Masimo logoMasimo (Nasdaq:MASI) announced today that it made a series of changes to its board of directors and governance policies.

The company attributed the changes to an ongoing board refreshment and governance review process. Regular engagement with stockholders informed these changes, according to a news release.

“We recently visited several of our large stockholders and had good discussions with them,” said Joe Kiani, Masimo founder, chair, and CEO. “Based on their feedback, as well as feedback we previously received from other stockholders, the Board has decided to make a number of changes.”

Masimo’s independent board directors unanimously elected H Michael Cohen as the board’s lead independent director. Cohen holds responsibility for leading meetings of the independent directors. He also presides at meetings of the board at which the chair (Kiani) is not present and provides input on agendas and materials in advance of board meetings.

Other changes include an expansion of the company’s board, declassification, the termination of a rights agreement and an adjustment to executive pay.

“We are pleased to announce these changes to our board’s structure and policies, which are informed by feedback from our stockholders,” said Cohen. “The board is confident that the changes we are announcing today will position it to continue to provide effective oversight as we seek to maximize value for all stockholders. Over the past twelve months, our independent directors have met with holders of more than 50% percent of Masimo’s stock as part of our investor engagement program.

“As our actions demonstrate, we are committed to collaborating productively with all Masimo’s stockholders in support of long-term value creation.”

Executive pay changes

The board made changes to executive pay to “better align compensation with stockholder returns.” It also comes in response to last year’s say-on-pay vote at the Masimo 2022 annual meeting. In that meeting, shareholders voted to advise against the company’s compensation package for top executives. About 53% of voting shareholders voted against the patient monitoring tech company’s handling of executive pay.

Masimo said it specifically moved to multi-year performance goals for equity-based incentive awards. It incorporated three-year cumulative performance metrics rather than annual metrics. The company also added market-based performance conditions. That includes a relative total shareholder return metric.

The total shareholder return metric targets the company’s performance at the 55th percentile ranking relative to the constituents of the Nasdaq Composite Index.

Masimo expands its board

In response to specific and broad stockholder feedback. Masimo expanded the board size from five to seven members. The company has support from an external advisory form and initiated a search process for two new directors.

“This process reflects the board’s commitment to regular refreshment with highly qualified, experienced directors and responsiveness to input from stockholders,” Masimo said.

The company also plans to solicit feedback from stockholders regarding specific individuals and qualities that would benefit the board.

Declassification leads to one-year terms

Masimo’s board resolved to recommend stockholders vote in favor of a proposal to declassify its board. This move would result in one-year terms for all directors. Masimo intends to detail this proposal in its 2023 proxy statement. It plans to file that proxy statement with the SEC in advance of the annual meeting.

If approved, the declassification would begin with the directors up for election at the 2024 annual meeting. Masimo said the full declassification of the board would take place at the 2026 annual meeting.

Rights agreement termination

The Masimo board terminated the rights agreement it adopted on Sept. 9, 2022. That termination went into effect as of March 22, 2023. Stockholders need not take any action as a result of this decision.

Masimo said its board has no intention of adopting another rights plan. Should it do so as a result of new circumstances in the future, the board would seek stockholder approval within 12 months of adoption unless it terminated that plan prior to such time.