KEI 2021 Proxy

DEF 14A 1 kei2021proxy.htm KIMBALL ELECTRONICS, INC. FORM DEF 14A KEI 2021 Proxy

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Notice of 2021 Annual Meeting and Proxy Statement

Environmental, Social, and Governance

We published our second Environmental, Social, and Governance (“ESG”) Report in December 2020.

The report provides us an opportunity to further showcase the many ways we live up to our Purpose Statement, “Creating Quality for Life.” Our ESG beliefs and practices are near and dear to us. They are also important to all of our stakeholders and to the greater good of humankind. We will strive each year for improvements in our reporting and transparency.

Despite the global interruptions and challenges caused by the COVID-19 pandemic, 2020 brought out the best in our people in various ways, many of which are noted in our annual report. In the Environmental section of the report, we note that the pandemic posed new challenges for us when it came to ensuring employee safety, which is always our number one priority. The Social section of the report proves that the pandemic did not detract us from demonstrating our commitment to the human rights, labor, and societal elements of our social focus. The Governance section of the ESG report provides a thorough overview of our commitment to good corporate governance.

Our Company’s purpose is Creating Quality for Life for our wide range of stakeholders. I hope the ESG report demonstrates how Creating Quality for Life is the perfect purpose statement for us. It is simply what we do, and what we do well. Our Company is a responsible guardian of our economic, environmental, and human resources. The actions we take in our ESG efforts positively affect our business strategies and benefit our people, our customers, and our communities. We have always taken pride in doing the right thing. What our 2020 ESG report clearly shows is that we can still do the right thing—even during the toughest of times.

Don Charron, Chairman of the Board / CEO

The Kimball Electronics 2020 ESG Report can be found on the Company’s website at:

https://www.kimballelectronics.com/esg


CHAIRMAN’S OVERVIEW

Dear Share Owner:

Fiscal year 2021 was a full year of operating in a pandemic world. The impacts were significant and far-ranging, from shutdowns to shortages and everything in between. But throughout, our top priority remained the health and safety of our employees, customers, suppliers, and communities. Despite the challenges, our team did a fantastic job in delivering outstanding results. Here is a recap:

Our Successes

•Records - new highs for net sales, operating income, net income, diluted earnings per share, cash flow from operations, and return on invested capital.

•Customer Loyalty - sales to customers that have been doing business with us for over 10 years increased to 81% of net sales.

•Service and Performance Excellence Recognition - Highest Overall Customer Rating in CIRCUITS ASSEMBLY 2021 Service Excellence Awards.

•Capital Expenditures - invested approximately $39 million to support future growth.

•Return to Share Owners - repurchased $3.0 million of shares, bringing the total since inception of the repurchase program to $80 million of $100 authorization.

Our Fiscal Year 2021 Results

•Net Sales - $1.3 billion, an 8% increase over fiscal year 2020.

•Sales by Market Vertical:

◦Automotive - $552 million - up 21%.

◦Medical - $385 million - down 3%.

◦Industrial - $294 million - up 8%.

◦Public Safety - $48 million - down 14%.

•Operating Income Margin - 5.1%.

•Net Income - $56.8 million.

•Diluted Earnings Per Share - $2.24.

•Return on Invested Capital - 13.1%.

•Available Liquidity - $207 million at June 30, 2021.

Other Key Accomplishments

•Expansion - began production facility expansions in Thailand and Mexico.

•Employee Engagement - record high scores in our employee engagement metrics measuring how we live up to our Mission and Guiding Principles.

For more detailed insights into the past year, I encourage you to read our Annual Report and Form 10-K, as well as follow us on our website at www.kimballelectronics.com.

I would like to extend a personal invitation for you to attend our annual meeting in person at our Kimball Electronics Headquarters, located at 1205 Kimball Blvd. in Jasper, Indiana, beginning at 9 a.m. EST on Tuesday, November 9, 2021. In the event of a significant change in the pandemic status, we have contingency plans in place to hold a virtual meeting. I hope to see you there.

Donald D. Charron

Chairman and Chief Executive Officer

Kimball Electronics, Inc.


NOTICE OF ANNUAL MEETING OF SHARE OWNERS

KIMBALL ELECTRONICS, INC.

1205 Kimball Blvd.

Jasper, Indiana 47546

(812) 634-4000

To the Share Owners of Kimball Electronics, Inc.:

The annual meeting of the Share Owners (the “2021 Annual Meeting”) of KIMBALL ELECTRONICS, INC., an Indiana corporation (the “Company”), will be held at the principal offices of the Company, 1205 Kimball Blvd., Jasper, Indiana, on Tuesday, November 9, 2021, at 9:00 A.M., Eastern Standard Time (EST), for the following purposes:


1.			To elect three (3) directors of the Company (“Proposal 1”).

2.			To ratify the selection of the Company’s independent registered public accounting firm for fiscal year 2022 (“Proposal 2”).

3.			To approve, by a non-binding, advisory vote, the compensation paid to the Company’s Named Executive Officers (“Proposal 3”).

4.			To consider and transact such other business as may properly come before the meeting or any adjournments thereof.

COVID-19

We intend to hold our 2021 Annual Meeting in person as described herein; however, as part of our precautions regarding COVID-19, we are planning for the possibility that the Company’s 2021 Annual Meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance by filing Definitive Additional Materials with the Securities and Exchange Commission along with notice of the changes to the 2021 Annual Meeting. Details on how to participate will be available at https://investors.kimballelectronics.com/.

By Order of the Board of Directors

John H. Kahle, Secretary

September 28, 2021


Annual Share Owners Meeting Information
DATE			November 9, 2021
TIME			9:00 a.m. EST
PLACE			Kimball Electronics, Inc. Headquarters 1205 Kimball Blvd. Jasper, IN 47546
RECORD DATE			September 10, 2021
VOTING ELIGIBILITY			Registered Share Owners as of the Record Date are entitled to submit proxies or vote in person at the Annual Share Owners Meeting.

Meeting Agenda Items


Proposal	Board Recommendation	Rationale
Proposal 1: Elect three Directors for a three-year term: • Donald D. Charron • Colleen C. Repplier • Gregory J. Lampert	Vote FOR each of the candidates.	All are very qualified and capable directors and will serve the interests of our Share Owners well. Mr. Charron has been the Company CEO since the spin-off in 2014. Ms. Repplier and Mr. Lampert bring unique capabilities as former operating executives of public companies.
Proposal 2: Ratify the selection of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm	Vote FOR ratification of the selection.	Deloitte & Touche is a major public accounting firm that is very well qualified to conduct an independent audit of Kimball Electronics and has done so very capably for many years.
Proposal 3: To approve, by a non-binding, advisory vote, the compensation paid to the Company’s Named Executive Officers	Vote FOR the advisory proposal approving the compensation paid to our Named Executive Officers.	The Company’s Named Executive Officers are qualified and capable executives with many years of industry experience and tenure with the Company. Their compensation has been reviewed against relevant market data and was deemed reasonable and competitive by the Compensation Committee. Market competitive compensation is critical to retain talented management for the Company.


YOUR VOTE IS IMPORTANT! WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE PROMPTLY BY TELEPHONE OR THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE NOTICE OR THE PROXY CARD, OR IF YOU RECEIVED A PRINTED SET OF PROXY MATERIALS, YOU MAY VOTE BY SIGNING, DATING, AND MAILING THE ACCOMPANYING PROXY CARD. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IF YOU ATTEND THE MEETING IN PERSON.


TABLE OF CONTENTS
			Page No.
Election of Directors			7
Communicating with the Board			9
Corporate Governance at Kimball Electronics			10








Review and Approval of Transactions with Related Persons			19
Report of the Audit Committee			20
Selection of Independent Registered Public Accounting Firm			21
Compensation Discussion and Analysis			22






Report of the Compensation and Governance Committee			37
Compensation Related Risk Assessment			37
Executive Compensation			37







Equity Compensation Plans Information			46
Proposal to Approve, in a Non-Binding, Advisory Vote, the Compensation Paid to our Named Executive Officers			46
Submission of Nominations and Proposals for 2022			47
Meeting and Voting Information			47
Share Ownership Information			50
Delinquent Section 16(A) Reports			51
Appendix A - Approval Process for Services Performed by the Independent Registered Public Accounting Firm			A-1


ELECTION OF DIRECTORS

NOMINEES FOR ELECTION AS DIRECTORS BY HOLDERS OF COMMON STOCK

Our Board of Directors (the “Board”) is divided into three classes with approximately one-third of the directors up for election each year. We have noted the class of each director and the date of their election in their qualification descriptions below. At the 2021 Annual Meeting of Share Owners, the Share Owners will elect each of three (3) directors to serve a term of three years, or until their respective successors have been duly elected and qualified.

A director elected by the Board to fill a vacancy holds office until the end of the term for which such director’s predecessor was elected, or if the vacancy arises because of an increase in the size of the Board, at the end of the term specified at the time of such director’s election or selection, and until that director’s successor has been elected and qualified or until the Board accepts his or her earlier resignation, or the director’s disqualification, disability, or removal.

Each nominee will begin service as a director of Kimball Electronics, Inc. (“we,” “us,” “our,” “Kimball Electronics,” or the “Company”) if elected. Each nominee has consented to serve as a director. If for any reason any such nominee shall become unable or unwilling to serve, the proxies will be voted to fill any vacancy so arising in accordance with the discretionary authority of the persons named in the accompanying proxy. The Board is confident that each such nominee will be able to serve.

The Class I nominees to be elected, serving a three-year term and then up for re-election in 2024, are:

Donald D. Charron

Colleen C. Repplier

Gregory J. Lampert

Below, we further describe the unique individual qualifications and skills of our nominees that led our Board to the conclusion that each should serve as a director and have included information each director has given us about their age, positions held, principal occupation, and business experience for at least the past five years, and the names of other publicly-held companies of which they currently serve (or during the past five years has served) as a director.

The nominees are:


	Donald D. Charron	Chairman of the Board, Chief Executive Officer

	Mr. Charron serves as Kimball Electronics’ Chairman of the Board and Chief Executive Officer. Prior to 2014, he served as an Executive Vice President of Kimball International, Inc. (our former parent company), a member of the Board of Directors of Kimball International, and the President of Kimball Electronics Group. Mr. Charron had led the EMS segment of Kimball International since joining Kimball International in 1999. Prior to that, he spent six years with Rockwell International in various leadership roles. Mr. Charron earned a Bachelor of Science degree in electrical engineering from the South Dakota School of Mines and Technology in 1987. Mr. Charron’s extensive contract electronics industry experience, as well as his intimate knowledge of Kimball Electronics provides valuable operational, strategic, and global market insights.
Director since 2014 Class I


	Colleen C. Repplier	Director

Director since 2014 Class I	Ms. Repplier is a strong and respected leader in the industrial, energy and commercial building industries, with more than three decades of operational and P&L experience in diversified manufacturing companies. Ms. Repplier began her career in the energy industry, holding roles in engineering and marketing with Westinghouse Electric Company, construction design with Bechtel Corporation, and progressing roles in engineering, process improvement, product management, sales and general management at General Electric. She also held senior leadership positions and was a company officer at Home Depot and HD Supply before joining Tyco in 2007. At Tyco, she served as President of the Tyco Fire Protection business until the company was acquired by Johnson Controls (JCI). She retired from JCI in her role as the Vice President and General Manager of a $4.5 billion global portfolio of HVAC product businesses with 20,000 employees in June 2018. Ms. Repplier received her Bachelor of Science degree in electrical engineering at the University of Pittsburgh. She later received her MBA from the University of Central Florida, where she also taught as an adjunct professor in the school of business. She is a certified Six Sigma Master Black Belt. In 2018, Ms. Repplier joined Stockholm-listed bearing and seal manufacturing company SKF as a director. In August 2019 she joined Triumph Group (NYSE: TGI) as a director. Ms. Repplier’s engineering background and extensive experience in operations, supply chain management, and six-sigma methodologies provide broad insights into operational planning and improvement opportunities.


	Gregory J. Lampert	Director

	Mr. Lampert is the Chief Executive Officer and President of Omni Cable Corporation, a distributor of specialty wire and cable, which he joined in February 2017. Prior to his executive position at Omni Cable Corporation, he was Chief Executive Officer of the Americas region of General Cable beginning in January 2013 and held the same position for the North America region beginning in 2008. Prior to that, he held various management positions at General Cable after joining the company in 1998. Prior to joining General Cable, he held engineering and commercial management positions with The Dow Chemical Company and Cintas Corporation. Mr. Lampert is a director of Omni Cable Corporation, as well as Xtek Corporation, a for-profit private company. Mr. Lampert has a Bachelor of Science degree in chemical engineering from the University of Cincinnati and an MBA from the University of Chicago with a concentration in Finance and Strategy. Mr. Lampert’s previous board experience and financial background, as well as experience in managing sales organizations provide broad insights into capital planning and sales operations.
Director since 2014 Class I
	The Board of Directors recommends a vote “FOR” the election of each of the Class I director nominees.


