Michael Hartnett
About Michael J. Hartnett
Founder-led operator with 35+ years of M&A and operating experience in engineered bearings; Chairman, President and CEO of RBC Bearings since 1992 and Chairman since 1993; age 80; BS Mechanical Engineering (Univ. of New Haven), MS (Worcester Polytechnic Institute), PhD Applied Mechanics (UConn). Under his tenure, FY2025 delivered record net sales ($1,636.3M), 44.4% gross margin, net income ($246.2M) and adjusted EBITDA ($519.8M), with five-year CAGRs of 17.6% for net sales, 20.0% for adjusted EBITDA and 15.6% for free cash flow; five-year TSR exceeded the peer average by ~32.6% . RBC’s adjusted EBITDA plan was exceeded in FY2025 (102.3% of plan), driving maximum annual cash bonus targets for CEO per the formula below .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| RBC Bearings | President & CEO; Chairman of the Board | 1992–present (CEO); Chairman since 1993 | Founder-led M&A program (29 transactions over 35 years), margin expansion, cash flow compounder . |
| Bearing manufacturing industry (unspecified companies) | Various leadership positions | Not disclosed | Domain expertise, patents, >24 technical papers; recognized tribology expert . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| None disclosed | — | — | No public-company external directorships disclosed . |
Board Governance and Committee Roles
- Board service: Director since 1992; Chairman since 1993; not independent per NYSE rules .
- Committees: Not listed as a member of Audit, Compensation, or Nominating & Governance (all-independent committees) .
- Dual-role implications: CEO is also Chairman; Board established Lead Independent Director (Richard R. Crowell) in June 2025 with defined responsibilities (independent-only sessions, agenda setting, liaison to Chair, shareholder outreach) to mitigate concentration of power .
- Board activity: Board held 4 meetings in FY2025; each director attended ≥75%; non-employee directors held 2 executive sessions .
Fixed Compensation
| Metric | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Base Salary ($) | 950,000 | 997,500 | 1,500,000 |
| All Other Compensation ($) | 90,271 | 166,342 | 189,133 |
- FY2025 perquisites detail: $170,000 reimbursement of personal expenses (incl. private aircraft use), $13,369 401(k) contribution, $4,850 healthcare reimbursement, $888 company vehicle, $26 gift card .
Performance Compensation
Annual Cash Bonus Outcomes (Non-Equity Incentive Plan)
| Metric | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Non-Equity Incentive Plan Compensation ($) | 1,425,000 | 1,496,250 | 2,250,000 |
- CEO/COO annual cash bonus formula (based on Adjusted EBITDA vs plan): 1.5x base salary for 100.0%–109.9% of plan; up to 2.5x at ≥120%; zero below 80% .
- FY2025 result: Adjusted EBITDA 102.3% of plan ($519.8M vs $507.9M target) → CEO paid 1.5x base salary = $2,250,000 .
Equity Incentive Mechanics (CEO)
| Component | Metric(s) | Target | Actual/Outcome | Payout/Value | Vesting |
|---|---|---|---|---|---|
| One-year equity (FY2025 awards) | Adjusted EBITDA vs plan | 4.5x salary at 95.0%–104.9% of plan | 102.3% of plan | 18,495 shares; $6,749,935 fair value at $364.96 | CEO receives unrestricted stock (no vest); COO restricted stock vests 1/3 annually . |
| Three-year equity (period ended FY2025) | Avg Adjusted EBITDA and Avg ROIC vs plan | EBITDA 1.2x salary at 100% plan; ROIC 0.6x at target | EBITDA 114.4% of plan; ROIC +1.8% above plan | 11,713 shares; $4,274,776 fair value (2.85x salary total) | Unrestricted stock to CEO; awarded May 2025 . |
| Future design (periods ending FY2027+) | TSR vs peer avg; Avg ROIC | Target multiples reset; TSR added; EBITDA removed from 3-yr | TSR and ROIC determine salary multiples per grid | See stated salary-multiple grids | Applies to awards made FY2028 onward per 2024 redesign . |
- CEO total compensation mix FY2025: $19,558,706 total; $17,869,573 (91.4%) performance-based per proxy methodology (includes FY2026 and FY2028 timing items per ASC 718) .
Vesting and Upcoming Delivery (selected)
- CEO award on 5/23/24 of 17,167 restricted shares vests in equal thirds in June 2025, June 2026, and June 2027 .
- FY2025 one-year CEO award (18,495 shares) issued 5/28/25 as unrestricted shares (no vesting) .
- Performance-cycle shares for FY2027 delivery shown as “unearned” placeholders (e.g., ROIC 9,213 shares at target; TSR 6,910 shares at >114.9% of peer avg) illustrate potential FY2028 issuance; actual shares depend on performance .
Equity Ownership & Alignment
| Item (as of July 8, 2025) | Value |
|---|---|
| Total Beneficial Ownership | 302,853 shares; 1.0% of outstanding |
| Restricted Shares Included | 22,000 shares |
| Options exercisable within 60 days | 0 (CEO) |
| Shares pledged as collateral | None; no margin or pledged shares |
| Hedging | Prohibited for directors, officers, employees (no derivatives) |
| Stock Ownership Guidelines | CEO 6x base salary (5-year accumulation window) |
- Insider liquidity events (FY2025): CEO exercised 126,536 options (value realized $15,756,242), indicating episodic sell/monetization capacity tied to option maturities; note this is value at exercise per proxy .
Employment Terms
| Term | Detail |
|---|---|
| Employment agreement | Amended and restated June 2024; initial term to Mar 31, 2026; auto-renews for 12-month periods unless 90 days’ notice |
| Base salary | $1,500,000 (reviewed annually; not decreased); increased to $1,545,000 for FY2026 |
| Annual cash bonus | Formula tied to Adjusted EBITDA vs plan (multiples of base salary) |
| Long-term equity | Performance-based stock; one-year (Adj. EBITDA) and three-year (ROIC and TSR from FY2028 cycles) |
| Perquisites | Private aircraft allowance/20 hours, leased vehicle, healthcare reimbursements, $50,000 personal expense reimbursement, LA apartment |
| Clawback | NYSE/SEC-compliant incentive compensation clawback policy |
| Hedging/Insider trading | Hedging prohibited; prescribed trading windows post-earnings |
Change-in-Control (double-trigger) and Severance Economics
- Double-trigger (termination within 24 months post-CoC): 250% of base salary + 250% of target bonus; prorated maximum annual bonus for year of termination; continued welfare benefits; equity provisions per plans .
- Outside CoC (death, disability, without cause, or non-renewal): base salary through term; prorated maximum annual bonus; continued benefits; full vesting of restricted/unvested options; prorated one-year and three-year equity at target multiples .
| Hypothetical Payment on CoC Termination at 3/29/2025 | Amount ($) |
|---|---|
| Severance Payment | 9,375,000 |
| Prorated Max Bonus | 3,750,000 |
| Other Payments/Benefits | 43,328 |
| Vested Stock Options (value) | 6,059,924 |
| Vested Restricted Stock (value) | 15,725,503 |
| Long-Term Stock Award | 3,080,739 |
| Total | 38,034,494 |
Performance & Track Record
- FY2025 highlights: Net sales $1,636.3M; gross margin 44.4%; adjusted EBITDA $519.8M; free cash flow conversion 99% .
- Five-year TSR outperformed peer average by ~32.6% .
- Five-year CAGRs: Net sales 17.6%; adjusted EBITDA 20.0%; free cash flow 15.6% .
| Metric ($ millions) | FY 2021 | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|---|---|
| Net Income | 90.1 | 54.7 | 166.7 | 209.9 | 246.2 |
| Adjusted EBITDA | 174.3 | 266.5 | 433.9 | 482.1 | 519.8 |
Compensation Committee and Peer Benchmarking
- Committee: All-independent Compensation Committee (Chair: Dolores J. Ennico); uses independent advisors; reviews goals, design, awards, employment agreements; stock ownership guidelines and clawback in place .
- Peer group (2024/2025): Carlisle, Curtiss‑Wright, Dana, Enerpac Tool Group, Flowserve, Gates Industrial, Graco, HEICO, Hexcel, ITT, Regal Rexnord, Terex, Textron, Timken, Woodward; Barnes Group removed after going private .
Say‑on‑Pay & Shareholder Feedback
- 2024 Say‑on‑Pay approval: 80% of votes cast, up 25 percentage points vs 2023 following extensive outreach to holders representing >52% of shares outstanding .
- Program changes adopted: removed overlapping metrics (no ROIC in 1‑yr; added TSR to 3‑yr); CEO equity weighting moves from 70/30 (1‑yr/3‑yr) to 60/40 at target beginning with FY2028 cycles .
- Governance response: Established Lead Independent Director in June 2025 in response to shareholder feedback about combined Chair/CEO structure .
Risk Indicators & Red Flags
- Alignment positives: No hedging or pledging; robust clawback; double-trigger CoC; ownership guideline (6x salary) .
- Potential concerns: Combined CEO/Chair role (mitigated via Lead Independent Director); significant perquisites (private aircraft allowance and personal expense reimbursements); high CEO pay ratio (301x global median; 274x U.S. median) .
- Option practices: No re‑pricing/backdating; options usage ceased for CEO/COO; CEO realized $15.8M from option exercises in FY2025—monitor for liquidity events around vest/expiry .
Director Compensation (for context; CEO is employee‑director)
- Non‑employee directors: $50,000 cash retainer; committee chair fees ($25,000 Compensation; $10,000 Audit in FY2026); annual equity at $325,000 value (60% RS, 40% options). RS vests over 3 years; options vest over 5 years .
Equity Ownership & Vesting Pressure – Additional Detail
| Upcoming/Outstanding (as of FY2025 year‑end) | Detail |
|---|---|
| Options outstanding (CEO) | 11,778 @ $137.44 exp 6/2/27; 30,400 @ $199.16 exp 6/3/28 (status as of 3/29/25; footnote indicates June 2025 vesting) . |
| Restricted stock (CEO) | 17,167 from 5/23/24: 1/3 vest in June 2025/2026/2027 . |
| Performance share placeholders | ROIC and TSR tranches slated for FY2028 delivery based on FY2025–FY2027 performance vs targets/peers . |
Investment Implications
- Pay-for-performance is firmly anchored to Adjusted EBITDA (1‑yr) and ROIC/TSR (3‑yr), supporting alignment with cash generation and returns; removal of options for CEO/COO and use of salary-multiple equity grants increases predictability but also enables meaningful immediate stock issuance (unrestricted CEO awards), which can create episodic supply upon delivery—watch Form 4s around award dates .
- Retention risk appears low near term given auto-renewing contract, large multi-year performance cycles (FY2028 deliveries), and substantial unvested/placeholder equity; however, CoC economics are sizable ($38.0M hypothetical), which could influence negotiation dynamics in strategic scenarios .
- Governance risk from combined Chair/CEO is partially mitigated by a Lead Independent Director and fully independent key committees; say‑on‑pay recovery to 80% suggests improved investor acceptance, but continued scrutiny of perquisites and equity sizing is likely given a high CEO pay ratio and large equity grants .
- Execution track record (record FY2025 results; strong 5‑year TSR vs peers) and long-tenured, founder-led model remain positives; monitor TSR-linked metrics for three-year awards and option expiry schedules for potential trading signals .