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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		Notice of Annual Meeting of Shareholders

 

 

Proxy Statement

We are providing the enclosed proxy materials to you in connection with the solicitation by the Board of Directors (the Board) of proxies to be voted during the Annual Meeting of Shareholders to be held on April 21, 2021 (the Annual Meeting).

As used in this Proxy Statement, the terms “Sherwin-Williams,” “the company,” “we,” and “our” refer to The Sherwin-Williams Company.

None of the share, restricted stock unit, per share, or per restricted stock unit information included in this Proxy Statement has been adjusted to reflect Sherwin-Williams’ three-for-one stock split announced on February 3, 2021.

In accordance with rules and regulations adopted by the Securities and Exchange Commission (SEC), Sherwin-Williams may furnish proxy materials by making them available via the Internet, instead of mailing printed copies to each shareholder of record. If you receive a Notice of Internet Availability of Proxy Materials by mail, you will not receive printed copies of our proxy materials unless you specifically request printed materials. You may request printed materials by following the instructions on the Notice of Internet Availability of Proxy Materials. We began making our proxy materials available on or about March 10, 2021.

 

 

 

Table of Contents

 

Proxy Summary

This summary highlights information contained elsewhere in this Proxy Statement and does not contain all of the information you should consider. Please carefully read the entire Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 before voting.

2021 Annual Meeting of Shareholders

 

Date and Time		Record Date		Location		Who Can Attend and Vote
Wednesday   April 21, 2021   9:00 a.m. EDT		February 23, 2021		Online only at www.virtualshareholdermeeting.com/SHW2021		Shareholders of record at the close of business on February 23, 2021

Proposals and Board Recommendations

 

Item		Proposal		Board Recommendations				Page
1		Election of 10 directors				FOR each nominee		16
2		Advisory approval of the compensation of the named executives				FOR		63
3		Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm				FOR		64

2020 Business Highlights

Throughout 2020, Sherwin-Williams devoted significant attention to responding to the COVID-19 pandemic to protect the health and well-being of our employees, customers, and communities and to mitigate the business impact, while maintaining focus on our near- and long-term strategies to drive future growth and continue delivering value to our shareholders.

Our Comprehensive COVID-19 Response

Beginning in March 2020, we began implementing changes in our business to protect and support our employees, customers, and communities during these challenging times, as well as to assist with efforts to contain and combat the spread of COVID-19. These changes have included the following.

 

●  Ensuring the company could continue supplying critical products to support healthcare facilities, manufacturing plants, food and beverage packaging, and other infrastructure and medical needs.   ●  Transitioning some of our facilities to temporarily manufacture hand sanitizer for use in our facilities and communities.   ●  Temporarily reducing store hours, closing sales floors, and transitioning customers to order product online or via phone and to access products via curbside pickup or delivery.   ●  Beginning in May, reinstituting regular store hours and re-opening sales floors with appropriate health and safety protocols.   ●  Providing premium pay for select front-line employees, and enhancing certain employee benefits, such as tele-health, paid sick leave, family leave, and voluntary leave of absence policies and programs.		●  Enhancing cleaning and sanitation procedures, and implementing remote, alternative, and flexible work arrangements where possible.   ●  Donating 250,000+ items of personal protective equipment, including masks, gloves, and other equipment, to our communities.   ●  Directing some of our customers to small business relief programs and resources.   ●  Identifying and making adaptations and investments within our global supply chain organization to support an unprecedented surge in do-it-yourself (DIY) demand.   ●  Continuing to make strategic investments to drive continued growth, such as opening new stores, developing our e-commerce platform, and adding innovative new products and productivity-enhancing services.

 

			1

Financial and Operating Performance

Achieving Record Results. Despite the unprecedented challenges of the COVID-19 pandemic and its impact to our business, 2020 was another outstanding year for Sherwin-Williams’ financial performance. While none of us anticipated the severity of these challenges, our employees responded as they always do when facing adversity – with extraordinary effort, determination, and resiliency. Consolidated net sales increased to a record $18.36 billion in 2020. Net income increased to $2.03 billion, and diluted net income per share increased 33.9% to $22.08. We also generated record net operating cash of $3.41 billion in 2020 — an increase of $1.09 billion.

 

 

 

1

2020 includes after-tax acquisition-related amortization expense of $230.0 million. 2019 includes after-tax acquisition-related costs of $299.6 million, after-tax non-cash trademark impairment of $93.1 million, a tax credit investment loss of $74.3 million, and after-tax pension settlement expense of $25.0 million, partially offset by an after-tax Brazil indirect tax credit of $33.3 million and an after-tax benefit from the resolution of the California litigation of $26.1 million. 2018 includes after-tax acquisition-related costs of $394.4 million, after-tax environmental expense provisions of $126.1 million, after-tax California litigation expense of $103.4 million, and after-tax pension settlement expense of $28.3 million.

 

2

2020 includes a charge of $2.50 per share for acquisition-related amortization expense. 2019 includes charges of $3.21 per share for acquisition-related costs, $1.00 per share for non-cash trademark impairment charges, a tax credit investment loss of $0.79 per share, and pension settlement expense of $0.27 per share, partially offset by a Brazil indirect tax credit of $0.36 per share and a benefit from the resolution of the California litigation of $0.28 per share. 2018 includes charges of $4.15 per share for acquisition-related costs, $1.32 per share for environmental expense provisions, $1.09 per share for California litigation expense, and $0.30 per share for pension settlement expense.

Returning Significant Value to Shareholders. In 2020, we continued our history of returning significant value to our shareholders and continued to execute on our disciplined capital allocation strategy. We returned approximately $2.93 billion to our shareholders in the form of dividends and share repurchases, an increase of 145% over the prior year. We also increased our annual dividend to $5.36 per share, extending our string of dividend increases to 42 consecutive years. In February 2021, the Board increased the quarterly cash dividend to $1.65 per share, an increase of approximately 23% over the dividend paid in the same quarter in 2020.

 

Sherwin-Williams has returned approximately $5.1 billion to shareholders over the three-year period		Total Shareholder Return, including reinvestment of dividends

 

2		2021 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.

This year, we have included a new director nominee—Aaron M. Powell, President, Asia-Pacific Consumer Business, Kimberly-Clark Corporation. Susan J. Kropf, who has served as a director since 2003, is not standing for re-election, as she will retire as a director at the end of her current term at the Annual Meeting in accordance with the Board’s retirement policy.

