Emerson Electric (EMR) DEF 14ADefinitive proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant   ☒                              Filed by a party other than the Registrant   ☐

Check the appropriate box:

EMERSON ELECTRIC CO.

(Name of Registrant as Specified in Its Charter)

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

Payment of Filing Fee (Check the appropriate box)

8000 W. Florissant Avenue

St. Louis, MO 63136

Dear Fellow Shareholder:

Emerson delivered strong performance in 2022, exceeding the underlying sales and adjusted earnings per share targets we set at the beginning of the year, with net sales up 8%, underlying sales up 9%, earnings per share up 42% and adjusted earnings per share up 16%.

Our leadership team and Board of Directors executed a series of decisive transactions in 2022 that are reshaping Emerson as a global automation leader. We are guiding our portfolio journey with a clear vision and purpose: to drive significant value creation for our shareholders through a higher value, higher growth and cohesive Emerson. There have been many important steps in our transformation journey, including divesting several non-core businesses and making a number of acquisitions in the last year to bolster our automation capabilities. These strategic actions are transforming the portfolio and will enable Emerson to enhance our end market diversification. Our journey is not complete, however, and we will continue to actively manage our portfolio, including pursuing acquisitions in attractive, high-growth automation markets.

A critical component of our value creation strategy – and an area of accelerated focus for us in 2022 – is our culture. This year, we have built upon our foundation and made great strides to reimagine what it means to be an employee at Emerson. We are creating an environment where everyone feels valued, trusted and empowered. A couple of highlights include work we have done to modernize our talent philosophy and talent management processes. We also implemented a global listening strategy, created remote working guidelines, fostered an inclusive environment through our 12,000-person Employee Resource Group community and identified targets to keep us accountable for building diverse and innovative teams as we continue to grow. We will continue to invest in our culture as we know this is key to unlocking the potential of our employees, driving innovation, executing with excellence and being a best-in-class global automation solutions organization.

I am thankful for the performance of the Emerson team that delivered this transformational year, and I appreciate the support of the Board of Directors who has been instrumental in enabling this transformation.

This is an important moment in the transformation of our company – and every vote is important. Please complete, sign and return your proxy card, or use telephone or internet voting prior to the meeting, so that your shares will be represented and voted at the meeting even if you cannot attend. Please see our 2022 Annual Report to Shareholders made available with this Proxy Statement.

On behalf of the Board of Directors and all of us at Emerson, thank you for your ongoing support and commitment.

December 9, 2022

Sincerely,

SURENDRALAL (LAL) L. KARSANBHAI

President, Chief Executive Officer and Director

Table of Contents

Proxy Statement Summary

This summary highlights information contained elsewhere in this Proxy Statement and does not contain all the information you should consider. You should read the entire Proxy Statement before voting.

Annual Meeting

 

2023 ANNUAL MEETING INFORMATION

For additional information about our Annual Meeting, including instructions on accessing the virtual meeting,

see Questions and Answers beginning on page 59.

 

Meeting Date Tuesday February 7, 2023		Meeting Place The Annual Meeting will be held in a virtual format, at www.virtualshareholdermeeting. com/EMR2023		Meeting Time 10:00 a.m. Central Time		Record Date           November 29, 2022

 

Voting Matters		Board Recommendation		Vote Standard		Page
Management Proposals
Item 1 Election of Directors		FOR each nominee		Majority present & entitled to vote		47
Item 2 Ratification of appointment of KPMG LLP as Independent Registered Public Accounting Firm		FOR		Majority present & entitled to vote		54
Item 3 Approval of named executive officer compensation		FOR		Majority present & entitled to vote		55
Item 4 Frequency of advisory votes on executive officer compensation		FOR ONE year		None		56

 

For the election of Directors, you have the choice of voting “FOR” individual nominees, “AGAINST” individual nominees, or “ABSTAIN” for individual nominees. For proposal two and three, you have the choice to vote “FOR”, “AGAINST” or “ABSTAIN”. For proposal four, you have the choice of whether the vote should occur every one, two or three years, or to abstain on the matter. Whether or not you plan to attend the meeting, please provide your proxy by internet, phone, or by filling in, signing, dating and promptly mailing your proxy card or voting instruction form.

 

By Internet www.proxyvote.com				By Phone 1-800-690-6903				By Mail Vote Processing, c/o Broadridge 51 Mercedes Way Edgewood, NY 11717

Attending the Meeting

To access the virtual meeting please visit www.virtualshareholdermeeting.com/EMR2023 and enter the 16-digit control number on your notice of internet availability, proxy card, or voting instruction form. Shareholders as of the close of business on November 29, 2022, the record date for the Annual Meeting, or their legal proxy holders may participate in, submit questions, examine the list of shareholders and vote at the Annual Meeting by following instructions on the virtual meeting site. Participants may access the virtual meeting site beginning at 9:45 a.m. Central Time to allow log-in prior to the start of the Annual Meeting at 10:00 a.m., Central Time.

For registered shareholders, the control number can be found on your proxy card or notice of internet availability that you previously received. If you are a beneficial or “street name” holder and hold your shares through an intermediary, such as a broker, bank or other nominee, you must obtain instructions from your broker, bank or other nominee to participate in, submit questions, examine the list of shareholders and vote at the Annual Meeting.

 

PROXY STATEMENT SUMMARY

Our Board of Directors

Nominees and Continuing Directors

The Emerson Board is divided into three classes. You are being asked to vote on the three Director nominees indicated below for the specified terms. The eight continuing Directors were previously elected to terms ending at the Annual Meeting specified. All Directors are independent, except Mr. Karsanbhai. Please see “Proxy Item No. 1 – Election of Directors” for more information.

 

AC  Audit Committee

CC  Compensation Committee

FC  Finance Committee

NC  Nominating and Corporate Governance Committee

EC  Executive Committee

 

 

Nominees for Terms Ending in 2026

Martin S. Craighead Former Chairman and Chief Executive Officer, Baker Hughes, Inc.   Age: 62 Director Since 2019 Committees: CC, NC

Gloria A. Flach Retired Corporate Vice President and COO, Northrop Grumman Corp.   Age: 63 Director Since 2017 Committees: CC, EC, FC

Matthew S. Levatich Retired President and Chief Executive Officer, Harley-Davidson, Inc.   Age: 57 Director Since 2012 Committees: AC, FC

 

To Continue in Office Until 2024

Mark A. Blinn Former Chief Executive Officer and President, Flowserve Corp.   Age: 60 Director Since 2019 Committees: AC, CC

Arthur F. Golden Former Sr. Partner, Davis Polk and Wardwell        Age: 76 Director Since 2000 Committees: EC, FC

Candace Kendle Retired Chairman and Chief Executive Officer, Kendle International, Inc.   Age: 75 Director Since 2014 Committees: AC, NC

James S. Turley Board Chair, Emerson, Retired Chair and CEO, Ernst & Young LLP   Age: 67 Director Since 2013 Committees: AC, EC, NC

 

To Continue in Office Until 2025

Joshua B. Bolten Chief Executive Officer, Business Roundtable        Age: 68 Director Since 2012 Committees: EC, NC

William H. Easter III Former Chairman, President and CEO, DCP Midstream   Age: 73 Director Since 2020 Committees: CC, FC

Surendralal (Lal) L. Karsanbhai President and CEO, Emerson        Age: 53 Director Since 2021 Committees: EC

Lori M. Lee CEO AT&T Latin America and Global Marketing Officer, AT&T, Inc.   Age: 57 Director Since 2018 Committees: AC, EC, FC

PROXY STATEMENT SUMMARY

Key Accomplishments

 

		Portfolio Transformation				Revising Annual Bonus Structure
		Announced Net Zero Targets				Revised Board Review Process

Board at A Glance

 

 

26				98%				98%				100%				65				2 of 3
Total Board and committee meetings in fiscal 2022				Attendance by    Directors at    committee    meetings    in fiscal 2022				Attendance by    Directors at 12    Board meetings    in fiscal 2022				Director    attendance at    2022 Annual    Meeting				Average    Director Age				Required    committees are    chaired by    women

Director Skills and Experience

Each member of the Board brings invaluable experience. Below we have highlighted skillsets that will be essential as we continue to transform our culture and portfolio. For a full breakdown of the Board’s skills and each Director’s skills and experience, see “Nominees and Continuing Directors’ Skills and Experience Matrix” on page 47.

 

 

PROXY STATEMENT SUMMARY

PROXY STATEMENT SUMMARY

From the Independent Chair

Dear Fellow Shareholder:

The leadership team continued transforming the Emerson portfolio through both acquisitions and divestitures, such as the transaction with AspenTech to bolster Emerson’s industrial software portfolio and the sale of a majority stake of Climate Technologies, a transaction expected to close in the first half of calendar year 2023. The Board has provided oversight and counsel throughout these transactions, and we have been pleased by the world-class approach to creating a truly cohesive Emerson with a primary focus on global automation solutions.

