Parker-Hannifin (PH) DEF 14ADefinitive proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

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

Check the appropriate box:

PARKER-HANNIFIN CORPORATION

(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 all boxes that apply):

Parker-Hannifin Corporation is a Fortune 250 global leader in motion and control technologies. For more than a century, the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.

ENABLING ENGINEERING

BREAKTHROUGHS THAT

LEAD TO A BETTER TOMORROW.

Parker-Hannifin Corporation

6035 Parkland Boulevard, Cleveland, Ohio, 44124-4141

NOTICE OF ANNUAL MEETING

OF SHAREHOLDERS

To Our Shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders of Parker-Hannifin Corporation. The meeting will be held at our headquarters located at 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, on Wednesday, October 26, 2022, at 9:00 a.m., Eastern Time, for the following purposes:

Voting Items

1

Election of Directors

2

Approval of the Compensation of Our Named Executive Officers on a Non-Binding, Advisory Basis

3

Ratify the Appointment of Deloitte & Touche LLP as our Independent Registered Public Accounting Firm

FOR each director nominee

FOR

FOR

and to transact such other business as may properly come before the meeting.

Shareholders of record at the close of business on September 2, 2022 are entitled to vote at the meeting. On September 2, 2022, 128,460,821 shares were outstanding and entitled to vote at the meeting. Each share is entitled to one vote. This Proxy Statement and the form of proxy are being mailed to shareholders on or about September 23, 2022. Your vote is important, so if you do not expect to attend the meeting, or if you do plan to attend but wish to vote by proxy, please mark, date, sign and return the enclosed proxy card promptly in the envelope provided or vote electronically via the internet or by telephone in accordance with the instructions on the proxy card. Please refer to the section “General Information About the Annual Meeting” for more information.

Thank you for your support of Parker-Hannifin Corporation.

By Order of the Board of Directors

Joseph R. Leonti

Secretary

September 23, 2022

How to Vote

VOTE VIA INTERNET www.proxyvote.com

VOTE BY PHONE 800-690-6903

VOTE BY MAIL Vote Processing c/o Broadridge 51 Mercedes Way, Edgewood, NY 11717

VOTE AT THE MEETING Parker-Hannifin Corporation 6035 Parkland Boulevard Cleveland Ohio, 44124

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on October 26, 2022.   This Proxy Statement, along with our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, is available free of charge on our investor relations website (www.phstock.com).

TABLE OF CONTENTS

3		Our Company
3		Business Highlights and Performance
4		Executive Compensation Highlights
5		Environmental, Social and Governance Highlights
10		Shareholder Engagement Highlights
11		Proxy Statement Summary/ Voting Roadmap
12				Item 1 – Election of Directors
13		Director Selection and Nomination, Qualifications and Diversity
14		Director Skills and Experience
15		Director Biographies
15		Nominees for Election as Directors for Terms Expiring in 2023
21		Director Independence
21		Annual Elections; Majority Voting; No Cumulative Voting
21		New Elections and Departures
22		Corporate Governance
22		Board and Committee Structure
22		Current Leadership Structure
23		Board Committees; Committee Charters
24		Meetings and Attendance; Executive Sessions
25		Director Education and Orientation Program
25		Board and Committee Evaluations
26		Board Strategic and Risk Oversight
26		Board’s Role in Strategic Oversight
27		Board’s Role in Risk Oversight
28		Spotlight: Oversight of Cybersecurity
28		Spotlight: Succession Planning
28		Spotlight: Board’s ESG Oversight
30		Communications with Directors
30		Other Governance Matters
30		Review and Approval of Transactions with Related Persons
31		Proxy Access
31		Stock Ownership Guidelines
31		Stock Ownership Restrictions - Speculative Transactions/Hedging
31		Governance Documents
32		Director Compensation
32		Compensation of Directors
33		Director Compensation for Fiscal Year 2022

34		Executive Compensation
34				Item 2 – Advisory Vote to Approve Named Executive Officer Compensation
35		Compensation Discussion & Analysis
35		Named Executive Officers
35		Executive Summary
40		Compensation Setting Process
45		Principal Elements of Executive Compensation
58		Other Compensation Policies and Practices
60		Accounting and Tax Considerations
60		Compensation Committee Report
61		Compensation Tables
61		Summary Compensation Table for Fiscal Year 2022
63		Grants of Plan-Based Awards for Fiscal Year 2022
65		Outstanding Equity Awards at June 30, 2022
67		Option Exercises and Stock Vested for Fiscal Year 2022
68		Pension Benefits for Fiscal Year 2022
69		Nonqualified Deferred Compensation for Fiscal Year 2022
70		Potential Payments Upon Termination or Change of Control at June 30, 2022
77		Chief Executive Officer Pay Ratio
78				Item 3 – Ratification of the Independent Registered Public Accounting Firm
78		Audit Fees and All Other Fees
79		Audit Committee Pre-Approval Policies and Procedures
79		Report of the Audit Committee
80		Beneficial Ownership of Common Stock
80		Principal Shareholders
81		Delinquent Section 16(a) Reports
82		General Information About the Annual Meeting
83		Other Matters
83		General
85		Shareholders’ Proposals
85		Shareholder Recommendations for Director Nominees

2

OUR COMPANY

Parker-Hannifin Corporation is a Fortune 250 global leader in motion and control technologies. For more than a century, the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.