 

COMMITTEES

Name and Principal Occupation

Age

Director Since

Independent

AC

CMDC

NCGC

Other Public Company Boards

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

63

2019

🌑

🌑

3

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

63

2006

🌑

C,F

3

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

64

2019

🌑

F

1

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

57

2012

🌑

F

C

1

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

57

2015

1

Christine A. Poon Executive in Residence, The Ohio State University

68

2014

🌑

🌑

🌑

4*

Aaron M. Powell President, Asia-Pacific Consumer Business, Kimberly-Clark Corporation

49

N/A

🌑

0

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

57

2017

🌑

🌑

0

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

62

2014

🌑

🌑

🌑

1

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

69

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

 

*	Ms. Poon is a director of Decibel Therapeutics, Inc., which went public on February 12, 2021. On February 23, 2021, Koninklijke Phillps N.V. publicly announced that Ms. Poon will retire from its Supervisory Board in May 2021 following the completion of her current term.

 

			3

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. Recently, the Board adopted a policy to include, and to request that any search firm it engages include, a diverse pool of qualified candidates, including women and racially/ethnically diverse persons, from which director nominees are chosen.

 

 

 

*	Based on director nominees’ self-identified diversity characteristics.

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.

 

 

 

4		2021 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.

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.

 

		Members1		Independence		Meetings Held During 2020
Board of Directors		10		9 of 10		7
Audit Committee		4		100%		8
Compensation and Management Development Committee		5		100%		4
Nominating and Corporate Governance Committee		4		100%		2

 

1

Susan J. Kropf will retire as a director at the end of her current term at the Annual Meeting in accordance with the Board’s retirement policy. Mrs. Kropf currently serves as Chair of the Compensation and Management Development Committee and a member of the Nominating and Corporate Governance Committee. Mr. Powell is a new director nominee this year. If our shareholders elect all of the director nominees at the Annual Meeting, the Board will consist of 10 directors, all of whom are independent, except our CEO.

Each of our current directors attended at least 75% of all of the 2020 meetings of the Board and the committees on which he or she served. All of our current directors also attended the 2020 Annual Meeting.

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.

 

 

			5

Risk Management & Oversight

While management is responsible for assessing and managing our exposure to various risks, the Board has responsibility for the oversight of risk management. Certain Board committees review specific risk areas to assist the Board with its overall risk management oversight responsibility. The following highlights select areas of Board and committee oversight during 2020.

 

		Audit Committee		Compensation Committee		Nominating Committee		Full Board of Directors
Enterprise Risk Management		🌑						🌑
Cybersecurity		🌑						🌑
Financial		🌑						🌑
COVID-19 Response		🌑		🌑				🌑
Compensation Policies & Practices				🌑				🌑
Management Development and Succession				🌑				🌑
Board Succession						🌑		🌑
Corporate Governance						🌑		🌑
Environmental (including the impacts of climate change)						🌑		🌑
Safety						🌑		🌑
Sustainability						🌑		🌑
Corporate Social Responsibility						🌑		🌑

 

6		2021 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. 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 2020, 90% of total direct compensation (base salary, annual incentive, and long-term incentive) for our 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. We review and evaluate our compensation programs, practices, and policies on an ongoing basis, and we modify them to address evolving best practices and changing regulatory requirements, as well as significant events, such as the COVID-19 pandemic. The following table highlights some of the more significant best practices we have adopted, and the practices we have avoided, to maintain our commitment.

 

 

			7

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 describe below our key corporate governance policies and practices.

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.

In February 2021, the Board conducted its annual review of our Corporate Governance Guidelines. Based upon its evaluation and consideration of evolving corporate governance practices with respect to board diversity, the Board revised our Corporate Governance Guidelines to include a policy that, when identifying candidates for Board membership, the Nominating and Corporate Governance Committee (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/ethnically diverse persons, from which director nominees are chosen.

Leadership Structure and Lead Director

Combined Chairman and Chief Executive Officer Role

Our Corporate Governance Guidelines provide that the same person should hold the positions of 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. A combined Chairman and CEO role provides clear insight and direction of business strategies and plans to both the Board and management, which facilitates the efficient and effective functioning of the Board and our company. 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 will annually elect an independent director to serve as Lead Director. Steven H. Wunning is currently the Lead Director. 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 CEO and the independent directors.

The Lead Director has a significant role, with comprehensive governance responsibilities that 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 non-management directors. Meet separately with the Chairman after executive sessions to review the matters discussed during the executive sessions.

 

•

Review with the Chairman the schedule for meetings of the non-management 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 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.

 

8		2021 PROXY STATEMENT

 

•

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.

 

•

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. All Board committees are entirely composed of independent directors. Non-management directors meet in executive session following every regularly scheduled Board meeting. The Lead Director may schedule additional executive sessions, as appropriate. The Board has full access to our management team at all times. 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 its responsibilities.

Management Succession Planning

In light of the importance of management development and succession planning to Sherwin-Williams’ success, the Board’s oversight function includes responsibility for selecting and evaluating our CEO, electing or appointing other senior management, and reviewing management succession planning, including with respect to our CEO. The Compensation and Management Development Committee (the Compensation Committee) supports the Board in overseeing this process. Succession planning is reviewed by the Board at least once per year and may be reviewed more frequently as the Board deems appropriate.

On an annual basis, the CEO conducts an evaluation of the performance of the senior management team. The CEO reports the results of such evaluation to the Board, along with the CEO’s thoughts and recommendations on management succession planning and development plans to help prepare management for future succession. The Board and our CEO also engage in discussions to plan for CEO succession, including in the event of an unexpected occurrence resulting in a temporary incapacity or a sudden departure of the CEO.

Code of Conduct

Our Code of Conduct applies to all directors and employees, including executive officers, 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 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 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 such a possible violation.

Under our Code of Ethics for Senior Financial Management, our CEO, CFO, and senior financial management 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.

Risk Management and Oversight

While management is responsible for assessing and managing our exposure to various risks, the Board has responsibility for the oversight of risk management. We have an enterprise risk management process to identify, assess, and manage the most significant risks facing us, including financial, operational, litigation, compliance, reputational, environmental, and cybersecurity risks. Management reviews various significant risks with the Board throughout the year, as necessary and/or appropriate, and conducts a formal annual review of its assessment and management of the most significant risks with the Board.

Certain Board committees review specific risk areas to assist the Board with its overall risk management oversight responsibility.

 

•

The Audit Committee has oversight responsibility for management’s enterprise risk management process, including the policies and guidelines used by management to identify, assess, and manage our exposure to various risks. In addition

 

			9

to this responsibility for the process generally, the Audit Committee is responsible for reviewing and discussing with management our risk exposure relating to cybersecurity, which includes reviewing the state of our cybersecurity and emerging cybersecurity developments and threats, as well as the steps management has taken to monitor and mitigate such exposure. The Audit Committee also has oversight responsibility for financial risks. Management reviews financial risks with the Audit Committee at least quarterly and reviews its risk management process with the Audit Committee on an ongoing basis.

