John T.C. Lee
MKSAbout John T.C. Lee
John T.C. Lee, age 62, is President & CEO of MKS Instruments and a director since 2020; he holds a BS from Princeton and an MSCEP/PhD from MIT in Chemical Engineering, with prior leadership roles at Applied Materials and Bell Labs/Lucent . In 2024 MKS generated $3.59B revenue, $190M net income, $528M operating cash flow, and $927M Adjusted EBITDA (used in pay metrics), while deleveraging via convertible notes and term loan prepayments . MKS shareholders approved 2024 say‑on‑pay at ~93%, and the 2024 plan added Adjusted Net Debt and rTSR to tighten alignment with deleveraging and shareholder returns .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| MKS Instruments | President & CEO | 2020–present | Led multi‑market expansion and integration (optics, chemistries, RF, vacuum); deep product/tech portfolio stewardship |
| MKS Instruments | President | 2019–2020 | Transition leadership; set strategic direction pre‑CEO |
| MKS Instruments | President & COO | 2018–2019 | Enterprise operations and execution across divisions |
| MKS Instruments | SVP & COO | 2016–2018 | Operational performance, cost structure, integration |
| Applied Materials | MD, Factory Tech & Projects; GM, Cleans; Maydan Tech Center | 2002–2007 | Customer‑side leadership at major OEM; insight into semi capital markets |
| Lucent/Bell Labs | Research Director; Member of Technical Staff (Plasma Processing) | 1991–2002 | Core process engineering and plasma research credentials |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Cognex Corporation | Director | Current | Public company board experience |
| Massachusetts High Technology Council | Chair; Executive Committee member; prior Vice Chair | Chair since 2023; Exec Committee since 2021; Vice Chair 2021–2023 | Governance, policy engagement |
| Mass Opportunity Alliance | Co‑Chair | Since 2024 | Regional technology/economic development |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary Paid ($) | $944,727 | $950,000 | $970,492 |
| Target Bonus % of Salary | 125% | 125% | 125% |
Performance Compensation
Annual Cash Incentive (Management Incentive Plan, 2024 design)
| Metric | Weighting | Threshold | Plan of Record | Stretch Target | Actual | Payout contribution |
|---|---|---|---|---|---|---|
| Non‑GAAP Operating Income ($MM) | 70% | ≤$580.5 → 0% | $774.0 → 25% | $874.7 → 100% | $776 → 26% of target (weighted 18%) | 18% |
| Adjusted Net Debt ($B) | 30% | ≥$3.89 → 0% | $3.79 → 25% | $3.71 → 100% | $3.76 → 40% of target (weighted 12%) | 12% |
| Total payout | — | — | — | — | — | 30% of target |
- CEO cash bonus paid: $363,935 (30% of target) .
Long‑Term Equity Incentive (2024 awards)
| Award | Grant Date | Shares | Grant Date Value ($) | Performance Metric | Measurement Period | Vesting | 2024 Achievement |
|---|---|---|---|---|---|---|---|
| Time‑based RSUs | 2/15/2024 | 22,608 | $2,800,000 | n/a | n/a | 3 equal annual tranches from Feb 2025 | n/a |
| Perf RSUs (Adjusted EBITDA) | 2/15/2024 | 23,738 (target) | $2,940,000 | Adjusted EBITDA (with revenue guardrails) | 1‑year (FY2024) | Vests in 3 equal annual tranches from Feb 2025, subject to achievement | 51% of target earned (FY2024 result) |
| Perf RSUs (rTSR) | 2/15/2024 | 10,174 (target) | $1,260,000 | rTSR vs S&P 1500 Composite Electronic Equipment, Instruments & Components Index | 3‑year (1/1/2024–12/31/2026) | Vests in full in Feb 2027, subject to percentile schedule | In‑flight until FY2026 |
Design signals:
- For 2024, “plan of record” thresholds paid 25% (not 100%), requiring “stretch” performance for target payout; same philosophy applied to Adjusted EBITDA in PSUs .
- Added rTSR PSUs (30% of performance equity) to strengthen shareholder alignment and multi‑year focus; caps apply if absolute TSR is negative and overall value cap 8x grant .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total beneficial ownership | 147,117 shares; less than 1% of outstanding (67,447,167 shares as of 3/4/2025) |
| Unvested RSUs (time‑based) | 20,777 (grant 4/29/2022); 59,484 (2/15/2023); 21,624 (2/15/2024) |
| Perf RSUs outstanding (unearned) | Adjusted EBITDA PSUs 47,477 (max display basis); rTSR PSUs 2,543 (threshold display basis) |
| Stock ownership guidelines | CEO required ≥5x base salary in MKS shares/RSUs (perf RSUs excluded); all directors and NEOs in compliance or within phase‑in as of 12/31/2024 |
| Hedging/pledging | Prohibited: no hedging instruments, margin purchases, or pledging of MKS stock |
Vesting cadence and potential selling pressure:
- Time‑based RSUs and Adjusted EBITDA PSUs from 2024 vest in equal annual installments beginning Feb 2025 through Feb 2027; rTSR PSUs cliff‑vest Feb 2027 if earned, concentrating potential taxable events and related sell‑to‑cover activity in annual vest windows and the FY2027 rTSR cliff .
Employment Terms
| Scenario | Cash Severance | Bonus Treatment | Health (COBRA) | Equity Acceleration |
|---|---|---|---|---|
| Termination without Cause or Good Reason (no CIC) | 18 months base salary + lump sum 1.5x target annual bonus; prior year’s unpaid bonus paid | As above; prior year unpaid bonus paid | Company share of premiums for 18 months | Per award agreements (see below) |
| Double‑trigger CIC (within 24 months after CIC) | Lump sum 3x base + 3x target annual bonus; pro‑rated current‑year target bonus; prior year bonus paid | As left | Company share of premiums during COBRA period; extend up to 36 months if employee continues premiums | Time‑based RSUs: full acceleration; Adjusted EBITDA PSUs: target‑level vest if still performance‑contingent; rTSR PSUs convert to time‑based based on actual performance at CIC “end price,” with full acceleration if not assumed or if later double‑trigger termination |
| Death/Disability | Prior year bonus + prorated current‑year target bonus | As left | — | RSUs fully vest, subject to any remaining performance criteria (target assumptions per table methodology) |
| Restrictive covenants | Non‑compete 1 year post‑termination; non‑solicit and certain customer/supplier restrictions for 2 years | |||
| Clawback | Adopted Oct 2, 2023 per SEC Rule 10D‑1/Nasdaq; covers erroneously awarded incentive comp, irrespective of misconduct; Committee can recover more for fraud/misconduct | |||
| Tax gross‑ups | No excise tax gross‑ups; best‑net cutback or full payment based on maximizing after‑tax outcome |
Potential payments illustration (as of 12/31/2024):
- Double‑trigger CIC with termination: cash $8,299,928; accelerated unvested equity $14,175,791; benefits continuation $78,198; total $22,553,917 .
Board Governance
- Board independence: all directors except Dr. Lee are independent under Nasdaq rules .
- Leadership structure: separate CEO and independent Chair since 2005 (Chair: Gerald G. Colella); Lead Director (Jacqueline F. Moloney) ensuring at least two independent‑only sessions annually and agenda/liaison roles .
- Committees: Audit (Mora—Chair; Cannone; Donahue; Jabre; all “financial experts”) ; Compensation (Batra—Chair; Moloney; Mora) ; Nominating & Corporate Governance (Moloney—Chair; Batra; Warner→Donahue post‑5/12/2025) .
- Attendance: Board held six meetings in 2024; all directors attended all Board and committee meetings; all directors attended the 2024 annual meeting .
- Director compensation context (non‑employee): $85,000 base retainer; Chair $105,000; Lead Director $30,000; committee chairs/members as specified; equity grant $200,000 in 2024, raised to $225,000 effective 1/1/2025; Dr. Lee is excluded from director compensation table as executive .
Compensation Structure Analysis
- Mix and risk: CEO total target equity increased to $7.0M in 2024 with 60% performance‑based (70% Adjusted EBITDA; 30% rTSR), and time‑based $2.8M; targets benchmarked ~30th–55th percentile vs peer group (median ±15%) .
- Metric rigor: 2024 plan paid 25% at plan‑of‑record (not 100%), requiring “stretch” to earn target—Management Incentive Plan paid 30% overall, reflecting muted end‑market and deliberate deleveraging .
- Pay vs performance disclosure: “Compensation Actually Paid” (CAP) and TSR reported; $100 investment value at $98.47 in 2024 vs peer $175.92; CAP tracked Adjusted EBITDA $927M and Net Income $190M .
- Governance practices: independent comp consultant (Pearl Meyer), ownership guidelines, clawback, no perquisites, no option repricing, no hedging/pledging .
Equity Ownership & Alignment Table (detail)
| Category | Value |
|---|---|
| Beneficial shares | 147,117; <1% of common |
| Time‑based RSUs unvested (grant dates) | 20,777 (4/29/2022) ; 59,484 (2/15/2023) ; 21,624 (2/15/2024) |
| Performance RSUs unearned (display basis) | Adjusted EBITDA 47,477 (max) ; rTSR 2,543 (threshold) |
| Ownership guidelines compliance | CEO in compliance/phase‑in; guideline = 5x base salary |
| Hedging/pledging status | Prohibited by policy |
Performance & Track Record
| Metric | 2023 | 2024 |
|---|---|---|
| Revenue ($B) | $3.62 | $3.59 |
| Net Income ($MM) | $(1,841) (loss, impairment) | $190 |
| Operating Cash Flow ($MM) | $319 | $528 |
| Adjusted EBITDA ($MM) | $863 | $927 |
| Capital structure actions | — | $1.4B converts; $1.2B term loan paydown; $426M voluntary prepayments; repricing |
Strategic highlights: world‑class optics design wins; chemistry + equipment attach in advanced packaging/AI; services annuity growth; Atotech cost synergies achieved .
Compensation Peer Group (used for 2024 benchmarking)
Agilent; AMETEK; Ciena; Coherent; Entegris; IDEX; IPG Photonics; Keysight; KLA; Lumentum; National Instruments (acq. by Emerson); Sensata; Skyworks; Teledyne; Teradyne; Trimble; Zebra . Target positioning around median ±15%; 2024 CEO/NEO total target levels generally 30th–55th percentile .
Say‑on‑Pay & Shareholder Feedback
- 2024 advisory say‑on‑pay approval ~93% (strong support) .
- Program changes: introduced Adjusted Net Debt to MIP (30% weight) to reinforce deleveraging; added rTSR PSUs (30% of perf equity, 3‑year period) to enhance shareholder alignment .
Board Service History and Dual‑Role Implications
- Dr. Lee serves as both CEO and director; the Board maintains separation of CEO and independent Chair, with Lead Independent Director role active since 2020 to preserve independent oversight and executive session cadence; Dr. Lee is classified as non‑independent per Nasdaq .
- Committee roles: Dr. Lee is not listed on standing committees; independence and committee oversight (Compensation, Audit, Nominating & Governance) mitigate dual‑role risks .
Employment Contracts, Severance, and CIC Economics
- At‑will employment; severance benefits with non‑compete/non‑solicit covenants (1–2 years) .
- Double‑trigger CIC: 3x base + 3x target bonus; pro‑rated current‑year bonus; significant equity acceleration mechanics; no excise gross‑up (best‑net) .
- RSU retirement provisions allow acceleration at/after qualifying retirement ages/tenure; specifics vary by grant cohort .
Investment Implications
- Alignment: Ownership guideline compliance and prohibition on hedging/pledging reduce misalignment risk; 2024 plan raised performance bar, evidenced by 30% cash payout and 51% PSU Adjusted EBITDA earnout .
- Retention and supply overhang: Multi‑year vesting of substantial time‑based RSUs (2022–2024 grants) plus 2024 PSUs through FY2027 indicates continued retention hooks; expect periodic sell‑to‑cover around Feb vest dates and a larger rTSR cliff in 2027 .
- Change‑in‑control protections: Robust double‑trigger CIC terms and equity acceleration could be material in M&A scenarios, but absence of tax gross‑ups and best‑net cutback moderates shareholder cost .
- Performance orientation: Addition of Adjusted Net Debt and rTSR measures plus explicit stretch requirements support deleveraging and TSR focus; continued deleveraging actions in 2024 bolster execution credibility .