ITT INC. - DEF 14A

DEF 14A 1 litt2021_def14a.htm ITT INC. - DEF 14A ITT INC. - DEF 14A

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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ITT Inc.

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2021

Notice of Annual Meeting & Proxy Statement

ITT Inc.

ITT Inc.
1133 Westchester Avenue
White Plains, NY 10604

DEAR FELLOW
SHAREHOLDER

RICHARD P. LAVIN
CHAIRMAN OF THE BOARD

April 5, 2021

On behalf of the ITT Inc. Board of Directors, thank you for your continued investment in ITT. The Company delivered another strong performance in 2020 despite the challenges posed by the COVID-19 global pandemic. ITT made continued progress on enhancing operational excellence, including safety, developing innovative new products that are winning in the marketplace and investing in its business and people to deliver long-term value for our shareholders. We invite you to join us at our 2021 Annual Meeting on May 19, 2021 at 9:00 a.m. Eastern Time to be held virtually via a live webcast at www.virtualshareholdermeeting.com/ITT2021. Details regarding how to attend the virtual meeting and the business to be conducted are provided in the accompanying Notice of Annual Meeting and Proxy Statement.

BOARD COMPOSITION AND REFRESHMENT

I had the honor of assuming the role of Chairman of the Board of Directors of ITT in May 2020 following the retirement of Frank MacInnis, who served as ITT’s independent chair since 2011. We also announced the retirement of Christina Gold at the end of May 2020. Christina served as a Director for over 23 years, serving on the Audit and Compensation and Personnel Committees. Both Frank and Christina were part of the original ITT Board prior to the spin-off of our defense and water businesses in 2011, and their retirements were part of a thoughtfully planned transition that occurred over the past three years. I would like to thank each of them for their contributions to ITT.

As Chair, I have focused on guiding ITT’s strategies for growth, profitability and capital deployment, and overseeing several new leadership appointments. As in the past, we remain thoughtful about Board composition and effectiveness during our formal annual Board and committee evaluation processes as well as through our director nominations process.

SUCCESSFUL CFO TRANSITION

This past year, we completed a successful CFO transition following the resignation of Thomas Scalera. Emmanuel Caprais was named senior vice president and chief financial officer of ITT in October 2020. Emmanuel joined ITT in 2012 as segment CFO for Motion Technologies, eventually assuming a similar role for the Industrial Process segment in 2017. He also led the Financial Planning & Analysis (FP&A) and Investor Relations functions for ITT and in addition in 2020 was appointed Group CFO. Emmanuel worked closely with Tom and CEO Luca Savi throughout 2020 to ensure a smooth transition.

SHAREHOLDER ENGAGEMENT

Shareholder engagement remains a key priority for the Board. The valuable feedback and perspectives received through discussions with our shareholders help to inform ongoing boardroom discussions. We continued our annual outreach and engagement efforts in 2020, engaging with shareholders collectively representing approximately 47% of our outstanding shares. These discussions centered on our responses to the COVID-19 global pandemic, Board refreshment and diversity, corporate governance, initiatives taken to protect our environment, executive compensation practices and leadership transitions. The company’s shareholders also acknowledged our enhanced sustainability reporting following ITT’s first-ever Sustainability Report published in 2019, which was followed by a 2020 supplement showing our continued progress. The Board recognizes the importance of Environmental, Social and Governance matters and will continue to make this a priority in 2021.

Again, I thank you for your continued support and confidence in ITT. I am honored to serve on this Board and look forward to hearing from ITT’s shareholders in 2021. We hope you can join us at the Annual Meeting.

Sincerely,

RICHARD P. LAVIN

NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS

MEETING INFORMATION
WEDNESDAY, MAY 19, 2021
9:00 a.m. Eastern Time

Virtually, via live webcast at www.virtualshareholdermeeting.com/ITT2021.

ITEMS OF BUSINESS

	1.	To elect the 11 nominees named in the attached Proxy Statement to the Board of Directors to serve until the 2022 annual meeting of shareholders or until their respective successors shall have been duly elected and qualified.
	2.	To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the 2021 fiscal year.
	3.	To conduct an advisory vote on the compensation of the Company’s named executive officers.
	4.	To consider a shareholder proposal, if properly presented at the Annual Meeting.
	5.	To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.