 

•

The Compensation Committee has oversight responsibility for the risks related to our compensation policies and practices. We include additional information about the Compensation Committee’s annual risk assessment of such policies and practices under the heading “Compensation Risk Assessment” in the “Board Meetings and Committees” section.

 

•

The Nominating Committee has oversight responsibility for the risks related to our environmental (including the impacts of climate change), safety, sustainability, and corporate social responsibility policies, objectives, and practices. Management periodically reviews such policies, objectives, and practices with the Nominating Committee.

Management’s role in identifying, assessing, and managing risk, and the Board’s role in risk oversight, have been well defined for many years. The Board’s role in risk oversight has not significantly impacted the Board’s leadership structure. We believe our current leadership structure, with Mr. Morikis serving as Chairman and CEO, enhances the Board’s effectiveness in risk oversight due to his extensive knowledge of our operations and the paint and coatings industry.

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 chairperson 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 non-management directors as a group, Non-Management Directors; each, c/o Corporate Secretary, The Sherwin-Williams Company, 101 West Prospect Avenue, 12th Floor, Midland Building, 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.

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 in the section above 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.

Director Independence

Under our Director Independence Standards (included in this Proxy Statement as Appendix A), 9 of our 10 current directors and 9 of our 10 director nominees are independent. All members of the Audit Committee, Compensation Committee, and Nominating Committee are independent. More information is set forth under the heading “Independence of Directors” in the “Proposal 1 — Election of Directors” section.

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.

 

10		2021 PROXY STATEMENT

 

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.

Executive Sessions of Non-Management Directors

The non-management members of the Board meet in executive session in connection with regularly scheduled Board meetings. Additional executive sessions may be scheduled by the Lead Director or the non-management directors. The Lead Director chairs these sessions.

Annual Board Self-Assessments

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

The Board may periodically engage an independent third-party advisor experienced in corporate governance matters to facilitate, and bring an outside perspective to, the annual self-assessment process. The Board last engaged such an advisor in 2018. During 2018, the advisor conducted one-on-one, open-ended interviews with all Board members to provide each director with the opportunity to openly discuss the performance and effectiveness of the Board as a whole and its committees. The interviews also provided each director with an opportunity to identify areas for improvement. In addition to the director interviews, the advisor conducted interviews with members of senior management who regularly attend Board meetings to solicit their perspectives on the relationship between the Board and management. The advisor’s process was developed in consultation with the Lead Director and the chair of the Nominating Committee, as well as our Chairman and CEO and our Senior Vice President, General Counsel and Secretary. The advisor gathered and analyzed the data and presented its findings and recommendations to the full Board.

Board Committee Charters

The Audit Committee, Compensation Committee, and Nominating Committee each have adopted written charters. Each committee reviews and evaluates the adequacy of its charter at least annually.

Stock Ownership Guidelines

The Board believes our directors and executives should have meaningful share ownership in Sherwin-Williams. Accordingly, the Board has established minimum share ownership requirements. Additional information is set forth under the heading “Stock Ownership Guidelines” in the “Other Arrangements, Policies, and Practices” section of the Compensation Discussion and Analysis (CD&A).

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 members should not serve on more than four public company boards (inclusive of our Board).

 

			11

Anti-Hedging and Anti-Pledging Policy

Directors and all employees, including our executive officers, are prohibited from engaging in hedging transactions with respect to our 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.

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 our 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

 

•

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.

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.

 

12		2021 PROXY STATEMENT

 

Corporate Responsibility

Our approach to corporate responsibility is grounded in our commitment to protecting and developing our greatest assets— our company, our employees, the communities where we live and operate, and the world around us. Presented below are highlights of our corporate responsibility programs and efforts, including with respect to human capital management and other environmental and social matters. You can find additional information about our programs and efforts on our Investor Relations website, investors.sherwin-williams.com.

 

		Our Company		We believe the pursuit of excellence is an ongoing commitment and a vital part of our culture.
Culture		✓ Seven guiding values are the foundation of our Culture of Excellence.   • Integrity — We keep our promises to our employees, customers, and shareholders.   • People — We are committed to providing safe, healthy, and inclusive work environments.   • Service — Our service approach is exemplary, personal, and professional, accompanied by the strongest product knowledge and supply chain in our industry.   • Quality — With a strong commitment to continuous improvement, we challenge ourselves to set the industry standard for excellence in color, products, and coatings.   • Performance — We set high expectations for—and take care to measure and reward—the achievement of challenging goals.   • Innovation — We encourage expansive thinking and innovation through challenging assumptions and leveraging our collective ingenuity and imagination.   • Growth — We are committed to growth that is sustainable and benefits our employees, customers, shareholders, and communities.
Ethics &   Compliance		✓ Annual Global Compliance Training — We believe it is important for our employees to complete annual compliance training to ensure integrity guides our business every day, and in every decision we make. This includes our Code of Conduct and topics such as human trafficking, anti-corruption, anti-bribery, equal employment and nondiscrimination, workplace harassment, conflicts of interest, and data privacy and security.   ✓ Global Environmental, Health and Safety (EHS) Policy — We are committed to global leadership and excellence in EHS throughout our operations. To fulfill this commitment, we develop, implement, and work to continually improve our global management systems, EHS standards, and performance measures.   ✓ Supplier Diversity and Code of Conduct — By engaging with strategic external partners, we aspire to create a supplier base that exemplifies inclusion and reflects our diversity commitment. In addition, we expect all of our suppliers and their subcontractors to operate in a manner that is consistent with our values.
		Our Employees		We are committed to engaging our employees, providing a safe and inclusive work environment, and advancing diversity within our company.
Culture &   Engagement		✓ Our People — We are committed to advancing a culture of inclusion where differences are welcomed, appreciated, and celebrated to positively impact the engagement of our people, as well as our business and the communities in which they live and work.
Talent   Management		✓ Our Strategy — Through our integrated talent management strategy, we strive to attract, retain, develop, and progress a workforce that embraces our culture of inclusion and reflects our diversity commitment.   ✓ Talent Programs — Our early talent programs play a critical role in attracting and progressing a diverse pipeline of talent. We also provide learning and employee networking opportunities to drive retention, progression, and engagement and help employees excel in their current and future roles.
Inclusion &   Diversity		✓ Equal Employment Opportunity Policy — We are proud to be an Equal Employment Opportunity/Affirmative Action employer committed to an inclusive and diverse workplace.   ✓ Conscious Inclusion — We believe in equipping our employees with education and resources to advance our culture of inclusion. Our training is designed to support and influence employee engagement, company performance, our customers’ experience, and our company values.   ✓ CEO Action for Diversity & Inclusion™ — Our CEO is a signatory to the largest CEO-driven business commitment to advancing inclusion and diversity in the workplace.

