation will match, on a 1:1 basis, gifts of $100 or more, up to an annual maximum of $3,000, made to qualifying nonprofit organizations and educational institutions.

Directors may defer all or a portion of their retainer and meeting fees under our Director Deferred Fee Plan into a common stock unit account, a shadow stock unit account, or an interest bearing cash account. Amounts deferred may be distributed either in annual installments over a period of up to ten years or in a lump sum pursuant to a director’s payment election. Amounts credited to a shadow stock unit account are distributed in cash, and units are vested in shadow stock and common stock unit accounts upon allocation to such accounts.

 

							29

Proposal 2 — Advisory Approval of the Compensation of the Named Executives

We are asking our shareholders to approve, on an advisory, non-binding basis, the compensation of the named executives as disclosed in this Proxy Statement pursuant to SEC rules, including Section 14(a) of the Securities Exchange Act of 1934, as amended (Exchange Act). This annual vote is commonly known as “say-on-pay.” This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executives and our executive compensation program and practices described in this Proxy Statement.

We are focused on delivering sustained financial and operating results with the ultimate goal of creating and maximizing long-term value for our shareholders. We believe our executive compensation program has been thoughtfully and appropriately designed and managed to support our overall business goals and strategies, to drive sustained performance, and to deliver superior shareholder returns.

Our objective is to ensure that our executive compensation program (a) is competitive by attracting, retaining, and motivating talented and high-performing executives, (b) maintains a pay for performance philosophy with a significant percentage of executive pay tightly linked to Company and business unit performance, and (c) aligns the interests of our executives with those of our shareholders through significant stock ownership requirements and long-term stock incentive compensation that rewards our executives the way our shareholders are rewarded—through growth in the value of our stock. We believe our program achieves this objective.

The CD&A describes our executive compensation program, including detailed information about how and why we make executive compensation decisions, and the decisions made relating to 2021 compensation. We include a list of our more significant executive compensation practices, which promote responsible pay and governance principles and alignment with shareholder interests, in the Executive Summary of the CD&A.

Accordingly, the Board requests that you vote “for” the following resolution:

“RESOLVED, that Sherwin-Williams’ shareholders hereby approve, on an advisory basis, the compensation of the named executives as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the executive compensation tables, and any related material disclosed in this Proxy Statement.”

Although this advisory vote on the compensation of the named executives is not binding, the Board and Compensation Committee highly value the opinions of our shareholders. The results of this vote will provide information to the Compensation Committee about our shareholders’ views of our executive compensation program, which the Compensation Committee will be able to consider in the future when making executive compensation decisions. We intend to hold this vote annually, with the next vote expected to occur at our 2023 annual meeting of shareholders. We also will hold the next vote on the frequency of such say-on-pay vote at our 2023 annual meeting of shareholders.

 

 

 

30		2022 PROXY STATEMENT

Executive Compensation

Compensation Discussion and Analysis

This CD&A describes our executive compensation program and how it applies to our six “named executives” listed below. As used in this CD&A, the terms “the Compensation Committee” and “the Committee” refer to the Compensation and Management Development Committee.

 

 

 

•

John G. Morikis.    Mr. Morikis has served as Chairman since January 2017 and Chief Executive Officer since January 2016. Mr. Morikis also served as President from March 2021 to March 2022. Mr. Morikis began his career with Sherwin-Williams in December 1984.

 

•

Allen J. Mistysyn.    Mr. Mistysyn has served as Senior Vice President – Finance and Chief Financial Officer since January 2017. He began his career with Sherwin-Williams in June 1990.

 

•

Peter J. Ippolito.    Mr. Ippolito has served as President and General Manager, Industrial Wood Division, Performance Coatings Group (PCG) since November 2021. Prior to his current role, Mr. Ippolito served as Senior Vice President, Strategic Initiatives from March to October 2021 and President, The Americas Group (TAG) from January 2018 to March 2021. He began his career with Sherwin-Williams in May 1986. Mr. Ippolito was an executive officer of the Company prior to assuming his current role in November 2021.

 

•

Mary L. Garceau.    Ms. Garceau has served as Senior Vice President, General Counsel and Secretary since August 2017. She began her career with Sherwin-Williams in February 2014.

 

•

Heidi G. Petz.    Ms. Petz has served as President and COO since March 1, 2022. Prior to her current role, Ms. Petz served as President, TAG from March 2021 to March 2022 and Senior Vice President, Sales and Marketing, TAG from November 2020 to March 2021. She began her career with Sherwin-Williams in June 2017 in connection with the Valspar acquisition.

 

•

Justin T. Binns.    Mr. Binns has served as President, TAG since March 1, 2022. Prior to his current role, Mr. Binns served as President, PCG from November 2020 to March 2022. He began his career with Sherwin-Williams in August 1997.

 

Table of Contents

 

 

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Executive Summary

We manage our business with the long-term fundamental objective of creating and maximizing value for our shareholders. Our pay for performance philosophy supports this objective by linking a significant percentage of our executive compensation program to Company performance, business unit performance (where applicable), and stock price appreciation.

Our compensation programs are integral to our longstanding success as they assist us in attracting, retaining, and motivating talented and high-performing people throughout our organization to drive consistent and strong financial and operating results. Our long track record of sustained success is exemplified by the following:

 

•

Our average annual shareholder return, including dividends, over the past 10 years is 29.33%, compared to the average annual return for the S&P 500 of 16.55%.

 

•

2021 was our 43rd consecutive year of increased dividends, as we continued our practice of returning significant value to our shareholders. During 2021, we returned approximately $3.34 billion to our shareholders through dividends and repurchases of our stock, an increase of approximately 14% over 2020. Over the past three years, we returned approximately $7.47 billion in cash to our shareholders through dividends and stock repurchases.

2021 Financial and Operating Performance

Our full year results were impacted by unprecedented supply chain disruptions and raw material cost inflation primarily resulting from two natural disasters that occurred during 2021. In February, Winter Storm Uri caused significant raw material availability disruptions and adversely impacted nearly 170 manufacturing facilities supplying the paint and coatings industry. In August, Hurricane Ida exacerbated the industry’s raw material shortages. These extreme weather events adversely impacted raw material availability and forced many of our suppliers in Texas and Louisiana to cease operations, with production of numerous key resins, additives, and solvents used in our products remaining offline for extended periods and into the third and fourth quarters. The raw material shortages resulting from the natural disasters significantly hindered the Company’s ability to manufacture the products needed to fully meet robust customer demand.

Our dedicated employees responded with determination and demonstrated remarkable resilience in navigating the supply chain challenges experienced during 2021. Through these challenges, we focused on identifying and making adjustments throughout our business to reduce the impacts to our customers and improve raw material availability, while continuing to invest in growth initiatives. We more fully describe our efforts to respond to the adverse impacts of these natural disasters later in this CD&A.

Despite the challenges of the past year, consolidated net sales increased 8.6% to a record $19.94 billion in 2021—marking our eleventh consecutive year of growth. Net income and diluted net income per share for the year were $1.86 billion and $6.98, respectively, and we generated net operating cash of $2.24 billion.

2021 Compensation Highlights

Recent key executive compensation highlights include the following:

 

•

2021 Annual Cash Incentive Compensation.

 

°

In the first quarter of 2021, the Compensation Committee set threshold, target, and maximum annual cash incentive performance goals at levels representing continued strong financial performance.

 

°

As described previously, Winter Storm Uri and Hurricane Ida caused significant supply chain disruptions and raw material shortages throughout the year. Despite management’s actions in responding to the unprecedented challenges of these unforeseen, extreme weather events, the achievement levels for most of the performance goals comprising our annual cash incentive compensation program were adversely impacted.

 

°

The Committee recognized that without management’s efforts, the adverse impacts of Winter Storm Uri and Hurricane Ida to our business would have been far more severe. The Committee reviewed with management and its independent compensation consultant, Compensation Advisory Partners, the actual results of the performance goals and the achievement levels of the affected performance goals adjusted to reflect the full net impact of the natural disasters. While nearly all affected metrics would have realized maximum achievement (200%) but for the adverse impacts of the natural disasters, the Committee considered the full adjustment and determined that, despite management’s efforts in responding to the unprecedented challenges, full adjustment was not appropriate.

 

32		2022 PROXY STATEMENT

°

At the recommendation of Compensation Advisory Partners and in consultation with management, the Committee determined to adjust certain performance results and capped the adjustment to reflect only a portion of the net impact of the natural disasters. After applying the cap to the adjustment, our named executives earned an average of 153.35% of their 2021 target annual cash incentive compensation.

 

•

2019 – 2021 Long-Term Incentive Compensation. Despite the unprecedented challenges caused by Winter Storm Uri and Hurricane Ida, the Compensation Committee did not adjust the performance payouts for the vesting of our 2019 – 2021 PRSUs due to the 2021 natural disasters. Our 2019 – 2021 PRSUs were earned at 182.5% and 135.0% of target based upon Company performance for cumulative earnings per share (EPS) and average annual return on net assets employed (RONAE), respectively, over the three-year performance period.

Impact of Last Year’s Say-on-Pay Vote

At our 2021 annual meeting, a substantial majority of shareholders (93.5% of votes cast) approved the compensation of our named executives. We consider this result to be a strong endorsement of our executive compensation program, practices, and policies. Based on this strong shareholder support, the Committee does not believe our executive compensation program requires material changes. However, the Committee has made, and will continue to make, changes designed to further enhance the objectives of our program and to account for business and other developments. We will continue to hold the advisory say-on-pay vote annually until the next shareholder vote on say-on-pay frequency in 2023.

The Committee highly values the input of our shareholders. The Committee will continue to consider the views of our shareholders in connection with our executive compensation program, including the results of the 2022 say-on-pay vote. We will make modifications based upon evolving best practices, developments in and factors affecting our business, input from our shareholders, market compensation information, and changing regulatory requirements. We encourage you to support this year’s say-on-pay proposal.

Independent Compensation Consultant

The Compensation Committee assessed the independence of Compensation Advisory Partners under applicable SEC rules and NYSE listing standards. The Committee determined that Compensation Advisory Partners is independent and its work raises no conflict of interest. Compensation Advisory Partners did not provide any services to Sherwin-Williams during 2021 other than those matters for which it was engaged by the Compensation Committee.

Relationship Between Pay and Performance

Our executive compensation program combines different elements of compensation. As a result, the total amount of executive compensation paid is not directly tied to any one measure or component of compensation. We believe this approach assists us in viewing performance holistically and helps mitigate the risk of over-emphasizing any one metric. That said, a significant portion of our executive compensation program is tied to the value of our stock, which we believe is critical to ensuring we deliver value to shareholders.

Each year, the Compensation Committee assesses our CEO’s compensation based on Sherwin-Williams’ performance relative to its peers. In October 2021, the Committee analyzed the relationship between the realizable pay of our CEO and total shareholder return (TSR) over the five-year period ended December 31, 2020, comparing Sherwin-Williams to the peer group we use when making executive compensation decisions. At the time of such review, 2020 was the most recent year for which compensation information was available for our peer group. TSR includes the reinvestment of dividends and is calculated on a compounded annual growth rate basis.

The chart in this section, prepared by Compensation Advisory Partners, shows the degree of alignment between the total realizable pay of our CEO and Sherwin-Williams’ TSR relative to companies in our peer group over the five-year period. The chart reflects all companies in our current peer group following the changes adopted during 2021 (as further described under the heading “Peer Group” in this CD&A), except for Dow Inc. and DuPont de Nemours, Inc., which were excluded due to the merger completed by The Dow Chemical Company and E.I. du Pont de Nemours & Company in 2017 and subsequent spin-offs to form two new publicly traded companies in 2019.

 

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Sherwin-Williams’ cumulative TSR over the five-year period was 197%, which was at the 95th percentile of our peer group. Companies in our peer group are indicated by the circles in the chart. Companies that fall within the shaded diagonal alignment zone are generally viewed as having pay and performance alignment. As illustrated in the chart, our CEO’s realizable pay was well aligned with Sherwin-Williams’ performance.

PAY FOR PERFORMANCE ALIGNMENT

CEO REALIZABLE PAY AND TSR

 

 

Realizable pay includes: (a) base salary during the five-year period; (b) actual cash incentive compensation earned during the five-year period; (c) the value of RSUs granted during the five-year period based on the 2020 year-end closing stock price per share; (d) the vesting date value of long-term performance equity awards that were earned in 2018, 2019, and 2020, which consisted of PRSUs; (e) the value of target long-term performance equity awards granted in 2019 and 2020, which consisted of PRSUs, based on the 2020 year-end closing stock price per share; and (f) the in-the-money value of stock options granted during the five-year period based on the 2020 year-end closing stock price per share. Valuing equity awards in this manner is different from valuing equity awards at their aggregate grant date fair value, which is the method used to value equity in the Summary Compensation Table and the 2021 Grants of Plan-Based Awards Table.

 

34		2022 PROXY STATEMENT

Overview of Executive Compensation Practices

Our compensation programs, practices, and policies are reviewed and evaluated on an ongoing basis. We list below some of the more significant best practices we have adopted, and practices we have avoided, that we believe highlight our commitment to responsible pay and governance principles that best serve our shareholders’ long-term interests.

 

What We Do						What We Don’t Do
✓Performance-Based Pay.    We emphasize pay for performance. For 2021, 90% of our CEO’s total direct compensation and an average of 79% of our other named executives’ total direct compensation was tied to performance.     ✓Independent Compensation Committee.    Each member of the Compensation Committee meets the independence requirements under SEC rules and NYSE listing standards.      ✓Independent Compensation Consultant. The Compensation Committee uses an independent compensation consultant, who provided no other services to our Company during 2021.      ✓Balanced Compensation Structure.    We utilize a balanced approach to compensation, which combines fixed and variable pay, short-term and long-term time horizons, and cash and equity components.      ✓Target Median.    We have a pay philosophy that targets market median compensation. We assess our current compensation practices, policies, and pay levels against peer companies.      ✓Responsibly Administered Incentive Compensation Programs.    We have diversified incentive compensation goals without steep payout cliffs. Vesting periods for annual equity awards encourage consistent behavior and reward long-term, sustained performance.      ✓Clawback and Recapture Policy.    Our clawback and recapture policy allows us to “clawback” incentive compensation earned by our executives and key employees.      ✓Double-Trigger Change in Control.    Our stock plan contains a “double-trigger” acceleration provision for the vesting of equity awards upon a change in control.      ✓Significant Stock Ownership.    Our directors and executives have significant stock ownership requirements.     ✓Annual Say-on-Pay Vote.    We hold our advisory say-on-pay vote on an annual basis.										No Employment Agreements.    We do not have employment agreements with our named executives; our named executives are employed at will.
										No Dividend Equivalents for Unvested RSUs or PRSUs. Dividend equivalents on RSU or PRSU awards are deferred and paid only on earned shares upon vesting.
										No Repricing or Replacing of Underwater Stock Options. We do not permit the repricing or replacing of underwater stock options without shareholder approval.
										No Hedging.    Directors and employees, including our executive officers, are prohibited from engaging in hedging transactions with respect to our securities.
										No Pledging.    Directors, executive officers, and certain other employees may not hold our securities in margin accounts or otherwise pledge our securities as collateral for a loan.
										No Speculative Trading.    Directors and employees, including our executive officers, may not engage in short sales of our securities or in put options, call options, or other market-offered derivative transactions in our stock.
										No Excessive Perquisites.    Consistent with our culture, we provide only limited perquisites to our executives.
										No Excessive Risk-Taking.    We conducted a risk assessment and concluded that our compensation policies do not encourage excessive or unnecessary risk-taking.
										No Above-Market Earnings on Deferred Compensation. We do not pay guaranteed, above-market, or preferential interest or earnings on deferred compensation.

 

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Overview of Our Executive Compensation Program

Independent Compensation Committee

The Compensation Committee, which is entirely composed of independent directors, oversees our executive compensation program. The Committee reports to the Board on all compensation matters for members of our senior management team, including our named executives. The Committee has engaged Compensation Advisory Partners as its independent compensation consultant in order to fulfill its responsibilities. We include additional information about the Compensation Committee, including the role of the compensation consultant and management in the compensation setting process, under the heading “Compensation and Management Development Committee” in the Board Committees section.