WHO CAN VOTE, RECORD DATE

Holders of record of ITT Inc. common stock at the close of business on March 22, 2021 are entitled to vote at the Annual Meeting and any adjournment or postponement thereof.

MAILING OR AVAILABILITY DATE

Beginning on or about April 5, 2021, this Notice of 2021 Annual Meeting of Shareholders and the attached Proxy Statement are being mailed or made available, as the case may be, to shareholders of record on March 22, 2021.

ABOUT PROXY VOTING

It is important that your shares be represented and voted at the Annual Meeting. If you are a registered shareholder, you may vote online at www.proxyvote.com, by telephone or by mailing a proxy card. You may also vote online during the virtual Annual Meeting. If you hold shares through a bank, broker or other institution, you may vote your shares by any method specified on the voting instruction form that they provide. See details under “How do I vote?” under “Information about Proxy Statement and Voting.” We encourage you to vote your shares as soon as possible.

By order of the Board of Directors,

MARY BETH GUSTAFSSON
Senior Vice President, General
Counsel, Corporate Secretary and Chief Compliance Officer
April 5, 2021

REVIEW YOUR PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:


ONLINE Visit the website on your proxy card	BY MAIL Sign, date and return your proxy card in the enclosed envelope	BY PHONE Call the telephone number on your proxy card	DURING THE ANNUAL MEETING Attend the Virtual Annual Meeting and Vote by Internet See page 75 for instructions on how to attend

Please refer to the enclosed proxy materials or the information forwarded by your bank, broker or other holder of record to see which voting methods are available to you.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR ITT Inc.’s Annual Meeting of Shareholders to be held on Wednesday, May 19, 2021, at 9:00 a.m. Eastern Time The Proxy Statement and 2020 Annual Report to Shareholders are available online at www.proxyvote.com

TABLE OF CONTENTS

PROXY STATEMENT EXECUTIVE SUMMARY	07
Annual Meeting of Shareholders of ITT Inc.	07
Voting Items	07
How To Vote	07
2020 Fiscal Highlights	08
Snapshot of 2021 Director Nominees	09
Corporate Governance Highlights	10
Shareholder Engagement and Responsiveness	10
Executive Compensation Highlights	10
Sustainability Highlights	11

CORPORATE GOVERNANCE AND RELATED MATTERS	12
Introduction	12
Corporate Governance Principles	12
Our Board Leadership Structure	13
The Board’s Role in Leadership Succession Planning	13
Directors’ Qualification and Selection Process	13
Board And Committee Evaluation Process	15
Director Orientation and Continuing Education	16
Shareholder Engagement	16
Board and Committee Meetings And Membership	18
Board and Committee Roles in Oversight Of Risk	19
Overview of Committees	20
Executive Sessions of Directors	22
Hedging and Pledging	22
Director Independence	22
Code of Conduct	23
Compensation Committee Interlocks and Insider Participation	23
Communication with the Board of Directors	24
Policies for Approving Related Party Transactions	24
Corporate Responsibility and Sustainability	25

ELECTION OF DIRECTORS (PROXY ITEM NO. 1)	26
Election Procedures	26
2021 Director Nominees	26

RATIFICATION OF APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROXY ITEM NO. 2)	33
Independent Registered Public Accounting Firm Fees	34
Pre-Approval of Audit and Non-Audit Services	34

AUDIT COMMITTEE REPORT	35
Role of The Audit Committee	35
Audit Committee Charter	35
Regular Review of Financial Statements	36
Communications with Deloitte	36
Independence of Deloitte	36
Recommendation Regarding Annual Report on Form 10-K	36

ITT INC. | 2021 PROXY STATEMENT

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (PROXY ITEM NO. 3)	37

COMPENSATION DISCUSSION AND ANALYSIS	38
Executive Summary	38
Governance and Compensation	42
Elements of Compensation	44
2020 Annual Incentive Plan	45
2020 Long-Term Incentive Compensation	48
Benefits and Perquisites	50
Other Compensation And Benefits	50
Policies	51

