DEF 14A 1 meritor36517443-def14a.htm DEFINITIVE PROXY STATEMENT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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	MERITOR, INC.
	(Name of Registrant as Specified In Its Charter)


	(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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	Letter to Shareholders Notice of 2022 Annual Meeting and Proxy Statement

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Chris Villavarayan

Chief Executive Officer and President

December 17, 2021

Dear Fellow Meritor Shareholders,

Fiscal year 2021 was pivotal for Meritor as we delivered strong financial performance and expanded our position in commercial vehicle electrification as customers aggressively evaluate electric technology solutions to prepare for the future. We were able to achieve good financial results this year despite the ongoing pandemic and resulting global supply chain crisis that led to greatly increased steel and freight costs and a challenging labor environment in the United States.

At the same time, strong demand and increased truck production occurred in all our markets throughout the year. Class 8 truck production in North America increased almost 20 percent, production in India more than doubled and South America was up 50 percent. Schedule volatility and labor challenges impacted many of our plants, but we maintained a high level of safety, quality and delivery. In fact, 50 percent of our facilities had zero recordable incidents for the year, I commend these teams for the work they did to maintain a safe working culture in a challenging environment.

Meritor’s heritage dates back over a century to 1909. At that time, no one could have envisioned that the drive axle of a commercial vehicle would become “prime real estate" as the need and desire for electric commercial vehicles became a reality. Not only is Meritor integrating an electric motor, multi-speed transmission, and powertrain controls into the drive axle, we are doing it in a way that provides more value to our customers compared to alternative electric drive systems in the market today. We believe that each of these systems will result in three to four times more content for us than our traditional drive axle. Based on forecasted adoption rates, we expect to achieve fifty percent of our growth – approximately $250 million – in our M2025 timeframe from electrification alone, which would put us on the path to $1.5 billion in electrification revenue in 2030.

Every quarter of fiscal year 2021, we announced new electrification agreements that expand our potential customer base. And we announced three more wins at our Strategy Day event on December 7. Each of these collaboration opportunities is a validation of our technology solution as commercial vehicle manufacturers finalize their market strategies and architecture choices.

Meritor’s Blue Horizon brand represents our revolution in commercial vehicle transportation. The product pipeline we are bringing to market is transforming the value we deliver to customers. Thanks to the forward-thinking of global customers, government officials and environmental agencies, we will make a difference that will impact every generation to come. There is no greater legacy we can leave our children and theirs. I take great pride in my new role as Meritor’s CEO and President. This is an exciting and revolutionary time for the industry, and I believe the Meritor team possesses the talent, expertise and knowledge that comes with a company that has a heritage as strong and solid as ours.

In fiscal year 2022, we will remain focused on delivering superior financial performance, growing the business in our traditional and emerging markets, and maintaining a workplace that fosters creativity and innovation for our valued employees.

Sincerely,

Chris Villavarayan

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MERITOR, INC.
2135 West Maple Road
Troy, Michigan 48084-7186

Notice of 2022 Annual Meeting of Shareholders

To the Shareholders of MERITOR, INC.:

Notice is Hereby Given that the 2022 Annual Meeting of Shareholders of Meritor, Inc. (the “Company”) will be held at the Westin Detroit Metropolitan Airport, 2501 World Gateway Place, in Detroit, Michigan 48242, on Thursday, January 27, 2022, at 9:30 a.m. (Eastern Standard Time) for the following purposes:

1.	To elect seven members of the Board of Directors of the Company with terms expiring at the Annual Meeting in 2023;
2.	To approve, on an advisory basis, the compensation of the named executive officers as disclosed in this proxy statement;
3.	To consider and vote upon a proposal to approve the selection by the Audit Committee of the Board of Directors of the firm of Deloitte & Touche LLP as auditors of the Company; and
4.	To transact such other business as may properly come before the meeting.

Only shareholders of record at the close of business on November 19, 2021 will be entitled to notice of, and to vote at, the meeting.

	By order of the Board of Directors,

	Scott M. Confer
	Interim Corporate Secretary


December 17, 2021

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PROXY STATEMENT
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VOTING SECURITIES	2
PROPOSAL 1 - ELECTION OF DIRECTORS	4
BOARD AND COMMITTEES	12
DIRECTOR QUALIFICATIONS AND NOMINATING PROCEDURES	17
DIRECTOR COMPENSATION IN FISCAL YEAR 2021	18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	20
CORPORATE GOVERNANCE AT MERITOR	21
CODE OF ETHICS	24
CORPORATE SOCIAL RESPONSIBILITY	24
OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES	25
EXECUTIVE COMPENSATION	26
COMPENSATION DISCUSSION AND ANALYSIS	26
FISCAL YEAR 2021 SUMMARY COMPENSATION TABLE	40
GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2021	42
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS	45
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2021	46
OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2021	48
FISCAL YEAR 2021 PENSION BENEFITS	48
NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL YEAR 2021	50
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL	51
CEO PAY RATIO	58
PROPOSAL 2 - ADVISORY VOTE TO APPROVE EXECUTIVE OFFICER COMPENSATION	59
AUDIT COMMITTEE REPORT	60
PROPOSAL 3 - APPROVE THE SELECTION OF AUDITORS	62
VOTE REQUIRED	63
OTHER MATTERS	64

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PROXY STATEMENT

The 2022 Annual Meeting of Shareholders of Meritor, Inc. (the “Company” or “Meritor”) will be held on January 27, 2022, for the purposes set forth in the accompanying Notice of 2022 Annual Meeting of Shareholders. The Board of Directors of Meritor is soliciting proxies to be used at the Annual Meeting, including any adjournment thereof, and is furnishing this proxy statement in connection with its solicitation.

As permitted by the rules of the Securities and Exchange Commission (the “SEC”), Meritor is making this proxy statement, the proxy card and the annual report to shareholders, collectively referred to herein as the proxy materials, available to you electronically via the internet. On December 17, 2021, we mailed to our shareholders a notice (the “Notice”) containing instructions on how to access and review the proxy materials and how to vote online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request one. If you would like a printed copy of the proxy materials, follow the instructions for requesting them that are included in the Notice.

Shareholders of record may vote in any of three ways: (1) via the internet; (2) by calling a toll-free telephone number; or (3) if you received your proxy materials by mail, by executing and returning a proxy card. Instructions for internet voting are included in the Notice, and instructions for telephone and internet voting are included on the proxy card. If you vote by telephone or internet, it is not necessary to return a proxy card. If you properly give a proxy (including a written proxy or a proxy via telephone or internet), your shares will be voted as you specify in the proxy. If no specification is made, the shares will be voted in accordance with the recommendations of the Board of Directors. You may revoke your proxy prior to its exercise by delivering written notice of revocation to the Corporate Secretary of the Company, by giving a valid, later-dated proxy, by voting via telephone or internet at a later date than the date of the proxy or by attending the meeting and voting in person.

If your shares are held in “street name” by a bank, broker or other nominee holder on your behalf, you must follow the directions that you receive from your bank, broker or other nominee holder in order to direct the vote or change the vote of your shares. If you wish to vote in person at the meeting, you must obtain a legal proxy from the nominee holding your Meritor shares.

Our policy is to keep proxy cards, ballots and voting tabulations that identify individual shareholders confidential. However, exceptions to this policy may be necessary in some instances to comply with legal requirements and, in the case of any contested proxy solicitation, to verify the validity of proxies presented by any person and the results of the voting. Inspectors of election and any employees associated with processing proxy cards or ballots and tabulating the vote must acknowledge their responsibility to comply with this policy of confidentiality.

The Company’s fiscal year ends on the Sunday nearest September 30. For example, fiscal year 2021 ended on October 3, 2021, fiscal year 2020 ended on September 27, 2020 and fiscal year 2019 ended on September 29, 2019. For ease of presentation, September 30 is utilized consistently throughout this proxy statement to represent the fiscal year end.

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VOTING SECURITIES

Only shareholders of record at the close of business on November 19, 2021 are entitled to receive notice of, and to vote at, the meeting. On November 19, 2021, we had outstanding 70,076,049 shares of our Common Stock, par value $1 per share (“Common Stock”). Each holder of Common Stock is entitled to one vote for each share held.

As of November 19, 2021, T. Rowe Price Trust Company, as directed trustee under the Meritor savings plans for its participating employees, owned the following shares of Common Stock:

Name and Address	Number of Shares	Percent of Outstanding Common Stock
T. Rowe Price Trust Company	1,001,047	1.4%
4515 Painters Mill Road
Owings Mills, MD 21117

If you are a participant and hold shares of Common Stock in Meritor’s savings plans, your internet or telephone vote or your proxy card will also serve as a voting instruction for the trustee with respect to shares held in your account. Shares held on account of participants in these plans will be voted by the trustee in accordance with instructions from the participants (either in writing or by means of telephone or internet voting procedures). Where no instructions are received, shares will be voted by the trustee in the same manner and proportion as shares for which instructions are received.

In addition, the following entities reported beneficial ownership of more than 5% of the outstanding shares of Common Stock, calculated as of November 19, 2021. Each entity has sole voting and investment power with respect to the shares of Common Stock listed unless otherwise indicated. This information is based on Schedules 13G that were filed with the SEC throughout fiscal 2021, unless otherwise known to us.

Name and Address	Number of Shares	Percent of Outstanding Common Stock
BlackRock, Inc.⁽¹⁾ 55 East 52nd Street New York, NY 10055	10,951,327	15.6%
The Vanguard Group⁽²⁾ 100 Vanguard Blvd. Malvern, PA 19355	8,257,807	11.7%
Wellington Entities⁽³⁾ c/o Wellington Management Company LLP 280 Congress Street Boston, MA 02210	6,193,882	8.8%
T. Rowe Price Associates, Inc.⁽⁴⁾100 E. Pratt Street Baltimore, MD 21202	5,582,704	7.9%

____________________

⁽¹⁾

BlackRock, Inc. filed an amendment to its Schedule 13G on February 5, 2021 as a parent holding company of thirteen subsidiaries, each of which acquired beneficial ownership of Common Stock that, in the aggregate, exceeds 5% of the total outstanding Common Stock. One of the persons deemed a beneficial owner of these shares exceeds the 5% threshold. BlackRock, Inc. has sole voting power with respect to 10,861,399 shares.

⁽²⁾

The Vanguard Group filed an amendment to its Schedule 13G on February 10, 2021 as a parent holding company of eight subsidiaries, each of which acquired beneficial ownership of Common Stock that, in the aggregate, exceeds 5% of the total outstanding Common Stock. The Vanguard Group has sole voting power with respect to 0 shares, shared voting power with respect to 141,265 shares, sole investment power with respect to 8,058,446 shares and shared investment power with respect to 199,361 shares.

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⁽³⁾

Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP, and Wellington Management Company LLP filed a joint Schedule 13G on February 4, 2021 with respect to Common Stock owned of record by clients of one or more investment advisers directly or indirectly owned by Wellington Management Group LLP. Each of Wellington Management Group LLP, Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP has sole voting power with respect to 0 shares, shared voting power with respect to 5,190,601 shares, sole investment power with respect to 0 shares, and shared investment power with respect to 6,193,882 shares. Wellington Management Company LLP has sole voting power with respect to 0 shares, shared voting power with respect to 4,876,527 shares, sole investment power with respect to 0 shares, and shared investment power with respect to 5,656,793 shares.

