Mike Lisman
TransDigm GroupAbout Mike Lisman
Michael J. Lisman, 42, is Co-Chief Operating Officer of TransDigm (appointed May 2023). He previously served as CFO (July 2018–May 2023), EVP (Jan 2022–May 2023), VP—M&A (Jan–Jun 2018), Business Unit Manager at Aero Fluid Products (Jan 2017–Jan 2018), and Director of M&A (Nov 2015–Jan 2017). Earlier, he was VP at Warburg Pincus (2011–2015) with prior private equity/investment banking roles at The Carlyle Group and Morgan Stanley . Company performance context: FY2024 TSR was ~73% and annual cash incentive metrics (51.0% EBITDA margin target and $4.076B EBITDA dollars target) were exceeded, with payout at 113.9% of target .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| TransDigm Group Inc. | Co-Chief Operating Officer | May 2023–present | — |
| TransDigm Group Inc. | Chief Financial Officer | Jul 2018–May 2023 | — |
| TransDigm Group Inc. | Executive Vice President | Jan 2022–May 2023 | — |
| TransDigm Group Inc. | Vice President—M&A | Jan 2018–Jun 2018 | — |
| Aero Fluid Products (TDG subsidiary) | Business Unit Manager (Air & Fuel Valves) | Jan 2017–Jan 2018 | — |
| TransDigm Group Inc. | Director of M&A | Nov 2015–Jan 2017 | — |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Warburg Pincus | Vice President | 2011–2015 | Private equity investing experience |
| The Carlyle Group | Private equity role | Not disclosed | Private equity background |
| Morgan Stanley | Investment banking role | Not disclosed | Investment banking background |
Fixed Compensation
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | 656,250 | 720,000 | 762,750 |
| Target Annual Incentive (% of Salary) | — | — | 100% |
| Target Annual Incentive ($) | — | — | 772,000 |
| Actual Annual Incentive Paid ($) | 631,800 | 764,400 | 879,308 |
Performance Compensation
Annual Cash Incentive Structure and FY2024 Outcome
| Metric | Weighting | Target | Actual FY2024 | Payout vs Target |
|---|---|---|---|---|
| EBITDA As Defined margin | 50% | 51.0% | 114% of target achievement | Contributes to 113.9% overall payout |
| EBITDA As Defined dollars | 50% | $4.076B | 113.8% of target achievement | Contributes to 113.9% overall payout |
| Overall | — | — | — | 113.9% of target |
FY2024 Equity Option Grants (Performance-based)
| Grant Date | Type | Options (#) | Exercise Price ($/sh) | Grant Date Fair Value ($) | Vesting Schedule | Notes |
|---|---|---|---|---|---|---|
| 11/2/2023 | Performance-based Option | 18,000 | 869.73 | 6,813,635 | Vests equally FY2027 and FY2028 | AOP performance hurdles; rigorous targets |
| 1/24/2024 | Performance-based Option | 23,000 | 1,059.92 | 10,312,384 | Vests equally FY2024–FY2028 | Administrative correction to missed biannual extension grant |
Outstanding Equity Awards (as of 9/30/2024)
| Options (Status) | Quantity (#) | Exercise Price ($/sh) | Expiration | Performance Vesting Criteria |
|---|---|---|---|---|
| Exercisable | 92,000 | 347.17 | 11/5/2028 | — |
| Unvested | 11,540 | 560.81 | 11/11/2030 | 2025 AOP: 5% at $170.88; 20% at $232.42 |
| Unvested | 38,450 | 582.80 | 11/9/2032 | 2026/2027 AOP: 12.5%/$319.91 & 50%/$420.85 in 2026; 12.5%/$351.90 & 50%/$494.50 in 2027 |
| Unvested | 18,000 | 869.73 | 11/2/2033 | See above 2026/2027 AOP thresholds |
| Unvested | 18,400 | 1,059.92 | 1/24/2034 | 2025 AOP: 5% at $460.45; 20% at $525.85; 2026: 5% at $506.50; 20% at $617.87; 2027: 5% at $557.15; 20% at $726.00; 2028: 5% at $612.86; 20% at $853.05 |
The Company does not use discretion in vesting; minimum vesting requires at least 10% cumulative AOP growth, with full vesting at 17.5% growth, aligning incentives with intrinsic value creation and EBITDA growth/capital structure discipline .
Option Exercises and Realized Value (FY2024)
| Name | Shares Acquired on Exercise (#) | Value Realized ($) |
|---|---|---|
| Michael J. Lisman | 28,000 | 21,397,439 |
Equity Ownership & Alignment
| Ownership Detail (as of 1/10/2025) | Value |
|---|---|
| Shares owned directly (#) | 2,309 |
| Options exercisable or exercisable within 60 days (#) | 142,760 |
| Total beneficial shares (#) | 145,069 |
| % of shares outstanding | <1% (based on 56,040,017 shares) |
| Pledging | None; no shares of directors/NEOs are pledged |
| Ownership Guidelines | NEOs must hold 3x salary; half in stock, remainder can be in-the-money vested options; 5 years to comply; cannot exercise options unless compliant; all NEOs currently in compliance |
| Hedging/Pledging Prohibition | Company-wide prohibition on hedging, pledging, derivatives, and short sales |
Employment Terms
| Term | Detail |
|---|---|
| Employment Agreement | Amended and restated in Jul 2023 upon promotion to Co-COO; term through Sep 30, 2028; no automatic renewal |
| Severance (death/disability, without cause, or resignation for good reason) | 1.25x salary + 1.25x greater of prior FY bonus paid or current FY target bonus + 18x monthly health premium differential; paid in equal monthly installments over 12 months |
| Change-in-Control treatment (options) | Pre-FY2024 grants: single-trigger full acceleration; FY2024+ grants: double-trigger acceleration (no replacement award or termination without cause/for good reason within 2 years) |
| CIC Option Intrinsic Value (hypothetical at $1,427.13 on 9/30/2024) | $42,461,821 (CIC only); $59,251,685 (CIC + qualifying event) |
| Clawback Policy | NYSE/SEC-compliant clawback adopted Oct 2, 2023; 3-year recovery for excess incentive-based compensation upon material restatements; broad recovery methods; limited impracticability exceptions |
| Insider Trading Controls | Pre-clearance; trading only in open windows; prohibition on MNPI disclosure/trading |
Board Service and Governance
- Status: Based on the 2025 proxy’s board composition and director nominees, Lisman is not listed as a current director. The 10 directors are Barr, Cronin, Graff, Hennessy, Howley (Chairman), McCullough, Santana, Small (Lead Independent Director), Stein (CEO), and Valladares III .
- Committee roles: None applicable for Lisman; board committees (Audit, Compensation, Nominating & Corporate Governance, Executive) are fully comprised of independent directors (with CEO and former COO as non-independent members of the full Board) .
- Dual-role implications: Separation of Chairman/CEO and presence of a Lead Independent Director mitigate governance concentration; Lisman’s non-director NEO status avoids CEO/Chair dual-role concerns and director independence issues .
Compensation Peer Group and Shareholder Feedback
- FY2024 peer group used (size/EV-based): AME, APTV, DOV, ETN, EMR, FTV, GD, HEI, HWM, ITW, IR, LHX, MSI, NOC, PH, RBC, ROK, ROP, TDY, TXT; ~60% turnover in composition; refreshed via Exequity LLP in FY2023 .
- Say-on-Pay: 68.8% approval at 2024 Annual Meeting; broader shareholder engagement increased and program changes implemented (no discretionary equity awards; no upward discretion in annual cash incentive; modified “Rule of 70” retirement vesting) .
Risk Indicators and Red Flags
- Equity award administrative error: Lisman’s FY2023 extension grant was issued as a one-year annual grant rather than biannual; corrected with a Jan 2024 option grant; Company instituted measures to prevent recurrence .
- Insider selling pressure: 28,000 shares exercised in FY2024 with $21.4M value realized, indicating meaningful liquidity events; future vesting tied to AOP hurdles may influence timing of exercises .
- Alignment safeguards: Prohibitions on hedging/pledging and ownership guidelines with exercise restrictions enhance alignment; clawback policy covers incentive-based compensation on restatement .
- CIC economics: Large potential intrinsic option value under CIC scenarios underscores sensitivity to corporate events .
Investment Implications
- Pay-for-performance alignment is strong: Lisman’s compensation is heavily equity option-based with rigorous AOP hurdles and no vesting discretion, linking pay to intrinsic value creation and EBITDA growth/capital discipline .
- Retention risk appears contained: Employment term through FY2028, annual extension grants, and structured severance support retention; modified retirement vesting criteria further codifies treatment without discretion .
- Trading signals: Significant 2024 option exercises and substantial unvested option inventory with defined AOP thresholds may create periodic selling pressure around vesting/maturity dates; monitor Form 4 activity and AOP target disclosures to gauge timing risk .
- Change-in-control sensitivity: Double-trigger provisions on recent grants reduce automatic acceleration, but large intrinsic value under CIC persists; governance structure with separate Chair/CEO and LID mitigates dual-role concerns given Lisman is not a director .