UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )

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Definitive Proxy Statement

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Soliciting Material under §240.14a-12

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GENERAC HOLDINGS INC.

(Name of Registrant as Specified In Its Charter)​

   

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)​

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Fee paid previously with preliminary materials.

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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(I)(1) and 0-11.

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April 29, 2022

To the Stockholders of our Company:

You are cordially invited to attend the 2022 Annual Meeting of Stockholders where we will be voting on the below matters.

Items of Business

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To elect the four nominees named herein as Class I directors;

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To ratify the selection of Deloitte & Touche LLP as our independent, registered public accounting firm for the year ending December 31, 2022;

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To vote on an advisory, nonbinding “say-on-pay” resolution to approve the compensation of our executive officers; and

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To consider any other matters that may properly come before the meeting or any adjournments or postponements of the meeting.

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WHERE:	​
Generac Power Systems, Inc. S45 W29290 Hwy. 59 Waukesha, Wisconsin 53189 ADMISSION: Holders of record of our common stock at the close of business on April 18, 2022 are entitled to notice of, and to vote at, the annual meeting.	​

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​	Internet	​	​	Telephone	​	​	Mail	​	​	In Person	​
​	Visit the internet website indicated on the Notice of Internet Availability or any proxy card you receive and follow the on-screen instructions.	​	​	Use the toll-free telephone number shown on the Notice of Internet Availability or any proxy card you receive.	​	​	If you request a paper proxy card by telephone or internet, you may elect to vote by mail. If you elect to do so, you should date, sign and promptly return your proxy card by mail in the postage prepaid envelope which accompanied that proxy card.	​	​	You can deliver a completed proxy card at the meeting or vote in person.	​
​	Thank you for your continued support of and interest in the Company.										​

 

 

TABLE OF CONTENTS

 

Summary Information

Our Corporate Strategy

Generac By The Numbers

* A full discussion of our use of non-U.S. generally accepted accounting principles measures to provide a baseline for evaluating and comparing our operating results, and a reconciliation of Adjusted EBITDA to net income can be found in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

SUMMARY INFORMATION

 

SUMMARY INFORMATION

Our 2021 Business Highlights

We achieved another year of record financial results in 2021 despite a challenging operating environment.

Key Components and Design of the Executive Compensation Program

* A full discussion of our use of non-U.S. generally accepted accounting principles measures to provide a baseline for evaluating and comparing our operating results, and a reconciliation of Adjusted EBITDA to net income can be found in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

Proposal 1 — Election of Class I Directors

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The nominees for election as Class I Directors at the 2022 annual meeting are described below, each of whom has been nominated by the Board. If elected, each of the nominees is expected to serve for a three-year term expiring at the annual meeting of stockholders of the Company in 2025 and until their respective successors have been elected and qualified. The Board of Directors recommends a vote FOR the Company’s nominees for Class I Directors.

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Our Board of Directors is divided into three classes, with each class serving a consecutive three-year term. The term of the current Class I Directors will expire on the date of the 2022 annual meeting, subject to the election and qualification of their respective successors. The Board of Directors expects that each of the nominees will be available for election as a director. However, if by reason of an unexpected occurrence, one or more of the nominees is not available for election, the persons named in the form of proxy have advised that they will vote for such substitute nominees as the Board of Directors may nominate.

In selecting director candidates, the Nominating and Corporate Governance Committee considers whether the candidates possess the required skill sets and fulfill the qualification requirements of directors approved by the Board of Directors, including integrity, objectivity, sound judgment, leadership, courage, and diversity in all aspects of that term, including differences of perspective, professional experience, education, skills, and other individual qualities, such as gender, race and ethnicity, and sexual orientation.

The following table provides the composition of each of our committees:

“C” = Chairperson

“L” = Lead Director

1

Effective May 1, 2022

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PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

Our directors and nominees bring a broad range of skills, experiences, and perspectives to our board. The below tables and graphics summarize the skills and experiences that bring value to our company.

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

The following biographies describe the business experience of each director. Following the biographical information for each director below, we have listed qualifications that, in addition to those discussed above, the Board of Directors considered in determining whether to recommend the director be nominated for reelection.

Nominees for Election

Class I Directors

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

Other Members of the Board of Directors

Including the nominees, the Board of Directors currently consists of eleven (11) directors, each of whom, other than the nominees, is described below. The terms of the Class II Directors expire at the 2023 Annual Meeting of Stockholders, subject to the election and qualification of their respective successors. The terms of the Class III Directors expire at the 2024 Annual Meeting of Stockholders, subject to the election and qualification of their respective successors.

Class II Directors

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

Class III Directors

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

 

PROPOSAL 1 — ELECTION OF CLASS I DIRECTORS

 

Corporate Governance

Board of Directors Independence Standards for Directors

Pursuant to our Corporate Governance Guidelines and Principles, a copy of which is available on our website at www.generac.com, the Board of Directors is required to affirmatively determine whether our directors are independent under the listing standards of the New York Stock Exchange (“NYSE”), the principal exchange on which our common stock is traded.

 

CORPORATE GOVERNANCE

Committees of the Board of Directors

Our Board of Directors has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Our Board of Directors has adopted charters for each of its standing committees. Copies of our committee charters are posted on our website at www.generac.com.

Audit Committee

In discharging its duties, the Audit Committee has the sole authority to select, retain, oversee, and terminate, if necessary, the independent registered public accounting firm, review and approve the scope of the annual audit, review and preapprove the engagement of our independent registered public accounting firm to perform audit and non-audit services, meet independently with our independent registered public accounting firm and senior management, review the integrity of our financial reporting process, and review our financial statements and disclosures and certain SEC filings and financial press releases.