⁽⁴⁾

T. Rowe Price Associates, Inc. filed a Schedule 13G on February 16, 2021 reporting ownership of shares of Common Stock by investment funds and/or managed accounts for which it serves as investment adviser. T. Rowe Price Associates, Inc. has sole voting power with respect to 1,300,415 shares.

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PROPOSAL 1 - ELECTION OF DIRECTORS

Meritor’s Restated Articles of Incorporation previously provided that the Board of Directors of the Company (the “Board”) would consist of three classes, each class to consist as nearly as possible of one-third of the directors and to serve for a term to expire at the third succeeding annual meeting of shareholders after their election. On January 23, 2020, our shareholders approved, and we filed, Restated Articles of Incorporation to eliminate the classified structure of our Board over a three-year period. Specifically, our Restated Articles of Incorporation provide that (1) the directors standing for election at our 2021 annual meeting would stand for election for one-year terms; (2) the directors standing for election at our 2022 annual meeting, which includes any director elected to our Board in 2021 who was nominated for re-election, are standing for election for one-year terms; and (3) beginning in 2023, all directors will stand for election for one-year terms. Culminating in 2023, our Board will be fully declassified.

The Board currently consists of eleven members – four directors in Class I and three directors in Class III, with terms expiring at the Annual Meeting of Shareholders in 2022, and four directors in Class II, with terms expiring at the Annual Meeting of Shareholders in 2023. Jeffrey A. Craig, a Class II director and Executive Chairman of the Board, has notified the Company that he intends to retire effective December 31, 2021, at which time the number of directors will be automatically reduced to ten members – four directors in Class I; three directors in Class III; and three directors in Class II. Also effective upon Mr. Craig's retirement, William R. Newlin will become the independent Chairman of the Board.

Four and three current directors are standing for re-election at the 2022 Annual Meeting as Class I and Class III directors, respectively, for terms expiring at the Annual Meeting of Shareholders in 2023.

Our Guidelines on Corporate Governance provide that directors should offer not to stand for re-election if they are age 72 or over at the time of re-election or will reach age 72 during their new term. The members of the Corporate Governance and Nominating Committee then decide whether continued Board service is appropriate and in the best interests of the Company. Three of the current nominees standing for re-election at the 2022 Annual Meeting, Ivor J. Evans, William R. Newlin and Lloyd G. Trotter, will be over age 72 at the time of re-election. In accordance with the Guidelines on Corporate Governance, Messrs. Evans, Newlin and Trotter offered not to stand for re-election at the 2022 Annual Meeting. After considering their contributions and qualifications, the Corporate Governance and Nominating Committee determined that their continued service is appropriate.

The directors in Class II (other than Mr. Craig) will continue to serve terms expiring at the Annual Meeting of Shareholders in 2023.

Proxies will be voted at the meeting (unless authority to do so is withheld) for the election as directors of the nominees specified in Nominees for Director with Terms Expiring in 2023, under the heading Information as to Nominees for Director and Continuing Directors below. If for any reason any of the nominees is not a candidate (which is not expected) when the election occurs, it is likely that either (1) proxies would be voted for the election of the other nominees and a substitute nominee or (2) the Board would reduce the number of directors serving in Class I or Class III, as applicable.

No director of Meritor was selected pursuant to any arrangement or understanding between him or her and any person other than Meritor. There are no family relationships, as defined in Item 401 of Regulation S-K (“Regulation S-K”) of the rules and regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), between any director, executive officer or person nominated to become a director or executive officer of Meritor. No person who has served as a director or executive officer of Meritor at any time since September 30, 2020 has any substantial interest, direct or indirect, in any matter to be acted on at the 2022 Annual Meeting, other than election of directors to office.

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INFORMATION AS TO NOMINEES FOR DIRECTOR AND CONTINUING DIRECTORS

Following are the biographies for our director nominees and our directors who will continue to serve after the 2022 Annual Meeting, including information concerning the particular experience, qualifications, attributes and skills that led the Corporate Governance and Nominating Committee and the Board to conclude that the nominee or director fulfills the Board’s membership criteria (discussed below under Director Qualifications and Nominating Procedures). Except as provided below, during the last five years, no director has held any directorships required to be disclosed pursuant to the rules and regulations promulgated by the SEC. For a discussion of membership guidelines that outline the desired composition of the Board as a whole, see Director Qualifications and Nominating Procedures below.

NOMINEES FOR DIRECTOR WITH TERMS EXPIRING IN 2023

Class I Nominees

IVOR J. EVANS

Former Executive Chairman of the Board, Chief
Executive Officer and
President Meritor
Age 79

Mr. Evans, a director since May 2005, previously served Meritor as Executive Chairman of the Board from April 2015 to April 2016; Chairman of the Board and Chief Executive Officer from August 2013 to March 2015 (also serving as President from August 2013 to June 2014); and Executive Chairman of the Board and Interim Chief Executive Officer and President from May 2013 until July 2013. Prior to joining the Board, he served as Vice Chairman of Union Pacific Corporation (rail transportation) from January 2004 until his retirement in March 2005 and served as a member of the Union Pacific board of directors from 1999 to 2005. He had served as President and Chief Operating Officer of Union Pacific Railroad from 1998 until January 2004. From 1989 to 1998, he served in various executive positions at Emerson Electric Company (technology and engineering applications), including Senior Vice President, Industrial Components and Equipment. Prior to that, he was President of Blackstone Corp. (automotive components and systems) from 1985 to 1989 and, prior to that, spent 21 years serving in key operations roles for General Motors Corporation (automotive). He is also a former director of Textron Inc., Cooper Industries, Roadrunner Transportation Systems, Inc. and Spirit AeroSystems and a former operating partner of HCI Equity Partners (formerly named Thayer Capital Partners).

Board Qualifications: Mr. Evans’ qualifications include extensive operational and manufacturing experience from his years as a chief operating officer and senior executive of large public companies, including some in the automotive and transportation markets in which we operate. His leadership roles at these companies have provided him with extensive capital allocation experience, which is instrumental in planning how best to use resources to develop Meritor’s business and maximize profitability. He also has considerable transactional and corporate finance experience from his time as an operating partner of a private equity firm. Mr. Evans’ service as a director of other public companies also provides broad perspective with respect to capital allocation, risk management, corporate governance, audit issues, strategy and other matters that confront public companies. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including leadership expertise and knowledge of the transportation and other manufacturing industries and Meritor’s business in particular.

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WILLIAM R. NEWLIN

Chairman Newlin
Investment Company, LLC
(Equity Investment Firm)
Age 81

Mr. Newlin, a director since July 2003, has been the Lead Independent Director of the Board since March 2021 and is a member of the Compensation and Management Development Committee and the Corporate Governance and Nominating Committee. He previously served as independent Chairman of the Board from April 2016 to March 2021 and Lead Independent Director of the Board from January 2015 to April 2016. He has been the Chairman and a director of Newlin Investment Company, LLC and lead investor and leader of early stage university spinout technology companies since April 2007. He served as Executive Vice President and Chief Administrative Officer of Dick’s Sporting Goods, Inc. (an NYSE listed sporting goods company) from October 2003 until his retirement in March 2007. He served as Chairman and CEO of Buchanan Ingersoll Professional Corporation (now Buchanan Ingersoll & Rooney PC, a law firm) from 1980 to October 2003. He is a director of several private companies primarily specializing in technology or life science solutions, including Liquid X Printed Metals (metallic inks), Sharp Edge Labs (patient-driven drug discovery), SpIntellx, Inc. (computational pathology) and Xibus Systems (food and beverage pathogen detection). He is a former director of Calgon Carbon Corporation (an NYSE listed purification system company) and a former director and chairman of Kennametal Inc. (an NYSE listed materials science and tooling company).

Board Qualifications: Mr. Newlin’s broad experience in major corporate transactions and in serving as a counselor providing strategic advice to complex organizations qualifies him to sit on our Board. He has led and managed all or a major segment of large businesses such as a major retailer, professional service providers, and other public and private companies. He has extensive experience analyzing and providing a balanced approach to capital allocation. His extensive executive leadership and entrepreneurial experience provide Mr. Newlin with the skills that make him an effective director. Mr. Newlin’s prior service as a director (and Chairman) of other public companies also affords our Board the benefit of his broader exposure to capital allocation, corporate governance issues, compensation issues and other matters facing public companies. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including leadership, governance, financing and specialized legal expertise, including transactional experience, experience in other strategic activities and knowledge of the federal securities laws and corporate governance matters.

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THOMAS L. PAJONAS

Retired Executive
Vice President and
Chief Operating Officer
Flowserve Corporation
(Manufacturer of Flow
Control Products)
Age 66

Mr. Pajonas, a director since September 2013, is Chair of the Corporate Governance and Nominating Committee and a member of the Audit Committee. He served as Executive Vice President and Chief Operating Officer of Flowserve Corp. from February 2014 until May 2017 when he announced his retirement and subsequent transition until December 2017. He also served as Senior Vice President and Chief Operating Officer of Flowserve from January 2012 to January 2014. Prior to that, he served as President of the Flow Control Division from 2004 to 2012, holding the positions of Vice President from 2004 to 2006 and Senior Vice President from 2006 to 2012 as an officer of Flowserve. Before joining Flowserve, Mr. Pajonas was Managing Director of the U.S. rail products unit of Alstom Transport (supplier of rail products) from 2003 to 2004, and Senior Vice President of the Worldwide Power Boiler Business of Alstom, Inc. (power generation and transmission and rail infrastructure) from 1999 to 2003. Prior to that, he served in various capacities as Senior Vice President and General Manager, International Boiler Operations, and subsequently Senior Vice President and General Manager, Standard Boilers Worldwide, of Asea Brown Boveri (power and automation technologies), including supply chain, power products manufacturing, and strategic operations.

Board Qualifications: Mr. Pajonas has extensive global leadership and operational experience combined with a strong manufacturing and engineering background, which provide useful insight into the operational issues that engineering and manufacturing companies like Meritor face. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including knowledge of the industrial products industry, risk management and international background and experience.

CHRIS VILLAVARAYAN

Chief Executive Officer and
President Meritor
Age 51

Mr. Villavarayan, a director since February 2021, has served as Chief Executive Officer and President of Meritor since February 2021. He previously served Meritor as Executive Vice President and Chief Operating Officer from January 2020 to March 2021; Senior Vice President and President of Global Truck from January 2018 to January 2020; Senior Vice President and President for Americas from February 2014 until January 2018; Vice President of Global Manufacturing and Supply Chain Management from June 2012 until February 2014; Managing Director of Meritor India and CEO of MHVSIL and Automotive Axles Ltd. (joint venture between Meritor and Kalyani Group of India) from December 2009 until June 2012; General Manager of European Operations and Worldwide Manufacturing Planning and Strategy from June 2007 until December 2009; Director of Manufacturing Performance Plus from November 2006 until June 2007; Regional Manager of Continuous Improvement from July 2005 until November 2006; Industrialization Project Manager from September 2001 until July 2005; and Site Manager of the Meritor St. Thomas, Ontario, facility from June 2000 until September 2001.

