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December 18, 2020

You are invited to the Annual Meeting of Shareholders of Plexus Corp., a Wisconsin corporation:

We call your attention to the proxy statement accompanying this notice, which contains important information about the matters to be acted upon at the meeting.

By Order of the Board of Directors,

 

Angelo M. Ninivaggi

Executive Vice President, Chief Administrative Officer,

General Counsel and Secretary

Plexus Corp. (“Plexus” or the “Company”) participates in the Electronic Manufacturing Services (“EMS”) industry. Plexus has a singular vision to help create the products that build a better world. In support of this vision, we remain disciplined and purposeful in our strategies and in our commitment to deliver shareholder value. Our team, of over 19,500 individuals, partners with our customers by providing product design and development, supply chain solutions, new product introduction, manufacturing services and aftermarket services. Plexus is a global leader that specializes in serving customers in industries with highly complex products and demanding regulatory environments. We deliver comprehensive end-to-end solutions in the Americas (“AMER”), Europe, Middle East, and Africa (“EMEA”) and Asia-Pacific (“APAC”) regions for our customers.

Over the past decade, we aligned to this strategic framework by deliberately adjusting our portfolio to further align with markets consisting of highly complex products and demanding regulatory environments. We have generated organic growth while delivering operating margin and earnings expansion over the long-term. Our prudent capital allocation strategy aligns our investments to support future growth while returning excess cash to shareholders.

In 2020, Plexus’ strategy, operations and teams were tested as the company navigated the unprecedented landscape associated with COVID-19. Our focus, execution, discipline and passion ensured our ability to lead through the global pandemic while prioritizing the well-being of our most precious asset - our people. Through our resilience and a winning strategy, we commit to continue to deliver excellence to our customers, growth opportunities for our employees and long-term value for our shareholders.

Plexus Corp. will hold its annual meeting of shareholders virtually on February 17, 2021 at 8 a.m. CST.

On or about December 21, 2020, we mailed to shareholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access our proxy materials, including our proxy statement and annual report, and how to vote via the internet. Shareholders will not receive printed copies of the proxy materials unless requested via the procedures described in the Notice. To assure timely delivery of printed copies of the proxy materials before the annual meeting, shareholders need to request a copy no later than January 27, 2021.

Shareholders of record at the close of business on December 11, 2020, are entitled to participate and vote at the virtual annual meeting. As of the Record Date, Plexus had 28,824,237 shares of common stock outstanding. If you are a shareholder of record as of the record date, you may vote either at the virtual annual meeting or in advance of the meeting by authorizing—by internet, telephone or mail—the persons named as proxies on the proxy card, Dean A. Foate, Todd P. Kelsey, Patrick J. Jermain and Angelo M. Ninivaggi, to vote your shares in accordance with your directions. We encourage you to vote as soon as possible, even if you are planning to attend the virtual annual meeting (by virtual presence online), so that the vote count will not be delayed.

If for any reason you desire to revoke your proxy, you may do so at any time before it is voted, either by written notice filed with the secretary, or acting secretary, of the meeting. Questions may be asked during the virtual meeting by submitting such questions in writing via the online platform.

For those investors whose shares are held by a broker or other nominee, you must complete and return the voting instruction form provided by your broker, bank or nominee to provide instruction on how to cast your vote. In the absence of your voting instructions, brokers or other nominees may or may not be able to vote your shares at their discretion depending upon the particular proposal. For example, brokers may not vote your shares at their discretion in the election of directors; therefore, you must vote your shares if you want them to be counted in the election of directors. In addition, your broker is not permitted to vote your shares at its discretion regarding matters related to executive compensation, including the advisory vote to approve named executive officer compensation. If a broker or other nominee holds your shares and you wish to change your proxy prior to the voting thereof, please contact the broker or other nominee.

Shareholders who own shares as part of Plexus’ 401(k) Retirement Plan (the “401(k) Plan”) will receive a separate means for voting the shares held in each account. Shares held by the 401(k) Plan for which participant designations are received will be voted in accordance with those designations. Those shares for which designations are not received will be voted proportionally based upon the shares for which voting directions have been received from participants in the 401(k) Plan.

The Secretary must receive a shareholder proposal no later than August 23, 2021, in order for the proposal to be considered for inclusion in our proxy materials for the 2022 annual meeting. The 2022 annual meeting of shareholders is tentatively scheduled for February 16, 2022. To bring a proposal or nomination before the 2022 annual meeting, you must comply with our bylaws, which require written notice to the Secretary between October 12, 2021, and November 6, 2021. The purpose of this requirement is to assure adequate notice of, and information regarding, any such matter as to which shareholder action may be sought. If we receive your notice after November 6, 2021, then your proposal or nomination would be untimely and it will not be presented to shareholders for action at the 2022 annual meeting of shareholders.

In addition, your proposal or nomination must comply with the procedural provisions of our bylaws. If you do not comply with these procedural provisions, your proposal or nomination can be excluded. Should the board nevertheless choose to present your proposal, the named proxies will be able to vote on the proposal using their best judgment.

To conduct the annual meeting, more than 50% of Plexus’ outstanding shares entitled to vote must be present at the virtual meeting or by duly authorized proxy. This is referred to as a “quorum.” Abstentions and shares that are the subject of broker non-votes will be counted for the purpose of determining whether a quorum exists. Shares represented at a meeting for any purpose are counted in the quorum for all matters to be considered at the meeting. Each outstanding share of common stock is entitled to one vote on each matter presented.

If you own shares as a registered holder and you do not vote, your shares will not be represented at the meeting and will not count toward the quorum requirement. If a quorum is obtained, then the shares that you have not voted will not affect whether a proposal is approved or rejected. If you are a shareholder whose shares are not registered in your name and you do not vote, then your bank, broker or other holder of record may still represent your shares at the meeting for purposes of obtaining a quorum.

Assuming a quorum is present, directors are elected by a plurality of the votes cast at the virtual meeting or by proxy by the holders of Plexus common stock entitled to vote in the election at the meeting. “Plurality” means that the individuals who receive the highest number of votes are elected as directors, up to the maximum number of directors to be chosen at the meeting. Any votes attempted to be cast “against” a candidate are not given legal effect and are not counted as votes cast in the election of directors. Therefore, any shares that are not voted, whether by withheld authority, broker non-vote or otherwise, have no effect in the election of directors except to the extent that the failure to vote for any individual results in another individual receiving a relatively larger number of votes.

Our bylaws provide that if any nominee for director does not receive, in an uncontested election, a majority of the votes cast for his or her election, the board will determine whether to accept the individual’s irrevocable, contingent resignation from the board (which must be submitted to, or on file with, the Company in order for that person to be nominated for board service).

Assuming a quorum is present, the results of the non-binding, advisory vote to approve the compensation of our named executive officers will also be determined by a majority of shares voting on such matter. In addition, ratification of PricewaterhouseCoopers LLP as our independent auditors for 2021 will be determined by a majority of the shares voting on such matter, assuming a quorum is present. Abstentions and broker non-votes will not affect these votes, except insofar as they reduce the number of shares that are voted.

Broadridge Financial Solutions, Inc. will use an automated system to tabulate the votes and its representative(s) will also serve as the election inspector(s).

The following table presents certain information as of the Record Date (December 11, 2020), regarding the beneficial ownership of Plexus common stock by each director or nominee for director, each named executive officer appearing in the “Summary Compensation Table” included in “Executive Compensation” herein, all directors and current named executive officers as a group, and each known 5%-or-greater beneficial owner of Plexus common stock. The specified individuals and entities have sole voting and sole dispositive powers as to all shares, except as otherwise indicated.

Plexus’ bylaws currently authorize up to 12 directors, as determined by the board. The Plexus board may elect directors to fill empty seats, including those created by an expansion, between meetings of shareholders. Each of the director nominees below was elected at the 2020 annual meeting except for Mr. Quadracci, who was first identified as a possible director candidate by a non-management director. After a thorough review, our Nominating & Corporate Governance Committee (“Nominating Committee”) recommended Mr. Quadracci to the board, and he was appointed on April 2, 2020.

In accordance with Plexus’ bylaws, the board has set the size of the board to be 10 directors immediately following the annual meeting of shareholders, with such directors to serve until their successors are duly elected and qualified. The individuals who are nominated as directors, and for whom proxies will be voted unless a shareholder specifies otherwise, are named below. If any of the nominees should decline or be unable to act as a director, which is unforeseen, the proxies will be voted with discretionary authority for a substitute nominee designated by the board of directors.

 

The composition of the board of directors is reviewed annually to ensure that an appropriate mix of skills, experiences and backgrounds is represented; the membership mix of the board may also be changed as necessary to meet business needs. In addition, any individual age 72 or above is not eligible for election or re-election to the board of directors, unless such candidate is also a full-time employee of Plexus at the time or the board of directors, by majority vote, waives the restriction for a particular individual prior to such person’s election or re-election. Your board nominees offer a diverse range of skills and experience in relevant areas, as set forth in the matrix, below. Since 2016, we have not had an ethnically or racially diverse member on our board of directors. The Nominating Committee intends to begin a search for an additional director in 2021 and is committed to prioritizing the inclusion of racially and ethnically diverse candidates in the pool from which director nominees are selected.

 

Mr. Cortinovis is a private equity investor in Lasco Foods, Inc., a food services industry manufacturer and distributor. He was previously a Partner of Bridley Capital Partners Limited, a private equity group, and prior thereto served as President–Europe of Emerson Electric Co., a diversified global technology company. He is also a director of Aegion Corporation, a global infrastructure protection and rehabilitation company, and serves as the chair of its Strategic Planning Committee and a member of its Compensation Committee. Mr. Cortinovis obtained a B.A. and a J.D. from St. Louis University.

Dr. Eisenhart retired as Executive Vice President and Chief People Officer at The Northwestern Mutual Life Insurance Company, a financial services and insurance provider, in 2019. Prior thereto, she served as Senior Vice President – Human Resources, Facilities and Philanthropy at Northwestern Mutual from 2013 until 2018, and as Senior Vice President – Human Resources since 2011. Dr. Eisenhart previously served as Senior Vice President – Human Resources at Pfizer Inc., a global biopharmaceutical company, and held various leadership positions at Rohm and Haas Company, a manufacturer of specialty chemicals. She earned a B.S. in Chemistry from the University of Illinois at Urbana-Champaign and a Ph.D. in Inorganic Chemistry from the University of Wisconsin-Madison. She also earned an M.A. and a Ph.D. in Human and Organizational Development from Fielding Graduate University.

Mr. Foate is not an independent director and therefore is not eligible for membership on a Board committee under Nasdaq rules or the committees’ charters.

Mr. Foate has served as Plexus’ Chairman of the Board since 2013. Mr. Foate retired as President and Chief Executive Officer of Plexus in 2016 after serving in such roles since 2002. He joined Plexus in 1984 and held various other executive roles, including prior service as its Chief Operating Officer. Mr. Foate is also a director of Regal Beloit Corporation, a manufacturer of electric motors, electrical motion controls, power generation and power transmission products, as well as a member of its Corporate Governance & Director Affairs Committee. Mr. Foate earned a B.S. in Electrical and Computer Engineering from the University of Wisconsin-Madison and a Master of Science in Engineering Management from the Milwaukee School of Engineering.

Mr. Jueckstock has served as an Executive Vice President of Tenneco Inc., a producer of automotive emission control and ride control products and systems, since 2018, when Tenneco acquired Federal-Mogul LLC, an automotive and industrial equipment supplier. Mr. Jueckstock has also served as President of Federal-Mogul Powertrain since 2018, after having served as its Chief Executive Officer since 2012. Prior to the acquisition of Federal-Mogul, he also served as its co-Chief Executive Officer and as a director since 2012, and as co-Chairman of the Board since 2015. Before joining Federal-Mogul, he was a member of the German Military. Mr. Jueckstock earned a degree in Engineering from the Military College at Zittau, Germany.

Mr. Kelly has served as Executive Vice President and Chief Financial Officer of NXP Semiconductors N.V., a global semiconductor company and a long-standing supplier in the industry, since 2017. Prior thereto, he served as Executive Vice President – Strategy and Mergers & Acquisitions since 2015, Executive Vice President and Chief Financial Officer since 2012 and Executive Vice President and General Manager of Operations prior thereto. He was a director of Graphic Packaging Holding Company, a provider of paper-based packaging solutions, as well as a member of its Audit Committee and Compensation and Benefits Committee, until 2018. Mr. Kelly earned a B.S. from the University of Manchester (U.K.) Institute of Science and Technology and is a fellow of the Chartered Institute of Management Accountants.

Mr. Kelsey is not an independent director and therefore is not eligible for membership on a Board committee under Nasdaq rules or the committees’ charters.

Mr. Kelsey has served as President and Chief Executive Officer of Plexus since 2016. He was previously Plexus’ Executive Vice President and Chief Operating Officer from 2013 until 2016, and its Executive Vice President – Global Customer Services prior thereto. Mr. Kelsey joined Plexus in 1994 as a Design Engineer in the Company’s Engineering Solutions Group, and has held various other positions with increasing responsibility since that time, including Senior Vice President – Global Customer Services and Senior Vice President – Engineering Solutions. He is also a director of Steelcase Inc., a global provider of workplace products, furnishings and services, as well as a member of its Audit Committee and Compensation Committee. Mr. Kelsey earned a B.S. and a M.S. in electrical engineering from the University of Wisconsin-Madison and an M.B.A. from the University of Wisconsin-Oshkosh.

As a newly elected director, Mr. Quadracci will be given committee assignment(s) in February 2021.

Mr. Quadracci has served as the Chairman, President and Chief Executive Officer of Quad/Graphics, Inc., a worldwide marketing solutions partner, since 2010. Mr. Quadracci joined Quad in 1991 and, prior to assuming his current role, served in various other positions with increasing responsibility including Senior Vice President of Sales & Administration and President and Chief Operating Officer. Mr. Quadracci received a B.A. in Philosophy from Skidmore College in 1991.

Ms. Rapp has served as Executive Vice President, Chief Financial Officer and Treasurer, of National Instruments Corp., a producer of automated test equipment and virtual instrumentation software, since 2017. Prior thereto, she served as the Senior Vice President of Corporate Development at NXP Semiconductors N.V., a global semiconductor company and a long-standing supplier in the industry, where she led the integration efforts for the NXP/Freescale Semiconductor, Ltd. merger, from 2015 to 2017. Prior to the merger, Ms. Rapp held several leadership positions at Freescale with increasing responsibility, including Vice President and Chief Information Officer, Director of Operations and Finance, Global Sales and Marketing, Director of Finance, Supply Chain, and Director of Finance, Continuous Development. Ms. Rapp holds an M.B.A from The University of Texas at Austin and a B.S. in Finance from Northern Illinois University.

Mr. Rooke retired as Chairman and Chief Executive Officer, as well as a director, of Lexmark International, Inc., a provider of document imaging and enterprise software solutions, in 2016. Mr. Rooke also previously served as President of Lexmark. Prior to becoming President and CEO of Lexmark in 2010, he held several leadership positions with increasing responsibility, including Executive Vice President and President, Imaging Solutions, Executive Vice President and President, Printing Solutions and Services, and Vice President and President, Business Printer. Mr. Rooke holds an M.B.A. from the University of Kentucky and a B.S. in Mechanical Engineering from the University of Michigan.

Mr. Schrock, the board’s Lead Director, is not currently a member of any of the Board’s committees.

Mr. Schrock, who has served as the Lead Director of Plexus’ board since 2013, has served as a Senior Advisor and Operating Consultant to Oak Hill Capital Partners, a private equity firm, since 2014. Mr. Schrock also serves as Chairman of the Board of Directors of Atkore International Group Inc., a manufacturer of electrical raceway products and mechanical products and solutions; he is also the chair of Atkore’s Executive Committee. In addition, Mr. Schrock is a director of MTS Systems Corporation, a global supplier of high-performance test systems and position sensors, as well as the chair of its Compensation and Leadership Development Committee and a member of its Governance and Nominating Committee. Mr. Schrock earned a B.S. from Bradley University and an M.B.A. from Northwestern University, Kellogg School of Management.

Unless otherwise noted, all directors have been employed in their principal occupation listed above for the past five years or more. Each of the attributes identified above, which together with the directors’ principal occupations and business experience, as well as the Company’s board member selection criteria, outlined in the next section, provide the reasons that each individual has been nominated to serve on the board.

We would like to give special thanks to two directors who have reached our mandatory retirement age, Mr. Ralf Böer and Mr. David Drury, each of whom will be retiring from the Board immediately following the annual meeting. Messrs. Drury and Böer have overseen the Company’s strategy through years of dramatic growth and success. Mr. Böer has served on Plexus’ board for 16 years, leveraging his background in law and international business to provide invaluable advice and guidance to the Company, most recently as Chair of the Company’s Nominating Committee. Mr. Drury has served as a director of the Company for 22 years, during which he has chaired the Audit and Compensation & Leadership Development Committees. Mr. Drury has provided instrumental counsel and leadership to management over the course of his tenure.

Plexus believes that it needs to attract and retain talented, focused and motivated leadership to develop and execute the Company’s long-term strategy and to deliver shareholder value. For Plexus, the concept of leadership is not limited to leadership within the Company; leadership also includes the individuals who serve on Plexus’ board of directors.

The Company believes it is important for its board to be comprised of individuals with diverse backgrounds, skills and experiences. All board members are expected to meet Plexus’ board member selection criteria, which are listed below:

We are committed to governance structures and practices that drive shareholder value and protect important shareholder rights, which are regularly reviewed and include the following:

Our independent directors have the opportunity to meet in executive session, without management present, as part of each regular board and committee meeting. Mr. Schrock, the board’s Lead Director, presides at board executive sessions. Plexus generally holds a board meeting coincident with the annual meeting of shareholders to minimize director travel obligations and facilitate their attendance at the shareholders’ meeting.

As a matter of good corporate governance, we believe that the board of directors should provide a strong voice in the governance of our company. Therefore, under our corporate governance policies and in accordance with Nasdaq Global Select Market rules, at least a majority of our directors must be “independent directors.”

When the board of directors makes its determinations regarding which directors are independent, it first considers and follows the Nasdaq Global Select Market rules. The board also reviews other transactions and relationships, if any, involving Plexus and its directors or their family members or related parties; see “Certain Transactions” herein for a discussion of our policy regarding such transactions. Plexus expects its directors to disclose any transaction, whether direct or indirect, such as through an immediate family member or an affiliated business entity, involving Plexus and the director; Plexus also surveys directors periodically to confirm this information. Plexus does not use any dollar amount to screen transactions that should be reported to the Company. The board reviews the information submitted by its directors for its separate determination of materiality and compliance with Nasdaq and other standards when it determines independence.

Based on the applicable standards and the board’s review and consideration, the board of directors has determined that Dr. Eisenhart and Ms. Rapp, as well as Messrs. Cortinovis, Jueckstock, Kelly, Quadracci, Rooke and Schrock, are each “independent” under applicable Nasdaq rules and guidelines. In reaching its determinations regarding the independence of Mr. Kelly and Ms. Rapp, the board considered that Mr. Kelly is an executive officer of NXP Semiconductors N.V., which is a supplier to Plexus, and that Ms. Rapp is an executive officer of National Instruments Corp., which is also a supplier to Plexus. It was determined that these relationships did not affect the independence of Mr. Kelly or Ms. Rapp. Messrs. Böer and Drury, who will be retiring immediately following the annual meeting, are also considered “independent.”

Mr. Foate, our Non-Executive Chairman and former Chief Executive Officer, and Mr. Kelsey, our current Chief Executive Officer, are not considered to be “independent” under applicable Nasdaq rules.

Mr. Foate has served as Chairman of the Board since 2013. Pursuant to a retirement and transition agreement (the “Transition Agreement”), which is described in “Directors’ Compensation” below, Mr. Foate began serving as Non-Executive Chairman (which is not an executive officer position) in fiscal year 2018.

Mr. Foate serves as the Chairman of the Board primarily due to his in-depth knowledge of the Company and EMS industry, keen understanding of the Company’s operations and strategies, and proven leadership of, as well as vision for, Plexus, all of which position him to provide strong and effective leadership of the board. Mr. Foate joined Plexus in 1984 and served as CEO from 2002 until his retirement in 2016. In addition to his experience and long service with Plexus, the board currently believes that Mr. Foate is in the best position as Chairman to lead board discussions regarding the Company’s business and strategy, and to help the board respond quickly and effectively to any challenges faced by the Company.

While currently the roles of Chairman and CEO are held by Mr. Foate and Mr. Kelsey, respectively, the board does not have a policy that requires the separation of these roles and believes the Company should adopt the board leadership structure that best serves its needs at any particular time. Pursuant to the Company’s Corporate Governance Guidelines, since Mr. Foate is not an independent director, the independent directors, meeting in executive session, elected a Lead Director from among the independent directors.

The Company believes that the designation of an independent Lead Director, whose duties are described below, provides essentially the same benefits as having an independent chairman in terms of oversight, access and an independent voice with significant input into corporate governance. Mr. Schrock currently serves as the board’s Lead Director.

All of the members of the Audit Committee are “independent” of Plexus under SEC and Nasdaq rules. The board has determined that Messrs. Kelly and Drury and Ms. Rapp are “audit committee financial experts” based on a review of each individual’s educational background and business experience. All members of the Audit Committee are “financially literate” and meet the other SEC and Nasdaq requirements for Audit Committee membership.

All of the members of the Committee are “independent” under SEC and Nasdaq rules. The Committee may, in its sole discretion, retain or obtain the advice of compensation consultants, legal counsel or other advisers. The Committee is directly responsible for the appointment, termination, compensation and oversight of the work of any compensation consultant, and considers the independence of any such consultant prior to retention.

All of the members of the Committee are “independent” under SEC and Nasdaq rules.

In addition to the board member selection criteria listed above, the Nominating Committee considers the diversity of backgrounds, skills and experiences among board members in identifying areas that could be augmented by new members. To help assure that directors have the time to devote to their duties, Plexus directors may not serve on the boards of more than three additional public companies. The Nominating Committee may utilize a director search firm to identify candidates, but, if so, it evaluates those individuals on its own; the Nominating Committee would also consider candidates suggested by outside directors, management and/or shareholders.

The Nominating Committee would consider proposed nominees to the board submitted to it by shareholders. If a qualified individual expresses a serious interest and there is a position available, the Nominating Committee would review that person’s background and experience to determine whether that individual may be an appropriate addition to the board, and, if appropriate, would meet with the individual. A decision would then be made whether to nominate that person to the board. The Nominating Committee’s policy is not to evaluate proposed nominees differently depending upon who has proposed the potential nominee.

If a shareholder wishes to propose someone as a director for the Nominating Committee’s consideration, the name of that nominee and related personal information should be forwarded to the Nominating Committee, in care of the Secretary, at least six months before the next annual meeting of shareholders to assure time for meaningful consideration by the Nominating Committee. Plexus has neither received nor rejected any candidates put forward by significant shareholders.

The Plexus board of directors conducts an annual self-evaluation, which focuses on the performance of each individual director, the board’s committees and the board as a whole, as well as the composition of each of the board’s committees. The annual self-evaluation process provides an opportunity for anonymous peer review and specific feedback, which is intended to strengthen board leadership. The Chairman of the Board is responsible for providing feedback to individual directors, while the Lead Director may also provide feedback and serve as a liaison between independent directors and the Chairman. We believe this process encourages actionable feedback, which provides context for decisions about board composition, committee member rotation and succession planning processes.

Any communications to the board of directors should be sent to Plexus’ Global Headquarters in care of Plexus’ Secretary, Angelo M. Ninivaggi. Any communication sent to the board in care of the Chief Executive Officer, the Secretary or any other corporate officer also is forwarded to the board. There is no screening process and any communication will be delivered directly to the director or directors to whom it is addressed.

Information related to our corporate governance practices, in addition to any new or proposed changes to procedures, are posted on our Corporate Governance page of our website at www.plexus.com under the link titled “Investors,” then “Corporate Governance” including:

The Nominating Committee of the board of directors recommends, subject to board approval, compensation paid to non-employee directors, including equity awards under Company plans. In determining the compensation paid to the non-employee directors, the Nominating Committee considers similar types of factors, including comparisons with the peer companies discussed below and Company performance that are considered by the Compensation and Leadership Development Committee when determining executive compensation. The Nominating Committee aims to set the compensation level of our directors and the Non-Executive Chair near the median of peer and market comparisons. Non-employee director compensation is reviewed on an annual basis. As part of the most recent review of the non-employee director compensation program, it was determined that no changes would be made to the amount or form of compensation for fiscal 2021.

In certain circumstances directors may be reimbursed for attending educational seminars or, in each individual’s capacity as a director, other meetings at Plexus’ behest. Directors do not receive board or committee meeting attendance fees.

For Mr. Foate’s service as Non-Executive Chairman, he currently receives an annual retainer of $240,000, which was determined based upon a review of market and peer group practices, and he is eligible to receive an annual equity grant at least equal to the grants made to the Company’s other non-employee directors. In accordance with the Transition Agreement, Mr. Foate is eligible to participate in the Company’s executive car and phone programs, and he and his dependents are also eligible to participate in the Company’s health plan until he reaches age 65, subject to his payment of the required premiums. Mr. Foate is otherwise compensated in accordance with Plexus’ policies for non-employee directors.

Plexus believes that it is important for directors to maintain an equity stake in Plexus to further align their interests with those of our shareholders. Therefore, directors must comply with stock ownership guidelines as determined by the board. The ownership guidelines currently require each director to own and maintain shares of common stock with a value equal to at least five times the director’s annual base cash retainer. The required ownership must be achieved within five years from the director’s initial election or appointment. Restricted stock (including RSUs) that has yet to vest does not count toward a director’s ownership for purposes of these guidelines. Nine of our eleven non-employee directors are currently in compliance with the ownership requirements of the guidelines, including Messrs. Böer and Drury, who will be retiring immediately following the annual meeting. Ms. Rapp has until 2023 and Mr. Quadracci has until 2025 to meet these requirements.

Stock ownership guidelines for executives are discussed in “Compensation Discussion and Analysis—Elements and Analysis of Direct Compensation—Equity Ownership Guidelines.”

For information regarding the Company’s anti-hedging and anti-pledging policy, which is applicable to directors as well as executive officers and other employees, see “Compensation Discussion and Analysis—Elements and Analysis of Director Compensation—Anti-Hedging and Anti-Pledging Policy.”

Directors participate in the 2016 Omnibus Incentive Plan (the “Incentive Plan”), which permits the grant of stock options, stock appreciation rights (“SARs”), restricted stock, which may be designated as restricted stock shares or RSUs, performance stock awards (which may be settled in cash or stock and designated as performance stock shares or performance stock units (“PSUs”)), other stock awards and cash incentive awards. The Incentive Plan provides for an annual cap on the amount of awards to individual non-employee directors. The use of equity awards is designed to align directors’ interests with the long-term ownership interests of our shareholders. In the second quarter of fiscal 2020, except for Mr. Quadracci, each non-employee director serving on the grant date received a grant of RSUs worth approximately $150,000. The number of RSUs granted was determined based on the average closing price of the Company’s stock during the 90 calendar day period ended December 1, 2019. The restrictions on the RSUs generally lapse on the first anniversary of the grant date.

Directors are eligible to defer their cash fees, as well as stock awards (excluding options), through the Non-Employee Directors Deferred Compensation Plan. Amounts in deferred cash accounts are credited with interest, compounded monthly, at the prime rate of interest, which is determined quarterly. Directors were previously eligible to defer their cash fees through Plexus’ supplemental executive retirement plan, which is described in “Compensation Discussion and Analysis” below.

It is management’s responsibility to manage the Company’s enterprise risks on a day-to-day basis. In furtherance of this responsibility, the Company has established a robust enterprise risk management (ERM) program to facilitate the identification, assessment, mitigation, monitoring and strategic integration of risks facing the Company. This framework combines the organizational structure described below with the establishment of risk management policies and controls to manage the most significant risks impacting the Company’s strategic objectives. As an essential element of this framework, management utilizes a Risk Oversight Council—a cross-functional team made up of seniorlevel leaders—that discusses, reviews and monitors the most significant enterprise risks. The Company also employs independent internal and external audit procedures to help validate key controls related to identified risks, the results of which are reported to the board regularly. In addition to ongoing monitoring of key risk areas, each of the functional teams completes an annual risk assessment designed to identify top enterprise risks to help management prioritize the risks that should be brought before the board.

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This framework establishes an effective risk oversight program that successfully integrates risk management practices throughout the organization, enables open communication between management and directors and ensures all directors are actively involved in the risk oversight function.

Plexus is committed to sustainability throughout our global business operations. Plexus’ Environmental, Social and Corporate Governance (“ESG”) program contains five pillars that reinforce our commitment to create a better world by being a responsible employer, a community partner, a global citizen, industry steward and a promoter of corporate governance. We remain focused on measuring the sustainability and societal impact our Company has on the world around us. As a member of the Responsible Business Alliance (“RBA”), we have taken an active role in improving not only our own practices, but influencing and holding others accountable throughout our supply chain to improve their focus on important principles related to ESG. We consider a variety of standards for responsible business practices, including, but not limited to, local and federal legal requirements in the jurisdictions where we operate, the International Organization for Standardization’s “Guidance for Social Responsibility” (ISO 26000) and standards established by the RBA.

Our board of directors, through its oversight of the Company’s risk management program, has primary responsibility for overseeing management’s efforts on the sustainability risks and business opportunities facing the Company.

executive officers. Plexus provides further detail regarding executive compensation in the tables and other information included in the “Executive Compensation” section of this proxy statement.

The Committee’s philosophy is to competitively compensate all employees, including executives, for their contributions to Plexus, to appropriately motivate employees to provide value to Plexus’ shareholders and to consider the ability of Plexus to fund any compensation decisions, plans or programs. Competitive compensation must balance both short-term and long-term considerations and take into account external forces, best practices, and the performance of Plexus and the employee. Compensation packages should also motivate executives to make decisions and pursue opportunities that are aligned with the interests of our shareholders, while not exposing the Company to excessive risk. Finally, the Committee considers Plexus’ financial condition, the conditions in Plexus’ industry and end markets, and the effects of those conditions on Plexus’ sales and profitability in making compensation decisions.

The Company continues to emphasize annual and long-term incentive opportunities as a portion of total compensation since they are performance-based, represent compensation that is at risk, promote the creation of shareholder value and are intended to align the interests of executive officers with those of our shareholders.

The Committee and the Company believe that shareholder value is maximized through revenue growth and generating a ROIC that exceeds the Company’s WACC. We refer to the amount of excess return when comparing these measures as economic return. The importance of achieving revenue growth and economic return goals has been emphasized by making a substantial component of each executive officer’s compensation dependent on the Company’s achievement of these goals, with executives maximizing their annual incentive compensation opportunity if the Company achieves its organic revenue growth and economic return goals.

Within our long term incentive plan we use economic return as a performance measure for PSUs. Relative TSR is also used as a performance measure for PSUs. The Committee believes it is important to balance absolute and relative measures in an effort to account for both internal and external influences on Company performance. The performance measures used by the Company’s annual and long-term incentive plans are described further within the “Elements and Analysis of Direct Compensation.”

Below are illustrations of the performance of our compensation program measures and their relationship to creating shareholder value. To drive value, both growth and economic return are critical.

 

Plexus uses the following compensation reward components, which work together to create competitive compensation arrangements for our executive officers. Greater detail is described in “Elements and Analysis of Direct Compensation.”

Plexus also offers other reward components to competitively compensate our employees:

Total direct compensation for executive officers at Plexus consists of three primary components—salary, annual cash incentive payments under the VICP and long-term equity-based awards. Each of these components is complementary to the others, addressing different aspects of direct compensation and seeking to motivate employees, including executive officers, in varying ways. The Committee reviews the total compensation package of each executive officer to determine whether it is reasonable.

The Committee uses a combination of peer company data and several published general industry and electronics industry surveys to provide insight into the competitiveness of each component of compensation offered to Plexus’ executive officers. This data is compiled and analyzed by Plexus human resources leaders, who then meet with the Committee’s compensation consultant to help the consultants understand Plexus’ business model, organizational structure and compensation philosophy.

The compensation consultants, Plexus human resources personnel, and our CEO discuss the analysis, rationale and methodology, and make recommendations to the Committee. Our CEO is excluded from CEO compensation discussions.

When assessing the competitiveness of compensation and making compensation determinations, the Committee’s process includes a review and analysis of various factors, including:

In performing these analyses, the Committee uses tally sheets, which incorporate these factors to provide a comprehensive view of Plexus’ total compensation for each executive and payout exposure under various performance scenarios.

When determining the competitive target compensation for each executive, the Committee uses comparable pay information as a point for reference. Through this form of benchmarking, the Committee does not aim for any particular numerical or percentage tests as compared to peer company data or surveys; however, it generally views the 50th percentile of market data as a reasonable comparison and uses its judgment following the review of multiple data points to arrive at individual pay determinations. In that consideration, the Committee discusses total compensation (including outstanding equity awards) for all executive officers, the level of experience and leadership each provides, and financial and personal performance results. The Committee seeks to properly position the total target direct compensation of the Company’s executive officers and to balance different types of compensation (including equity) in order to promote retention and strong Company performance. The Committee believes this approach results in a comprehensive and thoughtful compensation review process because it allows the Committee to use discretion when appropriate in responding to particular circumstances. The Committee intends to continue these practices in the future.

For compensation planning purposes, the Committee has constructed a peer group in order to compare the compensation of Plexus’ executive officers with that paid by other companies. Companies were chosen for the peer group using filtering criteria such as:

The Committee has established a group of peer companies for comparison purposes using the selection criteria discussed above. The Committee conducts reviews of the peer group and selection criteria on a periodic basis to ensure that both are appropriate.

During fiscal 2020, the Committee, with the assistance of Exequity, made adjustments to the peer group for fiscal 2021 compensation planning purposes. Using the selection criteria described above, TransDigm Group Incorporated and L3Harris Technologies (f/k/a Harris Corporation) were removed. ARRIS and Esterline Technologies Corporation were acquired in 2019 and also removed. Amkor Technology, Inc., CommScope Holding Company, Inc., Flex Ltd., Jabil Inc., Moog Inc., Regal Beloit Corporation, Triumph Group, Inc., and Waters Corporation were added to the peer group on account of each being more closely aligned with Plexus from a financial and industry perspective, as well as because each of those companies is more likely to compete with Plexus for talent.

The Committee believes that a majority of executive compensation should be at risk and that the CEO’s percentage at risk should be the highest. VICP targets for the named executive officers other than Mr. Kelsey ranged from 70% to 85% of base salary in fiscal 2020, with the opportunity to earn cash incentives beyond those levels if Plexus exceeded its targeted financial goals. In the case of Mr. Kelsey, the potential target compensation at risk as a percentage of base salary was 125% in fiscal 2020, reflecting his overall greater responsibility for the Company. In fiscal 2020, long-term incentives for executive officers were granted in the form of: (i) RSUs that vest based on continued service, which promotes a long-term ownership mentality; and (ii) PSUs, which represent compensation that is at risk since these awards will be forfeited if performance is below a threshold level.

Except in the case of promotions or other special circumstances, compensation adjustments and equity awards for executive officers are targeted for implementation in the second quarter of each fiscal year to align with the Company’s internal performance management cycle and changes to the compensation of its other non-executive employees. The Committee considers both individual and Company performance in making these determinations, and believes that this timing forges a strong link between performance and pay.

The resulting total targeted direct compensation mix used for fiscal 2020 for Mr. Kelsey and the average for the other named executive officers is illustrated in the charts below:

 

Prior to establishing the base salary level for the CEO and approving salary levels for other executive officers, the Committee takes into consideration various factors. These factors include:

The Committee uses this information and meets in executive session to discuss appropriate pay positioning and pay mix based on the data gathered. The data gathered in the determination process help the Committee to test for fairness, reasonableness and competitiveness. While the Committee takes into account the Company’s compensation philosophy and goals and follows a holistic approach to executive compensation packages, its final determination may incorporate the subjective judgment of its members, as well.

Executive officer base salary changes may include the following two components:

Base salary adjustments for 2020 were approved by the Committee in December 2019 for all executive officers. When considering compensation adjustments, the Company has placed a greater emphasis on annual and long-term incentive opportunities, as opposed to base salary, since they are performance-based, represent compensation that is at risk, promote the creation of shareholder value and are intended to further align the interests of executive officers with those of our shareholders. Our CEO’s base salary is higher than those of our other executive officers because of the more extensive and challenging duties and responsibilities associated with that position. In addition, the CEO’s total compensation is more heavily weighted toward performance-based compensation when compared to the total compensation of our other executive officers.

For 2020, Mr. Kelsey’s base salary was set at $1,000,000, which represented an increase of 3.6% from his previous salary. As a result, the base salary for Mr. Kelsey is positioned near the median of peer group and market comparisons.

Increases for our other named executive officers varied from 2.3% to 3.3%. Base salary increases for 2020 for these named executive officers represented a combination of competitive adjustments and merit increases. Variations between these named executive officers reflected competitive conditions and the Committee’s view of the named executive officers’ duties, responsibilities and performance. The Committee believed that base salaries for those named executive officers were appropriately aligned with peer group and market comparisons, and were awarded based on individual performance.

Presented below are the 2020 base salaries and percentage increases as compared to the prior year for our named executive officers:

The VICP provides annual cash incentives to approximately 3,700 participants, including all of our executive officers. The award opportunity levels for each participant are expressed as a percentage of base salary.

 

For executive officers, the VICP is a sub-plan of the Incentive Plan with the opportunity to earn above their targeted award opportunities based on the achievement of corporate financial goals. Higher levels of duties and responsibilities within Plexus lead to higher cash incentive opportunities under the VICP because the Committee believes that heightened responsibility leads to more influence on corporate performance. In addition, competitive factors drive relatively higher reward opportunities for those positions. For each executive officer, 80% of the targeted award is keyed to the corporate financial goals; the remaining 20% of the targeted award is keyed to the achievement of individual objectives.

Offering a greater percentage of compensation tied to performance measures is intended to more strongly link executive compensation with Company performance and shareholder returns. To stay competitive with market practice, the Committee believes that at-risk compensation should be in line with the median of our peers and survey data, including for newly assumed roles.

The table below lists the fiscal 2020 VICP award opportunities for the named executive officers, expressed as a percentage of base salary:

The VICP provides for payments relating to corporate financial goals both below and above the targeted awards by establishing specific threshold levels of corporate performance at which payments begin to be earned and maximum payout levels beyond which no further payment is earned. The payout for our executive officers at the maximum payout level is 200% of the targeted. The Committee believes that the opportunity to receive a payout above target should be based solely on achieving corporate financial goals. Therefore, to achieve the maximum payout of 200% of the targeted award, executive officers must achieve 90% payouts for each of the revenue and ROIC components of the VICP, with the individual objectives component comprising the balance at a maximum of 20%. Payments to participants are not permitted under the VICP unless the Company achieves net income for the plan year.

The VICP provides that extraordinary items or charges should be excluded from fiscal year results. In addition, the Committee has the authority to exclude non-recurring charges, when determining the achievement of the corporate financial goals. In 2020, COVID-19 had an impact on the Company’s financial results; however, the Committee made no adjustments to financial goals under the VICP.

Our financial and compensation models align with our business strategy. The specific corporate financial goals for fiscal 2020, each of which stood independently of the other with regard to award opportunities, were revenue and ROIC. The goals were chosen because they aligned performance-based compensation to the key financial metrics that the Company used internally to measure its ongoing performance and that it used in its financial plans. The fiscal 2020 targets for these goals were set as

part of our annual financial planning process and continue to align with our enduring financial goals. For each of the corporate financial goals, we also established specific “threshold” and “maximum” payout levels of achievement as part of that process.

For the purposes of the VICP, ROIC is defined as tax-effected annual operating income divided by the average invested capital over a five quarter period for the fiscal year and the prior fiscal year fourth quarter. Invested capital is defined as equity plus debt and operating lease liabilities, less cash and cash equivalents. Revenue is defined as the fiscal 2020 net recognized sales of the Company for financial statement purposes. The Committee has discretion to adjust ROIC to account for the effects of extraordinary items. No award is payable to any participant under the VICP unless we have net income for the fiscal year. In the event of results that are below the revenue and the ROIC threshold levels, the VICP may pay out only in respect to the portion based on individual objectives. When determining ROIC for VICP awards, extraordinary items or charges, and non-recurring charges, are disregarded, except as otherwise determined by the Committee in its discretion. Further discretion was not exercised by the Committee in fiscal 2020.

For fiscal 2020, in accordance with Plexus’ strategic plan, the Committee set performance levels for each metric with a focus on achieving our enduring financial goals using the philosophy below:

We believe that setting the maximum payout levels for revenue and ROIC consistent with our financial goals fully aligns employees with financial results that maximize value to our shareholders, without encouraging excessive risk-taking. Threshold levels for both metrics were set at the minimum levels of performance at which Plexus believes it begins generating value for our shareholders. Target levels for revenue and ROIC, which were set between the threshold and maximum payout levels, were intended to be challenging, but achievable, based on industry conditions and Plexus’ financial plan. Awards for performance between the threshold and target level, and between the target and maximum levels, are calculated by straight-line interpolation.

The following table sets forth the fiscal 2020 financial targets and potential VICP payout amounts (as a percent of targeted VICP cash incentive) for the named executive officers, at the threshold, target and maximum payout performance levels:

In fiscal 2020, revenue was $3,390 million and ROIC was 14.0%. Therefore, the Company’s performance was between the target and maximum payout levels for both revenue and ROIC. As a result, Plexus paid awards for corporate financial performance to executive officers and other employees based on revenue and ROIC performance; total payments to executives represented 139% versus the target of 80% for corporate financial performance.

The Committee determines and approves the individual objectives established for the CEO and the other executive officers. For fiscal 2020, common individual objectives were shared by all executive officers, including Mr. Kelsey and the other named executive officers. Attainment of the individual objectives represents 20% of the potential targeted VICP award; however, no such award may be earned based on individual objectives unless the Company achieves net income for the plan year. The Committee’s assessment of individual objectives is based on their likely impact on the achievement of the Company’s annual financial plan and other longer-term strategic priorities, their effect on shareholder value and their alignment with one another.

The fiscal 2020 shared individual objectives for all of our named executive officers concentrated on (a) reduction in transformation cost, which are the costs required to convert raw inventory into finished goods; (b) continued pursuit of the Company’s “zero defects” cultural journey, focused on quality improvement initiatives and goals; and (c) enterprise resource planning (ERP) system enhancements and process improvements. Mr. Kelsey provided the Committee with an assessment of the executive team’s performance on each shared individual objective and the Committee determined the ultimate award percentage level for each objective. Actual achievement of individual objectives for fiscal 2020 was based upon the Committee’s determination of the degree to which the objectives were completed by each member of the executive team.

In the second quarter of fiscal 2020, our top priorities were to make our workplaces the safest place for employees outside of their own home and to do our best to meet the production needs of our customers, including their demand for medical devices and other products directly combatting the effects of the pandemic. Our efforts to keep employees safe involved developing new practices, including personal protective equipment requirements, social distancing measures, decontamination, and contact tracing on a global scale, which we continue to monitor and improve. As a result of prioritizing these efforts, Plexus had success in mitigating the spread of COVID-19 at its sites and in meeting the needs of customers and communities. However, progress toward the transformation cost reduction objective was impacted by our need to incur costs to keep employees safe and to make other changes to our facilities to be responsive to customers. Progress toward the zero defects objective, which involved training to be conducted in person, was delayed by travel restrictions and health and safety guidelines established by the Centers for Disease Control, World Health Organization, and state and local governments. Because these impacts from COVID-19 were not within the control of our executive officers, the Committee excluded them from its determination of whether the shared individual objectives were achieved at a satisfactory level. As a result, all executive officers were awarded an 88% payout of the personal objectives portion of the VICP, or a 17.6% payout versus the target of 20% for individual objectives.

The following table sets forth the fiscal 2020 VICP total payout as a percentage of each named executive officer’s target award, capturing the fiscal 2020 results for the Company’s revenue and ROIC goals combined with the individual objectives payout.

Total compensation, consistent with practices in our industry, places a particular emphasis on equity-based compensation for executive officers. The shareholder-approved Incentive Plan allows, and its predecessor allowed, for various award types, including options, SARs, restricted stock awards (including RSUs), performance stock awards (including PSUs), other stock awards and cash incentive awards. Equity-based awards are intended to provide incentives to enhance corporate performance as well as to further align the interests of our executive officers with those of our shareholders. The reported values of the long-term incentive opportunities under equity plans can vary significantly from year to year as a percentage of total direct compensation because they are determined by valuing the equity-based awards on the same basis that we use for financial statement purposes; that value depends significantly on our stock price and its volatility at the time of the awards.

For fiscal 2020 grants, and in furtherance of its emphasis on at-risk performance-based compensation, the Committee’s annual equity grant allocation formula for named executive officers consisted of 50% PSUs and 50% RSUs. The Committee believes that this equity grant allocation formula promotes a strong pay-for-performance link and further enhances the alignment of the interests of our executives with those of our shareholders. The equity grant allocation formula also is intended to promote share ownership (along with our equity ownership guidelines) and motivate our executives to succeed in the long-term. The Committee intends to continue to emphasize the use of performance-based awards for executive officers in future years.

The Committee’s long-term incentive strategy allows for use of a portfolio approach when granting awards. Each element of the portfolio for fiscal 2020 was intended to address a different aspect of long-term incentive compensation, as set forth below:

Each year the Committee reviews market data, individual performance and the estimated value of the entire pool of equity awards prior to making grants to executive officers, including when making grants in connection with promotions or other increases in responsibilities. Pursuant to its portfolio approach, in fiscal 2020, the Committee distributed awards in the form of PSUs and RSUs to eligible participants, as discussed above. When making these determinations, PSUs that vest based on the relative TSR of Plexus common stock are valued using a Monte Carlo simulation model, while the values of PSUs that vest based on economic return performance and RSUs are determined based on the fair market value of Plexus common stock.

The Committee determines the grant for the CEO and approves grants for all other executive officers. The CEO provides the Committee with initial grant recommendations for each executive officer other than himself by balancing the need to provide competitive compensation with the desire to keep related compensation value and expense relatively stable from period to period. The Committee considers each executive officer’s duties, responsibilities and performance, as well as internal and external comparisons (for example, peer group comparisons and other third-party market surveys, as described above), when approving the grant value for each executive officer. Those in positions with more responsibility tend to receive larger grants to reflect their role in the Company and the market comparisons for their compensation. Also, as discussed above, for the CEO, the Committee uses the vested and unvested equity information, as well as the accumulated value analysis, to balance the level of existing awards with the desire to reward performance and to provide retention incentives.

The Committee continues its focus on increasing incentive award opportunities for our executive officers as a portion of total potential compensation in order to more strongly link executive compensation with Company performance and shareholder returns.

Grants of PSUs are made in the fiscal second quarter; however, the performance goals for the PSUs are set in the fiscal first quarter. Grants of RSUs are generally made once a year during the fiscal second quarter, but may also be made in connection with new hires, promotions, other increases in responsibilities or in special situations. The Committee anticipates continuing to follow this grant schedule and practice for future grants.

Based on the Committee’s long-term incentive strategy, as well as individual responsibility and performance considerations, and reflecting all of the grants discussed above, the Committee granted the following equity awards to Mr. Kelsey and the other named executive officers in fiscal 2020.

Vesting of 50% of the PSUs granted in fiscal 2020 is based on a three-point annual average of the Company’s absolute economic return performance during the performance period; vesting of the other 50% is based on the relative TSR of Plexus stock as compared to the companies in the Russell 3000 Index. Performance on these metrics will be determined following the conclusion of the relevant three year performance period.

In order to further align the Company’s financial model and business strategy to the payout of long-term incentives, the maximum payout on 50% of the PSUs is achieved when the three-point annual average economic return is at or above 5.0% over the three year performance period. If the maximum payout level is achieved, 200% of this portion of the PSUs will be earned. A target payout on this portion of the award will be achieved if the three-point annual average economic return is 2.5%; the Committee believes that this target is meaningfully difficult, but is achievable and appropriate for our industry. The Company believes it is appropriate for a portion of these awards to vest when the three-point annual average economic return exceeds 0.0% because any positive level of economic return generates shareholder value. If the Company does not achieve a positive three-point annual average economic return, this portion of the PSUs will not pay out. Below is the payout matrix for the portion of the PSUs that may be earned based on economic return performance (if performance is between the specified levels, the payout will be interpolated):

The TSR calculations will be based on the percentage change from the initial price to the final price during the performance period, which is three years from the date of grant, and will reflect the reinvestment of dividends, if any. The initial price is calculated using the average closing price of common stock over the 30 calendar day period ending on the trading day immediately preceding the first day of the three year performance period. The final price is the average closing price of common stock over the 30 calendar day period ending on the last day of the three year performance period. The TSR calculations will be adjusted to reflect stock splits, recapitalizations and other similar events.

The portion of the PSUs that may be earned based on relative TSR performance will vest at target if the TSR of Plexus stock is at the 50th percentile of companies in the Russell 3000 Index. A payout at maximum, which is 200% of the target award for this portion, may be achieved if the relative TSR of Plexus stock is at or above the 75th percentile of companies in the Russell 3000 Index. The Committee believes that a relative TSR at or above this level would be reflective of significant achievement during the performance period. In order to receive a payout at threshold, which is 50% of the target award for this portion, the relative TSR of Plexus stock must be at or above the 25th percentile of companies in the Russell 3000 Index. If the relative TSR of Plexus stock is below the 25th percentile, none of the PSUs will be earned and the awards will be forfeited.

The payout matrix for the portion of the PSUs granted in fiscal 2020 that may be earned based on relative TSR performance is presented in the table below (if performance is between the specified levels, the payout will be interpolated):

For information regarding the performance of PSUs granted in fiscal 2020 and prior fiscal years as of October 3, 2020, see the “Outstanding Equity Awards at Fiscal Year-End” table below.

Annual awards of RSUs generally vest on the third anniversary of the grant, subject to early vesting on a change in control.

The TSR of Plexus stock during the three year performance period for the fiscal 2017 PSUs that ended in fiscal 2020 was at the 62.1 percentile of companies in the Russell 3000 Index. As a result, and according to the matrix set forth above, the PSUs vested and paid out at approximately 148.4% of target after certification by the Committee.

The performance period with respect to the portion of the fiscal 2018 PSUs that vested based on a three-point annual average of the Company’s absolute economic return concluded at the end of fiscal 2020. Average economic return for the three year performance period was 5.13%. The three-year average used ROIC to determine economic return for the fiscal year 2020, a change from prior years as explained in “Fiscal 2020 Compensation Actions;” prior to such change ROCE governed the determination of economic return for fiscal years 2018 and 2019. As a result, and according to the matrix set forth above, this portion of the PSUs vested and paid out at 200% of target after certification by the Committee. The Committee plans to evaluate the performance of the portion of the fiscal 2018 PSUs that vests based on relative TSR at its February 2021 meeting.

The Company’s executive stock ownership guidelines are intended to increase the alignment between the interests of management and our shareholders. To accomplish these objectives, we require our CEO to own Plexus stock with a minimum market value equal to three times his annual base salary and our other executive officers, including those named in the “Summary Compensation Table,” to own Plexus stock with a minimum market value equal to their annual base salary. Stock options and unvested equity awards do not count toward the satisfaction of the guidelines. There is no specific time requirement to meet these guidelines. However, an executive officer is generally not permitted to sell Plexus shares that were acquired or awarded while an executive officer unless the applicable ownership requirement has been met; there are exceptions, including financing the exercise of stock options and any applicable taxes when the shares will be held, in connection with any applicable tax consequence related to the vesting of an equity award or with prior approval under special circumstances. All of our named executive officers, including Mr. Kelsey, have met the ownership amounts required by the guidelines and are in compliance with the procedural requirements of the guidelines.

Pursuant to the Plexus Corp. Executive Compensation Clawback Policy, in the event of a material restatement of the Company’s financial results as a result of significant non-compliance with financial reporting requirements, the Committee will review incentive compensation that was paid to the Company’s executive officers under the VICP (or any successor plan thereto) based solely on the achievement of specific corporate financial goals (“covered compensation”) during the period of the restatement. If any covered compensation would have been lower had the covered compensation been calculated based on the Company’s restated financial results, the Committee will, as and to the extent it deems appropriate, recoup any portion of covered compensation paid in excess of what would have been paid based on the restated financial results. The Committee may seek the recovery of covered compensation for up to three years preceding the date on which the Company is required to restate its financial results.

This policy applies in addition to any right of recoupment against the Company’s Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002. The policy does not apply in any situation where a restatement is not the result of significant non-compliance with financial reporting requirements, such as any restatement due to a change in applicable accounting rules, standards or interpretations, a change in segment designations or the discontinuance of an operation.

The Company’s Insider Trading Policy explicitly prohibits directors, officers and employees from engaging in transactions designed to hedge or offset a decrease in the price of the Company’s common stock, including, but not limited to, prepaid variable forward contracts, equity swaps, collars and exchange funds. Pledges and short sales of the Company’s securities are also prohibited under the Insider Trading Policy.

In addition to direct compensation, Plexus uses several other types of compensation, some of which are not subject to annual Committee action. These include benefits, retirement plans and employment or change in control agreements. These are intended to supplement the previously described compensation methodologies by focusing on long-term employee security and retention. Certain of these plans allow employees to acquire Plexus stock.

We generally provide health and welfare benefits to our executive officers on the same basis as other salaried employees in the United States, although some benefit programs, as discussed elsewhere, are specifically targeted to our executive officers’ specific circumstances. On January 1, 2020, the executive flexible perquisite benefit, valued up to $15,000 per calendar year, was eliminated; however there may be some benefit showing in the Summary Compensation Table due to the difference between the fiscal and calendar years. The flexible perquisite benefit was intended to be used for expenses such as personal financial planning, spouse travel costs in connection with business-related travel, club membership and/or tax and estate advice. The Committee also approved additional perquisites and other benefits for our CEO and the other executive officers in addition to those received by all U.S. salaried employees. The additional perquisites and other benefits for certain of our executive officers are: a company car and additional life and disability insurance due to the dollar limits of the Company’s disability insurance policies. As a result of local law and custom, different but comparable insurance programs and other benefits may apply to personnel who are located in countries outside of the United States, as well as to executive officers who may be temporarily assigned outside of the United States, if any.

In connection with Mr. Darroch’s movement between the United Kingdom and the United States, he also received during fiscal 2020, and is expected to receive in the future, certain relocation and related benefits, which are discussed in footnote 6 to the “Summary Compensation Table.”

The 401(k) Plan, which is available to substantially all U.S. employees, allows employees to defer a portion of their annual salaries into their personal accounts maintained under the 401(k) Plan. In addition, Plexus matches a portion of each employee’s contributions, up to a maximum of $11,400 per calendar year. Employees have a choice of investment alternatives, including a Plexus stock fund.

In response to Internal Revenue Code (the “Code”) limitations on compensation that may be attributed to tax qualified retirement plans (such as the 401(k) Plan), we have also developed a supplemental executive retirement plan. Plexus’ supplemental executive retirement plan (the “SERP”) is a deferred compensation plan that allows participants to defer taxes on current income. The SERP covers our executive officers and certain other executives, and provides a retirement savings alternative to

address their particular circumstances and promote a long-term commitment to Plexus until retirement. All U.S.-based executive officers participate in the SERP. Under the SERP, those executive officers may elect to defer compensation and Plexus may also make discretionary contributions. Additionally, Plexus has purchased Company-owned life insurance on the lives of certain executives to meet the economic commitments associated with this plan. The SERP allows the investment of deferred compensation amounts on behalf of the participants into individual accounts and, within these accounts, into one or more designated mutual funds or other investments. These investment choices do not include Plexus stock. Deferred amounts and any earnings that may be credited become payable upon termination, retirement from Plexus or in accordance with the executive’s individual deferral election.

Additionally, the Company may credit a participant’s account with a discretionary employer contribution. Any employer contributions to the SERP require approval of the Committee. The SERP provides a vehicle for the Company to restore the lost deferral and matching opportunity caused by tax regulation limitations on such deferrals and matched contributions for highly compensated individuals; the Committee believes these limitations make supplemental retirement plans common practice in general industry. The Committee also believes that further retirement compensation through the SERP is appropriate based on the market for executive compensation and its desire to provide an incentive for executives to remain with Plexus through retirement.

We do not generally have employment agreements with our executive officers other than our Chief Executive Officer. All executive officers, including Mr. Kelsey, have change in control agreements to help assure that these individuals will not be distracted by personal interests and will maintain their focus on shareholders in the case of a potential acquisition of Plexus, as well as to maintain their continuing loyalty.

Mr. Kelsey’s employment agreement and the change in control agreements for Mr. Kelsey and our other executive officers are described below in “Executive Compensation–Employment Agreements and Potential Payments Upon Termination or Change in Control.” Please refer to the discussions therein for a further explanation of those agreements.

The Committee considers the potential tax deductibility under the Code for executive compensation. However, at times and under certain circumstances, it believes that it is more important to provide appropriate incentives irrespective of tax consequences.

Section 280G of the Code imposes a 20% excise tax upon executive officers who receive “excess parachute payments” upon a change in control to the extent the payments received by them meet or exceed an amount approximating three times their average annual compensation. The excise tax applies to all payments over one times average annual compensation. Plexus would also lose its tax deduction for the “excess” payments. Excise tax gross-up provisions have been eliminated from all change in control agreements, and our agreements use a “best net” approach to minimize the possibility that an excise tax might be due or that a loss of the tax deduction might occur.

The Code also provides a surtax under Section 409A relating to various features of deferred compensation arrangements that do not comply with the requirements of Section 409A. We generally seek to structure our compensation arrangements either to comply with Section 409A or qualify for an exemption from Section 409A.

The duties and responsibilities of the Compensation and Leadership Development Committee of the board of directors are described above under “Corporate Governance—Board Committees—Compensation and Leadership Development Committee” and are set forth in a written charter adopted by the board, which is available on the Company’s website. The Committee reviews and reassesses this charter annually and recommends any changes to the board for approval.

As part of the exercise of its duties, the Committee has reviewed and discussed with management the above “Compensation Discussion and Analysis” contained in this proxy statement. Based upon that review and those discussions, the Committee recommended to the board of directors that the Compensation Discussion and Analysis be incorporated by reference in Plexus’ annual report to shareholders on Form 10-K and included in this proxy statement.

This section provides further information about the compensation paid to, and other compensatory arrangements with, our named executive officers.

The following table sets forth a summary of the compensation of our named executive officers. More detailed information is presented in the other tables and explanations that follow.