Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.   )

Filed by the Registrant ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Payment of Filing Fee (Check the appropriate box):

 

April 21, 2022

Dear Gentherm Shareholders:

We are pleased to welcome shareholders to attend our 2022 annual meeting on Thursday, June 2, 2022, at 8:30 a.m., Eastern Time. The annual meeting will be held in a virtual-only format to provide both easy access and a safe experience for shareholders and employees.

Looking back at 2021, our global teams faced a continuously challenging operating environment. The strong recovery in Automotive demand seen in late 2020 was disrupted in 2021 by volatile customer demand, supply shortages, material cost inflation and transportation challenges. The global healthcare system remained focused on addressing the COVID-19 pandemic, often at the expense of elective surgeries and the deferral of new technology investments. I’m proud to say that our talented Gentherm team demonstrated their resolve by successfully dealing with these challenges while continuing to deliver on our strategic plan to focus growth, realign our cost structure and bring innovative solutions to market.

Looking ahead, we would like to share what we are doing to position Gentherm for long-term profitable growth.

According to IHS Markit data, in 2021, light vehicle production increased 0.3% in North America, Europe, China, Japan, and Korea. In 2021, we continued to launch climate and comfort programs, battery performance solutions, hands-on-detection enabled steering wheel heaters and other electronics for our global OEM customers. This, along with increased adoption rates of climate and comfort solutions, enabled us to outperform in Automotive versus the key markets we serve in 2021.

Excluding the impact of foreign currency translation, our 13% increase in full-year organic Automotive revenue significantly outperformed light vehicle production in our key markets by approximately 1,300 basis points. We also secured $1.6 billion in Automotive awards in 2021, just shy of our all-time record which positions us well for further growth.

We continue to make great progress on ClimateSenseTM, our software-driven microclimate platform using an algorithm based on thermophysiology, which is a critical part of our long-term strategy. Winning our first ClimateSense production award in 2021 was a key milestone for Gentherm and our top priority remains the flawless launch of this award on an all-new 2024 model year electric vehicle with a global automaker. ClimateSenseTM continues to gain interest from global OEMs, as evidenced by a new development project with a third European OEM.

In Battery Performance Solutions, we have expanded beyond air-cooling and our PACE award winning thermal electric battery thermal management products for mild hybrid 48-volt lithium-ion batteries. We have now launched our high voltage cables, proprietary thin-foil battery heater, as well as wire-based and thin-foil cell connecting systems. Our growing portfolio of battery performance solutions help OEMs improve battery performance and extend longevity.

In 2021, we were again recognized by our customers for continuing to exceed their expectations. We were named a General Motors’ Supplier of the Year for the second consecutive year. This honor is given to one percent of GM’s global supply base. We were also named a top North American Supplier by Honda for a second year, where we were one of 61 suppliers out of a total of 743 to receive this award.

Our Medical business saw slower growth in 2021 due to canceled elective surgeries and hospital access challenges by our sales force, particularly in the first half of the year. However, we continued to see strong global demand for our Blanketrol® III and Hemotherm® CE flagship products. New product offerings are also contributing to our growth. The introduction of the ASTOPADTM Patient Warming System is a strong proof point of how we leverage technology from our automotive business to provide advancements in patient temperature management in our medical business.

OEM interest in transitioning from internal combustion engines to electrified engines has accelerated over the past year, with IHS Markit now forecasting electrified vehicle production to grow from 20% of global production in 2021 to 70% in 2030. As we continue to add innovative solutions to our portfolio, more electric vehicle manufacturers are now leveraging our solutions to enhance comfort while significantly improving energy efficiency and range. The proprietary technologies we introduced in 2021 include: ClimateSense™ Software and User Experience platform; FiberTherm™, our next generation carbon fiber seat heat technology; PilotSense™, the industry first, single layer steering wheel heat

and Hands-on-Detection solution; Intelligent Neck Conditioning; Intelligent Micro-Thermal Module (i MTM®), our next generation Climate Controlled Seat Active solution; and our proprietary thin foil cell-connecting system with embedded cell-sensing.

We aspire to attract, develop, and retain results-driven, high-performance talent while we promote a safe work environment and a culture that values fairness, diversity, equity, inclusion, and belonging. We value the diverse opinions of our Board of Directors, senior leadership, and employees. One-third of the members of our Board of Director are female and 58% of our global workforce is female. 36% of all employees and 23% of leadership are racially and/or ethnically diverse. Our efforts to build an inclusive culture where we value our differences to positively impact the lives of our employees, customers and communities are further described in the accompanying proxy statement.

We are proud of the strides we continue to make in our sustainability journey. In 2021, we launched our first web-based sustainability system, supporting environmental data tracking and increased transparency of our progress against our environmental performance metrics and efficiency targets. While there is much work ahead as we grow our sustainability practices, our commitment to People, Planet, and Places guides our actions as we build positive, lasting impact for our employees, customers, and stakeholders.

We have the right Board in place that is active in guiding Gentherm’s strategy, governance, and culture to ensure we continue to deliver significant long-term shareholder value. The Board has worked strategically to continue to refresh its membership to ensure it has diverse experiences, skills, backgrounds, and perspectives. During 2021, we appointed one new member, bringing the Board to nine directors with each of our three female directors serving as chair of a key Board committee.

With recent changes to the charters of our Board committees, our Nominating and Corporate Governance Committee is responsible for assisting the Board in overseeing the development and execution of the Company’s ESG strategy, including establishing appropriate performance goals and reviewing Company performance against such goals. The Compensation and Talent Committee changed its name from the Compensation Committee to better describe its broadened scope of responsibilities in recent years, including its oversight of the development, implementation and effectiveness of practices, policies and strategies regarding human capital management.

Our ability to perform well in 2021 was due to the commitment and tireless efforts of the entire Gentherm team to overcome challenges in the market and deliver on our mission to create and deliver extraordinary solutions that make meaningful differences in everyday life, by improving health, wellness, comfort and energy efficiency. While we expect continued industry headwinds in 2022, the momentum in new Automotive awards, along with expanding demand for our new technologies and our continued focus on productivity, position us well to deliver significant long-term shareholder value.

On behalf of the Board of Directors, we thank you for your continued investment and support of Gentherm. We respectfully request you to vote in accordance with our recommendations at the 2022 annual meeting.

Sincerely,

Our 2022 Annual Meeting of Shareholders will be held on Thursday, June 2, 2022, at 8:30 a.m., Eastern Daylight Time, in a virtual-only format at www.virtualshareholdermeeting.com/THRM2022, to conduct the following items of business:

Only holders of our common stock at the close of business on April 8, 2022, the record date, are entitled to receive this notice and to attend and vote at the annual meeting.

We have elected to furnish proxy materials to you primarily through the Internet. On or about April 21, 2022, we intend to mail to our shareholders of record a Notice of Internet Availability of Proxy Materials containing instructions on how to access the accompanying proxy statement and our 2021 annual report to shareholders through the Internet and how to vote.

We have designed the format of the annual meeting to provide our shareholders with similar rights and opportunities to participate that they would have at an in-person meeting. You will be able to attend and participate in the annual meeting online, vote your shares electronically and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/THRM2022 and entering the 16-digit control number on your Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card. A list of shareholders of record will also be available during the annual meeting on the meeting website. We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website, please call the technical support number that will be posted on the meeting log-in page.

By Order of the Board of Directors

 

Wayne Kauffman

Senior Vice President, General Counsel and Secretary

Northville, Michigan

April 21, 2022

Your vote is very important. Whether or not you plan to attend the meeting via live webcast,

we urge you to vote promptly and save us the expense of additional solicitation. If you virtually

attend the annual meeting, you may revoke your proxy in accordance with the procedures set

forth in the proxy statement and vote online during the meeting.

The Notice of 2022 Annual Meeting of Shareholders, the accompanying Proxy Statement, and the 2021 annual report to shareholders are available at www.proxyvote.com.

This proxy summary does not contain all of the information that you should consider. You should read the entire proxy statement before voting. For more complete information regarding the 2021 performance of Gentherm Incorporated (the “Company” or “Gentherm”), review our 2021 annual report to shareholders.

Your vote is important. Whether or not you plan to attend the 2022 annual meeting of shareholders (the “annual meeting”) via live webcast, we urge you to vote promptly to save us the expense of additional solicitation. Please carefully review the proxy materials and follow the instructions below to cast your vote on all of the proposals.

Even if you plan to attend the annual meeting, please vote in advance. Make sure to have your notice, proxy card or voting instruction card and follow the instructions. If you are a record holder, you may vote using one of the following methods. If you are a beneficial owner, you may vote using one of the methods listed on your voting instruction card.

Gentherm Incorporated is a global developer, manufacturer and marketer of innovative thermal management technologies for a broad range of heating and cooling and temperature control applications in the automotive and medical industries. Within the automotive industry, our products provide solutions for passenger climate comfort and convenience, battery thermal management and cell connecting systems. Within the medical industry our products provide patient temperature management solutions. Our automotive products can be found on vehicles manufactured by nearly all the major automotive manufacturers operating in North America and Europe, and several major automotive manufacturers in Asia. We operate in locations aligned with our major customers’ product strategies to provide locally enhanced design, integration and production capabilities. The Company is also developing a number of new technologies and products that are expected to enable improvements to existing products and to create new product applications for existing and new markets.

Highlights of Gentherm’s 2021 performance include⁽¹⁾:

Our sales are driven by the number of vehicles produced by the OEMs, which is ultimately dependent on consumer demand for automotive vehicles, our product content per vehicle, and other factors that may limit or otherwise impact production by us, our supply chain and our customers. In 2021, we achieved the highest cash flow from operations and Automotive revenue in the history of the Company. Further, we significantly outperformed actual light vehicle production in the Company’s key markets.

In 2021, the automotive industry experienced fluctuating demand and production disruptions related to supply chain challenges, facility closures, labor shortages, work stoppages and inflationary pressures, as a result of the COVID-19 pandemic and associated macroeconomic conditions. These broad-based operational and inflationary impacts negatively impacted the Company’s financial condition, results of operations and cash flows for 2021. In response to the global supply chain instability and inflationary cost increases, the Company took several actions to minimize any potential and actual adverse impacts by working closely with its suppliers and customers to monitor the availability of semiconductor microchips and other component parts and raw materials, customer vehicle production schedules and any other supply chain inefficiencies that may arise.

The Board of Directors of the Company (the “Board”) currently consists of nine directors. Following a review of the individual and aggregate qualifications, attributes, skills and experience of Board members, the Board has nominated all nine directors for re-election at the annual meeting. The Board believes that the director nominees will strongly position the Board to continue to collectively serve in the best interests of the shareholders and Company and fulfill the Board’s significant oversight roles and responsibilities.

All directors are elected annually and serve one-year terms until a successor has been duly elected and qualified or until such director’s earlier resignation, retirement or other termination of service. The following table provides summary information about our director nominees.

The following matrix provides a high-level summary of the individual qualifications, attributes, skills and experience that our Director nominees contribute to our Board:

 

At the annual meeting, the Board is asking our shareholders to provide advisory (non-binding) approval of the compensation of our named executive officers (“NEOs”) in 2021, as disclosed in this proxy statement, commonly known as a “say-on-pay” proposal. See “Compensation Discussion and Analysis” for detailed information regarding our compensation philosophy, objectives and design, our compensation-setting process and our executive compensation program components, as well as the decisions made for 2021 for NEOs.

The Compensation and Talent Committee approved the following changes in 2021 to the NEO’s target compensation, as well as other material changes to the NEO compensation program:

In 2021, we adopted the 2021 Senior Level Bonus Plan, which reverted to our historical approach of a full-year performance period with the performance goals of revenue and Adjusted EBITDA, equally weighted. In 2021, the Compensation and Talent Committee introduced a new team performance modifier for each NEO (excluding the CEO) based on objective company strategic goals relating to new business awards, new technology wins and diversity hires; in prior years, an individual performance modifier was used based on individual goals. This approach aligns the NEO payout modifier to key strategic, measurable objectives related to our long-term performance and vision, rather than applying individual and subjective objectives.

The Compensation and Talent Committee established the target performance goals aligned with the 2021 budget, within the range of analyst consensus and reflected significant growth over 2020 performance in March 2021, when the specific adverse impact of the supply chain challenges on the business and financial performance of the Company, as well as the automotive industry generally, was unforeseeable and largely outside of management’s control.

Overall, the Committee believes that the management team demonstrated strong performance during 2021 considering the notable headwinds, as evidenced under “Company Performance Highlights” above and the Company’s strong stock price performance in 2021. In consideration of the Company’s relative and overall performance, the Compensation and Talent Committee determined to adjust actual revenue and Adjusted EBITDA for the supply chain matters considered “unforeseeable items outside of management’s control” in accordance with its previously-disclosed objective bonus adjustment policy. The foregoing adjustments resulted in overall Company performance of 126.8% of target.

Our sustainability efforts are based on three pillars: People, Planet, and Places.

Beginning in 2019, we significantly expanded our sustainability and social responsibility programs, which included forming our environmental, social, and governance (“ESG”) steering committee, strengthening Board oversight of sustainability and social responsibility matters by delegating specific oversight leadership to the Nominating and Corporate Governance Committee, and releasing in April 2020 our first Gentherm Sustainability Report covering the year ended December 31, 2019.

In 2020 and 2021, we expanded our public disclosures and further integrated the fundamental values underlying our sustainability efforts into our everyday business operations and future strategies. We established environmental targets to measure our performance in reducing our use of utilities and natural resources, and waste to landfills. See “Board Matters—Corporate Sustainability and Social Responsibility—Board Focus on Interests of Company and Key Stakeholders.” Our 2021 progress is more fully described in the Gentherm 2021 Sustainability Report, which is available on our website.

The Board currently consists of nine directors. The Board has re-nominated all of the directors, listed below.

At the 2021 annual meeting, each of our directors standing for election received over 98% of shareholder votes in favor of their re-election.

Each nominee meets the qualifications, attributes, skills and experience that the Board has established for continuing service on the Board. Further, we believe the combined attributes of the director nominees sufficiently address the Board’s need to oversee critical matters relevant to the Company's strategy and operations and strongly position the Board to continue to collectively serve in the best interests of the shareholders and Company.

All directors are elected annually and, upon election, will serve one-year terms until the 2023 annual meeting of shareholders and until a successor has been duly elected and qualified, or until such director’s earlier resignation, retirement or other termination of service. The Board has affirmatively determined that the director nominees, except Mr. Eyler, are independent under the applicable rules of the Nasdaq Global Select Market (“Nasdaq”).

Each nominee has consented to be listed in this proxy statement and agreed to serve as a director if elected by the shareholders. If any nominee becomes unable or unwilling to serve between the date of this proxy statement and the annual meeting, which we do not anticipate, then the Board may designate a new nominee. In that case, the persons named as proxies in the attached proxy card will vote for that substitute nominee (unless the proxies were previously instructed to withhold votes for the nominee who has become unable or unwilling to serve). Alternatively, the Board may reduce the size of the Board.

 

The Company seeks to ensure the Board includes directors with diverse attributes and backgrounds and qualifications, skills and experience relevant to the Company’s business and strategy. Below is a breakdown of our director nominees by independence, tenure, age and gender and ethnic diversity:

As part of the Board’s annual self-evaluation process and in connection with director nominations and candidate searches, the Nominating and Corporate Governance Committee reviews and makes recommendations to the Board, from time to time, regarding the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board, the operations of the Company and the long-term interests of shareholders, as further discussed in this proxy statement.

Although specific qualifications for Board membership may vary from time to time, the minimum core qualities include (A) the highest ethical character, integrity and shared values with the Company, (B) loyalty to the Company and concern for its success and welfare, (C) sound business judgment, and (D) sufficient commitment and availability to carry out a director’s duties effectively. Listed below are

additional key skills and experience that we consider important for our directors to have in light of our current business and structure. The biographies of the director nominees set forth their specific qualifications, attributes, skills and experience that led to the Nominating and Corporate Governance Committee’s conclusion that each director nominee should continue to serve on the Board.

 

The Nominating and Corporate Governance Committee historically has appointed a Search Committee for carrying out the day-to-day activities of director recruiting, while such Committee remains in an oversight capacity and remains focused on overall director succession planning. The following director recruitment and succession planning process is designed to identify the highly qualified candidates in light of Company and Board needs and achieve desired composition:

 

The Board recently undertook its annual review of director independence in accordance with the applicable rules of Nasdaq. The independence rules include a series of objective tests, including that the director is not employed by the Company and has not engaged in various types of business dealings with us. In addition, the Board is required to make a subjective determination as to each independent director that no relationship exists which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Consistent with these considerations, the Board has affirmatively determined that each of Ms. Desormière, Ms. Hao, Mr. Heinzmann, Mr. Hundzinski, Mr. Kummeth, Ms. Meter, Dr. Shaw and Mr. Stacey are independent under the applicable rules of Nasdaq. Mr. Eyler is employed by the Company and therefore is not an independent director.

Each member of the Audit Committee, the Compensation and Talent Committee, the Nominating and Corporate Governance Committee, the Mergers and Acquisitions Committee and the Technology Committee is independent under Nasdaq rules. In addition, the Board has affirmatively determined that the members of the Audit Committee and Compensation and Talent Committee qualify as independent in accordance with the additional independence rules established by the U.S. Securities and Exchange Commission (the “SEC”) and Nasdaq.

In making these determinations, the Board reviewed and discussed information provided by the directors with regard to each director’s business and personal activities as they may relate to us and our management. In particular, the Board considered Mr. Heinzmann’s role as Chief Executive Officer of Littelfuse, Inc., which is a supplier to the Company. In determining that Mr. Heinzmann satisfies the Nasdaq objective independence tests and that his independence was not otherwise impaired under the subjective criteria, the Board determined that the Company’s supply relationship with Littelfuse, Inc. would not interfere with Mr. Heinzmann’s exercise of independent judgment. In making this determination, the Board considered, among other things, that Littelfuse, Inc. supplies diodes to the Company under a routine, ordinary course supply arrangement, and that the Company selected Littelfuse, Inc. following a request for quotations process. Further, the Company’s payments for diodes manufactured by Littelfuse, Inc. (indirectly through distributors) were substantially below 1% of Littelfuse, Inc.’s consolidated gross revenue for each of the last three fiscal years.

The Board has general oversight responsibility for our affairs and, in exercising its fiduciary duties, the Board represents and acts on behalf of the shareholders. Although the Board is not responsible for our day-to-day management, it stays regularly informed about our business and provides oversight and guidance to our management through periodic meetings and other communications. The Board provides critical oversight in, among other things, our strategic planning process, leadership development and succession planning, risk management, as well as other functions carried out through the Board Committees as described below.

Mr. Eyler, the Company’s President and Chief Executive Officer, is responsible for the Company’s day-to-day operations and strategic leadership, and implementing those actions, policies and strategies approved by the Board. Mr. Hundzinski was appointed as a non-executive Chair of the Board as of the 2020 annual meeting following the retirement of the prior Chair. He presides at all Board and shareholder meetings, as well as Board executive sessions of the independent directors, and has the following additional responsibilities, among others:

 

The Board believes that, by separating the positions of Chair of the Board and Chief Executive Officer, the Board can provide significant leadership to management and strong oversight of key opportunities and risks impacting the Company. Further, the Committees consist solely of independent directors and provide significant oversight and leadership of key Board functions and considerations. The foregoing structure provides more time for the Chief Executive Officer to devote to managing the business and developing and implementing strategies.

The Board has a policy that if the Chair of the Board is not independent under the applicable rules of Nasdaq, the Board will appoint a Lead Independent Director with significant responsibilities.

The Board oversees the Company’s risk management directly and through its Committees:

One of the most important activities of the Board and its Committees is to provide guidance and oversight to management regarding establishing, revising and implementing the Company’s long-term strategy. The Board receives updates from management and discusses various elements of the strategy at each Board meeting, and dedicates meetings periodically to focus solely on strategy. The Board also periodically discusses with members of management below the executive level the Company’s strategy and performance to inform its perspective on progress against the long-term strategy and ensure that it is able to perform its oversight responsibilities effectively. Further, the Board seeks recommendations from the Technology Committee related to the performance of the Company’s technology and related research and development in support of its overall business strategy. The Board also has engaged third parties that advise on internal and external competitive dynamics. The Company’s senior management team, consisting of the President and CEO and all of his direct reports, holds periodic meetings to review the Company’s strategy and the implementation thereof.

For a significant portion of the first half of 2020, substantially all of the Company’s major OEM and Tier 1 customers temporarily ceased or significantly reduced production as a result of restrictions that were requested or mandated by governmental authorities in response to the COVID-19 pandemic. As a result, substantially all of our manufacturing facilities either temporarily suspended production or experienced significant reductions in volumes during this period. Since the beginning of such impacts, the Board has received regular updates and been highly engaged with management. Board oversight has been focused on the matters most critical to the business throughout the pandemic, including management’s identification, management and risk mitigation of shifting trends and uncertainties in the automotive industry. Initially, the Board was highly focused on the Company’s efforts to ensure the health and safety of our employees and other stakeholders, the impact of the pandemic on our liquidity and the re-opening and/or ramp-up of our manufacturing facilities.

In 2021, the continuing impacts of COVID-19 impeded global supply chains of the automotive industry generally and the Company, resulting in longer lead times and delays in procuring component parts and raw materials, and in inflationary cost increases in certain raw materials, labor and transportation. During 2021, the Board has overseen management’s efforts to monitor customer vehicle production schedules and the availability of semiconductor microchips, other component parts and raw materials and other mitigation efforts.

See “Board Matters – Corporate Sustainability and Social Responsibility” for additional information regarding the Board’s oversight of sustainability.

Our Board and Audit Committee oversee our efforts related to information technology, data security and privacy matters, including related to capital expenditure projects, impacts of operational or strategic changes, internal controls, regulatory requirements, risk mitigation and incident response plans, as well as related cybersecurity insurance coverage. For example, in 2020, they oversaw our enhancements to our information security capabilities, in particular to address risks related to working from home. In 2021, they oversaw our implementation of system access enhancements, expanded internal testing, including mandatory cybersecurity training program for employees and tabletop exercises to test and further develop our incident response plan with our outside security and legal advisors.

Our Board engages in an annual succession planning process to understand our readiness and the related transition risks for an unplanned loss or an imminent planned transition of one or more key employees. Additionally, the Board and Compensation and Talent Committee, through its oversight of human capital management, identifies the company’s high potential talent and oversee key strategies in talent attraction, development, and retention. The Board regularly reviews CEO succession planning with Mr. Eyler as well as in executive session, and the CEO provides quarterly reviews on each member of senior management, talent management related to succession planning for such roles, as well as potential sources of external candidates. The Board and its Committees regularly invite senior management to make presentations at meetings as well as meet with directors in an informal setting to allow directors to form a more complete understanding of each executive’s skill and character. Board members can further access management as they deem appropriate.

The Board and its Committees meet throughout the year generally on a set schedule, and also hold special meetings and occasionally act by written consent as appropriate. The Board met six times in 2021. The independent directors hold regularly scheduled executive sessions to meet without management present. These executive sessions generally occur around regularly scheduled meetings of the Board. The independent directors also may hold additional meetings periodically as deemed necessary or appropriate.

All directors are expected to attend all meetings of the Board and of the Board Committees on which they serve. Each director serving in 2021 (as of and from the date he or she joined the Board and applicable Committees) attended 100% of the aggregate of all meetings of the Board and the Committees of which he or she was a member in 2021.

The Board has adopted a policy strongly encouraging directors to attend the Company’s annual meeting of shareholders. All current directors attended the 2021 annual meeting of shareholders.

The Board has delegated various responsibilities and authority to Board Committees. Each Committee has regularly scheduled meetings and reports on its activities to the full Board. Each Committee operates under a written charter approved by the Board, which the applicable Committee and the Board review annually. Each charter is available on our website, www.gentherm.com, under the “Investor Relations – Corporate Governance” tab.

The table below sets forth the current membership for the Board Committees and the number of meetings held for each in 2021.

The responsibilities and activities of the Audit Committee are described in greater detail in “Audit Committee Report” and “Audit Committee Matters,” as well as in its charter.

The Board has determined that each Audit Committee member has sufficient knowledge in reading and understanding financial statements to serve on the Audit Committee. The Board has further determined that three of the Audit Committee members, Ms. Hao, Ms. Meter and Mr. Hundzinski, qualify as “Audit Committee financial experts” in accordance with SEC rules.

The Compensation and Talent Committee changed its name in February 2022, from the Compensation Committee, to better describe its broadened scope of responsibilities in recent years.

The Compensation and Talent Committee also has the sole authority to engage outside advisors and to establish the terms of such engagement. The Compensation and Talent Committee may form and delegate its authority to subcommittees as appropriate. The responsibilities and activities of the Compensation and Talent Committee are described further in “Compensation Discussion and Analysis,” as well as in its charter.

Role of Management. The Compensation and Talent Committee regularly receives significant input from management with respect to the Company’s executive compensation program. See “Compensation Discussion and Analysis” for further information.

Role of Compensation Consultant. The Compensation and Talent Committee has the sole authority to engage outside advisors and establish the terms of their engagement, including compensatory fees. In connection with any engagement, the Compensation and Talent Committee reviews the independence of each outside advisor, based on the factors specified by Nasdaq as well as any other factors it deems appropriate, and any conflicts of interest raised by the work of the outside advisor.

The Compensation and Talent Committee determined to re-engage ClearBridge Compensation Group, LLC (“ClearBridge”) in 2021, its compensation consultant since 2018. See “Compensation Discussion and Analysis” for further information. The Compensation and Talent Committee’s determination to engage ClearBridge and approve the terms of their engagement was made independently from the Company’s management. Upon engagement and consistent with historical practice, the Compensation and Talent Committee worked with management to determine the compensation consultant’s responsibilities and direct its work product, although the Compensation and Talent Committee was responsible for the formal approval of the work plan. During 2021, ClearBridge received no compensation for other services provided to the Company, and the Compensation and Talent Committee has determined there are no conflicts of interest raised by the work of ClearBridge.

The responsibilities and activities of the Nominating and Corporate Governance Committee are described in detail in its charter.

The responsibilities and activities of the Technology Committee are described in detail in its charter.

The responsibilities and activities of the Mergers and Acquisitions Committee are described in detail in its charter.

The Board and management are committed to responsible corporate governance to ensure that we are managed for the benefit of our shareholders. To that end, the Board and management periodically review and update our corporate governance policies and practices and make changes, as appropriate.

A copy of the Board’s Committee charters, the Code of Business Conduct and Ethics and the Corporate Governance Guidelines are available on our website, www.gentherm.com, under the “Investor Relations – Corporate Governance” tab and will be sent to any shareholder, without charge, upon written request to Corporate Secretary, Gentherm Incorporated, 21680 Haggerty Road, Northville, MI 48167.

The Board has adopted the Corporate Governance Guidelines, which provide a structure for our directors and management to effectively pursue the Company’s objectives for the benefit of our shareholders. The Corporate Governance Guidelines address, among other things, Board and Committee structure, composition and procedures, director responsibilities, compensation and continuing education, and shareholder communications with the Board.

The Board has established a thoughtful, interconnected governance process, with enhanced director succession planning and recruitment designed to ensure both short- and long-term strategic goals are met.

 

The Corporate Governance Guidelines provide that if any nominee for director receives a greater number of votes “withheld” from his or her election than votes “for” his or her election, then the applicable director must promptly tender his or her resignation, conditioned on Board acceptance, following certification of the shareholder vote. This policy does not apply when the number of individuals nominated for election exceeds the number of directors to be elected, including as a result of a proxy contest. The Board, upon recommendation of the Nominating and Corporate Governance Committee, will determine whether to accept such resignation offer. The Board will promptly publicly disclose in reasonable detail its decision and rationale regarding the acceptance or rejection of the resignation, as applicable. If a director’s resignation is accepted by the Board, the Board may either fill the resulting vacancy or decrease the size of the Board pursuant to our Bylaws.

The Board has adopted the Code of Business Conduct and Ethics, which sets out the basic principles to guide the actions and decisions of our employees, directors and officers, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Business Conduct and Ethics addresses, among other things, ethical principles, insider trading, conflicts of interest, compliance with laws and confidentiality. Any amendments to the Code of Business Conduct and Ethics, or any waivers that are required to be disclosed by the rules of either the SEC or Nasdaq, will be posted on our website, www.gentherm.com, under the “Investor Relations – Corporate Governance” tab within four business days of any such amendment or waiver.

The Nominating and Corporate Governance Committee oversees the Company’s corporate sustainability and social responsibility programs through quarterly updates and discussions with management. The Board receives reports from Ms. Desormière, Chair of the Nominating and Corporate Governance Committee, and discusses strategic matters related to ESG. The foregoing oversight is focused on:

In April 2020, we released our first Gentherm Sustainability Report and initiated a formal process of reviewing our overall sustainability and social responsibility programs. Throughout 2020 and 2021, we further integrated the fundamental values underlying our sustainability efforts into our everyday business operations and future strategies.

The Company’s ESG steering committee consists of seven executive leaders and key employees across legal, human resources, operations and supply chain, environmental, health and safety, corporate strategy and investor relations, and sales, marketing and communications. The steering committee met seven times during 2021 to review our progress, consider and develop future goals and objectives and discuss strategies. Among our significant achievements during 2021, we expanded our renewable energy usage at three North American non-manufacturing sites to 100% renewable and committed $250,000 over five years to support the Project Green Light Detroit community program, an effort to improve community safety and grow local business. As described further below, we completed a global employee engagement survey of all employees with a strong participation rate, and we furthered our diversity, equity and inclusion efforts with leader training across the entire organization relating to unconscious bias and elevating diversity dialog. Our 2021 progress is more fully described in the Gentherm 2021 Sustainability Report, which is available on our website.

Our Board and Board Committees have a significant role in overseeing our human capital management and corporate culture, including:

The Board and Board Committees have access to key leaders and other key talent throughout the organization, primarily through participation in Board and Board Committee meetings, to assist its oversight role.

Gentherm’s human capital strategy focuses on building a strong talent pipeline, having a future-focused culture, building the capability of our teams and ensuring we provide a compelling employee value proposition. Gentherm’s Winning Culture Behaviors help shape our culture and our recognition programs. The behaviors are Customer Focus, Global Mindset, Performance & Accountability and Engagement & Inclusion.

Gentherm’s Human Capital goals have evolved to a more flexible, personal, employee value proposition since the onset of the pandemic to ensure we are aiding our employees in navigating through the blurred demands of work and life. We introduced a new flexible working guideline called “Locate for Your Day.”