The Audit Committee formally met nine times in 2021, and members of the Audit Committee also met informally among themselves, with management and with other members of the Board from time to time. Decisions regarding audit-related matters were approved by our Board after considering the recommendations of the Audit Committee and its members. The Audit Committee maintains a committee charter and meets with our independent registered public accounting firm without management present on a regular basis.

 

CORPORATE GOVERNANCE

Compensation Committee

The Compensation Committee has decision-making authority with respect to all compensation decisions for our executive officers, including annual incentive plan awards and grants of equity awards. The Compensation Committee is responsible for finalizing and approving the performance objectives relevant to the compensation of our CEO and other executive officers.

The Compensation Committee’s recommendations are developed with input from our CEO and, where appropriate, other senior executives. The Compensation Committee reviews management recommendations and input from compensation consultants, along with other sources of data when formulating its independent recommendations to the Board of Directors. A discussion and analysis of the Company’s compensation decisions regarding the executive officers named in the Summary Compensation Table appears in this proxy statement under the heading “EXECUTIVE COMPENSATION — Compensation Discussion and Analysis.”

To assist it in performing its duties, the Compensation Committee has the authority to engage outside consulting firms. The Compensation Committee has engaged Willis Towers Watson & Co. (“Willis Towers Watson”) as its independent compensation consultant since September 2014. In its capacity as outside and independent compensation consultants, Willis Towers Watson reports directly to the Compensation Committee.

The Compensation Committee has sole authority to replace compensation consultants retained from time to time, and to hire additional Compensation Committee consultants at any time.

Representatives from outside consulting firms engaged by the Compensation Committee attend meetings of the Compensation Committee, as requested, and communicate with the Chair of the Compensation Committee between meetings.

 

CORPORATE GOVERNANCE

The Compensation Committee assessed the independence of Willis Towers Watson pursuant to applicable SEC rules and concluded that no conflict of interest exists that would prevent Willis Towers Watson from independently advising the Compensation Committee.

The Compensation Committee reviews and discusses with management proposed Compensation Discussion and Analysis disclosures and determines whether to recommend the Compensation Discussion and Analysis to the Board of Directors for inclusion in the Company’s proxy statement and annual report. The recommendation is described in the Compensation Committee Report included in this proxy statement.

The Compensation Committee formally met five times in 2021, and members of the Compensation Committee also met informally among themselves, with management, with other members of the Board, and with Willis Towers Watson from time to time. Decisions regarding executive compensation were approved by our Board after considering the recommendations of the Compensation Committee.

Nominating and Corporate Governance Committee

Decisions regarding board nominations and corporate governance-related matters were approved by our Board after considering the recommendations of the Nominating and Corporate Governance Committee.

Criteria for Director Nominees

In selecting director candidates, the Nominating and Corporate Governance Committee considers whether the candidates possess the required skill sets and fulfill the qualification requirements of directors approved by the Board of Directors, including integrity, objectivity, sound judgment, leadership and diversity in all aspects of that term, including differences of perspective, professional experience, education, skills, and other individual qualities, such as gender, race, ethnicity, and sexual orientation. Annually, the Nominating and Corporate Governance Committee assesses the composition of the Board of Directors, including the Committee’s effectiveness in balancing the above considerations.

Other than the foregoing, there are no minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may consider such other factors as it may deem are in the best interests of the Company and its stockholders. The Nominating and

 

CORPORATE GOVERNANCE

Corporate Governance Committee does not assign specific weights to, and a potential or incumbent director will not necessarily satisfy all, the foregoing criteria, and in evaluating a candidate does not distinguish on the basis of whether the candidate was recommended by a stockholder. Notwithstanding the foregoing, in furtherance of the Committee’s commitment to increasing diversity within the Board of Directors, the Committee and the Board have determined that a focused effort to identify director candidates from underrepresented minority groups will be an important consideration and priority in selecting and nominating director candidates for election as future openings become available on the Board of Directors. Accordingly, the Board has amended the Company’s Corporate Governance Guidelines and Principles to include a requirement that any search firm engaged to fill such openings include qualified women, racially or ethnically diverse candidates, and/or other candidates from underrepresented minority groups in all prospective director candidate pools.

Process for Identifying and Evaluating Director Nominees

The Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board of Directors willing to continue in service. Current members of the Board of Directors with skills and experience that are relevant to the Company’s business and who are willing to continue in service are considered for renomination, balancing the value of continuity of service by existing members of the Board of Directors with that of obtaining a new perspective on the Board. If any member of the Board of Directors does not wish to continue in service or if the Nominating and Corporate Governance Committee decides not to renominate a member for reelection, the Nominating and Corporate Governance Committee identifies the desired skills and experience of a new nominee based on the criteria listed above. Current members of the Nominating and Corporate Governance Committee and Board of Directors are polled for suggestions as to individuals meeting the criteria of the Nominating and Corporate Governance Committee. Executive search firms may also be retained to identify qualified individuals. Ms. Nguyen was appointed as a Class I Director, effective March 1, 2022. A third-party search firm engaged by the Nominating & Corporate Governance Committee recommended Ms. Nguyen to serve on our Board.

Shareholders who wish to recommend a candidate for consideration by the Nominating and Corporate Governance Committee may do so by sending the candidate’s name and supporting information to Mr. Robert Dixon, Nominating and Corporate Governance Committee Chair, c/o Raj Kanuru, Executive Vice President, General Counsel, & Corporate Secretary, Generac Power Systems, Inc., S45 W29290 Highway 59, Waukesha, Wisconsin 53189.

