Exponent (EXPO) 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

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Exponent, Inc.

(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):

2021 NOTICE OF

ANNUAL STOCKHOLDERS MEETING

AND PROXY STATEMENT

Exponent, Inc.

149 Commonwealth Drive

Menlo Park, CA  94025

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 3, 2021

TO THE STOCKHOLDERS:

The Annual Meeting of Stockholders (the “Annual Meeting”) of Exponent, Inc., a Delaware corporation (the “Company”), will be held in a virtual format on Thursday, June 3, 2021, at 8:00 a.m. Pacific time, for the following purposes:

Stockholders owning the Company’s shares at the close of business on April 7, 2021 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting. As the normal business hours of our headquarters located at 149 Commonwealth Drive, Menlo Park, California 90425, have been affected due to the COVID-19 pandemic, we will make available, through electronic means, a list of stockholders of record as of the Record Date for inspection by stockholders for any purpose related to the meeting for ten days prior to the meeting. If you want to inspect this list, please send your request, along with proof of ownership, by email to investor-relations@exponent.com. The list will also be available to stockholders at www.meetingcenter.io/289121296 during the live webcast of the Annual Meeting.

There is no physical location for the Annual Meeting. All stockholders of record as of the Record Date are cordially invited to attend the virtual Annual Meeting. You may participate in the Annual Meeting by visiting www.meetingcenter.io/289121296.

FOR THE BOARD OF DIRECTORS

Richard L. Schlenker, Corporate Secretary

Menlo Park, California

April 21, 2021

TABLE OF CONTENTS

EXPONENT, INC.

PROXY STATEMENT

FOR THE

2021 ANNUAL MEETING OF STOCKHOLDERS

ABOUT THE ANNUAL MEETING

General

The enclosed proxy is solicited on behalf of the Board of Directors (the “Board of Directors” or the “Board”) of Exponent, Inc., a Delaware corporation (“we,” “our,” “us,” or the “Company”). The Company’s 2021 Annual Meeting of Stockholders (the “Annual Meeting”) will be held virtually, on Thursday, June 3, 2020 at 8:00 a.m. Pacific time.

As there will not be a physical location, stockholders will not be able to vote their shares in person at the Annual Meeting. The only way for stockholders to vote their shares is to submit a proxy in advance of the meeting using one of the methods described in the proxy materials for the Annual Meeting or to attend the meeting virtually per the instructions below.

We are committed to ensuring, to the extent possible, that stockholders will be afforded the ability to participate at the virtual meeting like they would at an in-person meeting. If you were a stockholder of record as of the close of business on April 7, 2021, (the “Record Date”), or hold a legal proxy for the meeting provided by your bank, broker or nominee, you are entitled to participate in the Annual Meeting, vote electronically and submit questions during the live webcast of the meeting by visiting www.meetingcenter.io/289121296 and entering your control number and the password, EXPO2021.

To be admitted to the Annual Meeting as a “stockholder” (with the option to vote your shares, examine the stockholder list and submit questions during the meeting), you must follow specific instructions, including, for stockholders of record, entering the control number you previously received and, for beneficial owners, obtaining a legal proxy and registering in advance for the virtual meeting.

If you are a beneficial owner and hold your shares in “street name,” through an intermediary, such as a bank, broker or other nominee, you must register in advance to participate in the Annual Meeting, vote electronically and submit questions during the live webcast of the meeting. To register in advance, you must obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. You must forward a copy of the legal proxy along with your email address to Computershare Trust Company, N.A. (“Computershare”). Requests for registration should be directed to Computershare by email at legalproxy@computershare.com no later than 5:00 p.m. Eastern Time, on Monday, May 31, 2021. You will receive a confirmation of your registration and instructions on how to attend the meeting by email after Computershare receives your registration materials.

Beneficial owners that are unable to register in advance may still attend the 2021 Annual Meeting by visiting www.meetingcenter.io/289121296 as a “guest” but will not have the option to vote shares electronically or submit questions during the live webcast of the meeting. Stockholders may also submit questions in advance of the Annual Meeting by emailing your question, along with proof of ownership, to investor-relations@exponent.com.  We will, subject to time constraints, answer all questions that are pertinent to the business of the Annual Meeting.

If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the login page for the Annual Meeting.

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What is the Purpose of the Annual Meeting?

At the Annual Meeting, stockholders will act upon matters outlined in the accompanying notice of the Annual Meeting and transact such other business that may properly come before the Annual Meeting.

Who is Entitled to Vote?

Only stockholders of record at the close of business on the Record Date, April 7, 2021, will receive notice of the Annual Meeting and are entitled to vote at the Annual Meeting. Each outstanding share entitles its holder to cast one vote on each matter to be voted upon. There are no cumulative voting rights.

If you hold your shares in “street name” and do not provide your bank, broker or other nominee holder with instructions on how to vote your shares, such bank, broker or other nominee holder may, in its discretion, either vote your shares or leave you shares without a vote (a “broker non-vote”) with respect to “routine” matters. Proposal No. 2 is a “routine” matter. As a result, your bank, broker or other nominee holder is permitted to exercise discretionary voting authority to vote your shares for that proposal. Your bank, broker or other nominee holder may not exercise discretionary voting authority on “non-routine” matters and as such may not vote your shares with respect to Proposals No. 1 and No. 3, resulting in a broker non-vote for each proposal, unless you provide your brokerage firm with voting instructions. We encourage you to provide instructions to your bank, broker or other nominee holder by voting your proxy. This ensures your shares will be voted at the Annual Meeting.

We have provided our stockholders access to our proxy materials over the internet in accordance with rules and regulations adopted by the United States Securities and Exchange Commission (“SEC”). Therefore, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed on or about April 21, 2021 to all stockholders entitled to vote at the meeting. The Notice will have instructions for stockholders on how to access Exponent’s proxy materials via a website or how to request that a printed copy of the proxy materials be mailed to them. The Notice will also have instructions on how to elect to receive all future proxy materials electronically or in printed form. If you choose to receive future proxy materials electronically, you will receive an email each year with instructions on how to access the proxy materials and proxy voting site.

The SEC has adopted rules that allow companies and intermediaries, such as brokers, to deliver a single copy of certain proxy materials to certain stockholders who share the same address, a practice referred to as “householding.” Some banks, brokers and other nominees will be householding Exponent’s proxy materials, unless contrary instructions are received from the affected stockholders. Once you have received notice from your broker or other nominee holder of your Exponent common stock that the broker or other nominee holder will be householding the proxy materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive separate proxy materials, or if you are receiving multiple copies of the proxy materials and wish to receive only one copy, please notify your broker or other nominee holder of your Exponent common stock. We will deliver promptly, on written or oral request, a separate copy of our proxy materials, including our annual report to stockholders, to each stockholder participating in householding. To request that proxy materials be householded or to request separate copies of proxy materials, please contact us at: Corporate Secretary, 149 Commonwealth Drive, Menlo Park, CA  94025 or by telephone at (650) 326-9400.  

How Do I Vote?

You may vote by telephone, vote via the internet, or vote electronically during the virtual meeting. To vote by telephone or via the internet, please follow the instructions provided in the Notice. If you are a stockholder of record and elected to receive printed proxy materials, you may submit your proxy by mail. To vote by mail, you must sign your proxy card and send it in the enclosed prepaid, addressed envelope. If you mark your voting instructions on the proxy card, your shares will be voted as you instruct.  If you return a signed card but do not provide voting instructions, your shares will be voted as recommended by the Board of Directors:

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What if I Change My Mind After I Vote?