			Other Directors Not Standing for Re-election in 2021


	Holly A. Van Deursen	Director

	Ms. Van Deursen currently serves as an independent director on the boards of two public companies, Albemarle Corporation (NYSE: ALB) and Synthomer, plc (LON: SYNT). She has also served as an independent director on the boards of Capstone Green Energy (formerly Capstone Turbine Corporation) (Nasdaq: CGRN) from 2007 to August 2021; Actuant Corporation, now Enerpac Tool Group Corporation (NYSE: EPAC), from 2008 to 2020; Bemis Company from 2008 to 2019; and Petroleum Geo-Services ASA from 2006 to 2018. Beginning in 1989, she served in various senior executive management roles for BP p.l.c., a $250 billion oil, gas and energy company operating in North America, Asia and Europe, before retiring in 2005 as a member of the top-forty executive management team. Prior to 1989, she served in various engineering, manufacturing and product development roles for Dow Corning Corporation. Ms. Van Deursen received her Bachelor of Science degree in chemical engineering from the University of Kansas and her MBA from the University of Michigan. Ms. Van Deursen’s experience in executive roles and as a public company director provides the Board significant insights into board operations and governance, leadership, and international business.
Director since 2019 Class II - re-election in 2022


	Michele A. M. Holcomb, PhD	Director

	Dr. Holcomb currently serves as Executive Vice President, Chief Strategy and Business Development Officer at Cardinal Health, a global, integrated healthcare services and products company, beginning in 2017. From 2012 to 2017, she held positions as Chief Operating Officer of Global R&D and Senior Vice President of Strategy, Portfolio, Search and Partnerships at Teva Pharmaceuticals, a global manufacturer of generic medicines. Prior to that, Dr. Holcomb served as a partner in the Global Pharmaceutical Practice at consulting firm McKinsey & Company. Dr. Holcomb received her Bachelor of Science degree in chemistry from Stanford University and a Doctorate in Chemistry from the University of California at Berkeley. Dr. Holcomb’s experience and background provide the Board with valuable insights in the areas of strategy, product development, and operations.
Director since 2019 Class II - re-election in 2022


	Robert J. Phillippy	Director

	Mr. Phillippy is an independent consultant, advising technology companies on a range of strategic, operational, and organizational issues. He retired in 2016 from his position as President, Chief Executive Officer, and a Director of Newport Corporation, a publicly-traded lasers, optics and photonics technology company with 15 manufacturing locations in seven countries. He joined Newport in 1996 and served in various executive management roles prior to his appointment as Chief Executive Officer in 2007. Previously, he served for 12 years in various management roles for Square D Company, a division of Schneider Electric. He currently serves on the boards of directors of ESCO Technologies (NYSE: ESE) and Materion Corporation (NYSE: MTRN). Mr. Phillippy received a Bachelor of Science degree in electrical engineering from the University of Texas at Austin in 1983 and a Master of Science degree in management from Northwestern University in 1993. Mr. Phillippy’s experience as a chief executive officer of a publicly-traded technology and manufacturing company adds significant leadership, strategy, and operational experience to the Board.
Director since 2018 Class III- re-election in 2023


	Gregory A. Thaxton	Director

	Mr. Thaxton is the former Executive Vice President and Chief Financial Officer of Nordson Corporation (Nasdaq: NDSN), a $2.1 billion publicly traded industrial technology company focused on precision dispensing, fluid management, and related processes with operations in nearly 40 countries. Mr. Thaxton retired from Nordson on August 28, 2020. He had more than thirty years of experience with Nordson, serving in various domestic and international financial management and leadership roles with Nordson after beginning his career with a Big Four public accounting firm. Mr. Thaxton also serves on the board of the non-profit Lorain County Community College Foundation, serving as Treasurer of the Executive Committee, and is a member of the Finance, Audit, and Compliance Committees. Mr. Thaxton is a Certified Public Accountant (inactive). Mr. Thaxton received his Bachelor of Science degree in accounting from Miami University in 1983 and his MBA in international management from Baldwin Wallace University in 1995. Mr. Thaxton’s experience adds significant financial, accounting, capital structure, and SEC reporting expertise to the Board.
Director since 2017 Class III - re-election in 2023


COMMUNICATING WITH THE BOARD

Share Owners may communicate with a member of the Board by sending comments in care of the Secretary of Kimball Electronics at 1205 Kimball Blvd., Jasper, Indiana 47546. The Secretary has the discretion to forward the correspondence to the director, or if circumstances dictate, to other departments within the Company to which such communication is more appropriately addressed. A log of correspondence received and copies of the correspondence are available to any director who wishes to review them.


CORPORATE GOVERNANCE AT KIMBALL ELECTRONICS

Director Qualifications

The rapidly changing business conditions and markets in which we operate require a high-performance and committed Board. Individual Board members should possess a broad variety of personal attributes, experience, and skills to give the Board the depth and breadth necessary to effectively oversee management on behalf of our Share Owners. Personal attributes include integrity, commitment to Kimball Electronics’ Vision and Guiding Principles, practical judgment, broad complementary education, and willingness to commit the time and energy necessary to effectively contribute as a Board member. The matrix below illustrates the Board’s collective assessment of the major strengths, skills, and experience determined to be most critical to a well-balanced and effective Board that is best able to understand the strategies and risks related to our operations:

DIRECTOR SKILLS AND EXPERIENCE

Director

Holly Van Deursen

Michele Holcomb

Bob Phillippy

Greg Lampert

Colleen Repplier

Greg Thaxton

Don Charron

Age

Independent Director

Committee:

AC - Audit, CGC - Compensation & Governance,

LID - Lead Independent Director

CGC

CGC Chair

CGC, LID

AC Chair

Strengths, Skills, and Experience

Public Company Experience

Active/Recently Retired Public Company CEO

Active/Recently Retired Public Company Executive

Electronics Industry or Related Experience

Medical Industry or Related Experience

Manufacturing Operations Experience

Cyber Security

International Business Experience

Mergers and Acquisition Experience

Strategy Development

Marketing Expertise

Supply Chain and Logistics Experience

Business Development/Growth

CFO Experience

Public Company Board Experience

Capital Structure (Finance/Banking) Expertise

Talent Development Experience

PR/Communication Experience

Government Relations Experience

Audit/Internal Control Experience

Public Financial Reporting Experience

Director Independence

The Board consists of a majority of “independent directors,” as noted in the table above and as defined by the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”), and the Board has determined that such independent directors have no relationship with us that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. The independent directors nominated for election are Ms. Repplier and Mr. Lampert. All of our independent directors meet after each Board meeting for regularly scheduled executive sessions and at other times as they deem appropriate.

We are committed to board refreshment. To strike a balance between retaining independent directors with deep knowledge of our business and adding directors with a fresh perspective, the Board seeks to maintain an average tenure of less than 10 years for its independent directors as a group by setting reasonable term limits. The current average tenure for our independent directors as of the end of fiscal year 2021 is 4.2 years.

Governance Philosophy

The Board is committed to good corporate governance. The Compensation and Governance Committee of the Board periodically reviews the Company’s overall governance structure and makes recommendations on governance issues or practices as warranted. As part of that commitment, during fiscal year 2021 the Committee recommended, and the Board adopted, significant enhancements to the Company’s Articles of Incorporation and By-Laws that “opted-out” of the Indiana classified board statute and provided the Share Owners the right to amend the Company’s By-Laws by majority vote.

Hedging Policy

We consider it improper and inappropriate for any director or executive officer to engage in short-term or speculative transactions in Company stock or debt. Such activities may violate applicable laws, but more importantly may put the personal gain of the individual in conflict with the best interests of the Company and its Share Owners, or create the appearance that the individual is either trading based on material non-public information or is focused on short-term performance at the expense of long-term objectives. Therefore, we have adopted a policy prohibiting such transactions by directors and executive officers, including short sales, hedging transactions, publicly traded options, margin accounts, and pledges.

Board Leadership Structure

The Board believes that we best serve our Share Owners if the Board retains flexibility to decide what leadership structure works best for us under our current facts and in our current circumstances. Currently, the Board combines the roles of Chairman of the Board and Chief Executive Officer and, accordingly, maintains a separate position of Lead Independent Director. Our CEO has primary responsibility for our day-to-day leadership and strategic direction, and our Lead Independent Director facilitates oversight of management, promotes communication among management and between management and the Board, presides over meetings of the independent directors, and helps to set and maintain Board culture. We believe that combining the Chairman and CEO roles aligns the Board and management on key strategy and Board operations. In addition, our combined Chairman/CEO has multiple, in-depth perspectives on and knowledge of our markets and operations and can assist the Board in quickly enacting corporate initiatives. Our unified role ensures strong, central leadership, increases efficiency, and provides the Board with superior knowledge and timely information about our strengths and weaknesses and the issues we need to address moving forward.

Board Classification

The Board has concluded that a three-tiered classified board is the appropriate governance structure for the Company and in the best interests of our Share Owners for the following reasons:

•Independence - Outside Board members can be more direct and independent of Company management knowing they have at least a three-year term to serve.

•Stability and Continuity - The Company’s Board can better perform its oversight responsibilities with seasoned Board members who have perspective on the Company’s markets, operations, and long-term strategies that is provided by experience gained over a multi-year tenure. Annual elections risk the potential instability of election of a very inexperienced Board.

•Long-Term Focus - As a public company, the Board’s primary focus is on the long-term best interests of our Share Owners. This includes oversight of the long-term strategic vision of the Company. A three-year term enables effective execution of that vision.

•Share Owner Accountability - Our classified Board has at least two directors who stand for election each year, and the Board feels this promotes Share Owner accountability because the Company’s Board has the primary fiduciary duty and is fully accountable to oversee the Company in the best interests of all Share Owners. In addition, the Board is accountable to long-term Share Owners through its existing governance principles, including highly-qualified, independent directors; board refreshment; tenure and retirement age policies; a strong lead independent director; and a commitment to diversity. In addition, the Board has a robust commitment to direct engagement with our Share Owners, including by conducting regular say on pay measures.

•Share Owner Value - The Board has reviewed and decided that there is well-reasoned academic research both for and against the proposition that the classification or declassification of a board has a correlation to increased Share Owner value. Therefore, the Board has judged this not to be a compelling reason for declassification.

•Statutory Requirement - As an Indiana company, Indiana corporate statutes mandate a classified board structure. While the Company states in its By-Laws that it does not intend for these provisions of Indiana’s corporate statutes to apply to the classes and terms of its Directors, the statutes reflect the judgment of the elected legislators of our state of incorporation as to an appropriate board structure.

The Board’s Strategic Planning Role

The Board works actively with management to formulate and review Kimball Electronics’ long-term corporate strategy. Each quarter, the Board and management confer on the execution of our long-term strategic plans, the status of key initiatives, and the key opportunities and risks facing us. In addition, the Board regularly conducts in-depth, long-term strategic reviews with our senior management team, and dedicates substantial parts of two meetings each year to developing our long-term strategy and to reviewing and approving management’s strategic plan for the Company. During these reviews, the Board and management discuss the overall business landscape, emerging competitive threats in our industries, and short and long-term plans and priorities within our strategy. Through these processes, the Board brings its collective, independent judgment to bear on the most critical long-term strategic issues facing Kimball Electronics.

How the Board Addresses and Oversees Risk

The Board takes an active role, as a whole and at the committee level, in overseeing management of our risks. The Board approaches our risk management process in an intelligent manner based on the fundamental recognition that risk management in any business enterprise requires an appropriate balance of two distinct aspects of risk:

•Value Preservation — recognizing and mitigating as much as possible the risk of potential for loss or harm to any element of our business.

•Value Creation — embracing the risks inherent in any business endeavor in order to reap the rewards of growth and profitability.

Kimball Electronics has a formalized Enterprise Risk Management (ERM) process. It is based on a four-phase continuous approach consisting of risk program development, risk assessment and prioritization, risk response, and risk validation and monitoring. We evaluate a broad range of operational, strategic, compliance, and reporting risks. Our senior leaders meet quarterly, and we also identify risks through interviews, surveys, and discussions of our leadership teams and others throughout our organization. Our leaders then rank and prioritize these potential risks along the two continuums of “likelihood” and “impact” and our team develops a specific remediation strategy for the significant risks. Individually and collectively, our leaders continually monitor, reassess, and validate risks and mitigation efforts throughout the year, including through regular meetings of our executive team.

We present relevant ERM information to our Committees at each of their quarterly meetings. The Board reviews the same information at each of its meetings and receives further reports from the Audit and Compensation and Governance Committees about specific financial and governance risks and mitigation efforts in areas overseen by those committees. The Board also implements its risk oversight responsibilities by having management provide appropriate briefings and informational sessions on the significant risks that the Company faces. Directly and through its Committees, the Board’s engagement with management includes broad strategic and operational discussions about interrelated risks, and more focused discussions about individual risks. For example, the Compensation and Governance Committee, along with the Board’s independent directors, evaluates risks related to compensation of our executive officers and our incentive and equity compensation plans.

Board Oversight Roles

Our Share Owners elect our Board to oversee management and to serve Share Owners’ long-term interests. As discussed above, our Board and its Committees work closely with management to provide oversight, review, and counsel related to long-term strategy, risks, and opportunities, and feedback we receive from our Share Owners. In particular, the Board oversees our corporate social responsibility efforts, works with management to align our goals with our long-term strategy, oversees risk management, performs annual evaluations of itself and our CEO, oversees human capital management and CEO succession planning, establishes accountability, and oversees internal controls over financial reporting and external audit.

We believe that our leadership structure promotes effective Board oversight of risk management because management provides the Board, directly and through its Committees, the information necessary to appropriately monitor, evaluate, and assess our overall risk management. We have provided additional examples of oversight areas below and further below we describe the Board’s committee structure and each Committee’s areas of focus and oversight.

Sustainability; Environmental, Health and Safety; and Social Responsibility Oversight

The Board as a whole maintains oversight of policies and operational controls of sustainability, environmental, health and safety, and social risks, rather than delegate that oversight to a committee. Management’s leaders for sustainability, environmental, health and safety, and social responsibility report to the Board on these matters, and these matters were discussed at each quarterly Board meeting in the last fiscal year. In addition, the Board has oversight of our Global Human Rights Policy and approves our annual Global Supply Chain Transparency Statement. The Board looks to the expertise of its Audit and Compensation and Governance Committees to provide strategic oversight in their areas of focus.

Cybersecurity/Information Security Oversight

Both the Board and the Audit Committee have oversight of risks related to information security, data protection, and cybersecurity. Cybersecurity protection is vital to maintaining our operations and the trust of our business and supply chain partners and of our Share Owners. We continue to secure our own manufacturing and information technology infrastructure; to train our employees throughout each year about malware, viruses, hacking, phishing, and other information security risks, including how to avoid and mitigate them; and to protect our sensitive data from failures, breaches, or cyber incidents. We maintain appropriate insurance policies to help address information security risks. To assist us in identifying and mitigating information security risks, we also maintain an ISO 27001-certified information security management system.

At each of their respective meetings, the Board and Audit Committee receive, and provide feedback on, reports on data protection and cybersecurity matters. Additionally, two regular Board meetings each year and each Audit Committee meeting include additional, in-depth technology and cybersecurity briefings from senior members of our information technology department, internal audit function, and legal department. The topics covered by these reports and briefings include risk management strategies, data protection, ongoing risk mitigation activities, cybersecurity strategy, governance structure, and the results of security breach simulations.

Our People are the Company: Human Capital Management and Succession Planning Oversight

One of our Board’s principal duties is to manage our human capital strategies and policies, including reviewing management succession planning. Its responsibilities specifically include overseeing and monitoring the Company’s policies on human rights, diversity, equity, and inclusion, compensation and benefits, and retention plans for the development, retention, and replacement of executive officers, including the CEO.

The Board reviews its management succession and retention plans annually. Additionally, the Board oversees the risks and exposures associated with management succession planning. Our Board believes that the directors and executive officers should collaborate on succession planning and that the entire Board should be involved in the critical aspects of the management succession planning process, including establishing selection criteria that reflect our business strategies, identifying and developing internal candidates to ensure the continuity of our culture, and making key management succession decisions.

The Board and the Compensation and Governance Committee discuss management succession in regular meetings and in executive sessions throughout the year as appropriate. Directors can become familiar with potential successors for key management positions through various means, including regular organizational strategy and talent reviews, presentations to the Board, and informal meetings.

The Board and management have made attracting, developing, and retaining the best people globally central to our strategy because our people are crucial to our long-term, global success. We are focused on attracting, developing, and retaining best-in-class teams and continuing to build an inclusive culture.

Our People

Purpose and Guiding Principles

We believe in creating quality for life. We believe our people are the company. We believe lasting relationships create our global success. We believe our people are our competitive edge for our service, quality, and value. Our people are the reason for our success.

Our Guiding Principles provide a foundation for our decisions, processes, and philosophies. With a common understanding that our customer is our business, our people are the company, the environment is our home, and profits are the ultimate measure, we are relentlessly focused on achieving results based on service to our customer, developing our talent, and driving continuous improvement in all we do. Our unique company culture provides the intangible structure for our people to achieve our goals, within the context of their strengths, in order to build our success.

From improving our customer scorecards to enhancing our recycling programs, our employees truly impact our company and communities through their spirit of innovation, mutual trust, integrity, and egoless execution of our strategy. Together, we celebrate our successes and we continuously improve by reflecting on our failures. We set the bar high then provide the support, systems, and tools to enable our team members to exceed expectations of excellence.

We have lasting relationships with our people. They enhance our culture and create our success. Our people are the company.

Our People are the Company

Our worldwide workforce includes approximately 6,400 people worldwide including approximately 1,300 employees in the United States and approximately 5,100 located in foreign countries. Approximately fifty percent of our worldwide workforce is female, including fifty percent of our executive officers. Below is the gender distribution by management level at our company:

In addition, approximately 54% of our employees are between ages 31 and 50, but we also have a significant number of employees who are age 51 and older (16%) and age 30 and younger (30%) in both managerial and non-managerial roles. We strive for diverse representation among our executives, management, and individual contributors, and we are committed to actively seeking highly-qualified diverse candidates (including diversity of experience, expertise, gender, race, and ethnicity) for consideration when we make recruitment and hiring decisions. The average tenure within our workforce is 6.6 years, and we work hard to mitigate turnover risk by consistently and formally surveying our workforce about how well we are living up to our People Guiding Principles by asking them to anonymously rate us on a scale from 1 (low) to 10 (high). We currently have a score of 8.15 across our enterprise. We believe this is evidence that we operate our business in a way that honors our Guiding Principle that our people are the company. We have a participation rate in our Guiding Principles survey each year that exceeds 90%. Upon completion of this survey every year, each local management team receives qualitative and quantitative feedback and are responsible for crafting improvement plans based on our people’s inputs.

Compensation and Benefits

The Kimball Electronics Total Rewards philosophy is built on the foundation of our Guiding Principles; specifically, we want employees to share in their company’s success, both financially and through personal growth and fulfillment. We expect and reward excellent performance of our teams around the globe. Our variable compensation structure allows flexibility in response to workforce fluctuations in addition to providing an incentive for our employees to earn above market value dependent on roles, responsibilities, and results.

In our plan, base pay is linked to performance, effort, market, and local demand. The variable incentive portion of our pay is linked to financial results and operational metrics. We believe it is important to have a portion of our variable compensation at risk for our salaried employees. We believe this incentivized nature drives collaboration, cooperation, personal development, and continuous improvement. Our production employees participate in an incentive program that is based on attainment of operational metrics important to each location’s priorities of focus. Increases in compensation are based on continuous improvement and desired behaviors. Things that are traditional factors at some companies such as seniority, automatic annual increases, or job titles do not support the underlying principles of our plan.

To attract talent in order to execute our business goals, we conduct regular market studies in all the locations we operate around the world. The benefits offered our employees in addition to their cash compensation provide a total rewards package that supports the financial health and personal wellness of our workforce. Deciding on appropriate market value of the total rewards package is not always simple and requires adequate data and informed judgment. Each global location’s benefits package is relevant and responsive to the local market. Our compensation philosophy at Kimball Electronics is grounded in our Guiding Principles and we strive to encourage collaboration, accountability, and execution. Our compensation philosophy is that base pay is linked to performance and the variable incentive portion of employees’ pay is linked to financial results and operational metrics. This philosophy is a core element of our Company’s culture.

Growth and Development

We have worked toward building vitality and visibility in our talent pipeline. We work to develop talent to support our continued growth into a multifaceted manufacturing solutions company by optimizing our core EMS business, accelerating growth of our DCMS business and further developing our production, test, and inspection equipment offerings. We continue to emphasize human-centered and purpose-driven philosophies and methodologies to optimize discretionary effort in our workforce so that we execute our business strategies and create impactful careers. We continue to mature as an organization by creating talent, systems, and new organization structures to coordinate priorities and enhance collaboration.

We leverage the talent we bring into our organization through our future-focused, individualized performance management practices. Our people deserve more than a rating, so we empower them to own and drive their personal and professional development within the context of our overall business plan so that real needs, not rules, are met. We use accomplishments, aspirations, and challenges to qualitatively determine development needs. Our leaders are coaches who model our values, align expectations, and adapt to our people’s needs. With a commitment to the role they play in our success, our people make our Company whole.

We deeply care for our people, want to protect what is good about our culture, and are continuously improving the sense of importance and urgency on people development. The transition from subjective and informal performance management toward evidence-based, objective, and business-centric talent management has been the result of structure, calibration, and capability building. We introduced a well-respected, evidence-based behavioral assessment tool known as the Predictive Index as our evidence-based data source about our leaders’ natural behavioral drives. We complemented this evidence with managers’ observations of their people’s aspirations, motivations, cognitive agility, and job performance in order to gain insights to development gaps and impactful action planning. We augment these conversations with recently implemented and deployed performance and succession management modules in Workday, our Human Resources Information System.

Our Leadership Development strategy is to prepare our leaders by utilizing a structured, high-impact, culturally congruent program based on our Leading, the Kimball Way capabilities:

1.Be a catalyst for growth

2.Have an enterprise mindset

3.Show courage

4.Build followership

5.Cultivate talent

The design of our Leading, the Kimball Way journey has been grounded in research about effective behavior change and leadership development. We started the journey by focusing on leading selves before transitioning to leading teams, and the last phase centers on leading at the enterprise. On these leadership development journeys, we continue to build capabilities of advocacy and inquiry in our leaders, especially as it relates to leading others. Our growth and development efforts aim to close the identified gaps in leadership capabilities required to execute our business strategy by designing leadership development leveraging face-to-face education, virtual learning, peer learning, mentoring, and developmental feedback.

We train employees annually and through targeted, supplemental sessions throughout the year on our Code of Conduct, which outlines our human rights, labor regulations, and anti-discrimination practices. We strive to have all our employees worldwide complete discrimination and harassment training on an annual basis, and we audit our compliance with this goal. Our annual core compliance curriculum also includes courses on Foreign Corrupt Practices Act (FCPA), business ethics and essentials, and information security. We do not tolerate discrimination and harassment in our workplaces. As part of monitoring our compliance with our Guiding Principles and Code of Conduct, we continue to prioritize responding to and remedying hotline reports, addressing a variety of issues through guidance, review, and/or investigation.

At Kimball Electronics, we believe that we have an organizational structure, information systems, and development of personal skills that maximize our people’s flexibility to respond to our customers on their own terms. We are realizing the positive effects of the time, energy, and attention our leaders are devoting to our People Strategy.

Diversity, Equity, and Inclusion

At Kimball Electronics, we believe in personal integrity, respect for dignity of the individual, and mutual respect. We believe the most unfair system of all is one that blindly treats all situations the same. Our Diversity, Equity, and Inclusion strategy is to achieve excellence in customer service, employee relations, and business objectives through creativity, responsiveness, and innovation as a result of increased well-being, sense of belonging, and meaningful work for our employees. We are proud of the gender diversity on our Board of Directors: half of our Independent Directors are female. Fifty percent of our executive management team is female. Ten percent of our executive officers are African American and ten percent are Hispanic or Latino.

We continue to execute on our commitment to diversity, equity, and inclusion, and exhibit our commitment to gender, racial, and ethnic diversity by striving toward the corporate goals we outline in our Global Human Rights Policy, including by:

•Increasing female representation globally at the executive and senior management levels;

•Increasing racial and ethnic diversity at the senior management level and above so our leadership will reflect our organization and the communities in which we operate;

•Holding leadership accountable for diversity, equity, and inclusion outcomes.

We know our strength as an employer of choice with a diverse and equitable talent pipeline is in our differences, so we use an evidence-based approach to focus efforts on the attraction, retention, and promotion of the most qualified individuals. Also, we use the Predictive Index tool to encourage building teams with diverse thoughts, tendencies, and expertise to strengthen outcome execution. We aim to assess our vendors, suppliers, and third-party partners in order to facilitate decision making about our own supply chain, prioritizing those suppliers who mirror our own Guiding Principles and inclusion beliefs.

Health and Safety

Our priority has always been the health and safety of our employees, made all the more important in fiscal year 2021 by the worldwide outbreak of COVID-19. As the global pandemic continued, we did not ease our diligence in protecting our employees through safety protocols including mandating mask wearing, physical distancing in workspaces, body temperature monitoring, and enhanced hygiene. Of our worldwide employees, approximately 9% have tested positive since the pandemic began in early 2020. In each case, we worked comprehensively to follow established protocols of communication to our employees, contact tracing, self-quarantining, testing, and sanitization of the affected work areas.

Our Safety Management System, programs, employee involvement, and training make us a safer place to work. Our goal is zero injuries, period. We are in the process of achieving ISO 45001 certification across all our locations. We are organized so that each facility location has safety, environmental, and facility (SEF) personnel from the workforce and leadership who are responsible for implementation of best-in-class safety practices. We rely on our safety managers to ensure regular communication and sharing of best practices through monthly teleconferences and an annual face-to-face meeting that we hold at one of our global facilities. We conduct regular assessments to ensure that all facilities comply with our safety, environmental, and facility company standards and other applicable regulations. These safety standards and management systems focus on our employee health, security, and emergency response and help us integrate a culture of safety and emergency preparedness.