Stockholder Nominations

Our Bylaws contain provisions which address the process by which a stockholder may nominate an individual to stand for election to the Board of Directors at the Company’s annual meeting of stockholders. To make a nomination for election to the Board of Directors, a stockholder must submit his or her nomination by providing the person’s name and appropriate background and biographical information in writing to the Nominating and Corporate Governance Committee at Generac Holdings Inc., Attn: Raj Kanuru, Executive Vice President, General Counsel, & Corporate Secretary, S45 W29290 Highway 59, Waukesha, Wisconsin 53189. A stockholder’s nomination must be received by the Company’s Secretary either (i) no later than the close of business on the 90th day, nor earlier than the close of business on the 120th day, prior to the first anniversary of the previous year’s annual meeting of stockholders, or (ii) in the event the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of

 

CORPORATE GOVERNANCE

business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such meeting is first made by the Company, or (iii) in the case of a special meeting of stockholders called for the purpose of electing directors, not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the date on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. A stockholder nomination must be accompanied by the information required by the Bylaws with respect to a stockholder director nominee.

We may require any proposed nominee to furnish other information as we may reasonably require to determine the eligibility of the proposed nominee to serve as a director of the Company. See “PROPOSALS BY STOCKHOLDERS” for the deadline for nominating persons for election as directors at our 2023 annual meeting of stockholders.

Board of Directors Role in Risk Oversight

Our Board and management continually monitor the material risks facing our Company, including financial risk, strategic risk, operational risk, and legal and compliance risk. Management regularly reports to the Board on its activities in monitoring and mitigating such risks. Overall responsibility for risk oversight rests with our Board. In addition, the Board may delegate risk oversight responsibility to a particular committee in situations in which the risk falls within the committee’s area of focus or expertise. Our Board believes that for certain areas of risk, our Company is better served by having the initial risk evaluation and risk monitoring undertaken by a subset of the entire Board that is more focused on the issues pertaining to the particular risk. For instance, our Compensation Committee assists the Board in evaluating risks relating to our compensation policies and procedures. Also, our Audit Committee assists the Board in fulfilling the Board’s oversight responsibility relating to the evaluation of financial and enterprise risks, including information security, environmental, health & safety, product regulatory, and product safety matters. As it deems necessary and on at least an annual basis, the respective committee to which oversight and monitoring of a particular risk has been assigned reports on risk exposures and mitigation strategies with respect to such risk to the entire Board.

Board of Directors Leadership Structure

Aaron Jagdfeld has served as a director of the Company since 2006 and is the Company’s Chairman of the Board, President, and Chief Executive Officer. Bennett Morgan serves as Lead Director.

The Lead Director has broad responsibility and authority, including to:

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Review the agendas for and preside over meetings of the independent directors.

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Preside at all meetings of the Board of Directors at which the Chairman is not present, including executive sessions of the independent directors.

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Call meetings of the independent directors.

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Serve as the principal liaison between the Chairman and the independent directors.

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CORPORATE GOVERNANCE

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Consult with the Chairman regarding:

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Information sent to the Board of Directors, including the quality, quantity, appropriateness, and timeliness of such information.

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Meeting agendas for the Board of Directors.

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The frequency of Board of Directors meetings and meeting schedules, assuring there is sufficient time for discussion of all agenda items.

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Development of annual priorities and goals for the Board of Directors.

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Be available, when appropriate, for consultation and direct communication with stockholders.

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Select, retain, and consult with outside counsel and other advisors as the Lead Director deems appropriate.

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In conjunction with the Nominating and Corporate Governance Committee:

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Annually review the performance of, and provide feedback to, the CEO.

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Annually meet with each Director to collect and review feedback.

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Periodically, our Board assesses these roles and the Board leadership structure to ensure the interests of the Company and its stockholders are best served.

Our Board has determined that its current structure, with a combined Chairman and CEO role and an independent Lead Director, is in the best interests of the Company and its stockholders at this time based on a number of factors, including:

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A combined Chairman and CEO structure provides the Company with decisive and effective leadership with clearer accountability to our stockholders and customers.

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The combined role is both counterbalanced and enhanced by the effective oversight and independence of our Board of Directors, and the independent leadership provided by our Lead Director and independent committee chairs.

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The Board believes that the appointment of a strong independent Lead Director and the use of regular executive sessions of the non-management Directors, along with the Board’s strong committee system and all Directors being independent except for Mr. Jagdfeld, allow it to maintain effective oversight of management.

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Stockholders and other parties interested in communicating directly with Mr. Bennett Morgan as Lead Director may do so by writing to Mr. Morgan, c/o Generac Holdings Inc., S45 W29290 Highway 59, Waukesha, Wisconsin 53189.

Attendance at Meetings

It is our policy that each director is expected to dedicate sufficient time to the performance of his or her duties as a director, including by attending meetings of the stockholders, Board of Directors, and committees of which he or she is a member. All then-serving members of the Board of Directors attended the 2021 Annual Meeting of Stockholders.

In 2021, the Board of Directors held 12 meetings (including regularly scheduled and special meetings) and took action by unanimous written consent from time to time. All incumbent directors attended at least 75% of  (i) the total number of meetings of the Board of Directors (held during the period for which he or she has been a director); and (ii) the total number of meetings held by all committees on which he or she served (during the periods that he or she served).

 

CORPORATE GOVERNANCE

Stockholder Communications with the Board of Directors

Stockholders and other parties interested in communicating directly with the Board of Directors, whether individually or as a group, may do so by writing to the Board of Directors, c/o Generac Holdings Inc., S45 W29290 Highway 59, Waukesha, Wisconsin 53189. The Secretary will review all correspondence and regularly forward to the Board of Directors all such correspondence that, in the opinion of the Secretary, deals with the functions of the Board of Directors or committees thereof, or that the Secretary otherwise determines requires attention. Concerns relating to accounting, internal controls, or auditing matters will immediately be brought to the attention of the Chair of the Audit Committee. We have adopted a Whistleblower Policy, which establishes procedures for submitting these types of concerns, either personally or anonymously through a toll-free telephone “hotline” or web transmission operated by an independent party. Our Whistleblower Policy can be found on the Company’s website at www.generac.com.