Compensation Objectives

We design and manage our Company-wide compensation programs to align with our overall business strategy and to focus our employees on delivering sustained financial and operating results and creating value for our shareholders on a consistent, long-term basis. We believe it is important that our compensation programs:

 

•

Be competitive.    Our programs are designed to attract, retain, and motivate talented and high-performing people at all levels of our Company around the world. We structure our compensation programs to be competitive with the programs of companies of comparable size and business.

 

•

Maintain a performance- and achievement-oriented culture.    A significant percentage of our employees participate in incentive plans tied to performance goals that support our business strategies. We utilize both annual and long-term incentives to appropriately balance consistent annual results with improved performance over the longer term. We select performance goals that are sufficiently demanding, support our financial and operating objectives, and help drive our business. We reward employees for performance without encouraging excessive or unnecessary risk-taking.

 

•

Align the interests of our executives with those of our shareholders.    It is important that a significant portion of our executives’ incentive compensation be directly tied to our stock price in order to align the financial interests of our executives with the interests of our shareholders and keep our executives focused on sustained financial performance. We have significant stock ownership requirements for our executives described under the heading “Executive Stock Ownership Requirements” in the Other Arrangements, Policies, and Practices section of this CD&A.

We believe our compensation programs achieve these goals.

 

36		2022 PROXY STATEMENT

Compensation Components

Our Approach and Mix.    We maintain a balanced approach to compensating our named executives by combining elements that vary by the (a) type of compensation (fixed and variable), (b) length of the performance period (short- and long-term), and (c) form of compensation (cash and equity). We believe this mix aligns with our business strategies and emphasizes pay for performance. We determine this mix by reviewing market compensation information. We do not have a specific policy for the allocation of compensation between fixed and variable, short- and long-term, and cash and equity.

The components of our executive compensation program, the primary purpose of each component, and the form of compensation for each component are described in the following table.

 

Component		Primary Purpose		Form of Compensation
Base Salary		Provides base compensation for day-to-day performance of job responsibilities.		Cash
Annual Cash Incentive Compensation		Rewards achievement of annual performance goals.		Cash
Long-Term Equity Incentive Compensation		Encourages improvement in the long-term performance of our Company and aligns the financial interests of our executives with the interests of our shareholders.		Stock options, which vest in equal installments on the first, second, and third anniversary of grant and have a ten-year term.   PRSUs, which vest at the end of a three-year period based upon the achievement of pre-established financial performance goals and are paid in stock.
Other Employee and Executive Benefits		Provides a broad-based executive compensation program for employee retention, retirement, and health.		Retirement and savings programs, health and welfare programs, and employee benefit plans, programs, and arrangements generally available to all employees; executive life insurance and executive long-term disability plans; and limited perquisites and other benefits.

At-Risk Compensation.    A core principle of our executive compensation program is that a significant percentage of the compensation opportunity for each named executive, especially our CEO, is variable and at-risk. This type of compensation is primarily dependent upon the financial success of our Company and the performance of Sherwin-Williams common stock. This means that our executives are rewarded when they produce value for our shareholders. The following chart illustrates the mix of key compensation components for our named executives for 2021. The percentages reflect the amounts of each of our named executive’s base salary, target annual cash incentive compensation, and long-term equity incentive compensation (consisting of stock options and PRSUs and valued using aggregate grant date fair values) for 2021.

 

 

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Peer Group

The Compensation Committee utilizes a peer group of companies to assess the competitiveness of our executive compensation program relative to the market. The compensation consultant annually identifies the compensation paid to named executives with similar roles and responsibilities at a group of chemical, industrial, manufacturing, consumer product, and retail companies with comparable sales to those of Sherwin-Williams, which are considered to be our peer group companies. The compensation consultant also compiles compensation data from broad-based surveys of companies of similar size and industry to us. These surveys are sponsored by nationally recognized compensation consulting firms. We, along with many of our peer group companies, participate in these surveys.

We monitor executive compensation levels and program designs at these peer group companies because their sizes and businesses make them most comparable to us. We also believe these companies likely compete with us for executive talent. The compensation consultant annually reviews current and potential peer companies and recommends changes primarily based upon revenue size, market capitalization, industry, business description/mix, and brand recognition. The Compensation Committee periodically evaluates and, if necessary, adjusts the composition of our peer group to ensure it remains the most relevant group of companies to use for compensation purposes.

