James Lico
FortiveAbout James Lico
President and CEO of Fortive since 2016 and a director on Fortive’s board; previously Executive Vice President at Danaher (2005–2016) overseeing businesses that later became Fortive . Under his leadership, Fortive reports 5‑year Adjusted EPS CAGR of 14%, Free Cash Flow CAGR of 18%, and ~600 bps of Adjusted Operating Profit Margin expansion; 2024 results included Adjusted EPS $3.89, FCF $1.4B, and ~27% Adjusted Operating Profit Margin despite 1% core revenue growth . Pay-for-performance is emphasized: 92% of CEO target 2024 pay is performance-based, 78% equity; 50% of LTI is PSUs tied 60% to relative TSR (target at 55th percentile vs S&P 500) and 40% to three-year average Core Revenue Growth, with a one-year post-vest holding period . 2024 Say‑on‑Pay approval was 92.06% .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Fortive | President & CEO | 2016–present | Led FBS-driven portfolio evolution; separation of Precision Technologies (Ralliant) announced 2024; improved margins, EPS and FCF growth . |
| Danaher | Executive Vice President | 2005–2016 | Oversaw multiple businesses that were separated into Fortive; deep operating knowledge of FBS and capital allocation . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| DuPont de Nemours, Inc. | Director | 2024–present | Brings materials/technology board perspective to Fortive . |
Fixed Compensation
| Metric | FY 2023 | FY 2024 |
|---|---|---|
| Base Salary (CEO) | $1,250,000 | $1,250,000 |
| Target Annual Bonus (% of salary) | 190% | 190% |
| Target Annual Bonus ($) | $2,375,000 | $2,375,000 |
| Actual Annual Incentive Payout ($) | — | $2,380,700 (100.2% of target) |
Performance Compensation
Annual Incentive Plan (2024)
| Component | Weight | Target | Actual | Payout % (pre-weight) |
|---|---|---|---|---|
| Adjusted EPS | 60% | $3.79 | $3.89 | 126.3% |
| Free Cash Flow | 20% | $1,375M | $1,406M | 122.5% |
| Core Revenue Growth | 20% | 4.0% | 1.3% | 0% |
| Company Performance Factor | — | — | — | 100.3% |
| CEO Strategic Performance Factor | 20% slice of total | Predefined strategic goals | Assessed vs goals | Aligned with Company factor for CEO in 2024 |
Notes:
- 2024 program: Company factor weight increased to 80% (from 60%); individual/strategic reduced to 20% .
- CEO’s personal factor aligned with Company factor, reinforcing shareholder alignment .
Long-Term Incentives (2024 grants; target values)
| Vehicle | Weight/Terms | CEO Target ($) |
|---|---|---|
| PSUs | 60% of LTI; 60% rTSR vs S&P 500 (Target=55th percentile; 0% below 25th; no floor for positive absolute TSR), 40% three-year average Core Revenue Growth; 3-year performance + 1-year hold | $6,500,000 |
| RSUs | 50% vesting in year 3 and 50% in year 4; “incremental” RSUs (10–50%) earn-out based on Adjusted EBITDA Margin | $3,250,000 |
| Stock Options | 50% vesting in year 3 and 50% in year 4; exercise at grant-date close | $3,250,000 |
| Total LTI Target | — | $13,000,000 |
PSU and RSU outcomes to date:
- 2022 PSU cycle paid at 91.5% of target; CEO earned 83,572 shares vs 91,315 target (rTSR 50th percentile, Core Rev Growth average 95.6%) .
- 2024 RSU “incremental” earn-out: Adjusted EBITDA Margin at 28.4% yielded 10% incremental RSUs; CEO earned 3,862 incremental on 38,620 base .
- 2024 Core Revenue Growth PSU Year 1 result: 0% (1.3% vs 4.0% target); final payout depends on 2025–2026 average .
Vesting Schedules (2024 awards)
- PSUs: 3-year performance period; earned shares subject to 1-year holding .
