Scott Rowe
FLOWSERVEAbout Scott Rowe
R. Scott Rowe is President, Chief Executive Officer, and Director of Flowserve, serving as CEO since April 2017; he is 54 and has been a director since 2017 . His background spans leadership at Cameron International and the Cameron Group of Schlumberger, including President & CEO roles and Subsea leadership, as well as prior service as a U.S. Army Captain (O3) . Under his tenure, Flowserve reported a 94.8% three-year TSR for 2022–2024, and 2022–2024 PSUs paid 76.7% of target (strong ROIC offset by below-threshold FCF with a +15% rTSR modifier), indicating strategic progress with cash-conversion execution risk to monitor . Rowe currently serves on the board of Quanta Services, Inc. (since 2022) and holds no FLS board committee assignments; he is not considered independent due to his CEO role, and FLS maintains an independent Board Chair structure to mitigate dual-role concerns .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Flowserve Corporation | President & Chief Executive Officer; Director | 2017–Present | CEO leadership of transformation and execution; director service |
| Cameron Group of Schlumberger Ltd. | President | 2016–2017 | Led Cameron Group post-combination with Schlumberger |
| Cameron International Corporation | President & CEO; President & COO | 2015–2016; 2014–2015 | Enterprise leadership roles through energy cycle |
| OneSubsea (Cameron/Schlumberger JV) | Chief Executive Officer | 2014 | CEO of JV focused on subsea systems |
| Cameron – Subsea Systems | President | 2012–2014 | Led subsea division |
| Cameron – Engineered & Process Valves | President | 2010–2012 | Led engineered/process valves business |
| United States Army | Captain (O3) | 1993–1998 | Leadership experience |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Quanta Services, Inc. | Director | 2022–Present | Current public company directorship |
Fixed Compensation
| Component (Rowe) | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | 1,181,962 | 1,200,000 | 1,200,000 |
| AIP Target (% of Salary) | — | — | 125% |
| AIP Target ($) | — | — | 1,500,000 |
| Director Fees | — | — | None (employees receive no director pay) |
Notes: 2024 total target compensation for Rowe was $9.1M with LTI target grant value of $6.4M; O&C Committee positioned targets near the median of the compensation peer group .
Performance Compensation
Annual Incentive Plan (AIP) – 2024
- Metrics: Adjusted Operating Income, Adjusted Primary Working Capital as % of Sales, Customer Bookings; strategic goals payout modifier +/-15% .
- Outcome: Rowe’s AIP paid 136% of target ($2,040,000 on $1,500,000 target); quantitative goals payout 118% .
| Metric | Weighting | Target | Actual | Payout % | Payout $ |
|---|---|---|---|---|---|
| Adjusted Operating Income | N/D | N/D | Above target (Corporate & FPD) | — | — |
| Adjusted PWC as % of Sales | N/D | N/D | Above target (Corporate & FPD) | — | — |
| Customer Bookings | N/D | N/D | Slightly below target (FCD below) | — | — |
| Strategic Goals Modifier | — | — | Applied as warranted | — | — |
| Total | — | — | — | 136% | $2,040,000 |
N/D = Not disclosed
Long-Term Incentives (LTI) – Program Design and 2024 Grants
- Mix and rigor: 2024 CEO target LTI increased by $550k; delivered 55% PSUs / 45% RSUs to enhance performance alignment . RSUs vest ratably over 3 years on March 1 each year following grant; PSUs have a 3-year performance period .
- 2024 PSU metrics and targets: 50% ROIC and 50% FCF as % of Adjusted Net Income with +/-15% rTSR modifier (no upward modifier if absolute TSR negative). ROIC 2024 payout scale: 11% threshold, 12.6% target, 13.9% max (50/100/200%); FCF 2024 payout scale: 75%/85%/100% (50/100/200%) .
- 2022–2024 PSU outcome: Overall 76.7% payout; ROIC strong (avg 133.3% payout); FCF below threshold; rTSR at 81st percentile added +15% .
| 2024 Grant (2/9/2024) | Units | Grant Date Fair Value ($) |
|---|---|---|
| RSUs | 71,145 | 2,952,518 |
| PSUs – Target | 87,230 | 3,719,487 |
| PSUs – Maximum | 200,629 | 8,326,104 |
Equity Ownership & Alignment
- Beneficial ownership: 558,945 shares (includes 114,943 shares acquirable via options within 60 days) . As a percent of 131,667,157 shares outstanding (record date 3/18/2025), ownership is approximately 0.42% (558,945 / 131,667,157) .