In November 2021, we completed our first global engagement survey with a best-in-class response rate of 97%. The results of the survey, in addition to several new listening tools introduced in the last two years, help our managers continue to adapt and meet the needs of our workforce. In 2022, we are communicating our results with our employees and rolling out action plans by location and business unit to continue to enhance our culture and inspire a culture of feedback.

At Gentherm, our mission is to “create and deliver extraordinary thermal solutions that make meaningful differences in everyday life, by improving health, wellness, comfort and energy efficiency.” Our people are the foundation for making our mission come to life every day. Our global workforce creates a competitive advantage and operates in over 12 countries in 23 locations. Notable statistics as of December 31, 2021:

Our Diversity, Equity and Inclusion Council has built strong momentum in 2021 with monthly engagement activities and enrichment programming promoting awareness and celebrating ethnic and underrepresented employees within Gentherm. Activities included inclusion trainings called “Elevate the Dialogue” to all global people leaders, educating team members on consistent standards, identifying feedback mechanisms to solve for conflict, and creating a culture that unites us all. We also trained our senior leaders to build awareness of unconscious bias. In 2021, our Senior Level Bonus Plan included a DE&I metric (diversity hires) as part of the team performance modifier focused on objective Company strategic matters applicable to the entire senior leadership team (except the CEO).

Our Mission: Embracing diversity inspires innovation. We are building an inclusive culture where we value our differences to positively impact the lives of our employees, customers and communities.

Gentherm’s compensation and benefits programs are designed to attract and retain our employees in the locations where we compete for talent, consistent with employee positions, skill levels, experience, knowledge and geographic location.

Training underpins our focus on helping team members realize their full potential. Foundational leadership development programs ensure our people leaders are equipped to engage and lead in today’s complex business environment. In 2021, we trained over 600 leaders in our leadership development program called !MPACT. We expanded our training programs to provide on demand, flexible learning solutions for our global salaried workforce. We also introduced our Accelerator program in 2021. This year-long program gave our high-potential participants access to our executive leaders and concluded with a capstone presentation. In 2021, our employees participated in over 300,000 hours of training in safety, quality, leadership, competency skills, personal effectiveness and DE+I.

Our management regularly engages with shareholders and prospective shareholders to understand their perspectives on the Company and our business. Management meets with shareholders during scheduled events and in private meetings held throughout the year. In addition, our Board and management are available to engage with our shareholders and other stakeholders. Our Board also receives regular feedback from management regarding investor sentiment, institutional investor voting and governance policies, and trends in stakeholder issues, which informs the Board’s ongoing evaluation of appropriate governance and other practices.

In late 2021 and early 2022, we reached out to shareholders owning over 67% of our outstanding common stock to give significant shareholders an opportunity for one-on-one discussions with representatives of our management team. From December 2021 to February 2022, our Senior Vice President of Strategy, Corporate Development and Investor Relations and our Senior Vice President & Chief Human Resources Officer, met with responsive shareholders who represented ownership of over 36% of our outstanding common stock as of December 31, 2021. Our shareholders expressed appreciation for our proactive engagement and open dialogue. We reported shareholder feedback to the full Board. The Board and management considered such feedback in developing our Board and Committee meeting agendas for 2022, shaping our focus to consider disclosure enhancements and compensation and governance improvements, review Board composition and identify our near-term environmental and social sustainability priorities.

Further, in September 2021, we engaged a third party to conduct an investor perception study. We use these studies to gauge ways to improve our shareholder communications, obtain insights into Company perceptions, identify significant value drivers and understand our shareholders’ capital deployment preferences.

The Board values regular dialogue with our shareholders and welcomes shareholder feedback and perspectives. Shareholders wishing to send communications directly to the Board or to a specific director are asked to send those communications to Corporate Secretary, Gentherm Incorporated, 21680 Haggerty Road, Northville, MI 48167. Shareholders sending communications should clearly mark them as intended for delivery to the Board or to a specific director. Our corporate secretary has been instructed by the Board to screen each communication so received only for the limited purposes of ascertaining (A) whether the communication is indeed from a shareholder and (B) whether the communication relates to the Company. Our corporate secretary will promptly forward copies of all such communications that pass this limited screening to each director, in the case of communications to the entire Board, or to the particular director addressee.

If a shareholder’s communication to the Board involves or concerns our corporate secretary, or if a shareholder has another appropriate reason for communicating to the Board through a means other than through our corporate secretary, the shareholder should send the communication to the attention of either the Company’s President or the Chair of the Board, in either case at the address above. Any such communication should clearly state that it is a shareholder communication and the reason it was not delivered to our corporate secretary for further delivery to the Board.

Our non-employee director compensation plan is intended to encourage non-employee directors to continue Board service, further align the interests of the Board and shareholders, and attract new non-employee directors with outstanding skills and qualifications. Directors who are employees or officers of the Company do not receive any additional compensation for Board service.

The Board has delegated to the Compensation and Talent Committee the responsibility, among other things, to review and make recommendations to the Board regarding any proposed changes to the non-employee director compensation program. The Compensation and Talent Committee typically reviews the non-employee director compensation program every other year. In connection with this review, the compensation consultant to the Compensation and Talent Committee provides analysis regarding market trends and benchmarking data.

The Compensation and Talent Committee reviewed non-employee director compensation for 2021 against peer group benchmarking data (using the same peer group used for NEO compensation), general industry data and related information presented by ClearBridge. ClearBridge noted that the compensation program aligned with market trends from a design perspective. However, the data indicated that the Company’s total non-employee director compensation was positioned between the 25^th percentile and the 50^th percentile of peers. Notwithstanding such benchmarking, the Compensation and Talent Committee approved limited changes to the Company’s non-employee director compensation for 2021 (effective as of May 20, 2021, the date of the 2021 annual meeting of shareholders) to reflect the combination of the Nominating Committee with the Corporate Governance Committee during 2020 and to provide an annual cash retainer for service on the Mergers and Acquisitions Committee, by:

The following table sets forth the compensation program for non-employee directors in 2021.

Consistent with historical practice, the annual cash retainers were paid to all of our directors in advance immediately following the 2021 annual meeting of shareholders.

The restricted stock awards to existing directors were granted on the date of the 2021 annual meeting of shareholders. Ms. Meter, who was newly appointed to the Board in 2021, was granted a pro rata portion of the restricted stock award for Board service as of her initial appointment date. The number of shares of restricted stock granted to each non-employee director in 2021 was determined by dividing the target dollar value of each restricted stock award by the per share closing price of our common stock on the grant date. The equity retainer vests on the earlier of the first anniversary of the grant date or the date of the next annual meeting of shareholders.

A director will forfeit their restricted stock in the event of termination of service as a non-employee director of the Company before the first anniversary of the grant date. However, vesting accelerates upon retirement, and the Compensation and Talent Committee may accelerate the vesting of all or a portion of the restricted stock at any time. During the restricted period, the restricted stock entitles the participant to all of the rights of a shareholder, including the right to vote the shares. Before the end of the restricted period, a participant may not sell, assign, pledge, or otherwise dispose of or hypothecate his or her restricted stock.

The Company does not provide any perquisites to directors, but does reimburse directors for out-of-pocket expenses incurred in attending Board and Committee meetings.

The table below sets forth the compensation of each non-employee director in 2021.

At December 31, 2021, each non-employee director held 1,422 shares of unvested restricted stock.

The 2013 Equity Plan provides that the sum of any cash compensation for service as an outside director of the Company and the grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of all equity awards for service as an outside director of the Company will not exceed $600,000 in any calendar year for any individual outside director.

In February 2019, the Board adopted revised stock ownership requirements for the directors of the Company, executive officers and other designated employees to further the alignment of shareholders and such persons. In August 2021, we further amended our guidelines to, among other things, require that all persons covered by the guidelines must retain all shares that vest pursuant to equity awards granted by the Company until the ownership level is met. See “Compensation Discussion & Analysis—Compensation Policies—Recently Enhanced Stock Ownership Guidelines.”

The executive officers of the Company serve at the pleasure of the Board. The executive officers of the Company as of April 8, 2022 are as follows:

This section of the proxy statement explains our compensation philosophy, design, objectives and goals of our executive compensation program as well as the decisions made for 2021 with respect to each of our NEOs. This section also provides certain other information as additional context for the “Named Executive Officer Compensation Tables” that follow.

Our NEOs for 2021 and their titles during such period were:

In this Compensation Discussion & Analysis, we refer to the Compensation and Talent Committee as the “Committee.”

Highlights of Gentherm’s 2021 performance include⁽¹⁾:

 

The compensation program for NEOs is designed to attract, motivate and retain qualified executives and to provide them incentives to achieve or exceed the Company’s annual operational, financial and strategic goals and increase long-term shareholder value. Our NEO compensation program is structured appropriately to support our business objectives, as well as our performance-based culture. The Committee regularly reviews the NEO compensation program to ensure the fulfillment of our compensation philosophy and goals.

The Committee approved the following changes in 2021 to the NEO’s target compensation, as well as other material changes to the NEO compensation program, which generally represented a renewal of the historical program adopted in 2018 taking into account the high level of shareholder support (93% approval) for say-on-pay proposal at our 2021 annual meeting:

In 2021, we adopted the 2021 Senior Level Bonus Plan, which reverted to our historical approach of a full-year performance period with the performance goals of revenue and Adjusted EBITDA, equally weighted. In 2021, the Compensation and Talent Committee introduced a new team performance modifier for each NEO (excluding the CEO) based on objective company strategic goals relating to new business awards, new technology wins and diversity hires; in prior years, an individual performance modifier was used based on individual goals. This approach aligns the NEO payout modifier to key strategic, measurable objectives related to our long-term performance and vision, rather than applying individual and subjective objectives.

The Committee established the target performance goals aligned with the 2021 budget, within the range of analyst consensus in March 2021 and reflected significant growth over 2020 performance, when the specific adverse impact of the supply chain challenges on the business and financial performance of the Company, as well as the automotive industry generally, was unforeseeable and largely outside of management’s control.

Overall, the Committee believes that the management team demonstrated strong performance during 2021 considering the notable headwinds, as evidenced under “Company Performance Highlights” above and the Company’s strong stock price performance in 2021. In consideration of the Company’s relative and overall performance, the Compensation and Talent Committee determined to adjust actual revenue and Adjusted EBITDA for the supply chain matters considered “unforeseeable items outside of management’s control” in accordance with its previously-disclosed objective bonus adjustment policy. The foregoing adjustments resulted in overall Company performance of 126.8% of target.

The below summarizes the key factors considered in determining the target payout under the 2021 Senior Level Bonus Plan, which is further described below under “Cash Bonus”.

The key elements of our compensation program for 2021 were as follows:

The below charts show the mix of target pay for our NEOs (base salary, target 2021 bonus and target long-term equity incentive awards) in 2021 as approved by our Committee in March 2021:⁽¹⁾

In 2021, each NEO received an annual base salary paid in cash. Initial base salaries of our NEOs are negotiated in connection with their hiring, and the Committee reviews the base salaries of the NEOs on an annual basis. Historically, base salary increases have been between 3-6% to reflect general market trends and performance. However, larger base salary increases are considered where market information indicates that an adjustment is appropriate.

For 2021, taking into account benchmarking data and individual performance, the Committee increased the base salaries of the continuing NEOs by 3-5%, effective April 1, 2021.

The following table sets forth the base salaries in effect for the named executive officers during 2020 and beginning April 1, 2021.

The Committee reviews and approves each of the target bonuses (as a percentage of base salary) for the NEOs, generally consistent with the process used to determine base salaries. For NEOs who begin employment with the Company during a year, annual performance bonuses are prorated based on the number of days worked during such year.

2021 Senior Level Bonus Plan – Consistent with Pre-COVID Annual Bonus Plan; for NEOs (Excluding CEO), Includes Revised Performance Modifier. The bonus plan for senior level management, including all executive officers, was approved by the Committee in March 2021 (the “Senior Level Bonus Plan”). Following detailed evaluation, the Committee determined that it was reasonable and appropriate to revert back to the Company’s historical annual bonus plan in 2021, including setting annual performance goals and using a performance modifier for NEOs other than the CEO.

Pursuant to the Senior Level Bonus Plan, participants earn cash bonuses up to capped amounts based on the achievement of financial performance metrics for the full year. Mr. Eyler’s bonus is based solely on such Company financial performance metrics. For other NEOs, the 2021 bonus program also includes a performance modifier based on objective strategic goals of the Company that may increase (but not decrease) earned bonuses. In prior years, such modifier was based on individual performance goals of an NEO.

2021 target bonuses (as a percentage of base salary) were 115% for Mr. Eyler (increased from 100% in 2020), 60% for Mr. Anversa and 50% for other NEOs. Each executive officer’s maximum bonus opportunity in 2021 was 200% of target bonus.

Company Performance Metrics – Equally Weighted Between Adjusted EBITDA and Revenue. These two measures reflect the Company’s strategic goals of focusing on overall sales growth, strong margins and profitable operations. The Committee approved target performance goals for each of the performance metrics that corresponded to the budget, within the range of analyst consensus for 2021 and reflected significant growth over 2020 performance. Target performance goals were established when the specific adverse impact of the supply chain challenges on the business and financial performance of the Company, as well as the automotive industry generally, was unforeseeable and largely outside of management’s control.

Actual, Unadjusted Performance. Our actual, unadjusted performance would have resulted in a preliminary bonus payout (as a percentage of target bonus) of 37.8% for our NEOs other than our CEO, due to (i) unadjusted actual revenue between threshold and target performance and (ii) unadjusted Actual EBITDA below threshold performance.

Objective Bonus Adjustment Policy. In 2019, the Committee approved an objective policy for addressing the following unusual or extra-ordinary events (to the extent not already captured in the applicable definitions of the metrics), without limiting the Committee’s ability to apply adjustments in its discretion, under the Senior Level Bonus Plan. This policy was reviewed and updated in 2021:

In 2021, the Committee applied adjustments to actual Adjusted EBITDA and revenue in accordance with its policy, taking into account favorable and unfavorable impacts associated with matters largely outside of management’s control. The adjustments reflect a favorable impact in changes in foreign exchange rates and unfavorable impacts associated with customer order cancellations, premium freight and raw material spot buy costs, manufacturing productivity losses and raw material inflationary costs associated with supply chain disruptions, net of customer recoveries. These adjustments resulted in adjusted actual Adjusted EBITDA and revenue performance as specified below.

Team Performance Modifier of Objective Company Strategic Goals for NEOs (Excluding CEO). For each other NEO, objective strategic goals of the Company were established for 2021, based on CEO recommendation and approval by the Committee to align NEO compensation to long-term and strategic directives. Achievement payouts were set for threshold performance for a particular goal (50%) to stretch performance (150%). If at least threshold performance was achieved, in aggregate, based on the Company financial performance metrics, the team performance modifier could increase (but not decrease) earned bonuses up to the maximum bonus opportunity of 200% of target. This approach incentivizes the NEOs to achieve key goals that are part of the Company’s long-term strategic vision, without

inappropriately punishing the NEOs if the stretch and rigorous goals were not achieved. For 2021, the performance modifier was based on the following goals:

2021 Earned Bonus – Committee Establishes Cap at Target Bonus (100%). The following table shows the bonuses that our NEOs would have earned (prior to the use of Committee discretion to cap the earned bonus at target described below) based on the Company’s actual financial results, as adjusted, and taking into account that the objective company strategic goals for the team performance modifier for all NEOs (excluding CEO) were met at their maximum performance level.

Notwithstanding the Company’s actual financial results, as adjusted, and the application of the team performance modifier described above, using its discretion under the 2021 Senior Level Bonus Plan, the Committee determined that 2021 earned bonuses would be capped at target (100%) for all NEOs, notwithstanding Company performance, as adjusted, and the application of the team performance modifier above.

We pay bonuses approximately two months after the end of the applicable performance period. Unless the Committee provides for an exception, a participant must be employed on the bonus payment date to receive a bonus. Mr. Giberson was not eligible to receive a bonus for 2021 because he was not employed with the Company at the time of payment.

Annual Grants. Equity awards represent a significant portion of our NEOs’ compensation, as the Committee continues to regard increasing long-term shareholder value as senior management’s primary objective. Our long-term incentive program for senior level participants, including all executive officers, was initially approved in 2018 following significant shareholder engagement and a comprehensive review of our overall compensation program. Consistent with our equity award program since 2018, the 2021 equity awards included 60% of target value being delivered via PSUs and 40% being delivered via RSUs. Further, the size of the awards depended on the executive’s position and current salary, as well as management’s recommendations, competitiveness in the market, internal pay equity, and other subjective factors deemed relevant by the Committee. We have granted the annual equity awards during the first quarter since 2019.

Performance-Based Restricted Stock Units (PSUs). A target number of PSUs was granted to each NEO. PSUs ultimately are earned and vest based on three Company performance metrics, and any PSUs earned on any portion of the award vest three years from the grant date.

Relative TSR Comparison Group – Substantially Consistent with 2018-2020. The Committee selected the following companies for Relative TSR comparison purposes, with advice from ClearBridge. The companies chosen reflect companies that are impacted by the same external economic forces as Gentherm. Specifically, companies were identified based on their industry and the correlation of their stock price movement with Gentherm. Given that this comparison group is used for purposes of measuring Relative TSR performance, and not for setting target pay levels, company size was not used as a factor in determining the comparison group. The 2021 peer group was consistent with the 2020 peer group for Relative TSR, except the Committee removed Delphi Technologies following its acquisition by BorgWarner.

Time-Based Restricted Stock Units (RSUs). RSUs vest ratably over three years, with one third of RSUs vesting on each anniversary of the grant date.

2021 Annual Equity Target Values. The Committee determined the award values for equity granted in 2021 primarily based on peer group or survey data for similar positions, as well as the executive’s current position and salary. The values listed below represent the target values approved by the Committee and differ from the actual grant date fair values reported in the Summary Compensation Table for 2021.

The target values were divided by the 30-trading day average closing price of our common stock ending on the day immediately preceding the grant date to determine the number of target shares of PSUs and the actual number of RSUs awarded. The grant date for the awards to the NEOs was March 12, 2021, and the 30-trading day average closing price for our common stock ending on March 11, 2021 was $70.94.

As a result, the number of target PSUs and actual RSUs awarded was as follows:

Objective PSU Adjustment Policy in Effect for 2021 PSUs. The terms of the 2021 PSUs included an objective policy for addressing the following unusual or extra-ordinary events (to the extent not already captured in the applicable definitions of the metrics) as follows: