Company: AOS
Filing Date: 2025-02-27
Form Type: DEF 14A
Source: 0001193125-25-037641
Chunk: 37

Company: SMITH A O CORP
Filing Date: 2025-02-27
Form: DEF 14A
Chunk 37
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’ Questionnaire.

Benchmarking

We endeavor to benchmark our executive compensation against similarly situated executives in comparably sized organizations. We believe we compete for executive resources with other nonfinancial institutions across multiple industrial segments. With that in mind, our consultants utilize broad-based, general industry salary surveys and regress their data to organizations with revenues similar to A. O. Smith. We believe market median is an appropriate target for our total compensation program. We attempt to design both short-term and long-term incentives to produce rewards in excess of median market levels when company performance is better than target. The PCC authorized WTW to perform a detailed analysis of our executive compensation levels in 2024, as we do each year.

As we describe below, the PCC asked WTW to provide input on marketplace trends in executive compensation, and overall compensation and components of compensation for 13 executive positions.

We utilize WTW because we believe its survey resources ensure consistent and statistically valid data that is representative of the market in which we compete for executive talent. Its database includes a broad array of over 800 companies. We did not rely on a specific subgroup of peer companies within that database. In working with WTW, we played no role in selecting the companies for which the data was obtained.

For 2024 compensation, WTW performed a regression analysis to reflect base pay levels of an organization with $3.75 billion in revenue and reported its findings to the PCC in October 2023. Its comparison focused on overall compensation, as well as base salary, annual incentive bonus, equity awards and each of the other compensation elements discussed below. We believe its methodology provides appropriate comparisons by utilizing industrial companies of comparable size and referencing databases with comparable executive officer positions.

For 2024, the PCC generally targeted our overall compensation and benefits programs and each element of compensation at the median level of the surveyed companies. Since a number of variables can influence the relationship of an individual executive’s pay components to the survey median data, the PCC considers a range of 80% to 120% of median generally to be appropriate when reviewing total compensation. Although the PCC generally attempts to have each component of compensation in this target range, the PCC puts greater emphasis on achieving the target at the total compensation level. Variables considered include, but are not limited to, education, position tenure, previous experience, level of performance, additional responsibilities and, as appropriate, recruitment considerations, and as described further below in the discussion of individual compensation elements, the PCC will set compensation outside of its typical