Stockholders and other parties interested in communicating directly with Mr. Andrew Lampereur, as Chair of the Audit Committee, may do so by writing to Mr. Lampereur, Chair, Audit Committee, c/o Generac Holdings Inc., S45 W29290 Highway 59, Waukesha, Wisconsin 53189.

Code of Ethics and Business Conduct

We have adopted a Code of Ethics and Business Conduct (the “Code”), that applies to all our directors, officers and employees, including our principal executive officer and principal financial accounting officer. In addition, we have adopted a Supplemental Code of Ethics and Conduct (the “Supplement”) that applies to all our directors and executive officers, including our principal executive officer and principal financial accounting officer. The Code and Supplement are both posted on our website at www.generac.com. Any amendments to, or waivers under, our Code or Supplement which are required to be disclosed by the rules promulgated by the SEC will be disclosed on the Company’s website at www.generac.com.

Corporate Governance Guidelines and Principles

We have adopted Corporate Governance Guidelines and Principles. These guidelines outline the role of our Board of Directors, the composition and operating principles of our Board of Directors and its committees, and our Board of Directors’ working process. Our Corporate Governance Guidelines and Principles are posted on our website at www.generac.com.

 

CORPORATE GOVERNANCE

Environmental, Social, and Governance Practices

Generac’s purpose is to lead the world’s evolution to more resilient, efficient, and sustainable energy solutions. In executing that purpose, Generac takes seriously its environmental, social, and governance (“ESG”) responsibilities and, in the course of its business, encounters and manages a broad range of ESG matters. We understand and appreciate that there is a growing interest in greater ESG disclosure by public companies. To meet these growing expectations, the Company published its 2021 Environmental, Social, and Governance Report (“ESG Report”) in April 2022. The ESG Report can be found at www.generac.com, and will be updated and published on an annual basis.

Political Contributions

It is Generac’s policy that Company funds or assets will not be used to make a political contribution to any political party or candidate, unless approval has been given by the Board of Directors or its authorized designee. Generac did not contribute to any political parties or candidates in 2021. In addition, Generac has not organized or established any political action committee.

Website Information

Website references and their hyperlinks throughout this document are provided for convenience only, and the content of the referenced websites, including but not limited to the content contained in our ESG Report, is not incorporated by reference into this proxy statement, nor does it constitute a part of this proxy statement.

Compensation Committee Interlocks and Insider Participation

In 2021, the members of our Compensation Committee were John Bowlin, Bennett Morgan, William Jenkins, and Marcia Avedon. No member of the Compensation Committee was, during 2021 or previously, an officer or employee of Generac or its subsidiaries. In addition, during 2021, there were no Compensation Committee interlocks required to be disclosed.

 

Beneficial Ownership of our Common Stock

The following table shows information regarding the beneficial ownership of our common stock as of April 18, 2022 by:

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each person or group who is known to own beneficially more than five percent of our common stock;

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each member of our Board of Directors, each nominee for election as a director, and each of our named executive officers; and

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all members of our Board of Directors and our executive officers as a group.

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Beneficial ownership of shares is determined under rules of the SEC, and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them.

Unless otherwise indicated, the address for each holder listed below is c/o Generac Holdings Inc., S45 W29290 Highway 59, Waukesha, Wisconsin 53189.

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Less than 0.1%

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(1)

Based on information obtained from Amendment No. 11 to Schedule 13G filed by The Vanguard Group (“Vanguard”) on February 10, 2022. According to that report, Vanguard has

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BENEFICIAL OWNERSHIP OF OUR COMMON STOCK

sole voting power over 0 shares, shared voting power over 106,324 shares, sole dispositive power over 6,380,102 shares, and shared dispositive power over 259,532 shares. In addition, according to that report, Vanguard’s business address is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(2)

Based on information obtained from Schedule 13G filed by Blackrock, Inc. on March 11, 2022. According to that report, Blackrock, Inc. has sole voting power over 4,454,258 shares, shared voting power over 0 shares, sole dispositive power over 4,997,627 shares, and shared dispositive power over 0 shares. In addition, according to that report, Blackrock, Inc.’s business address is 55 East 52nd Street, New York, New York 10022.

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(3)

With respect to Messrs. Jagdfeld, Ragen, Minick, Forsythe and Wilde, the number of shares beneficially owned includes 558,640, 140,564, 679, 57,542 and 10,618 shares respectively, which may be acquired pursuant to options issued under the Omnibus Plan because such options are exercisable within 60 days. The respective number of shares for the individuals mentioned above were in each case also added to the denominator for purposes of calculating the percentage ownership of that individual.

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(4)

With respect to Ms. Roedel and Messrs. Ramon, Dixon, Morgan, Lampereur, Jenkins and Zarcone, the number of shares beneficially owned includes 9,058, 3,685, 7,642, 11,023, 13,674, 1,417, and 9,330 Deferred Stock Units, respectively, all of which were issued pursuant to the Company’s Deferred Stock Unit Plan for Non-Employee Directors, effective April 1, 2017.

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Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (CD&A) describes our executive compensation program. It provides an overview of the 2021 compensation for the following named executive officers, practices and policies, and how the Compensation Committee made its decisions.

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On February 11, 2022, Mr. Minick gave notice of his intention to retire from the Company following an appropriate transition of his responsibilities, and in any event by no later than May 1, 2022.

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2021 was another strong year for Generac:

*   A full discussion of our use of non-U.S. generally accepted accounting principles measures to provide a baseline for evaluating and comparing our operating results, and a reconciliation of Adjusted EBITDA to net income can be found in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

First and foremost, we want to highlight Generac’s team of over 9,500 employees globally and their hard work and perseverance throughout a very challenging operating environment in 2021. Our teams have helped us successfully navigate the pandemic while still providing an incredible level of service to customers and partners around the world. The hyper-scale growth that we are experiencing reflects their commitment to the execution of our strategy and their dedication to our success.

As a result of our team’s collective efforts, Generac achieved another year of record revenue, adjusted EBITDA, and adjusted EPS in 2021, far exceeding the previous record levels seen last

 

EXECUTIVE COMPENSATION

year. Revenue increased by approximately $1.3 billion, representing 50% growth over the prior year and marking the highest annual growth rate in our history as a public company. Adjusted EBITDA margin was strong at 23.1%, which was similar to the prior year despite a variety of supply chain challenges, considerable inflation and significant investments for future growth.

In addition to our operational execution and strong financial performance, Generac had a number of key accomplishments with significant progress made on several strategic initiatives in 2021:

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We achieved an important milestone by starting production of home standby generators during the third quarter at our newest facility in Trenton, South Carolina, and executed the further build out of our Clean Energy market opportunity.

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We broadened our energy technology solutions portfolio with the strategic acquisitions of Deep Sea Electronics, Chilicon Power, Apricity, Off Grid Energy, Tank Utility, and ecobee.

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We introduced several exciting new products during the year, including our market-leading 26kW air-cooled home standby generator, our Generac-branded microinverter that we call PWRmicro, the industry’s first dedicated engine-driven battery charging system we call PWRgenerator, and our innovative PWRmanager load control device.

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We introduced a host of new Commercial & Industrial (“C&I”) products and announced Smart Grid Ready capabilities for our home standby generators, PWRcell energy storage systems, and natural gas C&I generators.

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These accomplishments, along with our execution on a number of other strategic initiatives, have accelerated Generac’s evolution into an energy technology solutions company, which is reflected in our new enterprise strategy, “Powering A Smarter World.”

* A full discussion of our use of non-U.S. generally accepted accounting principles measures to provide a baseline for evaluating and comparing our operating results, and a reconciliation of Adjusted EBITDA to net income can be found in Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

EXECUTIVE COMPENSATION

(1)   Total Shareholder Return reflects the compound annual price appreciation of Generac shares expressed as a percentage.

(2)   On January 1, 2018, we adopted ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost; ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments; and ASU 2014-09, Revenue from Contracts with Customers. These new standards required retrospective application to all periods presented in our financial statements.

 

EXECUTIVE COMPENSATION

Generac’s Executive Compensation Practices

The following best practices ensure alignment between shareholders and executives while maintaining corporate governance.

 

EXECUTIVE COMPENSATION

ABOUT OUR EXECUTIVE COMPENSATION PROGRAM

2021 Executive Compensation Program Changes and Events

We remain focused on the continuous improvement of our executive compensation program to ensure alignment with our compensation philosophy, Powering Our Future Strategy, and shareholder interests, as well as market best practices. To this end, the Committee has made the following refinements to executive compensation:

Philosophy and Objectives

We believe that the compensation program for our executives should directly support the achievement of specific annual, long-term, and strategic goals of the business and, thereby, align the interests of executives with the interests of our stockholders. Our compensation program is designed to balance rewards for corporate, business, and individual results.

The program’s strong pay-for-performance alignment is an important part of our continuing commitment to enhancing long-term stockholder value.

 

EXECUTIVE COMPENSATION

We also believe that stockholders are best served when we can attract and retain high caliber executive talent. To that end, we offer competitive base salaries, as well as annual and long-term incentive opportunities, which encourage specific performance and reward the successful efforts of our executives. Within this context, the four major objectives for our executive compensation program are:

To achieve these objectives, we have structured a compensation program that provides our executives with the following:

The total direct compensation of our executives is market-based, and a significant portion of that compensation, including annual bonus and long-term incentives, is also performance-based. The Compensation Committee believes this construct results in a fair level of pay for target performance, and an above-market opportunity if the executive team builds share value in a sustainable way. We target cash compensation (base salary and annual bonus) around the median of our market and compensation peer group, taking into account the relative responsibilities of our executives. In general, we target long-term incentives at or above the market median to encourage the sustainability of the business and drive long-term stockholder value creation. This

 

EXECUTIVE COMPENSATION

aligns with our approach to long-term financial goal setting in which the Company often sets performance goals above the median, and in some cases above the 75th percentile, relative to similar financial measures at our peers and the general industry. Actual total compensation in any given year may be above or below the total target level based on individual and corporate performance.

Target Pay Mix

The charts below reflect the target pay mix for our CEO and average target pay mix for our other named executives, and show that the majority of our named executives’ total target direct compensation in 2021 was variable and performance based:

Target Pay Mix for our Executives

*   The average calculation of Average Other NEOs does not include incremental awards that were made during the period

HOW COMPENSATION DECISIONS ARE MADE

The Compensation Committee, composed solely of independent directors, is responsible for making executive compensation decisions for the named executive officers. The Compensation Committee works closely with its independent compensation consultant and management to examine pay and performance matters throughout the year.

Each year, the CEO and CFO establish a budget, which is approved by the Board of Directors. The budget establishes financial targets and other performance-related goals, which gives the Compensation Committee a basis for approving financial targets under the annual incentive plans for the year. The Compensation Committee also reviews the basis for establishing goals and objectives related to the compensation of the named executive officers. During this review, the Compensation Committee considers the balance between short-term cash compensation and

 

EXECUTIVE COMPENSATION

long-term incentives and evaluates alignment of pay-for-performance in light of established goals and objectives. The Compensation Committee also considers profitable growth of the business and financial performance. The Compensation Committee sets the CEO compensation based on that evaluation using market and peer group data to determine appropriate total direct compensation levels (consisting of base salary, annual bonus and long-term incentives). The Compensation Committee also reviews and approves compensation for all executive officers using market data and in conjunction with recommendations from the CEO and EVP, Human Resources. See “Assessing External Market Practice” below for more information. Finally, in making subjective evaluations of the overall performance of the CEO, the Compensation Committee considers performance from the perspective of our core values and our leadership principles, which include practicing integrity, driving innovation, demonstrating agility, operational excellence, developing our employees, and building a positive team environment.