Stakeholder Engagement

Our Board and management team engage on a year-round basis with a range of stakeholders, including not only our Share Owners, but also our workforce, our vendors, our customers, and our communities. Our engagement program includes maintaining formal global councils and task forces within our Company on subject matters including human resources and employee engagement; COVID-19; safety, environmental, and facilities (SEF); enterprise information security and cybersecurity; materials management; supplier quality; quality systems; digital processes; community engagement/outreach; and business planning. Each of our councils and task forces holds regular meetings either monthly or quarterly throughout the year, and additionally as warranted, to collaborate and engage with their own internal and external stakeholders. They each report back to our executive team and our Board. Our global councils provide us a system to consult and engage with our internal and external stakeholders formally and to offer them ongoing opportunities to provide feedback on and to direct and influence our business in support of our sustainable growth.

Share Owner Rights

Kimball Electronics strives to implement good governance practices in shareholder rights and to ensure that we and our Board align with the long-term interests of shareholders. We have enhanced our corporate governance framework over time based on input from our Board, Share Owners, and other governance experts. Important Share Owner rights include:

•Single class of shares with each share entitled to one vote

•No multiple voting rights, enhanced voting rights, voting certificates, or non-voting shares

•Majority voting standard for directors in uncontested elections

•Simple majority vote to amend our By-Laws

•Share Owner approval required to materially modify our equity capital structure

•Confidential voting policy

•Board tenure policy that seeks to maintain an average Board tenure of less than 10 years for the Board’s independent directors

Board and Committee Meetings

During fiscal year 2021, the Board met six times and each director then in office attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Committees of the Board on which such director served during their tenure. The Board currently has two standing committees: Audit Committee and the Compensation and Governance Committee. We expect our directors to attend all Board and applicable Committee meetings, calls regarding specific initiatives or acquisitions, as well as the Annual Meeting of Share Owners.

AUDIT COMMITTEE


Members			Gregory A. Thaxton (Chairperson), Robert J. Phillippy, and Michele A. M. Holcomb

Meetings in Fiscal 2021			9

Committee Accomplishments in 2021			Reviewed Quarterly Earnings Releases and SEC Filings; Recommended the selection of Deloitte as auditors for fiscal 2021; Approved the fiscal 2021 audit scope and fees; Revised its Committee charter; Approved the fiscal 2021 internal audit plan; Conducted reviews of the Company’s cybersecurity program, significant accounting rule adoptions, GDPR readiness, related party transactions, and enterprise risk management process.
Responsibilities of the Committee			The Audit Committee operates under, and has the responsibilities set forth in, a written charter, which has been approved by the Board and is reviewed and reassessed annually or as circumstances dictate by the Audit Committee. The Audit Committee modifies the written charter, as necessary, to comply with all regulatory requirements as or before they become effective. A copy of the Audit Committee charter is available on the Corporate Governance section of our Investor Relations website, https://investors.kimballelectronics.com. The Board has determined that Mr. Thaxton, Mr. Phillippy, and Ms. Holcomb are each “Audit Committee financial experts” as defined by the rules of the Securities and Exchange Commission (“SEC”). None of the Audit Committee members are salaried employees of the Company and, in the opinion of the Board, all meet the Nasdaq and SEC requirements with respect to independence and financial expertise.
Comments from the Committee			The Committee meets in regularly scheduled quarterly meetings and before each quarterly earnings release. The Committee works effectively with Kimball Electronics’ internal audit function and its independent registered public accounting firm and meets regularly with both of them and with management in executive sessions.

COMPENSATION AND GOVERNANCE COMMITTEE


Members			Gregory J. Lampert (Chairperson), Colleen C. Repplier, and Holly A. Van Deursen

Meetings in Fiscal 2021			8

Committee Accomplishments in 2021			Made significant compensation enhancements including implementation of a personal performance bonus program, performance share award criteria for performance to financial plan, and implementation of an executive severance plan. Made significant governance enhancements including “opting-out” of Indiana’s classified board statutes; revised executive share ownership guidelines; amended corporate governance principles and Committee charter; approved and set executive officers’ and CEO compensation; approved performance share grants and awards, profit sharing incentive bonus plan economic profit targets, and retirement plan company contribution; reviewed and recommended slate of directors for election at 2021 Annual Share Owners Meeting; evaluated Board member independence. Continued working with Aon as independent compensation consultants to provide insight on executive compensation programs.
Responsibilities of the Committee			The Compensation and Governance Committee’s responsibilities include advising the Board in matters of corporate governance, identification of individuals qualified to be board members, board member evaluations, orientation, and succession planning. A copy of the Compensation and Governance Committee’s charter is available on the Corporate Governance section of the Company’s Investor Relations website, https://investors.kimballelectronics.com. The Compensation and Governance Committee identifies potential nominees for director based on specified objectives in terms of the Board composition, considering the need for broad and complementary experience and expertise. Nominees, whether recommended by the Compensation and Governance Committee or a Share Owner, will be evaluated on the basis of established Board member criteria, including, but not limited to those noted above in the “Director Qualifications” section of this Proxy Statement. The Compensation and Governance Committee considers diversity of gender, race, national origin, education, and professional experience in evaluating potential nominees to bring a varied set of skills and backgrounds to bear on the complicated issues which come before the Board.
			The Compensation and Governance Committee also will consider candidates recommended by Share Owners. A Share Owner who wishes to recommend a director candidate for consideration by the Compensation and Governance Committee should send such recommendation to the Secretary of the Company at 1205 Kimball Blvd., Jasper, Indiana 47546, who will forward it to the Compensation and Governance Committee. Any such recommendation should include a description of the candidate’s qualifications for board service, the candidate’s written consent to be considered for nomination and to serve if nominated and elected and addresses and telephone numbers for contacting the Share Owner and the candidate for more information. A Share Owner who wishes to nominate an individual as a director candidate at the Annual Meeting of Share Owners, rather than recommend the individual to the Compensation and Governance Committee as a nominee, must comply with the advance notice requirements mandated by the Company’s By-Laws and further explained in this Proxy Statement under “Submission of Nominations and Proposals.”
			The Committee’s responsibilities also include making all determinations about the compensation of the Chairman and CEO; reviewing and approving the compensation of all other executive officers in consultation with the CEO; approving awards under stock incentive plans; reviewing and approving the Company’s contribution to its defined contribution retirement plan; and approving targets, certification of target achievement, and authorization of payments under our profit sharing incentive bonus plan. See “Compensation Discussion and Analysis — Compensation Process” for a description of the role of executive officers and compensation consultants in setting compensation for executive officers. The Committee also regularly reviews corporate governance practices, evaluates their applicability to Company objectives, and strives to continuously improve our governance practices. Each of the members of the Compensation and Governance Committee is “independent” as such term for compensation committee members is defined in the listing standards of Nasdaq, each is a “Non-Employee Director” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and each is an “Outside Director” as defined by the regulations under Section 162(m) of the Internal Revenue Code.
Comments from the Committee			The Committee meets regularly in both scheduled quarterly meetings and executive sessions. The Committee continues to evaluate and adjust as appropriate Board, CEO, and Executive Officer compensation programs. The Committee actively reviews and evaluates evolving good corporate governance practices as evidenced by its consideration and recommendation of proposals for governance changes presented to, and approved by, Share Owners in 2020, and other significant changes made in fiscal year 2021 as noted above.

Compensation and Governance Committee Interlocks and Insider Participation

None of the Compensation and Governance Committee members has ever been employed as an officer or employee of Kimball Electronics or any of its subsidiaries, and none of the Compensation and Governance Committee members during fiscal year 2021 was involved in a relationship requiring disclosure under Item 404 of Regulation S-K. None of our executive officers serves, or during fiscal year 2021 served, on a board of directors or compensation committee of a company that has an executive officer serving on our Board or the Compensation and Governance Committee.

Director Compensation

Fiscal Year 2021 Compensation to Non-Employee Directors

Directors’ compensation is set by the Board. The level of compensation is guided by the following goals: compensation should fairly pay directors for work required in a company of Kimball Electronics’ size and scope; and the structure of the compensation should be simple, transparent, market-competitive, easy to understand, and aligned with Share Owner interests.

Each of our non-employee directors received an annual retainer fee of $75,000 plus a $65,000 equity retainer for service in fiscal year 2021. Additionally, the Lead Independent Director of the Board, the Chairperson of the Audit Committee of the Board, and the Chairperson of the Compensation and Governance Committee of the Board each received an additional $10,000 annual retainer fee.

Directors were able to elect to receive all or a portion of their annual, Lead Independent Director, or Chairperson retainers in Common Stock. The $65,000 of annual equity retainer fees are to be paid in shares of the Company’s Common Stock. The Board-approved Non-Employee Directors Stock Compensation Deferral Plan (the “Deferral Plan”) allows non-employee directors to elect to defer all, or a portion of, their stock retainer fees until termination of service from the Board. Shares of Common Stock will be issued either under the Company’s 2014 Stock Option and Incentive Plan or the Non-Employee Directors Stock Compensation Deferral Plan. Directors are also reimbursed for reasonable travel, continuing education, and other expenses incurred in connection with Board and Committee meeting attendance.

The following Non-Employee Director Compensation Table shows the compensation paid to each non-employee director during fiscal year 2021. Donald D. Charron, Chairman and CEO, is a Director of the Company but does not receive compensation for his services as a Director.

Non-Employee Director Compensation in Fiscal Year 2021


	Fees Earned or		Stock		Total
Name	Paid in Cash ($) (1)		Awards ($) (2)		($)
(a)	(b)		(c)		(h)
Michele A. M. Holcomb	$	75,000	$	65,000	$	140,000
Gregory J. Lampert	$	85,000	$	65,000	$	150,000
Robert J. Phillippy	$	75,000	$	65,000	$	140,000
Colleen C. Repplier	$	85,000	$	65,000	$	150,000
Gregory A. Thaxton	$	85,000	$	65,000	$	150,000
Holly A. Van Deursen	$	75,000	$	65,007	$	140,007

(1)Represents fees paid during fiscal year 2021 and includes the following number of shares for which the director elected to receive Common Stock in lieu of cash: Mr. Lampert 5,537, Mr. Phillippy 4,886, and Ms. Repplier 5,537. These shares were valued using the per share price of $15.35, the market value for such shares on November 18, 2020, and each of these directors elected to defer receipt of all these shares under the Deferral Plan.

(2)Represents the value of the equity retainer awards granted during the year of 4,235 shares for each non-employee director using the per share price of $15.35, the market value for such shares on November 18, 2020. Ms. Holcomb, Mr. Lampert, Mr. Phillippy, Ms. Repplier, and Mr. Thaxton each elected to have all their fiscal year 2021 equity retainer awards deferred under the Deferral Plan. Ms. Van Deursen’s fiscal year 2021 equity retainer award was issued to her under the 2014 Plan.


REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS

On an annual basis, each Director and Executive Officer is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions with Kimball Electronics having an aggregate value of at least $120,000 in which the Director or Executive Officer or any member of his or her immediate family has an interest. In addition, any transactions with related persons or other circumstances that present potential conflicts of interest are to be reported to the Company’s compliance officer either directly or through an anonymous reporting service. When reported, the transactions or other conflicts are reviewed and approved by the Compensation and Governance Committee, if in the best interests of our Share Owners to do so. The Audit Committee has established a written policy and procedures for review and approval of related party transactions.

There were no such transactions or conflicts reported during fiscal year 2021.


REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board is responsible for providing independent, objective oversight of the Company’s accounting functions, internal control over financial reporting, and financial reporting processes. During the fiscal year ended June 30, 2021, the Audit Committee was comprised of at least three directors as required per the Audit Committee Charter. All members of the Audit Committee meet the independence and experience requirements of The Nasdaq Stock Market LLC and the Securities and Exchange Commission.

Management is responsible for the Company’s accounting functions, internal control over financial reporting, and financial reporting processes. The Company’s independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”), is responsible for auditing and expressing an opinion in accordance with auditing standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) on the Company’s consolidated financial statements.

In connection with these responsibilities, the Audit Committee met with management and Deloitte to review and discuss the June 30, 2021 financial statements including a discussion of the acceptability and quality of the accounting principles, the reasonableness of critical accounting policies, the clarity of disclosures in the financial statements, and such other matters as are required to be discussed with the Audit Committee under standards established by the Securities and Exchange Commission and the PCAOB. The Audit Committee also has received the written disclosures and the letter from Deloitte in accordance with the applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence and has discussed with Deloitte its independence from the Company and management. In addition, the Audit Committee considered whether Deloitte’s independence would be jeopardized by providing non-audit services to the Company.

The Audit Committee reviewed the overall scope of the audits performed by the internal auditor and Deloitte. The Audit Committee met with the internal auditor and Deloitte, with and without management present, to discuss the results of the audits of the Company’s consolidated financial statements and the overall quality of the Company’s financial reporting.

It is not the duty of the Audit Committee to perform audits or to determine that the Company’s financial statements are complete and accurate and in accordance with generally accepted accounting principles; that is the responsibility of management and Deloitte. Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and Deloitte. Based on the Audit Committee’s discussions with management and Deloitte, and the Audit Committee’s review of the representations of management and Deloitte, the Audit Committee recommended to the Board, and the Board approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021, filed with the Securities and Exchange Commission.

Respectfully submitted,

THE AUDIT COMMITTEE

Gregory A. Thaxton (Chairperson)

Robert J. Phillippy

Michele A. M. Holcomb


SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates (collectively the “Deloitte Entities”) audited the Company’s financial statements for the fiscal year ended June 30, 2021. The Deloitte Entities have been our independent auditor since our spin-off in 2014. In conjunction with the mandated rotation of Deloitte’s lead engagement partner beginning in fiscal year 2022, the Audit Committee was involved in fiscal year 2021 in the selection of a new lead audit engagement partner. As part of its auditor engagement process, the Audit Committee considers whether to rotate the independent audit firm because the Committee believes that it is important for the registered public accounting firm to maintain independence and objectivity. As part of its engagement decision, the Committee determined there are significant benefits to having an independent auditor with an extensive history with the Company, including:

•Higher quality audit work due to the Deloitte Entities’ institutional knowledge of our global business, accounting policies and practices, and our internal control framework; and

•Operational efficiencies and resulting fee savings because of the Deloitte Entities’ history and familiarity with our business.

In addition to the reasons discussed above, the Committee selected Deloitte based on:

• performance on past audits, including the expertise of the engagement team;

• experience, client service, and responsiveness;

• leadership, management structure, and ethical culture; and

• the amount of fees charged in relation to scope of work performed.

Representatives of the Deloitte Entities will be present at the Annual Meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions.

Independent Registered Public Accounting Firm Fees


	Deloitte Entities
	2021		2020
Audit Fees(a)	$	1,200,824	$	1,241,780
Audit-Related Fees(b)	7,952		6,218
Tax Fees(c)	99,464		17,522
All Other Fees	—		—
Total	$	1,308,240	$	1,265,520

(a)Audit fees include fees and out of pocket expenses paid or expected to be paid for the audit of the annual financial statements and for the statutory audits of international subsidiaries.

(b)Audit-related fees consist primarily of fees paid or expected to be paid for a benefit compliance audit.

(c)Tax Fees consist of fees paid or expected to be paid for tax compliance and related tax services.

Consideration of Services Provided by the Independent Registered Public Accounting Firm

The Audit Committee approves all audit and non-audit services provided by the independent registered public accounting firm. The Audit Committee has established an approval process for services provided by the independent registered public accounting firm which complies with the requirements of the Sarbanes-Oxley Act of 2002. A description of the approval process is attached to this Proxy Statement as Appendix A. The Audit Committee has considered whether all services provided are compatible with maintaining the independent registered public accounting firm’s independence in accordance with this approval process and has determined that such services are compatible.

Ratification of Selection of Independent Registered Public Accounting Firm

The Audit Committee has selected the Deloitte Entities to be the Company’s independent registered public accounting firm for the fiscal year ended June 30, 2022.

Ratification is not required by law or our By-Laws. We are submitting the selection of the Deloitte Entities to our Share Owners for ratification as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our Share Owners.

The Board of Directors recommends a vote “FOR” ratification of the selection of the Deloitte Entities as the Company’s independent registered public accounting firm.


COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Our compensation philosophy is grounded in our Guiding Principles and rewards the execution of our business strategies. We believe our customer is our business, our people are the company, the environment is our home, and profits are the ultimate measure. Our executive compensation programs align pay to achievement of our business objectives by rewarding performance, aligning to Share Owner interests, retaining executive talent, and strengthening collaboration.

Our incentive compensation components reflected our business results for fiscal year 2021 which include the following:

•Percentage payout of our performance-based cash incentive among the highest in the last five years, which recognizes achievement of operational excellence in delivering record profits

•Lowest percentage payout of our long-term performance-based stock incentive in the last five years, which reflected our slower growth in fiscal year 2021 compared to the benchmarked group even though we generated record profits

•Market-based adjustments for our executives with consideration of performance, potential, and individual contribution

•Introduced an individual incentive as part of our performance-based cash incentive which correlated a portion of payout to attainment of personal objectives within the fiscal year

The Compensation and Governance Committee (the “Committee”) of our Board, which is responsible for overseeing the compensation program for all executive officers, plays a key role in designing and administering the Company’s executive compensation program. All principal elements of compensation paid to our executive officers are subject to approval by the Committee. The report of the Committee follows this Compensation Discussion and Analysis. The Committee also regularly reviews principles of good governance and market pay best practices to monitor the Company’s compensation process to ensure alignment to creating Share Owner value:


We DO:			We DO NOT:
•Tie a large portion of both short and long-term executive compensation to company performance. •Provide a long-term incentive program for executive officers comprised 100% of performance-based equity. •Maintain a robust director and executive stock ownership policy that helps align the interests of our shareholders with our directors and executive officers. •Require executives to retain 100% of all net shares (post-tax) that vest until achieving their stock ownership requirements. •Review the metrics for our cash and equity awards annually. •Include a metric in our performance-based equity awards based on performance relative to our industry to reward significant positive outperformance. •Deliver short and long-term awards based on a clear formula. •Utilize a third-party compensation consultant to advise on market, peer, and best practices for executive compensation. •Maintain a strong clawback policy to ensure accountability. •Require a minimum one-year vesting period for performance shares granted under our stock plan.			•Use a rigid formula for compensation allocation between cash and non-cash, short and long-term, and fixed and variable components. •Insulate our executives from the effects of poor stock price performance on equity awards or holdings. •Offer uncapped cash or equity incentive plans. •Enter into long-term employment agreements with executives. •Provide “single trigger” change-in-control provisions. •Offer tax gross-ups on perquisites or severance for executives. •Guarantee cash or equity bonuses or salary increases. •Allow any short sales, hedging, and trading in derivatives of our securities. •Maintain evergreen equity plans. •Reprice or replace underwater equity awards. •Issue equity awards at below-market exercise rates.

Kimball Electronics’ executive officers as of the date of this Proxy Statement are: Donald D. Charron, Chairman of the Board and Chief Executive Officer; Jana T. Croom, Vice President, Chief Financial Officer; John H. Kahle, Vice President, General Counsel, Chief Compliance Officer, Secretary; Steven T. Korn, President, Global EMS Operations; Desiree L. Castillejos, Vice President, Corporate Development and M&A and Chief Strategy Officer; Jessica L. DeLorenzo, Vice President, Human Resources; LeRoy (Lee) W. Kemper, Vice President, Diversified Contract Manufacturing Services (DCMS); Sandy A. Smith, Vice President, Information Technology; Kathy R. Thomson, Vice President, Global Business Development and Design Services; and Christopher J. Thyen, Vice President, New Platforms.

This Compensation Discussion and Analysis provides detailed information regarding our compensation programs and decisions for our chief executive officer, chief financial officer, and the three other most highly compensated executive officers, based on their compensation for the fiscal year ended June 30, 2021. These officers are referred to herein as our “named executive officers,” or “NEOs.” Our NEOs for fiscal year 2021 are: Donald D. Charron, Chairman of the Board and Chief Executive Officer; John H. Kahle, Vice President, General Counsel, Chief

Compliance Officer, Secretary; Steven T. Korn, President, Global EMS Operations; Michael K. Sergesketter, Former Vice President, Chief Financial Officer1; and Christopher J. Thyen, Vice President, New Platforms.

This Compensation Discussion and Analysis is intended to supplement the more detailed information concerning executive compensation that appears in the “Executive Compensation” section below. Our goal is to provide our Share Owners and the investing public with a better understanding of our executive compensation practices and the decisions made concerning the compensation payable to our executive officers, including our NEOs.

Information about Our Executive Team

Because Mr. Charron is also a Director, we have included his biographical information above in the section “Election of Directors.”


	Jana T. Croom	Vice President, Chief Financial Officer

	Ms. Croom was appointed Vice President, Chief Financial Officer effective July 1, 2021. Ms. Croom joined Kimball Electronics in January 2021 in the role of Vice President, Finance. Prior to joining Kimball Electronics, she held the position of Vice President, Financial Planning and Analysis for NiSource Inc., one of the largest fully regulated utility companies in the United States, since August 2019. From 2012 through 2019, Ms. Croom held positions at NiSource including director roles in operations planning, state finance, and regulatory affairs. Ms. Croom has more than 20 years of experience in various areas of finance, is a graduate of the College of Wooster and earned a Master’s degree in Business Administration from the Fisher College of Business at The Ohio State University.
Executive Officer since 2021


	John H. Kahle	Vice President, General Counsel, Chief Compliance Officer, Secretary

	Mr. Kahle is our Vice President, General Counsel, Chief Compliance Officer, and Secretary. His executive leadership responsibilities include Legal, Safety, Environmental and Facilities management functions on behalf of Kimball Electronics. He has served as Chief Compliance Officer since 2016 and as General Counsel since the Company spun off from its former parent, Kimball International, in 2014. He served as Executive Vice President, General Counsel, and Secretary of Kimball International from 2001 through 2014 and as General Counsel prior to that time after joining Kimball in 1987. Prior to joining Kimball, he was a Certified Public Accountant and in private legal practice in Indianapolis, Indiana. Mr. Kahle received a Bachelor’s degree in Accounting from Indiana University and his Juris Doctor from Indiana University School of Law in Bloomington. He is also a Certified Management Accountant.
Executive Officer since 2014


	Steven T. Korn	President, Global Electronics Manufacturing Services (EMS) Operations

	Steven T. Korn is our President, Global Electronics Manufacturing Services Operations. Mr. Korn joined Kimball Electronics in December of 2004. He was most recently Vice President, North American Operations and Global Supply Chain from our spin-off in 2014 through 2020. He has over 30 years of EMS experience in Operations Management, Business Development and Engineering Management. Mr. Korn graduated from South Dakota School of Mines and Technology with a degree in Mechanical Engineering.
Executive Officer since 2014

1 Mr. Sergesketter retired from Kimball Electronics on June 30, 2021. Jana Croom, then-Vice President, Finance of the Company, succeeded Mr. Sergesketter as Vice President, Chief Financial Officer on July 1, 2021.


	Desiree L. Castillejos	Vice President, Corporate Development and M&A and Chief Strategy Officer

	Ms. Castillejos was appointed Vice President, Corporate Development and M&A, and Chief Strategy Officer in 2018. Prior to joining Kimball Electronics, she held the position of Vice President, Strategy and Corporate Development for Nokia Technology and Alcatel-Lucent since 2015, managing Nokia and IBM’s strategic alliance. She has over fifteen years of experience in corporate development, strategy, and business development in the technology industry in a global capacity. Ms. Castillejos received an MBA from the Wharton School of the University of Pennsylvania, and a Master of Science and Bachelor of Science in Computer Engineering from the Université de Technologie de Compiègne in France.
Executive Officer since 2018


	Jessica L. DeLorenzo	Vice President, Human Resources

	Ms. DeLorenzo was appointed Vice President, Human Resources in 2018. She provides Kimball Electronics with HR strategies to support people development, business growth, and continuous improvement aligned with our Guiding Principles and worldwide regulatory requirements. She is responsible for providing leadership to our global operations and HR Managers in the development and implementation of effective ‘Employer of Choice’ philosophies and execution of our talent management framework. Ms. DeLorenzo joined Kimball Electronics in 2015 in the position of Director, Organizational Development. Before joining Kimball Electronics, she held the position of Director, Student Services at Vincennes University from 2011 through 2015. Ms. DeLorenzo graduated from Rice University with a degree in Psychology and from Louisiana State University in Shreveport with a Master of Science in Human Services Administration.
Executive Officer since 2018


	LeRoy (Lee) W. Kemper	Vice President, Diversified Contract Manufacturing Services (DCMS)

	Mr. Kemper serves as Kimball’s Vice President, DCMS. He joined Kimball Electronics in 2018 as the General Manager for the Company’s Kimball Electronics Indianapolis facility. He guides and directs all facets of our DCMS operations to increase revenue through new business development, project management, continuous business process improvement, and people development. Prior to joining Kimball Electronics, he was the President of iScribeMD in Toledo, Ohio from 2017 through 2018 and Vice President of Operations for Fresh Products, LLC from 2012 through 2016. He has over 20 years of manufacturing, operations, and supply chain experience. He has a Bachelor’s degree in business administration from the University of Saint Francis (Indiana) and an MBA from the University of Toledo.
Executive Officer since 2020


	Sandy A. Smith	Vice President, Information Technology

	Ms. Smith has served as our Vice President, Information Technology since 2014. She has global responsibility for our information technology and computing systems. She leads global IT strategy and efforts in leveraging Industry 4.0 applications and analytics to drive operational performance improvements as part of Industry 4.0 and the digital transformation of manufacturing. Ms. Smith joined our former parent Kimball International, Inc. in 1987, starting in customer service, moving into information technology support, and eventually ascending to Vice President, Information Technology in 2000. Ms. Smith graduated from Indiana State University with a Bachelor of Science degree.
Executive Officer since 2014


	Kathy R. Thomson	Vice President, Global Business Development and Design Services

	Ms. Thomson was appointed Vice President, Global Business Development and Design Services in 2018. Previously, Ms. Thomson held the position of Vice President of Business Development for Creation Technologies since 2012. She has more than 15 years of Electronics Manufacturing Services experience and has held positions of increasing responsibilities with Creation Technologies and Plexus Corp. Ms. Thomson earned both her Bachelor of Arts in business administration and her MBA from Lakeland University.
Executive Officer since 2018


	Christopher J. Thyen	Vice President, New Platforms

	Mr. Thyen was appointed our Vice President, New Platforms, in 2018. Prior to this role, he served as our Vice President, Global Business Development and Design Services since 2008. He has had a long and successful career with Kimball Electronics and Kimball International, our the former parent, holding positions of increasing responsibilities in operations and business development. Mr. Thyen holds a Bachelor of Science degree in mechanical engineering technology from Purdue University.
Executive Officer since 2014

Advisory Vote on Executive Compensation

At our 2020 Annual Meeting, non-binding, advisory Share Owner voting was held to approve the compensation paid to our NEOs, commonly referred to as a say on pay vote. A substantial majority of votes cast voted in favor of the executive compensation program described in the Company’s 2020 proxy statement. As a result, the Committee and the Board determined that no changes needed to be made to our executive compensation policies and procedures as a result of the 2020 vote, and the Committee and the Board continued to apply the same general principles in determining the amounts and types of executive compensation. Additionally, at our 2018 Annual Meeting, a majority of our Share Owners voted in favor of the non-binding, advisory vote on our executive compensation being held every year. Considering the preference of our Share Owners, the Board determined that this frequency was appropriate and was consistent with our approach to executive compensation. Accordingly, we are holding a non-binding, advisory vote on executive compensation at our 2021 Annual Meeting and will continue to do so in subsequent years.

