Kieran M. O’Sullivan
About Kieran M. O’Sullivan
Kieran M. O’Sullivan, age 62, has served as President & CEO of CTS since January 2013 and as Chairman since May 2014; he has been a director since 2013 and chairs the Technology & Transactions Committee . 2024 operating results used in incentive design: sales $516 million vs $550 million in 2023, adjusted EPS $2.17 vs $2.22, and cash from operations $99 million vs $89 million . Over the 2022–2024 PSU cycle, CTS delivered 92nd percentile RTSR versus peers, cumulative operating cash flow of $309 million, and 0.6% three‑year sales growth, driving a 130% payout of target PSUs for O’Sullivan . O’Sullivan is not an independent director; board mitigants include a Lead Independent Director, independent committees, and executive sessions at each regular meeting .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Continental A.G. | EVP Global Infotainment & Connectivity; later added NAFTA Interior Division | 2006–2012 | Led operations/strategy in transportation/mobility tech segments |
| Motorola Automotive | Corporate Vice President | 2004–2006 | Senior leadership in automotive electronics and connectivity |
External Roles
| Organization | Role | Years | Committee Roles / Notes |
|---|---|---|---|
| LCI Industries (NYSE: LCII) | Director | Since 2015 | Chair of Risk Committee; member of Audit and Corporate Governance, Nominating & Sustainability Committees |
Board Governance and Dual-Role Implications
- Board service history: Director since 2013; Chairman since 2014; Technology & Transactions Committee Chair . Independence: O’Sullivan is the only non‑independent director .
- CEO + Chairman considerations: CTS combines CEO/Chair; mitigants include a Lead Independent Director (R.A. Profusek) with enumerated duties and a $20,000 retainer; independent Audit, Compensation & Talent, and Nominating, Governance & Sustainability committees; executive sessions of independent directors occur at each regular meeting; all directors met at least 75% attendance, with five board meetings in 2024 .
- Stock ownership guidelines for directors and executives; all directors exceed guidelines except two recent appointees still within the six‑year compliance window. O’Sullivan exceeds the CEO ownership requirement .
Fixed Compensation
| Metric ($) | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Salary (earned) | 788,693 | 775,385 | 823,385 |
| Stock Awards (grant-date fair value) | 1,924,573 | 2,400,021 | 2,800,011 |
| Non-Equity Incentive (MIP) | 1,440,000 | — | 540,380 |
| All Other Compensation | 22,750 | 24,000 | 24,750 |
| Total Compensation | 4,176,016 | 3,199,406 | 4,188,526 |
Notes:
- 2024 base salary rate set at $832,000 (effective April 2024), a 4% increase YoY .
- Say‑on‑pay approval: >97% in 2024; five‑year average >97% .
Performance Compensation
| Component | Metric | Weighting | Threshold / Target / Max | Actual 2024 | Payout Impact |
|---|---|---|---|---|---|
| Annual MIP (CEO) | Adjusted EPS | 60% | $2.03 / $2.22 / $2.45 | $2.15 | Contributes to 64.9% of target payout |
| Annual MIP (CEO) | Sales | 30% | $523m / $550m / $589m | $501m | Below threshold; zero on this metric |
| Annual MIP (CEO) | Controllable Working Capital (% of sales) | 10% | 17.9% / 17.0% / 14.5% | 17.8% | Above threshold; contributes to payout |
| Annual MIP Modifier | ESG (Women in leadership) | ±10% | <27% = −10%; >30% = +10% | 31% | +10% modifier applied |
| Annual MIP (CEO) | Target (% of base) | — | 100% | — | Target $832,000; actual earned 64.9% = $540,380 |
| Long-Term PSU (2022–2024) | RTSR vs peer group | 35% | 30% / 50% / 70% / 90% | 92% | 200% on metric |
| Long-Term PSU (2022–2024) | Three‑Year Sales Growth | 35% | 13% / 16% / 20% / 25% | 0.6% | 0% on metric |
| Long-Term PSU (2022–2024) | Three‑Year Operating Cash Flow | 30% | $190m / $250m / $275m / $300m | $309m | 200% on metric |
| Long-Term PSU (2022–2024) | CEO target and payout | — | Target 34,314 RSUs | 130% of target | 44,608 shares paid in 2025 |
Additional equity programs:
- 2023–2025 PSU targets: CEO 32,877 RSUs; metrics: 60% three‑year sales growth, 40% three‑year operating cash flow; RTSR ±20% modifier (25th/75th percentile); peer set disclosed .
- 2024–2026 PSU targets: CEO 38,019 RSUs; same metrics and modifier; peer set disclosed .
Service-based RSUs granted in 2024:
| Grant Type | Units | Vesting |
|---|---|---|
| 3‑year vesting | 25,344 | 1/3 annually, on grant anniversary |
2024 stock vested value:
| Shares Vested | Value Realized |
|---|---|
| 85,869 | $3,829,150 (gross) |
Equity Ownership & Alignment
- Beneficial ownership: 305,942 shares, 1.0% of outstanding; no pledging of shares by any director or executive officer .
- CEO stock ownership guideline: 5.5x annual base salary; O’Sullivan holds shares in excess of minimum .
- Anti‑hedging/anti‑pledging: officers and directors prohibited from hedging and pledging CTS securities; 10b5‑1 preclearance required under Insider Trading Policy .
Outstanding equity and vesting schedule (as of 12/31/2024):
| Category | Units | Market/Payout Value ($) |
|---|---|---|
| Unvested service-based RSUs | 47,616 | 2,510,792 (at $52.73) |
| PSU opportunities (unearned) | 53,997 | 2,847,262 (at $52.73) |
Service-based RSUs scheduled vesting:
| Vest Date | Units |
|---|---|
| Feb 8, 2025 | 8,448 |
| Feb 9, 2025 | 7,306 |
| Feb 10, 2025 | 7,660 |
| Feb 8, 2026 | 8,448 |
| Feb 9, 2026 | 7,306 |
| Feb 8, 2027 | 8,448 |
Ownership context:
- Directors’ and officers’ group: 466,422 shares (1.6%); directors’ deferred stock units do not count toward beneficial ownership but count toward guideline compliance .
Employment Terms
| Term | Detail |
|---|---|
| Employment start date | January 2013 (President & CEO); Chairman since May 2014 |
| Employment agreement | None; CTS does not have employment agreements for NEOs |
| Severance Policy (CEO) | If eligible termination: lump sum equal to 2x base salary + target annual incentive; 24 months medical/dental; accelerated vesting of service RSUs and pro‑rata PSU vesting based on actual performance; up to $30,000 outplacement; 12‑month non‑compete and non‑solicit |
| Change‑in‑Control (CIC) | Double trigger for equity; severance if terminated without cause or for good reason within 3 years post‑CIC |
| CIC cash multiple | 2x the greater of base or 3‑yr avg base + the greater of avg cash incentive or target; plus an additional 1x of that sum for O’Sullivan due to non‑compete consideration (effectively 3x total for CEO) |
| CIC equity treatment | Service RSUs and PSUs vest in full if not assumed; or upon qualifying termination within 24 months post‑CIC; PSUs vest at greater of target or actual performance to CIC date |
| Non‑compete / non‑solicit | 1 year non‑compete after CIC severance; non‑solicit through 4th anniversary of CIC |
| 280G cutback | Payments reduced to avoid excise tax under 280G/4999 |
CIC estimated payout (as of 12/31/2024):
| Component | Amount ($) |
|---|---|
| Severance (cash) | 5,300,400 |
| Welfare benefits equivalent | 54,350 |
| Outplacement | 30,000 |
| Accelerated equity vesting | 8,058,567 |
| 280G reduction | — |
| Total | 13,443,318 |
Clawback policy:
- Effective Oct 2, 2023; mandatory recovery of excess incentive‑based compensation upon restatements; broad recoupment methods; no indemnification permitted .
Performance & Track Record
- Strategic diversification: diversified markets reached 51% of 2024 revenue; adjusted gross margin up 243 bps YoY; returned over $48 million to shareholders via dividends and buybacks; acquired SyQwest to expand into defense sonar sub‑systems .
- 2024 performance vs plan: sales down 6% YoY; adjusted EPS declined modestly; cash generation improved; ESG talent objective achieved, increasing women in leadership to >30% .
- Board attendance and governance cadence: five board meetings; executive sessions held each meeting; independent committee oversight .
Compensation Committee Analysis
- Compensation philosophy: target total compensation at ~50th percentile vs comparators; significant at‑risk mix via MIP and PSUs .
- Independent advisor: Exequity LLP engaged; committee determined no conflicts of interest .
- PSU peer groups disclosed for 2022–2024, 2023–2025, 2024–2026 cycles; RTSR used as metric or modifier in long‑term plans .
- Say‑on‑pay outcomes: 2024 approval >97%; five‑year average >97% .
Director Compensation (O’Sullivan)
- Receives no additional compensation for board service; compensation set by Board in independent session .
Risk Indicators & Policies
- Anti‑hedging/anti‑pledging policy covering directors and officers .
- Clawback policy aligned with SEC rules .
- Related‑party transactions overseen by committees per governance guidelines .
Equity Ownership & Trading Pressure Signals
- Upcoming vesting tranches for service RSUs in Feb 2025–2027 may create mechanical sell‑to‑cover activity; 2024 vesting of 85,869 shares realized $3.83 million gross value .
- Insider trading policy requires preclearance and open window trading; Rule 10b5‑1 plans permitted under policy .
Compensation Structure Observations
- Year‑over‑year cash vs equity: 2024 total rose driven by higher stock awards; annual cash MIP paid below target (64.9%) due to sales miss; strong PSU outcomes (130% of target) reflect outsized RTSR and cash flow vs muted sales growth .
- Incentive metrics: balanced between earnings quality (Adjusted EPS), top‑line (Sales), working capital efficiency, and ESG leadership composition; long‑term focus on sales growth, operating cash, and relative TSR .
- Ownership alignment: guideline at 5.5x base salary; CEO exceeds requirement; explicit prohibitions on hedging/pledging reduce misalignment risk .
Equity Ownership & Alignment (Detail Table)
| Item | Value |
|---|---|
| Beneficial ownership | 305,942 shares; 1.0% of class |
| Shares pledged | None (policy prohibits pledging) |
| CEO ownership guideline | 5.5x base salary; CEO exceeds guideline |
| Unvested service RSUs | 47,616 units |
| Unvested PSU opportunities | 53,997 units |
Employment Contracts, Severance & Change‑of‑Control Economics (Detail Table)
| Provision | CEO Terms |
|---|---|
| Employment agreement | None |
| Severance (non‑CIC) | 2x base + target bonus; 24 months benefits; service RSU acceleration; PSU pro‑rata based on actual performance |
| CIC cash | 2x base+incentive (greater of averages/target) + additional 1x for CEO non‑compete consideration |
| CIC equity | Full vest if not assumed or upon qualifying termination within 24 months; PSUs vest at greater of target or actual to CIC date |
| Non‑compete / Non‑solicit | 1 year non‑compete; non‑solicit through 4th anniversary of CIC |
| Estimated CIC payout | $13,443,318 total (incl. $8,058,567 equity) |
Investment Implications
- Alignment: High equity ownership, prohibition on hedging/pledging, and ownership guidelines indicate strong pay‑for‑performance alignment; PSU structures with RTSR and cash flow have rewarded shareholders despite muted sales growth, evidenced by 130% PSU payout and 92nd percentile RTSR .
- Retention risk: Ongoing three‑year PSU cycles (2023–2025, 2024–2026) and staged service‑RSU vesting through 2027, plus robust severance protections, point to low near‑term retention risk; monitor annual vest dates for sell‑to‑cover activity and potential liquidity overhang .
- M&A sensitivity: CIC economics for the CEO are substantial (effective 3x cash plus equity acceleration), implying higher transaction friction costs; double‑trigger equity mitigates “single‑trigger” windfalls but still raises deal premiums considerations .
- Execution focus: Compensation metrics emphasize earnings quality, cash conversion, and ESG leadership composition; continued weak sales growth in 2024 suggests the long‑term PSU emphasis on sales growth will be an important watch‑item versus strong RTSR/cash flow performance .
- Governance: CEO/Chairman combined role is counterbalanced by a strong Lead Independent Director and independent committees; say‑on‑pay support (>97%) reduces governance overhang risk .