 

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Inclusion &   Diversity   (cont.)		✓ CEO Forums on Inclusion — 2020 served as the third year during which our CEO and other members of management held forums to encourage and obtain feedback from employees on our inclusion and diversity approach, with specific sessions dedicated to the significant social unrest experienced in the U.S.   ✓ Employee Resource Groups — In 2020, we expanded our employee-led networks and programs that support our inclusive culture and advance our commitment to attracting, developing, engaging, and retaining diverse talent.   ✓ Recognitions — Over the past year, we have been recognized by Forbes as one of the Best Employers for Diversity 2020, Best Employers for Women 2020, Best Employers for Veterans 2020, and Best Employers for New Grads 2020.
Safety &   Health		✓ Recordable Safety Incidents — For 2020, 67 global supply chain sites had zero recordable safety incidents. We track the total number of employees with recordable incidents per 200,000 hours worked each year. For 2020, our rate improved to 1.06.   ✓ EHS Management Systems — At December 31, 2020, 5 manufacturing sites were certified for safety and health management systems under ISO 45001, 7 sites were certified under OHSAS 18001, and 31 sites were certified under the OSHA voluntary protection program. Also at December 31, 2020, 24 manufacturing sites were certified for environmental management systems under ISO 14001.   ✓ Emergency Management Programs — All manufacturing facilities have trained emergency action teams that practice responding to various emergencies throughout the year.   ✓ Fleet Accidents — We are consistently well below industry benchmarks for fleet accidents per million miles.   ✓ Fires & Spills — We are committed to Process Safety Management improvement to minimize the risk of fires and spills.   ✓ COVID-19 — We adapted our business over the past year to protect the health and well-being of our employees, including enhancing cleaning and sanitation procedures and implementing remote, alternative, and flexible work arrangements where possible, including split shifts at facilities and remote work options for non-essential on-site functions.
Employment   Practices		✓ Our Practices — We are committed to the fair, consistent, and equitable treatment of our employees in relation to working conditions, wages, benefits, policies, and procedures.   ✓ Total Rewards — Our total rewards programs are designed to offer competitive compensation, comprehensive benefits, and other programs to support growth, both personally and professionally, and the diverse needs and well-being of our employees worldwide.   ✓ COVID-19 — During 2020, we provided premium pay for select front-line employees and enhanced benefits to support the health and well-being of our employees during the pandemic, such as tele-health, paid sick leave, family leave, and voluntary leave of absence programs and policies.
		Our Communities		Through the compassion of our employees and the performance of our products, we help protect, preserve, and enhance communities around the world.
Charitable   Giving		✓ The Sherwin-Williams Foundation — The Foundation is committed to supporting access to safe and healthy housing, advancing a skilled workforce that sustains inclusive, vibrant communities, and beautifying and preserving assets around the world. Sherwin-Williams and the Foundation contribute to our communities each year through product donations, employee pledge campaign donations, Foundation grants, and the Foundation Matching Gifts Program.   ✓ 2020 Contributions — During 2020, the Foundation contributed to efforts supporting non-profit organizations and underserved communities dealing directly with the ongoing, significant impacts of the pandemic.
Community   Engagement		✓ National Painting Week — For many years, our employees from more than 4,300 of our neighborhood stores across the U.S. and Canada have partnered with local organizations to find projects that could use a fresh coat of paint.   ✓ HomeWork Program — Staffed with Sherwin-Williams’ retirees, this program started in 2004 and has since provided professional painter training to thousands of low-income residents, job placement assistance with local contractors and unions, and EPA Renovate, Repair & Painting Certification instruction.   ✓ Volunteerism — We encourage our employees to volunteer their time and leadership to communities across our global footprint.   ✓ COVID-19 — During 2020, we transitioned some of our facilities to temporarily manufacture hand sanitizer for use in our facilities and surrounding communities and donated 250,000+ items of personal protective equipment, including masks, gloves, and other equipment, to our communities.

 

14		2021 PROXY STATEMENT

 

		Our Stewardship		We are committed to striking a careful balance — growing our business with care while minimizing adverse impacts on the world around us.
Sustainable   Products		✓ Product Stewardship Program — Our program is rooted in continuous improvement and driven by a set of guiding principles regarding the safe use of chemicals in our formulations and manufacturing processes. We employ a dedicated global product stewardship team to recognize and address potential impacts of our products throughout their lifecycle.   • We are an industry leader in ensuring our products meet and exceed criteria for green building credits in the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program.   • We are committed to developing innovative products and technologies that reduce impacts on the environment, such as through energy efficiency, enhanced durability, and lower emissions of volatile organic compounds.   • We actively engage government agencies and industry and non-governmental organizations that value sustainability practices as much as we do.
Climate   Change &   Emissions		✓ 2020 Goal — We set the following GHG emissions goal to be met by the end of 2020 (with base-line year of 2017): reduce by 5.9% per 100 lbs. produced. Our results and new goals will be published in our Corporate Social Responsibility (CSR) report later this year.   ✓ GHG Emissions — We actively monitor and track GHG emissions in a variety of ways, including direct emissions, by intensity, and relative to sales.   ✓ Carbon Accounting — We completed our first company-wide carbon accounting in 2006 and are a long-time supporter of CDP (formerly, The Carbon Disclosure ProjectTM), since first joining in 2009.
Energy		✓ 2020 Goal — We set the following electricity usage goal to be met by the end of 2020 (with base-line year of 2017): reduce electricity usage by 7.3% per 100 lbs. produced. Our results and new goals will be published in our CSR report later this year.   ✓ Energy Efficiency — We routinely use equipment upgrades as an opportunity to be more energy efficient and realize savings on gas and electricity.
Waste		✓ 2020 Goals — We set specific waste goals to be met by the end of 2020 (with base-line year of 2017): (a) reduce non-hazardous liquid waste by 7.3% per 100 lbs. produced; (b) reduce non-hazardous solid waste by 14.3% per 100 lbs. produced; and (c) reduce hazardous waste by 7.3% per 100 lbs. produced. Our results and new goals will be published in our CSR report later this year.   ✓ Waste Reuse and Recycle — We track and actively encourage and manage the reuse and recycling of raw materials, packaging, and hazardous and non-hazardous waste. Manufacturing waste values have been an area of significant success for us. We currently operate three sites that are zero to landfill.

 

			15

Proposal 1 — Election of Directors

Our Board has nominated the following 10 director nominees for election at the 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.

Our Board currently has 10 members. All are standing for re-election as nominees, except Mrs. Kropf, who is retiring as a director at the Annual Meeting in accordance with the Board’s retirement policy. Each nominee was elected by our shareholders at the 2020 Annual Meeting, except for our new nominee, Mr. Powell, who was nominated to be elected as a director by unanimous action of the Board on February 17, 2021.

All of the nominees are independent, except Mr. Morikis, who is not considered to be independent because of 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. 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 “Experiences, Qualifications, Attributes, and Skills of Director Nominees.”

 

Retired, Former Chief Executive Officer and President, Wendy’s International, Inc.   Director since: 2019   Age: 63   Committees:   Compensation and Management Development		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.

 

16		2021 PROXY STATEMENT

 

Retired, Former Chairman and Chief Executive Officer, Swagelok Company   Director since: 2006   Age: 63   Committees: Audit (Chair)		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) and 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 extensive financial 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: 64   Committees: Audit		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 Lead Director of Dow Inc. (NYSE: DOW) and a director of Kohler Company. Mr. Fettig also serves as a director of the Indiana University Foundation and a trustee of PGA REACH. 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.

 

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Chairman of the Board, Chief Executive Officer and President, The Goodyear Tire & Rubber Company   Director since: 2012   Age: 57   Committees: Audit and Nominating and Corporate Governance (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) 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 over 21 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: 57   Committees: None		John G. Morikis   Mr. Morikis has served as Chief Executive Officer of Sherwin-Williams since January 2016 and Chairman of Sherwin-Williams since January 2017. Mr. Morikis served as President of Sherwin-Williams from October 2006 to March 2019, Chief Operating Officer of Sherwin-Williams from October 2006 to January 2016, and President, Paint Stores Group of Sherwin-Williams 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 over 36 years, including over 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.

 

18		2021 PROXY STATEMENT

 

Executive in Residence, The Max M. Fisher College of Business, The Ohio State University   Director since: 2014   Age: 68   Committees: Compensation and Management Development and Nominating and Corporate Governance		Christine A. Poon   Ms. Poon has served as Executive in Residence at The Max M. Fisher College of Business at The Ohio State University since September 2015. Ms. Poon served as Professor of Management and Human Resources at The Max M. Fisher College of Business from October 2014 to September 2015 and Dean and John W. Berry, Sr. Chair in Business at The Max M. Fisher College of Business from April 2009 to October 2014. 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), a director of Regeneron Pharmaceuticals, Inc. (Nasdaq: REGN) and Decibel Therapeutics, Inc.* (Nasdaq: DBTX), and Vice-Chairwoman of the Supervisory Board of Koninklijke Philips N.V.** (NYSE: PGH).   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.   *   Decibel Therapeutics, Inc. went public on February 12, 2021.   ** On February 23, 2021, Koninklijke Philips N.V. publicly announced that Ms. Poon will retire as a member of its Supervisory Board in May 2021 following the completion of her current term.

 

President, Asia-Pacific Consumer Business, Kimberly-Clark Corporation   Director since: N/A   Age: 49   Committees: N/A		Aaron M. Powell   Aaron M. Powell has served as President, Asia-Pacific Consumer Business for Kimberly-Clark Corporation (global manufacturer and marketer of personal care, consumer tissue, and other household and professional products) since March 2020. Mr. Powell joined Kimberly-Clark in September 2007 and has held a variety of 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.

 

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Retired, Former Chair and Chief Executive Officer, Owens Corning   Director since: 2017   Age: 57   Committees: Compensation and Management Development		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 beginning in December 2007, Chair of Owens Corning beginning in 2002, and President of Owens Corning from December 2007 to August 2018. Mr. Thaman is a director of Kohler Company. 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.

 

Retired, Former Executive Vice President and Chief Operating Officer, FedEx Freight, FedEx Corporation   Director since: 2014   Age: 62   Committees: Audit and Nominating and Corporate Governance		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.

 

20		2021 PROXY STATEMENT

 

Retired, Former Group President, Caterpillar Inc.   Lead Director since 2019   Director since: 2015   Age: 69   Committees: Compensation and Management Development		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) and Summit Materials, Inc. (NYSE: SUM) and Independent Lead Director of 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.

 

 

 

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Independence of Directors

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. A complete copy of our Director Independence Standards is included in this Proxy Statement as Appendix A.

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, whichever is greater, of such other company’s annual gross revenues;

 

•

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 assets;

 

•

if the director, or an immediate family member of the director, serves as an officer, director, or trustee of a not-for-profit organization, and Sherwin-Williams’ discretionary charitable contributions (excluding matching contributions) to the organization are less than $500,000 or five percent, whichever is greater, of that organization’s annual 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 9 of our 10 current directors and 9 of our 10 director nominees are independent. All members of the Audit Committee, Compensation Committee, and Nominating Committee are independent. The Board determined that Ms. Anderson, Mrs. Kropf, Ms. Poon 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 New York Stock Exchange (NYSE). The Board also determined that David F. Hodnik, who served as a director until his retirement in April 2020, was independent under our Director Independence Standards and the independence requirements of the NYSE. Mr. Morikis is not considered to be independent because of his employment with Sherwin-Williams.

 

22		2021 PROXY STATEMENT

 

Experiences, Qualifications, Attributes, and Skills of Director Nominees

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 with respect to gender, race, and ethnicity, that it believes enables a director nominee to make significant contributions to the Board, Sherwin-Williams, and our shareholders. These experiences, qualifications, attributes, and skills are more fully described below. Additionally, in connection with director candidate searches, the Board’s policy is to include a diverse pool of qualified candidates, including women and racially/ethnically diverse persons, from which new director candidates are chosen for Board membership.

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 Nominating Committee may also consider such other experiences, qualifications, attributes, and skills, as it deems appropriate, given the then-current needs of the Board and Sherwin-Williams.

 

 

 

*	Based on director nominees’ self-identified diversity characteristics.

 

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Director Compensation

2020 Director Compensation Table

The following table sets forth information regarding the compensation of our non-management directors for 2020.

 

Name		Fees Earned or Paid in Cash ($)(2,3)					Stock Awards ($)(4,5)					All Other Compensation ($)(6)					Total ($)
Kerrii B. Anderson				125,000					160,671					3,000					288,671
Arthur F. Anton				150,000					160,671					3,000					313,671
Jeff M. Fettig				125,000					160,671					3,000					288,671
David F. Hodnik(1)				38,462					160,671					-0-					199,133
Richard J. Kramer				138,846					160,671					3,000					302,517
Susan J. Kropf				148,000					160,671					3,000					311,671
Christine A. Poon				131,154					160,671					-0-					291,825
Michael H. Thaman				125,000					160,671					3,000					288,671
Matthew Thornton III				125,000					160,671					-0-					285,671
Steven H. Wunning				160,000					160,671					3,000					323,671

 

1	Mr. Hodnik retired as a director at the end of his term at the 2020 Annual Meeting in accordance with the Board’s retirement policy. His fees were prorated for the portion of the year he served on our Board.

 

2	These amounts reflect the annual Board retainer, the annual retainer for the Lead Director, and the annual retainers for committee chairs.