- Outstanding equity awards at 12/31/2024:
- Stock options: 114,943 exercisable at $48.63; expire 5/4/2027 (all vested 4/1/2020) .
- RSUs not vested: 160,483; scheduled vesting remaining: 28,718 on 2/17/2026; 24,113 on 3/1/2026; 24,113 on 3/1/2027 (several 2025 tranches vested after year-end) .
- PSUs outstanding (unearned): 2022 cycle showing 71,995 (vested at 76.7% on 2/13/2025); 2023 cycle shown at maximum 204,312; 2024 cycle 203,259 (SEC table presentation conventions) .
- Ownership guidelines: CEO must hold stock equal to 6x base salary; unvested RSUs count, PSUs/options do not; all NEOs met requirements as of 12/31/2024 .
- Hedging/pledging: Prohibited for directors and employees under Insider Trading Policy (reduces alignment risk from pledging/hedging) .
| Category | Detail | Amount/Units | Valuation Basis |
|---|---|---|---|
| Beneficial ownership | Shares | 558,945 | — |
| Options (exercisable) | Shares; strike; expiry | 114,943 @ $48.63; 5/4/2027 | — |
| In-the-money value (12/31/24) | (57.52−48.63)×114,943 | ~$1.022M (calc using $57.52 close) | Calculation shown |
| RSUs not vested | Shares | 160,483 | $57.52 ref |
| RSU future vest dates | Shares by date | 28,718 (2/17/2026); 24,113 (3/1/2026); 24,113 (3/1/2027) | — |
| PSUs (2022 cycle) | Units | 71,995; certified 76.7% payout on 2/13/2025 | — |
| PSUs (2023 cycle) | Units (max presentation) | 204,312 | SEC table convention |
| PSUs (2024 cycle) | Units | 203,259 | SEC table convention |
| Ownership guideline | CEO requirement | 6x salary; all NEOs compliant at 12/31/24 | — |
| Hedging/pledging | Policy | Prohibited | — |
Note: Potential selling pressure may occur around scheduled RSU vest dates (e.g., Feb/Mar 2026–2027) for tax withholding or diversification; no pledging permitted .
Employment Terms
- No individual employment agreement; FLS states no employment agreements for Executive Officers .
- Executive Officer Severance Plan (non‑CIC): 24 months’ base salary continuation for officers; payment equivalent to target AIP (subject to threshold achievement); pro‑rated PSU payout for cycles ending in termination year; limited near-term RSU vesting treatment (award agreements govern post‑2/15/2022 grants) .
- Change‑in‑Control (CIC) Plan—Double trigger: If terminated without cause or constructively terminated within 2 years after a CIC (or within 90 days before a CIC under specified circumstances), CEO receives lump sum cash equal to 3x (base salary + target AIP), pro‑rata AIP at target, full vesting at target of LTI, continued benefits and supplemental pension accruals during benefits continuation; no excise tax gross‑up .
- Quantified potential payments (as of 12/31/2024):
- Termination without cause (non‑CIC): ~$8.74M total for Rowe, including 2x base ($2.4M), target AIP ($1.5M), and equity/other components .
- CIC termination: ~$28.52M total for Rowe, including 3x salary ($3.6M), 3x target AIP ($4.5M), full vesting of equity ($19.49M), supplemental pension ($0.84M), and benefits ($0.09M) .
- Death/Disability: Death total ~$20.99M; Disability total ~$22.53M, primarily equity vesting .
| Scenario (Rowe) | Key Cash Multiple | Equity Treatment | Total Est. ($) |
|---|---|---|---|
| Termination w/o cause (non‑CIC) | 2x base + target AIP | Partial continued/near-term vesting per plan | 8,738,503 |
| CIC + termination/constructive term. | 3x (base + target AIP) | Full vesting at target of LTI | 28,523,878 |
| Death | Life insurance + full equity vest | Immediate vesting | 20,994,393 |
| Disability | Disability benefits + full equity vest | Immediate vesting | 22,529,060 |
Multi‑Year Compensation (Summary Compensation Table)
| Year | Salary ($) | Stock Awards ($) | Non‑Equity Incentive ($) | Change in Pension Value ($) | All Other Comp ($) | Total ($) |
|---|---|---|---|---|---|---|
| 2024 | 1,200,000 | 6,672,310 | 2,040,000 | 665,849 | 20,928 | 10,599,087 |
| 2023 | 1,200,000 | 6,270,244 | 2,670,000 | 422,246 | 20,996 | 10,583,487 |
| 2022 | 1,181,962 | 5,942,446 | 1,179,210 | 377,658 | 21,617 | 8,702,893 |
All Other Compensation (2024) detail: DC plan contributions $14,850; insurance premiums $2,034; annual physical exam $4,044 (total $20,928) .
