Robert J. Pagano, Jr.
WATTS WATER TECHNOLOGIESAbout Robert J. Pagano, Jr.
Chief Executive Officer, President, and Chairperson of the Board of Watts Water Technologies since May 2014 (Chair since February 2022). Age 62 as of the 2025 Annual Meeting; CPA who started his career at KPMG, later serving at ITT Corporation as Senior Vice President and President of ITT Industrial Process before joining Watts; also served twice as interim CFO (Oct 2014–Apr 2015; Apr 2018–Jul 2018) . Performance under his leadership features 2024 sales of $2.25B (+10% y/y), EPS $8.69 (+11% y/y), operating margin 17.3% (+20 bps), and operating cash flow of $361M (vs. $311M in 2023) . Pay-versus-performance shows cumulative TSR index of 212.18 for 2024 (vs. 142.93 for Russell 2000 peer group), net income $291.2M, and ROIC 24.4%; 2023 TSR 215.68, net income $262.1M, ROIC 24.3% . 2022 PSU cycle (2022–2024) paid out at 189% based on Revenue CAGR 4.3% and ROIC 24.4% .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| ITT Corporation | Senior Vice President; President, ITT Industrial Process | Apr 2009–May 2014 | Led a global industrial process unit at a diversified manufacturer of engineered components |
| ITT Corporation | VP Finance; Corporate Controller; President, Industrial Products | 1997–2009 (joined 1997) | Progressive finance and operating leadership roles across ITT |
| Watts Water Technologies | Interim Chief Financial Officer | Oct 2014–Apr 2015; Apr 2018–Jul 2018 | Provided transitional finance leadership during CFO changes |
| KPMG LLP | Auditor (CPA) | Pre-1997 | Early-career public accounting experience; CPA credential |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Applied Industrial Technologies, Inc. | Director | Since Aug 2017 | Distributor in industrial supplies and fluid power; public company board service |
| The Water Council | Director | Since Oct 2021 | Non-profit advancing freshwater innovation and stewardship |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | $1,000,575 | $1,039,775 | $1,081,500 |
| Approved 2024 Base ($) and merit increase | $1,092,000 (+4.0%) effective Apr 1, 2024 |
Performance Compensation
Annual Incentive Design (2024)
| Metric | Weighting | Threshold | Target | Maximum | Actual | Achievement % |
|---|---|---|---|---|---|---|
| Consolidated Net Sales ($mm) | 25% | $1,916 | $2,247 | $2,593 | $2,252 | 101.5% |
| Consolidated Adjusted Net Income ($mm) | 40% | $241 | $282 | $326 | $301 | 144.4% |
| Consolidated Free Cash Flow ($mm) | 25% | $218 | $256 | $307 | $333 | 200.0% |
| Individual Component | 10% | — | — | — | Exceeded objectives | 16.1% weighted achievement |
Payout curve: 50% of target at Threshold, 100% at Target, 200% at Maximum .
| Bonus Summary | Value |
|---|---|
| Target bonus (% of salary) | 125% |
| Target bonus ($) | $1,365,000 |
| Financial achievement (weighted) | 133.1% |
| Individual achievement (weighted) | 16.1% |
| Bonus as % of target | 149.2% |
| Actual bonus paid ($) | $2,036,580 (paid Mar 2025) |
Long-Term Incentives (2024 grants)
| Award | Grant date | Target value ($) | Units (target) | Vesting/Performance |
|---|---|---|---|---|
| Performance Stock Units (PSUs) | Mar 14, 2024 | $2,730,000 | 13,440 target; 26,880 max | Performance period ends Dec 31, 2026; matrix on Revenue CAGR and ROIC; 0–200% payout; dividend equivalents accrue on earned shares |
| Deferred Stock Awards (DSAs) | Mar 14, 2024 | $2,730,000 | 13,440 DSAs | Service-only vesting 33⅓% annually over 3 years; dividend equivalents accrue and are paid at vest |
| Management Stock Purchase Plan (MSPP) RSUs (2024 bonus) | Mar 14, 2025 | 50% of 2024 bonus contributed; 6,032 RSUs acquired at $168.80 discounted price (20%) | 6,032 | Vest 33⅓% annually starting 1 year post-grant; settlement can be deferred; dividend equivalents credited |
Recent PSU settlements: 2022 PSU cycle settled Feb 3, 2025 at 189% payout; Pagano earned 23,150 shares .