During 2021, the Committee reviewed the continued appropriateness of our peer group. Based upon its evaluation and the recommendation of Compensation Advisory Partners, the Committee made the following changes:

 

•

Eastman Chemical Company and Huntsman Corporation were removed because they were among the smallest companies (by revenue) in the prior peer group. Consistent with past practice, Kimberly-Clark Corporation was removed due to director Aaron Powell’s employment with the company at the time of the peer group evaluation.

 

•

Dow Inc., DuPont de Nemours, Inc., and International Paper Company were added because their sizes and industries are comparable to Sherwin-Williams’ size and industry.

Because these changes to our peer group were adopted in mid-2021, they did not affect the majority of 2021 executive compensation decisions, which were made earlier in the year using the prior peer group.

Following these changes, our new peer group consists of the 23 companies listed below. Revenues for the companies ranged from approximately $7.6 billion to $40.6 billion, with Sherwin-Williams ranking at the 54th percentile.

 

Air Products and Chemicals, Inc.		Eaton Corporation plc		Masco Corporation
Akzo Nobel N.V.		Ecolab Inc.		Mohawk Industries, Inc.
Ball Corporation		Honeywell International Inc.		Newell Brands Inc.
Colgate-Palmolive Company		Illinois Tool Works Inc.		PPG Industries, Inc.
Cummins Inc.		International Paper Company		Stanley Black & Decker, Inc.
Deere & Company		Johnson Controls International plc		3M Company
Dow Inc.		Linde plc		Whirlpool Corporation
DuPont de Nemours, Inc.		LyondellBasell Industries N.V.

Use of Market Compensation

The compensation consultant calculates an average of (a) the compensation available at companies in our peer group (using the most recent proxy data) and (b) the average compensation data from broad-based surveys. We refer to this average as “market” compensation, which provides the Compensation Committee with a framework to evaluate the competitiveness of our executive compensation program, as well as assistance in determining the mix of compensation components and target compensation levels. We generally benchmark target compensation for our named executives to be within a general range (plus or minus approximately 15%) of the market median compensation of comparable positions, although we do not have a formal policy of setting target compensation levels at a specific percentile of the market median.

 

38		2022 PROXY STATEMENT

We benchmark against market compensation because it allows us to attract and retain executives and helps us to manage the overall cost of our compensation program. We consider this information only as a reference point or as a framework, not as a determining factor or part of any arithmetic formula, in setting compensation. The policies we use to make compensation decisions, and the decisions we make, are materially similar for all named executives and generally result in higher compensation levels for our CEO due to the nature and responsibilities of the role and higher market compensation for CEOs.

The compensation consultant annually provides the Committee with a comprehensive analysis of market compensation, which includes base salary, annual cash incentive compensation, long-term equity incentive compensation, total annual cash compensation, and total direct compensation. We define total direct compensation as the sum of base salary, annual cash incentive compensation, and long-term equity incentive compensation. We review total direct compensation to help us determine whether the key compensation components we pay our executives are competitive in the aggregate.

The Committee generally compares each named executive’s total direct compensation and total annual cash compensation to the market median compensation. Individual components may be more or less than market median compensation because we focus on the overall competitiveness of our entire compensation program. Judgment may be used to adjust a component of compensation above or below the market median for reasons such as an executive’s performance, responsibilities, experience, and tenure, our Company-wide performance, and internal pay equity.

Key Components of Our Executive Compensation Program

Base Salary

Annual Salary Reviews.    Salary is the only key component of our executive compensation program that is not at-risk. The Compensation Committee reviews and approves the base salary of each executive at least annually and at other times, as appropriate, in connection with a promotion or other change in responsibility. Annual base salary increases generally are effective in the first quarter of each year and are based, in part, on the overall annual salary budget guidelines for our Company.