 

3

Ms. Anderson, Mrs. Kropf, Ms. 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 2020 were as follows: Ms. Anderson ($31,250), Mrs. Kropf ($148,000), Ms. Poon ($32,788), Mr. Kramer ($138,846), 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

These values reflect 277 time-based restricted stock units (RSUs) granted during 2020 to each of our non-management directors under our 2006 Stock Plan for Nonemployee Directors. 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, 2020 was as follows: 525 for each of Ms. Anderson and Mr. Fettig and 669 for each of Mrs. Kropf, Ms. Poon, and Messrs. Anton, Kramer, Thaman, Thornton, and Wunning. Dividend equivalents on RSUs are deferred and paid upon vesting at the same rate as dividends are paid on our common stock.

 

None of our non-management directors held any stock options at December 31, 2020. Stock options are not part of our director compensation program.

 

6	These amounts reflect charitable matching gifts under The Sherwin-Williams Foundation Matching Gifts Program, which is described on the next page.

Director Compensation Program

The Compensation Committee is responsible for reviewing and approving the 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 non-management director compensation program is designed to attract and retain highly qualified directors by ensuring non-management 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 compensation program.

 

24		2021 PROXY STATEMENT

 

Director Fees

During 2020, 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 chair of the Audit Committee, $23,000 for the chair of the Compensation Committee, and $20,000 for the chair of the Nominating Committee;

 

•

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; and

 

•

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, Compensation Advisory Partners, 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 2020, the Compensation Committee performed such assessment and, based upon its evaluation and the recommendation of the compensation consultant, the Committee approved maintaining the current compensation program for our non-management directors. 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 Meetings and Committees” section.

Director Stock Ownership Requirement

The Board has established a minimum share ownership requirement to ensure the interests of our directors are aligned with the interests of our shareholders. Each non-management director who has served on the Board for at least five years is required to own shares of common stock equal in value to at least seven times the annual Board cash retainer. We include additional information about this requirement and the Compensation Committee’s annual review to determine whether our non-management directors are meeting this requirement under the heading “Stock Ownership Guidelines” in the “Other Arrangements, Policies, and Practices” section of the CD&A.

Other Benefits

We also provide liability insurance and business travel accident insurance for all directors, including $300,000 accidental death and dismemberment coverage and $300,000 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 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 by eligible participants to qualifying nonprofit organizations and educational institutions with tax-exempt affiliates.

Directors may defer all or a part 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.

 

			25

Board Meetings and Committees

The Board held seven meetings during 2020. Each incumbent director attended at least 75% of all of the meetings of the Board and committees on which he or she served. Under our Corporate Governance Guidelines, each director is expected to attend, absent unusual circumstances, all meetings of shareholders. All current directors attended the 2020 Annual Meeting.

The Board has established an Audit Committee, Compensation Committee, and Nominating Committee. Each committee has adopted a written charter. You may find a complete copy of each committee charter on our Investor Relations website, investors.sherwin-williams.com.

Committee Membership

The following table sets forth the current membership and chairs of the committees of the Board.

 

Name

Audit Committee

Compensation Committee

Nominating Committee

Kerrii B. Anderson

✓

Arthur F. Anton

Chair

Jeff M. Fettig

✓

Richard J. Kramer

✓

Chair

Susan J. Kropf

Chair

✓

Christine A. Poon

✓

✓

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 our 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 our internal audit function;

 

•

our compliance with legal and regulatory requirements; and

 

•

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

The Audit Committee met eight times during 2020 and made regular reports to the Board. Each member of the Audit Committee is independent under applicable SEC rules, NYSE listing standards, and our Director Independence Standards. The Board has determined that Messrs. Anton, Fettig, and Kramer are “audit committee financial experts” under SEC rules.

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 directors and management, which includes our executive officers and operating management;

 

•

support the Board in overseeing our management development and succession planning process; and

 

•

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

 

26		2021 PROXY STATEMENT

 

As part of its charter, the Compensation Committee reviews and evaluates our programs, priorities, and progress for recruiting, staffing, developing, and retaining competent managers, including supporting the Board in overseeing management succession planning for our CEO and other executives.

The Compensation Committee met four times during 2020 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 reports to the Board on all compensation matters regarding our directors and management, which includes our executive officers and operating management. 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 our management and their staff, 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 2020 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, including relating to the impact of the COVID-19 pandemic on executive compensation throughout 2020.

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 our 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 staff 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;

 

			27

•

salary increases;

 

•

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

 

•

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 for recommendations concerning our CEO’s compensation. Our CEO and our SVP – HR also meet with the chair of the Compensation Committee and the compensation consultant prior to meetings to review the agenda for the meetings and the compensation recommendations. Our CEO and our SVP – HR generally attend all Compensation Committee meetings. Our CEO does not have the ability to call meetings. Our SVP – HR serves as secretary for the Compensation Committee at its meetings. Our CEO is excused from that 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:

 

•

identifying individuals qualified to become members of the Board;

 

•

determining the composition of the Board and its committees;

 

•

reviewing and developing our Corporate Governance Guidelines and practices;

 

•

guiding the annual evaluation of the performance of the Board; and

 

•

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

The Nominating Committee met two times in 2020 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 Qualifications

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, Sherwin-Williams, 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 it in identifying potential members of the Board. 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.

Aaron M. Powell was identified as a director candidate by an outside search firm. The Nominating Committee provided the search firm with guidance as to the skills, experience, and qualifications that the Nominating Committee was seeking in potential candidates, and the search firm identified candidates for the Nominating Committee’s consideration. After evaluating Mr. Powell in the manner described above and considering input from our other independent directors and our Chairman and CEO, the Nominating Committee identified Mr. Powell as a director candidate and recommended him as a nominee to the Board.

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

 

28		2021 PROXY STATEMENT

 

diverse set of experiences, qualifications, attributes, and skills, including self-identified diversity characteristics, such as gender, race, and ethnicity. This matrix is included in this Proxy Statement under the heading “Experiences, Qualifications, Attributes, and Skills of Director Nominees.” 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. In assessing its overall effectiveness in recommending a diverse group of director nominees, the Nominating Committee utilizes these reviews, as well as its committee self-assessments.

In connection with director candidate searches, the Board’s policy is to include a diverse pool of qualified candidates, including women and racially/ethnically diverse persons, from which new director candidates are chosen for Board membership.

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 are required to 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 numbers;

 

•

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) 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 that 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 he or she is 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, 12th Floor, Midland Building, 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 to nominate a director utilizing proxy access in our Regulations.

 

			29

Audit Committee Report

Management has the primary responsibility for the integrity of Sherwin-Williams’ financial information and the financial reporting process, including the system of internal control over financial reporting. Ernst & Young LLP, Sherwin-Williams’ independent registered public accounting firm, is responsible for conducting independent audits of Sherwin-Williams’ financial statements and the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and expressing an opinion on the financial statements and the effectiveness of internal control over financial reporting based upon those audits. The Audit Committee is responsible for overseeing the conduct of these activities by management and Ernst & Young LLP.