COMPENSATION TABLES	54
Summary Compensation Table	54
All Other Compensation Table	55
Grants of Plan-Based Awards in 2020	56
Outstanding Equity Awards at 2020 Fiscal Year End	57
Option Exercises and Stock Vested In 2020	58
2020 Pension Benefits	58
2020 Nonqualified Deferred Compensation	60
Potential Post-Employment Compensation	63
CEO Pay Ratio	67

COMPENSATION AND HUMAN CAPITAL COMMITTEE REPORT	68

2020 NON-MANAGEMENT DIRECTOR COMPENSATION	68

CONSIDERATION OF A SHAREHOLDER PROPOSAL REGARDING SPECIAL SHAREHOLDER MEETINGS (PROXY ITEM NO. 4)	71

OTHER MATTERS	74
Information about the Proxy Statement & Voting	74
Voting Information	75
Stock Ownership of Directors, Executive Officers and Certain Shareholders	81
Equity Compensation Plan Information	82
Form 10-K	83

APPENDIX A	84
List of Companies Utilized From The Willis Towers Watson Compensation Survey	84

Date	May 19, 2021
Time	9:00 a.m. Eastern Time
Location	Virtually, via live webcast at www.virtualshareholdermeeting.com/ITT2021

Voting Item		Board Voting Recommendation	Further Information (page)
1.	To elect the 11 nominees named in the Proxy Statement to ITT’s Board of Directors	FOR each nominee	26
2.	To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2021	FOR	33
3.	To conduct an advisory vote on the compensation of the Company’s named executive officers	FOR	37
4.	To consider a shareholder proposal regarding special meetings of shareholders	AGAINST	71

YOUR VOTE IS IMPORTANT:

ONLINE Visit the website on your proxy card	BY MAIL Sign, date and return your proxy card in the enclosed envelope	BY PHONE Call the telephone number on your proxy card	DURING THE ANNUAL MEETING Attend the Virtual Annual Meeting and Vote by Internet. See page 75 for instructions on how to attend

Revenue	Segment Operating Income	Segment Operating Margin	EPS	Operating Cash Flow
$2,478 (13%)	$319 (26%)	12.9% (230 bps)	$0.78 (79%)	$436 22%

Organic Revenue	Adjusted Segment Operating Income	Adjusted Segment Operating Margin	Adjusted EPS	Free Cash Flow
$2,455 (14%)	$376 (18%)	15.2% (80 bps)	$3.20 (16%)	$372 40%

■	Revenue of $2,477.8 decreased $368.6, including $24.4 from our 2019 acquisitions and unfavorable foreign exchange of $1.3. Organic revenue decreased 13.8%, mainly as a result of the global impact of COVID-19 which drove declines in transportation of 16%, industrial of 7%, and oil and gas of 23%. Sequentially, revenue increased in each of the last two quarters of 2020, from $514.7 in the second quarter to $591.2 in the third quarter and $708.6 in the fourth quarter.
■	Segment operating income of $318.6 declined $113.7, which included higher restructuring and asset impairment costs of $28.1 and $15.3, respectively. Adjusted segment operating income declined $80.3 due to reduced volume from weaker demand and disruption caused by COVID-19, partially offset by savings from restructuring, productivity and cost actions. Sequentially, segment operating income increased in each of the last two quarters of 2020, from $37.3 in the second quarter to $83.9 in the third quarter and $119.5 in the fourth quarter.
■	Income from continuing operations decreased $254.9, which included increased pension costs of $108.2, net of tax, from the termination of our U.S. qualified pension plan, a decline in segment operating income, and higher asbestos costs of $64.4, net of tax, primarily to extend the period over which we estimate our net liability through 2052 (i.e., “full horizon”), partially offset by a reduction in corporate costs. As a result, earnings per diluted share decreased from $3.65 to $0.78. Adjusted earnings per share was $3.20, reflecting a decrease of $0.61 from the prior year.
■	Operating cash flow of $435.9 increased $78.2 or 21.9%, primarily due to higher collections from customers, improved inventory management and cost containment measures. Operating cash flow less capital expenditures was $372, an increase of $106 or 40%.