Annual Performance Appraisals.    All salaried employees, including our named executives, undergo an annual performance appraisal. Each non-CEO named executive’s performance for the prior year is evaluated by our CEO. The evaluation is based upon the executive’s performance results (including accomplishment of incentive performance goals, financial accomplishments, and other contributions) and leadership (including work ethic and strategic contributions). For the evaluation of our CEO, our non-management directors assess his performance across the following pre-established categories: (a) performance results; (b) business strategy; (c) developing a management team, which includes championing diversity; (d) personal and board leadership; and (e) ESG leadership, which includes the development, integration, and execution of ESG strategy, as well as progress on ESG initiatives, as part of Sherwin-Williams’ overall business strategy. These factors are not quantified or weighted. Instead, judgment is used in assessing the factors in a qualitative manner. In any one year, any one factor or group of factors may play a larger role in assessing performance. The results are reviewed by the Committee and by the non-management directors in executive session.

2021 Base Salaries.    The following table sets forth the base salary as of December 31, 2021 for each of our named executives and, for those who were named executives during 2020, the percentage increase over their base salaries as of December 31, 2020. Percentage salary increases for Messrs. Mistysyn and Ippolito included market adjustments for their respective positions. During the year, the Committee adjusted Mr. Ippolito’s and Ms. Petz’s base salaries to reflect their previously mentioned 2021 job changes.

 

Name		Base Salary as of December 31, 2020 ($)		% Increase		Base Salary as of December 31, 2021 ($)
John G. Morikis		1,339,000		2.99%		1,379,000
Allen J. Mistysyn		750,088		6.65%		800,000
Peter J. Ippolito		630,028		7.93%		680,000
Mary L. Garceau		640,097		3.35%		661,541
Heidi G. Petz		—		—		600,000
Justin T. Binns		—		—		575,000

 

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Annual Cash Incentive Compensation

Annual cash incentive compensation may be earned by our named executives under our shareholder-approved 2007 Executive Annual Performance Bonus Plan (the Performance Plan). Annual cash incentive compensation is intended to motivate our executives to achieve annual performance goals that strengthen our Company over the long term.

Target and Maximum Annual Incentive Levels.    The Committee annually reviews target and maximum annual cash incentive compensation levels for our named executives as a percentage of their base salary. Target incentive awards are determined by using the market median annual cash incentive compensation, which generally equals the amount a named executive could receive if he or she achieved a 100% average of their performance goals. The maximum incentive awards are determined by the Committee following a review of the maximum annual cash incentive compensation available to similarly-situated executives at peer group companies.

The following table sets forth the 2021 minimum, target, and maximum annual cash incentive compensation levels, as a percentage of base salary, for each named executive.

 

		Incentive Amount as a Percentage of Salary
Name		Minimum		Target		Maximum
John G. Morikis		0%		160%		320%
Allen J. Mistysyn		0%		90%		180%
Peter J. Ippolito		0%		80%		160%
Mary L. Garceau		0%		80%		160%
Heidi G. Petz		0%		80%		160%
Justin T. Binns		0%		80%		160%

Objective Annual Payout Formula.    The Committee approves annual performance goals and payout formulae for our named executives in February of each year. Our CEO also approves the goals and payout formulae for our other named executives. For the 2021 annual cash incentive program, the Committee reviewed the 2021 annual operating budget and approved target financial performance goals at levels that were the same as set forth in the budget. During 2021, Messrs. Morikis and Mistysyn and Ms. Garceau had identical corporate performance goals. Mr. Ippolito had two sets of goals as a result of his job change in March 2021. He had performance goals related to TAG for January 1, 2021 through March 27, 2021 and corporate performance goals for March 28, 2021 through December 31, 2021 due to his position as Senior Vice President, Strategic Initiatives during the majority of this period. Ms. Petz and Mr. Binns had performance goals related to the business unit for which they were each responsible during 2021.

We use multiple performance goals to encourage our named executives to have a well-rounded approach to managing the business and not to concentrate on achieving just one goal to the detriment of others. We use EPS as a performance metric for both a portion of our annual cash incentive program and a portion of our PRSU program. EPS is a widely communicated and easily understood key measure used in both evaluating the success of our Company’s performance and determining the market value of our stock. The Committee and management believe it is important to utilize EPS for portions of both programs because, over the long term, EPS growth will drive value for our shareholders. By using EPS, management is held accountable for driving top-line growth and managing our operating cost structure. Each year, the Committee and management evaluate the incentive structure, including the metrics used in each of the incentives. Based on the most recent review, we believe EPS provides effective line of sight to drive individual performance. Additionally, by delivering the entire long-term incentive in equity, executives are encouraged to drive long-term value for shareholders, and the performance metrics used in the annual incentive program provide reinforcement of the activities we believe will drive value.

The Committee reviews and approves each named executive’s achievement of performance goals for the prior year. In determining the level of achievement of performance goals, the Committee may include or exclude the impact of certain items, as permitted under the Performance Plan.

 

40		2022 PROXY STATEMENT

Calculation of 2021 Annual Cash Incentive Amounts Earned.    In February 2022, the Committee approved the annual cash incentive compensation amounts earned by our named executives for 2021. Each performance goal has corresponding pre-established achievement levels ranging from a minimum of 0 to a maximum of 125, with a target achievement of 100. The achievement level for each goal is multiplied by the goal’s weight to determine a weighted achievement for the goal. For each named executive, the weighted achievement levels for all goals are added together to determine a total weighted achievement level. Total weighted achievement levels range from 0 to 125, with a target of 100. Total weighted achievement levels correspond to a pre-established range of final payouts as a percentage of salary for each named executive. The range of final payouts as a percentage of salary between 0 – 75, 75 – 100, and 100 – 125 are determined on a straight-line basis.

In considering the level of achievement for the 2021 performance goals, the Committee reviewed the significant, adverse impacts of Winter Storm Uri and Hurricane Ida, which resulted in raw material shortages significantly hindering our ability to manufacture the products needed to fully meet robust customer demand. In the Committee’s judgment, the performance goals adversely impacted by the natural disasters were the corporate adjusted EPS and adjusted free cash flow (FCF) metrics, the TAG sales, profit before taxes (PBT), and RONAE metrics, and the PCG PBT and RONAE metrics. In evaluating the results of the performance goals, the Committee considered management’s efforts during 2021 in responding to the unprecedented impacts of the natural disasters, some of which are highlighted below.

 

•

Adapting and Strengthening Our Business

 

°

Identified and made adjustments throughout our business to improve raw material availability and reduce the impacts to our customers, such as through SKU rationalizations to focus production on higher demand products and eliminate similar regional products, utilization of alternative raw material suppliers, and reformulations of certain of our products.

 

°

Collaborated with and provided support to impacted suppliers to alleviate raw material shortages, including by providing Company resources to help complete batch productions.

 

°

Continued to make strategic investments in our business to drive continued growth and better serve the needs of our customers, such as the acquisition of a manufacturer and developer of water-based polymers used in architectural and industrial coatings and other applications to expand our existing internal resin manufacturing capabilities, and plans to significantly expand the capacity gained through the acquisition to serve internal demand and external customers.

 

°

Implemented numerous pricing actions across each of our businesses to offset higher, sustained raw material and other costs.

 

°

Strengthened relationships with our customers through deliberate, consistent, and transparent communications regarding the challenges and resulting delays, as well as continued responsiveness to customers’ current and future needs.

 

°

Engaged with employees, rewarded resiliency and hard work, and made changes throughout our business to encourage retention, including wage increases, reduced store hours, and employee benefit enhancements.

 

•

Delivering and Enhancing Shareholder Value

 

°

Increased consolidated net sales by 8.6% to a record $19.94 billion in 2021 despite the raw material shortages hindering our ability to fully meet demand.

 

°

Continued to drive strong total shareholder return (including the reinvestment of dividends) for 2021 at 44.90%, compared to 28.71% for the S&P 500.

The Committee recognized that the natural disasters were unforeseen, significant events outside of management’s control, were not accounted for when the performance goals were established, and the extent of their impacts to the Company and across the industry were unprecedented. As a general matter and consistent with past practice, the Committee believes annual cash incentive compensation should focus on performance that is generally within the control of management and not take into account unforeseen circumstances that may not be realized. In the event of unforeseen circumstances, like natural disasters, the Committee generally evaluates management’s performance in responding to the related impacts and challenges and makes adjustments if the Committee deems appropriate, as permitted under the Performance Plan.

 

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