The CEO and EVP, Human Resources also provide the Compensation Committee with additional analyses and recommendations related to compensation of the CFO, our executive officers, and certain other key members of executive management. The annual analysis includes market compensation data and a review of factors such as industry knowledge, level of experience, and skill set as to the compensation of the named executive officers. Neither the CEO nor the EVP, Human Resources makes recommendations with respect to his or her own compensation.

In 2021, Willis Towers Watson provided advice to the Compensation Committee regarding base pay, use of peer group data, benchmarking of unique job scopes, annual and long-term incentive design, and the CEO pay ratio along with a variety of other compensation-related topics. The Compensation Committee has assessed the independence of Willis Towers Watson pursuant to the SEC rules and concluded that no conflict of interest exists that would prevent Willis Towers Watson from independently advising the Compensation Committee.

Attracting and incentivizing high caliber executive talent is a critical part of our compensation philosophy and leadership strategy. Therefore, integral to our approach for setting compensation levels is ensuring we have a competitive pay framework. In support of this objective, Willis Towers Watson annually provides the Compensation Committee with compensation data with respect to similarly sized manufacturing companies in the identified peer group and amongst similarly sized general industry companies from a published survey perspective. In 2021, the Compensation Committee considered both of these sources in determining competitive total direct compensation benchmarks for our CEO, CFO and for the EVP Industrial, Americas. Published industry-specific market survey data were considered in determining market total direct compensation benchmarks for all other executive officers. The Compensation Committee has generally targeted the market median for total cash compensation of our named executive officers, with the opportunity to meet or exceed market median if the Company achieves outstanding financial performance in a particular year. The Committee has targeted long-term incentive grant values at or above market median, which may result in total direct compensation at or above the market median with outstanding financial performance.

 

EXECUTIVE COMPENSATION

Peer group membership is also reviewed annually. In September 2021, the Compensation Committee engaged Willis Towers Watson to evaluate the peer group to ensure alignment with the company’s energy technology strategy and recent growth. Following the review, the Compensation Committee approved changes to remove two companies, Barnes Group and Franklin, due to size and industrial focus no longer aligned with the company. The Compensation Committee also approved the addition of four new companies, including AMETEK Inc., Enphase Energy, Inc., Lennox International Inc., and Rockwell Automation, Inc., which have similar business models/end products and revenues as the Company. The Compensation Committee also noted the merger of two peer companies, Regal Beloit Corp. and Rexnord Corporation, and determined that the resulting entity should still be considered a peer. Following these changes, the Compensation Committee examined the compensation practices of the following peer group companies for 2022 compensation decisions:

During 2021, we met with various stockholders to discuss corporate governance, executive compensation, and other matters. The Board and the Committee have considered, and will continue to seriously consider, feedback from these discussions as we review and evaluate our corporate governance practices and executive compensation programs.

 

EXECUTIVE COMPENSATION

2021 EXECUTIVE COMPENSATION PROGRAM
DECISIONS

Base Salary

The Compensation Committee reviews and approves base salary levels for all named executive officers at the beginning of each year. The following decisions reflect the Compensation Committee’s consideration of external market practices, peer and published survey data, and other factors including the individual’s scope of role and performance, time in position, and industry experience, and are intended to more closely align pay with market competitive levels.

In March 2021, the Compensation Committee increased Mr. Jagdfeld’s base salary to $1,000,000 to recognize performance and further align his pay to market competitive levels. Messrs. Ragen, Minick, Forsythe and Wilde received a base salary increase after consideration of both performance and market data.

In early March 2022, the Compensation Committee sought to address market considerations and recognize the sustained strong performance and strategic contributions of Mr. Jagdfeld with an increase to $1,050,000. The Compensation Committee also increased the base salary for Messrs. Ragen, Forsythe and Wilde. Mr. Ragen’s base salary increased to $525,000, Mr. Forsythe to $430,000, and Mr. Wilde to $420,000. Mr. Minick’s base salary remained flat due to his announced retirement later in 2022.

Annual Performance Bonus Plan

Under the Annual Performance Bonus Plan, the Compensation Committee approved the financial targets of the 2021 Annual Incentive Plan (“AIP”). Consistent with prior years, the annual bonus is calculated as a percentage of base salary and is paid in cash.

For 2021, the threshold, target and maximum bonus opportunity are as follows:

 

EXECUTIVE COMPENSATION

In March 2021, the Compensation Committee increased Mr. Jagdfeld’s Target Bonus from 115% to 125% and also increased the Target Bonus for Messrs. Ragen and Minick from 65% to 75% to further align to market competitive levels. For 2021, the AIP included two financial metrics: Adjusted EBITDA (excluding the impact of acquisitions that occurred during the performance period and before deduction for noncontrolling interests) and Primary Working Capital (“PWC”) as a percentage of net sales. Individual performance goals (“IPG”) continues to be the third and nonfinancial metric. The weighting of the metrics remained the same as summarized below:

2021 Annual Performance Bonus Plan Results

The 2021 financial targets for Adjusted EBITDA and PWC were $770.4 million and 24.0%, respectively. IPG goals for named executive officers for 2021 were based on achieving these financial targets, growing the Company’s portion of the residential market, increasing industrial market share, geographic expansion (organic and inorganic), goals related to growth of our Clean Energy business, product development, organizational development, and succession planning. For 2022, we have incorporated ESG goals into the IPGs for our named executive officers, which address the development of our ESG programs, goals, initiatives, and future metrics.

Achievement of the above stated financial targets under the plan would result in a 100% of target payout for three components in the plan. Under the AIP for 2021, the Company’s Adjusted EBITDA (excluding the impact of acquisitions that occurred during the performance period and before deduction for noncontrolling interests) was $843.5 million, which exceeded the target for the Adjusted EBITDA portion. The IPG portion of the bonus plan is paid out at the same level of achievement as that achieved for Adjusted EBITDA, subject to adjustments for each named executive officer’s performance against certain defined and measurable goals established at the commencement of the year and developed to achieve specific initiatives related to the Company’s long-term strategy. The Company’s PWC, also excluding the impact of acquisitions, was 26.2%, which fell short of threshold for the PWC portion. As a result, the Committee approved the overall 2021 payout of 122% out of a maximum of 200%.

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*

Adjusted EBITDA under the AIP excludes the impact of acquisitions that occurred during the performance period and is calculated before deduction for noncontrolling interests.

​

The Compensation Committee maintains its discretion to adjust the annual performance bonuses, regardless of the outcome under incentive bonus formulas. For 2021, the Compensation Committee made no adjustments or modifications to the financial targets or payouts.

 

EXECUTIVE COMPENSATION

Long-Term Incentives

Generac believes that equity awards and other forms of long-term incentive compensation are a critical component of a competitive, comprehensive executive compensation program.

Consequently, the Company has made annual equity awards to its named executive officers since 2012.

Our long-term incentive program (“LTIP”) is designed to reward our executives for their contribution to the Company’s long-term growth and performance, and to better align the interests of our named executive officers with those of our stockholders. In addition, our long-term awards are used to attract and retain critical employee talent by providing a competitive market-based opportunity.

For the grants made in 2021, the Company granted to the named executive officers a combination of stock options, restricted stock, and performance share awards, as follows:

•

Thirty-three percent (33.3%) of the award was granted in the form of performance shares. Named executive officers may earn from 0% to 200% of their target performance share awards based on the achievement of specified revenue growth, EBITDA margin, and Free Cash Flow Conversion goals. Each performance share has a value equal to a share of common stock and the number of shares that can be earned is contingent upon Company performance over a three-year performance period, against goals approved by the Compensation Committee.

​

•

Thirty-three percent (33.3%) of the award was granted in the form of restricted stock, with those shares vesting equally over the three anniversaries immediately following the date of grant.

​

•

Thirty-three percent (33.4%) of the award was granted in the form of stock options, with those options vesting equally over the four anniversaries immediately following the date of grant.

​

2021 Long-Term Equity Incentive Mix

 

EXECUTIVE COMPENSATION

For 2021, the award grants for the named executive officers were as follows:

2021 Long-Term Equity Awards

​

(1)

Value of time-vested stock options at March 2021 grant date.

​

(2)

Value of time-vested restricted stock at March 2021 grant date.

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(3)

Value of performance shares at target payout at March 2021 grant date.

​

(4)

Value excludes incremental equity awards granted to Mr. Minick.

​

In addition to the 2021 Long Term Equity Awards, the Compensation Committee approved certain incremental equity awards to be granted to Mr. Minick effective March 1, 2021. The equity awards included an award of restricted stock valued at $1 million that vests on March 1, 2024, and an award of performance shares valued at $1 million, at target achievement level, with a performance period ending December 31, 2023. Other than the three-year cliff vesting period for the restricted stock grant, the two-year performance period for the performance shares, and the use of financial metrics tied to the Company’s Clean Energy business for measuring the payout of the performance shares, the awards had the same vesting terms and conditions as the annual equity awards Mr. Minick and the other executives received at the same time. These awards will be forfeited in connection with Mr. Minick’s retirement.

2019-2021 Performance Share Results

The named executive officers held performance shares granted in 2019 that vested based on results during the three-year, 2019-2021 performance period. This grant was intended to encourage target revenue growth measured in compound annual growth rate (“CAGR”), target Adjusted EBITDA margin percentages, and Free Cash Flow (“FCF”) Conversion percentages for 2019-2021. Specifically, if revenue growth (CAGR), average Adjusted EBITDA margin percentages, and FCF Conversion percentages during the period were achieved within a defined target range on a performance matrix, the named executive officers would earn from 50% to 200% of their target performance share awards. The revenue growth (CAGR), Adjusted EBITDA margin, and FCF Conversion targets were set at a level, given business conditions at the time the awards were granted, that were designed to be challenging but achievable with strong management performance. After the conclusion of the three-year period, the performance share targets were measured against actual financial results for Generac Power Systems, Inc., excluding any businesses acquired during the three-year period. For the three-year period from 2019-2021, the Committee determined and approved a final payout equal to 133.2% of target, out of a

 

EXECUTIVE COMPENSATION

maximum of 200%. The minimum, target, and maximum financial performance metrics and the actual results for the 2019-2021 performance awards are reflected below:

OTHER PRACTICES, POLICIES & GUIDELINES

Clawback and Hedging Policies

Effective April 2019, the Company adopted a formal “clawback” policy applicable to annual and long-term incentive awards made to the CEO, CFO and any other key member of executive management as identified by the Board or CEO. Under this policy, the Company may seek to recoup incentive compensation paid to covered employees to the extent that such compensation was granted, vested, or earned based on financial results that the Company is required to restate as a result of material noncompliance with any financial reporting requirement under federal securities laws.

In June 2021, the Compensation Committee approved a change to the CEO multiple of salary to 6.0 times annual base pay.

In March 2022, the Company expanded the policy to allow recoupment of incentive compensation paid in the event of gross negligence in performance or misconduct resulting in a violation of law or Company policy, where such acts resulted in significant financial or reputational harm to the Company.

In addition, under our insider trading policy, officers, employees, and members of the Board of Directors may not engage in short-selling Company common stock at any time. Such individuals are also prohibited from pledging Company securities, including holding Company securities in a margin account, and from engaging in hedging transactions. The prohibition on hedging transactions covers all officers, employees and members of the Board of Directors, and their designees, and prohibits the purchase of any financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) and other transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s securities. The prohibition on hedging does not preclude general portfolio diversification or investing in broad-based index funds.

Stock Ownership Guidelines

The Compensation Committee believes that it is in the best interest of Generac and its stockholders to align the financial interests of the Company’s officers and directors with those of Generac’s stockholders by requiring officers and directors to establish and maintain a permanent minimum ownership position in Company stock (based on the market value of our common stock), and by limiting the ability to sell Company stock until guideline ownership levels have been achieved. In addition, the Compensation Committee believes that the investment community values stock ownership by such officers and that share ownership demonstrates a commitment to and belief in the long-term strategic direction of Generac. Accordingly, stock ownership guidelines have been established for the Company’s officers and directors, including all the named executive officers.

 

EXECUTIVE COMPENSATION

The current stock ownership guidelines are as follows:

Executives are expected to build ownership value over time as a result of their performance and participation in the Company’s equity compensation programs. Under the guidelines, no time period is specified for compliance for officers. The following retention ratios apply to each executive based on years of service and percentage of the guideline that has been achieved. Under the stock ownership guidelines, (i) an executive that has met 50% of the multiple of salary guideline and has less than five years of service has a 50% retention ratio, (ii) an executive that has met 50% of the multiple of salary guideline and has five or more years of service has a 25% retention ratio and (iii) an executive that has met less than 50% of the multiple of salary guideline has a 75% retention ratio. The Compensation Committee assesses progress towards meeting the guidelines on an annual basis. As of March 31, 2022, all five named executive officers, including the CEO and CFO, have met their ownership guidelines.

Outside directors have five years to meet their minimum ownership requirement. As of March 31, 2022, all Directors are compliant with the applicable stock ownership guidelines as follows:

Benefits and Perquisites

Generac does not provide special medical, dental, insurance or disability benefits for the named executive officers beyond that offered to all employees. In addition, Generac does not offer special perquisites for any of the named executive officers.

Retirement Plans

The named executive officers are eligible to participate in the Generac Power Systems, Inc. Employees 401(k) Savings Plan on the same terms as other participating employees.

 

Report of the Compensation Committee

The Compensation Committee has reviewed and discussed the “EXECUTIVE COMPENSATION — Compensation Discussion and Analysis” section with our management. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the “EXECUTIVE COMPENSATION — Compensation Discussion and Analysis” section be included in this Proxy Statement, which has been incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Respectfully submitted by the Compensation Committee of the Board of Directors.

Marcia Avedon, Chair
John Bowlin
William Jenkins
Bennett Morgan

 

 

2021 Summary Compensation Table

The following table shows compensation information for 2019, 2020 and 2021 for our named executive officers.

​

(1)

The amounts reported for 2021 represent the aggregate grant date fair value for awards of restricted stock, stock options, and performance shares and are computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Subtopic 718. See Note 17 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of the relevant assumptions used in calculating these amounts. All amounts represent potential future income calculated for financial reporting purposes; actual amounts recognized by the named executive officers may be materially different depending on, among other things, the Company’s stock price performance and the period of service of the executive. The Stock Award amounts are composed in equal measure of restricted stock and performance shares, with the performance share portion assuming target performance by the Company during the relevant performance period. Assuming achievement of maximum performance during the relevant performance period for the performance shares, the Stock Award amounts provided would increase by a multiplier of 1.5.

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(2)

The non-equity incentive plan compensation column reflects cash incentive awards earned pursuant to our Annual Performance Bonus Plan as previously described. These awards are earned during the year reflected and paid in the following year.

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(3)

All other compensation represents the employer matching contributions and employer nonelective contributions of the defined contribution plan and cash payouts of unused vacation. Included in the number for Mr. Jagdfeld, Mr. Ragen and Mr. Wilde are $15,385, $32,885 and $12,154, respectively, for unused 2021 vacation time.

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Grants of Plan-Based Awards in 2021

The following table indicates potential cash incentive compensation under our Annual Performance Bonus Plan based on 2021 performance and equity awards granted in 2021.

​

(1)

Under the Annual Performance Bonus Plan, the Compensation Committee approved a 2021 Annual Incentive Plan (“AIP”). For additional information regarding the Annual Performance Bonus Plan, please see the Compensation Discussion and Analysis.

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(2)

Represents an award of performance shares that vests from 50% to 200% on the third anniversary of the grant date based on meeting certain Company performance goals relating to the 2021-2023 performance period.

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(3)

Represents an award of restricted stock, vesting in equal installments on each anniversary of the date of grant over three years.

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(4)

Represents an award of stock options, vesting 25% on each anniversary of the date of grant over four years.

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(5)

The grant date fair values were computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Subtopic 718. See Note 17 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of the relevant assumptions used in calculating these amounts.

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(6)

Represents certain incremental equity awards granted to Mr. Minick effective March 1, 2021. The equity awards included an award of restricted stock valued at $1 million that vests on March 1, 2024, and an award of performance shares valued at $1 million, at target achievement level, with a performance period ending December 31, 2023. Other than the three-year

​

 

 

cliff vesting period for the restricted stock grant, the two-year performance period for the performance shares, and the use of financial metrics tied to the Company’s Clean Energy business for measuring the payout of the performance shares, the awards had the same vesting terms and conditions as the annual equity awards Mr. Minick and the other executives received at the same time. Accordingly, all outstanding equity awards granted to Mr. Minick, including these incremental awards, will be forfeited in connection with his retirement.

 

 

2021 Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2021: