Craig Aaron
BORGWARNERAbout Craig D. Aaron
Craig D. Aaron, age 47, has served as Executive Vice President and Chief Financial Officer of BorgWarner Inc. since March 1, 2024. He joined the company in 2007 and previously served as Vice President & Controller, Vice President & Treasurer, and VP Finance for BorgWarner Morse Systems. He holds a B.A. in Accounting from Michigan State University and is a Certified Public Accountant (Michigan) . In 2024, BorgWarner delivered ~$14.1B sales, 10.06% Adjusted Operating Margin (AOM), and $729M Free Cash Flow (FCF); despite strong fundamentals, the company reported a negative stock return in 2024, and applied a -10% MIP performance modifier, yielding a 190% of target MIP payout .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| BorgWarner Inc. | EVP & CFO | Mar 2024 – Present | Transitioned into CFO role; entered CoC agreement; rebalanced incentives aligned with peer benchmarking . |
| BorgWarner Inc. | Vice President & Controller | Dec 2022 – Feb 2024 | Led corporate accounting and controls during portfolio evolution . |
| BorgWarner Inc. | Vice President & Treasurer | Mar 2019 – Nov 2022 | Managed liquidity/capital structure across electrification strategy . |
| BorgWarner Morse Systems | Vice President, Finance | Dec 2016 – Feb 2019 | Business-unit finance leadership during product transition . |
| Federal-Mogul Corporation | Corporate Account Manager | Pre-2007 | Customer/commercial finance responsibilities . |
| Deloitte & Touche LLP | In-Charge Auditor | Pre-2007 | External audit experience; CPA foundation . |
External Roles
- None disclosed for Aaron (no external public company directorships noted) .
Fixed Compensation (2024)
| Component | Detail | Amount/Rate | Notes |
|---|---|---|---|
| Year-end Base Salary | As of 12/31/2024 | $675,000 | Increased from $400,000 upon promotion to CFO effective 3/1/2024 . |
| Salary Paid (2024 SCT) | Actual salary earned in 2024 | $629,167 | Reflects partial-year CFO timing . |
| Target Annual Bonus % (Plan) | MIP target as % of base | 120% | Set at appointment as CFO (pro-rated for 2024) . |
| Effective Target Bonus % (2024) | Effective annualized % used for payout calc | 113% | Reflects pro-ration in 2024 . |
| Perquisite Allowance (Plan) | CFO perquisite policy | $35,000 | Increased at appointment . |
| Perquisite Allowance (Paid) | Amount in 2024 AOC table | $33,333 | Per SCT footnote table . |
| Retirement/Excess Plan Contributions | Company contributions | $119,980 | Defined contribution + Excess Plan . |
| All Other Compensation (AOC) | Total 2024 AOC | $153,313 | Sum of perq + contributions; no aircraft usage disclosed . |
Performance Compensation
2024 Annual Bonus (MIP) – Design, Targets, Results, and Payout
| Metric | Weight | Threshold | Target | Maximum | Actual | Payout for Metric | Notes/Vesting |
|---|---|---|---|---|---|---|---|
| Adjusted Operating Margin (AOM%) | 50% | 8.95% | 9.45% | 9.95% | 10.06% | 200% of target | AOM defined as adjusted operating income ÷ net sales; MIP excludes certain M&A impacts . |
| Free Cash Flow (FCF) | 50% | $425M | $525M | $625M | $729M | 200% of target | FCF defined as cash from operations – capex (incl. tooling), adjusted; MIP excludes certain M&A impacts . |
| Performance Modifier | +/-10% of target | — | — | — | Applied -10% | Net 190% of target | Negative modifier due to negative 2024 absolute TSR despite strong AOM/FCF . |
| Aaron’s 2024 MIP Payout | — | — | — | — | — | $1,355,230 | Based on effective base $629,918, effective target 113%, payout 190% . |
Long-Term Equity Incentives (LTI)
2024 Grants and Vesting
| Award Type | Grant Date | Target/Units | Grant-date Value | Vesting Schedule | Notes |
|---|---|---|---|---|---|
| Performance Shares (2024–2026) | 2/6/2024 | 39,880 target (17,448 thr; 79,760 max) | $1,471,871 | Cliff at end of 3-year period | Monte Carlo $45.42; share price $34.07 . |
| Restricted Stock (Time-based) | 2/6/2024 | 19,930 shares | $679,015 | 50% on 2/28/2026; 50% on 2/28/2027 | FMV at grant; Jan avg conversion price $33.86 for 2024 awards . |
| Additional Performance Shares (2023–2025) | 3/1/2024 | 17,080 target (7,473 thr; 34,160 max) | $522,136 | Cliff at end of 3-year period | Recognized upon promotion; share price $31.15; Monte Carlo $28.83 . |
2024–2026 PSU Plan Metrics (weighting and design)
- 25% eProducts Revenue (2026), 25% eProducts AOM (2026), 25% Foundational AOM (2026), 25% Relative TSR vs peer group; emphasis on e-products growth and margins; target dollar amounts converted using January average price of $33.86 .
2022–2024 PSU Outcomes (company-level context)
| Metric | Weight | Outcome | Payout |
|---|---|---|---|
| Relative TSR (3-yr) | 25% | 64th percentile (9th of 23) | 156% of target . |
| eProducts Revenue Mix (2024) | 25% | 16.6% vs 16% target (24% max) | 108% of target . |
| eProducts Revenue (2024) | 25% | $2.335B (between threshold $2.0B and target $3.0B) | 67% of target . |
| Cumulative FCF (2022–2024) | 25% | $1.975B (between target $1.7B and max $2.0B) | 192% of target . |
| Combined Payout | — | Weighted average | 131% of target . |
Looking ahead – 2025 LTI design updates (company-level)
- 50% Relative TSR, 25% Cumulative Adjusted EPS, 25% Relative Revenue Growth; TSR at 55th percentile pays 100% of target; cap TSR payout at 100% if absolute TSR is negative .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total Beneficial Ownership | 70,300 shares; includes 48,841 unvested restricted shares with voting rights; <1% of class (219,686,258 shares outstanding) . |
| Vested vs Unvested | Unvested restricted shares: 48,841 (voting rights retained) . PSUs are not counted toward ownership until vested . |
| Ownership Guidelines | CFO guideline = 3x base salary; executives expected to meet within 5 years; until met, must hold at least 50% of net-after-tax vested shares . |
| Compliance Status | As of Mar 3, 2025, each NEO either met the guideline or had additional time per the 5-year window . |
| Hedging/Pledging | Prohibited for directors and Section 16 officers; also prohibits short sales and monetization transactions . |
Employment Terms
| Provision | Key Terms | Source/Notes |
|---|---|---|
| Change-of-Control (CoC) Equity | Double-trigger vesting for restricted stock and performance shares upon CoC and qualifying termination . | |
| CoC Definition | 20%+ acquisition, board majority change, major transaction changing control, or liquidation . | |
| Severance – Executive Severance Plan (Non-CoC) | Cash severance = 1.5x (base + 3-yr avg bonus); pro-rated bonus; specified benefit continuation and outplacement . | |
| Estimated Non-CoC Payout (as of 12/31/2024) | Cash $1,488,044; Pro-rated bonus $317,029; RSU vesting $358,089; Benefits/Outplacement $80,824; Total $2,243,986 . | |
| Severance – CoC Agreement (Double-trigger) | Cash severance = 3x (base + 3-yr avg bonus); pro-rated bonus; accelerated RSU/PSU vesting; benefits/ outplacement . | |
| Estimated CoC Payout (as of 12/31/2024) | Cash $2,976,087; Pro-rated bonus $317,029; RSU vesting $808,388; PSU vesting $2,056,972; Benefits/Outplacement $444,441; Total $6,602,917 . | |
| 280G Gross-up | No excise tax gross-ups; “best net” cutback may reduce payments to avoid 4999 excise tax if beneficial . | |
| Clawback | Policy adopted Nov 7, 2023; recovers erroneously awarded incentive comp for 3 completed years preceding a restatement . |
Compensation Structure Analysis
- Cash vs equity mix: For 2024, Aaron’s compensation leaned heavily to equity and at-risk pay (Stock Awards $2.67M; MIP $1.36M; Salary $0.63M), supporting performance alignment during his transition year .
- Shift in LTI design: Company removed FCF from LTI metrics for 2024–2026 to avoid overlap with MIP; 2025–2027 LTI adds Cumulative Adjusted EPS and Relative Revenue Growth and raises TSR target bar (55th percentile for 100% payout), addressing investor feedback and strengthening pay-for-performance .
- Discretionary modifier: Despite maxing both AOM and FCF, the Compensation Committee applied a -10% target modifier due to negative absolute TSR in 2024—an investor-friendly alignment mechanism .
- Peer benchmarking: CFO target direct compensation set at ~80% of peer median for new-in-role executives, balancing retention with prudent pay setting .
Risk Indicators & Red Flags
- Hedging/pledging prohibited; reduces misalignment risk from collateralized shares .
- No excise tax gross-ups; double-trigger equity in CoC; limits windfall optics and aligns with governance best practices .
- Say-on-pay: 2024 meeting support was 72.9% for 2023 program—lower than prior year’s 92.1%—prompting program changes for 2025; watch future votes for sentiment on transitions and retention awards .
Vesting Schedules and Potential Selling Pressure
| Award | Key Dates/Amounts | Potential Pressure |
|---|---|---|
| 2024 RSU Grant (19,930) | 50% vests 2/28/2026; 50% vests 2/28/2027 . | Possible sales to cover tax withholding at vest. |
| 2023–2025 PSUs (17,080 target) | Cliff vests after 12/31/2025 performance period . | Delivery/settlement post-certification may prompt liquidity needs. |
| 2024–2026 PSUs (39,880 target) | Cliff vests after 12/31/2026 performance period . | Longer-dated; contingent on performance. |
Director/Committee, Related Party, and Governance Notes
- Compensation Committee members independent; no interlocks; Item 404 related-person transactions none requiring disclosure .
Investment Implications
- Alignment: Aaron’s package emphasizes at-risk and performance-based equity (PSUs/RSUs) with robust guardrails (clawback, no pledging/hedging) and investor-responsive metric design—constructive for long-term alignment .
- Retention vs inflation risk: New-in-role pay set at ~80% of peer median mitigates inflationary ratcheting; RSU/PSU vesting cadence (2025–2027) supports retention across CEO/CFO transition period .
- Execution signals: 2024 max performance on AOM/FCF, but negative TSR triggered a payout haircut; 2025 MIP targets (AOM 10.4%, FCF $800M) are set above 2024 actuals and guidance, indicating elevated performance hurdles—positive signal for discipline but raises execution bar .
- Trading watch: Monitor Form 4s around vesting dates (early 2026 and 2027) and post-2025 PSU certification for tax-related selling; ownership guidelines (3x salary) and holding requirements temper wholesale selling risk .
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