Equity Ownership & Alignment
| Beneficial Ownership as of Mar 1, 2025 | Shares | Notes |
|---|---|---|
| Class A common stock held directly | 139,080 | |
| Deferred stock awards vesting within 60 days | 12,597 | |
| RSUs settling within 60 days | 9,314 | |
| Total beneficial | 160,991 (less than 1% of class A; voting power <1%) |
Outstanding/unvested awards at Dec 31, 2024:
| Award Type | Grant date | Unvested units | Market value ($) at $203.30 |
|---|---|---|---|
| DSA | Mar 15, 2022 | 4,084 | $830,277 |
| DSA | Mar 13, 2023 | 8,069 | $1,640,428 |
| DSA | Mar 14, 2024 | 13,440 | $2,732,352 |
| MSPP RSUs | Mar 15, 2022 | 3,105 | $631,247 |
| MSPP RSUs | Mar 15, 2023 | 5,181 | $1,053,297 |
| MSPP RSUs | Mar 15, 2024 | 6,223 | $1,265,136 |
| PSUs (2023 cycle tracking above target) | Mar 13, 2023 | 24,204 (max shown per SEC rules) | $4,920,673 |
| PSUs (2024 cycle tracking at target) | Mar 14, 2024 | 13,440 (target) | $2,732,352 |
Ownership policies:
- Stock ownership guideline: CEO must hold ≥5× base salary; all executives with ≥5 years tenure were in compliance as of Q2 2024 .
- Hedging/pledging: Prohibited for all employees, officers, and directors; no margin or derivative transactions allowed .
- Clawback: Mandatory recovery of erroneously received incentive compensation for three years preceding required restatement, per NYSE/SEC rules .
Vesting supply and potential selling pressure:
- DSAs from 2022/2023/2024 vest on grant anniversaries (33⅓% per year) .
- MSPP RSUs from Mar 14, 2025 (6,032 RSUs) begin vesting Mar 14, 2026 (then 2027, 2028) .
- PSUs (2024 grant) settle after Dec 31, 2026 with 0–200% payout based on Revenue CAGR and ROIC .
Employment Terms
| Provision | Key terms |
|---|---|
| Employment agreement | None; executives (including CEO) do not have individual employment agreements |
| Severance (non‑cause) | Lump sum equal to 12 months COBRA premiums plus 1× base salary; CEO receives 2× base salary . As of Dec 31, 2024, Pagano would receive $2,207,268 for involuntary termination without cause . |
| Change in control (double trigger) | If involuntary termination without cause or resignation for good reason within 24 months post‑CIC (or within 6 months pre‑CIC): 24 months COBRA premiums plus 2× (base salary + target bonus); equity acceleration: time‑based awards fully vest; performance awards vest at greater of target or performance-to-date . Pagano’s cash severance would be $4,960,536 under CIC scenarios as of Dec 31, 2024 . |
| Equity acceleration amounts at Dec 31, 2024 | Under CIC: DSAs 25,593 shares ($5,203,057), PSUs 53,532 shares ($10,883,056), RSUs 14,509 ($901,461 net of purchase price) . |
| Non‑compete/non‑solicit | Required in severance agreements as determined appropriate; non‑disparagement covenants and release also required . |
| Retirement vesting | Eligible executives (including Pagano) continue vesting in DSAs post‑retirement and receive pro‑rated PSUs based on actual performance; added condition to remain employed through last working day of grant year to qualify . |
Board Governance
- Board service: Director since 2014; Chairperson since Feb 2022; CEO/Chair dual role adopted after a leadership structure review; Lead Independent Director role established (David Dunbar since 2023) with responsibilities including presiding over executive sessions, liaison duties, advising on agendas, and information needs .
- Independence: Pagano is not independent due to being CEO; company is a “controlled company” under NYSE rules (Horne family holds 68.3% voting power via dual-class B stock and 1997 Voting Trust), but Watts does not use controlled-company exemptions and maintains a majority independent board and independent committees .
- Committee memberships: Audit (Raines, Boll, Napolitano, Reitmeier); Compensation (Goeser – Chair; Dubose; Dunbar); Governance & Sustainability (Dubose – Chair; Boll; Dunbar; Goeser; Napolitano; Raines; Reitmeier). Pagano is not on these standing committees .
- Board effectiveness: 2024 Board met 7 times; all incumbent directors attended ≥75% of Board and committee meetings; quarterly executive sessions of non-management directors .
- Director compensation: CEO receives no additional compensation for board service; non‑employee director program includes $85,000 cash retainer, leadership/chair retainers, and ~$130,000 annual stock grant; deferral program available .
Compensation, Incentives, and Peer Benchmarking
- Philosophy and mix: Significant at‑risk pay via annual incentive and PSUs/DSAs; benchmarking targets around peer median .
- Annual incentive metrics: Net sales, adjusted net income, free cash flow, plus individual objectives; maximum payout capped at 200% .
- Long‑term metrics: PSUs tied to Revenue CAGR and ROIC, aligned to strategic plan; PSUs pay 60% at threshold, 200% at max .
- Peer group (2024–2025 reviews): A.O. Smith, Barnes Group, Chart Industries, Crane, EnPro, Franklin Electric, Graco, Itron, ITT, Mueller Industries, Mueller Water Products, Nordson, Pentair, SPX Technologies, Zurn Water Solutions; Pearl Meyer confirmed group suitability and independence as consultant .
- Say‑on‑Pay: 2024 vote received >98% approval; annual advisory votes adopted .
Performance & Track Record
| Metric | 2023 | 2024 |
|---|---|---|
| Sales ($B) | $2.06 (+4% y/y) | $2.25 (+10% y/y) |
| Operating margin (%) | 17.1 (+120 bps y/y) | 17.3 (+20 bps y/y) |
| EPS ($) | $7.82 (+5% y/y) | $8.69 (+11% y/y) |
| Net cash from operations ($M) | $311 | $361 |
| Selected CSR/ESG recognitions | Newsweek Most Responsible Companies (sixth year), America’s Greenest Companies (second year), USA Today Climate Leaders (second year) |
Latest quarterly context (Q3 2025): Reported sales $612M (+13% reported; +9% organic), adjusted EBITDA $128M (+21%), adjusted EBITDA margin 20.9% (+140 bps), adjusted EPS $2.50 (+23%); strong Americas growth, improving Europe margins, flat APMEA; continued tariff management and acquisitions integration .
Compensation Committee Analysis
- Committee composition: All independent directors; chaired by Louise K. Goeser; authority to retain independent consultants; Pearl Meyer engaged and assessed as independent; annual risk assessment performed (no excessive risk taking) .
- Clawback and governance controls: NYSE/SEC-compliant clawback; hedging/pledging prohibited; robust ownership guidelines; annual say-on-pay .
Equity Ownership, Hedging, and Pledging
- Beneficial ownership less than 1% of class A; mix of directly held shares plus time‑based awards due to vest within 60 days .
- Hedging/pledging prohibited; no margin or derivatives; Insider Trading Compliance Policy filed as an exhibit to 2024 Form 10‑K .
- Ownership guidelines met (≥5× salary requirement for CEO) .
Employment Contracts, Severance, and Change-of-Control Economics
- No employment agreement .
- Severance: CEO—2× base salary plus 12 months COBRA premiums for non‑cause involuntary termination .
- Change-in-control: 2× (base salary + target bonus) plus 24 months COBRA premiums; equity acceleration including PSUs at greater of target or performance-to-date; 280G cutback if beneficial to executive .
- Illustrative amounts (as of Dec 31, 2024): Non‑cause termination $2,207,268; CIC cash $4,960,536; CIC equity acceleration DSAs 25,593 shares ($5.20M), PSUs 53,532 ($10.88M), RSUs 14,509 ($0.90M net) .
- Retirement vesting eligibility: Pagano meets requirements; DSAs continue vesting; PSUs pay pro‑rata based on actual performance .
Related Party, Dual-Class, and Control Considerations
- Dual class structure (Class B 10 votes/share) established pre‑IPO; controlled company under NYSE via Horne Voting Trust holding 68.3% voting power; Watts does not use controlled company exemptions; majority independent board; disclosure of director emeritus role for Timothy P. Horne .
- Related party transactions governed by Board policy and Governance & Sustainability Committee oversight .
Say‑on‑Pay & Shareholder Feedback
- 2024 say‑on‑pay approval >98%; annual frequency adopted .
- Audit fees and independence oversight detailed; KPMG ratification recommended .
Investment Implications
- Strong pay-for-performance alignment: Annual and long‑term incentives tied to sales, profitability, free cash flow, and multi‑year Revenue CAGR/ROIC; high say‑on‑pay support suggests shareholder approval of design .
- Retention and succession: Retirement vesting eligibility (DSAs, pro‑rated PSUs) reduces forced exit risk and supports orderly transition; severance/CIC terms are standard and not excessive (no excise tax gross‑ups; cutback applied) .
- Trading signals from award calendars: Meaningful scheduled vesting across DSAs and MSPP RSUs (2022–2025 grants) could create supply over the next 1–3 years, but hedging/pledging prohibitions and ownership guidelines mitigate misalignment; MSPP participation (50% of bonus in RSUs) reinforces skin‑in‑the‑game .
- Governance risk mitigants: CEO/Chair dual role offset by active Lead Independent Director; majority‑independent board and independent committees; controlled company status disclosed, with no exemptions used .
- Operational performance momentum: 2024 record results and Q3 2025 margin expansion support incentive realizability; long‑term PSUs historically paying above target (e.g., 2021 200%, 2022 189%) indicate well‑calibrated goals tied to ROIC and growth .