As part of its oversight responsibility, the Audit Committee has reviewed and discussed the audited financial statements, the adequacy of financial controls, and the effectiveness of Sherwin-Williams’ internal control over financial reporting with management and Ernst & Young LLP. The Audit Committee also has discussed with Ernst & Young LLP the matters required to be discussed by the applicable requirements of the PCAOB and SEC rules. The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence. The Audit Committee also has discussed with Ernst & Young LLP the firm’s independence.

Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Sherwin-Williams’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the SEC.

AUDIT COMMITTEE

Arthur F. Anton, Chair

Jeff M. Fettig

Richard J. Kramer

Matthew Thornton III

 

30		2021 PROXY STATEMENT

 

Compensation Risk Assessment

The Compensation Committee annually assesses the risks related to our compensation policies and practices. During 2020, the Compensation Committee engaged Compensation Advisory Partners to conduct a comprehensive risk assessment of our incentive compensation programs, plans, and policies. Compensation Advisory Partners presented the risk assessment to the Compensation Committee.

Based upon the assessment, the Compensation Committee and Compensation Advisory Partners concluded that our compensation policies and practices do not encourage excessive or unnecessary risk-taking and are not reasonably likely to have a material adverse effect on Sherwin-Williams. The following factors help mitigate against employees taking excessive or unnecessary risks:

 

•

We utilize a balanced approach to compensation, which combines fixed and variable pay, short-term and long-term time horizons, and cash and equity.

 

•

We have diversified incentive compensation metrics with performance goals focused on growth, profitability, and managing capital at different levels within our company.

 

•

We design our incentive compensation plans without steep payout cliffs that might encourage short-term business decisions that are inconsistent with our long-term business strategy.

 

•

Performance incentives are capped at maximum payout amounts.

 

•

We grant equity awards annually, with appropriate vesting periods, that encourage consistent behavior and reward long-term, sustained performance.

 

•

Our equity plans include a “double-trigger” acceleration provision with respect to vesting in connection with a change in control.

 

•

We have significant stock ownership guidelines for our directors and executives.

 

•

We regularly benchmark our current compensation practices, policies, and pay levels against peer companies and have a pay philosophy that targets market median compensation.

 

•

We prohibit the hedging and pledging of our securities by our directors and employees, including our executive officers.

 

•

The Compensation Committee reviews tally sheets for our named executives that provide a holistic view of each executive’s compensation.

 

•

We have a clawback and recapture policy allowing us to “clawback” incentive compensation earned by executives and key employees.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Sherwin-Williams’ Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and this Proxy Statement.

COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE

Susan J. Kropf, Chair

Kerrii B. Anderson

Christine A. Poon

Michael H. Thaman

Steven H. Wunning

 

			31

Compensation Discussion and Analysis

Named Executive Officers.    This Compensation Discussion and Analysis (CD&A) describes our executive compensation program and how it applies to our five “named executives” listed below.

 

 

 

•

John G. Morikis.    Mr. Morikis has served as Chief Executive Officer since January 2016 and Chairman since January 2017. 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.

 

•

David B. Sewell.*    Mr. Sewell has served as President and Chief Operating Officer since March 2019. Mr. Sewell began his career with Sherwin-Williams in February 2007.

 

•

Peter J. Ippolito.    Mr. Ippolito has served as President, The Americas Group (TAG) since January 2018. He began his career with Sherwin-Williams in May 1986.

 

•

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.

 

*

On March 1, 2021, Mr. Sewell notified the company of his decision to resign from his position as President and Chief Operating Officer, effective March 12, 2021. Following his departure, Mr. Morikis will serve as President in addition to his current role and assume Mr. Sewell’s primary duties and responsibilities.

 

Table of Contents

 

 

32		2021 PROXY STATEMENT

 

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. Guided by this philosophy and our objective of creating and maximizing shareholder value, we retained our focus on business execution throughout 2020 and delivered strong performance as we adapted our operations to address the unique challenges presented by the COVID-19 pandemic. Throughout the year, the Compensation Committee monitored and assessed the impact of the pandemic on our compensation programs, with a focus on ensuring that our programs continued to fairly reflect corporate and individual performance, motivate our employees, and mitigate risks.

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 25.6%, compared to the average annual return for the S&P 500 of 13.9%.

 

•

2020 was our 42nd consecutive year of increased dividends, as we continued our practice of returning significant value to our shareholders. During 2020, we returned $2.93 billion to our shareholders through dividends and repurchases of our stock, an increase of 145% over 2019. Over the past three years, we returned approximately $5.07 billion in cash to our shareholders through dividends and stock repurchases.

2020 Business Highlights

Since the beginning of the COVID-19 pandemic, we have implemented changes in our business to protect and support our employees, customers, and communities and to respond to the uncertainties and challenges of the pandemic, including the wide-ranging actions and mandates instituted by public health and government authorities to contain and combat the spread of COVID-19. These changes and management’s extraordinary efforts throughout 2020 are further described in the Proxy Summary and elsewhere in this CD&A.

Despite the unprecedented challenges of the COVID-19 pandemic and its impact to our business, 2020 was another outstanding year for Sherwin-Williams’ financial performance. Consolidated net sales increased to a record $18.36 billion in 2020. Net income increased to $2.03 billion, and diluted net income per share increased 33.9% to $22.08. We also generated record net operating cash of $3.41 billion in 2020 — an increase of $1.09 billion.

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

 

 

 

1

2020 includes after-tax acquisition-related amortization expense of $230.0 million. 2019 includes after-tax acquisition-related costs of $299.6 million, after-tax non-cash trademark impairment of $93.1 million, a tax credit investment loss of $74.3 million, and after-tax pension settlement expense of $25.0 million, partially offset by an after-tax Brazil indirect tax credit of $33.3 million and an after-tax benefit from the resolution of the California litigation of $26.1 million. 2018 includes after-tax acquisition-related costs of $394.4 million, after-tax environmental expense provisions of $126.1 million, after-tax California litigation expense of $103.4 million, and after-tax pension settlement expense of $28.3 million.

 

			33

2

2020 includes a charge of $2.50 per share for acquisition-related amortization expense. 2019 includes charges of $3.21 per share for acquisition-related costs, $1.00 per share for non-cash trademark impairment charges, a tax credit investment loss of $0.79 per share, and pension settlement expense of $0.27 per share, partially offset by a Brazil indirect tax credit of $0.36 per share and a benefit from the resolution of the California litigation of $0.28 per share. 2018 includes charges of $4.15 per share for acquisition-related costs, $1.32 per share for environmental expense provisions, $1.09 per share for California litigation expense, and $0.30 per share for pension settlement expense.