Board Governance
- Board service: Director since April 2017; no FLS board committee roles assigned to the CEO .
- Independence: Rowe is not independent (employee director); all other current directors/nominees determined independent under NYSE and FLS guidelines .
- Structure: Independent Chairman; committees composed 100% of independent directors; executive sessions of non‑employee directors at each regular meeting; each director nominee attended at least 89% of Board meetings and at least 75% of their committee meetings in 2024 .
- Director compensation: Rowe receives no director compensation; non‑employee program includes $90,000 cash retainer, committee and chair fees, and $160,000 equity grant target value (restricted shares) .
Compensation Committee & Peer Benchmarking
- Independent consultant: F.W. Cook (independent; no conflicts); survey data by Willis Towers Watson .
- Positioning: Total target compensation designed near median of Compensation Peer Group (CPG) with adjustments for performance and market .
- 2024 Compensation Peer Group (excerpt): AMETEK, Crane, Donaldson, Dover, Fortive, IDEX, ITT, Kennametal, Lincoln Electric, Nordson, Pentair, Regal Rexnord, Snap‑on, Terex, Trinity, Wabtec, Woodward, Xylem .
- Say‑on‑Pay support: >93% approval in 2024; no program changes deemed necessary .
Equity Grant Timing, Clawbacks, and Risk Controls
- Grant timing: Annual February grants; directors receive grants after the annual meeting; no options currently granted to executives; ESPP available .
- Clawbacks: Dodd‑Frank‑aligned clawback for restatements (3‑year lookback) and separate misconduct recoupment policy (cash and equity) .
- Risk mitigation: Emphasis on long-term equity; capped payouts; robust ownership guidelines; no hedging/pledging; no option repricing without shareholder approval; no employment agreements with Executive Officers .
Director Service History and Dual‑Role Implications
- Service history: Director since 2017; no committee memberships; other public board: Quanta Services (since 2022) .
- Dual‑role considerations: While Rowe is CEO and director, FLS mitigates concentration of power via an independent Chairman, fully independent committees, and annual CEO performance evaluations by independent directors (informing compensation decisions) .
Performance & Track Record
- TSR and incentives: 2022–2024 PSUs paid 76.7%, driven by strong ROIC but below‑threshold 3‑year FCF; rTSR at the 81st percentile added +15% to payouts, and three‑year TSR was +94.8% under Rowe’s leadership .
- AIP execution: Above‑target AIP payout (136%) for 2024 reflects strong operating income and working capital performance, with mixed bookings (FCD slightly below target) .
Compensation Structure Analysis
- Shift toward performance equity: CEO’s 2024 LTI increased by $550k and allocated 55% to PSUs (vs 45% RSUs) to enhance pay‑for‑performance linkage .
- Target positioning: 2024 CEO total target compensation of $9.1M with AIP at 125% of salary and LTI target $6.4M, aligned near CPG median .
- Program integrity: No hedging/pledging, no excise tax gross‑ups (except relocation applicable to all associates), no option repricing without shareholder approval, and comprehensive clawbacks .
Investment Implications
- Alignment and upside: High performance linkage (PSUs with ROIC/FCF and rTSR modifier, AIP on operating income and working capital) and strong recent TSR (+94.8% over 2022–2024) support alignment with shareholders and incentive for continued value creation .
- Execution watch‑items: Cash conversion remains a focus (below‑threshold FCF drove PSU under‑target payout); AIP/bookings variance at FCD suggests demand/pricing mix execution risk to monitor .
- Retention and overhang: Significant unvested RSUs/PSUs and robust CIC protection (3x cash multiple and full target vesting) reduce near‑term retention risk but create potential share supply around vest dates (2026–2027) and event‑risk overhang in a CIC scenario .
- Governance/independence: Independent chair, strong Say‑on‑Pay (>93%), and independent comp oversight (F.W. Cook) mitigate CEO/director dual‑role concerns and lower governance risk premium .