- RSUs/Options: 50% on 3rd anniversary; 50% on 4th anniversary .
Equity Ownership & Alignment
| Category | Detail |
|---|---|
| Total Beneficial Ownership | 1,915,121 shares (includes derivative holdings per SEC definition) . |
| Options (exercisable within 60 days) | 1,354,306 shares . |
| 401(k) Fortive Stock Fund | 19,938 shares attributable . |
| EDIP Phantom Shares | 152,375 notional phantom shares . |
| Ownership Guidelines | CEO must hold ≥5x base salary; once met, requirement fixed in shares; time-based RSUs count, options do not . |
| Pledging/Hedging | Absolutely prohibited for directors and executive officers; no derivatives/hedging allowed . |
| Incremental RSU Earn-out (2024) | 10% incremental earned on base RSUs (see above) . |
Employment Terms
- Severance and Change-of-Control (Severance Plan):
- Double-trigger CIC (within 24 months): CEO receives 2x base salary + target annual bonus; prorated target annual bonus; immediate acceleration of all unvested equity at target; 24 months health benefits; no 280G excise tax gross-up .
- Termination without cause (non‑CIC): CEO 2x base salary; prorated annual incentive based on actual performance; equity prorated and remains subject to original performance/time vesting; 24 months health benefits; no excise tax gross-up .
- Early Retirement Policy for CEO Equity (grants 2022+): Upon qualified early retirement tied to approved CEO transition, Lico’s equity continues vesting under original schedules (no performance waiver), supporting an orderly transition around the Ralliant separation and CEO succession .
- Clawback: Applies to all Section 16 officers; mandatory restatement-based recoupment of incentive-based comp; Board discretion to recoup additional compensation (including time-based equity) for gross misconduct; unvested equity forfeited upon termination for gross misconduct .
- Perquisites (2024): Personal aircraft use allowance ($150,000 for CEO); financial counseling stipend ($10,000); other limited perqs .
- Insider Trading/Policies: Strict insider trading policy filed with 10‑K; hedging/pledging prohibited .
Board Governance and Dual-Role Implications
- Role: CEO and director; not Board Chair (independent Chair: Sharmistha Dubey) with separated Chair/CEO structure .
- Committees: Member of the Finance Committee; other key committees (Audit, Compensation, Nominating & Governance) are fully independent .
- Independence: Nine of ten current directors are independent; CEO is the only non-independent director .
- Attendance: Board met 7 times in 2024; all directors ≥75% attendance .
- CEO Succession: Fortive announced in Sept 2024 that Olumide Soroye will succeed Lico upon completion of the Precision Technologies separation (Ralliant) .
- Director Compensation/Ownership: Non-employee director ownership 5x retainer; RSUs/options granted; not applicable to CEO director compensation .
Compensation Structure Analysis
- Mix and leverage: 92% of CEO target pay performance-based; 78% equity; 50% of LTI in PSUs with rTSR tilt and no floor for positive absolute TSR—heightened alignment with shareholder returns .
- Year-over-year design changes: 2024 increased company financial weighting in annual plan to 80% and reduced strategic to 20%; removed rTSR “floor” for positive absolute TSR; refined peer group by removing larger peers Danaher and 3M .
- Outcomes reflect performance: 2024 company factor ~100% reflects EPS/FCF beats and core growth shortfall; 2024 Core Revenue Growth PSU Year 1 at 0% introduces downside to LTI .
- Governance safeguards: No single-trigger CIC benefits; no option repricing; no evergreen; one-year minimum vesting; robust clawback; no pledging/hedging .
Say‑on‑Pay & Shareholder Feedback
- 2024 Say‑on‑Pay support: 92.06% voted in favor .
- Shareholder engagement influenced design: increased PSUs weight, added Core Revenue Growth performance measure, shifted annual plan weighting to financials, and removed rTSR payout floor .