DIRECTOR SNAPSHOT
					Board Committees
Name	Age	Director Since	Other Public Company Boards	Position	Audit	Compensation and Human Capital	Nominating and Governance
Orlando D. Ashford	52	2011	2	Executive Chairman of Azamara
Geraud Darnis	61	2015	0	Former President & CEO of UTC Building & Industrial Systems
Donald DeFosset, Jr.	72	2011	3	Former Chairman, President & CEO of Walter Industries, Inc.
Nicholas C. Fanandakis	64	2016	2	Former Executive Vice President of DowDuPont
Richard P. Lavin non-executive Chairman	69	2013	1	Former President & CEO of Commercial Vehicle Group, Inc.
Mario Longhi	66	2017	2	Former President & CEO of United States Steel Corporation
Rebecca A. McDonald	68	2013	0	Former CEO of Laurus Energy, Inc.
Timothy H. Powers	72	2015	0	Former Chairman, President & CEO of Hubbell Incorporated
Luca Savi	55	2019	0	CEO & President of ITT Inc.
Cheryl L. Shavers	67	2018	1	Chairman & CEO of Global Smarts, Inc.
Sabrina Soussan	51	2018	1	CEO of dormakaba Holding AG

WHAT WE DO
	Independent Chair	Annual Board and committee evaluation and self- assessments
	Highly independent and diverse Board	Active Board refreshment
	Annual election of directors	Director skill sets aligned with corporate strategy
	Majority voting for uncontested director elections	Formal limit on outside directorships
	Regular executive sessions of the Board and its committees	Meaningful stock ownership guidelines for directors
	Proxy access right	Formal director orientation and continuing education program
	Shareholder right to call special meetings	Proactive engagement with shareholders
	A policy prohibiting hedging and pledging of the Company’s securities

■	no director may stand for re-election after he or she has reached the age of 75;
■	directors must be able to devote the requisite time for preparation and attendance at regularly scheduled Board and Committee meetings, as well as be able to participate in other matters necessary for good corporate governance;
■	non-employee directors are limited to service on four public company boards (including the ITT Board). If the director serves as an active CEO of a public company, the director is limited to service on two public company boards (including the ITT board) in addition to service on his or her own board;
■	the CEO is limited to service on one public company board (in addition to service on the ITT Board). Currently, the CEO serves only on the ITT Board;
■	the CEO reports at least annually to the Board on succession planning and management development;
■	the Board evaluates the performance of the CEO and other senior management personnel at least annually; and
■	the Board maintains a process whereby the Board and its committees are subject to annual evaluation and self-assessment.

■	personal qualities and characteristics, accomplishments and reputation in the business community;
■	current knowledge and contacts in the Company’s business communities and industries;
■	the fit of the individual’s skills and personality with those of other directors in building a Board that is effective, collegial and responsive;

■	ability and willingness to commit adequate time to Board and committee matters;
■	diversity of viewpoints, background, experience and other demographics;
■	independence (including independence from the interests of a particular group of shareholders);
■	absence of potential conflicts with our interests; and
■	such other criteria as the Board may from time to time determine relevant.


		27%
		female
		27%
		racially/ethnically diverse
		36%
		citizens of non-U.S. countries*

*	In some cases in addition to the U.S.

■	the nominee’s fit with the membership criteria discussed above;
■	the nominee’s skills and attributes and overall complement to the skills matrix discussed above; and
■	the diversity that the nominee will add to the Board.

Board and Committee Operations	Board Performance	Committee Performance
■ Board and committee membership, including director skills, background, expertise and diversity	■ Key areas of focus for the Board	■ Performance of committee duties under committee charters
■ Committee structure and process, including keeping the full Board abreast of committee matters	■ Oversight of the Company’s strategy	■ Effectiveness of management support for committees
■ Access to management, experts and internal and external resources	■ Effectiveness of risk oversight	■ Identification of topics that should receive more attention and discussion, particularly emerging risk areas
■ Materials and information, including the quality and quantity of information received	■ Performance of Board Chair	■ Performance of committee chairs
■ Conduct of meetings, including encouragement of and time allocated for candid dialogue

■	prioritizing diversity in the next director search;
■	increased Board exposure both formally and informally to key executives;
■	additional reserved time for “Board only” discussions to continue to foster openness and cohesiveness among the Board; and
■	a coordinated director education schedule to provide additional education on relevant topics as part of regularly scheduled meetings.