2020 Compensation Highlights

Recent key executive compensation highlights include the following:

 

•

No Increases to Base Salaries. In the first quarter of 2020, due to uncertainties relating to the potential impact of the COVID-19 pandemic to the company’s business, the Compensation Committee rescinded the 2020 base salary increases for our named executives that were scheduled to go into effect in the first quarter.

 

•

2020 Annual Cash Incentive Compensation.

^¡    In the first quarter of 2020, the Compensation Committee set threshold, target, and maximum annual cash incentive performance goals at levels they considered appropriately rigorous for the year and represented continued strong financial performance. The COVID-19 pandemic was not a consideration at the time these goals were approved.

^¡    When the uncertainties relating to the potential impact of the COVID-19 pandemic to the company’s business began to become more apparent, the CEO volunteered to forego, and the Compensation Committee approved rescinding, the previously approved increase to the CEO’s target and maximum annual incentive opportunities from 145% and 290% to 160% and 320%, respectively, of his base salary.

^¡    2020 was a challenging year for businesses worldwide due to the COVID-19 pandemic. Management took extraordinary efforts to mitigate the impact of COVID-19 to the company’s business and effectively manage costs, operations, and working capital. With these efforts, we earned maximum achievement for our earnings per share (EPS) and adjusted Free Cash Flow (FCF) metrics for the corporate performance goals. Given the nature of the pandemic, including shutdowns and other government and public health mandates, our sales were adversely impacted and resulted in below target achievement for both the corporate and TAG sales performance metrics (each, weighted 25%). To better reflect management’s efforts and accomplishments in delivering record 2020 financial performance, the Compensation Committee adjusted the achievement levels of these performance metrics by adding to the achievement levels for the corporate and TAG sales performance goals an amount attributable to lost sales as a result of the COVID-19 pandemic, as further described below. No adjustments were made to any other 2020 annual cash incentive performance goals. With the sales adjustments, our named executives earned an average of 193.2% of their 2020 target annual cash incentive compensation.

 

•

2018 – 2020 Long-Term Incentive Plan Compensation. Despite the impact of the COVID-19 pandemic to the company’s business, the Compensation Committee did not adjust the performance requirements or payouts due to the COVID-19 pandemic for the vesting of our 2018 – 2020 performance-based restricted stock units (PRSUs). Our 2018 – 2020 PRSUs were earned at 120.4% and 130.0% of target based upon company performance for cumulative EPS and average annual return on net assets employed (RONAE), respectively, over the three-year performance period.

 

•

Annual CEO Performance Appraisal. As part of Mr. Morikis’ annual performance appraisal, our non-management directors assess his performance across pre-established performance categories. In October 2020, the Compensation Committee reviewed and approved revisions to the performance categories, effective for the 2020 performance period. These revisions added a new category for Environmental, Social and Governance (ESG) leadership, which includes the development, integration, and execution of an ESG strategy, as well as improvement in related results, as part of the company’s overall business strategy.

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. Our executives only realize the full value of their compensation if our shareholders also realize value.

 

34		2021 PROXY STATEMENT

 

Each year, the Compensation Committee assesses our CEO’s compensation in light of Sherwin-Williams’ performance relative to its peers. In October 2020, the Compensation Committee analyzed the relationship between the realizable pay of our CEO and total shareholder return (TSR) over the five-year period ended December 31, 2019, comparing Sherwin-Williams to the peer group we use when making executive compensation decisions. At the time of such review, 2019 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 following chart, prepared by our independent compensation consultant, Compensation Advisory Partners, shows the degree of alignment between the total realizable pay of our CEO and Sherwin-Williams’ TSR relative to our peer group over the five-year period. Sherwin-Williams’ cumulative TSR over the five-year period was 133%, which was higher than all but one company in our peer group. Peer group companies 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 below, 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 2019 year-end closing stock price per share; (d) the vesting date value of long-term performance equity awards that were earned in 2017, 2018, and 2019, which consisted of PRSUs; (e) the value of target long-term performance equity awards granted in 2018 and 2019, which consisted of PRSUs, based on the 2019 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 2019 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 in the Summary Compensation Table and the 2020 Grants of Plan-Based Awards Table.

 

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Independent Compensation Consultant

The Compensation Committee assessed the independence of Compensation Advisory Partners under applicable SEC rules and NYSE listing standards. The Compensation Committee determined that Compensation Advisory Partners is independent and its work raises no conflicts of interest. Compensation Advisory Partners did not provide any services to Sherwin-Williams during 2020 other than those matters for which it was engaged by the Compensation Committee.

Overview of Executive Compensation Practices

Our compensation programs, practices, and policies are reviewed and evaluated on an ongoing basis. We modify our compensation programs to address evolving best practices and changing regulatory requirements, as well as significant events, such as the COVID-19 pandemic. We list below some of the more significant best practices we have adopted, and the practices we have avoided, which 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 2020, 90% of our CEO’s total direct compensation was tied to performance, with an average of 79% for our other named executives.   ✓  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 2020.   ✓  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 continue to 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 PRSUs.    Dividend equivalents on 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.

Impact of Last Year’s Say-on-Pay Vote

At our 2020 Annual Meeting, a substantial majority of shareholders (96.0% of votes cast) approved the compensation of our named executives. We consider this vote to be a strong endorsement of our executive compensation program, practices, and policies. Based on this strong shareholder support, the Compensation Committee does not believe our executive compensation program requires material changes. However, the Compensation Committee has made, and will continue to

 

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make, changes designed to further enhance the objectives of our program, as well as to address significant events to the extent appropriate to do so, such as in connection with the COVID-19 pandemic. 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 Compensation Committee highly values the input of our shareholders. The Compensation Committee will continue to consider the views of our shareholders in connection with our executive compensation program, including the results of the 2021 say-on-pay vote. We will make modifications based upon evolving best practices, developments in 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.

Overview of Our Executive Compensation Program

Independent Compensation Committee

The Compensation Committee, which is comprised entirely of independent directors, oversees our executive compensation program. The Compensation Committee reports to the Board on all compensation matters for members of our senior management team, including our named executives. The Compensation 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 Meetings and 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 clear, pre-established 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 achieving and exceeding performance goals, without creating a sense of entitlement or encouraging unnecessary or excessive 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 implemented significant stock ownership requirements for our executives described below under the heading “Other Arrangements, Policies, and Practices – Stock Ownership Guidelines.”

We believe our compensation programs achieve these goals.

 

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Components of Compensation

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 performance during the year based on the 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.

Mix of Compensation Components

Our Approach.    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-term 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 performance-based, annual and long-term, and cash and equity.

At-Risk Compensation.    A core principle of our executive compensation program is that a significant percentage of the compensation opportunity of 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.

 

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