December 22, 2022
Acuity Brands Reveals Company Goals and Exec Compensation
In 2022, top executives were rewarded for crushing the revenue target
In preparation for the January 2023 Annual Meeting of Shareholders, Acuity Brands recently made an SEC filing that details the company’s performance for fiscal year 2022 that concluded in August 2022. A common topic for Annual Shareholder meetings for many publicly traded companies is executive compensation. The proxy statements published by Acuity Brands detail how the performance of the company’s top executives was measured, and how each executive was compensated.
Acuity Brands published the three-year salary history of Neil Ashe, Chairman, President and CEO, as well as three named executive officers ("NEOs").
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Karen Holcom, Senior Vice President and Chief Financial Officer
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Barry Goldman, Senior Vice President and General Counsel
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Dianne Mills, Senior Vice President and Chief Human Resources Officer
Both Ashe and Mills joined the company while fiscal year 2020 was in progress, which is why the two executives received six-figure bonuses that year; they were signing bonuses.
The healthy total compensation figures are likely high when compared to other lighting industry executives – but are also in line with many other multi-billion dollar publicly traded corporations. Additionally, it should be noted that stock awards and option awards are deferred compensation – often “cashed out” years later – and not necessarily actual sums of money that were directly deposited into the individual’s checking account during the fiscal year cited.
Acuity Brands FY2022 Financial Targets
One of the more intriguing aspects of the filing was the revelation of what the 2022 executive goals were and how the company performed versus those goals. We imagine that the goals were established and approved by the Board of Directors in the first half of calendar year 2021 when the world was getting vaccinated and supply chain woes were beginning to reach a sustained boiling point with no short-term relief in sight.
Below is inside.lighting opinion on the three performance measures above:
Revenue $4.006B actual vs. $3.882B target
Acuity’s FY2020 was supposed to be the one when the company hit $4 billion for the first time. Then COVID happened, but only delayed the milestone accomplishment by two years. Hitting the top line was certainly aided by multiple price increases which likely gave double-digit percentage lift. We would like to see a comparison of year-over-year unit sales. Regardless, $4 billion is an impressive accomplishment for a company that derives the majority of sales in North America.
Operating Profit
In a year when material and logistics costs were volatile and spiking, managing profits was a challenge for any manufacturer in any industry. Acuity seemed to do an admirable job – hitting $510 million in adjusted operating profit. The higher-than expected top line likely helped here, while rising costs may have diluted the end result.
Free Cash Flow
When the cash flow goals were written in the first half of calendar year 2021, Just-In-Time (JIT) manufacturing was still a thing. As the year progressed, companies like Acuity Brands fought against insane lead times by bolstering both parts inventory and finished goods inventory. Those lead-time-driven decisions were customer focused, but likely worked against any reasonable internal free cash flow goal.
And two more things…
One doesn’t have to scour through an 88-page Acuity Brands SEC filing to find corporate communication that highlights its goals related to Environmental, Social, and Governance (ESG) and Diversity Equity & Inclusion (DEI). But there was so much messaging about those topics, 55 total mentions, that it was hard to ignore the interwoven themes – particularly when executive compensation is tied to ESG goals:
ESG Goals are Tied to Executive Compensation
Acuity Brands' EarthLIGHT program is consistently cited as an integral part of the company's strategy that reflects its comprehensive approach around ESG topics. According to Ashe, the company has "made significant advancements to reduce our environmental impact, build out our values-driven culture, and enhance our governance activities."
Acuity Brands has also built ESG initiatives into the compensation of its senior executives. The compensation plans of Holcom, Goldman and Mills each have an ESG component tied to their individual incentive compensation.
Diversity Equity & Inclusion (DEI)
In its most recent fiscal year, Acuity Brands completed the first year of a three-year DEI strategic roadmap. Acuity Brands explains "In fiscal 2021, we created a robust three-year DEI plan, which we initiated with success in fiscal 2022. We understand how diversity of backgrounds and experiences is critical to our ongoing success, and our goal is to ensure that all associates feel valued, respected, and accepted for their contributions regardless of their race, sex, religion, ethnicity, age, gender identity, disabilities, national origin, sexual orientation, or other unique characteristics."
"The company's Compensation and Management Development Committee is responsible for the oversight of, and receives regular updates on, Acuity Brands' human capital programs. Acuity Brands went on to state, "We believe that the active management of our associates’ development and our increased focus on DEI are significant advantages in attracting and retaining the best talent that will enable the Company's continued success."
We couldn’t find any published mention in the recent SEC filing that connected DEI initiatives to executive compensation.
