Michael S. Simmons

About Michael S. Simmons

Michael S. Simmons, age 53, has served as Valhi’s Vice Chairman of the Board and Chief Executive Officer since 2023, and as President and director since 2022; previously Senior VP, Finance (2021–2022) and VP & Chief Accounting Officer (2019–2021). He is Vice Chairman at Kronos Worldwide, NL Industries, and CompX; President & CEO of Contran; and previously spent 1994–2018 at PwC, most recently as Managing Director . In 2024, Valhi’s net income was $108.0 million versus a 2023 loss of $9.9 million, reflecting Chemicals segment recovery and one‑time items . Valhi’s TSR index moved from 74 (2023) to 115 (2024) while the S&P 500 Industrial Conglomerates index rose from 132 to 182 over the same period .

Past Roles

External Roles

Fixed Compensation

Valhi uses Intercorporate Services Agreements (ISAs) with Contran for executive services; the reported “Salary” is the portion of Contran’s ISA fees allocated to Valhi and subsidiaries for Simmons’ services. No equity, bonus, pension, or deferred comp is paid by Valhi to executives; and executives are ineligible for director fees/equity grants at Valhi, Kronos, NL, or CompX .

Breakdown of Simmons’ ISA allocations (fees charged to each entity for his services):

Additional compensation design facts:

• No grants of plan-based awards; no outstanding equity awards; no options exercised or vested stock in 2024 .
• No defined benefit pension; no nonqualified deferred compensation .
• Clawback policy adopted Nov 2023; June 2024 restatement triggered review, but no recovery required due to lack of incentive-based comp .
• Section 162(m) deductibility limits exceeded for certain individuals; Contran absorbs disallowance impact .

Performance Compensation

Valhi did not use specific financial performance measures to link executive compensation for 2024; compensation is determined via ISA cost allocation and time devoted, not tied to revenue, EBITDA, TSR, or ESG metrics . As such, no incentive metrics, weightings, targets, or payouts are applicable.

Equity Ownership & Alignment

Simmons reports zero beneficial ownership in Valhi, Kronos Worldwide, NL Industries, and CompX common equities (disclaimers apply) . Valhi has no stock ownership guidelines for management; guidelines exist for non-employee directors only (≥3x base annual retainer), and annual director stock grants of ~$20,000 are fully vested at grant .

Hedging/Pledging:

• Hedging: Company has not adopted employee/director hedging policies; hedging must comply with insider trading policy .
• Pledging: Corporate-level pledging of Kronos shares by Valhi to secure Contran’s facility; not personal pledging by Simmons .

Insider selling pressure:

• With no equity awards and no reported equity holdings, Simmons’ direct selling pressure and vesting overhang are de minimis .

Employment Terms

• Employment relationship: Executives are employed by Contran and seconded to Valhi (and affiliates) via ISAs; annual charge set by independent directors after MD&C committee recommendation and CFO concurrence .
• ISA renewal/termination: ISAs generally renew quarterly; either party may terminate via written notice 30 days prior to next quarter .
• Severance/COC: No Valhi-specific employment agreements, severance multiples, or change-of-control triggers disclosed; compensation is via ISA, not Valhi executive contracts .
• Non-compete/non-solicit/garden leave: Not disclosed.

Board Governance

• Board structure: Controlled company status (Dixie Rice ~91.4%); majority independent directors currently; no separate nominations/governance committee; MD&C committee lacks a charter and does not meet all NYSE standards .
• Leadership: Non-executive Chair (Loretta J. Feehan); Simmons is Vice Chairman, President & CEO; audit committee chair presides over independent director sessions .
• Committees:
  • Audit: Barry (chair), Herrington, McIlroy, Norris, Tidlund; Herrington and Norris are audit committee financial experts .
  • Management Development & Compensation: Barry (chair), McIlroy, Herrington .
• Meetings and attendance: Board met 4 times in 2024; audit committee 6; MD&C committee 2; all incumbents attended meetings and committees held during their tenure .

Director Compensation (for reference)

• 2024 retainers: Director $50,000 (raised from $40,000 effective July 1, 2024); Chair $50,000; Audit Chair/Financial Expert $45,000; other audit members $25,000; other committees $5,000; $1,000/day meeting fees; plus ~$20,000 stock grant (fully vested) .
• Executives (including Simmons) receive no director compensation/equity at Valhi/Kronos/NL/CompX .

Say-on-Pay & Shareholder Feedback

• 2024 Say-on-Pay approval: 93.2% of eligible shares voted in favor; Valhi made no material changes to compensation practices thereafter .
• Say-on-Pay frequency: Annual; next vote at 2026 annual meeting; frequency vote in 2029 .

Related Party Transactions & Red Flags

• Extensive related-party ecosystem with Contran and affiliates: risk management group program (captive Tall Pines), tax sharing, unsecured revolving note from Contran, guarantees/pledges, ISAs across entities .
• Valhi unsecured revolving note from Contran: up to $150 million; prime+1%; outstanding $44.6 million at 12/31/2024; $6.3 million interest/fees paid in 2024 .
• Pledge of 16.7 million Kronos shares as collateral for Contran’s facility; Valhi receives 50 bps fee on FMV; $0.9 million received in 2024 .
• ISA fees paid in 2024 (expected 2025): Valhi $7.3mm ($7.8mm); Kronos $23.7mm ($25.8mm); NL $5.3mm ($5.7mm); CompX $3.2mm ($3.4mm) .
• Compensation consultants: None engaged .
  These highlight governance complexity and potential conflicts under controlled company dynamics.

Performance & Track Record

Chemicals segment recovery: 2024 operating income $138.5mm vs 2023 operating loss $(41.1)mm, with production utilization up to 96% and lower energy/feedstock costs; TiO2 average selling prices were ~5% below 2023 .

Valhi Financial Momentum (Quarterly)

Values retrieved from S&P Global.*

Compensation Structure Analysis

• Cash vs equity mix: 100% cash via ISA allocations; no equity or options granted to executives—reduces alignment with public shareholders but also limits dilution and short-term risk-taking .
• At-risk pay: Minimal; no performance-based payouts; clawback policy exists but had no effect due to no incentive comp .
• Discretionary decisions: ISA charges approved by independent directors based on cost allocations and time devoted rather than Valhi performance metrics .
• Peer benchmarking: Not disclosed; no compensation consultants engaged .
• Ownership requirements: None for management; directors only .

Risk Indicators & Red Flags

• Controlled company (91.4% ownership via Dixie Rice) with reduced governance requirements; MD&C committee lacks charter; nominations/governance handled by full board .
• Extensive related-party financing and pledging (Contran note; Kronos share pledge), creating potential conflict and dependence .
• No hedging policy adopted (insider trading policy applies), potentially allowing hedging by insiders subject to policy .
• Environmental/legal overhangs at NL (lead pigment, environmental matters) and CompX PFAS suits—managed but persistent .
• Tariff risks (e.g., 25% tariff on imports from Canada implemented March 4, 2025) affecting Kronos’ North American TiO2 economics .

Investment Implications

• Pay-for-performance alignment: Executive pay is formulaic ISA cost allocation and not contingent on Valhi/Kronos/NL performance; alignment relies on Simmons’ multi-entity leadership and Contran oversight rather than direct equity incentives .
• Retention risk: Low via Contran employment structure and cross-entity roles; absence of disclosed severance/COC terms reduces immediate shareholder cost exposure but limits transparency .
• Trading signals: Minimal insider selling pressure given zero equity holdings and no vesting/calendar overhang ; monitor 8-Ks for governance or ISA changes and Valhi/Kronos tariff impacts .
• Governance discount: Controlled company and related-party complexity may warrant a discount; however, 2024 operational rebound (Chemicals) and TSR improvement suggest execution under current structure is working; watch sustainability of TiO2 demand/pricing, tariffs, and NL legal exposures .

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