*Percent of Shares Outstanding Contacted:*		*Percent of Shares Outstanding Engaged:*
*69%*		*47%*
Specific Areas of Focus and Feedback

Corporate Governance	Executive Compensation	Sustainability
Board Diversity & Refreshment	Compensation Program	Sustainability Reporting
■ Discussed how the Board’s evaluation process supports thoughtful refreshment	■ Shareholders understood the relevance of our compensation program metrics to our business strategy and acknowledged our link between pay and performance	■ Shareholders appreciated ITT’s recent reporting efforts, including SASB aligned metrics and 2020 supplement to our Sustainability Report
■ Shareholders recognized ITT’s commitment to Board diversity, including gender, race/ethnicity, age, geography, and business experience	■ Shareholders supported the metrics and weighting of our incentive plans, and the decision not to adjust plan designs due to the financial impact of the pandemic. Shareholders stressed that any discretion applied for AIP payouts should include robust disclosure	■ Shareholders encouraged ITT to consider setting specific sustainability- related goals, including carbon emissions
■ Shareholders appreciated ITT’s smooth leadership succession process, including the CEO transition in 2019 and the CFO, Value Center Presidents and independent Chair transitions in 2020	■ Shareholders understood the actions taken by the Board of Directors in light of the pandemic to approve temporary compensation reductions for Directors, the CEO, and other Executive Officers	■ Discussed investors’ views on various data sources and reporting standards

Governance	Employees	Board Oversight of Sustainability
■ Shareholders appreciated ITT’s robust corporate governance profile and practices, including our long-standing independent Chair role	■ Shareholders were interested to understand the actions taken to keep employees safe and productive during the pandemic	■ Discussed the Nominating & Governance Committee’s oversight of ESG risks impacting ITT
■ Shareholders discussed and generally supported ITT’s current threshold required to call a special meeting	■ Shareholders appreciated the diversity metrics published in the 2020 supplement to our Sustainability Report, and encouraged disclosure of diversity targets	■ Discussed the Compensation & Human Capital Committee’s focus on cultivating an innovative, diverse and inclusive workplace that engages and energizes people

■	Board Refreshment: Our approach to Board refreshment and diversity continues to be informed by our shareholders’ perspectives. Recent additions to our Board further enhanced our Board’s skill sets and diversity. We completed a transition of the independent Chair role at the 2020 Annual Meeting.
■	Compensation: The total annual compensation of non-employee directors elected at the Company’s 2020 annual meeting in May 2020 was reduced by 20% effective from the annual meeting on May 15, 2020 through December 31, 2020, and then reinstated on a pro-rated basis for the remainder of their term effective January 1, 2021. The annual salary of the CEO was reduced by 20% effective from April 1, 2020 through December 31, 2020 and then reinstated effective January 1, 2021. The annual salary rates of the other Executive Officers were reduced by 20% effective from April 1, 2020 through September 30, 2020 and then reinstated effective October 1, 2020.
■	Sustainability: We continue to evolve and enhance our sustainability practices and disclosure, taking into account multiple years of shareholder feedback. Our 2019 Sustainability Report included metrics reported in accordance with SASB, and our 2020 supplemental report included three-year progress on environmental metrics and introduced baseline metrics around workplace diversity.

		Compensation
		and Human	Nominating and
Name	Audit	Capital	Governance
Orlando D. Ashford
Geraud Darnis
Donald DeFosset, Jr.
Nicholas C. Fanandakis
Richard P. Lavin
Mario Longhi
Rebecca A. McDonald
Timothy H. Powers
Luca Savi
Cheryl L. Shavers
Sabrina Soussan
Chair

■	the position within or relationship of the Related Party with the Company;
■	the materiality of the transaction to the Related Party and the Company, including the dollar value of the transaction, without regard to profit or loss;
■	the business purpose for and reasonableness of the transaction, taken in the context of the alternatives available to the Company for attaining the purposes of the transaction;
■	whether the transaction is comparable to a transaction that could be available on an arms-length basis or is on terms that the Company offers generally to persons who are not Related Parties;
■	whether the transaction is in the ordinary course of our business and was proposed and considered in the ordinary course of business; and
■	the effect of the transaction on our business and operations, including on the Company’s internal control over financial reporting and system of disclosure controls or procedures, and any additional conditions or controls (including reporting and review requirements) that should be applied to such transaction.

SEC Form DEF 14A filed by ITT Inc.