Board Qualifications: Mr. Villavarayan’s qualifications to serve on our Board include extensive operational and manufacturing experience from his years leading Meritor’s operations at varying levels of seniority. This broad business background, as well as his knowledge of Meritor from many perspectives, makes him invaluable as a Board member. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including leadership expertise and knowledge of the transportation industry in general and Meritor’s business in particular. Additionally, he contributes to the diversity of the Board.

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CLASS III NOMINEES

JAN A. BERTSCH

Retired Chief Financial
Officer Owens-Illinois,
Inc. (Manufacturer of
Glass Containers)
Age 64

Ms. Bertsch, a director since September 2016, is Chair of the Audit Committee and a member of the Corporate Governance and Nominating Committee. She served as Chief Financial Officer of Owens-Illinois, Inc. from November 2015 until her retirement in April 2019. From 2012 to November 2015, she served as Executive Vice President, Chief Financial Officer of Sigma-Aldrich Corporation (life science and biotechnology). From 2009 to February 2012, she served in various capacities for BorgWarner, Inc. (automotive components), including as Vice President and Treasurer and subsequently Vice President, Controller and Principal Accounting Officer. From 2001 to 2009, she served in various capacities for Chrysler Group LLC (automotive), ultimately serving as Senior Vice President, Chief Information Officer and Treasurer of Chrysler LLC. Ms. Bertsch has been a director of BWX Technologies (nuclear components) since 2015 (where she is the chair of the audit committee and a member of the compensation committee) and its predecessor Babcock & Wilcox from 2013 to 2015 (where she served as a member of the audit and compensation committees), a director of Regal Beloit Corporation (electric motors) since June 2019 (where she is a member of the audit committee and the compensation committee) and also served as chair of the Board of Visitors for the Wayne State University School of Medicine from 2003 to September 2016.

Board Qualifications: Ms. Bertsch has extensive financial acumen and expertise through her experience as Chief Financial Officer of Fortune 500 companies. She possesses the attributes to satisfy the Board’s basic membership criteria. She also possesses additional experience relevant to Board service, including leadership experience and expertise in the areas of manufacturing, accounting and finance, risk management, knowledge of generally accepted accounting principles and familiarity with the SEC’s disclosure rules and practices. Additionally, she contributes to the diversity of the Board.

RODGER L. BOEHM

Retired Senior Partner
McKinsey & Company, Inc.
(Management Consultant)
Age 62

Mr. Boehm, a director since December 2017, is a member of the Audit Committee and the Compensation and Management Development Committee. Until his retirement in September 2017, Mr. Boehm was a senior partner at McKinsey & Company, Inc. where he spent 31 years in a variety of roles with increasing responsibility. Mr. Boehm holds a Bachelor of Science degree in materials engineering from Purdue University and a Master of Business Administration degree from Harvard University.

Board Qualifications: Mr. Boehm has extensive experience leading consulting engagements on long-term growth strategies and performance improvement combined with a strong engineering background, which provide useful insight into the strategic issues that global manufacturing companies like Meritor face. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including knowledge of the industrial products industry.

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LLOYD G. TROTTER

Managing Partner
GenNx360 Capital Partners
(Private Equity Firm)
Age 76

Mr. Trotter, a director since January 2015, is Chair of the Compensation and Management Development Committee and a member of the Corporate Governance and Nominating Committee. He is a founder of GenNx360 Capital Partners, where he has been Managing Partner since February 2008. He served General Electric (conglomerate) as Vice Chairman, and as President and Chief Executive Officer of GE Industrial, from 2006 until his retirement in February 2008. He previously held various leadership positions with General Electric, including Executive Vice President, Operations, from 2005 to 2006; President and Chief Executive Officer, GE Consumer and Industrial Systems, from 1998 to 2005; and President and Chief Executive Officer, Electrical Distribution and Control, from 1992 to 1998. Prior to that he held various positions in General Electric businesses from 1970, when he began his career with the company. Mr. Trotter is a former director of Daimler AG, PepsiCo, Inc. and Textron, Inc.

Board Qualifications: Mr. Trotter has extensive knowledge and experience, through his leadership roles at General Electric, in a variety of fields that are important to Meritor’s business, including business operations, finance, manufacturing, information technology, supply chain management and international business opportunities. He has experience with acquisitions and divestitures, including from his current leadership of a private equity firm. He also has extensive corporate governance and executive compensation experience from serving on boards and committees of public companies, which further enhances his contributions and value to the Board and Meritor. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including leadership expertise, international experience and knowledge of the industrial products industry. Additionally, he contributes to the diversity of the Board.

The Board recommends that you vote “FOR” the election of these nominees.

CLASS II – CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2023

STEVEN BERINGHAUSE

Retired Executive
Vice President, Chief
Technology Officer Sensata
Technologies Holding plc (Electrical Sensors
and Controls)
Age 56

Mr. Beringhause, a director since December 2019, is a member of the Compensation and Management Development Committee. He served as Chief Technology Officer of Sensata Technologies Holding plc from September 2015 until January 2021 transitioning to retirement in May 2021. He previously served Sensata as Executive Vice President, Performance Sensing Auto from April 2015 to December 2017; Senior Vice President, Sensors from January 2013 to March 2015; Vice President, Sensors, Asia from May 2010 to December 2012; and Vice President, Sensors, Americas from April 2006 to April 2010. From 1988 to 2006, he served in various technical roles of increasing responsibility for Texas Instruments (semiconductor design and manufacturing). He is also a former director of Lithium Balance A/S (private manufacturer of battery management systems) and Uhnder (private digital radar manufacturer). Mr. Beringhause holds a Master of Science and a Bachelor of Science, both in mechanical engineering, from Massachusetts Institute of Technology.

Board Qualifications: Mr. Beringhause has extensive experience in managing advanced technology for commercial applications, including megatrend applications primarily in the areas of electrification and autonomous vehicles, and leading business operations, which provides useful insight into the future technological and product development challenges facing Meritor and its industry. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses additional experience relevant to Board service, including knowledge of the transportation industry.

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ELIZABETH A.
FESSENDEN

Former Principal
American Capital, Ltd.
(Private Equity Firm)
Age 66

Ms. Fessenden, a director since June 2021, is a member of the Compensation and Management Development Committee. She served as principal at American Capital, Ltd. (a Nasdaq listed private equity firm) from 2005 to 2007. Prior to that, she spent 28 years at Alcoa Corporation (aluminum manufacturer), where she held various leadership positions, including President, Flexible Packaging from May 2002 to April 2005 and President, Primary Metals Allied from July 2000 to April 2002. Ms. Fessenden has been a director of Ampco-Pittsburgh Corporation (specialized metals manufacturer) since 2017 (where she is chair of the compensation committee), a director of Alpha Metallurgical Resources, Inc. (mining and metallurgical products) since February 2021 (where she is the chair of the safety, health and environmental committee) and a director of Fluence Energy, Inc. (energy storage technology and services provider) since October 2021 (where she is chair of the audit committee). Ms. Fessenden holds Bachelor’s and Master’s degrees in engineering as well as a Master’s degree in business administration, all from Clarkson University.

Board Qualifications: Ms. Fessenden has extensive global leadership and operational experience combined with a strong manufacturing and engineering background, which provide useful insight into the operational issues that engineering and manufacturing companies like Meritor face. She possesses the attributes to satisfy the Board’s basic membership criteria. She also possesses additional experience relevant to Board service, including knowledge of the industrial products industry and international background and experience. Additionally, she contributes to the diversity of the Board.

FAZAL MERCHANT

Retired Co-Chief Executive
Officer Tanium Inc
(IT Security and Systems
Management)
Age 48

Mr. Merchant, a director since October 2020, is a member of the Audit Committee. He served as Co-Chief Executive Officer of Tanium Inc. from June 2019 until his retirement in September 2020. He previously served Tanium as Chief Operating Officer and Chief Financial Officer from May 2017 to June 2019. From 2014 to 2016, he served as Chief Financial Officer for DreamWorks Animation SKG, Inc. He has also served as a director of Ryman Hospitality Properties, Inc. since December 2017 (hospitality real estate investment trust), a director of Ariel Investments (investment company) since March 2021 and a director of Tanium since June 2019. He also serves as a senior advisor to Sixth Street Partners (investment firm). Mr. Merchant holds a Bachelor of Business Administration degree from the University of Texas and a Master of Business Administration degree from Indiana University.

Board Qualifications: Mr. Merchant’s qualifications to serve on our Board include his extensive business experience in senior positions with involvement in and oversight of technology, strategy, financial reporting and controls, marketing, sales, legal and treasury operations, as well as leading Tanium’s global operations. In addition, Mr. Merchant’s experience as Chief Financial Officer of multiple companies, brings to our Board extensive financial acumen and experience. He possesses the attributes to satisfy the Board’s basic membership criteria. He also possesses the additional relevant experience of extensive accounting and finance expertise, including educational credentials, leadership experience in the areas of accounting and finance, risk management, knowledge of generally accepted accounting principles and familiarity with the SEC’s disclosure rules and practices. Additionally, he contributes to the diversity of the Board.

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BOARD DIVERSITY MATRIX

The following matrix provides information regarding the gender, race and ethnicity demographics of our Board.

Gender

Female

●

Male

●

Race/Ethnicity

Asian (excluding Indian/South Asian)

Black/African American

●

Caucasian/White

●

Hispanic/Latin American

Indian/South Asian

●

Middle-Eastern/North African

Native American/Alaskan Native

Native Hawaiian/Other Pacific Islander

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BOARD AND COMMITTEES

The Board directs or oversees the strategy and management of the business of Meritor. In fiscal year 2021, the Board held five regularly scheduled meetings and one special meeting. Each current director attended at least 75% of the aggregate number of meetings of the Board (held during the period for which he or she was a director) and the standing and special committees on which he or she served in fiscal year 2021 (during the periods that he or she served). Meritor encourages each director to attend the Annual Meeting of Shareholders. All of the then-serving directors attended the 2021 Annual Meeting.

The Board has established independence standards for directors, which are set forth in the Company’s Guidelines on Corporate Governance and are identical to the standards prescribed in the corporate governance rules of the New York Stock Exchange (the “NYSE”). The Board determined that Mses. Bertsch and Fessenden, and Messrs. Beringhause, Boehm, Evans, Merchant, Newlin, Pajonas and Trotter have no material relationship with Meritor, either directly or as a partner, shareholder or officer of an organization that has a relationship with Meritor, and are therefore independent within the meaning of the Guidelines on Corporate Governance and the NYSE listing standards. There were no transactions, relationships or arrangements involving the Company and any director or nominee for director in fiscal year 2021 that were considered by the Board in determining the independence of these directors under the Guidelines on Corporate Governance or the NYSE listing standards.

Board’s Role in Risk Oversight

While risk management is primarily the responsibility of the Company’s management, the Board provides overall risk oversight with a focus on the most significant risks facing the Company. Throughout the year, in conjunction with its regular business presentations to the Board and its committees, management highlights any significant related risks and provides updates on other relevant matters, including issues in the industries in which the Company operates, issues that may impact the Company, operations reviews, the Company’s short- and long-term strategies and treasury-related updates. The Board has delegated responsibility for the oversight of certain risks to the Audit Committee, which oversees the Company’s policies with respect to risk assessment and risk management, including financial, accounting and cybersecurity risk exposures and management’s initiatives to monitor and control such exposures. In that role, the Audit Committee discusses with the Company’s management the Company’s major risk exposures and how these risks are managed, monitored and mitigated. The Audit Committee receives regular reports on the work of the Company’s Business Standards Compliance Committee from the Company’s General Auditor. In addition to receiving regular internal audit reports and updates on Sarbanes-Oxley Act compliance, the Audit Committee regularly meets in private session with our General Auditor and, separately, with our external auditors, which provides the opportunity for confidential discussion. The Audit Committee also receives reports on any fraud investigations that may arise. In addition, on an annual basis, management conducts an enterprise risk assessment and provides a summary report to the Audit Committee. This assessment is reviewed by management and utilized with the Audit Committee throughout the year as circumstances change. Within the Company, risk responsibilities are managed by those with the relevant functional expertise and shared among the Company’s senior management.

Risk Assessment in Compensation Programs

Our compensation consultant, Pay Governance LLC (“Pay Governance”), has been engaged to assess Meritor’s compensation programs and has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on Meritor. Representatives from Internal Audit, Human Resources and Legal, with the concurrence of the Compensation and Management Development Committee, developed and carried out a process for evaluation of compensation risks. The process assessed the Company’s executive and broad-based compensation and benefits programs to determine if the programs’ provisions and operations create undesired or unintentional risk of a material nature. The focus was on the programs with variability of payout, in which the participant can directly affect payout, and on the controls that exist on such participant action and payout. To the extent that risks were identified, controls or mitigation of such risks and their effectiveness were discussed. The representatives also took into account Meritor’s balance between short- and long-term incentives, the alignment of performance metrics with shareholder interests, the existence of share ownership guidelines and other considerations relevant to assessing risks. Based upon the foregoing, we believe that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

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Board Leadership Structure

The Board currently consists of eleven members, all of whom, other than Mr. Craig, our Executive Chairman, and Mr. Villavarayan, our Chief Executive Officer and President, are independent.* Since April 2016, our Amended and Restated By-Laws (the “By-Laws”) and Guidelines on Corporate Governance have required the separation of the offices of Chairman and Chief Executive Officer. The Board believes this governance structure and the preponderance of outside directors represents a commitment to the independence of the Board and a focus on matters of importance to Meritor’s shareholders. The Board believes the structure also allows the Board to work effectively and properly oversee risk.

Committees

The Board currently has three standing committees (Audit; Compensation and Management Development; and Corporate Governance and Nominating), with the chairs, membership and principal functions detailed below. The charters of these committees are posted on our website, www.meritor.com, in the section headed “Investors – Corporate Governance.” The Board also establishes special committees from time to time for specific limited purposes or durations.

	Compensation and Management	Corporate Governance and
Audit Committee	Development Committee	Nominating Committee
Jan A. Bertsch (Chair)	Lloyd G. Trotter (Chair)	Thomas L. Pajonas (Chair)
Rodger L. Boehm	Steven Beringhause	Jan A. Bertsch
Fazal Merchant	Rodger L. Boehm	William R. Newlin
Thomas L. Pajonas	Elizabeth A. Fessenden	Lloyd G. Trotter
	William R. Newlin

Audit Committee

Meritor has a separately designated standing audit committee established in compliance with applicable provisions of the Exchange Act and NYSE listing standards. The Audit Committee is currently composed of four non-employee directors: Jan A. Bertsch (chair), Rodger L. Boehm, Fazal Merchant and Thomas L. Pajonas. Each of these directors meets the criteria for independence specified in the listing standards of the NYSE. The Board has determined that Ms. Bertsch and Mr. Merchant qualify as “audit committee financial experts” (as defined by the SEC). The Board has adopted a written charter for the Audit Committee, which is reviewed and reassessed annually for compliance with the NYSE listing standards. The Audit Committee held five regularly scheduled meetings and one special meeting in fiscal year 2021.

The Audit Committee is charged with monitoring the integrity of the Company’s financial statements, accounting and financial reporting processes and financial statement audits; compliance with legal and regulatory requirements; the independence and qualifications of the Company’s independent public accountants; the performance of the Company’s internal audit function and independent public accountants; and the Company’s systems of disclosure controls and procedures, internal controls over financial reporting and compliance with the Company’s ethical standards.

To carry out its responsibilities, the Audit Committee has authority under its charter and engages in the following activities:

Document and Information Review

●	review its charter annually and submit changes to the Corporate Governance and Nominating Committee and the Board for approval;
●	review the Company’s annual and quarterly financial statements, before their release, with the independent public accountants and senior management;

____________________

*	In November 2021, the Company announced that Mr. Craig will retire as Executive Chairman of the Board and Mr. Newlin will become the independent Chairman of the Board effective December 31, 2021.

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●	review the Company’s annual and quarterly earnings releases, including the use of pro forma or adjusted information that does not conform with generally accepted accounting principles;
●	review financial information and earnings guidance before they are provided by the Company to analysts and rating agencies;

Independent Public Accountants

●	select and employ (subject to approval of the shareholders), and terminate and replace where appropriate, the independent public accountants for the Company, and approve and cause the Company to pay all audit engagement fees;
●	review the performance and independence of the independent public accountants and remove them if circumstances warrant;
●	review and approve in advance the scope and extent of any non-audit services performed by the independent public accountants and the fees charged for these services, and receive and evaluate at least annually a report by the independent public accountants as to their independence, including consideration of whether provision of non-audit services is compatible with their independence;
●	review annually the experience and qualifications of the independent public accountants’ lead partner and determine that all applicable partner rotation requirements are satisfied;
●	discuss with the independent public accountants the matters to be discussed under the standards of the Public Company Accounting Oversight Board;
●	review any significant issues related to the audit activities of the independent public accountants, and oversee the resolution of any disagreements between them and management;
●	review with the independent public accountants critical accounting policies and practices; new accounting pronouncements; significant financial reporting issues and judgments, including alternative treatments of financial information, significant changes in application of accounting principles and treatment of complex or unusual transactions; significant internal control matters, including recommendations as to the adequacy of the Company’s system of internal controls; material written communications between the independent public accountants and management, and critical audit matters and related disclosures;
●	review at least annually a report from the independent public accountants describing the firm’s internal quality control procedures, including material issues raised on review of such procedures and any investigations by governmental or professional authorities;
●	assess the objectivity and skepticism demonstrated by the independent public accountants in the performance of their work;
●	establish the Company’s policies with respect to hiring former employees of the independent public accountants;
●	review critical audit matters and related disclosures;

Financial Reporting, Accounting Policies and Internal Control Structure

●	review the integrity of the Company’s financial reporting processes in consultation with the independent public accountants and the internal audit function;
●	understand the scope of the audit plan, including the independent public accountants’ review of internal control over financial reporting and procedures used in audits and reviews of the Company’s financial statements;
●	review any disclosure made in connection with annual and quarterly certifications by the Chief Executive Officer and Chief Financial Officer in filed documents with respect to internal controls over financial reporting, disclosure controls and procedures, and instances of fraud;
●	review issues regarding accounting principles and financial statement presentation;
●	review analyses prepared by management and the independent public accountants regarding significant financial reporting issues and judgments in connection with preparation of financial statements;

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●	review the effect of regulatory and accounting initiatives and off-balance sheet structures on the financial statements;
●	review and approve all related-party transactions, defined as those transactions required to be disclosed under Item 404 of Regulation S-K;
●	establish procedures for the receipt, retention and handling of complaints regarding accounting, internal controls or auditing matters, including procedures for the confidential and anonymous submission by employees;
●	recommend to the Board whether the Company’s annual financial statements be included in the Company’s annual report on Form 10-K;
●	prepare the report to be included in the Company’s annual proxy statement;

Internal Audit

●	review and approve the internal audit charter, the scope of the annual internal audit plan and the results of internal audits, including management’s response to audit reports;
●	review the internal auditor’s comments on significant issues related to, and any restrictions on, internal audit activities;
●	review with the internal auditor significant internal control matters, including incidents of fraud;
●	review the composition and qualifications of the internal audit staff;
●	review and concur with management as to the appointment, reassignment, replacement, dismissal, and compensation of the internal auditor charged with auditing and evaluating the Company’s system of internal controls;
●	review the results of any quality assurance reviews;

Legal and Ethical Compliance and Risk Management

●	oversee and update the Company’s standards of business conduct policies, and monitor compliance by employees with these policies;
●	review with the Company’s chief legal officer significant contingencies that could impact the financial statements and legal compliance matters;
●	monitor policies with respect to risk assessment and risk management, including financial and accounting risk and cybersecurity risk, and initiatives to control risk exposures;
●	oversee and annually review the activities of the Company’s Employee Benefit Plan Committee (which is made up of management personnel);
●	review any findings by regulatory agencies with respect to the Company’s activities and management’s response;

General

●	review and consult with management concerning the composition and capability of the finance staff;
●	investigate matters brought to its attention within the scope of its duties;
●	engage outside consultants, independent counsel or other advisors;
●	review its performance annually; and
●	perform any other activities consistent with its charter, applicable law and the Company’s governing instruments.

As part of each regularly scheduled meeting, the Audit Committee meets in separate executive sessions with the independent public accountants, the internal auditors and senior management and as a committee without members of management present.

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Compensation and Management Development Committee

The five current members of the Compensation and Management Development Committee (the “Compensation Committee”) are Lloyd G. Trotter (chair), Steven Beringhause, Rodger L. Boehm, Elizabeth A. Fessenden and William R. Newlin. Each of these directors is a non-employee director who meets the criteria for independence specified in the listing standards of the NYSE (including those criteria specifically applicable to members of compensation committees) and the criteria for qualifying as a non-employee director specified under the Exchange Act. These directors are not eligible to participate in any of the plans or programs that are administered by the Compensation Committee. The Compensation Committee held five regularly scheduled meetings and no special meetings in fiscal year 2021. To carry out its responsibilities, the Compensation Committee has authority under its charter and engages in the following activities:

●	review and approve the goals and objectives relevant to the Chief Executive Officer’s compensation, evaluate his performance against these goals and objectives, and set his compensation accordingly;
●	establish salaries and annual incentive opportunities of all of the Company’s other officers and review the salary plan and annual incentive opportunities for other Company executives;
●	evaluate the performance of the Company’s senior executives and plans for management succession and development;
●	review the design and competitiveness of the Company’s compensation plans and make recommendations to the Board;
●	administer the Company’s incentive, deferred compensation, stock options and long-term incentive plans (except with respect to any equity grants to directors, which are administered by the Corporate Governance and Nominating Committee) and any employment, severance, change in control or similar agreements applicable to the Company’s senior executives;
●	review material amendments to the design and competitiveness of the Company’s medical benefit plans;
●	review all material amendments to the Company’s pension and other retirement plans and make recommendations to the Board concerning these amendments;
●	hire outside consultants, independent counsel and other advisors and approve the terms of their engagement, after considering the advisors’ independence from management;
●	prepare the report to be included in the Company’s annual proxy statement;
●	oversee the Company’s compliance with rules and regulations of the SEC and NYSE relating to shareholder approval of certain executive compensation matters; and
●	review its performance annually.

See Executive Compensation - Compensation Discussion and Analysis below for further information on the scope of authority of the Compensation Committee and the role of management and compensation consultants in determining or recommending the amount or form of executive compensation.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee is currently composed of four non-employee directors, Thomas L. Pajonas (chair), Jan A. Bertsch, William R. Newlin and Lloyd G. Trotter, all of whom meet the criteria for independence specified in the listing standards of the NYSE. The Corporate Governance and Nominating Committee held five regularly scheduled meetings and no special meetings in fiscal year 2021. To carry out its responsibilities, the Corporate Governance and Nominating Committee has authority under its charter and engages in the following activities:*

●	screen and recommend to the Board qualified candidates for election as directors of the Company and for service as the Chairman;

____________________

*	In connection with Mr. Craig’s retirement, the Board approved amendments to the Corporate Governance and Nominating Committee’s charter eliminating the role of Executive Chairman effective December 31, 2021. The above summarizes the charter as revised.

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●	periodically prepare and submit its selection criteria for director nominees to the Board for adoption;
●	oversee, with the assistance of management, a process for new Board member orientation;
●	annually assess the performance of the Board and each committee;
●	consider matters of corporate governance and Board practices, including oversight of the Company’s strategies and self-assessments related to environmental, social and governance (ESG) matters that are material to the Company’s performance;
●	review periodically the Company’s articles of incorporation, by-laws and guidelines on corporate governance in light of statutory changes and current best practices;
●	review periodically the charter, responsibilities, membership and chair of each committee of the Board and recommend appropriate changes;
●	review periodically non-employee directors’ compensation and make recommendations to the Board;
●	review director independence, conflicts of interest, qualifications and conduct, and recommend to the Board removal of a director when appropriate;
●	oversee engagement with shareholders and proxy advisory firms regarding corporate governance matters and establish protocols with respect to the Company’s overall shareholder engagement initiatives; and
●	engage search firms and other consultants and independent counsel.

See Director Qualifications and Nominating Procedures below for further information on the nominating process.

In discharging its duties with respect to review of director compensation, the Corporate Governance and Nominating Committee from time to time retains a compensation consultant to provide information on current trends, develop market data and provide objective recommendations as to the amount and form of director compensation. In fiscal year 2021, the compensation consultant was Pay Governance. Management has no role in determining or recommending the amount or form of director compensation.

DIRECTOR QUALIFICATIONS AND NOMINATING PROCEDURES

As described above, Meritor has a standing nominating committee, the Corporate Governance and Nominating Committee, currently composed of four non-employee directors who meet the criteria for independence specified in the listing standards of the NYSE. The Corporate Governance and Nominating Committee’s charter is posted on our website, www.meritor.com, in the section headed “Investors – Corporate Governance.”

The Board has adopted guidelines that outline the desired composition of the Board as a whole and the criteria to be used in selecting director nominees. These guidelines provide that the Board should be composed of directors with a variety of experience and backgrounds, who have significant senior managerial experience in complex organizations and who represent the balanced interests of shareholders as a whole rather than those of special interest groups.

The basic selection criteria include: highest character and integrity; experience with and understanding of strategy and policy-setting; reputation for working constructively with others; sufficient time to devote to Board matters; no conflict of interest that would interfere with performance as a director; and financial acumen. Other important factors include: knowledge of the transportation and industrial products industry or another manufacturing industry; specialized expertise in a field with which the Board may be expected to interface; experience doing business abroad; and enhancement of the diversity of the Board (which the Board considers in terms of all aspects of diversity, such as diversity of perspective, experience, background and expertise, when compared with the skillsets and backgrounds of other directors, as well as diversity of gender and race). The Board understands the value of cognitive diversity in decision making and has sought qualified individuals, including women and underrepresented minorities, as Board candidates. The guidelines also set forth examples, for illustrative purposes only, of candidates whose backgrounds would generally be considered to make them positive additions to the Board.

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In considering candidates for the Board, the Corporate Governance and Nominating Committee is guided by the criteria set forth above. The entirety of each candidate’s credentials is considered, and there are no specific minimum qualifications that must be met by a director nominee. In addition, our Guidelines on Corporate Governance require that qualified women and underrepresented minority candidates be included in each search pool from which the Corporate Governance and Nominating Committee selects director candidates. The individual biographies of each of our current directors and nominees set forth above outline each individual’s specific experiences, attributes and skills that qualify that person to serve on our Board.

The Corporate Governance and Nominating Committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating candidates. In fiscal year 2021, the Corporate Governance and Nominating Committee paid Heidrick & Struggles $126,647 in reimbursed expenses in connection with identifying Board candidates for consideration, including Ms. Fessenden.

Our By-Laws allow a shareholder, or group of up to 20 shareholders, to nominate up to two director candidates or, if greater, up to 20% of the number of directors then serving on the Board, if the shareholder or group meets the ownership requirement of 3% or more of our outstanding Common Stock held continuously for at least the previous three years. In order for such nominees to be included in our proxy materials, the shareholder(s) and nominee(s) must also satisfy the other requirements specified in our By-Laws and submit a notice of proxy access nomination together with certain related information required by our By-Laws. Shareholders may also recommend candidates for consideration by the Corporate Governance and Nominating Committee by writing to the Corporate Secretary of the Company at its headquarters in Troy, Michigan, giving the candidate’s name, biographical data and qualifications. A written statement from the candidate, consenting to be named as a candidate and, if nominated and elected, to serve as a director, should accompany any such recommendation. The Corporate Governance and Nominating Committee evaluates the qualifications of candidates properly submitted by shareholders using the same criteria and in the same manner as potential nominees identified by the Company. No candidates for Board membership have been put forward for election at the 2022 Annual Meeting pursuant to these proxy access provisions of our By-Laws.

DIRECTOR COMPENSATION IN FISCAL YEAR 2021

The following table reflects compensation for the fiscal year ended September 30, 2021 awarded to, earned by or paid to each non-employee director who served during the fiscal year.

Name	Fees Earned or Paid in Cash ($)⁽¹⁾		Stock Awards ($)⁽²⁾⁽³⁾		Total ($)
Steven Beringhause		105,000		119,974	224,974
Jan A. Bertsch		—		249,938	249,938
Rodger L. Boehm		—		234,932	234,932
Rhonda L. Brooks⁽⁴⁾		57,500		119,974	177,474
Ivor J. Evans		105,000		119,974	224,974
Elizabeth A. Fessenden		35,000		69,980	104,980
Fazal Merchant		115,000		149,957	264,957
William R. Newlin		196,667		119,974	316,641
Thomas L. Pajonas		125,000		119,974	244,974
Lloyd G. Trotter		—		239,916	239,916

____________________

⁽¹⁾

This column includes retainer fees, committee chair fees and, for Mr. Newlin, the Chairman and Lead Independent Director fees earned in fiscal year 2021. This column does not include cash amounts paid in 2021 if such amounts were earned and reported in prior years but deferred for future payment pursuant to the Deferred Compensation Policy for Non-Employee Directors.

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⁽²⁾

This column includes the grant date fair value, computed in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, of the following separate grants of restricted shares of Common Stock (“restricted shares”). Information on the assumptions used in valuation of the grants is included in Note 18 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (the “Form 10-K”). These amounts may not reflect the actual value realized upon settlement or vesting.

Name	10/1/2020 Grants		1/1/2021 Grants		2/5/2021 Grants		4/1/2021 Grants		6/1/2021 Grants		7/1/2021 Grants
Steven Beringhause	$	—	$	—	$	119,974	$	—	$	—	$	—
Jan A. Bertsch		32,489		32,487		119,974		32,491		—		32,497
Rodger L. Boehm		28,741		28,747		119,974		28,732		—		28,738
Rhonda L. Brooks		—		—		119,974		—		—		—
Ivor J. Evans		—		—		119,974		—		—		—
Elizabeth A. Fessenden		—		—		—		—		69,980		—
Fazal Merchant		29,983		—		119,974		—		—		—
William R. Newlin		—		—		119,974		—		—		—
Thomas L. Pajonas		—		—		119,974		—		—		—
Lloyd G. Trotter		29,983		29,975		119,974		29,985		—		29,999

⁽³⁾

In connection with their service on the Board, the current non-employee directors held the following restricted shares granted under the 2020 Long-Term Incentive Plan (the “2020 LTIP”), the 2010 Long-Term Incentive Plan, as amended and restated (the “2010 LTIP”), and other former plans of the Company at fiscal year-end 2021. There were no stock options outstanding at fiscal year-end 2021.

Name	Restricted Shares
Steven Beringhause		9,668
Jan A. Bertsch		29,579
Rodger L. Boehm		28,586
Ivor J. Evans		15,074
Elizabeth A. Fessenden		2,620
Fazal Merchant		5,329
William R. Newlin		20,285
Thomas L. Pajonas		15,074
Lloyd G. Trotter		29,172

⁽⁴⁾	Ms. Brooks retired from the Board on April 1, 2021.

Narrative Description of Director Compensation

Only non-employee directors receive compensation for Board service. Directors who are also employees of Meritor or any of its subsidiaries do not receive compensation for serving as a director. The Company also reimburses its directors for their travel and related expenses in connection with attending Board, committee and shareholders’ meetings.

The following types of compensation were earned by or paid to non-employee directors in fiscal year 2021:

Retainer Fees. Non-employee directors of Meritor received an annual cash retainer of $105,000 for Board service. Members of the Audit Committee also received an additional annual cash retainer of $10,000. The chairs of the standing Board committees received additional annual cash retainers in the following amounts: Audit Committee and Compensation Committee - $15,000; and Corporate Governance and Nominating Committee - $10,000. In addition and as applicable for the time periods served, the independent Chairman of the Board received an additional annual cash retainer in the amount of $150,000 and the Lead Independent Director of the Board received an additional annual cash retainer in the amount of $50,000.

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Equity-Based Awards. As part of our director compensation, each non-employee director is entitled to receive, on or about the date of the Annual Meeting of Shareholders, an equity grant with a value of approximately $120,000, in the form of restricted shares. The restricted shares were granted under the 2020 LTIP and generally vest upon the earlier of (1) three years from the date of grant or (2) the date the director resigns or ceases to be a director by reason of the antitrust laws, compliance with the Company’s conflict of interest policies, or other circumstances the Board determines not to be adverse to the best interests of the Company, if the Board deems such restricted shares to be earned. The equity grants to directors in 2021 were made on February 5, 2021 in the amount of 3,953 restricted shares per director.

Deferrals. A director may elect to defer payment of all or part of the cash retainer and committee fees to a later date, with interest on deferred amounts accruing quarterly at a rate equal to 120% of the Federal long-term rate set each month by the Secretary of the Treasury. Each director also has the option each year (provided sufficient shares are available under a plan covering director equity grants to accommodate this deferral option at the time of the director’s election) to defer all or any portion of the cash retainer and meeting fees by electing to receive restricted shares or restricted share units that could be forfeited if certain conditions are not satisfied. The restricted shares or restricted share units in lieu of the cash retainer and committee fees are valued at the closing price of the Common Stock on the NYSE – Composite Transactions reporting system (the “NYSE Closing Price”) on the date the fee payment would otherwise be made in cash. In fiscal year 2021, none of the directors deferred cash payments to a later date and three directors elected to receive restricted shares in lieu of cash payments.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since the beginning of fiscal year 2021, there have been no transactions, and there are no currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any director, officer or greater-than-5% beneficial owner of Common Stock, or any member of their immediate family, had or will have a direct or indirect material interest.

Various means are employed to solicit information about relationships or transactions involving officers and directors that could raise questions of conflict of interest. Annual questionnaires solicit information from directors and officers regarding transactions and relationships that could trigger SEC rules on disclosure of related-person transactions, as well as relationships and transactions that could impair a director’s independence under the listing standards of the NYSE. Directors and officers have a continuing duty to update this information should any changes occur during the fiscal year. In addition, all salaried employees, including officers, and directors have a duty to report any known conflicts of interest that would violate the Company’s Code of Ethics (including policies regarding standards of business conduct and conflicts of interest; see Code of Ethics below). A toll-free ethics helpline is available for that purpose. Salaried employees, including officers, are also required to complete an annual certification that they are unaware of, or have reported, any such conflict of interest.

Although we have no written policy regarding review, approval or ratification of related-person transactions, the Audit Committee under its charter has the authority to review and approve all related-party transactions, defined as those transactions required to be disclosed under Item 404 of Regulation S-K. The Business Standards Compliance Committee (which is made up of management personnel) and the Audit Committee have responsibility for review of compliance by officers and other employees (including their immediate family members) with the Code of Ethics, including conflict of interest provisions, and the Corporate Governance and Nominating Committee has similar responsibility with respect to compliance by directors and director nominees (including their immediate family members). If a transaction or relationship involving an officer or director were to be reported through the toll-free ethics helpline, annual compliance certifications, questionnaires or otherwise, the Audit Committee, with the assistance of the Business Standards Compliance Committee, would investigate and consider all relevant facts and circumstances, including the nature, amount and terms of the transaction; the nature and amount of the related person’s interest in the transaction; the importance of the transaction to the related person and to the Company; whether the transaction would impair the judgment of a director or officer to act in the Company’s best interest; and any other facts involving the transaction that the Audit Committee deems significant, and would then take appropriate action. Transactions will not be approved under the Code of Ethics if they are not in the Company’s best interests. Any committee member who is a related person in connection with a transaction would not participate in consideration of that transaction.

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CORPORATE GOVERNANCE AT MERITOR

The Company believes good corporate governance is critical to its stability and long-term success. The Board is committed to good governance policies and practices that serve the long-term interests of the Company and its shareholders, employees and other stakeholders. Highlighted below are some of our key corporate governance policies and practices.

Corporate Governance Highlights

☑9 of 11 directors are independent under our Guidelines on Corporate Governance and the NYSE’s listing standards ☑Independent Board Chair or Lead Director ☑Board Chair and Chief Executive Officer roles separated ☑Proxy access right granted to shareholders ☑Qualified women and underrepresented minority candidates required in each search pool from which the Corporate Governance and Nominating Committee selects director candidates		☑Director resignation policy for directors who fail to obtain a majority vote ☑Annual Board and committee evaluations ☑Executive sessions of independent directors held at each regularly scheduled Board meeting ☑Commitment to corporate social responsibility ☑Share ownership guidelines for directors and executives

The foundation of our corporate governance principles and practices is the independent nature of our Board, and its primary responsibility to Meritor’s shareholders. Our Guidelines on Corporate Governance are reviewed periodically by the Corporate Governance and Nominating Committee, and changes are recommended to the Board for approval as appropriate. We will continue to monitor developments and review our Guidelines on Corporate Governance periodically and will modify or supplement them when and as appropriate. Our current Guidelines on Corporate Governance are posted on our website, www.meritor.com, in the section headed “Investors – Corporate Governance.” Our Guidelines on Corporate Governance and practices are summarized below.*

Board Independence

●	Independent directors must comprise at least a majority of the Board and, as a matter of policy, a substantial majority of the Board should be independent directors. The Board has adopted criteria for independence based on the definition used in the listing standards of the NYSE;
●	The Board reviews the independence of each director annually;
●	Only independent directors serve on the Board’s standing committees;

Board Composition

●	The Board should consist of a sufficient number of directors to represent various viewpoints and areas of expertise, but not be so large as to impair its ability to function efficiently. In general, the Board consists of 9 to 13 members, but may be smaller or larger to address special circumstances;
●	Board membership criteria have been adopted by the Board and are reviewed for appropriateness at least every three years. Board nominees are screened and recommended by the Corporate Governance and Nominating Committee and approved by the full Board (see Director Qualifications and Nominating Procedures above for information on Board selection criteria);
●	Qualified women and underrepresented minority candidates are required in each search pool from which the Corporate Governance and Nominating Committee selects director candidates;

____________________

*	In connection with Mr. Craig’s retirement, the Board approved amendments to the Guidelines on Corporate Governance eliminating the role of Executive Chairman effective December 31, 2021. The above summarizes the Guidelines on Corporate Governance as revised.

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●	Committee membership is reviewed periodically to assure that each committee has the benefit of both experience and fresh perspectives;
●	Committee chair rotation is considered at least once every four years;
●	Our directors generally should not serve on the boards of more than three other public companies, unless the Board has determined that such service does not impair the ability of the director to serve effectively on the Board;
●	The Chief Executive Officer should not ordinarily serve on the boards of any other public companies during the first two years of tenure as Chief Executive Officer and thereafter should not ordinarily serve on more than one other public company board, unless the Board, in each case, determines that such simultaneous service would not impair the ability of the Chief Executive Officer to serve the Company and the Board effectively and no director should join the board of another public company unless the Corporate Governance and Nominating Committee and the Board determine that such service would not conflict with service on the Board or a Company policy;
●	The Guidelines on Corporate Governance establish the following expectations regarding director tenure:

○	Non-employee directors should offer not to stand for re-election if they are age 72 at the time of re-election or will reach age 72 during their new term. The Corporate Governance and Nominating Committee decides whether continued Board service is appropriate and, if so, the length of the next term;
○	Directors whose job responsibilities change significantly during their Board service, or who retire from the position they held when elected to the Board, are required to offer to resign upon such occurrence. The Corporate Governance and Nominating Committee reviews the appropriateness of continued Board membership;
○	When the Chief Executive Officer retires or resigns from that position, he or she is expected to offer his or her resignation from the Board. The Board and the successor Chief Executive Officer determine whether continued Board service is desirable and appropriate;
○	Under the Company’s majority vote policy, any nominee for director who receives a greater number of “withheld” votes than “for” votes in an uncontested election is required to tender his or her resignation after the certification of the election results. The Corporate Governance and Nominating Committee considers the resignation and recommends to the Board what action should be taken. The Board is required to take action and publicly disclose the decision and its underlying rationale within 90 days of certification of the election results;

Key Responsibilities of the Board

●	The Company’s long-term strategic goals and plans are discussed in depth by the Board at least annually;
●	The non-employee directors select the Chief Executive Officer and meet at least annually to evaluate the Chief Executive Officer’s performance against long-term goals and objectives established by the Compensation Committee. This evaluation is used in the Compensation Committee’s consideration of the Chief Executive Officer’s compensation;
●	Management development and succession plans are reviewed annually, including Chief Executive Officer succession plans;

Board and Committee Meetings

●	The Board has appointed a Chairman who chairs executive sessions, serves as liaison with the Chief Executive Officer and participates in development of meeting agendas;
●	Board and committee meeting agendas are developed through discussions with management and the Chairman and/or committee chair, and are focused on business performance and strategic issues, leadership, and recent developments;

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●	Agendas are distributed in advance so directors are aware of matters to be discussed and can recommend additional items;
●	Presentation materials are generally made available to Board and committee members for review in advance of each meeting. If the subject matter is too sensitive for advance distribution of materials, directors are advised in advance of the subject matter and issues to be considered and are given ample time to deliberate on proposed actions;
●	Directors are expected to attend, prepare for and participate in meetings. The Corporate Governance and Nominating Committee monitors each director’s attendance and addresses any issues that arise;
●	Non-employee directors meet in private executive sessions during each regular Board meeting. The Chairman chairs these meetings and communicates the results of the sessions to the Chief Executive Officer;
●	Minutes of each committee meeting are provided to each Board member, and the chair of each committee reports at Board meetings on significant committee matters;
●	Information and data important to understanding the Company’s business, including financial and operating information and factors affecting the Company’s strategic plans and outlook, are distributed regularly to the Board;

Board Performance and Committee Operations

●	The Corporate Governance and Nominating Committee, which is composed solely of independent directors, is responsible for corporate governance and Board practices, and formally evaluates these areas periodically;
●	Each Board committee has a detailed charter outlining its responsibilities, as described above under the heading Board and Committees – Committees;
●	The Board and its committees have the authority to hire such outside counsel, advisors and consultants as they choose with respect to any issue related to Board activities. Directors also have full access to Company officers and employees and the Company’s outside counsel and auditors;
●	To enhance Board effectiveness, the Corporate Governance and Nominating Committee reviews and assesses annual self-evaluations of the Board’s and each committee’s performance. In addition, informal reviews of individual performance are conducted periodically. Results are shared with the Board, and action plans are formulated to address any areas for improvement;

Director Education

●	Each new director participates in an orientation program for the Company’s business, which includes discussions with key members of management and background materials on the Company’s governance framework, financial results and business;
●	The continuing education process for Board members includes review of extensive informational materials and meetings with key management personnel;
●	Meeting agendas regularly include discussions of business environment, outlook, performance and action plans for the various business segments;
●	Board members may request presentations on particular topics and specific facility visits to educate themselves and update their knowledge as to the Company, its industry and markets, the responsibilities of directorship and other topics of interest;
●	Each director is encouraged to attend educational seminars and conferences to enhance his or her knowledge of the role and responsibilities of directors;
●	In each fiscal year, at least one director is required to attend a director education seminar. In fiscal year 2021, three directors each attended one or more of such seminars;

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Alignment with Shareholder Interests

●	A portion of director compensation is equity-based and therefore tied to the Company’s stock performance. Directors can also elect to receive their cash retainer fees in the form of restricted shares or restricted share units;
●	The Compensation Committee and the Board oversee executive compensation programs to help ensure that they are linked to performance and increasing shareholder value. The Compensation Committee also monitors compliance by Company executives with stock ownership guidelines (see Executive Compensation –Compensation Discussion and Analysis below);
●	Senior management meets regularly with major institutional investors and shareholders and reports to the Board on analysts’ and shareholders’ views of the Company; and
●	The Board has adopted stock ownership guidelines for non-employee directors to further the direct alignment of directors’ and shareholders’ economic interests. Each non-employee director is required to own shares of Common Stock, restricted shares or restricted share units with a market value equal to at least five times the annual cash retainer, effective five years from the date of his or her initial election to the Board. As of the end of fiscal year 2021, all of the non-employee directors were in compliance with the ownership guidelines, taking into account permitted transition periods for newer directors.

CODE OF ETHICS

All Meritor employees, including our Executive Chairman, Chief Executive Officer, Chief Financial Officer and other executive officers and our Chief Accounting Officer, are required to comply with our corporate policies, regarding standards of business conduct and conflicts of interest. The purpose of these corporate policies is to ensure to the greatest possible extent that our business is conducted in a consistently legal and ethical manner. The Audit Committee has oversight responsibility with respect to compliance by employees. The Board is also required to comply with these policies, and the Corporate Governance and Nominating Committee is responsible for monitoring compliance by directors.

Employees are obligated to report any conduct that they believe in good faith to violate these policies. Employees may submit concerns or complaints regarding ethical issues on a confidential basis to our ethics helpline, by means of a toll-free telephone call or e-mail. The Office of the Chief Legal Officer investigates all concerns and complaints. Employees may also contact the Board or the Audit Committee directly on these issues (see Communications with the Board below).

Meritor’s ethics manual, including the text of the policies on standards of business conduct and conflicts of interest, is posted in the section headed “Investors – Corporate Governance” on our website, www.meritor.com. We will post on our website any amendment to, or waiver from, a provision of our policies that applies to our Executive Chairman, Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer, and that relates to any of the following elements of these policies: honest and ethical conduct; disclosure in reports or documents filed by the Company with the SEC and in other public communications; compliance with applicable laws, rules and regulations; prompt internal reporting of code violations; and accountability for adherence to the policies.

CORPORATE SOCIAL RESPONSIBILITY

Meritor’s and the Board’s commitment to sustainability, including beneficial ESG related business practices, is integral to how the Company conducts its business. Sustainability and good corporate stewardship have been a part of Meritor’s culture throughout its long history of innovative product design and manufacture. We last published our annual sustainability report in March 2021 to share the work we have done in the areas of advanced technologies; environment, health and safety; manufacturing initiatives; human capital, social responsibility and corporate governance.

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OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES

The following table shows the beneficial ownership, reported to us as of October 31, 2021, of Common Stock of (1) each director; (2) each executive officer listed in the table under Executive Compensation – Fiscal Year 2021 Summary Compensation Table below; and (3) such persons and other executive officers as a group. See Voting Securities above for information on beneficial holders of more than 5% of outstanding Common Stock.

Beneficial Ownership as of October 31, 2021
				Percent of
				Outstanding
Name	Number of Shares⁽¹⁾			Common Stock⁽²⁾
Steven Beringhause		9,668	⁽³⁾		*
Jan A. Bertsch		56,786	⁽³⁾⁽⁴⁾		*
Rodger L. Boehm		36,523	⁽³⁾		*
Ivor J. Evans		329,015	⁽³⁾		*
Elizabeth A. Fessenden		2,620	⁽³⁾		*
Fazal Merchant		5,329	⁽³⁾		*
William R. Newlin		204,336	⁽³⁾⁽⁵⁾		*
Thomas L. Pajonas		62,936	⁽³⁾		*
Lloyd G. Trotter		76,470	⁽³⁾		*
Chris Villavarayan		123,421	⁽⁶⁾⁽⁷⁾		*
Jeffrey A. Craig		299,803	⁽⁶⁾		*
Carl D. Anderson II		31,976	⁽⁶⁾⁽⁷⁾		*
Timothy Bowes		318			*
John Nelligan		19,699	⁽⁶⁾⁽⁷⁾		*
Hannah S. Lim-Johnson⁽⁸⁾		—			*
All of the above and other executive officers as a group (16) persons		1,284,952	^{(3)(4)(5)(6)(7)}		1.8	%

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*	Less than one percent.
⁽¹⁾	Each person has sole voting and investment power with respect to the shares of Common Stock listed unless otherwise indicated.
⁽²⁾	For purposes of computing the percentage of outstanding shares beneficially owned by each person, the number of shares of Common Stock owned by that person and the number of shares of Common Stock outstanding include shares as to which such person has a right to acquire beneficial ownership within 60 days (for example, through the exercise of stock options, conversions of securities or through trust arrangements), in accordance with Rule 13d-3(d)(1) under the Exchange Act.
⁽³⁾	Includes restricted shares awarded under the Company’s long-term incentive plans. Restricted shares are held by the Company until certain conditions are satisfied.
⁽⁴⁾	Includes 25,767 shares of Common Stock held by a trust of which Ms. Bertsch is trustee.
⁽⁵⁾	Includes 6,860 shares of Common Stock held by a trust of which Mr. Newlin’s spouse is beneficiary.
⁽⁶⁾	In accordance with Rule 13d-3(d)(1) under the Exchange Act, the number of shares of Common Stock owned includes the following number of shares of Common Stock that may be acquired upon vesting of restricted share units within 60 days: 66,066 restricted share units for Mr. Villavarayan; 261,263 restricted share units for Mr. Craig; 12,011 restricted share units for Mr. Anderson; 16,011 restricted share units for Mr. Nelligan; and 365,356 restricted share units for all directors and executive officers as a group. Does not include restricted share units or performance share units granted under the Company’s stock plans and held as of October 31, 2021 that do not vest within 60 days.
⁽⁷⁾	Includes shares beneficially owned under the Company’s Savings Plans.
⁽⁸⁾	Ms. Lim-Johnson, Senior Vice President, Chief Legal Officer and Corporate Secretary, separated from the Company effective October 25, 2021.

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EXECUTIVE COMPENSATION

COMPENSATION COMMITTEE REPORT

The Compensation and Management Development Committee (the “Compensation Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, and based on such review and discussions, recommended to the Board that such Compensation Discussion and Analysis be included in this proxy statement and the Form 10-K. The four independent directors listed below were the members of the Compensation Committee who participated in the review, discussions and recommendation with respect to the Compensation Discussion and Analysis for fiscal year 2021.

Compensation and Management Development Committee

Lloyd G. Trotter, Chair
Steven Beringhause
Elizabeth A. Fessenden
William R. Newlin

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee has served as an officer or employee of the Company or any of its subsidiaries within the last three fiscal years. During fiscal year 2021, no member of the Compensation Committee had a relationship that must be described under SEC rules relating to disclosure of related-person transactions. In fiscal year 2021, none of the Company’s executive officers served on the board of directors or compensation committee of any entity that had one or more of its executive officers serving on the Board or the Compensation Committee.

COMPENSATION DISCUSSION AND ANALYSIS

The purpose of this section of the proxy statement is to provide information about our executive compensation programs that relate to the compensation of the Named Executive Officers, as defined below. The Named Executive Officers are the senior members of management listed or discussed in the compensation tables included in this proxy statement. The qualitative information and rationales regarding our executive compensation policies and practices described below are intended to provide a better understanding of the quantitative information regarding each Named Executive Officer described in the tables and narratives that follow this section.

COVID-19 Pandemic Response

The COVID-19 pandemic adversely affected the Company’s financial performance throughout most of fiscal year 2020 and the beginning of fiscal year 2021, however the direct adverse impacts of the pandemic on its operations and financial performance started to dissipate over the course of the third fiscal quarter of fiscal year 2021. Due to the adverse effects of the COVID-19 pandemic on the Company’s financial performance and the uncertainty around its duration and breadth, the Company implemented a series of cost reduction measures in March 2020 to preserve its financial flexibility, including the suspension of certain employer-paid retirement savings plan and pension contributions from May 1, 2020 through the end of the first quarter of fiscal year 2021. These actions affected certain elements of the compensation paid to our Named Executive Officers for portions of fiscal year 2021 as further detailed below.

In December 2020, the Compensation Committee adjusted the fiscal 2019-2021 performance cycle under the 2010 LTIP to address retention and attrition concerns resulting from the COVID-19 pandemic’s impact on the Company’s incentive compensation plans, and to continue to incentivize executive performance in a difficult and uncertain environment. The adjustment lowered the threshold targets required to achieve a payout for the fiscal 2019-2021 performance cycle but did not adjust the targets for these performance metrics for payments at or above 100% of target. Further detail on the impacts of this adjustment on the compensation paid to our Named Executive Officers in fiscal year 2021 is provided below.

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Executive Summary

We believe our executive compensation program represents best practices that serve the interests of shareholders. Highlighted below are some of our key practices.

What We Do		What We Don't Do
☑Focus the majority of pay on performance-based elements ☑Retain an independent compensation consultant ☑Perform an annual peer review and risk assessment ☑Target the median of our peer group when determining executive compensation ☑Maintain a clawback policy in cases of financial restatement ☑Require double-trigger upon change in control in order to receive cash severance and for accelerated vesting to occur ☑Set rigorous stock ownership guidelines for officers and directors ☑Incentive payouts are capped at 200% of target ☑Request an annual say-on-pay shareholder vote		☒Provide excessive perquisites ☒Pay excise tax gross-ups ☒Promise multi-year salary increases ☒Guarantee minimum bonuses ☒Allow officers or employees to hedge or pledge company stock

The main components of Meritor’s executive compensation program are annual salary, annual incentives and long-term incentives. The Compensation Committee believes in a “pay for performance” philosophy under which executives are rewarded for performance against objective standards and, as part of that philosophy, continues to examine the Company’s executive compensation program and makes changes accordingly. The actions taken by the Compensation Committee in fiscal year 2021 reflect that philosophy.

Recent actions taken by the Compensation Committee to update and improve the Company’s compensation practices include:

●

Changes to Compensation Levels due to Transition of Leadership. As discussed below under the heading “Elements of the Meritor Compensation Program – Components,” in March 2021, Mr. Craig, formerly the Chief Executive Officer and President, assumed the title of Executive Chairman of the Board, and Mr. Villavarayan, formerly Executive Vice President and Chief Operating Officer, assumed the title of Chief Executive Officer and President (see Board of Directors and Committees – Board Leadership Structure above for further information). This arrangement was the first step in the transition of leadership from Mr. Craig to Mr. Villavarayan and was accompanied by adjustments to their compensation to reflect their revised roles (see “Summary Compensation Table” below for information on total compensation for Mr. Craig and Mr. Villavarayan in 2021, reflecting this mid-year adjustment). In November 2021, Mr. Craig notified the Board of his intention to retire as Executive Chairman effective December 31, 2021. With Mr. Craig’s retirement, the Committee will continue to assess the compensation of Mr. Villavarayan and the leaders of the Company’s business and functional units based on each individual’s scope and responsibilities and the corresponding market analysis and benchmarking studies provided by Pay Governance. There are no current plans to fill the positions of Executive Chairman or Chief Operating Officer, and in November 2021, the Board, upon the recommendation of the Corporate Governance and Nominating Committee, adopted Amended and Restated By-laws effective December 31, 2021, which eliminate the Executive Chairman position and provide for an independent non-executive Chairman of the Board.

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Continued 100% Equity-Based Long-Term Incentives Going Forward. For the fiscal 2020-2022 and fiscal 2021-2023 performance cycles, the Compensation Committee made awards that were entirely equity-based. Awards for both fiscal 2020-2022 and fiscal 2021-2023 were 60% performance-based, in the form of performance share units, and 40% service-based, in the form of restricted share units, as described below. In November 2021, the Compensation Committee continued this practice, granting 100% equity-based long-term incentives for the fiscal 2022-2024 performance cycle. These awards are also 60% performance-based, in the form of performance share units, and 40% service-based, in the form of restricted share units. The Compensation Committee believes the mix of awards for our executives will promote achievement of performance goals and provide retention incentives to key management personnel.

●

Peer Group Analysis Review. The Compensation Committee annually assesses the competitiveness of the Company’s executive compensation compared to that of similar companies, as described below under the heading “Market Analysis and Benchmarking.” In July 2021, the Compensation Committee engaged its compensation consultant, Pay Governance, to evaluate the Company’s peer group to help ensure that it is appropriate in light of the Company’s current situation. This evaluation resulted in the removal and addition of two peer companies, and the results of this evaluation were used in the Compensation Committee’s review of executive compensation in November 2021 for fiscal year 2022.

Administration of Executive Compensation Program

The Compensation Committee has overall responsibility for executive compensation, including administration of equity compensation plans (see Board and Committees above for information on the Compensation Committee’s members, charter and meetings in fiscal year 2021). As part of this responsibility, the Compensation Committee evaluates the performance of the Executive Chairman and Chief Executive Officer and determines their compensation in light of the goals and objectives of the Company and the executive compensation program.

The Compensation Committee continued its retention of Pay Governance as a compensation consultant in fiscal year 2021. Prior to engaging Pay Governance, the Compensation Committee assessed Pay Governance’s independence under the standards set forth in the rules under the Exchange Act and the listing standards of the New York Stock Exchange (the “NYSE”). The Compensation Committee concluded that such standards were satisfied and no conflict of interest existed with respect to Pay Governance’s work.

Pay Governance provides information on current compensation trends, develops competitive market data and provides objective recommendations as to the design of the compensation program, including the form and mix of awards, the type of performance criteria and the level of award targets. The Compensation Committee directly engages Pay Governance, which also assists the Corporate Governance and Nominating Committee with respect to directors’ compensation. Pay Governance performs no other services for the Company or management.

The Compensation Committee seeks and considers input from senior management in many of its decisions, and Pay Governance confers and collaborates with senior management in developing its compensation recommendations. Senior management regularly participates in the Compensation Committee’s activities in the following ways:

●

The Executive Chairman and Chief Executive Officer report to the Compensation Committee with respect to their evaluation of the performance of the Company’s other senior executives, including the other Named Executive Officers that report to the Chief Executive Officer. The Chief Executive Officer, together with the Executive Chairman and the Vice President and Chief Human Resources Officer, makes recommendations as to compensation decisions for these individuals, including base salary levels and the amount and mix of incentive awards.

●

The Vice President and Chief Human Resources Officer participates in the development of the executive compensation program, including formulation of performance objectives and targets for incentive compensation, and oversees its implementation and interpretation, in each case carrying out the direction of the Compensation Committee and the recommendations of Pay Governance. He also assists the Chair of the Compensation Committee in developing meeting agendas and oversees preparation and distribution of pre-meeting informational materials on the matters to be considered.

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●

The Chief Financial Officer is responsible for evaluating the tax, financial and accounting aspects of certain compensation decisions, as appropriate. He participates in developing financial objectives and targets for performance-based incentive compensation and oversees calculation of payout and vesting levels, in accordance with plan design and the direction of the Compensation Committee.

Executive Compensation Philosophy and Objectives

The Compensation Committee’s compensation philosophy is to “pay for performance.” The fundamental objectives of the Company’s executive compensation program are to: (1) attract, retain and motivate high caliber executives necessary for Meritor’s leadership and growth; (2) recognize and reward company and individual performance through evaluation of each executive’s effectiveness in meeting strategic and operating plan goals; and (3) foster the creation of shareholder value through close alignment of the financial interests of executives with the investment interests of Meritor’s shareholders.

The Compensation Committee uses several basic practices and policies to carry out its philosophy and to meet the objectives of Meritor’s executive compensation program:

●	Competitive Compensation Packages. In order to attract and retain talented executives, the Compensation Committee designs total compensation packages to be competitive with those of other companies with which Meritor competes for talent, using benchmarking studies to determine market levels of compensation, as described below.
●	Performance-Based Compensation. A significant portion of each Named Executive Officer’s total potential compensation is performance-based (in other words, the compensation is at risk because it is contingent on achieving strategic and operating plan goals that are intended to improve shareholder return). These goals are established to recognize Company performance against specified targets. The remainder of the compensation of the Named Executive Officers is comprised of base salary and service-based restricted share units. Annual incentives are 100% performance-based, as discussed in detail below under the heading “Elements of the Meritor Compensation Program – Components.” With respect to long-term incentives, for the three-year cycle beginning in fiscal 2021, 60% of the awards are performance-based, in the form of performance share units, and 40% of the awards are service-based, in the form of restricted share units. The Compensation Committee continued this approach for the three-year cycle beginning in fiscal 2022, keeping 60% of the awards performance-based, in the form of performance share units, with the remaining 40% of the awards service-based, in the form of restricted share units.
●	Equity Awards and Stock Ownership Requirements. A portion of incentive compensation for executives is often comprised of equity and equity-based awards, which are intended to align the interests of the Company’s executives with those of shareholders. As noted above, all of the awards for the long-term incentive cycles in fiscal 2020, 2021 and 2022 are equity-based, in the form of performance share units and restricted share units. In addition, metrics used for performance-based incentives are intended to align the interests of executives with those of shareholders. Senior executives are also required under the Company’s stock ownership guidelines to own shares of Common Stock (including share equivalents) with a value equal to a specified multiple of their salary.

Market Analysis and Benchmarking

The Compensation Committee assesses the competitiveness of Meritor’s compensation program using data and studies compiled and provided by Pay Governance. Pay Governance provides a detailed annual competitive pay study. As part of the assessment process, the Compensation Committee compares the amount of each component and the total amount of direct compensation (defined below) for each executive officer with that for comparable officers at peer companies in the durable goods manufacturing sector, including companies in the automotive sector that have executive officer positions comparable to the Company’s and with which the Company may compete for talented executives. The Compensation Committee reviewed the Company’s peer group with Pay Governance in July 2020 and determined that it was still appropriate in light of the Company’s then current situation, and the same peer group was used in the Compensation Committee’s review of executive compensation for fiscal year 2021.

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The peer group for the competitive analysis for fiscal year 2021 included the following 20 companies:

AGCO Corporation		The Manitowoc Company, Inc.
American Axle & Manufacturing Holdings, Inc.		Modine Manufacturing Company
BorgWarner Inc.		Navistar International Corporation
Cooper-Standard Holdings, Inc.		Oshkosh Corporation
Dana Incorporated		Terex Corporation
Flowserve Corporation		The Timken Company
The Greenbrier Companies, Inc.		Trinity Industries, Inc.
Hyster-Yale Materials Handling, Inc.		Visteon Corporation
ITT Inc.		Wabash National Corporation
Kennametal Inc.		Wabtech Corporation

See “Elements of the Meritor Compensation Program – Overview and Analysis” below for information on how the Compensation Committee uses this peer group data in setting compensation.

The Compensation Committee (or the Board, as appropriate) may also consider practices at other companies with respect to other elements of compensation, such as perquisites, retirement plans, and health and welfare benefits, in assessing the competitiveness and cost effectiveness of the Company’s compensation programs. Any such studies are done on a case-by-case basis, as needed, and may use a group of comparable companies identified at the time by Pay Governance or other advisors.

As noted in “Peer Group Analysis Review” above, in connection with the Compensation Committee’s review of executive compensation for fiscal year 2022, Navistar International Corporation and BorgWarner Inc. were removed from, and Harley-Davidson, Inc. and LCI Industries were added to, the Company’s peer group.

Elements of the Meritor Compensation Program

Overview and Analysis

The primary components of Meritor’s executive compensation program are base salary, annual incentives and long-term incentives, collectively referred to herein as direct compensation. The aggregate of these components (in other words, the total compensation package), and the relative levels of equity and non-equity compensation that comprise direct compensation, are generally targeted in relation to competitive market rates among peer group companies, as described above. Although the Compensation Committee targets the median for the total package of direct compensation for an individual, particular elements of direct compensation may be either below or above the median.

With this principle in mind, the Compensation Committee approves variations from the peer group median (adjusted for each individual based on the revenue responsibility of their respective operating units), or 50th percentile, base salary levels for some individuals based on their responsibilities, experience, expertise and performance. In addition, when recruiting new executives, base salary may be set at a premium above the median of the peer group in order to attract the most qualified candidates.

The Compensation Committee also believes that individuals should have an opportunity to earn above-median rewards for superior performance. Therefore, while the Compensation Committee looks at the median of the peer group in terms of the target annual and long-term incentive award for each position, it identifies a maximum potential payout for each position that would be significantly above median if maximum performance objectives are achieved. The range of potential payouts on annual and long-term incentives is described below, under the heading “Components.”

Each year, the Compensation Committee determines the appropriate mix among the components of direct compensation, and the appropriate mix of equity versus non-equity awards, and performance-based versus service-based awards. However, the compensation program contemplates that a significant portion of each executive’s direct compensation is performance-based and therefore is at risk. Performance-based awards, whether in the form of equity or non-equity awards, are tied to achievement of goals that are intended to improve, or reflect improvements in, shareholder

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value (see the performance-based awards described under the heading “Components” below). In fiscal year 2021, 86% of our Chief Executive Officer’s target compensation and 68% of the average target compensation of our other Named Executive Officers was at risk.

Chief Executive Officer		Other NEOs

In conjunction with setting compensation for fiscal year 2021, the Compensation Committee reviewed past pay-for-performance results over the tenure of each officer. The Compensation Committee was also aware of the potential value of outstanding long-term incentives, including the likelihood of their payout and vesting (based on achievement of performance objectives to date and on the levels of payout and vesting of past awards). This information was also implicit in the overall plan design used by Pay Governance in making recommendations for fiscal year 2021 compensation.

In addition to direct compensation, special hiring or retention incentives have been put in place for certain executives to motivate them to join the Company or to continue their employment. Named Executive Officers also receive health and welfare benefits and are entitled to participate in the Company’s pension plans and savings plans on substantially the same basis as other employees.

Each component of the executive compensation program is discussed below.

Components

Base Salary. The Compensation Committee generally reviews and sets base salaries for the executive officers each fiscal year, customarily at its November meeting. Annual salary increases, if any, for executive officers are based on evaluation of each individual’s performance and on his or her level of pay compared to that for similar positions at peer group companies, as indicated by Pay Governance’s reports and survey data. The Compensation Committee from time to time also reviews and adjusts base salaries for executive officers at the time of any promotion or change in responsibilities. Mr. Craig and Mr. Villavarayan received salary adjustments in March 2021, which were based on a plan for the transition of leadership of the Company from Mr. Craig (who assumed the title of Executive Chairman) to Mr. Villavarayan (who assumed the title of Chief Executive Officer and President). In connection with the transition, Mr. Craig’s compensation was reduced, and Mr. Villavarayan’s compensation was increased, to reflect the beginning of the transfer, with this reallocation resulting in no incremental compensation cost to the Company on an annualized basis. With Mr. Craig’s retirement, the Committee will continue to assess the compensation of Mr. Villavarayan and the leaders of the Company’s business and functional units based on each individual’s scope and responsibilities and the corresponding market analysis and benchmarking studies provided by Pay Governance. Messrs. Anderson, Bowes and Nelligan received salary adjustments in connection with an increase in their responsibilities in March 2021.

Annual Incentives. The Incentive Compensation Plan, as amended (the “ICP”) was last approved by the Company’s shareholders in January 2015. At that time, the ICP was amended and restated to (1) add a clawback provision applicable to awards that are subsequently the subject of a restatement of financial statements within o