Equity Award Detail (select, 2024 and recent)
| Item | Detail |
|---|---|
| 2024 CEO LTI mix | PSUs $6.5M; RSUs $3.25M; Options $3.25M (target grant-date allocations) . |
| 2024 RSU incremental earn-out | Adjusted EBITDA Margin 28.4% → 10% incremental RSUs; CEO: base 38,620 + 3,862 incremental . |
| 2022 PSU payout (delivered 2025 with 1-year hold) | CEO: 83,572 shares (91.5% of target); rTSR 50th percentile (88.8% factor); Core Rev Growth avg 95.6% factor . |
Performance & Track Record
- Pay vs Performance (PEO): 2024 Compensation Actually Paid $11.86M; TSR value of $100 since 2019 at $119.87 vs peer group $176.44; Net Income $832.9M; Adjusted EPS $3.89 .
- Operational achievements: 2024 Adjusted EPS up 13%, FCF up 13%, Adjusted Operating Margin ~27% (+100 bps); ~$1B returned via buybacks/dividends .
- Strategic actions: Announced separation of Precision Technologies (Ralliant) to sharpen focus and enhance capital allocation; leadership transitions planned to support separation .
Compensation Committee & Peer Group
- Committee: Independent; uses Pearl Meyer as independent advisor; no conflicts; oversees HCM and shareholder engagement on compensation .
- Peer group: 15 companies across industrials, healthcare, and software; removal of Danaher and 3M improved comparability; compensation philosophy targets competitive market positioning (no stated fixed percentile target) .
Equity Ownership & Beneficial Ownership Table (CEO)
| Component | Amount |
|---|---|
| Beneficially Owned Shares (incl. derivatives per SEC definition) | 1,915,121 |
| Options exercisable within 60 days | 1,354,306 |
| 401(k) Fortive Stock Fund | 19,938 |
| EDIP Notional Phantom Shares | 152,375 |
| Pledging/Hedging | Prohibited |
Employment & Contracts
- Severance/CIC: Double-trigger CIC 2x cash and full equity acceleration at target for CEO; non-CIC severance 2x base with prorated awards; no excise tax gross-ups .
- Early retirement / transition: CEO equity grants (2022+) continue vesting with approved early retirement in connection with planned succession; supports smooth transition around Ralliant separation .
- Non-compete/solicit: Corporate-level no-hire/non-solicit covenants between Fortive and Ralliant post-spin (6–18 months) in Employee Matters Agreement; individual executive non-compete terms not disclosed in proxy .
- Clawback/Grant timing: Policy prevents timing grants around MNPI; annual equity on pre-set schedule; comprehensive clawback .
Board Service History and Roles (Director)
- Fortive Board: Director since 2016; currently serves on Finance Committee; not independent by NYSE standards as sitting CEO .
- Board leadership: Independent Chair; executive sessions led by Chair; majority independent board; majority appointed since 2020 .
- Independence/Dual-role implications: Separation of Chair/CEO mitigates concentration of power; committee structure keeps CEO off Audit/Comp/Nominating; Lico’s Finance Committee role provides operating insight but requires independent oversight on capital allocation .
Investment Implications
- Alignment strong: High performance leverage in pay mix; rTSR-heavy PSUs with no floor tie realized pay to shareholder experience; robust clawback and prohibition on pledging/hedging reduce governance risk .
- Near-term overhangs/pressure: 2024 core growth shortfall drove 0% Year 1 PSU credit; large 3–4 year cliff vesting for RSUs/options (50%/50%) can create episodic sell pressure around anniversaries, though 1‑year hold on PSUs tempers immediate supply .
- Transition risk and continuity: Announced CEO succession upon Ralliant separation adds execution risk but early-retirement equity continuity and independent Chair oversight mitigate disruption .
- Shareholder sentiment: Strong Say-on-Pay support and responsive program changes (peer group refinement, weighting shifts, rTSR floor removal) are positives for governance quality .