This year was also pivotal for Emerson as a global citizen as the company outlined new ESG targets and initiatives. ESG is an area of distinct focus for the Board, and we have been proud of the swift progress and new targets Emerson has announced. An important goal – achieving net zero GHG emissions across its value chain (Scopes 1, 2 and 3) by 2045 – was announced in the company’s most recent ESG report.

As a Board, we also continue to advance our commitment to sound governance, ensuring Emerson is managed to the highest standards of ethics and excellence. This past year, we continued our Board refreshment efforts, which included the engagement of an outside consultant to further develop the skills and competencies that are most desirable in new directors and match the company’s portfolio transformation. We will help ensure the right balance of tenure, experience and diversity on our Board to guide Emerson’s journey to become the world’s leading provider of comprehensive automation solutions.

We look forward to our continued collaboration with Lal and the leadership team to go boldly toward the future of Emerson, and we are energized by what the future will offer for all of Emerson’s stakeholders.

On behalf of the Board, thank you for your ongoing trust.

James S. Turley

Chair of Board of Directors, Emerson

Board and Committee Operations

Board and Corporate Governance

Board Responsibility Overview

The primary responsibility of our Board is to foster the Company’s long-term success. In fulfilling this role, each Director must exercise good faith business judgment in the best interests of Emerson, our shareholders, employees and communities in which we operate. Our Board has responsibility for establishing broad corporate policies, setting strategic direction and overseeing management. Management has responsibility for our day-to-day operations, implementing these policies and strategic direction, subject to Board oversight.

Governance Principles and Ethics Program

Our Board has adopted the Company’s Corporate Governance Principles and Practices that govern the structure and operations of our Board, Board oversight of management and relations between the Board and our shareholders. In addition, our Board has adopted an ethics program that applies to all Emerson employees and our Directors, and includes an Employee Code of Conduct, supplements that are specifically applicable to our Directors and executive officers, and an additional code of ethics applicable to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller.

The Company’s Corporate Governance Principles and Practices and each component of its ethics program are available on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Business Ethics. Printed copies of these documents are available to shareholders upon written request to Emerson Electric Co., 8000 West Florissant Avenue, St. Louis, Missouri 63136, Attn: Secretary. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting any amendments and/or waivers to its ethics code at the same location on its website.

The Board of Directors annually reviews its governance policies and practices, taking into account changes in applicable law, trends in corporate governance and input from shareholders.

Board Role in Environmental, Social & Governance (ESG)

Our ESG and corporate social responsibility strategy is overseen by our Board and its committees as a part of their oversight of our overall strategy and risk management. These efforts are part of a process that is designed to provide the Board timely visibility into the identification, reporting, assessment, and management of ESG issues. The Corporate Governance and Nominating Committee is responsible for assisting the Board in the oversight of the Company’s sustainability strategy, engaging with shareholders on inquiries related to ESG, and establishing principles and policies for ESG, which includes, among other things, the matters covered in the Company’s ESG Report. Our ESG Report (formerly our Corporate Social Responsibility Report) has been published annually since 2015 and these reports are available on our website. Our Audit Committee provides oversight of the integrity of our ESG data in the Company’s disclosures, reviews a summary of the Company’s environmental activities and a summary of anticipated environmental audits and expenditures each year. Our Compensation Committee provides oversight of alignment of management compensation with the Company’s ESG objectives, including diversity, equity and inclusion (DE&I) and GHG emissions reduction targets.

In our business and manufacturing operations around the world, our strategy focuses on efficient use of energy and natural resources to help reduce the intensity of the Company’s GHG emissions. In 2019, we announced a goal to reduce our GHG emissions by 20%, normalized to sales, across our manufacturing and shared services facilities by the year 2028. As part of these efforts, in 2021 we appointed our first Chief Sustainability Officer who is leading the Company and the Environmental Sustainability Steering Committee, comprised of senior-level Emerson executives, to further our environmental sustainability efforts. In 2022, we announced ambitious net zero GHG emissions targets and surpassed our original EHG emissions reduction targets, normalized to sales.

Our human capital management and succession planning, including DE&I initiatives, are important components of our strategy. Attracting, developing, and retaining talent is key to our business and operating results. Nearly half of the members of our current Board of Directors are women or persons of color. We have developed and continue to enhance a robust and comprehensive company-wide talent management program. In 2021, we introduced a diversity goal at our leadership level and evaluate progress in attaining those goals as part of our management’s compensation. We have developed processes to track our progress towards achieving these goals, which are reviewed under the supervision of the Audit Committee. We hired our first Chief People Officer in 2021 to help ensure the Company remains positioned to grow and retain talent now and in the future. To assess and improve employee retention and engagement, the Company surveys employees with the assistance of third-party consultants and takes actions to address areas of employee concern. Over 26,000 employees participated in our most recent surveys and overall gave high scores in our three focus areas: employee engagement, processes and procedures related to COVID-19 and diversity. As part of our DE&I efforts, among other things, the Company has a Diversity Council, comprised of 14 senior-level Emerson executives to advance diversity and inclusion within the company. Over 25,000 employees have completed training modules addressing diversity awareness and unconscious bias. The Company has established the following employee resource groups: Black Employee Alliance, LGBTQ + Allies, Somos (focusing on supporting the Latin Americans and Hispanics at Emerson and in the communities we serve), the Veterans Resource Group, the Women’s Impact Network, the Asian & Pacific Islander Alliance, and Mosaic (focusing on employees working away from their home country). In 2022, we formed a new employee resource group named Diverse Abilities (focusing on encouraging social awareness of perceived impairments and/or disabilities). In addition, we have also amplified our diversity objectives with focus within our communities, including working more closely with Historically Black Colleges and other diverse academic institutions, allocating a portion of our charitable contribution funds to be directed by our employee resource groups.

BOARD AND COMMITTEE OPERATIONS

Highlights of Recent ESG Changes

Our Corporate Governance and Nominating Committee regularly considers a broad range of corporate governance issues and is committed to adopting governance practices that are the most beneficial to the Company and its shareholders. As part of its review process, the Board recently made the following changes to Emerson’s ESG-related corporate governance policies:

We believe these actions are indicators of good governance and enhance our accountability to shareholders.

Board Meetings and Attendance

There were twelve meetings of the Board during fiscal 2022. All Directors attended at least 75% of the meetings of the Board and committees on which he or she served. Moreover, Directors had 98% Board meeting attendance and the Directors’ average attendance rate at meetings of the committees on which they serve was 98%. Directors are strongly encouraged to attend the Annual Meeting, although the Company has no policy requiring attendance. All Directors then in office attended the 2022 Annual Meeting.

Board Leadership Structure

The Board believes that it should have the flexibility to determine whether the same person should serve as both Chair and CEO based on what it believes will provide appropriate Company leadership and deep global industry knowledge. In 2021, the Board determined to separate the roles of the Chief Executive Officer and the Chair of the Board and to elect an independent Chair. The Board believes that this current structure, with Mr. Karsanbhai serving as both CEO and as a Director and Mr. Turley serving as an independent, non-executive Board Chair, is appropriate given Mr. Karsanbhai’s recent promotion and Mr. Turley’s extensive experience in key Board roles and leadership experience. Consistent with past practice, if those functions are re-combined in the future, the Company anticipates that it would designate a Lead Independent Director at such time.

BOARD AND COMMITTEE OPERATIONS

The Board Chair serves an important role in our governance structure with roles and responsibilities specified in the Company’s Corporate Governance Principles and Practices, which includes, among other things:

Each year the Board, through its Corporate Governance and Nominating Committee, reviews its leadership structure to ensure that it remains appropriate for the Company.

Board Role in Company Strategy

One of the Board’s responsibilities is overseeing management’s development and execution of the Company’s strategy. The Board receives updates from management and engages with management to understand and monitor business objectives, competitive landscape, economic trends and other developments. The Board looks to the expertise of its committees, and third-party experts as needed, to inform its oversight responsibilities. The Board was actively engaged in the Company’s recent M&A activities, including the Company’s investment in AspenTech, the sale of a majority interest in its Climate Technologies business and the decision to exit business operations in Russia and divest Metran.

Board Role in Risk Oversight

The Board has responsibility for oversight of the Company’s risk management process. The Board administers its risk oversight both through active review and discussion by the full Board and by delegating certain oversight responsibilities to one of its committees for further consideration and evaluation of specific risks. Each committee reports to the full Board with respect to the committee’s risk oversight activities on a regular basis. This process is designed to provide to the Board timely visibility into the identification, assessment and management of critical risks. The areas of critical risk include strategic, macroeconomic and operational risks. With respect to the Board’s committees, the Compensation Committee provides oversight for risks associated with its purpose, including, among others, risks related to human capital. The Governance and Nominating Committee provides oversight for risks associated with its purpose, including, among others, risks related to the Company’s reputation, matters of shareholder interest, social issues, laws and regulations. The Audit Committee provides oversight for risks associated with its purpose, including, among others, risks related to financial reporting, compliance with laws and regulations, reputational issues and cybersecurity. The Audit Committee also assists the Board by annually reviewing and discussing with management this process and its functionality. The full Board, or the appropriate committee, receives this information through updates from management to enable it to understand and monitor the Company’s risk management process.

Shareholder Engagement

We value our shareholders’ perspective on our businesses and each year interact with shareholders and investment analysts through a variety of engagement activities. These engagement activities include our annual investor conference and participation in industry conferences throughout the year. In addition, we routinely schedule additional engagement meetings with investors and analysts in various locations around the world. Investors and analysts may schedule meetings with our Vice President of Investor Relations to request additional information regarding the Company. We reach out to our largest shareholders each year in connection with our Annual Meeting to discuss, among other things, the matters that will be voted on at the meeting, leadership structure, business strategy, financial performance, governance, executive compensation, diversity, sustainability initiatives, and we respond to questions or concerns raised by shareholders. We discuss input provided by our shareholders during these meetings with our full Board, Corporate Governance and Nominating Committee, Compensation Committee, and other Committees of the Board as appropriate. Our Investor Relations department can be reached at 314-553-2197, investor.relations@emerson.com, or at www.Emerson.com, Investors, Investor Resources, Shareholder Information.

Board Composition

Our current Board consists of eleven Directors. We have added six new Directors in the last six years.

As required by our Restated Articles of Incorporation, our Board is divided into three classes, with the terms of office of each class ending in successive years. The Directors in one class are elected at each Annual Meeting to serve for a three-year term and until their successors are duly elected and qualified, subject to their earlier death, resignation or removal. Periodically, a Director is elected to a class with a shorter term, or moved into a different class between meetings, to rebalance the classes.

Pursuant to the Company’s Bylaws, a Director may not stand for election after age 72 without Board review and assessment. If our Board determines that continued service beyond this period is in the best interests of Emerson and our shareholders, our Board may amend the Bylaws to waive this requirement and allow election to an additional term, subject to our classified Board structure and key business issues. In light of his extensive experience and recent addition to our Board, in 2021 we amended our Bylaws to permit Mr. Easter to stand for election at the 2022 Annual Meeting. The Bylaws also permitted Mr. Golden and Dr. Kendle to stand for election to the Board for an additional term at the 2021 Annual Meeting.

We are committed to reviewing our Board’s composition to ensure that we continue to have the right mix of skills, diversity, background and tenure. Our Board retained Spencer Stuart to perform an analysis of the Board’s composition and its alignment with the Company’s strategic direction.

BOARD AND COMMITTEE OPERATIONS

Our Board’s membership represents a balanced approach to Director tenure, allowing our Board to benefit from the experience of longer-serving Directors as well as the fresh perspectives of newer Directors. The Board is continually seeking out highly-qualified, diverse candidates to add to the range of skills and experience represented on our Board.

Our Directors have a wide range of skills and experience in a variety of professions and industries, including:

The specific background, skills and experience of each of our Directors is detailed under “Proxy Item No. 1 – Election of Directors” on page 47. The Corporate Governance and Nominating Committee has the primary responsibility for developing a Director succession plan. The Committee periodically reviews our Board composition and, as discussed above, identifies the appropriate mix of experiences, skills, attributes and tenure for our Board in light of our Company’s current and future business environment and strategic direction, all with the objective of recommending a group of Directors that can best continue our success and represent our shareholders’ interests. The Committee and our Board are committed to developing a diverse pool of potential candidates for future Board service. In 2022, the Committee retained Spencer Stuart to assist in identifying and evaluating potential candidates.

Other Key Governance Policies

We have adopted corporate governance policies which encourage significant long-term stock ownership and align the interests of our executives with our shareholders. These policies include:

Review, Approval or Ratification of Transactions with Related Persons

We have developed and implemented processes to obtain and review all transactions and relationships in which the Company and any of our Directors, Director nominees or executive officers, or any of their immediate family members, are participants, and to determine whether any of these individuals have a direct or indirect material interest in any such transaction. Our Corporate Governance and Nominating Committee reviews and provides oversight over related party transactions. Transactions that are determined to be material to a related person are disclosed as required. Pursuant to these processes, all Directors and executive officers annually complete a Director and Executive Officer Questionnaire and a Conflict of Interest Questionnaire that are designed to identify related person transactions and both actual and potential conflicts of interest. We also review the nature and extent of business between the Company and other companies affiliated with our Directors or executive officers. Under the Company’s ethics program, an executive officer is required to immediately disclose all the relevant facts and circumstances of any actual or potential conflict of interest to the Company’s Ethics Committee. If the Ethics Committee determines that there is a conflict, it will refer the matter to the Board of Directors. A Director is required to immediately disclose all the relevant facts and circumstances of any actual or potential conflict of interest to the Board. In each case, the Board will review the matter to make a final determination as to whether a conflict exists, and, if so, the appropriate resolution.

The Company has a written ethics program applicable to all Directors and executive officers of the Company that prohibits Directors and executive officers from entering into transactions, or having any relationships, that would result in a conflict of interest with the Company. Waivers of the ethics program requirements for Directors and executive officers may only be granted by the Board of Directors. The Company’s ethics program documents can be found on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Business Ethics.

BOARD AND COMMITTEE OPERATIONS

Certain Business Relationships and Related Party Transactions

Based on the review described above, there were no transactions from October 1, 2021, through the date of this proxy statement, and there are no currently proposed transactions, in which the Company was or is to be a participant, in which the amount involved exceeded $120,000 and in which any of the Company’s Directors, nominees or executive officers or any of their immediate family members, or any beneficial holder of more than 5% of our common stock, either had or will have a direct or indirect material interest.

Director Independence

The Board has determined that all current Directors, other than Mr. Karsanbhai, are independent, as defined under the general independence standards of the New York Stock Exchange (“NYSE”). C. A. H. Boersig retired from the Board at the 2022 Annual Meeting but was determined to be independent while he served. All Directors identified as independent meet the Board adopted independence standards. These standards are included in Appendix A and are available on the Company’s website at www.Emerson.com, Investors, Corporate Governance, Principles & Practices.

In the course of the Board’s independence determinations, it considered any transactions, relationships and arrangements as required by the Company’s independence standards. In particular, with respect to each of the three most recently completed fiscal years, the Board considered for:

Committees of Our Board of Directors

Our Board of Directors has delegated certain of its responsibilities to committees to provide for more efficient Board operations and allow Directors to engage in deeper analysis and oversight in specific areas of importance. The members and Committee Chairs are designated by the Board based on recommendations from the Corporate Governance and Nominating Committee. The Chair of each Committee helps develop the agenda for that Committee and provides a report to our Board on Committee activities. Each Committee annually reviews the adequacy of its Charter and conducts an evaluation of its performance.

BOARD AND COMMITTEE OPERATIONS

Our Board has adopted written Committee charters which are available on our website, www.Emerson.com, Investors, Corporate Governance, Committee Charters. The primary responsibilities and membership of each Committee are below:

Board and Committee Evaluations

Our Board assesses annually its effectiveness and that of its Committees. All Directors complete an evaluation form for the Board and for each Committee on which they serve. These forms include numerical ratings for certain key metrics, as well as the opportunity for written comments. The comments provide key insights into the areas Directors believe the Board can improve or in which its performance is strong. The evaluation results are reported to the full Board, and each Committee is provided with its Committee evaluation results. The Corporate Governance and Nominating Committee oversees the process. Evaluation topics include number and length of meetings, topics covered and materials provided, Committee structure and activities, Board composition, including any comments on other members of the Board and their expertise, succession planning, Director participation and interaction with management and promotion of ethical behavior. Our Board discusses the results of each annual evaluation and, as appropriate, implements enhancements and other modifications identified during the evaluation.

Also as part of the annual self-assessment process, the Chair of the Board meets with each Director individually to solicit peer-to-peer evaluations. The Chair then meets with each Director individually to provide feedback on their performance that was obtained in the peer-to-peer evaluation sessions.

BOARD AND COMMITTEE OPERATIONS

Corporate Governance and Nominating Committee

Nomination Process

The Corporate Governance and Nominating Committee is primarily responsible for identifying and evaluating director candidates and for recommending re-nomination of incumbent directors. The Committee, which consists entirely of independent directors under applicable SEC rules and NYSE listing standards, regularly reviews the appropriate size and composition of the Board and anticipates vacancies and required expertise. The Committee reviews potential nominees from several sources, including Directors, management, shareholders or others. The Committee is also authorized to retain search firms to identify potential director candidates, as well as other external advisors, including for purposes of performing background reviews of potential candidates. The Committee retained Spencer Stuart in 2021 to assist in identifying and evaluating potential candidates.

In evaluating potential nominees, the Committee considers the knowledge, reputation, experience, integrity and judgment of the candidates, their contribution to the diversity of backgrounds, experience and skills on the Board and their ability to devote sufficient time and effort to their duties as Directors. The Board considers the following experience particularly relevant: global business, technology and innovation, business development, large company CEO or COO, financial leadership or expertise, corporate governance, operational leadership, industry, end markets and targeted growth areas, as well as experience on the boards of other major organizations. The Company’s Corporate Governance Principles and Practices set forth the minimum qualifications for nominees. Candidates are interviewed multiple times by the Chair of the Board, the CEO, the Chair of the Corporate Governance and Nominating Committee and other members of the Board to ensure that candidates not only possess the requisites skills and characteristics, but also the personality, leadership traits, work ethic, and independence of thought to effectively contribute as a member of the Board. The best candidates are then recommended by the Committee to the Board.

To ensure that the Board continues to evolve and be refreshed in a manner that serves the Company’s changing business and strategic needs, before recommending for re-nomination a slate of incumbent directors for an additional term, the Committee also evaluates whether incumbent directors possess the requisite skills and perspective, both individually and collectively. This evaluation is based primarily on the results of the periodic review the Committee performs of the requisite skills and characteristics of Board members, as well as the composition of the Board as a whole, and the results of the Board’s annual evaluation.

The Board’s policy is to seek qualified candidates. In evaluating candidates, the Committee will consider diversity criteria such as race, ethnicity, gender, cultural background, national origin, religion, disability, age or sexual orientation. The Board seeks to maintain a balance of perspectives, qualities and skills on the Board to obtain a diversity of viewpoints to better understand the technical, economic, political and social environments in which the Company operates. The Board is committed to using refreshment opportunities to strengthen its cognitive diversity. To accomplish this, existing Board members and outside agencies are required to recommend candidates to further these objectives. The Board’s success on these objectives is measured by the range of viewpoints represented on the Board.

The Committee will consider candidates recommended by shareholders if required biographical information is properly submitted as described in “Other Matters – Future Shareholder Proposals and Nominations” on page 61. Properly submitted shareholder recommendations are sent to the Committee and will receive the same consideration as others identified to the Committee.

The Company’s Bylaws permit shareholders to nominate Directors at an annual meeting of shareholders or at a special meeting at which Directors are to be elected. The procedures for making such nominations are discussed in “Other Matters – Future Shareholder Proposals and Nominations” beginning on page 61.

Director Orientation and Continuing Education

Our orientation process familiarizes new Directors with the Company’s businesses, operational strategy, and policies to optimize their Board service in their assigned committees. New Directors receive an extensive suite of onboarding materials which addresses topics including director roles and responsibilities, corporate governance policies and procedures, leadership structure, and Company strategy. We encourage our Directors to engage in continuing education to help ensure our Directors maintain a deep and up-to-date understanding of the critical issues and corporate governance developments relating to the operation of public company boards. We also provide Directors with access to director education programs provided by third parties.

Proxy Access

In 2017, the Board amended the Company’s Bylaws to permit up to 20 shareholders owning in the aggregate at least 3% of the Company’s outstanding common stock continuously for at least three years to nominate and include in the Company’s proxy materials director nominees constituting up to the greater of two individuals or 20% of the Board, provided that the nominating holders and the nominees satisfy the requirements specified in the Bylaws, including providing the Company with advance notice of the nomination. For more information on how to submit a nominee for inclusion in Company proxy materials pursuant to these provisions, see “Other Matters – Future Shareholder Proposals and Nominations” on page 61.

In fiscal 2021, the Board amended the Company’s proxy access Bylaw to remove a limitation relating to our classified board structure. The limitation provided that as long as we maintained a classified Board, the maximum number of proxy access nominees in a year could not exceed one-half of the number of Directors to be elected at that annual meeting.

BOARD AND COMMITTEE OPERATIONS

Director Compensation

Processes and Procedures for Determination of Director Compensation

The Corporate Governance and Nominating Committee annually reviews compensation practices for the Company’s Directors and makes recommendations to the Board regarding the form and amount of compensation for determination by the Board. To assist the Committee in performing these duties, management engages an outside consultant to prepare a director compensation analysis and to make recommendations. Based on this analysis, management makes recommendations regarding Director compensation for the Committee’s consideration. Frederic W. Cook & Co. prepared this analysis for fiscal 2022. Changes were recommended by management and the Committee and made by the Board.

Director Compensation Program

Each non-management Director is paid an annual retainer comprised of cash and equity in the form of restricted stock or restricted stock units (“RSUs”), as well as meeting fees and reimbursement of expenses. The Board Chair and each Committee Chair receive an additional cash retainer. Mr. Karsanbhai does not receive any additional compensation for service on the Board. In fiscal 2022, the Director compensation program provided for the following payments:

Effective October 1, 2021, the cash portion of the annual retainer was increased to $140,000, the annual restricted stock or RSU retainer was increased to $175,000 and meeting fees were eliminated for the first 24 Board or Committee meetings per year.

Emerson’s Director Stock Ownership Policy generally requires non-management Directors to hold stock equal to five times annual cash compensation, subject to a phase-in policy for new Directors. Our non-management Directors generally are required to hold all restricted stock and RSUs until retirement from our Board. The awards generally do not vest until the last day of a Director’s term after the age of 72, or earlier death, disability or a change of control of the Company. If a Director’s tenure on the Board ends for any other reason, the vesting of the award is at the discretion of the Committee. If the restrictions on the awards do not lapse, the awards are forfeited to the Company. Restricted stock includes both dividend and voting rights. Dividend equivalents are paid on RSUs, which do not have voting rights.

Directors may defer all or a part of their cash compensation under the Company’s Deferred Compensation Plan for Non-employee Directors. Directors may also defer payment of the dividend equivalents on RSUs. Deferred amounts are credited with interest quarterly at the Bank of America prime rate. Under SEC rules, interest on deferred amounts is considered above-market if the rate of interest exceeds 120% of the applicable federal long-term rate. During fiscal 2022, the applicable prime rate ranged from 3.25% to 6.25%, while 120% of the applicable federal long-term rate ranged from 2.07% to 3.95%. A. F. Golden participated in this deferral program during fiscal 2022 and above-market earnings on his deferred amounts are set forth in the Director Compensation Table. All deferred amounts are payable in cash.

As part of the Company’s charitable contributions practice, the Company may, in the Board’s discretion, make a charitable contribution in the names of Emerson and a Director (including management Directors) upon retirement from the Board (as determined by the Board), taking into account the Director’s Board tenure, accomplishments, and other relevant factors.

BOARD AND COMMITTEE OPERATIONS

The table below sets forth non-management Director compensation for fiscal 2022.

Director Compensation Table

BOARD AND COMMITTEE OPERATIONS

Audit Committee

Report of the Audit Committee

The Audit Committee assists the Board in providing oversight of the systems and procedures relating to the integrity of the Company’s financial statements, the Company’s financial reporting process, its systems of internal accounting, financial and reporting controls, the performance of the internal audit function, risk management, the independent audit process of the Company’s annual financial statements and the Company’s compliance with legal and regulatory requirements. Management is responsible for these processes.

The Audit Committee reviews with management the Company’s major financial risk exposures and the steps management has taken to monitor, mitigate and control such exposures. Additionally, the Committee provides oversight of the Company’s processes for managing cybersecurity risk, including the Company’s framework for preventing, detecting, and addressing cybersecurity, and processes and metrics related to our management of human capital and our stated diversity goals. An independent third party is used to audit our systems and processes for alignment with ISO 27001.

Management has the responsibility for the implementation of these activities. In fulfilling its oversight responsibilities, the Committee reviewed and discussed with management the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022, including a discussion of the quality and the acceptability of the Company’s financial reporting and controls. The Committee also reviews the Company’s quarterly earnings press releases and reports on Form 10-Q prior to distribution and filing.

The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles and on the effectiveness of the Company’s internal control over financial reporting. The Committee reviewed with the independent registered public accounting firm the firm’s judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters as are required to be discussed with the Committee by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the Securities and Exchange Commission. In addition, the Committee has discussed with the independent registered public accounting firm the firm’s independence from management and the Company, including the impact of non-audit related services provided to the Company and the matters in the independent registered public accounting firm’s written disclosures required by the applicable requirements of the PCAOB.