You may revoke your proxy and change your vote at any time before the polls close at the virtual Annual Meeting. You may do so by voting by telephone or via the internet, by signing and delivering another proxy with a later date if you are a stockholder of record and elected to receive printed proxy materials or by voting during the virtual Annual Meeting. Your proxy with the latest date is counted.

What Does it Mean if I Receive More than One Notice?

It means you have multiple accounts with the transfer agent and/or with brokers. Please provide voting instructions for all Notices you receive.

What Constitutes a Quorum and What Vote is Required to Approve the Proposals?

The presence of the holders of record of a majority in voting interest of the shares of stock of the Company, as of the Record Date, entitled to be voted at the meeting and present in person or by proxy at the meeting constitutes a quorum at the Annual Meeting.  

Shares that are voted “For” or “Against” proposals are treated as being present at the Annual Meeting for purposes of establishing a quorum and are deemed to be “votes cast” at the Annual Meeting with respect to the proposals. Abstentions and broker non-votes will also be included for purposes of determining whether a quorum of shares is present at the Annual Meeting.

Proposal No. 1 – Election of Directors requires that each director nominee receives a majority of votes cast "For" his or her election. Abstentions and broker non-votes are not counted as votes cast for or against a director nominee and as such will have no impact on Proposal No. 1 – Election of Directors.

Proposal No. 2 – Ratification of Appointment of Independent Registered Public Accounting Firm requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote thereon for approval.  Abstentions will have the same effect as a vote against this proposal.  Proposal No. 2 - Ratification of Appointment of Independent Registered Public Accounting Firm is considered to be a "routine" matter and, as such, the Company does not expect any broker non-votes on this proposal.

Proposal No. 3 – Advisory Vote on Named Executive Officer Compensation for Fiscal 2020 requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote thereon for approval.  Abstentions will have the same effect as a vote against this proposal. Proposal No. 3—Advisory Vote on Named Executive Officer Compensation for Fiscal 2020 is considered to be a "non-routine" matter and as such, failure to provide voting instructions on this proposal to your bank, broker or other nominee holder of your shares will result in a broker non-vote.  Broker non-votes will have no impact on this proposal.

Proposal No. 2 – Ratification of Appointment of Independent Registered Public Accounting Firm and Proposal No. 3 – Advisory Vote on Named Executive Officer Compensation for Fiscal 2020 are advisory votes and as such, are not binding on the Company.

Signed, unmarked proxy cards are voted as recommended by the Board of Directors.

As of the Record Date, a total of 52,122,879 shares of the Company’s common stock, $.001 par value, were issued and outstanding. For information regarding security ownership by management and by the beneficial owners of more than 5% of the Company’s common stock, see “Security Ownership of Certain Beneficial Owners and Management.”  The closing price of the Company’s common stock on the Nasdaq Global Select Market on the Record Date was $97.94 per share.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Nominees

A Board of seven directors is to be elected at the Annual Meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company’s seven nominees named below. The term of office of each person elected as a director will continue until the next Annual Meeting or until a successor has been elected and qualified. The Board has determined that a majority of the members of the Board are independent directors within the meaning of applicable Nasdaq listing standards.

Required Vote

The Company’s Bylaws require that each director be elected by the majority of votes cast with respect to such director in uncontested elections. Each current director has provided an irrevocable, conditional resignation which is effective only if (i) he or she fails to receive the required majority vote at any annual meeting at which he or she faces re-election and (ii) the Board accepts such resignation. If an incumbent director fails to receive the required majority vote for re-election, the Nominating and Governance Committee will act on an expedited basis to determine whether to accept the director’s resignation and will submit such recommendation for prompt consideration by the Board.  

The election of directors pursuant to this Proposal is an uncontested election, and, therefore, the majority vote standard will apply. Abstentions and broker non-votes will not have any effect on the outcome of this Proposal. In tabulating the voting results for the election of directors, only “FOR” and “AGAINST” votes are counted.

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW:

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BOARD INDEPENDENCE

The Board has determined that the following current members of the Board are independent directors within the meaning of applicable Nasdaq listing standards: George H. Brown, Carol Lindstrom, Karen A. Richardson, John B. Shoven, Ph.D. and Debra L. Zumwalt.  John B. Shoven, Ph.D. was appointed Lead Independent Director in May 2018.  Under applicable Securities and Exchange Commission and Nasdaq rules, the existence of certain “related party” transactions above certain thresholds between a director and the Company are required to be disclosed and may preclude a finding by the Board that the director is independent. Except as discussed below regarding Ms. Zumwalt and transactions between Stanford University and the Company, no transactions required to be disclosed under SEC rules, and no other transactions, arrangements or relationships, existed or were considered by the Board in making its independence determinations. There is no family relationship between any of the directors and officers of the Company.

In making its determination that Ms. Zumwalt is an independent director within the meaning of applicable Nasdaq listing standards, the Board considered transactions between the Company and Stanford University (“Stanford”), of which Ms. Zumwalt is the Vice President and General Counsel. During the past three fiscal years and during the current fiscal year to date, the Company performed consulting services for Stanford. The total amount paid for these consulting services was $1,500,000, $433,000 and $126,000 for fiscal 2018, 2019 and 2020, respectively. Ms. Zumwalt did not have an interest in these transactions. Given the relatively small amounts involved as compared to the revenues of each of the Company and Stanford, the Board concluded that the transactions at issue and Ms. Zumwalt’s relationship with Stanford did not affect Ms. Zumwalt’s status as an independent director.

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BOARD MEETINGS, COMMITTEES, AND BOARD LEADERSHIP

The Board held four meetings in fiscal 2020. Each director attended at least 75% of applicable Board meetings and committee meetings during fiscal 2020. The following table describes the Board’s committees including their current composition. The members of each committee are all independent directors within the meaning of applicable Nasdaq listing standards.

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The responsibilities of the Audit Committee, the Human Resources Committee and the Nominating and Governance Committee are set forth in written charters for each committee, which are available on the Company’s website at: https://www.exponent.com/investors/corporate-governance/.

Board Leadership Structure and Risk Oversight

The Company currently separates the positions of Chief Executive Officer and Chairman of the Board. However, our Corporate Governance Guidelines permit the roles of the Chairman of the Board and the Chief Executive Officer to be filled by the same or different individuals. In the event that the Chairman of the Board is not an independent director, the independent members of the Board will designate a Lead Independent Director.  John B. Shoven, Ph.D. was appointed Lead Independent Director in May 2018. The Lead Independent Director shall:

The Board considers oversight of risk management to be a responsibility of the full Board. The Board’s role in risk oversight includes receiving regular reports from its committees and from members of senior management on areas of material risk to Exponent, including human resources, professional practice, client concentration, finance, facilities, information technology, cybersecurity, business continuity, environmental, and social issues. The Board has delegated oversight for matters involving certain specific areas of risk exposure to its committees. Each committee reports to the Board of Directors at regularly scheduled Board meetings, and more frequently if appropriate, with respect to the matters and risks for which the committee provides oversight. The Audit Committee oversees the integrity of the Company’s financial statements, risks related to the Company’s financial reporting process and internal control, and the independent registered public accounting firm’s qualifications, independence and performance. The Human Resources Committee is responsible primarily for the design and oversight of the Company’s executive compensation policies, plans and practices. A key objective of the Human Resources Committee is to ensure that the Company’s overall executive compensation program appropriately links pay to performance and aligns the interests of the Company’s executives with its stockholders, while seeking to encourage an appropriate level of risk-taking behavior consistent with the Company’s long-term strategy. The Human Resources Committee monitors the design and administration of the Company’s compensation programs to ensure that they include appropriate safeguards to avoid encouraging unnecessary or excessive risk taking by Company employees. The Human Resources Committee also reviews and monitors the Company’s practices for supporting diversity, equity, and inclusion in the workplace. The Nominating and Governance Committee is primarily responsible for identifying and recommending nominees for

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director and overseeing the annual board evaluation of its performance. Another important element of risk mitigation is ensuring a balanced, engaged and independent board.  

Nominating and Governance Committee

As described in the previous table, the Nominating and Governance Committee of the Board identifies individuals qualified to become Board members, recommends that the Board select the director nominees for the next annual meeting of stockholders, oversees the Board’s annual evaluation of its performance and reviews and recommends to the Board compensation for non-employee directors. The committee is also responsible for developing and recommending to the Board a set of corporate governance guidelines applicable to the Company and for periodically reviewing such guidelines. The members of the Nominating and Governance Committee are all independent directors within the meaning of applicable Nasdaq listing standards. The responsibilities of this committee are set forth in the Nominating and Governance Committee Charter, which is available on the Company’s website at: https://www.exponent.com/investors/corporate-governance/.

The information below describes the criteria and process that the Nominating and Governance Committee uses to evaluate candidates to the Board of Directors.

Criteria for Nomination to the Board of Directors.  The Nominating and Governance Committee considers the appropriate balance of experience, skills and characteristics required of the Board of Directors, and seeks to ensure that at least a majority of the directors are independent under the rules of the Nasdaq Global Select Market, that members of the Audit Committee meet the financial literacy requirements under the rules of the Nasdaq Global Select Market and at least one of them qualifies as an “audit committee financial expert” under the rules of the SEC. Nominees for director are recommended to the Board on the basis of the appropriate size, function and needs of the Board, taking into account that the Board as a whole should have competency in the following areas: (i) industry knowledge; (ii) accounting and finance; (iii) business judgment; (iv) management; (v) leadership; (vi) business strategy; and (vii) corporate governance.

Stockholders’ Proposals for Nominees.  The Nominating and Governance Committee will consider written proposals from stockholders for nominees for director. Any such nominations should be submitted to the Nominating and Governance Committee c/o the Secretary of the Company, 149 Commonwealth Drive, Menlo Park, CA  94025, and should include, in addition to the other information required under our Bylaws, the following information: (a) all information relating to such nominee that is required to be disclosed pursuant to Regulation 14A under the Securities Exchange Act of 1934 (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (b) the name(s) and address(es) of the stockholder(s) making the nomination and the number of shares of the Company’s common stock that are owned beneficially and of record by such stockholder(s); and (c) appropriate biographical information and a statement as to the qualifications of the nominee.  The nomination should be submitted in the time frame described in the Bylaws of the Company and under the caption, “Stockholder Proposals and Nominations for the 2021 Annual Meeting.”

Process for Identifying and Evaluating Nominees.  The Nominating and Governance Committee believes the Company is well served by its current directors, and in the ordinary course re-nominates incumbent directors who continue to be qualified for Board service, have performed well and are willing to continue as directors. If an incumbent director is not standing for re-election, or if a vacancy on the Board occurs between annual stockholder meetings, the Nominating and Governance Committee may seek out potential candidates for Board appointment who meet the criteria for selection as a nominee and have the specific qualities or skills being sought. Director candidates are selected based on input from members of the Board, senior management of the Company and, if the Nominating and Governance Committee deems appropriate, a third-party search firm. The Nominating and Governance Committee will evaluate each candidate’s qualifications and check relevant references. In addition, such candidates will be interviewed by at least one member of the Nominating and Governance Committee. Candidates meriting serious consideration will meet with the majority of the members of the Board. Based on this input, the Nominating and Governance Committee will evaluate which of the prospective candidates is qualified to serve as a director and whether the Committee should recommend to the Board that this candidate be appointed to fill a current vacancy on the Board, or presented for approval of the stockholders, as appropriate.

The Company expects that the evaluation process for a stockholder nominee would be similar to the process outlined above.

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Board Nominees for the 2021 Annual Meeting.  Dr. Corrigan, Dr. Johnston, Ms. Lindstrom, Ms. Richardson, Dr. Shoven, and Ms. Zumwalt are current directors standing for re-election. Mr. Brown has been a director of the Company since October of 2020 but has not previously been subject to stockholder election. Mr. Brown was initially identified by one of our non-management directors and recommended to the Nominating and Governance Committee as a candidate for director.

How to Contact the Board of Directors.  Interested parties wishing to contact the Board of Directors or the non-management directors or any individual director of the Company may do so by writing to them at the following address: Corporate Secretary, 149 Commonwealth Drive, Menlo Park, CA  94025. All letters received will be categorized by the Company’s Corporate Secretary, and then forwarded to the Board, the Company’s non-management directors or such individual director, as applicable.

The Company does not have a policy requiring the directors to attend the annual stockholders’ meeting. However, all of the Company’s directors in office at the time of our last annual stockholders’ meeting attended that meeting.

Code of Business Conduct and Corporate Governance

The Board of Directors has adopted a Code of Business Conduct and Ethics, which applies to all of the Company’s employees, officers and members of the Board of Directors. The Company has also adopted a Code of Ethics applicable to its senior financial officers, including its Chief Executive Officer, Executive Vice President and Chief Financial Officer, and Vice President, Corporate Controller and Treasurer. Copies of both documents are available on the Company’s website at: https://www.exponent.com/investors/corporate-governance/. The Company intends to disclose any waivers from these codes in a report on Form 8-K filed with the SEC.

Risk Management

The Company takes a comprehensive approach to risk management and seeks to employ risk management principles in all of its management processes. This comprehensive approach is reflected in the reporting processes pursuant to which management provides information to the Board to support the Board’s role in oversight, approval and decision-making. The Board maintains oversight responsibility for the management of the Company’s risks, and closely monitors the information it receives from management to provide oversight and guidance to our management team concerning the assessment and management of risk. The Board approves the Company’s high-level goals, strategies and policies to set the tone and direction for appropriate levels of risk taking within the business.

Our Board also reviews the Company’s enterprise risk management (“ERM”) program to ensure that an appropriate ERM process is in place. This review includes a discussion of the major risk exposures identified by senior management and steps implemented to monitor and mitigate such exposures on an ongoing basis. In addition to these reviews, our senior executives with responsibility for various business functions provide the Board and its committees with periodic updates regarding the Company’s strategies and objectives, and the risks inherent thereto. Members of management most knowledgeable of relevant issues attend Board meetings to provide additional insight into items being discussed, including risk exposures. In addition, our directors have access to Company management at all times and at all levels to discuss any matters of interest, including those related to risk.

Compensation of Directors

Members of our Board of Directors who are employees of the Company do not receive additional compensation for their services as directors of the Company. Non-employee members of the Board of Directors receive:

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Director Stock Ownership Guidelines

We believe that the financial interests of our directors should be aligned with those of our stockholders. On June 3, 2010 our Nominating and Governance Committee adopted stock ownership guidelines for all non-employee directors. The stock ownership guideline for non-employee directors is equal to three times the director’s annual cash retainer for board service. This amount was increased from two to three times in 2019 to more closely align the financial interests of our directors with those of our stockholders. Stock that counts towards satisfaction of our stock ownership guidelines includes shares owned outright by the non-employee director or his or her immediate family members residing in the same household or in trust and restricted stock units, whether or not vested. The value of shares owned outright is calculated as Exponent’s prior 365-day average closing common stock price. The value of restricted stock units is the grant date fair value. The calculation is done at the beginning of each year. Non-employee directors are required to achieve their stock ownership guideline within five years of the date the guidelines were adopted or the start of their service, whichever is later. If a person’s stock ownership guideline increases, that person has a five-year period to achieve the new guideline. Until the guideline is achieved, the person is required to retain at least 50% of net shares delivered through our Restricted Stock Unit Program or the exercise of stock options. Net shares refer to those that remain after shares are sold or netted to pay the exercise price of stock options and withholding taxes. As of April 7, 2021, all non-employee directors met the stock ownership guidelines or are expected to meet the applicable ownership guidelines within the specified time period.

DIRECTOR COMPENSATION IN FISCAL 2020

The following table sets forth information regarding outside director compensation during fiscal 2020:

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The following Report of the Audit Committee of the Board of Directors does not constitute soliciting material and should not be considered filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.

The Audit Committee of the Board of Directors is responsible for general oversight of the Company’s financial accounting and reporting process. The Committee’s primary responsibilities fall into three broad categories:

The Audit Committee’s responsibilities are presented in detail in the complete charter of the Committee, which is available on the Company’s website at: https://www.exponent.com/investors/corporate-governance/. The charter reflects standards set forth in the applicable SEC regulations and the Nasdaq Global Select Market rules. Audit Committee members are independent as defined by these regulations and rules. The Board of Directors has determined that Mr. Brown, Ms. Richardson and Dr. Shoven are “audit committee financial experts” as such term is defined by these rules and regulations.

The Audit Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention it considers necessary or appropriate to each of the matters assigned to it under the Committee’s charter.

In overseeing the preparation of the Company’s consolidated financial statements, the Audit Committee met with both management and the Company’s independent registered public accounting firm to review and discuss all quarterly and annual financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Audit Committee that all financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the Audit Committee discussed the statements with both management and the independent registered public accounting firm. The Audit Committee discussed with KPMG LLP the matters required to be discussed pursuant to applicable auditing standards adopted by the Public Company Accounting Oversight Board together with the guidelines established by the SEC and the Sarbanes-Oxley Act, including, among other items, matters related to the conduct of the audit of the consolidated financial statements by the independent registered public accounting firm and its audit of the effectiveness of internal control over financial reporting pursuant to Section 404.

The Audit Committee has received from KPMG LLP the written communications required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG’s communications with the Audit Committee concerning independence. The Audit Committee has discussed with KPMG matters relating to its independence, including a review of both audit and non-audit services, and considered the compatibility of non-audit services with KPMG’s independence.

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On the basis of these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Board approve the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2021, for filing with the SEC.

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RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP has been the independent registered public accounting firm that audits the financial statements of the Company since 1987. In accordance with standing policy, KPMG LLP periodically changes the personnel who work on the audit. In addition to performing the audit of the Company’s consolidated financial statements, and effectiveness of internal control over financial reporting, KPMG LLP provided various other services during fiscal 2020. The aggregate fees incurred during fiscal 2020 and fiscal 2019 for each of the following categories of services are set forth below:

Audit Fees.  Consists of fees incurred for professional services rendered for the audit of the Company’s consolidated financial statements and effectiveness of internal control over financial reporting, and review of the interim consolidated financial statements included in quarterly reports. Audit fees also include audit or other attest services required by statute or regulation (foreign or domestic) such as consents and reviews of SEC filings.

Audit-Related Fees.  Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees.” No audit related fees were incurred during fiscal years 2020 or 2019.

Tax Fees.  Consists of fees billed or expected to be billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance.

All Other Fees.  No other fees were incurred during fiscal years 2020 or 2019.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. During fiscal year 2020, 100% of audit and permissible non-audit services of the independent registered public accounting firm were pre-approved by the Audit Committee in accordance with this policy.

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PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has appointed KPMG LLP, an independent registered public accounting firm, to audit the financial statements of the Company for the year ending December 31, 2021. KPMG LLP has audited the Company’s financial statements since 1987. A representative of KPMG LLP is expected to be present at the Annual Meeting, will have the opportunity to make a statement if he or she so desires, and is expected to be available to respond to appropriate questions.

Required Vote

The ratification of the appointment of KPMG LLP will require the affirmative vote of a majority of shares of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal.

In the event that the stockholders do not approve the selection of KPMG LLP, the Audit Committee of the Board of Directors will reconsider the appointment of the independent registered public accounting firm.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2021.

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PROPOSAL NO. 3

ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION FOR FISCAL 2020

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") enables the Company’s stockholders to vote to approve, on an advisory or non-binding basis, the compensation of our named executive officers, as disclosed in this proxy statement in accordance with SEC rules. Although the vote is advisory and is not binding on us or on our Board of Directors, our Human Resources Committee will take into account the outcome of the vote when considering future executive compensation decisions and will evaluate whether any actions are necessary to address stockholder concerns.

We believe that our compensation philosophy has allowed us to attract, retain, and motivate qualified executive officers who have contributed to our success. For more information regarding the compensation of our named executive officers and our compensation philosophy, we encourage you to read the section of this proxy entitled “Executive Officer Compensation – Compensation Discussion and Analysis,” the compensation tables and the narrative discussion following the compensation tables for a more detailed discussion of our compensation policies and practices.  

We are asking for stockholder approval of the compensation of our named executive officers in accordance with SEC rules (including without limitation, Section 14A of the Securities Exchange Act of 1934, as amended). This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this proxy statement.

This non-binding advisory vote is currently scheduled to be conducted every year. The next advisory vote on named executive officer compensation is expected to take place at our 2022 annual meeting of stockholders (the “2022 Annual Meeting”).

Required Vote

The affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal is required for advisory approval of this proposal.

The Board of Directors unanimously recommends a vote FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement on an advisory basis pursuant to the compensation disclosure rules of the SEC.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates beneficial ownership of the Company’s common stock as of April 7, 2021. It includes stockholders known by the Company to beneficially own more than 5% of the Company’s common stock, the Company’s directors, the executive officers of the Company named in the Summary Compensation Table, and the directors and executive officers of the Company as a group. The address of each of the directors and officers is 149 Commonwealth Drive, Menlo Park, CA  94025. A total of 52,122,879 shares of the Company’s common stock were issued and outstanding as of April 7, 2021.

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Delinquent Section 16(a) Reports

The Company believes that during fiscal 2020, all filings with the SEC, by its executive officers, directors and 10% stockholders complied with requirements for reporting ownership or changes in ownership of Company common stock pursuant to Section 16(a) of the Securities Exchange Act of 1934, except for the following: A failure to file a Form 4, Statement of Changes in Beneficial Ownership, on a timely basis for Maureen Reitman with regards to the sale of 2,000 shares of Company stock on August 10, 2020. The form 5 reporting this sale was filed on February 12, 2021.

Compensation Committee Interlocks and Insider Participation

During fiscal 2020, Mr. Brown, Ms. Lindstrom, Ms. Richardson, Dr. Shoven, and Ms. Zumwalt served as members of the Human Resources Committee. No member of the Human Resources Committee is or was formerly an officer or an employee of the Company or any of its subsidiaries.

During fiscal 2020, none of the Company’s executive officers served as a member of the compensation committee (or other board committee performing similar functions) or as a director of an entity for which any member of the Human Resources Committee or the Board of Directors served as an executive officer.

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EXECUTIVE OFFICER COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis explains our compensation philosophy, objectives, policies and practices with respect to our Chief Executive Officer, our Executive Vice President and Chief Financial Officer and our other three most highly-compensated executive officers, as determined in accordance with applicable SEC rules and as set out in the “Summary Compensation Table.” We collectively refer to these five individuals as our “named executive officers.”

General Philosophy.  Our fundamental compensation philosophy is to align management’s incentives with the long-term interests of our stockholders, create a sense of partnership and provide a retention vehicle. We strive to compensate our named executive officers competitively with executives and consulting professionals throughout the industry and geographies in which we operate. Executive officer compensation is based on the performance of the Company, individual achievements and the competitive environment. Individual performance assessments are based on appraisals of financial performance, professional accomplishments and leadership that meet the level of excellence demanded. We use a total compensation approach for our named executive officers, in which each element of compensation is reviewed individually and considered collectively with the other elements of our compensation program to ensure that it is consistent with the objectives of both that particular element of compensation and our overall compensation program. Our compensation program consists of the following elements: base salary, bonus, equity compensation and other benefits.

Say of Pay.  During our Board and committee meetings on September 11, 2020, we considered the results of the “say on pay” proposal from our 2020 proxy, on which 96.8% of votes cast by our stockholders were in support of our executive compensation policies and decisions for fiscal 2019. Our approach for fiscal 2020 on compensation policies and decisions remained consistent with our 2019 approach and no substantial changes were made during fiscal 2020.

Board Process.  The responsibility for determining the compensation of our named executive officers has been delegated by the Board of Directors to the Human Resources Committee (which is hereinafter referred to as the “Committee”). As described in more detail below, the Committee’s responsibilities include establishing the general compensation policies for all employees and overseeing the specific compensation for officers of the Company. The Committee regularly reviews these compensation programs and makes adjustments as appropriate to accomplish its objectives. The Committee met five times during fiscal 2020.  

In the case of the Chief Executive Officer, the Committee reviews the Chief Executive Officer’s written assessment of her performance, evaluates the performance of the Chief Executive Officer relative to her objectives and determines the appropriate compensation. For the other executive officers, the Chief Executive Officer evaluates their performance and presents her evaluation and compensation recommendations to the Committee for review and approval. The Committee also approves all equity compensation grants. The Charter of the Committee is available on our website at: https://www.exponent.com/investors/corporate-governance/.

The Charter of the Committee provides for the Committee to retain, and terminate as necessary, a compensation consultant. During 2020, the Committee engaged Compensia, an executive compensation consulting firm, to provide recommendations regarding the framework for performance objectives, as discussed below, and a group of publicly-traded professional service companies with revenue, operating income and business focus comparable to Exponent that will be used to develop competitive compensation data for our Chief Executive Officer and our Executive Vice President and Chief Financial Officer. For fiscal 2020, the Committee reviewed competitive compensation data for the chief executive officer and chief financial officer of eight publicly-traded professional service companies recommended by Compensia with revenue, operating income, market capitalization, and business focus comparable to Exponent. Those companies included CRA International, FTI Consulting, Heidrick and Struggles, Huron Consulting Group, ICF International, Korn/Ferry International, Resources Connection, and The Hackett Group. There were no changes to this group of companies as compared to fiscal 2019 except for the removal of Navigant Consulting which was acquired. During 2020, the Committee also reviewed executive compensation survey data compiled by Radford, a compensation survey provider, for chief executive officers and chief financial officers of publicly-traded companies in Northern California with annual revenues in the $200 million to $999 million range. The Committee does not target compensation against a specific percentile or range of percentiles within any peer group because there are no comparable companies that offer the same technical capability and breadth of services as Exponent. We use the

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data for a general understanding of the marketplace. The competitive compensation data for base salary, total cash compensation and long-term incentives and the executive compensation survey data provided by Radford were reviewed by the Committee to ensure that the Chief Executive Officer and the Executive Vice President and Chief Financial Officer’s compensation are not outliers relative to the peer group reviewed.

Compensation and Risk Management

The Committee does not believe that our executive compensation program encourages excessive or unnecessary risk-taking. By dividing our executives’ compensation into three key elements, the Committee believes it has properly weighted the performance compensation eligible to be earned by our executives appropriately between short-term and long-term goals. Additionally, the annual bonus for all executive officers is capped at two times their target bonus and 40% of each executive officer’s annual bonus is settled with fully vested restricted stock units that are not delivered for four years. These provisions add protection against disproportionately large short-term incentives. The primary component of our equity compensation program is restricted stock units, which cliff vest four years from the date of grant. The delayed vesting encourages our executives’ sustained focus on the long-term performance of the Company and encourages retention. The Committee believes our executive compensation program promotes proper alignment of our executives’ interests with those of the Company’s stockholders.

Elements of Compensation Program

Base Salary.  We believe that competitive base salaries are necessary to attract and retain management talent critical to achieving our business objectives. We strive to provide base salaries commensurate with comparable executives at professional service organizations with similar revenue, operating income, market capitalization, business focus and location and with consulting professionals of similar background and experience working for both professional service organizations and in private practice. Base salaries are reviewed annually and adjusted to realign salaries with market levels after taking into account our performance, as well as the individual’s responsibilities, experience and performance. The level of total compensation relative to our other executive officers, senior scientific and engineering consultants that we hire and those that have left to compete with us are also considered when determining executive officer base salaries.

Effective April 3, 2021, the annual base salary for Dr. Corrigan, President and Chief Executive Officer, increased 7% from $725,000 to $775,000. Dr. Corrigan’s increased annual base salary reflected a level that the Committee concluded was appropriate based upon Dr. Corrigan’s performance and the competitive compensation data. Effective April 3, 2021, the annual base salary for Mr. Schlenker, Executive Vice President and Chief Financial Officer, increased 4% from $520,000 to $540,000. Mr. Schlenker’s increased annual base salary reflected a level that the Committee concluded was appropriate based upon Mr. Schlenker’s performance and the competitive compensation data. Effective April 3, 2021, the annual base salary for Dr. Reitman, Group Vice President, increased 5% from $500,000 to $525,000. Dr. Reitman’s increased annual base salary reflected a level that the Committee concluded was appropriate based upon Dr. Reitman’s performance during fiscal 2020. Effective April 3, 2021, the annual base salary for Dr. James, Group Vice President, increased 6% from $410,000 to $435,000. Dr. James’s increased annual base salary reflected a level that the Committee concluded was appropriate based upon Dr. James’s performance during fiscal 2020. For 2020, the Committee concluded that the annual base salary for Dr. Murray, Group Vice President, was competitive and would not be increased.

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Bonus.  Annual bonuses are designed to create an incentive and to reward named executive officers for their contributions to our performance by making a significant portion of their total compensation variable. Our bonus plan covers all employees, including named executive officers, and the bonus pool is equal to 33% of our pre-tax income before bonuses, stock-based compensation, realized gain/loss on foreign exchange and interest income. An additional amount of up to the amount of the Chief Executive Officer’s target bonus may be added to the bonus pool if the Chief Executive Officer’s targets for revenue and profit are exceeded, as discussed below. Our bonus pool has historically been 33% and the Committee determined that this amount was competitive for fiscal 2020. The total amount available in the bonus pool for fiscal 2020 was $51,126,000. Generally, 40% of each named executive officer’s annual bonus is settled with fully vested restricted stock unit awards, rather than cash, to provide a longer term incentive, under which each executive officer has the right to receive shares of our common stock four years from the date of grant. The remainder of each executive officer’s annual bonus is paid in cash.  

Where a named executive officer has responsibilities for both providing direct consulting services to clients and managing a business unit, his or her performance is generally weighted toward the direct consulting activities. For a named executive officer who has broader corporate responsibilities, such as our Executive Vice President and Chief Financial Officer, his or her performance is based on that officer’s overall contribution to the Company.

For fiscal 2020, the Chief Executive Officer’s performance was evaluated using a process developed with the help of Compensia, based on performance objectives in three categories: revenue, profitability, and leadership.

Performance Awards.  Our 2008 Equity Incentive Plan authorizes the grant of performance awards to our executive officers. Performance awards are payable only to the extent certain performance targets, based on objective business criteria specified by the Committee, are achieved in the relevant measurement period. Performance awards are payable in cash or restricted stock units, at the discretion of the Committee. At the beginning of each year, the Committee must determine the performance goals and the achievement necessary for the bonus payout. After the conclusion of the performance period, the Committee certifies (1) the extent to which each executive officer has achieved the applicable prior fiscal year’s performance targets, and (2) the appropriate amount, if any, to be paid with respect to such performance-based annual incentive award. Even if the performance targets are achieved, the Committee may reduce the amount of an award through “negative discretion” and thereby reduce the payment made under a performance award, but the Committee cannot increase the amount of such award.

On February 13, 2020, the Committee determined the performance award opportunity to be granted to Dr. Corrigan for fiscal 2020. In doing so, the Committee established the performance targets, the performance required to achieve payout under the award and maximum amounts payable under this award. The Committee set the target bonus level and maximum payout at amounts they believe are competitive. Dr. Corrigan’s target award was set at $241,667 (one-third of Dr. Corrigan’s base salary for 2020) with the maximum amount payable set at twice the target. Performance between the applicable targets would be paid on a straight-line basis. In establishing the target for Dr. Corrigan’s 2020 performance award, the Committee decided that 60% of the award, to the extent earned, would be payable in cash and 40% of the award would be payable in fully vested restricted stock units under which Dr. Corrigan has the right to receive shares of our common stock four years from the date of grant.  

Two performance targets were established. The revenue performance target was a 6.0% increase in revenues before reimbursements. This target is measured on a scale of 0 to 2 with 0 being equal to 4.0% revenue decline, 1 being equal to 6.0% revenue growth, and 2 being equal to 16.0% revenue growth. Performance between the targets is prorated on a straight-line basis. We did not meet this quantitative goal with actual revenues before reimbursements declining 3.3%. This resulted in a quantitative performance factor for this objective of 0.07 on a scale of 0 to 2.  

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The profit performance target was to meet the adjusted EBITDAS (EBITDAS is a non-GAAP financial measure defined as net income before income taxes, interest income, depreciation and amortization and stock-based compensation) target margin. The adjusted EBITDAS margin is the calculated margin (EBITDAS/revenues before reimbursements) excluding the realized gain/loss on foreign exchange. The EBITDAS target margin for fiscal 2020 was 32.25% increased or decreased by five basis points for each 1% of revenue before reimbursements growth above or below 6%. This is also measured on a scale of 0 to 2 with 0 being equal to 200 basis points below the EBITDAS target margin, 1 being equal to the EBITDAS target margin, and 2 being equal to 200 basis points above the EBITDAS target margin. We did not meet this quantitative goal and were below the EBITDAS target margin by 39 basis points. This resulted in a quantitative performance factor for this objective of 0.80 on a scale of 0 to 2.

On February 11, 2021, the Committee certified and determined the amounts payable to Dr. Corrigan with respect to the cash and equity components of her performance award for fiscal 2020. Both of the performance targets were weighted equally. This resulted in a composite performance factor of 0.435 on a scale of 0 to 2.  Accordingly, the formula amount payable for the performance award was $105,000 (target of $241,667 multiplied by the composite performance factor of 0.435).

Qualitative Bonuses.  The target for Dr. Corrigan’s qualitative bonus was set at $483,333 (two-thirds of Dr. Corrigan’s base salary for 2020) for fiscal 2020 with the maximum payout set at twice the target. The Committee set the target bonus level and maximum payout at amounts they believe are competitive. Performance was evaluated based on objectives in three categories: revenue, profitability and leadership. The performance objectives for revenue and profit are weighted 25% each and the performance objective for leadership is weighted 50%. The Committee may reduce the qualitative bonus from the target amount at their discretion.

With respect to the revenue objective, the determination was based on the judgment of the Committee, taking into consideration factors such as how well we accomplished strategic growth initiatives and added top talent. For the profit objective, the determination was based on the judgment of the Committee, taking into consideration factors such as how we were able to control expenses and manage headcount growth. The leadership objective was based on the judgment of the Committee taking into consideration factors such as management of enterprise risk and our overall strategic direction. In determining the appropriate qualitative bonus, the Committee considered Dr. Corrigan’s contributions to achieving each of the three objectives.

In making a qualitative assessment of the revenue objective the Committee determined that this objective was exceeded. Our revenue was substantially impacted by the COVID-19 pandemic, but exceeded expectations in light of the extent of macroeconomic disruption and business and travel restrictions to which our clients were subject. Business and travel restrictions associated with the pandemic impacted our performance in human participant studies, legal work, and laboratory work for non-essential businesses. Court closures caused clients in multiple industries to pause work for ongoing cases and to delay the hiring of experts for newly-filed cases. Despite the business and travel restrictions, we continued our business development efforts associated with our strategic growth initiatives and had a strong hiring year for talent. We realized strong growth in our proactive services and increased both the number and strength of our industrial client relationships. As the pandemic took hold late in the first quarter, we rapidly positioned ourselves to capture work related to the coronavirus. We were engaged by clients to provide regulatory support in the United States and Europe as they registered biocide products and disinfecting devices and developed diagnostic tests; we advised clients on occupational health and safety concerns including testing, contact tracing, and disinfection; we utilized wearable technology platforms for COVID-19 risk monitoring and mitigation, and we developed protocols for assessing vaccine safety.  

In making a qualitative assessment of the profit objective, the Committee determined that this objective was exceeded due to how expenses were managed, infrastructure was leveraged, and headcount was managed. We controlled expenses effectively in 2020 while making important investments in our corporate functions such as Information Technology and Business Development. Increased expenses associated with environmental health and safety measures were more than offset by large reductions in nonchargeable travel associated with business development and recruiting, which were curtailed due to the pandemic.

With respect to the leadership objective, the Committee recognized that this objective was exceeded due to the management of enterprise risk, the strategic direction provided, and the retention of key employees. Health and safety concerns associated with the COVID-19 pandemic were effectively managed and we successfully

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transitioned our operations to a remote working environment at the start of the pandemic. We provided critical employee support as our teams navigated the many challenges of working from home. We also made substantial progress in 2020 in our efforts to improve diversity, equity and inclusion at the firm.  

Based on the Committee’s qualitative evaluation, the composite performance factor was 1.85 on a scale of 0 to 2. Accordingly, the amount payable for the qualitative bonus was $895,000 (target of $483,333 multiplied by the composite performance factor of 1.85) for Dr. Corrigan. The Committee decided that 60% of the qualitative bonus will be paid in cash and 40% of the qualitative bonus will be settled with fully vested restricted stock units under which Dr. Corrigan has the right to receive shares of our common stock four years from the date of grant.

The bonuses for the other named executive officers were determined on a total compensation basis based on their relative contribution to our overall performance. Where a named executive officer has responsibilities for both providing direct consulting services to clients and managing a business unit, his or her performance is generally weighted toward the direct consulting activities. The size of our bonus pool was also considered when determining the annual bonuses for our other named executive officers.  

Equity Compensation.  Our equity compensation program is designed to align the named executive officers and stockholders’ interests, create a sense of partnership and long-term incentives, provide a mechanism for retention and provide a competitive total compensation package. We use a combination of restricted stock units and stock options to achieve these objectives.

Generally, 40% of each named executive officer’s annual bonus is settled with fully vested restricted stock unit awards. The percentage of each named executive officer’s annual bonus settled with vested restricted stock unit awards may be less than 40% when called for by the terms of an employment agreement or when other equity grants made were deemed adequate to align named executive officers and stockholders’ interests. Under these restricted stock unit awards, each executive officer has the right to receive shares of our common stock four years from the date of grant.  Each named executive officer who received a fully vested restricted stock unit award is also granted a matching number of unvested restricted stock unit awards. These unvested restricted stock unit awards cliff vest four years from the date of grant provided the holder has met certain employment conditions. In the case of retirement at 59 ½ years or older, all unvested restricted stock unit awards will continue to vest, provided that the named executive officer does all consulting work through the Company and does not become an employee for a past or present client (direct or indirect) or competitor of the Company.  

Our practice is to determine each named executive officer’s bonus and the dollar amount of vested and unvested restricted stock unit awards following the availability of financial results for the prior year. With the exception of significant promotions and new hires, we generally grant restricted stock unit awards once a year during the allocation of our bonus pool. For restricted stock unit awards our 2008 Equity Incentive Plan defines the fair market value of the restricted stock unit awards as the closing price of our stock on the day of grant.  

During the annual review process in February 2020, the Committee granted a stock option to purchase 24,000 shares of our common stock to Dr. Corrigan and a stock option to purchase 16,000 shares of our common stock to Mr. Schlenker. These stock option grants reflect levels that the Committee concluded were generally appropriate based upon past practices within the Company, each individual’s total stock ownership and the amount needed to remain competitive. For stock option awards the exercise price is equal to the closing price of our stock on the date of grant. Our option awards vest ratably over a four-year period beginning on the grant date, subject to continued employment.  All stock option awards continue to vest in the case of retirement at 59 ½ years or older, provided that the named executive officer does all consulting work through the Company and does not become an employee for a past or present client (direct or indirect) or competitor of the Company.

Unvested restricted stock unit awards and stock options are occasionally granted for select new hires and promotions. There were no new hire awards granted to any named executive officers.

Executive Stock Ownership Guidelines. We believe that the financial interests of our executive officers should be aligned with those of our stockholders. Our stock ownership guidelines are determined as a multiple of the named executive officer’s annual base salary. Individual guidelines are three times for the Chief Executive Officer, two times for the Executive Vice President and Chief Financial Officer and one time for the other named executive officers.  Stock that counts towards satisfaction of our stock ownership guidelines includes shares owned outright by the named

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executive officer or his or her immediate family members residing in the same household or in trust and restricted stock units, whether or not vested. The value of shares owned outright is the prior 365-day average closing price for the Company’s common stock. The value of restricted stock units is the grant date fair value. The calculation is done at the beginning of each year. Named executive officers are required to achieve their stock ownership guideline within five years of the date the guidelines were adopted. If a person’s stock ownership guideline increases, that person has a five-year period to achieve the new guideline. Until the guideline is achieved, the person is required to retain at least 50% of the net shares delivered through our Restricted Stock Unit Program or the exercise of stock options. Net shares refer to those that remain after shares are sold or netted to pay the exercise price of stock options and withholding taxes. As of April 7, 2021, all the named executive officers met the stock ownership guidelines or are expected to meet the applicable ownership guidelines within the specified time period.

Hedging and Pledging. Our insider trading policy prohibits directors, officers, and employees from selling short or otherwise engaging in hedging or offsetting transactions involving the Company’s securities, including the trading of those securities on margin. Our policies do not permit any director or officer, including our named executive officers, to pledge Exponent securities as collateral.

Clawback Policy. We have a “clawback” policy for the recovery of excessive incentive-based compensation. In the event that we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws, we will use reasonable efforts to recover from any current or former officer of the Company who was paid or granted incentive based compensation and whom the Board has determined has willfully committed an act of fraud, dishonesty or recklessness in the performance of his or her duties as an officer that contributed to the noncompliance that resulted in the Company’s obligation to prepare the accounting restatement, all excessive incentive-based compensation. Incentive-based compensation includes the amount of the culpable employee’s annual incentive awards paid under our cash incentive program, stock options and performance-based equity or equity-based awards (or any amount attributable to such awards) paid or granted to the culpable employee under our long-term incentive equity program, and any other incentive-based compensation paid or granted in respect of Company and/or individual performance to a culpable employee pursuant to an “incentive plan” as such term is defined in Item 402(a)(6)(iii) of Regulation S-K under the Exchange Act. The policy applies to financial statements filed in a rolling three-year, lookback period. This clawback policy is in addition to any policies or recovery rights that are required under applicable laws, including the Sarbanes Oxley Act and the Dodd Frank Act.

No Compensation Consultant Conflicts of Interest.  We are not aware of any conflict of interest that has been raised by the work performed in 2020 by Compensia. During 2020 the Human Resources Committee reviewed the six independence factors enumerated by the Securities and Exchange Commission and determined that Compensia was independent.

Nonqualified Deferred Compensation.  To attract and retain high performing executive officers and consultants we have a nonqualified deferred compensation plan under which we provide certain highly compensated employees, including the named executive officers, the opportunity to elect to defer the receipt of compensation. Participants in the plan may elect to defer up to 100% of their compensation including base salary and bonus. We also retain the discretion to make company contributions for any participant. For additional information, please refer to the Nonqualified Deferred Compensation table.

Other Benefits.  Executive officers participate in our other benefit plans on the same terms as other employees.  These plans include medical and dental insurance, life insurance, an employee stock purchase plan and company contributions to each employee’s defined contribution retirement account. We also provide paid vacation and other paid holidays to all eligible employees, including named executive officers.

Tax Deductibility of Pay

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally places a limit of $1,000,000 on the amount of annual compensation that we may deduct in any one year with respect to certain executive officers unless the compensation is qualifying performance-based compensation where certain requirements are met. The Tax Cuts and Jobs Act (the “Tax Legislation”) was enacted on December 22, 2017. Under the Tax Legislation, the exclusion for performance-based compensation will not be available with respect to taxable years beginning after December 31, 2017 unless the compensation is pursuant to a written binding contract which was in effect on November 2, 2017 and is not modified in any material respect on or after such date. Pursuant to the Tax Legislation, for the taxable year

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beginning after December 31, 2017, Section 162(m) of the Code was expanded to cover additional executive officers, including the chief financial officer, so that the compensation of the chief executive officer and chief financial officer (at any time during the fiscal year), and the three other most highly compensated executive officers (as of the end of any fiscal year) will be subject to Section 162(m) limitation under the Code. Any executive officer whose compensation is subject to Section 162(m) of the Code in taxable years beginning after December 31, 2016 will have compensation subject to Section 162(m) of the Code for all future years, including years after the executive terminates employment or dies.

Compensation Accounting Matters

The Committee also considers the accounting and cash flow implications of various forms of executive compensation. In our financial statements, we record salaries and bonuses as expenses in the amount paid, or to be paid, to the named executive officers. Accounting rules also require us to record an expense in our financial statements for equity awards, even though equity awards are not paid as cash to employees. The Committee believes, however, that the many advantages of equity compensation more than compensate for the non-cash accounting expense associated with these types of awards. We currently amortize compensation expense associated with equity awards over an award’s requisite service period and establish fair value of equity awards in accordance with applicable accounting standards. Based upon the structure of our employee stock purchase plan program we are not required to record compensation expenses for financial statement purposes in connection with employees’ rights to purchase our stock granted under this program.

Potential Payments upon Termination or Change-in-Control  

Our restricted stock unit award agreements state that in the event of a change in control of the Company, the successor shall assume or substitute equivalent awards on the same terms and conditions. If the award holder is involuntarily terminated within a two-year period beginning on the date of the change of control for any reason other than the award holder’s failure to substantially perform the duties of the award holder’s position, all awards are vested and settled on the date of termination. Assuming a change in control and involuntary termination of employment, the value of restricted stock unit awards that would have vested based on the closing price of our common stock on the last business day of fiscal 2020, January 1, 2021 of $90.03 for each named executive officer was as follows: Dr. Corrigan $2,539,000, Mr. Schlenker $2,128,000, Dr. Reitman $1,367,000, Dr. James $1,015,000, and Dr. Murray $1,888,000. We do not have any other contracts, agreements (including employment agreements), plans or arrangements, whether written or unwritten, providing for payments to a named executive officer at, following, or in connection with any termination of a named executive officer or a change in control or a change in a named executive officer’s responsibilities.

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REPORT OF THE HUMAN RESOURCES COMMITTEE OF THE BOARD OF DIRECTORS

The following report of the Human Resources Committee of the Board of Directors does not constitute soliciting material and should not be considered filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein.

The Human Resources Committee of the Board of Directors oversees the general compensation policies for all employees and the specific compensation plans for officers of the Company, including the Chief Executive Officer.  The Committee is composed of five independent non-employee directors. No executive officers of the Company are included on the Human Resources Committee.

The Committee has reviewed and discussed with management the “Compensation Discussion and Analysis”, and based on the review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Members of the Human Resources Committee

Debra L. Zumwalt, Chairperson

George H. Brown

Carol Lindstrom

Karen A. Richardson

John B. Shoven, Ph.D.

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SUMMARY COMPENSATION TABLE

The following table summarizes information regarding compensation earned by our named executive officers during fiscal 2020 and, as applicable, fiscal 2019 and 2018.

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GRANTS OF PLAN-BASED AWARDS IN FISCAL 2020

The following table sets forth information regarding grants of plan-based awards to our named executive officers during fiscal 2020:

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Restricted Stock Unit Awards.  Each of the named executive officers were awarded the number of vested and unvested restricted stock unit awards as shown in the table above. The number of fully vested restricted stock unit awards granted was determined by dividing the portion of each named executive officer’s 2019 bonus designated for settlement in fully vested restricted stock units by the closing price of our common stock on the day of the grant. An equal number of matching unvested restricted stock unit awards were also granted to each named executive officer. For financial statement reporting purposes the value of these awards is amortized over the shorter of the four-year vesting period or the period between the grant date and the date the award recipient turns 59 ½.  

Stock Options.  Certain of the named executive officers were awarded stock options as shown in the table above.  The exercise price of these stock options was equal to the closing price of our common stock on the date of grant.

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OUTSTANDING EQUITY AWARDS AT FISCAL 2020 YEAR-END

The following table sets forth information regarding each named executive officer’s outstanding equity awards as of January 1, 2021:

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OPTION EXERCISES AND STOCK VESTED IN FISCAL 2020

The following table sets forth information for each named executive officer regarding options exercised and restricted stock units vested during fiscal 2020:

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NONQUALIFIED DEFERRED COMPENSATION IN FISCAL 2020

The following table sets forth information regarding activity in our nonqualified deferred compensation plan for each named executive officer during fiscal 2020:

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CEO Pay Ratio

Our compensation and benefits philosophy and the overall structure of our compensation and benefit programs are broadly similar across the organization to encourage and reward all employees who contribute to our success. Under rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are required to calculate and disclose the total compensation paid to our median paid employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO.

Under the relevant rules, we are required to identify the median employee by use of a consistently applied compensation measure. We identified the median employee by looking at annual base pay, overtime pay, cash bonuses, and our company contributions to our defined contribution retirement plans. We did not perform adjustments to the compensation paid to part-time employees to calculate what they would have been paid on a full-time basis. We identified the median employee for our 2019 pay ratio disclosure using our world-wide employee population on January 3, 2020. We used the same median employee for 2020 pay ratio disclosure as there were no changes that would significantly impact this disclosure. For the pay ratio disclosure, we calculated the median employee’s total annual compensation in accordance with the requirements of the Summary Compensation Table. Our median employee compensation as calculated using Summary Compensation Table requirements was $145,857 for 2020. Our CEO’s compensation as reported in the Summary Compensation Table was $2,674,792. Therefore, our CEO to median employee pay ratio is 18:1. This information is being provided for compliance purposes. Neither the Human Resources Committee nor management of the Company used the pay ratio measure in making compensation decisions.

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EQUITY COMPENSATION PLAN INFORMATION IN FISCAL 2020

The following table sets forth certain information regarding securities authorized for issuance under the Company’s equity compensation plans during the fiscal year ended January 1, 2021. The equity compensation plans of the Company include the 2008 Equity Incentive Plan and the 2008 Employee Stock Purchase Plan.

The 2008 Equity Incentive Plan and the 2008 Employee Stock Purchase Plan were both approved by the Company’s stockholders.

The following table summarizes the Company’s equity compensation plans as of January 1, 2021: