James Stern

About James F. Stern

James F. Stern, age 62, is Executive Vice President, General Counsel and Secretary of A. O. Smith, a role he has held since 2007 after serving as a Partner at Foley & Lardner LLP from 1997–2007 . Over the last five years, A. O. Smith delivered a total shareholder return of 56.5% (company index rising from 100.0 to 156.5), and reported net sales of $3,753.9M (2022), $3,852.8M (2023), and $3,818.1M (2024) with gross margin improving from 35.4% (2022) to 38.1% (2024) . Stern oversees legal, governance and corporate secretary duties through cycles of growth and margin focus, with compensation tied to EBIT, net sales, ROIC and ESG outcomes .

Past Roles

Organization	Role	Years	Strategic Impact
A. O. Smith Corporation	Executive Vice President, General Counsel and Secretary	2007–Present	Senior officer overseeing legal, governance, compliance, and corporate secretary functions (prepares/attests filings, supports Board committees and compensation governance) .
Foley & Lardner LLP	Partner	1997–2007	Led corporate legal matters; experience leveraged for public company governance and transactional oversight .

External Roles

No additional public company directorships or external board roles disclosed for Stern.

Fixed Compensation

Metric	2023	2024	Notes
Base Salary ($)	$621,000	$646,000	2025 base set at $668,600 (effective Jan 1, 2025) .
Target Bonus (% of Base)	67%	70%	Tied to corporate EBIT (80%) and net sales (20%) .
Actual Annual Incentive Bonus ($)	$626,000	$313,000	2024 payout reflects 69% corporate achievement .
Perquisite Allowance ($)	$40,000	$40,000	Grandfathered perquisite program .

Performance Compensation

Component	Metric / Goal	Weighting	Target / Grant	Actual / Payout	Vesting
Annual Incentive (2024)	Corporate EBIT	80%	Target EBIT $799.1M	68.1% of target achieved	Annual.
Annual Incentive (2024)	Corporate Net Sales	20%	Target Net Sales $4.0258B	72.7% of target achieved	Annual.
Performance Cash (2024–2026)	ROIC vs Cost of Capital	n/a	Target payout at 30.8% performance	Est. 195.6% of target through Dec 2024	3-year (pro-rata on retirement; payout based on actual performance) .
Performance Stock (2024–2026)	Water savings (ESG)	n/a	100% at 16M gallons; 150% at 20M gallons	Est. 150.0% of target through Dec 2024	3-year (pro-rata on retirement; payout based on actual performance) .

2024 named executive officer grant detail for Stern:

Restricted Stock Units: 6,295 units; grant-date fair value $510,021; vests Feb 12, 2027, subject to minimum ROE threshold .
Performance Stock (target): 1,890 units; threshold 0; max 2,835; grant-date fair value $153,128 .
Performance Cash (target): $357,000 for 2024–2026 cycle .

Equity Ownership & Alignment

Item	Amount	Detail
Common Stock Owned	115,434 shares (direct/indirect)	<1% of common shares outstanding .
RSUs (Unvested)	17,035 units	Subject to ROE threshold; scheduled vesting below .
Options – Exercisable Within 60 Days	112,745 shares	Upcoming rights include 5,470 shares at $74.265 exercise price on Feb 7, 2025 .
Upcoming RSU Vesting	3,890 (Feb 7, 2025); 6,850 (Feb 13, 2026); 6,295 (Feb 12, 2027)	Represents unvested RSUs scheduled by tranche .
Option/Stock Vested (2024)	0 options; 4,125 shares vested; $331,134 value	2024 realizations on equity vesting .
Ownership Guideline	3× base salary; Stern in compliance (including granted but unvested RSUs)	Aligns executive interests with stockholders .
Hedging/Pledging	Prohibited for directors/officers/employees	Aligns with governance best practice; reduces red-flag risk .
Non-Qualified Deferred Comp (Balance)	$5,414,560 at Dec 31, 2024	2024 registrant contributions $31,986; earnings $557,434 .

Employment Terms

Scenario (as of Dec 31, 2024)	Cash Severance	Pro Rata Bonus	Equity Treatment	Other
Qualifying Termination (no Change in Control)	$1,647,300	$313,000 (actual 2024 bonus basis)	RSUs $1,161,958; Performance Units $607,000; Performance Stock $136,488 (pro-rata, actual performance)	Medical $20,955; Outplacement $161,500 (max 25% of base) .
Change in Control + Qualifying Termination	$2,196,400	$452,200 (2024 target basis)	RSUs $1,161,958; Performance Units $632,000; Performance Stock $136,488	Outplacement $27,940; No excise tax gross-up; modified gross-up effect $0 .

Plan features:

Severance period: 18 months for Stern; continuation equals annual salary plus target bonus; non-compete, non-solicit, confidentiality required; release needed to receive benefits .
Equity after retirement: continued vesting on original schedule; pro-rata for performance awards based on actual results .
Clawback: SEC/NYSE-compliant recoupment; applies globally to equity awards and incentive compensation for restatements and detrimental conduct .

Other benefits:

Life Insurance: $1,938,000 death benefit during employment; $646,000 post-retirement .
Pension: Participant in Executive Supplemental Pension Plan; present value $3,258,485 (as of Dec 31, 2024) .
Perquisites/Other (2024): Perquisite allowance $40,000; other items include spouse travel $2,411; total “All Other” $101,861 with retirement/401(k) contributions and dividend equivalents .

Compensation Structure Analysis

Shift to RSUs and performance stock from stock options beginning in 2023 (no options granted; introduced performance stock with ESG metrics) .
Pay-for-performance linkage maintained: annual incentives weighted to EBIT and net sales; long-term incentives tied to ROIC and ESG (water savings in 2024; landfill diversion for 2025 awards) .
Governance and risk mitigation: clawback policy expanded beyond SEC/NYSE minimums; hedging/pledging prohibited; caps on incentive programs .

Say-on-Pay & Benchmarking

Say-on-pay approval ~97% at 2024 Annual Meeting; PCC made few changes to 2025 program .
Benchmarking: Willis Towers Watson (WTW) general industry surveys regressed to similar revenue; not a bespoke peer list; total comp targeted near median with 80–120% range flexibility .

Performance & Track Record (Company Context)

Metric	2022	2023	2024
Net Sales ($M)	$3,753.9	$3,852.8	$3,818.1
Gross Profit Margin (%)	35.4%	38.5%	38.1%
Net Earnings ($M)	$235.7	$556.6	$533.6
5-Year TSR Index	—	—	156.5 (vs 2019 base 100)

Investment Implications

Alignment: Stern exceeds 3× salary ownership guideline, cannot hedge or pledge, and compensation mix is heavily performance-based (EBIT/net sales, ROIC, ESG), supporting shareholder alignment and reducing governance red flags .
Near-term selling pressure: 2025 scheduled RSU vesting (Feb 7, 2025: 3,890 units) and option exercisability (5,470 at $74.265 on Feb 7, 2025) could add modest insider supply; however, Stern did not exercise options in 2024 and vested shares were modest (~4,125 shares) .
Retention economics: Robust severance/change-in-control protections (no excise tax gross-up) and continued vesting on retirement reduce flight risk while maintaining performance gatekeeping via pro-rata and actual performance payouts .
Pay-for-performance credibility: 2024 bonus compressed (69% achievement) on EBIT/net sales misses; long-term ROIC and ESG tranches tracking above target, sustaining motivational balance across cycles .