Compensation Philosophy

Kimball Electronics applies a consistent philosophy to compensation for all employees, including management. We link annual base salary to performance, contribution, leadership, market, and local demand. The variable incentive portion of pay is linked to financial results and operational metrics. We believe it is important to have a portion of our variable compensation at risk for our salaried employees, especially our executive officers. This incentivized nature drives collaboration, cooperation, personal development, and continuous improvement to create long-term Share Owner value by:

1.Rewarding Performance. All parts of compensation are designed to reward executive performance. Base salary is designed to reward annual achievements, demonstrated leadership abilities, and management experience and effectiveness. All other elements of compensation focus on motivating the executive to grow sales, achieve superior financial results, and attain personal goals that are aligned to key stakeholders within the business.

2.Aligning with Share Owners’ Interest. Our objective is to align the interests of the executives with our Share Owners by strongly linking compensation to Company financial performance. Improved Company performance leads to improved stock prices and increased Share Owner value.

3.Retaining Executive Talent. Our objective is to retain our executives by using key elements of compensation that provide better opportunity for financial rewards when compared to other similar professional opportunities.

4.Strengthening Collaboration. Our objective is to strengthen collaboration by allocating a portion of employees’ compensation as a variable incentive based on results achieved together as a team.

Components of Compensation

Our compensation program is comprised of the following primary components: (i) annual cash compensation, which includes base salary and performance-based cash incentive compensation, and (ii) long-term performance-based stock incentive compensation, each of which is described below.

Compensation Component

Purpose

Link to
Compensation Philosophy

Annual base salary

To provide an appropriate level of fixed compensation that will promote executive recruitment and retention based on business responsibilities, personal performance, and leadership qualities.

Rewards performance.

Retains executive talent.

Performance-based cash incentive compensation

Variable component used to incentivize, motivate, and link compensation with the Company’s financial success.

Rewards performance.

Aligns interests with Share Owners’ interests.

Retains executive talent.

Strengthens collaboration.

Long-term performance-based stock incentive compensation

To motivate officers and key managers to focus on long-term financial performance of the Company.

Rewards performance.

Aligns interests with Share Owners’ interests.

Retains executive talent.

Additional discretionary cash and/or stock compensation

To recognize individual achievement in special situations.

Rewards performance.

Retains executive talent.

Strengthens collaboration.

Total Direct Compensation

The following chart illustrates the allocation of fiscal year 2021 realized compensation for each NEO among each of the major compensation components.

The amounts in the above graph represent actual compensation realized in fiscal year 2021 as follows:

•Performance-Based Stock is the actual value of long-term performance shares earned during fiscal year 2021, based on the number of shares earned as calculated under the profit sharing incentive bonus plan and achievement of sales growth goals multiplied by the average of the high and low price of the Company’s Common Stock of $23.36 on August 24, 2021.

•Performance-Based Cash is the actual amount of cash incentive compensation earned during fiscal year 2021, pursuant to the Company’s profit sharing incentive bonus plan.

•Non-Performance-Based Compensation consists of base salary received in fiscal year 2021 and all other components of compensation that are valued the same as reported in the Summary Compensation Table.

In making executive compensation decisions, the Committee does not have a fixed compensation allocation methodology but utilizes competitive benchmarks to determine market level allocations of fixed, variable, and stock compensation for each executive and NEO role, while also considering individual performance.

Compensation Decisions

The annual compensation of our NEOs is based on the process described below in the “Compensation Process” section of this Compensation Discussion and Analysis and consists of components as delineated in the “Components of Compensation” section. The Committee does not utilize any specific target or formula for the NEOs’ total compensation.

The Committee took the following actions during fiscal year 2021 and early fiscal year 2022 in regard to NEO compensation.


Date						Action Taken
July 2020						• Awarded long-term performance share opportunities for fiscal year 2021. • Certified fiscal year 2020 economic profit results and sales growth attainment, resulting in approval of issuance of long-term performance shares and incentive bonus plan payments.
May 2021						• Reviewed and approved compensation of NEOs.
July 2021						• Approved the award of long-term performance share opportunities for fiscal year 2022. • Certified fiscal year 2021 economic profit results resulting in approval of issuance of long-term performance shares and incentive bonus plan payments.

Annual Cash Compensation

1. Base Salary. Base salaries for our NEOs are based on the scope of their responsibilities, their performance, the period over which they have performed those responsibilities, and other subjective factors as noted below in the “Compensation Process” section of this Compensation Discussion and Analysis. Decisions regarding salary increases or decreases take into account the executive’s effort, performance, local demand, current salary, and market benchmarks. Base salaries of the Chief Executive Officer (“CEO”) and Chairman of the Board (“Chairman”) are reviewed as appropriate by the Committee, and the Committee makes adjustments as it deems necessary. Base salaries of our other executive officers are reviewed by the CEO on an annual basis. Adjustments to the base salaries of our other executive officers are initiated by the CEO and approved by the Committee. Annualized base salaries in effect as of the date of this Proxy Statement and the percentage change from annualized base salaries in effect as of the date of last year’s proxy statement, for each of our NEOs were as follows:


Named Executive Officer	Annualized Base Salary		% Increase
Donald D. Charron	$	724,000	2.0	%
Michael K. Sergesketter*	$	—	—	%
John H. Kahle	$	397,800	—	%
Steven T. Korn	$	421,000	12.3	%
Christopher J. Thyen	$	326,000	5.2	%

*Mr. Sergesketter retired effective June 30, 2021 and is not employed by the Company as of the date of this Proxy Statement. Ms. Croom was appointed Chief Financial Officer of the Company effective July 1, 2021 and her current base salary is $368,000.

2. Cash Incentive Compensation. Executive officers and full-time salaried employees are eligible to participate in the Profit Sharing Incentive Bonus Plan which provides participants with an opportunity to receive a cash payment if certain profitability levels (tiers) for the fiscal year are achieved. The profit sharing incentive bonus plan measures economic profit at two levels within the Company: (1) worldwide for Company-wide performance (“Worldwide”); and (2) at a business unit level for the performance of designated operations within the Company (“Business Unit”).

The goal of the Profit Sharing Incentive Bonus Plan is to link compensation with the long-term financial success of the Company and Share Owner return. A key aspect of the Plan to accomplish this goal includes the fact that substantially all full-time salaried employees participate in the same profit sharing incentive bonus plan which puts all management employees in the same position to encourage growth of economic profit. Substantially all full-time employees have some portion of their compensation “at-risk,” and the variable incentive portion of pay is linked to financial results. The total of base salary and variable incentive compensation approximates a market value for a role. The variable incentive represents a significant part of a Plan participant’s total compensation, thus putting more compensation at-risk and giving them greater incentive to improve economic profit and increase their total compensation.

The Profit Sharing Incentive Bonus Plan establishes potential cash incentive amounts as a range of percentages of the participant’s salary, with the payout percentage increasing with higher levels of profitability. The Plan also establishes different payout percentage ranges across several participant categories, setting higher payout percentage ranges for participants who, by virtue of their responsibilities, are expected to have a greater effect on the Company’s profitability. The following matrix summarizes the cash incentive payout percentages at each economic profit tier for the various participant categories:


Economic Profit	Participant Categories
Tiers	1		2		3		4		5		6		7		8
1	100	%	80	%	60	%	50	%	40	%	30	%	20	%	10	%
2	80	%	60	%	45	%	35	%	30	%	22	%	15	%	7	%
3	60	%	40	%	30	%	25	%	20	%	15	%	10	%	5	%
4	40	%	20	%	15	%	12	%	10	%	7	%	5	%	3	%
5	20	%	10	%	8	%	6	%	5	%	4	%	3	%	2	%
6	0	%	0	%	0	%	0	%	0	%	0	%	0	%	0	%

For a particular fiscal year, the Committee sets each tier to a specific amount of economic profit. Economic profit is equal to the amount of net income less the cost of capital. The cost of capital represents the economic cost of a reasonable return on capital that is used in the business. New capital expenditures are excluded in computing the cost of capital for an appropriate period of time (currently 12 months) to encourage needed capital investments. Separate economic profit tiers are set for the Worldwide and Business Unit plans. The economic profit tiers are set by the Committee after considering many factors, including comparisons to economic performance of numerous public companies. Net income must be earned before bonus is earned. The economic profit tiers are established so that performance attained between the tier 4 and tier 3 levels approximates the median economic profitability performance of these public companies. Also, this payout approximates market value for an employee’s role. According to the Company’s compensation philosophy, the Company is comfortable paying below market when results are low, and over market when results exceed expected standards. Economic profit performance above tier 3 should result in a participant exceeding market value, and economic profit performance below tier 4 should result in total compensation being below market value. Achievement of a 100% cash incentive payout for executive officers is very difficult because the profit sharing incentive bonus plan is designed to pay maximum cash incentives only if the Company achieves economic profitability near the top quartile of these public companies. The Committee approves the economic profit tiers within 90 days after the commencement of each fiscal year, usually in late July or early August. The Committee may, within such 90-day time period, make adjustments for non-operating income and loss and other profit-computation elements as it deems appropriate to provide suitable incentives for eligible employees. While the Committee may make adjustments beyond the 90-day period, any such adjustments will not be applicable to our NEOs.

Our NEOs may earn cash incentives from zero to 100% of base salary, except for the CEO, whose cash incentives can range from zero to 110% of base salary. The Committee has set the target cash incentive for our NEOs at approximately 40% (tier 4 level) which is a cash incentive payout reflecting our desired level of compensation at risk. During fiscal year 2021, all NEOs participated at the Worldwide level. For the past three years, cash incentive payouts for our NEOs averaged 46%, except for the CEO, whose cash incentive payouts averaged 53%.

At the end of each fiscal year, but before cash incentives under the profit sharing incentive bonus plan may be paid, the Committee certifies the actual economic profit that was achieved and approves the payment of the cash incentive. The Committee does not have the discretion to increase, but can decrease, the amount of any cash incentive for NEOs under the profit sharing incentive bonus plan. There were no decreases in fiscal year 2021.

Cash incentives earned under the profit sharing incentive bonus plan for a particular fiscal year are accrued annually and paid in multiple installments over the succeeding fiscal year, unless local country requirements dictate otherwise. In the United States, 50% of the accrued bonus is payable in August and 12.5% is payable in each of the following months of September, January, April, and June. This schedule varies in the Company’s global locations based on local pay practices and regulations. Cash incentives totaling less than $2,000 are paid in a lump sum in August. Except for provisions relating to retirement, death, permanent disability, and certain other circumstances described in a participant’s employment agreement or benefit plan, participants must be actively employed on each payment date to be eligible to receive any unpaid installments. If a participant’s termination of employment is caused by retirement, death, disability, or certain other circumstances described in a participant’s employment agreement or benefit plan, the participant (or beneficiary, in the event of the participant’s death) will be entitled to receive all cash incentive payments for the previous fiscal year and a pro rata share for the current fiscal year, all to be paid in full within 2½ months after the end of the Company’s fiscal year.

Based on the fiscal year 2021 economic profit results, our NEOs will each receive a payout of 67%, except for the CEO, who will receive 77%, of their fiscal year 2021 base salary under the profit sharing incentive bonus plan.

Stock Compensation

The Company’s 2014 Stock Option and Incentive Plan (the “2014 Plan”) permits a variety of stock incentive benefits consisting of restricted stock, restricted share units, unrestricted share grants, incentive stock options, non-qualified stock options, stock appreciation rights, performance shares, and performance units. Under the 2014 Plan, no option or stock appreciation rights may be repriced, replaced, regranted through cancellation, repurchased for cash or other consideration, or modified without shareholder approval (except in connection with a change in our capitalization) if the effect would be to reduce the exercise price for the shares underlying the award. The Committee granted performance shares during fiscal year 2021. The Committee’s view is that performance shares represent one of the more effective forms of stock incentive compensation available under the 2014 Plan by tying compensation directly to the economic profitability of the Company. NEOs have no voting or dividend rights with respect to the performance shares until earned. We use the term “award” to mean the maximum number of shares that we have provided an employee the opportunity to earn if we attain our goals in a future performance period. We use the term “grant” to mean the number of shares out of each award that an employee actually earned on our attainment of our goals in a prior performance period.

Performance Shares

For fiscal year 2021, performance shares consisted of a long-term award with one-third (1/3) of the award vesting (if at all) in annual installments over the succeeding three-year period. The performance share awards set forth the maximum number of shares of our stock which the participant was eligible to receive if the applicable profitability levels and sales growth goals for the fiscal year were achieved. The maximum number of shares awarded to each of our NEOs was determined by the Committee based on the relative level of responsibilities of the NEOs and within an overall projected total cost of the awards based on anticipated financial performance for the upcoming fiscal year, as well as the other subjective factors noted below in the “Compensation Process” section of this Compensation Discussion and Analysis.

For fiscal year 2021, the Committee determined the number of shares of each annual installment the NEO would be eligible to earn by a combination of the three (3) year average Worldwide Category 1 bonus percentage computed under the Company’s Profit Sharing Incentive Bonus Plan (“Bonus Plan”) for the applicable fiscal years ended June 30 (“Bonus Percent”) and the Company’s growth based on a comparison of its three (3) year Compounded Annual Growth Rate (“CAGR”) to the Electronics Manufacturing Services (“EMS”) Industry’s three year CAGR. The Committee applies the following formula:

a.Profitability Attainment - computing a percentage based on a ratio, the numerator of which is the average of the Bonus Percent for the Company’s last three (3) fiscal years, divided by a denominator of 40% (“Profitability Grant Percentage”). The Profitability Grant Percentage may not exceed 100%. The Grant Percentage is then multiplied by sixty percent (60%) of the total annual installment.

b.Growth Attainment - computing a percentage based upon a ratio, the numerator of which is the three (3) year CAGR of the Company’s fiscal year net sales revenue, divided by a denominator of the three (3) year CAGR of the EMS industry total calendar year sales revenue as reported by the Manufacturing Market Insider EMS industry trade publication (“Growth Grant Percentage”). The Growth Grant Percentage may not exceed 100%. The Growth Grant Percentage is then multiplied by forty percent (40%).

Applying the formula above based on the fiscal year 2021 results, approximately 96% of awarded shares were earned, and we granted our NEOs the following shares for the fiscal year 2021 performance under the 2014 Plan:


Named Executive Officer												FY 2021 LTPS Grant (Shares Issued) (1)
Donald D. Charron												69,137
John H. Kahle												9,731
Steven T. Korn												15,740
Michael K. Sergesketter												12,028
Christopher J. Thyen												11,275

(1) Shares have not been reduced by the number of shares withheld to satisfy tax withholding obligations.

The “Stock Awards” column of the Summary Compensation Table includes the targeted value of performance shares granted during fiscal year 2021, estimated based on an assumed payout at a target (Tier 4) level of our profit sharing incentive bonus plan, achievement of the sales growth attainment component, and using the share price as of the date awarded, which was $13.67 as reported by Nasdaq on August 24, 2020.

The table below compares the targeted value with the actual value of performance shares earned during fiscal year 2021 as set forth above, based on the number of shares earned as calculated under the profit sharing incentive bonus plan and the average of the high and low price of the Company’s Common Stock as reported by Nasdaq for the August 24, 2021 vesting date, which was $23.36.

We are providing this information to give additional context to the fiscal year 2021 compensation of our NEOs by showing the impact that our actual fiscal year 2021 financial performance and change in share price had on the value of realized compensation.


	Performance Shares
Named Executive Officer	Targeted Value for August 2020 Awards		Realized (Earned and Vested Value of Grants)		Realized (Granted) Value as a Percentage of Targeted (Award) Value
Donald D. Charron	$	983,351	$	1,614,695	164.2	%
John H. Kahle	$	138,409	$	227,268	164.2	%
Steven T. Korn	$	223,874	$	367,608	164.2	%
Michael K. Sergesketter	$	171,080	$	280,914	164.2	%
Christopher J. Thyen	$	160,376	$	263,328	164.2	%

Beginning with the fiscal year 2022 through fiscal year 2024 performance period under the 2014 Plan, awards cliff vest at the third anniversary of the award date. The change to a three-year cliff vesting period reinforces the focus of our NEOs on our long-term success, and the resulting value it delivers to our Share Owners, by further aligning their personal financial success with that long-term success.

To avoid a gap in the vesting of equity awards due to the transition from grants that vested annually in three equal installments to ones that vest after three years, in August 2021 we awarded our NEOs a bridge award for the fiscal year 2022 and fiscal year 2022-2023 vesting periods. The first tranche of the bridge award for the fiscal year 2022 performance period cliff vests at the first anniversary of the grant. The second tranche of the bridge award for the fiscal year 2022-2023 performance period cliff vests at the second anniversary of the grant. The third tranche of the award for the fiscal year 2022-2024 performance period, and future performance share awards, cliff vest at the third anniversary of the grant. The maximum number of performance shares awarded to each of our NEOs in August 2021 that may be granted under the 2014 Plan based on the award’s respective performance periods was as follows:


	Maximum # of Shares Awarded for Performance Period:
Named Executive Officer	FY 2022	FY 2022 - FY 2023	FY 2022 - FY 2024
Donald D. Charron	75,820	39,998	59,998
John H. Kahle	7,409	—	—
Steven T. Korn	18,678	11,149	16,724
Michael K. Sergesketter	—	—	—
Christopher J. Thyen	11,455	5,570	8,355

Jana Croom, who was appointed Chief Financial Officer effective July 1, 2021, was awarded 3,929, 7,859, and 11,789 shares in August 2021 for the fiscal year 2022, fiscal year 2022-2023, and fiscal year 2022-2024 performance periods, respectively.

Other Compensation and Employee Benefits

Retirement Plan

Our NEOs participate in a defined contribution, participant-directed retirement plan in which all domestic employees are eligible to participate (the “Retirement Plan”). The Retirement Plan is intended to attract employees and promote employee retention by providing a long-term savings opportunity. The Retirement Plan provides for voluntary employee contributions as well as a discretionary annual Company contribution as determined by the Committee. The Committee considers Company profitability among other factors when determining the contribution. The total Company contribution is allocated based on the total eligible compensation of eligible participants. Each eligible participant’s Company contribution percentage is identical, including our NEOs. The Company’s contribution percentage for fiscal year 2021 was approximately 3% of eligible compensation, up to the annual compensation limit under Section 401(a) of the Internal Revenue Code. Participant contributions are fully vested immediately, and Company contributions are fully vested after five years of participation according to the following schedule. All NEOs are fully vested in the Retirement Plan as they have been participants for greater than five years.


Years of Vesting Service						Vested Percentage
Less than 1						0%
1						10%
2						20%
3						40%
4						60%
5						100%

The Retirement Plan is fully funded, and participants may choose to invest their balances among any combination of the following investment options shown in the table below. The annual return of each fund for the fiscal year ended June 30, 2021 is included in the table below.


Fund Name	Asset Class	AATR (1 year) 7/1/20 - 6/30/21
JPMorgan Lg Cap Gr R6	Domestic Stock - Large Growth	41.70%
Small-Cap Index Fund Inst	Domestic Stock - Small Cap	56.51%
Kimball Electronics	Company Stock	60.34%
International Growth Adm	International Stock	51.23%
Inst Index Fund Inst	Domestic Stock - Small Cap	40.77%
Retirement Savings Trust III	Short Term Reserves	1.83%
Cash Res Fed MM Adm	Short Term Reserves	0.04%
Inst Target Ret 2015 Fund	Balanced Funds (Stocks and Bonds)	13.61%
Inst Target Ret 2020 Fund	Balanced Funds (Stocks and Bonds)	18.96%
Inst Target Ret 2025 Fund	Balanced Funds (Stocks and Bonds)	22.81%
Inst Target Ret 2030 Fund	Balanced Funds (Stocks and Bonds)	26.11%
Inst Target Ret 2035 Fund	Balanced Funds (Stocks and Bonds)	29.34%
Inst Target Ret 2040 Fund	Balanced Funds (Stocks and Bonds)	32.73%
Inst Target Ret 2045 Fund	Balanced Funds (Stocks and Bonds)	36.10%
Inst Target Ret 2050 Fund	Balanced Funds (Stocks and Bonds)	36.49%
Inst Target Ret 2055 Fund	Balanced Funds (Stocks and Bonds)	36.50%
Inst Target Ret 2060 Fund	Balanced Funds (Stocks and Bonds)	36.54%
Inst Target Ret 2065 Fund	Balanced Funds (Stocks and Bonds)	36.49%
Inflation-Protect Sec Adm	Bonds	6.47%
Inst Target Ret Inc Fund	Balanced Funds (Stocks and Bonds)	12.04%
Real Estate Index Admiral	Real Estate	34.37%
Windsor II Fund Adm	Domestic Stock	51.31%
Delaware Small Cap Core I	Domestic Stock - Small Cap	54.18%
Met West Total Rt Bd Inst	Bonds	1.28%
Total Bond Mkt Index Inst	Bonds	-0.41%
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For those eligible employees who, under the 1986 Tax Reform Act, are deemed to be highly compensated, their individual Company contribution under the Retirement Plan is reduced. See the following “Nonqualified Deferred Compensation” section.

Nonqualified Deferred Compensation

For our NEOs, other executive officers, and other key employees who are deemed to be highly compensated under the 1986 Tax Reform Act, there is a fully-funded, nonqualified, Supplemental Employee Retirement Plan (“SERP”) under which we contribute to the account of each participant an amount equal to the reduction in their Company contribution under the Retirement Plan arising from the provisions of the 1986 Tax Reform Act. In addition, participants may voluntarily defer up to 50% of their eligible compensation under the SERP. A participant’s deferrals are fully vested. Company contributions are subject to the same vesting schedule as the Retirement Plan and are made within 2½ months after the end of the fiscal year. The Company’s contribution percentage for fiscal year 2021 was approximately 3% of eligible compensation in excess of the annual compensation limit under Section 401(a) of the Internal Revenue Code. Investment options are the same as those under the Retirement Plan except for the exclusion of the Retirement Savings Trust III and the Company Stock Fund. Payments of a participant’s elective deferrals and Company contributions are made as elected by the participant in lump sum or in installment payments over a period of 5 or 10 years commencing upon retirement or termination of employment, whichever occurs first. These amounts may be paid earlier in the event of death of the participant or an unforeseen emergency affecting the participant as determined by the committee appointed to administer the SERP. The SERP is intended to promote retention by providing a long-term savings opportunity on a tax-efficient basis. The assets of the SERP are held in a grantor trust in what is commonly referred to as a “rabbi trust” arrangement. This means that the assets of the SERP are subject to the claims of the Company’s general creditors in the event of the Company’s insolvency. For more information about amounts deferred by the NEOs, see the Nonqualified Deferred Compensation Table in the “Executive Compensation — Nonqualified Deferred Compensation” section in this Proxy Statement.

Other Compensation

During fiscal year 2021, as part of their then-existing employment agreements, the Company provided our NEOs with other benefits, which the Committee believes were reasonable, competitive, and consistent with the Company’s overall compensation program directives. They were designed to promote the executives’ physical and mental well-being in order to help them function more effectively in their respective positions.

These benefits and the rationale for providing each are as follows:


Benefit						Rationale
Financial Counseling						Aid personal financial planning through expert advice to properly manage financial affairs.
Tax Preparation						Assist in accurate preparation of personal income tax filings.
Executive Preventive Healthcare Program						Maintain health of executive and primary personal support person to permit peak performance.
Medical Reimbursement						Promote seeking of proper medical care by reducing potential financial barriers.

No loans of Company funds have ever been made to any executive officer for any purpose. The exact amounts received from these benefits are not predetermined.

As discussed below in the section “Employment Agreements with NEOs and Potential Payments Upon Termination or Change-In-Control,” at the end of fiscal year 2021, we terminated the employment agreements for our executive officers, including each of our NEOs, effective June 30, 2021. By terminating these agreements, we also ceased providing the “Other Compensation” benefits above.

As of July 1, 2021, our executives are eligible for the same benefits available to our other full-time employees. In the U.S., our benefits include our 401(k) plan, health care plans, life insurance plans, and other welfare benefit programs. As discussed above, in addition to the standard benefits offered to all U.S. employees, we maintain a nonqualified Supplemental Employee Retirement Plan (“SERP”) for our NEOs, other executive officers, and other key employees who are deemed to be highly compensated under the 1986 Tax Reform Act. This deferred compensation plan is unfunded, and participation is voluntary.

Employment and Severance Agreements

As described in the “Executive Compensation — Employment Agreements with NEOs and Potential Payments Upon Termination or Change-In-Control” section of this Proxy Statement, during the last fiscal year, we had employment agreements with our executive officers, including each of our NEOs, that remained effective through June 30, 2021. After the last fiscal year ended, we terminated those employment agreements. Effective July 1, 2021, we superseded them with the Kimball Electronics, Inc. Executive Severance and Change in Control Plan.

Compensation Process

The Committee sets the Chairman and CEO’s compensation and approves the compensation of the other executive officers in consultation with the Chairman and CEO who directly supervises those executive officers throughout the year. The Committee gives significant consideration to the recommendation of the Chairman and CEO, but the final compensation decisions affecting our executive officers are within the Committee’s discretion. No other roles are taken by the executive officers in setting their compensation, except for discussion of their individual performance with the Chairman and CEO and Vice President, Human Resources. During fiscal year 2021, we implemented a new process to set individual performance goals for each executive with the accomplishment of those goals tied to the payout of a portion of the amounts earned under the Company’s profit sharing incentive bonus plan. In addition, executives are given feedback related to their leadership and results execution through the annual talent review and performance management process, which results in a personal development plan reviewed and approved by the Chairman and CEO and Vice President, Human Resources.

Judgment is used in making compensation decisions. Flexibility is critical in the assessment process to allow for adjustments due to new business conditions and to adjust for the evolving business environment. There is no predetermined formula for allocating compensation between cash and non-cash, current and long-term, or fixed and variable elements.

Key considerations affecting the determination of executive compensation include:

1.Responsibilities — the scope and breadth of the duties and level of responsibility undertaken.

2.Leadership — demonstrated ability to lead an organization.

3.Performance — with an emphasis on consistent, sustained performance.

4.Potential — demonstrated capacity and aspiration to grow into more responsible leadership positions.

5.Execution of Strategy — record of getting things done according to plans.

6.Personal Development — demonstrated willingness to learn and grow professional and leadership skills.

7.Promotion of Company Culture and Values — demonstrated commitment to modeling of Company Mission and Guiding Principles and ethical behavior.

8.Company Results — demonstrated teamwork and support of Company goals and performance.

9.Benchmarking — comparison of executive compensation to industry or other relevant compensation benchmarks.

10.Retention — compensation at sufficient levels to retain talented executives.

During fiscal year 2021, the Committee utilized guidance from a third-party compensation consulting firm, Aon Consulting, in setting executive compensation. Aon Consulting was engaged directly by the Committee to advise on levels and components of executive compensation and peer incentive pay practices, and to confirm our peer group composition. The Committee also utilizes full market compensation studies provided by Aon Consulting. The data from Aon Consulting included information on base pay, stock awards, and other forms of compensation awarded at comparable benchmarked companies. The Committee used this data and the recommendations from Aon Consulting and management when making compensation decisions during fiscal year 2021 to ensure that the types and amounts of executive compensation were reasonable and competitive.

Use of Peer Companies

For compensation planning purposes, the Committee, with input from management and Aon Consulting, has constructed a peer group in order to compare the compensation of our executive officers with that paid by other companies that we believe compete with us for executive talent. Companies were chosen for the peer group using filtering criteria such as:

•Company size and performance (revenue, market capitalization, performance criteria);

•Companies identified as specific competitors for executive talent;

•Geographic footprint;

•Industries served;

•Organizational structure; and

•Companies identified by others as our competitors.

The Committee conducts reviews of the peer group and selection criteria annually to ensure that both are appropriate.

Peer Group Used in Compensation Planning During Fiscal Year 2021


	Company	Stock Symbol
1	Bel Fuse, Inc.	BEL
2	Benchmark Electronics, Inc.	BHE
3	CTS Corp.	CTS
4	IPG Photonics Corp.	IPGP
5	Keytronic Corp.	KTCC
6	Knowles Corp.	KN
7	Littelfuse, Inc.	LFUS
8	Methode Electronics, Inc.	MEI
9	Novanta, Inc.	NOVT
10	OSI Systems, Inc.	OSIS
11	Plexus Corp.	PLXS
12	TTM Technologies, Inc.	TTMI
13	Trimble, Inc.	TRMB

Tax and Accounting Considerations

Section 162(m)

The Committee takes into account the tax and accounting treatment of executive compensation arrangements when structuring our executive compensation program. One of those considerations is Section 162(m) of the Internal Revenue Code, which sets a limit of $1 million on the amount the Company can deduct for compensation paid to our “covered employees.” Historically, compensation meeting the requirements of “qualified performance-based compensation” under Section 162(m) did not count toward the $1 million limit. However, the Tax Cuts and Jobs Act (“Tax Reform”), which was enacted on December 22, 2017, made a number of changes to Section 162(m), generally effective for taxable (fiscal) years beginning after December 31, 2017, including the repeal of the “qualified performance-based compensation” exemption, subject to certain transition rules (which apply to remuneration provided pursuant to written binding contracts which were in effect on November 2, 2017 and which are not subsequently modified in any material respect). Tax Reform also expanded the definition of “covered employees” by including both the chief financial officer and certain former named executive officers as “covered employees.”

Our general philosophy has been to attempt to qualify compensation for tax deductibility under Section 162(m) of the Internal Revenue Code, wherever we deem appropriate, recognizing that, under certain circumstances, the limitations may be exceeded. Historically, treatment as “qualified performance-based compensation” has been sought to the extent practicable and only to the extent that it is consistent with our overall compensation objectives. However, there can be no guarantee that any compensation paid to our “covered employees” in excess of $1 million will be or remain exempt from Section 162(m). In any event, the Committee retains full discretion to construct compensation packages that will best attract, retain, and reward successful executive officers. Therefore, the Committee may award compensation that is not fully deductible under Section 162(m) if the Committee believes it will contribute to the achievement of our business objectives.

Section 409A

Section 409A of the Internal Revenue Code affects the payments of certain types of deferred compensation to key employees and includes requirements relating to when payments under such arrangements can be made, acceleration of benefits, and timing of elections under such arrangements. Failure to satisfy these requirements will generally lead to an acceleration of the timing for including deferred compensation in an employee’s income, as well as certain additional taxes, penalties, and interest. The Company intends for, but does not currently require, its nonqualified deferred compensation arrangement to meet the effective requirements of Section 409A.

Recovery of Compensation from Executive Misconduct

The Company has adopted a “Claw Back” policy providing that if the Company determines that an executive officer has engaged in fraudulent or intentional misconduct resulting in a restatement of the Company’s financial results, the executive would be obligated and the Company would take all possible actions to recover any portion of performance-based or incentive compensation paid or awarded to the executive that is greater than the amount that would have been paid or awarded if calculated based on the restated financial results.


REPORT OF THE COMPENSATION AND GOVERNANCE COMMITTEE

The Compensation and Governance Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for fiscal year 2021. This report is provided by the following independent directors who comprise the Committee: Gregory J. Lampert (Chairperson), Colleen C. Repplier, and Holly A. Van Deursen.


COMPENSATION RELATED RISK ASSESSMENT

The Board believes that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. In addition, the Compensation and Governance Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks.

The Compensation and Governance Committee extensively reviewed the elements of executive compensation to determine whether any portion of executive compensation encouraged excessive risk taking and concluded:

•the profit sharing incentive bonus plan’s focus on the long-term financial success of the Company, as well as the payout over the subsequent fiscal year, discourages short-term risk taking;

•the profit sharing incentive bonus plan profitability tiers are appropriately set to calibrate variable incentive payouts at the targeted cash incentive level to the median levels of peer group performance and bonus payouts calibrated to superior results;

•performance share awards are appropriately linked to sales growth and profitability; and

•equity ownership guidelines discourage excessive risk taking.

Furthermore, as described under “Compensation Discussion and Analysis — Compensation Process,” compensation decisions include judgment by the Committee, which mitigates the influence of purely objective calculations on excessive risk taking. The Compensation and Governance Committee reviews the Company’s compensation policies and practices on an annual basis to consider how effectively the policies and practices are providing incentives at an appropriate level of risk to executive employees.


EXECUTIVE COMPENSATION

The Company believes in an incentive compensation system that applies to all employees, including management, based on the fundamental philosophies of rewarding performance, aligning with Share Owners’ interests by directly linking compensation to financial performance, and talent retention and strengthening collaboration. For management, the system includes three components: a base salary, performance-based cash compensation, and performance-based stock incentive compensation. The incentive components are pegged to attainment of economic profit, which includes a cost of capital component, and the stock compensation incentive also includes a sales growth component, both as compared to specific goals.

Summary Compensation Table

The Summary Compensation Table appearing below sets forth information regarding the compensation paid and/or awarded to our chairman of the Board and chief executive officer, chief financial officer, and the three other most highly compensated executive officers, for or during the years ended June 30, 2021, 2020, and 2019. These officers are referred to herein as our “named executive officers,” or “NEOs.”

The Summary Compensation Table appearing below contains values calculated and disclosed according to SEC reporting requirements. The “Stock Awards” column reflects awards with a grant date during each fiscal year.


Name and Principal Position	Year	Salary		Stock Awards		Non-Equity Incentive Plan Compensation		All Other Compensation		Total
		($)		($) (1)		($) (2)		($) (3)		($)
Donald D. Charron	2021	$	709,752	$	983,351	$	546,509	$	39,850	$	2,279,462
Chairman of the Board and Chief Executive Officer	2020	$	709,752	$	766,814	$	283,901	$	30,639	$	1,791,106
	2019	$	695,770	$	1,317,125	$	292,223	$	33,143	$	2,338,261


John H. Kahle	2021	$	397,800	$	138,409	$	266,526	$	55,969	$	858,704
Vice President, General Counsel, Chief Compliance Officer, Secretary	2020	$	397,800	$	128,503	$	119,340	$	39,689	$	685,332
	2019	$	397,800	$	335,757	$	167,076	$	45,268	$	945,901


Steven T. Korn	2021	$	373,007	$	223,874	$	249,915	$	25,878	$	872,674
President, Global EMS Operations	2020	$	323,179	$	155,038	$	96,954	$	19,080	$	594,251
	2019	$	316,813	$	264,279	$	133,061	$	26,274	$	740,427


Michael K. Sergesketter	2021	$	331,560	$	171,080	$	222,145	$	46,621	$	771,406
Former Vice President, Chief Financial Officer	2020	$	322,265	$	153,901	$	96,679	$	24,905	$	597,750
	2019	$	314,683	$	259,327	$	132,167	$	41,277	$	747,454


Christopher J. Thyen	2021	$	309,538	$	160,376	$	207,390	$	56,579	$	733,883
Vice President, New Platforms	2020	$	302,272	$	145,008	$	90,681	$	28,694	$	566,655
	2019	$	296,317	$	247,638	$	124,453	$	32,624	$	701,032

(1) Stock awards consist of performance shares:

•The compensation reported in the above table represents targeted performance share compensation for each of our NEOs, which does not reflect compensation received or earned by the NEOs in the respective years. The amounts included above represent the value at the award date based on the probable outcome of the performance conditions, which is estimated based on the combination of the bonus percentage attainment component calculated under the Company’s profit sharing incentive bonus plan, adjusted to a three-year average bonus percentage, and a growth attainment component, which is the Company’s growth in sales revenue based on comparison of its three-year compounded annual growth rate (“CAGR”) with the Electronics Manufacturing Services Industry’s three-year CAGR. or 100% of the maximum award opportunity for Long-Term Performance Shares (“LTPS”).

•The performance shares awarded that will be reported for fiscal year 2022 as valued on the August 24, 2021 award date based on the probable outcome of the performance conditions for Messrs. Charron, Kahle, Korn, Sergesketter, and Thyen were $1,774,946, $173,445, $437,252, $0, and $268,162, respectively.

•The assumptions used to calculate the grant date fair values are set forth in Note 10 - Stock Compensation Plans to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

(2) Amounts consist of cash incentive compensation earned for services rendered in the applicable fiscal year. The amounts are paid in five installments over the succeeding fiscal year, pursuant to the profit sharing incentive bonus plan, with 50% payable in August and 12.5% payable in each of the following months of September, January, April, and June.

(3) Includes benefits received by the NEOs from executive financial services programs, supplemental medical reimbursement, the value of the services and related benefits provided pursuant to the Executive Preventive Healthcare Program, Company contributions earned for the Retirement Plans and SERP plans, and de minimus Christmas bonus paid by the Company. SERP and Retirement Plan Company contribution amounts earned for fiscal year 2021 and paid in fiscal year 2022 for Messrs. Charron, Kahle, Korn, Sergesketter, and Thyen were $37,688, $19,930, $18,688, $16,611, and $15,508, respectively.

See the “Compensation Discussion and Analysis” section in this Proxy Statement for further information about the material terms of the NEOs’ compensation plans.

Grants of Plan-Based Awards in Fiscal Year 2021


		Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)							Estimated Future Payouts Under Equity Incentive Plan Awards (2)			Grant Date Fair Value of Stock and Option Awards (3)
	Grant		Threshold		Target		Maximum		Threshold	Target	Maximum
Name	Date		($)		($)		($)		(#)	(#)	(#)	($)
Donald D. Charron
Profit Sharing Incentive Bonus Plan			$	—	$	354,876	$	780,727

LTPS(4)	08/24/20								—	71,935	71,935	$	983,351
John H. Kahle
Profit Sharing Incentive Bonus Plan			$	—	$	159,120	$	397,800

LTPS(4)	08/24/20								—	10,125	10,125	$	138,409
Steven T. Korn
Profit Sharing Incentive Bonus Plan			$	—	$	149,203	$	373,007

LTPS(4)	08/24/20								—	16,377	16,377	$	223,874

SEC Form DEF 14A filed by Kimball Electronics, Inc.