The Committee also discussed with the Company’s internal auditors and the independent registered public accounting firm in advance the overall scope and plans for their respective audits, including timing, risk assessments, locations and coverage, and any reliance by the external auditors on work performed by the internal auditors. The Committee meets at least quarterly with the internal auditor and the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls, and the overall quality of the Company’s accounting and financial reporting.

The Committee is directly responsible for the appointment, oversight, qualification, independence, performance, compensation and retention of the Company’s independent registered public accounting firm, including audit fee negotiations and approval. The Committee has evaluated whether retaining KPMG LLP (KPMG) as the Company’s independent auditor for the year is in the best interest of Emerson and its shareholders. The Committee considers whether KPMG’s known legal risks include involvement in proceedings that could impair their ability to perform the annual audit, and reviews historical and proposed KPMG fees charged to the Company.

In performing its review, the Committee also considers the quality, candor and effectiveness of KPMG’s communications with the Committee and management; how effectively KPMG maintained its independence as demonstrated by exercising judgment, objectivity and professional skepticism; reports of the PCAOB; and other available data regarding the quality of work performed by KPMG; KPMG’s long tenure and experience as the Company’s auditor, and the geographic reach and expertise of KPMG to address the demands placed on an auditor by the global breadth and complexity of Emerson’s business in terms of quantity, quality and location of staff.

The Committee also considers whether, to assure continuing auditor independence, there should be rotation of the independent registered public accounting firm.

The Committee is responsible for the selection of the lead engagement partner, and as required by law, assures rotation of the lead partner every five years. When appropriate, KPMG provides a list of candidates for the role of lead engagement partner, who are then interviewed by members of senior management. The Committee considers their recommendations and those of KPMG leadership, evaluates the candidate’s qualifications, strengths and weaknesses and selects the lead engagement partner.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2022, for filing with the Securities and Exchange Commission. In accordance with its Charter, the Committee has reappointed KPMG as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements for fiscal 2023, based on their overall qualifications, objectivity, significant experience and understanding of the Company’s operations, and their ability to deploy resources to match Emerson’s global operations.

BOARD AND COMMITTEE OPERATIONS

Fees Paid to KPMG LLP

Fees paid to KPMG LLP, the Company’s independent registered public accounting firm:

Audit Fees primarily represent the cost for the audit of the Company’s annual financial statements, reviews of quarterly SEC filings and statutory audits at non-U.S. locations. This includes $4.1 million of fees for AspenTech, which is a majority owned subsidiary of the Company.

Audit-Related Fees are primarily attributable to audit procedures related to potential divestitures, acquisition and divestiture due diligence, audits of employee benefit plans and statutory filings.

Tax Fees are related to tax compliance services.

The Audit Committee approved in advance all services provided by KPMG LLP. The Audit Committee’s pre-approval policies and procedures are included within the Audit Committee Charter, which can be found on the Company’s website at www.Emerson.com, Investors, Corporate Governance.

Compensation Committee

The Compensation Committee operates under a written charter that details the Committee’s authority, composition and procedures. The Committee may delegate authority with respect to specific matters to one or more members, provided that all decisions of any such members are presented to the full Committee at its next meeting.

For fiscal 2022, the Compensation Committee reviewed management’s process for assessing risk in the Company’s compensation programs, policies and practices for its employees, including the Company’s executive compensation program and practices. The Committee accepted the result of these reviews that our compensation programs, policies and practices do not create risks that are reasonably likely to have a material adverse effect on our business. See “Our Compensation Best Practices” on page 23 and “Policies Supporting our Fundamental Principles” on page 33 for additional information.

Role of Executive Officers and the Compensation Consultant

Executive Officers

As described in “Compensation Discussion and Analysis – Setting Annual Total Compensation” on page 25, our CEO makes recommendations to the Compensation Committee based on management input regarding total compensation of the other executive officers. Management also develops and presents to the Committee design recommendations for compensation programs.

The Compensation Committee has unrestricted access to management and may request the participation of management or the Committee’s independent consultant at any meeting or executive session. Committee meetings are regularly attended by the CEO, except for executive sessions and discussions of his own compensation, Senior Vice President and Chief People Officer, who leads some of the discussions regarding the Company’s compensation programs, and the Committee’s independent consultant. The Committee regularly reports to the Board on compensation matters and annually reviews the CEO’s compensation with the Board in executive sessions of non-management Directors only.

Compensation Consultant

The Compensation Committee has sole discretion, at Company expense, to retain and terminate compensation consultants, independent legal counsel or other advisors, including sole authority to approve their fees and retention terms. Any Committee member may request the participation of independent advisors at any meeting. The Committee has engaged Exequity LLP (Exequity) as its independent consultant. Exequity reports directly to the Committee and performs services as directed by the Committee. In 2022, Exequity reviewed our comparator group companies, the compensation of our CEO and the other NEOs and a pay for performance analysis. Management engages Frederic W. Cook & Co. from time to time to assist with executive compensation program design and competitive pay analysis as well as director compensation analysis. The Committee reviews this information in determining compensation for the NEOs. Neither Exequity nor Frederic W. Cook & Co. provides any other services to the Company. See also “Competitive Market Information” on page 24.

BOARD AND COMMITTEE OPERATIONS

Compensation Committee Report

The Compensation Committee of the Board of Directors acts on behalf of the Board to establish and oversee the Company’s executive compensation program in the interests of the Company and its shareholders. For a discussion of the Compensation Committee’s policies and procedures, see “Compensation” on page 12, “Compensation Committee” on page 17 and “Role of Our Compensation Committee” on page 21.

Management of the Company has prepared the Compensation Discussion and Analysis describing the Company’s compensation program for senior executives, including the NEOs. See “Compensation Discussion and Analysis” beginning on page 19. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis for fiscal 2022 with the Company’s management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement for its 2023 Annual Meeting of Shareholders.

Compensation Committee Interlocks and Insider Participation

The functions and members of the Compensation Committee are set forth above under “Compensation” on page 12. All Committee members are independent and none of the Committee members has served as an officer or employee of the Company or a subsidiary of the Company. During fiscal 2022, no member of the Committee and no other Director was an executive officer of another company on whose compensation committee or board any of our executive officers served.

Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the compensation programs and practices regarding our Named Executive Officers (“NEOs”) for the 2022 fiscal year. Our NEOs for fiscal 2022 included our Chief Executive Officer, Chief Financial Officer and the next three most highly compensated officers, listed below:

Executive Summary

At Emerson, our goal is to attract and retain talented executives who deliver value to our shareholders through the achievement of the Company’s specific business objectives, such as consistent growth in earnings per share, cash flow and return on investments. Our executive compensation program and overall pay for performance philosophy align with that goal and drive our results.

In fiscal 2022, the Company took decisive steps to position Emerson as a leading global automation company. In addition to the significant progress made in our portfolio transformation, the Company continued to advance its culture evolution, expanded its industrial software capabilities and continued its strong operational execution.

Fiscal 2022 Performance Highlights

EXECUTIVE COMPENSATION

Purpose Driven - Culture, Portfolio and Execution

At Emerson, our Purpose is to drive innovation that makes the world healthier, safer, smarter and more sustainable. Our Purpose builds on and is supported by our foundational Values of Integrity, Collaboration, Safety & Quality, Continuous Improvement, Customer Focus, Innovation and Support Our People. In this transformative time for our Company, through portfolio reshaping and continued global economic and social obstacles and challenges, we are focused on strategically driving the Company forward through three priority areas: Culture, Portfolio and Execution. We want to continue to build upon our legacy and advance our business with intention and purpose and reinforce a strong future of Emerson for our employees, communities, customers, shareholders and valued partners.

Culture

We believe that strengthening the foundation of our culture by continuing our focus on our people will make our Company more collaborative, innovative and successful. We are committed to enabling a culture where everyone feels valued, trusted and empowered and continuing to integrate environmental, social and governance (ESG) priorities, including as part of our total compensation discussions and programs. In June 2022, the Company published its most recent ESG report. That report outlines the Company’s ESG plans and goals, which include specific net zero and DE&I goals. We also implemented a global listening strategy, created remote working guidelines, and fostered an inclusive environment through our more than 12,000-person Employee Resource Group community. Further, in determining fiscal year 2022 annual bonuses, the Compensation Committee considered the Company’s progress in our announced GHG and DE&I goals.

Portfolio

In fiscal 2022, the Company accelerated critical portfolio changes at a scale that is unprecedented in its recent history. These portfolio changes (below) are reshaping the Company into a focused automation leader. The Company expects these actions to deliver higher growth and a cohesive portfolio.

In October 2022, the Company announced an agreement to sell a majority stake in its Climate Technologies business to a joint venture with Blackstone. This is a key step in the Company’s transformation into a focused automation leader, and the Company expects that it will lead to additional strategic investments in automation markets.

Execution

The Company’s financial performance highlighted its strong focus on execution as it navigated the impact of the global pandemic, geopolitical challenges, supply chain disruptions, labor shortages and inflation. The Company delivered 8% net sales and 9% underlying sales growth, a 42% earnings per share, 16% adjusted earnings per share increase, operating cash flow of $2.9 billion, free cash flow of $2.4 billion, and 90% operating cash flow conversion with 98% adjusted free cash flow conversion. Through this transformative year, the Company also continued to reinvigorate its organic growth engine through innovation and commercial excellence programs. The Company’s portfolio actions position it to be a more focused automation company that is accelerating key growth initiatives such as industrial software enablement, energy transition readiness and end-market diversification.

EXECUTIVE COMPENSATION

Pay for Performance Fundamental Principles

Our executive compensation program is based on a consistent set of key principles that directs compensation decisions and communicates to participants the Company’s Purpose, core Values, critical business strategies and performance objectives. These principles guide the performance objectives that drive strong results to maximize shareholder value, make Emerson a good global citizen, enhance critical capabilities for us and our customers and encourage career-long commitments to the Company.

These fundamental compensation principles include:

Shareholder Engagement and Compensation Program Benchmarking   We engage with and value the feedback of our shareholders on the components of our executive compensation program. We also regularly engage with our independent compensation consultants and other industry groups to work to ensure that we are continually reviewing and evolving our compensation programs with competitive market standards. We share feedback received on our compensation programs and market practices with our Compensation Committee. Our Compensation Committee carefully considers the long-term interests of the Company and our shareholders when making decisions regarding our compensation programs. Emerson’s shareholders again expressed strong support for our executive compensation program at our 2022 Annual Meeting, with a vote of nearly 89% in support.

Role of Our Compensation Committee

Our Compensation Committee acts on behalf of our Board to establish our compensation philosophy and oversee our executive compensation program. The current members of our Compensation Committee are Gloria A. Flach (Chair), Mark A. Blinn, Martin S. Craighead and William H. Easter III. Pursuant to its Charter, which can be found on our website at www.Emerson.com, our Committee is responsible for:

EXECUTIVE COMPENSATION

Compensation Mix

In determining the total compensation of each of our NEOs, the Compensation Committee balances the compensation mix considering the executive’s level of responsibilities, leadership and career potential, individual performance and service with the Company, with the objective of achieving a high and sustainable level of Company and individual performance. At-risk compensation (annual cash bonus and performance shares) increases as responsibilities increase and generally makes up 75% or more of the total compensation mix for our NEOs. Total compensation is targeted to the median market range of our compensation comparator group.

Key Compensation Decisions in Fiscal 2022

EXECUTIVE COMPENSATION

Our Compensation Best Practices

EXECUTIVE COMPENSATION

Competitive Market Information

How We Determine Our Compensation Comparator Group

The Compensation Committee annually reviews and approves the compensation comparator group that it uses to conduct market analysis and determine competitive pay ranges for our NEOs. As in prior years, the Committee reviewed a special study and screening prepared by Frederic W. Cook & Co. and selected compensation comparator companies for fiscal 2022 compensation based upon one or more of the following criteria (which are not assigned any specific weight):

Fiscal 2022 Compensation Comparator Group Companies

For fiscal 2022, Ingersoll Rand and United Technologies were removed and Carrier Global, DuPont, Stanley Black & Decker and Trane were added, resulting in the 24-company compensation comparator group listed below:

Emerson vs. Compensation Comparator Group

Source: Capital IQ

Results as of 9/30/22

EXECUTIVE COMPENSATION

Compensation of our Named Executive Officers

Setting Annual Total Compensation

The Compensation Committee targets annual total compensation (cash and annual long-term stock compensation) for our NEOs in the median market range of our compensation comparator group. To determine the median market range, the Committee uses a competitive pay analysis of total compensation for the proxy reported officer positions at the compensation comparator group companies prepared by Frederic W. Cook & Co. The Committee also reviews and confirms the competitive market pay analysis with Exequity, its independent compensation consultant. The competitive pay analysis is not used to establish performance goals in the Company’s compensation programs. The Committee does monitor the relative internal compensation relationships between the CEO and the other NEOs, however, no specific pay ratio is targeted.

For the fiscal 2022 annual bonus, the Committee did not set specific financial or operating targets related to annual cash compensation and pay determinations were not based on any formula. Actual pay was dependent on Company and individual performance and based on the Committee’s informed judgment. However, for 2022, the Committee utilized an ESG performance modifier based on the achievement of ESG targets in support of our publicly disclosed leadership representation and GHG goals. This ESG modifier provided that the discretionary bonus amount determined by the Committee would be adjusted by plus or minus 7.5% based on progress toward the ESG goals.

The Committee meets in executive session to review and set the CEO’s compensation. For fiscal 2022, the Committee considered a number of factors in making its decision, including: market data, compensation elements, Company performance, tenure and experience, retention and the CEO’s individual performance, leadership, contributions to the Company and impact on results. The Committee also discusses the CEO’s compensation annually with the non-management Directors in executive session.

For the NEOs and other key executives, our CEO reviews with the Committee the individual performance and leadership potential of these key executives, along with the Company’s financial results, and makes individual pay recommendations to the Committee. The CEO’s recommendations are informed by our robust annual organizational review, compensation planning and performance review processes.

For the fiscal 2023 annual bonus, the Committee determined to shift to a formulaic bonus structure with pay dependent on the Company’s progress toward objective pay criteria utilizing adjusted EPS, operating cash flow and ESG goals.

EXECUTIVE COMPENSATION

Fiscal 2022 CEO and NEO Performance

CEO Performance. In determining the appropriate level of total compensation for Mr. Karsanbhai, the Committee evaluated the Company’s strong and consistent financial performance in fiscal 2022 (summarized on page 19) and his focus and actions on Company’s strategy as driven by portfolio transformation, cultural evolution, and strong operational execution.

Mr. Karsanbhai’s annual total compensation (cash and annual long-term stock compensation) is in the median market range of our compensation comparator group. The Committee noted that Mr. Karsanbhai has successfully led the Company through this period of transition and highlighted the following significant accomplishments.

Other Named Executive Officer Performance. In setting compensation for the other NEOs, the Committee considered the Company’s strong and consistent fiscal 2022 financial performance, the mitigation of supply risks, labor shortages and other geopolitical challenges, the disciplined management of the Company’s business and operations, including through continued progress toward cost reset targets and the continued focus on safety and wellbeing of our employees, as well as our CEO’s evaluation of each NEO’s individual performance, leadership and accomplishments. The Committee also evaluated the NEOs based on their interactions with and presentations to the Board.

EXECUTIVE COMPENSATION

ESG Performance Modifier

After determining the discretionary bonus for fiscal 2022 based on the factors described above, the Committee adjusted the bonus amounts for the results of an ESG performance modifier based on the achievement of ESG targets in support of our publicly disclosed leadership representation and GHG goals. This ESG modifier provided that the discretionary bonus amount determined by the Committee would be adjusted by plus or minus 7.5% based on progress toward the ESG goals, including the Company’s goals to double the representation of women globally and U.S. minorities in leadership roles by 2030, and the Company’s goal to reduce GHG emissions by 20%, normalized to sales. As a result of this modifier, each of the NEO’s annual bonus was increased by 5%.

EXECUTIVE COMPENSATION

Fiscal 2022 Annual Total Compensation Mix

We believe that our practice of setting a majority of our NEOs’ compensation as “at-risk” pay underscores our commitment to our fundamental pay-for-performance principles. By tying a significant percentage of NEO annual total compensation (cash and performance shares) to performance-based pay that is dependent on achievement of the Company’s performance goals as well as the consistent attainment of strong individual performance, we maximize the value we can deliver to shareholders. In fiscal 2022, 91% of our CEO’s annual pay and an average of 84% of the other NEOs’ annual pay was comprised of “at-risk” compensation (calculated on base salary paid as shown in Summary Compensation Table; amounts do not include other forms of compensation shown in the Summary Compensation Table or special restricted stock grants).

Annual Cash Compensation

The Committee targets total annual cash compensation in the median market range of total cash compensation, while placing more emphasis on performance-based annual cash bonus than on base salary. Base salary is the only guaranteed component of our NEOs annual total compensation and generally represents 10-20% of annual total compensation. Bonus generally represents 15-25% of annual total compensation.

Base Salary. The Compensation Committee generally determines NEO base salaries effective as of October 1 of each year. Fiscal 2022 base salary increases were based on the Committee’s review of the Company’s fiscal 2022 performance, individual performance, and potential and competitive market compensation. The Committee also considered market survey data that the predicted merit increase, without promotions, for comparable executive positions.

As shown above, for fiscal 2022, base salary (the only guaranteed portion of NEO compensation) comprised only 9% of our CEO’s and an average of 16% of our other NEOs’ annual total compensation.

Bonus. In determining fiscal 2022 bonuses, the Compensation Committee reviewed the Company’s strong financial performance and strong actions in portfolio, culture and execution, as well as the individual performance and leadership of each NEO. The Committee used discretion and based its decisions on its informed judgment considering these factors collectively. No individual weightings were assigned to any of these factors.

EXECUTIVE COMPENSATION

As discussed above, after determining appropriate discretionary bonuses, the Committee adjusted the bonus amounts based on the results of an ESG performance modifier based on the Company’s achievement of ESG targets in support of our publicly disclosed leadership representation and GHG emission reduction goals. As a result of this modifier, each of the NEO’s annual bonus was increased by 5%. In addition, with respect to the year-over-year increase in NEO bonuses, the Committee considered key actions that occurred in the fiscal year related to the shaping and transformation of the Company’s portfolio and the need to retain key leadership in a competitive market environment.

As shown above, for fiscal 2022, cash bonus comprised only 17% of our CEO’s and an average of 20% for our other NEOs’ annual total compensation.

Annual Long-Term Stock Compensation

The Committee targets total annual compensation for our NEOs in the median market range of our compensation comparator group, with performance-based stock compensation being the largest component of our NEOs annual total compensation. We value our long-term stock compensation awards based on the grant date fair value computed in accordance with FASB ASC Topic 718; however, an executive may realize more or less than his or her targeted long-term compensation depending on Company and stock performance over the performance period.

Performance Shares. Performance shares awards are the primary long-term compensation element and the cornerstone of our pay-for-performance philosophy. When determining the amount of an NEO’s annual award, the Committee may increase or decrease the amount based on individual performance. The Committee targets the median market range for each NEO’s total annual compensation. We believe that performance shares align the interests of our executives and shareholders and support the achievement of long-term strategic operating goals such as premium, sustained growth in earnings and cash flow.

Each annual Performance Shares Program has a three-year performance period with defined operating performance targets set by the Committee at the beginning of the period from the various measures set forth in the Company’s Incentive Shares Plans. An award of performance shares under the program represents the right to receive shares of our common stock to the extent the identified performance objectives are met. Dividend equivalents may be paid, but only on earned awards at the end of the performance period. Historically, payouts have been made primarily in common stock, with a portion paid in cash to cover tax obligations. To facilitate fixed accounting treatment for these awards beginning with the fiscal 2022 - 2024 Performance Shares Awards, the Company will no longer pay a portion of earned awards in cash (other than accrued dividends). Awards include confidentiality, non-competition and non-solicitation obligations and expanded clawback rights and are subject to a double-trigger change of control provision.

At the end of a performance period, the Committee reviews the Company’s financial results against the operating performance targets and certifies the level of achievement for payout of the awards. The Committee may include or exclude from both targets and actual results specified items of an unusual, non-recurring or extraordinary nature as allowed by the plans or as defined in the specific Program award agreement. Pursuant to our Incentive Shares Plans, the Committee also has the discretion to adjust a payout percentage where results and/or business climate warrant, except as may be defined in the specific Program award agreement. For the fiscal 2022 – 2024 Performance Shares Program, the Committee has adopted a defined set of acceptable adjustments, removing negative discretion under the Plans, to facilitate fixed accounting treatment.

For the fiscal 2021 – 2023 Performance Shares Program and earlier Programs, our operating targets were benchmarked to growth over nominal G7 GDP growth, and the target growth rate was set at three percentage points above G7 GDP. Beginning with our fiscal 2021 – 2023 Performance Shares Program, we also added a relative total shareholder return modifier benchmark (“rTSR”) to measure our total shareholder return performance relative to the S&P 500 Capital Goods Index group of companies (the “CGI Group”). After the payout percentage is determined by reviewing our financial performance for the performance period against the operating metrics, we will then measure our three-year total shareholder return relative to the CGI Group performance for the same period. If our total shareholder return is at or above the 80th percentile of the CGI Group, the payout percentage from operating results will be increased by 20 percentage points. If our total shareholder return is at or below the 20th percentile of the CGI Group, the payout percentage will be decreased by 20 percentage points. No adjustment to the payout percentage will be made for relative performance between the 20th and 80th percentile of the CGI Group.

For the fiscal 2022 – 2024 Performance Shares Program, we determined that the G7 GDP benchmark does not sufficiently reflect our strategic objectives for the performance period and our determination for increased value creation. Accordingly, for the fiscal 2022 – 2024 Program, we set

EXECUTIVE COMPENSATION

specific operating growth targets and have removed the G7 GDP +3% growth benchmark. The new operating growth targets are based on our three year operating plan and are intended to be difficult but attainable and incentivize the achievement of that plan. The operating growth targets were set using defined growth rates of Adjusted EPS (weighted 60%) and cumulative free cash flow (weighted 40%). We also defined categories of acceptable adjustments removing any negative discretion. We retained the rTSR benchmark.

Fiscal 2022 – 2024 Performance Metrics

(Period from October 1, 2021 – September 30, 2024)

What do we consider when we make performance shares awards?

In making an individual annual award, the Committee considers the NEO’s: (1) ability to make a significant contribution to the Company’s financial results, (2) level of responsibility, (3) individual performance, (4) commitment to the Company’s Purpose, Values and the Enabling Pillars of Culture, Portfolio and Execution, and (5) leadership potential. The annual performance shares award generally represents more than half of the NEO’s total compensation, depending on the NEO’s role and responsibilities.

In fiscal 2022, 100% of our NEOs annual long-term incentive awards were performance-based awards.

Why these performance metrics?

Each year, the Compensation Committee works with executive management and its independent executive compensation consultant to review and establish financial and operational performance metrics that are consistent with our long-term strategic objectives and in line with market practices. The Committee sets targets for the three-year performance period that will challenge our business leaders to drive operating results that generate shareholder returns. At the end of the performance period, our NEOs earned awards are based on the level of achievement against these targets.

Historically, the Committee utilized earnings per share and cumulative free cash flow (operating cash flow less capital expenditures) as the metrics most appropriate to drive growth. However, beginning with the fiscal 2022 – 2024 Performance Shares Program, the Committee determined to utilize adjusted EPS instead of EPS to align with the use of adjusted EPS for the supplemental reporting of results to our shareholders, and cumulative FCF. The Company uses adjusted EPS to facilitate period-to-period comparisons and provide additional insight into the underlying, ongoing operating performance of the Company.

Growth Targets

For the fiscal 2022 – 2024 Performance Shares Program and the fiscal 2023 – 2025 Performance Shares Program, the Committee determined that the G7 GDP benchmark (as used in prior years) does not sufficiently reflect our strategic objectives for the performance period and our determination for increased value creation. Accordingly, we have set specific operating growth targets, removing the G7 GDP +3% growth benchmark for the performance period. The operating growth targets for the fiscal 2022 – 2024 Performance Shares Program are based on three year operating plan targets, weighted at 60% Adjusted EPS and 40% Cumulative FCF.

EXECUTIVE COMPENSATION

We have retained the rTSR benchmark. The Committee will review our total shareholder return for the three-year period relative to the CGI Group. If our total shareholder return is above the 80th percentile or below the 20th percentile of the CGI Group, the payout percentage will be adjusted as discussed above.

How do we calculate results against our performance metrics?

At the end of the fiscal 2022 – 2024 Performance Period, the Committee will review our financial results against the performance targets set at the beginning of the performance period. Subject to the predefined categories of acceptable adjustments, the Committee will consider whether there are any adjustments that should be made to account for unusual, non-recurring or extraordinary items. The Committee will then certify the level of achievement against the targets for payout of the awards.

Fiscal 2022 – 2024 Performance Shares Program Awards. In fiscal 2022, 100% of our NEOs’ annual long-term stock compensation was comprised of performance shares awards. The following individual performance shares awards were made to the NEOs:

For fiscal 2022, performance shares represented 74% of our CEO’s annual total compensation and an average of 64% for our other NEOs.

Fiscal 2020 – 2022 Performance Shares Program. The performance period for the fiscal 2020 – 2022 Performance Shares Program ended on September 30, 2022. The targets and weightings were calculated as described above. The Committee determined that the target earnings per share was $4.22 and target cumulative free cash flow was $8.076 billion. In determining the results for the performance period, the Committee determined that it was appropriate to adjust for certain discrete items, including adjustments primarily related to a gain on a subordinated interest, acquisition and divestiture activity, write-offs associated with the Company’s announced Russia exit, as well as other tax items.

EXECUTIVE COMPENSATION

The Committee determined that the fiscal 2022 EPS, after an aggregate downward adjustment of $0.79 (from $5.41), was $4.62, and cumulative free cash flow over the performance period, after an upward adjustment of $218 million (from $7.930 billion), was $8.148 billion. The performance results after the impact from the adjustments resulted in a payout percentage of 106% of the previously awarded shares under the formula. The payouts are reflected in the Option Exercises and Stock Vested table on page 39.

Other Stock Awards

Restricted Stock. Restricted stock is also available for award under our long-term stock-based compensation program. In limited circumstances, such as special retention, recognition and succession planning needs, the Committee may make a separate award of restricted stock. Awards of restricted stock are highly selective. Restricted stock awards are not considered as a portion of an NEO’s annual total compensation and may, therefore, result in compensation above the median range in the year of award. The Committee views this program as an important management succession planning and retention tool. The objective is to lock in top executives and their potential replacements identified through the succession planning process. Restricted stock provides participants with dividends and voting rights beginning on the award date. There is no set frequency of restricted stock awards, and they are granted with long-term cliff vesting periods of up to 10 years and no less than 3 years. Mr. Karsanbhai received an award of restricted stock in connection with his appointment as CEO in fiscal 2021. Each of Messrs. Krishnan and Bulanda also received awards of restricted stock in connection with their appointments and for retention in fiscal 2021. No awards of restricted stock were made in fiscal 2022.

Stock Options. Our 2011 Stock Option Plan expired on November 2, 2020. Although our NEOs have stock options outstanding, no stock option awards have been made to any of the NEOs since 2016. All stock options previously awarded were issued at no less than fair market value on the date of the award with vesting over a period of three years with a ten-year term. We do not pay dividend equivalents on stock options and do not “reprice” awards.

EXECUTIVE COMPENSATION

Policies Supporting Our Fundamental Principles

To support our pay-for-performance philosophy and underlying fundamental principles of our compensation programs, we have implemented certain policies regarding NEO ownership of and actions in connection with stock and other incentive compensation. In addition to our compensation programs, we believe that appropriate stock ownership guidelines and our stock trading, clawback and pledging, and anti-hedging policies further align the interests of our executives with shareholders by encouraging long-term superior performance without encouraging excessive or unnecessary risk taking.

Severance, Executive Termination and Retirement

Emerson does not have employment agreements, severance agreements or golden parachute agreements with the NEOs. The terms of all executive terminations and retirements are reviewed by the Committee individually based on specific facts and circumstances and not on formulaic rules. We follow these general principles:

The Committee has adopted an Executive Officer Severance Policy which provides that the Company shall not implement individual severance or change of control agreements providing certain benefits (as described in the Policy) to any NEO in excess of 2.99 times the sum of the NEO’s then current base salary and most recent cash bonus without shareholder ratification. The policy is located at www.Emerson.com, Investors, Corporate Governance, Executive Officer Severance Policy. M. J. Bulanda, Executive President Automation Solutions, is retiring from the Company effective December 31, 2022. We entered into a letter agreement with Mr. Bulanda which, among other things, reaffirmed and extended his restrictive covenants. See “Description of M. J. Bulanda Letter Agreement” on page 44 for a description of his retirement arrangements.

Change of Control

If a change of control occurs, we protect all employees who participate in long-term stock plans, the Savings Investment Restoration Plans and the Pension Restoration Plan as described under “Potential Payments Upon Termination or Change of Control” on page 41. Our 2011 Stock Option Plan and 2015 Incentive Shares Plan include a “double trigger” for vesting following a change of control, although stock awards under our prior incentive shares plan vest upon a change of control. When triggered, we would expect to accelerate vesting of stock awards and pay accrued benefits under the Savings Investment Restoration Plans and the Pension Restoration Plan. We do not credit additional years of service under any plans or continue medical or other benefits. We do not make additional cash payments related to stock compensation plans. We do not increase payouts to cover payment of taxes and do not provide tax gross-ups.

EXECUTIVE COMPENSATION

Security and Perquisites

Due to increased security risks inherent in senior executive positions, we provide NEOs with residential security monitoring and personal security as needed. The Company’s security policy and the Board of Directors require, unless otherwise approved in advance by the Chief Financial Officer and the Head of Global Security, that the CEO use Company aircraft for all travel for business to facilitate business efficiency and safety given our global footprint. Because of his importance to the Company and the level of security risk inherent in his position, the CEO is encouraged to use the Company aircraft for personal travel. The Head of Security must review in advance the itinerary and security assessment for any trips made by the CEO on commercial aircraft. The Company provides limited personal use of Company aircraft to the other NEOs, and all such use must be approved in advance by the CEO. All NEOs reimburse the Company at 400% of the Standard Industry Fare Level Rate rates for personal use.

The Company historically has also provided NEOs with cars, club memberships, financial planning and an annual physical. In fiscal 2021, we performed a thorough review of these perquisites, including a review of market data for our compensation comparator group, the S&P 500 Capital Goods Index group of companies and the general industry to determine the prevalence of these perquisite practices. Following such review, we determined that effective January 1, 2022, the Company would no longer provide or reimburse for club memberships. The review of market data showed the car, financial planning, annual physical and personal security monitoring perquisites remain a prevalent market practice. We are, therefore, continuing to provide these perquisites to assist in retaining and attracting executives. NEOs and other employees may also receive Company tickets for sporting, entertainment or other events. The Committee reviews these perquisites annually. Total perquisite costs and related information appear in the Summary Compensation Table on page 36. The Company does not provide any reimbursement for taxes on perquisites, except as may be prescribed in our relocation policies applicable to all employees.

Other Benefits

The NEOs are eligible for Company-provided benefits that are generally available to all other employees, including qualified 401(k) savings plans, a qualified defined-benefit pension plan, medical, life and disability insurance, and a charitable matching gifts program, among others. The defined-benefit pension was closed to new participants effective October 1, 2016. A portion of U.S. employees, including certain of the NEOs, continue to participate. The following additional benefits are also available to the NEOs:

No changes were made for fiscal 2022 in the method of calculating any NEO benefits that appear in the Summary Compensation Table beginning on page 36.

Regulatory Considerations

Internal Revenue Code Section 162(m) imposes a $1 million limit on the Company’s deductions for compensation paid to specified executive officers (“Covered Employees”). For taxable years beginning before January 1, 2018, the Covered Employees consisted of a corporation’s chief executive officer and up to three other highly compensated executive officers (other than the chief financial officer) and qualifying “performance-based compensation” was not subject to this limitation if specified requirements were met (i.e., compensation paid only if performance meets pre-established objective goals based on performance criteria approved by shareholders).

Pursuant to the Tax Cuts and Jobs Act of 2017, for taxable years beginning after December 31, 2017, (i) the remuneration of a public corporation’s chief financial officer is now also subject to the deduction limit, (ii) once an individual is considered a Covered Employee with respect to a taxable year, he or she will be considered a Covered Employee for all future years, including after termination of employment or death, and (iii) the exemption from the deduction limit for “performance-based compensation” is no longer available. These changes do not apply to remuneration provided under a binding written contract in effect on November 2, 2017, which is not materially modified after that date. Consequently, for fiscal years beginning after December 31, 2017, no remuneration in excess of $1 million paid to a Covered Employee will be deductible unless such compensation is granted pursuant to a written binding contract that was in effect prior to November 2, 2017.

While the Committee considers the impact of the tax treatment of executive compensation, the primary factor influencing program design is the support of business objectives, and the Committee retains the flexibility to design and administer compensation programs that are in the best interests of Emerson and its shareholders. The Committee does not communicate annual bonus targets to the NEOs. Our compensation plans also comply with IRC Section 409A for nonqualified deferred compensation arrangements.

In accordance with FASB ASC Topic 718, for financial statement purposes we expense all equity-based awards over the period earned, or subsequently, based upon their estimated grant date fair value, depending on the terms of the award. FASB ASC Topic 718 has not resulted in any significant changes in our compensation program design.

EXECUTIVE COMPENSATION

Equity Compensation Grant Practices

The Committee approves all grants of equity compensation to executive officers, as defined in Section 16 of the Exchange Act. All elements of executive officer compensation are reviewed by the Committee annually at its October or November meetings. Generally, equity awards are made at those meetings, but may be made at other meetings. The Committee meeting date, or the next business day if the meeting is on a non-business day, is the grant date for equity awards.

Compensation Tables

Summary Compensation Table

The following information relates to compensation received or earned by our Chief Executive Officer, our Chief Financial Officer, and each of our next three most highly compensated executive officers for the last fiscal year (the “named executive officers” or “NEOs”).

COMPENSATION TABLES