The following sections provide highlights from our fiscal year 2022 across matters of importance to our shareholders, including business and financial performance, executive compensation, our environment, social and governance (“ESG”) program and shareholder engagement.

Business Highlights and Performance

Fiscal year 2022 was a year marked by significant macroeconomic headwinds, including inflation, supply chain constraints, international conflict and ongoing COVID-19 challenges. Nonetheless, The Win Strategy drove sustained profitable growth and strong financial performance as compared to our diversified industrial proxy peers. The actions taken under The Win Strategy to strengthen our portfolio and improve our performance have built a business that we believe is better equipped than ever before to be resilient across macroeconomic cycles. Our Purpose Statement: Enabling Engineering Breakthroughs that Lead to a Better Tomorrow continued to provide inspiration and direction for our team members, and represents how we can strengthen our communities and have a positive impact on the world.

In fiscal year 2022, we delivered strong financial performance and value for our shareholders, including:

Our Company

Executive Compensation Highlights

The tables below highlight the performance-based nature of our compensation program and how our program aligns with what we view as executive compensation best practices.

Elements of Executive Compensation

Executive Compensation Practices

What We Do				What We Don’t Do
Executive compensation program with pay-for-performance structure aligned with The Win Strategy    The target total direct compensation package for our Chief Executive Officer is a mix of 9% fixed and 91% at-risk, and for our other Named Executive Officers is an average mix of 18% fixed and 82% at-risk    Annual advisory vote on executive compensation with consistent high degree of approval    One-year minimum vesting or performance period requirements for equity incentives under our Amended and Restated 2016 Omnibus Stock Incentive Plan “    Claw back” policy to recover or withhold incentive-based compensation to executive officers in certain circumstances    Anti-hedging and anti-pledging policy for Directors and executive officers    Robust Stock Ownership Guidelines for executive officers and Directors				Offer employment agreements to our executives     Offer above-market earnings on contributions to deferred compensation accounts     Grant stock options or SARs with an exercise price less than the fair market value of Parker’s common stock on the date of grant     Re-price stock options or SARs     Cash out underwater stock options or SARs     Include reload provisions in any stock option or SAR grant     Permit directors or employees, or their respective related persons, to engage in short sales of Parker’s stock or to trade in instruments designed to hedge against price declines in Parker’s stock     Permit directors or officers to hold Parker securities in margin accounts or to pledge Parker securities as collateral for loans or other obligations

4

Our Company

Environment, Social and Governance Highlights

Our ESG program includes a range of initiatives around corporate social responsibility and sustainability, taking into account the interests of our key stakeholders, including our shareholders, team members, customers and communities. Issues that we focus on include, among others, workplace health and safety, climate risk, water conservation, human capital management, diversity, equity and inclusion, cyber security, and business ethics and compliance. For information on Board and Committee ESG oversight responsibilities, see “Board’s Role in Risk Oversight” on page 27 of this Proxy Statement.

We publish our Sustainability Report in line with Sustainability Accounting Standards Board (SASB) standards, addressing the many ways in which we apply our core technologies to make a positive impact on the world, including through our team members, social responsibility, environmental initiatives, product stewardship, and governance, ethics and compliance. Selected aspects of our most recent Sustainability Report are highlighted below.

We are proud of our corporate social responsibility and sustainability accomplishments, but recognize that best practices in ESG integration and reporting frameworks continue to evolve. While there is more work to be done, we are confident in our strategy of achieving business success through social responsibility and sustainable business practices:

Environment

Our Company

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Our Company

Social

Our Company

Governance

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Our Company

Our Company

Shareholder Engagement Highlights

We actively seek and highly value feedback from our shareholders. During fiscal year 2022, in addition to our traditional investor relations outreach efforts, we proactively reached out to shareholders representing over 51% of our outstanding common stock to engage with them on ESG matters. We engaged with each shareholder that accepted our invitation.

We also shared the feedback received during these meetings with our Corporate Governance and Nominating Committee, our Human Resources and Compensation Committee and our full Board of Directors. As a result of our shareholder engagement efforts and the feedback we received, we strengthened our disclosures in this Proxy Statement and our Sustainability Report.

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PROXY STATEMENT SUMMARY/

VOTING ROADMAP

This summary highlights certain information relating to the voting items for our 2022 Annual Meeting of Shareholders. Additional details are found throughout this Proxy Statement.

Item 1 – Election of Directors

Director Selection and Nomination, Qualifications

and Diversity

The Corporate Governance and Nominating Committee of our Board is responsible for identifying, evaluating and recommending potential Director candidates. The Corporate Governance and Nominating Committee ensures that Director recruiting, succession and refreshment are persistent areas of focus and regularly reviews the size, composition and independence of our Board, and any expected vacancies, in determining whether and to what extent to actively recruit new Directors or to replace departing Directors.

The Corporate Governance and Nominating Committee utilizes a variety of methods and processes to identify potential Director candidates, including through reputable third-party search firms, unsolicited recommendations from other third-party search firms, and referrals from current or past members of our Board. In addition, the Corporate Governance and Nominating Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as Directors (provided that such recommendations comply with the procedures set forth under the caption “Shareholder Recommendations for Director Nominees”) and will consider such candidates on the same basis as candidates recommended by other sources.

The Corporate Governance and Nominating Committee generally will not, however, consider recommendations for Director nominees submitted by individuals who are not affiliated with us. The Corporate Governance and Nominating Committee has developed and implemented a robust process to ensure that its formal Director searches are appropriately scoped and designed to produce a slate of potential candidates representing a broad range of backgrounds, educations, experiences, skills and viewpoints that will enable them, individually and collectively, to address the issues affecting our Board, our business, our team members and our shareholders, and optimize the functioning and decision-making and oversight roles of our Board and its Committees. The Corporate Governance and Nominating Committee currently focuses on the following key search and evaluation criteria, but considers the entirety of each proposed candidate’s credentials and all available information that may be relevant to each candidate’s nomination.

The Corporate Governance and Nominating Committee, utilizing its robust and thoughtful approach to Director recruiting, succession and refreshment, has built an experienced, diverse and independent Board that provides significant oversight over our plans and strategies for growth, financial performance and shareholder value creation.

Item 1 – Election of Directors

Director Skills and Experience

In addition to the metrics included on page 8, the following table presents on an individual basis the skills and experience of our Board in areas that are of importance to our Company. Our Board refreshment efforts over the last several years have strengthened the culture, skills and diversity of our Board. Each Director nominee brings his or her own unique background and range of expertise, knowledge and experience which provides a comprehensive and optimal mix of skills and qualifications necessary for our Board to effectively fulfill its oversight responsibilities.

Director Experience

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International

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Risk Management

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Item 1 – Election of Directors

Director Biographies

Nominees for Election as Directors for Terms Expiring in 2023

Lee C. Banks

		Director Since: 2015                                            Age: 59   Committees: None		Other Public Company Directorships:   •   Westinghouse Air Brake Technologies Corporation (Wabtec) (since 2020)   •   Nordson Corporation (former) (2010-2020)

Mr. Banks has been our Vice Chairman and President since August 2021. From February 2015 to August 2021 he was President and Chief Operating Officer. He was our Executive Vice President from August 2008 to February 2015 and our Operating Officer from November 2006 to February 2015.

Our Board believes that Mr. Banks will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Jillian C. Evanko

		Director Since: 2021                                            Age: 44   Committees: Audit   Human Resources and Compensation		Other Public Company Directorships:   •   Chart Industries, Inc. (since 2018)   •   Alliant Energy Corporation (former) (2019-2021)

Ms. Evanko has been President and Chief Executive Officer of Chart Industries, Inc. (cryogenic technologies) since June 2018. She was the Chief Financial Officer of Chart from March 2017 until January 2019. Prior to Chart, Ms. Evanko served as Vice President and Chief Financial Officer of Truck-Lite Co., LLC (truck and commercial vehicle products) since October 2016. Prior to Truck-Lite, Ms. Evanko was Vice President and Chief Financial Officer of Dover Corporation’s Dover Fluids (diversified global manufacturer) since January 2014.

Our Board believes that Ms. Evanko will effectively serve our Board of Directors, our business, our team members and our shareholders based on her significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Item 1 – Election of Directors

Lance M. Fritz

		Director Since: 2021                                            Age: 59   Committees: Corporate Governance and Nominating   Human Resources and Compensation		Other Public Company Directorships:   •   Union Pacific Corporation (since 2015)

Mr. Fritz has been Chairman of the Board of Union Pacific Corporation (rail transport) since October 2015, and President and Chief Executive Officer since February 2015.

Our Board believes that Mr. Fritz will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Linda A. Harty

		Director Since: 2007                                            Age: 62   Committees: Audit (Chair)   Corporate Governance and Nominating		Other Public Company Directorships:   •   Westinghouse Air Brake Technologies Corporation (Wabtec) (since 2016)   •   Syneos Health, Inc. (since 2017)   •   Chart Industries, Inc. (since 2021)

Now retired, Ms. Harty was Treasurer of Medtronic plc (medical technology) from February 2010 to April 2017.

Our Board believes that Ms. Harty will effectively serve our Board of Directors, our business, our team members and our shareholders based on her significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

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Item 1 – Election of Directors

William F. Lacey

		Director Since: 2021                                            Age: 52   Committees: Audit   Corporate Governance and Nominating		Other Public Company Directorships:   •   None

Mr. Lacey has been Vice President of Finance (Books, Kindle and Digital Content) of Amazon (e-commerce) since February 2022. He previously was Chief Executive Officer of GE Lighting (lighting technology), a Savant company, from 2015 to February 2022; and served as Chief Financial Officer of GE Home and Business Solutions Lighting from 2011 to 2015.

Our Board believes that Mr. Lacey will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Kevin A. Lobo

		Director Since: 2013                                            Age: 57   Committees: Audit   Human Resources and Compensation		Other Public Company Directorships:   •   Stryker Corporation (since 2012)

Mr. Lobo has been Chairman of the Board of Stryker Corporation (medical technologies) since July 2014 and has been Chief Executive Officer, President and a Director since October 2012.

Our Board believes that Mr. Lobo will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Item 1 – Election of Directors

Joseph Scaminace

		Director Since: 2004                                            Age: 69   Committees: Human Resources and Compensation (Chair)   Corporate Governance and Nominating		Other Public Company Directorships:   •   Cintas Corporation (since 2010) (Lead Director)

Now retired, Mr. Scaminace served as the Chairman and Chief Executive Officer of OM Group, Inc. (metal-based specialty chemicals) from June 2005 to October 2015 and Chairman of the Board of OM Group from August 2005 to October 2015.

Our Board believes that Mr. Scaminace will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Åke Svensson

		Director Since: 2010                                            Age: 70   Committees: Audit   Corporate Governance and Nominating		Other Public Company Directorships:   •   None

Mr. Svensson is Chairman of Swedavia AB (transport infrastructure). He was Chairman of the Association of Swedish Engineering Industries (manufacturing trade organization), and Board Member of the Confederation of Swedish Enterprises from May 2018 until May 2020. He was previously Director General of Swedish Engineering Industries from September 2010 to August 2016. Mr. Svensson is a former Director, Chief Executive Officer and President of Saab AB.

Our Board believes that Mr. Svensson will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

18

Item 1 – Election of Directors

Laura K. Thompson

		Director Since: 2019                                            Age: 58   Committees: Audit   Corporate Governance and Nominating		Other Public Company Directorships:   •   Wesco International (since 2019)   •   Titan International, Inc. (since 2021)

Now retired, Ms. Thompson served as Executive Vice President of The Goodyear Tire & Rubber Company (tire manufacturing) from December 2013 until her retirement in March 2019, and Chief Financial Officer of Goodyear from December 2013 until October 2018.

Our Board believes that Ms. Thompson will effectively serve our Board of Directors, our business, our team members and our shareholders based on her significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

James R. Verrier

		Director Since: 2016                                            Age: 59   Committees: Audit   Human Resources and Compensation		Other Public Company Directorships:   •   BorgWarner, Inc. (former) (2013-2018)

Now retired, Mr. Verrier served as a Board Advisor to BorgWarner, Inc. (powertrain solutions) from August 1, 2018 until his retirement on February 28, 2019. He previously served as Chief Executive Officer and director of BorgWarner, Inc. from January 2013 until July 31, 2018, and President of BorgWarner from March 2012 until July 31, 2018.

Our Board believes that Mr. Verrier will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Item 1 – Election of Directors

James L. Wainscott

		Director Since: 2009                                            Age: 65   Committees: Corporate Governance and Nominating (Chair and Lead Director)   Human Resources and Compensation		Other Public Company Directorships:   •   CSX Corporation (since 2020)

Now retired, Mr. Wainscott was Chairman of the Board of AK Steel Holding Corporation (steel producer) from January 2006 to May 2016; and President, Chief Executive Officer and a Director of AK Steel Holding Corporation from October 2003 to January 2016.

Our Board believes that Mr. Wainscott will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

Thomas L. Williams

		Director Since: 2015                                            Age: 63   Committees: None		Other Public Company Directorships:   •   The Goodyear Tire & Rubber Company (since 2019)   •   Chart Industries, Inc. (former) (2008-2019)

Mr. Williams has been our Chairman of the Board since January 2016, and our Chief Executive Officer since February 2015. He was our Executive Vice President from August 2008 to February 2015 and our Operating Officer from November 2006 to February 2015.

Our Board believes that Mr. Williams will effectively serve our Board of Directors, our business, our team members and our shareholders based on his significant and diverse experiences, skills, qualifications and viewpoints from, among other things:

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Item 1 – Election of Directors

Director Independence

Our Corporate Governance Guidelines require at least a majority of our Directors to be “independent” as defined in the listing standards established by the New York Stock Exchange. Our Board of Directors has also adopted standards for Director independence, which are set forth in our Independence Standards for Directors.

Of the twelve current members of our Board of Directors, ten are independent based on our Board of Directors’ consideration of the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. In addition, each of the Audit Committee, the Corporate Governance and Nominating Committee and the Human Resources and Compensation Committee of our Board of Directors is composed entirely of independent Directors. As a result, independent Directors directly oversee critical matters such as our executive compensation program, our Corporate Governance Guidelines, policies and practices, the integrity of our financial statements and our internal controls over financial reporting.

Our Board of Directors has affirmatively determined that the following ten individuals who currently serve as Directors are independent: Jillian C. Evanko, Lance M. Fritz, Linda A. Harty, William F. Lacey, Kevin A. Lobo, Joseph Scaminace, Åke Svensson, Laura K. Thompson, James R. Verrier and James L. Wainscott.

Among other things, our Board of Directors does not consider a Director to be independent unless it affirmatively determines that the Director has no material relationship with us either directly or as a partner, shareholder or officer of an organization that has a relationship with us. Our Corporate Governance and Nominating Committee and our Board of Directors annually reviews and determines which of its members are independent based on the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. During such review, our Corporate Governance and Nominating Committee and our Board of Directors broadly consider all facts and circumstances which they deem relevant, including any commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships between us and any of our Directors.

In fiscal year 2022, after considering the facts and circumstances applicable to each Director, our Board of Directors determined that Ms. Evanko and Messrs. Fritz, Lacey and Lobo served as executive officers of companies that have existing customer and/or supplier relationships with us. Our Corporate Governance and Nominating Committee and our Board of Directors further analyzed these relationships and found that each of Ms. Evanko and Messrs. Fritz, Lacey and Lobo does not receive any direct or indirect personal benefits as a result of these relationships, that the relationships were on ordinary course, competitive terms, and that the amounts paid to or by us under such relationships fell significantly below the threshold for independence provided in the applicable independence standards of the New York Stock Exchange and our Independence Standards for Directors. Our Board of Directors thus affirmatively concluded that each of Ms. Evanko and Messrs. Fritz, Lacey and Lobo is independent.

Annual Elections; Majority Voting; No Cumulative Voting

Our Amended and Restated Regulations provide for the annual election of our entire Board of Directors. Accordingly, each Director elected at this Annual Meeting of Shareholders will hold office until the next Annual Meeting of Shareholders and until his or her successor is elected.

Our Amended Articles of Incorporation provide for a majority voting standard in the annual election of our Directors. Accordingly, at each Annual Meeting of Shareholders, each candidate for Director is elected only if the votes “for” the candidate exceed the votes “against” the candidate, unless the number of candidates exceeds the number of Directors to be elected. If the number of candidates exceeds the number of Directors to be elected, then in that election the candidates receiving the greatest number of votes shall be elected. Abstentions and broker non-votes shall not be counted as votes “for” or “against” a candidate, and shareholders are not able to cumulate votes in the election of Directors.

New Elections and Departures

We had no new Director elections in fiscal year 2022. On October 27, 2021 Candy M. Obourn retired from our Board of Directors.

CORPORATE GOVERNANCE

Board and Committee Structure

Current Leadership Structure

Our Board of Directors currently employs a “dual leadership” structure. We have a Lead Director who is also the Chair of the Corporate Governance and Nominating Committee, and a Chairman of the Board, who is our Chief Executive Officer.

		Thomas L. Williams   Chairman of the Board since 2016

		James L. Wainscott   Lead Independent Director since 2016

Our Lead Director is elected solely by the independent members of our Board of Directors and holds a position separate and independent from our Chairman of the Board. Our Corporate Governance Guidelines provide that the Chair of the Corporate Governance and Nominating Committee will serve as our Lead Director and that the Chair of the Corporate Governance and Nominating Committee is elected every five years.

The specific authorities, duties and responsibilities of our Lead Director are described in our Corporate Governance Guidelines. Among other things, our Lead Director presides over and supervises the conduct of all meetings of our independent Directors, calls meetings of our independent Directors, and prepares and approves all agendas and schedules for meetings of our Board.

Our Board believes that having a Lead Director who is elected by our independent Directors ensures that our Board will at all times have an independent Director in a leadership position. At the same time, our Board of Directors believes that it is important to maintain flexibility in its leadership structure to allow for a member of management to serve in a leadership position alongside the Lead Director if our Board of Directors determines that such a leadership structure best meets the needs of our Board, our business, our team members and our shareholders.

Our Board has determined that this leadership structure is currently more efficient and effective than a structure which employs a single, independent Chairman of the Board. Our Board of Directors views this structure as one that ensures both independence in leadership and a balance of knowledge, power and authority. For example, our leadership structure employs both a Chairman of the Board who is also our Chief Executive Officer and who possesses an intimate working knowledge of our day-to-day business, plans, strategies and initiatives, and a Lead Director who has a strong working relationship with our non-management, independent Directors. These two individuals combine their unique knowledge and perspectives to ensure that management and our independent Directors work together as effectively as possible. Among other things, our Chairman of the Board ensures that our Board addresses strategic issues that management considers critical, while our Lead Director ensures that our Board addresses strategic issues that our independent Directors consider critical.

Our Board recognizes, however, that no single leadership model may always be appropriate. Accordingly, our Board of Directors regularly reviews its leadership structure to ensure that it continues to represent the most efficient and effective structure for our Board of Directors, our business, our team members and our shareholders.

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Corporate Governance

 Board Committees; Committee Charters

Our Board has established and delegated certain authorities and responsibilities to three committees: the Human Resources and

Compensation Committee, the Corporate Governance and Nominating Committee, and the Audit Committee. Each Committee of our Board is governed by a written charter which is posted and available on the Corporate Governance page of our investor relations website at www.phstock.com. Shareholders may request copies of these charters, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling (216) 896-3000.

All members of each Committee are independent under the listing standards of the New York Stock Exchange as well as our Independence Standards for Directors. Each Committee regularly reports its activities to the full Board of Directors.

Each of our Committees works with members of our Human Resources, Internal Audit, Enterprise Compliance, Legal, and other departments to oversee and evaluate other risks relevant to each Committee.

  Human Resources and Compensation Committee

  KEY OVERSIGHT RESPONSIBILITIES

  Corporate Governance and Nominating Committee

  KEY OVERSIGHT RESPONSIBILITIES

Corporate Governance

 Audit Committee

The Audit Committee of our Board of Directors is our standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Each member of our Audit Committee is independent, as defined in our Independence Standards for Directors and in compliance with the independence standards applicable to audit committee members under the New York Stock Exchange listing standards and under the federal securities laws.

KEY OVERSIGHT RESPONSIBILITIES

Our Board of Directors has determined that each of Jillian C. Evanko, Linda A. Harty, William F. Lacey, Kevin A. Lobo and Laura K. Thompson, are audit committee financial experts (designated above as (ACFE)) as defined in the federal securities laws.

Meetings and Attendance; Executive Sessions

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Corporate Governance

Director Education and Orientation Program

Our director orientation program includes extensive meetings with management and other Directors and familiarizes new directors with The Win Strategy and Parker’s businesses, strategies, policies and corporate governance framework; assists them in developing company and industry knowledge; and educates them with respect to their fiduciary duties and legal responsibilities.

Our Board places high importance on the continuous development and education of our Board members. Directors have ongoing education and development opportunities through participation in Board and Committee meetings, and publications and activities offered by reputable third party organizations. Directors receive specialized presentations on an established cadence from senior-level leaders across our global businesses and functions. When appropriate, our Board also travels to put “feet on the ground” at Company locations to expand their knowledge and oversight of the Company. Most recently, the Board visited our facilities in Clyde, New York and Erie, Pennsylvania as part of our regularly scheduled Board and Committee meetings in April 2022.

Board and Committee Evaluations

Our Board recognizes that a rigorous and constructive evaluation process is an essential component of good corporate governance and Board effectiveness. Under the leadership of our Lead Director, the Corporate Governance & Nominating Committee oversees the annual evaluation process and periodically reviews the format of the process to help ensure it is eliciting actionable feedback with respect to the effectiveness of the Board, Board committees and each individual Director. The annual evaluation process consists of the following components:

Continuous Evaluation/ Annual Review   •   Through ongoing discussions at Board and Committee Meetings, our Board and Committees are continually seeking ways to strengthen their governance and oversight practices and effectiveness. •   Towards the end of our fiscal year, each director completes a questionnaire assessing the performance of the Board and its committees on which he or she serves. •   Our Lead Director and Chairman also conduct evaluations of each individual Director towards the end of our fiscal year.

Assessment   •   The questionnaire results are provided to the Board and to each of the Audit, Human Resources and Compensation and Corporate Governance and Nominating Committees, generally at our regularly scheduled Board and Committee meetings in August. •   The results of the individual Director evaluations are also shared with the Corporate Governance and Nominating Committee in August.

Discussion   •   The Board and each such committee discuss the results and identify areas for continuous improvement. The results of the committee sessions are communicated to the full Board.

Feedback   •   As a result of the Board’s 2022 self- assessment process, the Board identified opportunities to further strengthen the Board’s practices in areas relating to Board and committee-level oversight of ESG matters; meeting process efficiency; director education; and engagement with management.

Corporate Governance

Board Strategic and Risk Oversight

Management and our Board of Directors and its Committees are collectively engaged in identifying, overseeing, evaluating and managing the strategic priorities and material risks facing our business to ensure that our strategies and objectives align with the goals of The Win Strategy and work to minimize such risks. Our Board believes that its current level of independence, leadership structure and qualifications and diversity of its members facilitate the effective identification, oversight, evaluation and management of our business strategy and related risks.

Board’s Role in Strategic Oversight

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Corporate Governance

 Board’s Role in Risk Oversight

Management and our Board of Directors and its Committees view the risk management role of our Board of Directors and its Committees, and their relationship with management in the identification, oversight, evaluation and management of risk, as paramount to the short-term viability and long-term sustainability of our business.

BOARD OF DIRECTORS Our Board of Directors has the ultimate responsibility to monitor the risks facing our business. Among other things, our Board of Directors receives a report from our Audit Committee which reviews and discusses in detail, at least annually, the business and operational risks identified through our enterprise risk management and integrated risk management programs which are led by our Vice President of Audit and Compliance. As set forth in our Corporate Governance Guidelines, although it may delegate certain oversight responsibilities to its Committees, our full Board retains ultimate oversight responsibility over the Company’s strategies, initiatives, policies and risks related to ESG matters, including in the areas of corporate strategy, purpose and values, environmental sustainability (e.g., climate targets and actions), social responsibility, team member safety and engagement, diversity, equity and inclusion, cybersecurity, and external reporting. For more detail on the Board’s role in risk management, including cybersecurity and ESG oversight, see the spotlight sections on the next page.				OUTSIDE ADVISORS   Management and our Board of Directors and its Committees also engage outside advisors where appropriate to assist in the identification, oversight, evaluation and management of the risks facing our business. These outside advisors include our independent registered public accounting firm, external legal counsel and insurance providers, and the independent compensation consultant retained by the Human Resources and Compensation Committee.
LEAD DIRECTOR AND BOARD COMMITTEES The Committees of our Board of Directors are each responsible for the various areas of risk oversight as described in the “Board and Committee Structure” and “Board Strategic and Risk Oversight” sections of this Proxy Statement. Management and the Chair of the applicable Committee ensure that any significant risks are reported to and addressed with the entire Board of Directors. Our Lead Director and the other Committee Chairs ensure that risk management is a recurring agenda item for meetings of our Board and its Committees. Our Lead Director meets regularly with our other independent Directors without management to discuss current and potential risks and the means of mitigating those risks, and has the authority to direct and evaluate our risk management efforts.
MANAGEMENT Various members of management are responsible for our day-to-day risk management activities, including members of our Human Resources, Internal Audit and Compliance, Legal, Tax, Risk Management, Treasury, Finance, and Information Technology departments. We have an internal Cyber Security Committee comprised of our Vice President-Chief Digital and Information Officer and other senior members of our IT department. We also have an ESG Steering Committee which is comprised of senior management, including our Chief Operating Officer, General Counsel and Secretary and our EHS leader. Working together with our CEO, these management committees and individuals are charged with identifying, overseeing, evaluating and managing risks in their areas of responsibility and for ensuring that any significant risks are addressed with our Board or the appropriate Board Committees.

Corporate Governance

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Corporate Governance

The primary areas of ESG oversight responsibility of the Board and Committees are:

Corporate Governance

Communications with Directors

Our shareholders and other interested parties may communicate with our Board of Directors as a group, with the non-management Directors as a group, or with any individual Director by sending written communications to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary. Complaints regarding accounting, internal accounting controls or auditing matters will be forwarded directly to the Chair of the Audit Committee. All other communications will be provided to the individual Director(s) or group of Directors to whom they are addressed. Copies of all communications will be provided to all other Directors; provided, however, that any such communications that are considered to be improper for submission to the intended recipients will not be provided to the Directors. Examples of communications that would be considered improper for submission include customer complaints, solicitations, communications that do not relate, directly or indirectly, to our business and/or our subsidiaries, or communications that relate to improper or irrelevant topics.

Other Governance Matters

Review and Approval of Transactions with Related Persons

The Corporate Governance and Nominating Committee is responsible for considering questions of possible conflicts of interest of Directors and executive officers and for making recommendations to prevent, minimize or eliminate such conflicts of interest. Our Global Code of Business Conduct provides that our Directors, officers, and other team members and their spouses and other close family members must avoid interests or activities that create any actual or potential conflict of interest. These restrictions cover, among other things, interests or activities that result in receipt of improper personal benefits by any person as a result of his or her position as our Director, officer, or other team member or as a spouse or other close family member of any of our Directors, officers or other team members. Our Global Code of Business Conduct also requires our Directors, officers and other team members to promptly disclose any potential conflicts of interest to our Corporate Compliance Office. We also require that each of our executive officers and Directors complete a detailed annual questionnaire that requires, among other things, disclosure of any transactions with a related person meeting the minimum threshold for disclosure under the relevant U.S. Securities and Exchange Commission (“SEC”) rules. All responses to the annual questionnaires are reviewed and analyzed by our legal counsel and, as necessary or appropriate, presented to the Corporate Governance and Nominating Committee for analysis, consideration and, if appropriate, approval.

The Corporate Governance and Nominating Committee will consider the following in determining if any transaction with a related person or party should be approved, ratified or rejected:

During fiscal year 2022, we determined that no material related-party transactions exist which would require disclosure under the U.S. Securities and Exchange Commission Rules or otherwise require approval, ratification, or rejection of the Corporate Governance and Nominating Committee. This review included a review of the annual questionnaires and a detailed evaluation of the transactions reviewed and analyzed by our Board of Directors in determining Director independence as described in the “Director Independence” section of this Proxy Statement.

None of our Directors are related to each other and no arrangements or understandings exist pursuant to which any Director was selected as a Director or Director nominee.

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Corporate Governance

Proxy Access

Our Amended and Restated Regulations permit a shareholder, or a group of up to twenty shareholders, owning three percent or more of the Company’s outstanding shares of Common Stock continuously for at least three years to nominate and include in the Company’s annual meeting proxy materials a number of director nominees up to a greater of (x) two, or (y) twenty percent of the Board, provided that the shareholder(s) and nominee(s) satisfy the requirements specified in our Amended and Restated Regulations.

Stock Ownership Guidelines

Our stock ownership guidelines align the financial interests of our executive officers and Directors with those of our shareholders by encouraging the accumulation and retention of our common stock by our Directors and executive officers. Our Board of Directors has approved the following amended stock ownership guidelines for our Directors and executive officers:

The recommended time period for achieving compliance with the guidelines is five years from election or appointment to the position that is subject to the guidelines. The Human Resources and Compensation Committee reviews share ownership information with the Chief Executive Officer in August of each year to ensure compliance with the guidelines. As of June 30, 2022, all executive officers and Directors in their positions for at least five years were in compliance with the guidelines.

Stock Ownership Restrictions - Speculative Transactions/Hedging

We maintain an insider trading policy that applies to all of our Directors, officers, other team members and consultants. The insider trading policy prohibits those covered by the policy from engaging in speculative transactions with respect to Company securities that could lead to inadvertent violations of securities laws, such as short sales and acquiring exchange-traded options (including puts, calls and other derivatives). Furthermore, the insider trading policy prohibits certain arrangements that could result in sales or transfers of Company securities without the covered person’s consent at times at which he or she is not permitted to trade in Company securities, including holding Company securities in margin accounts or pledging them as collateral.

The insider trading policy also prohibits those covered by the policy from entering into hedging or monetization transactions (such as zero-cost collars and forward sale contracts) with respect to Company securities, because such transactions may provide ownership of Company securities without the full risks and rewards of such ownership.

Governance Documents

Our Global Code of Business Conduct, our Corporate Governance Guidelines, and our Independence Standards for Directors are posted and available on the Corporate Governance page of our investor relations website at www.phstock.com. Shareholders may request copies of these documents, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling (216) 896-3000. The information contained on or accessible through our website is not a part of this Proxy Statement.

DIRECTOR COMPENSATION

Compensation of Directors

Directors who are also our team members do not receive any additional compensation for their services as Directors. As a result, Thomas L. Williams and Lee C. Banks are not included in the table on page 33. During fiscal year 2022, non-employee Directors received an annual retainer, meeting fees (if applicable), and a restricted stock unit award. Our non-employee Directors are also eligible to participate in our Matching Gifts Program as described in the Compensation Discussion and Analysis section on page 60 of this Proxy Statement. The following table reflects the annual retainers of the non-employee Directors effective during fiscal year 2022:

In addition to the annual retainers described above, non-employee Directors are entitled to receive a $2,000 fee for attending each Board of Directors or Committee meeting that exceeds the number of regularly scheduled Board or Committee meetings in a fiscal year by more than two. On that basis, in fiscal year 2022 each director received two additional payments of $2,000.

During fiscal year 2022, Directors could elect to defer all or a portion of their annual retainers under our Deferred Compensation Plan for Directors.

Each Director who was serving as a Director on October 27, 2021 and who was not a current employee was granted 556 restricted stock units (“RSUs”) under our Amended 2016 Equity Plan (as defined below). Ms. Evanko’s and Mr. Fritz’s pro-rated award of 547 RSUs granted upon their appointments to the Board in January 2021 vested on January 27, 2022; Mr. Lacey’s pro-rated award of 365 RSUs granted upon his appointment to the Board in April 2021 vested on April 22, 2022. The terms of the RSUs provide that the RSUs will vest 100% on the later of (a) one year from the grant date; or (b) on the date of our next Annual Shareholders Meeting, also known as, in each case, the Vesting Date, except that if a Director ceases to be a Director for any reason prior to the next Annual Meeting of Shareholders that occurs after the grant date, a pro-rated portion of her or his RSUs will vest on the Vesting Date and the remaining RSUs will be forfeited. All RSUs earn dividend equivalent units paid as additional RSUs, which are subject to the terms and conditions of the original RSU award and are payable directly to each Director to whom they are issued.

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Director Compensation

Director Compensation for Fiscal Year 2022

The following table sets forth compensation information for our non-employee Directors for fiscal year 2022.

EXECUTIVE COMPENSATION

 

Item 2 – Advisory Vote to Approve Named Executive Officer Compensation

In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 and the related SEC rules, we are providing our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of the Named Executive Officers as disclosed in this Proxy Statement. We encourage our shareholders to carefully read this Proxy Statement in its entirety before deciding whether or not to vote for or against this Item 2.

At our 2017 Annual Meeting of Shareholders, shareholders voted in favor of annual frequency for the non-binding, advisory approval of the compensation of the Named Executive Officers. The next non-binding, advisory vote on the compensation of the Named Executive Officers is expected to take place at our 2023 Annual Meeting of Shareholders.

As described in detail throughout our Compensation Discussion and Analysis section of this Proxy Statement, our executive compensation program features, among other things, the following:

 

•

A “pay-for-performance” structure which helps ensure that a significant portion of the compensation for our executive officers is “at-risk,” is dependent on the short-term and long-term performance of our business and encourages and rewards performance that drives the key goals, operational priorities and metrics that we use to profitably grow our business and enhance shareholder value;

 

•

A structure which helps ensure that our executive compensation program aligns the interests of our executive officers and our shareholders, is not overly weighted towards annual cash incentive compensation and does not otherwise have the potential to threaten long-term shareholder value by promoting unnecessary or excessive risk-taking by our executive officers;

 

•

A structure consistent with our philosophy of targeting executive compensation at market median, which allows us to remain competitive with companies that compete with us for talented team members and shareholder investment;

 

•

Various executive compensation practices that contribute to good corporate governance, including a “clawback” policy, stock ownership guidelines for Directors and executive officers, hedging, pledging and other stock ownership restrictions, and an annual compensation risk review; and

 

•

Effective oversight and decision-making by a highly-independent Board of Directors and a Human Resources and Compensation Committee consisting entirely of independent Directors that retains an independent executive compensation consultant.

The vote on this Item 2 is non-binding and advisory in nature, which means that the vote is not binding on us, our Board of Directors or any of the Committees of our Board of Directors. However, our Board of Directors values the views of our shareholders and our Board of Directors and Human Resources and Compensation Committee will review the results of the vote and take them into account when addressing future compensation policies and decisions.

Our Board of Directors believes that our executive compensation program is reasonable and well-structured, satisfies its objectives and philosophies and is worthy of shareholder support. Accordingly, our Board of Directors requests that our shareholders vote to approve the following resolution:

RESOLVED, that the compensation paid to our Named Executive Officers, as disclosed pursuant to the rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative discussions, is approved on a non-binding, advisory basis.

 

		THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT ON A NON-BINDING, ADVISORY BASIS.

    

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Executive Compensation

Compensation Discussion & Analysis

Named Executive Officers

Our named executive officers for fiscal year 2022 are:

Executive Summary

Objectives and Philosophies of the Executive Compensation Program

The Win Strategy has been the foundation of our business and has represented the unified strategic vision of our team members worldwide since it was first introduced in 2001. The Win Strategy defines the key goals, operational priorities and metrics used to profitably grow our business. We are confident that our continuing focus on The Win Strategy maximizes long-term shareholder value by helping us realize our goal of top-quartile performance among our competitors and peers and steady appreciation of our stock price.

The Win Strategy also provides the means by which we measure and reward success. In fact, the objective of our executive compensation program is to encourage and reward performance that implements the strategies and advances the goals of The Win Strategy. The program is designed to:

Executive Compensation

2022 Executive Compensation Program

Categories and Elements of Executive Compensation

Our executive compensation program covers all compensation paid to our executive officers. In fiscal year 2022 our executive officers included, among others, our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers identified in the Summary Compensation Table for Fiscal Year 2022, which we refer to as the Named Executive Officers.

Our executive compensation program offers the categories and elements of compensation identified in the following table. Each element of compensation is more specifically defined and described in the “Principal Elements of Executive Compensation” section beginning on the page indicated in the table.