DEF 14A 1 kei2020proxy.htm KIMBALL ELECTRONICS, INC. FORM DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Exchange Act of 1934 (Amendment No.)

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Notice of 2020 Annual Meeting and Proxy Statement

Environmental, Social, and Governance
We published our first Environmental, Social, and Governance (“ESG”) Report in December 2019.
The report is a new way for us to showcase how our employees around the world share a strong sense of responsibility to protect the environment, sustain a safety focus at our facilities, and give back in meaningful ways to the communities where we live and work, as well as reporting on our commitments and our progress.
These are the areas we have defined as critical to good environmental stewardship, social responsibility, and sound corporate governance:

Environmental | Social | Governance
•Environmental Management | •Human Rights | •Board Structure
•Carbon and Climate | •Labor | •Compensation
•Natural Resources | •Society | •Share Owners’ Rights
•Waste and Toxicity |  | •Financial Oversight
•Health and Safety |  |

Our disclosures and progress will continue to evolve in future reports. We will continue our demonstrated commitment to our Environmental, Social, and Governance philosophies and practices. They have been part of who we are since our founding.
Don Charron, Chairman of the Board / CEO
The Kimball Electronics 2019 ESG Report can be found on the Company’s website at:
http://www.kimballelectronics.com/social-responsibility

CHAIRMAN’S OVERVIEW

Dear Share Owner:
Fiscal year 2020 was an interesting year, to say the least. The first half was business as usual, and the second half was dominated by the disruptions and changes necessitated by the COVID-19 pandemic. As we continue to operate in a pandemic world, our top priority is the health and safety of our employees, customers, suppliers, and communities, while remaining steadfast in our commitment to continue building a strong and successful company for the future. He re is a recap:
Our Successes
•Records - new highs for net sales and cash flow from operations.
•Customer Loyalty - sales to customers that have been doing business with us for over 10 years remained steady.
•Service and Performance Excellence Recognition - CIRCUITS ASSEMBLY - one of best in industry for calendar year 2019 for customer satisfaction.
•Investments for Future Growth - invested approximately $39 million in capital expenditures, including machinery and equipment to increase capacity and support new business awards.
•Return to Share Owners - returned $8.8 million through our share repurchases.
Our Fiscal Year 2020 Results
•Net Sales - $1.2 billion, a 2% increase over fiscal year 2019.
•Sales by market vertical:
◦Automotive - down 4%.
◦Medical - up 8%.
◦Industrial - up 6%.
◦Public Safety - down 15%.
•Operating income margin - 2.7%.
•Net income - $18.2 million.
•Diluted earnings per share - $0.71.
•Return on invested capital - 6.9%.
•Available liquidity at June 30, 2020 - $143 million.
Other Accomplishments
•We successfully supported our medical customers who experienced significant demand increases for their respiratory care and patient monitoring products due to significant COVID-19 pandemic-related needs.
•We remain very active in the implementation of a new talent management framework.
•We published our first Environmental, Social, and Governance (ESG) report.

|  | For more detailed insights into the past year, I encourage you to read our Annual Report and Form 10-K, as well as follow us on our website at www.kimballelectronics.com. |  |  |
|  | And if the status of the pandemic will allow it, I would like to extend a personal invitation for you to attend our annual meeting in person at our Kimball Electronics Headquarters, located at 1205 Kimball Blvd. in Jasper, Indiana, beginning at 9 a.m. EST on Tuesday, November 10, 2020. If it will not, we have contingency plans in place to hold a virtual meeting. Either way, I hope to see you there. |  |  |
|  | Donald D. Charron Chairman and Chief Executive Officer Kimball Electronics, Inc. |  |  |

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NOTICE OF ANNUAL MEETING OF SHARE OWNERS

KIMBALL ELECTRONICS, INC.
1205 Kimball Blvd.
Jasper, Indiana 47546
(812) 634-4000
To the Share Owners of Kimball Electronics, Inc.:
The annual meeting of the Share Owners (the “2020 Annual Meeting”) of KIMBALL ELECTRONICS, INC., an Indiana corporation (the “Company”), will be held at the principal offices of the Company, 1205 Kimball Blvd., Jasper, Indiana, on Tuesday, November 10, 2020, at 9:00 A.M., Eastern Standard Time (EST), for the following purposes:

1. | To elect two (2) directors of your Company (“Proposal 1”).
2. | To ratify the selection of the Company’s independent registered public accounting firm for fiscal year 2021 (“Proposal 2”).
3. | To approve, by a non-binding, advisory vote, the compensation paid to the Company’s Named Executive Officers (“Proposal 3”).
4. | To consider and transact such other business as may properly come before the meeting or any adjournments thereof.
COVID-19 |
We intend to hold our 2020 Annual Meeting in person as described herein; however, as part of our precautions regarding COVID-19, we are planning for the possibility that the Company’s 2020 Annual Meeting may be held solely by means of remote communication. If we take this step, we will announce the decision to do so in advance by filing Definitive Additional Materials with the Securities and Exchange Commission along with notice of the changes to the 2020 Annual Meeting. Details on how to participate will be available at http://investors.kimballelectronics.com/. |

By Order of the Board of Directors
John H. Kahle, Secretary
September 29, 2020

Annual Share Owners Meeting Information |
DATE | November 10, 2020
TIME | 9:00 a.m. EST
PLACE | Kimball Electronics, Inc. Headquarters 1205 Kimball Blvd. Jasper, IN 47546
RECORD DATE | September 8, 2020
VOTING ELIGIBILITY | Registered Share Owners as of the Record Date are entitled to submit proxies or vote in person at the Annual Share Owners Meeting.

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Meeting Agenda Items

Proposal | Board Recommendation | Rationale
Proposal 1: Elect two Directors for a three-year term: • Robert J. Phillippy • Gregory A. Thaxton | Vote FOR each of the candidates. | Both are very qualified and capable directors and will serve the interests of our Share Owners well. Messrs. Phillippy and Thaxton bring unique capabilities as a former CEO and CFO of public companies, respectively.
Proposal 2: Ratify the selection of Deloitte & Touche LLP as the Company’s Independent Registered Public Accounting Firm | Vote FOR ratification of the selection. | Deloitte & Touche is a major public accounting firm that is very well qualified to conduct an independent audit of your Company and has done so very capably for several years.
Proposal 3: To approve, by a non-binding, advisory vote, the compensation paid to the Company’s Named Executive Officers | Vote FOR the advisory proposal approving the compensation paid to our Named Executive Officers. | The Company’s Named Executive Officers are qualified and capable executives with many years of industry experience and tenure with the Company. Their compensation has been benchmarked against relevant market data as developed by Aon Consulting and is competitive. Market competitive compensation is critical to retain talented management for the Company.

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

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TABLE OF CONTENTS |  |  |  |
7 |  |  |  | Election of Directors
9 |  |  |  | Communicating with the Board
10 |  |  |  | Corporate Governance at Kimball Electronics
15 |  |  |  | Review and Approval of Transactions with Related Persons
16 |  |  |  | Report of the Audit Committee
17 |  |  |  | Selection of Independent Registered Public Accounting Firm
18 |  |  |  | Compensation Discussion and Analysis
27 |  |  |  | Report of the Compensation and Governance Committee
28 |  |  |  | Compensation Related Risk Assessment
28 |  |  |  | Executive Compensation
37 |  |  |  | Equity Compensation Plans Information
37 |  |  |  | Proposal to Approve, in a Non-Binding, Advisory Vote, the Compensation Paid to our Named Executive Officers
38 |  |  |  | Submission of Nominations and Proposals for 2020
38 |  |  |  | Meeting and Voting Information
41 |  |  |  | Share Ownership Information
42 |  |  |  | Delinquent Section 16(A) Reports
A-1 |  |  |  | Appendix A - Approval Process for Services Performed by the Independent Registered Public Accounting Firm

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ELECTION OF DIRECTORS

NOMINEES FOR ELECTION AS DIRECTORS BY HOLDERS OF COMMON STOCK
The Board of Directors (the “Board”) is divided into three classes with approximately one-third of the directors up for election each year. The class of each director and the date of their election is noted in their qualification descriptions below. At the 2020 Annual Meeting of Share Owners, the Share Owners will elect each of two (2) directors to serve a term of three years, or until their respective successors have been duly elected and qualified.
A director elected by the Board to fill a vacancy holds office until the end of the term for which such director’s predecessor was elected, or if the vacancy arises because of an increase in the size of the Board, at the end of the term specified at the time of such director’s election or selection, and until that director’s successor has been elected and qualified or until the Board accepts his or her earlier resignation, or the director’s disqualification, disability, or removal.
Each nominee will begin service as a director of Kimball Electronics, Inc. (“we,” “us,” “our,” “Kimball Electronics,” or the “Company”) if elected. Each nominee has consented to serve as a director. If for any reason any such nominee shall become unable or unwilling to serve, the proxies will be voted to fill any vacancy so arising in accordance with the discretionary authority of the persons named in the accompanying proxy. The Board is confident that each such nominee will be able to serve.
The Class III nominees to be elected, serving a three-year term and then up for re-election in 2023, are:
Robert J. Phillippy
Gregory A. Thaxton
Unique individual qualifications and skills of our nominees that led our Board to the conclusion that each should serve as a director are further described below and includes information each director has given us about his or her age, positions held, principal occupation, and business experience for at least the past five years, and the names of other publicly-held companies of which he or she currently serves (or during the past five years has served) as a director.
The nominees are:

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

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| Gregory A. Thaxton | Director
| Mr. Thaxton is the former Executive Vice President and Chief Financial Officer of Nordson Corporation (NASDAQ: NDSN), a $2.3 billion publicly traded industrial technology company focused on precision dispensing, fluid management, and related processes with operations in nearly 40 countries. Mr. Thaxton stepped down as Chief Financial Officer on July 6, 2020 and retired from Nordson on August 28, 2020. He has more than twenty-five years of experience serving in various domestic and international financial management and leadership roles with Nordson after beginning his career with a Big Four public accounting firm. Mr. Thaxton also serves on the board of the non-profit Lorain County Community College Foundation, serving as Treasurer of the Executive Committee, and is a member of the Finance and Audit Committees. Mr. Thaxton is a Certified Public Accountant (inactive). Mr. Thaxton received his Bachelor of Science degree in accounting from Miami University in 1983 and his MBA in international management from Baldwin Wallace University in 1995. Mr. Thaxton’s experience adds significant financial, accounting, capital structure, and SEC reporting expertise to the Board. |
Director since: 2017 Class III |  |
| The Board of Directors recommends a vote “FOR” the election of each of the Class III director nominees. |

| Other Directors Not Standing for Re-election in 2020 |

| Donald D. Charron | Chairman of The Board, Chief Executive Officer
| Mr. Charron serves as Kimball Electronics’ Chairman of the Board and Chief Executive Officer. He formerly served as an Executive Vice President of Kimball International, Inc. (“Kimball International” or “former Parent”), a member of the Board of Directors of Kimball International, and the President of Kimball Electronics Group. Mr. Charron had led the EMS segment of Kimball International since joining Kimball International in 1999. Prior to that, he spent six years with Rockwell International in various leadership roles. Mr. Charron earned a Bachelor of Science degree in electrical engineering from the South Dakota School of Mines and Technology in 1987. Mr. Charron’s extensive contract electronics industry experience, as well as his intimate knowledge of Kimball Electronics provides valuable operational, strategic, and global market insights. |
Director since: 2014 Class I - re-election in 2021 |  |

| Colleen C. Repplier | Director
Director since: 2014 Class I - re-election in 2021 | Ms. Repplier is a strong and respected leader in the industrial, energy and commercial building industries, with more than three decades of operational and P&L experience in diversified manufacturing companies. Ms. Repplier began her career in the energy industry holding roles in engineering and marketing with Westinghouse Electric Company, construction design with Bechtel Corporation, and progressing roles in engineering, process improvement, product management, sales and general management at General Electric. She also held senior leadership positions and was a company officer at Home Depot and HD Supply before joining Tyco in 2007. At Tyco, she served as President of the Tyco Fire Protection business until the company was acquired by Johnson Controls. She retired from Johnson Controls (JCI) in her role as the Vice President and General Manager of a $4.5 billion global portfolio of HVAC product businesses with 20,000 employees in June 2018. Ms. Repplier received her Bachelor of Science degree in electrical engineering at the University of Pittsburgh. She later received her MBA from the University of Central Florida, where she also taught as an adjunct professor in the school of business. She is a certified Six Sigma Master Black Belt. In 2018, Ms. Repplier joined Stockholm-listed bearing and seal manufacturing company SKF as a director. In August 2019 she joined Triumph Group (NYSE: TGI) as a director. Ms. Repplier’s engineering background and extensive experience in operations, supply chain management, and six-sigma methodologies provide broad insights into operational planning and improvement opportunities. |

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| Gregory J. Lampert | Director
| Mr. Lampert is the Chief Executive Officer and President of Omni Cable Corporation, a distributor of specialty wire and cable, which he joined in February 2017. Prior to his executive position at Omni Cable Corporation, he was Chief Executive Officer of the Americas region of General Cable beginning in January 2013 and held the same position for the North America region beginning in 2008. Prior to that, he held various management positions at General Cable after joining the company in 1998. Prior to joining General Cable, he held engineering and commercial management positions with The Dow Chemical Company and Cintas Corporation. Mr. Lampert is a director of Omni Cable Corporation, as well as Xtek Corporation, a for-profit private company. Mr. Lampert has a Bachelor of Science degree in chemical engineering from the University of Cincinnati and his MBA from the University of Chicago with a concentration in Finance and Strategy. Mr. Lampert’s previous board experience and financial background as well as experience in managing sales organizations provide broad insights into capital planning and sales operations. |
Director since: 2014 Class I - re-election in 2021 |  |

| Holly A. Van Deursen | Director
| Ms. Van Deursen currently serves as an independent director on the boards of several public companies, including Albemarle Corporation (NYSE: ALB), Capstone Turbine Corporation (NASDAQ: CPST), and Synthomer, plc (LON: SYNT). She joined BP Amoco in 1989, a $250 billion oil, gas and energy company operating in North America, Asia and Europe. She served in various senior executive management roles for BP, plc. before retiring in 2005 as a member of the top-forty executive management team. Prior to 1989, she served in various engineering, manufacturing and product development roles for Dow Corning Corporation. Ms. Van Deursen received her Bachelor of Science degree in chemical engineering from the University of Kansas and her MBA from the University of Michigan. Ms. Van Deursen’s experience in executive roles and as a public company director provides the Board significant insights into board operations and governance, leadership, and international business. |
Director since: 2019 Class II - re-election in 2022 |  |

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

COMMUNICATING WITH THE BOARD

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

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

Director | Holly Van Deursen | Michele Holcomb | Bob Phillippy | Greg Lampert | Colleen Repplier | Greg Thaxton | Don Charron
Age | 61 | 52 | 60 | 53 | 59 | 59 | 56
Independent Director | l | l | l | l | l | l |
Committee: AC - Audit, CGC - Compensation & Governance, LID - Lead Independent Director | CGC | AC | AC | CGC Chair | CGC, LID | AC Chair |
Strengths, Skills, and Experience |  |  |  |  |  |  |
Public Company Experience | l | l | l | l | l | l | l
Active/Recently Retired Public Company CEO |  |  | l |  |  |  | l
Active/Recently Retired Public Company Executive |  | l | l | l | l | l | l
Electronics Industry or Related Experience |  |  |  | l | l | l | l
Medical Industry or Related Experience |  | l |  |  |  | l | l
Manufacturing Operations Experience | l |  |  | l | l | l | l
Cyber Security | l |  |  |  | l | l |
International Business Experience | l | l | l | l | l | l | l
Mergers and Acquisition Experience | l | l | l | l | l | l | l
Strategy Development | l | l | l | l | l | l | l
Marketing Expertise |  | l | l | l | l |  |
Supply Chain and Logistics Experience | l |  |  | l | l |  | l
Business Development/Growth | l | l | l | l | l |  | l
CFO Experience |  |  |  |  |  | l |
Public Company Board Experience | l |  | l | l | l | l | l
Capital Structure (Finance/Banking) Expertise | l |  | l |  |  | l |
Talent Development Experience | l | l | l | l | l | l | l
PR/Communication Experience | l | l |  | l |  | l |
Government Relations Experience | l | l | l |  |  |  |
Audit/Internal Control Experience |  |  | l |  |  | l |
Public Financial Reporting Experience |  |  | l | l | l | l |

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Director Independence
The Board consists of a majority of “independent directors,” as noted in the table above and as defined by the listing standards of The NASDAQ Stock Market LLC (“NASDAQ”), and the Board has determined that such independent directors have no relationship with the Company that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. The independent directors nominated for election are Mr. Phillippy and Mr. Thaxton. The independent directors meet in four regularly scheduled executive sessions and at other times as they deem appropriate.
How the Board Addresses Risk
The Board has an active role, as a whole, and also at the committee level, in overseeing management of the Company’s risks. The Board approaches the Company’s risk management process in an intelligent manner based on the fundamental recognition that risk management in any business enterprise requires an appropriate balance of two distinct aspects of risk:
•Value Preservation — recognizing and mitigating as much as possible the risk of potential for loss or harm to any element of our business.
•Value Creation — embracing the risks inherent in any business endeavor in order to reap the rewards of growth and profitability.
The Company has a formalized Enterprise Risk Management (ERM) process. It is based on a four-phase continuous approach consisting of program development, risk assessment and prioritization, risk treatment and risk validation, and monitoring. Risks are categorized as operational, strategic, compliance, and reporting. Risks in each of these categories were identified by key leadership interviews, surveys, and discussions. Those risks are then ranked and prioritized along the two continuums of “likelihood” and “impact.” A specific remediation strategy is then developed for the significant risks. All risks are continually monitored and validated.
The Board regularly reviews the ERM information and is also informed through Audit and Compensation and Governance Committee reports about financial and governance risks and mitigation in areas unique to the matters overseen by those committees.
Governance Philosophy
The Board is committed to good corporate governance. The Compensation and Governance Committee of the Board periodically reviews the Company’s overall governance structure and makes recommendations on particular governance issues or practices as warranted. For example, the Company brought proposals to, and obtained approvals from, the Share Owners at the 2019 Annual Meeting to eliminate the supermajority voting requirement to amend the Articles of Incorporation and provide for majority voting in uncontested director elections.
Hedging Policy
Kimball Electronics considers it improper and inappropriate for any director or executive officer to engage in short-term or speculative transactions in Company stock or debt. Such activities may put the personal gain of the individual in conflict with the best interests of the Company and its Share Owners, may create the appearance that the individual is trading based on material non-public information, is focused on short-term performance at the expense of long-term objectives, and/or be a potential violation of the law. Therefore, Kimball Electronics has adopted a policy prohibiting such transactions by directors and executive officers, including short sales, hedging transactions, publicly traded options, margin accounts, and pledges.
Board Leadership Structure
The Board believes that we best serve our Share Owners if the Board retains flexibility to decide what leadership structure works best for us under our current facts and in our current circumstances. Currently, the Board combines the roles of Chairman of the Board and Chief Executive Officer and, accordingly, maintains a separate position of Lead Independent Director. Our CEO has primary responsibility for our day-to-day leadership and strategic direction, and our Lead Independent Director facilitates oversight of management, promotes communication among management and between management and the Board, presides over meetings of the independent directors, and helps to set and maintain Board culture. We believe that combining the Chairman and CEO roles at this time aligns the Board and management on key strategy and Board operations issues. In addition, our combined Chairman/CEO has multiple, in-depth perspectives on and knowledge of our markets and operations, and can assist the Board in quickly enacting corporate initiatives. Our unified role ensures strong, central leadership, increases efficiency, and provides the Board with superior knowledge and timely information about our strengths and weaknesses and the issues we need to address moving forward.
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Board Classification
The Board has concluded that a three-tiered classified board is the appropriate governance structure for the Company and in the best interests of our Share Owners for the following reasons:
•Independence - Outside Board members can be more direct and independent of Company management knowing they have at least a three-year term to serve.
•Stability and Continuity - The Company’s Board can better perform its oversight responsibilities with seasoned Board members with perspective on the Company’s markets, operations, and long-term strategies that is provided by experience gained with a multi-year tenure. Annual elections risk the potential instability of election of a very inexperienced Board.
•Long-Term Focus - As a public company, the Board’s primary focus is on the long-term best interests of our Share Owners. This includes oversight of the long-term strategic vision of the Company. Effective execution of that vision is enabled by a three-year term.
•Share Owner Accountability - Our classified Board has at least two directors who stand for election each year, and the Board feels this promotes Share Owner accountability because the Company’s Board has the primary fiduciary duty and is fully accountable to oversee the Company in the best interests of all Share Owners. In addition, the Board believes the Company’s accountability to long-term Share Owners are well served by a number of governance principles already in effect in the Company, including highly-qualified, independent directors, board refreshment, tenure and retirement age policies, a strong lead independent director, and diversity in addition to say on pay measures, and a robust commitment to direct engagement with our Share Owners.
•Share Owner Value - The Board has reviewed and decided that there is well-reasoned academic research both for and against the proposition that the classification or declassification of a board has a correlation to increased Share Owner value. Therefore, the Board has judged this not to be a compelling reason for declassification.
•Statutory Requirement - As an Indiana company, Indiana corporate statutes mandate a classified board structure. While the Board is aware that some Indiana companies have “opted-out” of this requirement, it does reflect the judgment of the elected legislators of our state of incorporation as to an appropriate board structure.
Board and Committee Meetings
During fiscal year 2020, the Board met six times and each director then in office attended at least 75% of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Committees of the Board on which such director served during his or her tenure. The Company expects its directors to attend all Board and applicable Committee meetings, calls regarding specific initiatives or acquisitions, as well as the Annual Meeting of Share Owners. Your Board currently has two standing committees: the Audit Committee and the Compensation and Governance Committee.
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AUDIT COMMITTEE

Members | Gregory A. Thaxton (Chairperson), Robert J. Phillippy, and Michele M. Holcomb
Meetings in Fiscal 2020 | 9
Committee Accomplishments in 2020 | Reviewed Quarterly Earnings Releases and SEC Filings; Recommended the selection of Deloitte as auditors for fiscal 2020; Approved the fiscal 2020 audit scope and fees; Approved the fiscal 2020 internal audit plan; Conducted reviews of the Company’s cybersecurity program, lease accounting rule adoption, GDPR readiness, and enterprise risk management process.
Responsibilities of the Committee | The Audit Committee operates under, and has the responsibilities set forth in, a written charter, which has been approved by the Board and is reviewed and reassessed annually or as circumstances dictate by the Audit Committee. The Audit Committee modifies the written charter, as necessary, to comply with all regulatory requirements as or before they become effective. A copy of the Audit Committee charter is available on the Company’s website at: http://investors.kimballelectronics.com/static-files/0c5a90f0-edc7-4c38-8584-ab3cb03d1732 The Board has determined that Mr. Thaxton, Mr. Phillippy, and Ms. Holcomb are each “Audit Committee financial experts” as defined by the rules of the Securities and Exchange Commission (“SEC”). None of the Audit Committee members are salaried employees of the Company and, in the opinion of the Board, all meet the NASDAQ and SEC requirements with respect to independence and financial expertise.
Comments from the Committee | The Committee meets in regularly scheduled quarterly meetings. The Audit Committee is comfortable with the Company’s financial processes and controls. The Committee works effectively with the Company’s independent registered public accounting firm and meets regularly with them and management in executive sessions.

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COMPENSATION AND GOVERNANCE

Members | Gregory J. Lampert (Chairperson), Colleen C. Repplier, and Holly A. Van Deursen
Meetings in Fiscal 2020 | 7
Committee Accomplishments in 2020 | Approved and set executive officers’ and CEO compensation; Approved performance share grants and awards, profit sharing incentive bonus plan economic profit targets, and retirement plan company contribution; Reviewed and recommended slate of directors for election at 2020 Annual Share Owners Meeting, Board member independence, and director age and term limits; Engaged Aon as compensation consultants to provide insight on executive compensation programs.
Responsibilities of the Committee | The Compensation and Governance Committee’s responsibilities include advising the Board in matters of corporate governance, identification of individuals qualified to be board members, board member evaluations, orientation, and succession planning. A copy of the Compensation and Governance Committee’s charter is available on the Company’s website at: http://investors.kimballelectronics.com/static-files/0abc152b-426a-4788-a5c4-f6440213b242 The Compensation and Governance Committee identifies potential nominees for director based on specified objectives in terms of the Board composition, taking into account the need for broad and complementary experience and expertise. Nominees, whether recommended by the Compensation and Governance Committee or a Share Owner, will be evaluated on the basis of established Board member criteria, including, but not limited to those noted above in the “Director Qualifications” section of this Proxy Statement. Although it does not have a policy regarding diversity, the Compensation and Governance Committee does consider diversity of gender, race, national origin, education, and professional experience, which would enable a nominee to bring a varied set of skills and backgrounds to bear on the complicated issues which come before the Board.
| The Compensation and Governance Committee also will consider candidates recommended by Share Owners. A Share Owner who wishes to recommend a director candidate for consideration by the Compensation and Governance Committee should send such recommendation to the Secretary of the Company at 1205 Kimball Blvd., Jasper, Indiana 47546, who will forward it to the Compensation and Governance Committee. Any such recommendation should include a description of the candidate’s qualifications for board service, the candidate’s written consent to be considered for nomination and to serve if nominated and elected, and addresses and telephone numbers for contacting the Share Owner and the candidate for more information. A Share Owner who wishes to nominate an individual as a director candidate at the Annual Meeting of Share Owners, rather than recommend the individual to the Compensation and Governance Committee as a nominee, must comply with the advance notice requirements mandated by the Company’s By-Laws and further explained in this Proxy Statement under “Submission of Nominations and Proposals.”
| The Committee’s responsibilities also include making all determinations with respect to the compensation of the Chairman and CEO, reviewing and approving the compensation of all other executive officers in consultation with the CEO, approving awards under stock incentive plans, reviewing and approving the Company’s contribution to its defined contribution retirement plan, and approving targets, certification of target achievement, and authorization of payments under the Company’s profit sharing incentive bonus plan. See “Compensation Discussion and Analysis — Compensation Process” for a description of the role of executive officers and compensation consultants in setting compensation for executive officers. The Committee also regularly reviews corporate governance practices, evaluates their applicability to Company objectives, and strives to continuously improve the Company’s governance practices. Each of the members of the Compensation and Governance Committee is “independent” as such term for compensation committee members is defined in the listing standards of NASDAQ, each is a “Non-Employee Director” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and each is an “Outside Director” as defined by the regulations under Section 162(m) of the Internal Revenue Code.
Comments from the Committee | The Committee meets regularly in executive sessions. The Committee continues to evaluate and adjust as appropriate Board, CEO, and Executive Officer compensation programs. The Committee is active in review and evaluation of evolving good corporate governance practices as evidenced by its consideration and recommendation of proposals for governance changes presented to, and approved by, Share Owners in 2019. The Committee addressed issues and redesigned components of the Company’s profit sharing incentive bonus plan and long-term incentive stock plan to increase individual accountability and align better with market practices.

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Compensation and Governance Committee Interlocks and Insider Participation
None of the Compensation and Governance Committee members has ever been employed as an officer or employee of Kimball Electronics or any of its subsidiaries, and none of the Compensation and Governance Committee members during fiscal year 2020 was involved in a relationship requiring disclosure under Item 404 of Regulation S-K. None of our executive officers serves, or during fiscal year 2020 served, on a board of directors or compensation committee of a company that has an executive officer serving on our Board or the Compensation and Governance Committee.
Director Compensation
Fiscal Year 2020 Compensation to Non-Employee Directors
Directors’ compensation is set by the Board. The level of compensation is guided by the following goals: compensation should fairly pay directors for work required in a company of Kimball Electronics’ size and scope; and the structure of the compensation should be simple, transparent, market-competitive, easy to understand, and aligned with Share Owner interests.
All non-employee directors of your Company received an annual retainer fee of $75,000 plus a $65,000 equity retainer for service in fiscal year 2020. Additionally, the Lead Independent Director of the Board, the Chairperson of the Audit Committee of the Board, and the Chairperson of the Compensation and Governance Committee of the Board each received an additional $10,000 annual retainer fee.
Directors were able to elect to receive all or a portion of their annual, Lead Independent Director, or Chairperson retainers in Common Stock. The $65,000 of annual equity retainer fees are to be paid in shares of the Company’s Common Stock. The Board-approved Non-Employee Directors Stock Compensation Deferral Plan (the “Deferral Plan”) allows non-employee directors to elect to defer all, or a portion of, their stock retainer fees until termination of service from the Board. Shares of Common Stock will be issued either under the Company’s 2014 Stock Option and Incentive Plan or the Non-Employee Directors Stock Compensation Deferral Plan. Directors are also reimbursed for reasonable travel, continuing education, and other expenses incurred in connection with Board and Committee meeting attendance.
The following Non-Employee Director Compensation Table shows the compensation paid to each non-employee director during fiscal year 2020. Donald D. Charron, Chairman and CEO, is a Director of the Company but does not receive compensation for his services as a Director.
Non-Employee Director Compensation in Fiscal Year 2020

| Fees Earned or | Stock | Total
Name | Paid in Cash ($) (1) | Awards ($) (2) | ($)
(a) | (b) | (c) | (h)
Michele M. Holcomb | $ | 75,000 |  | $ | 65,000 |  | $ | 140,000 |
Gregory J. Lampert | $ | 85,000 |  | $ | 65,000 |  | $ | 150,000 |
Robert J. Phillippy | $ | 75,000 |  | $ | 65,000 |  | $ | 140,000 |
Colleen C. Repplier | $ | 85,000 |  | $ | 65,000 |  | $ | 150,000 |
Gregory A. Thaxton | $ | 85,000 |  | $ | 65,000 |  | $ | 150,000 |
Holly A. Van Deursen | $ | 75,000 |  | $ | 65,013 |  | $ | 140,013 |

(1)Represents fees paid during fiscal year 2020 and includes the following number of shares for which the director elected to receive Common Stock in lieu of cash: Mr. Lampert 4,913, Mr. Phillippy 4,335, and Ms. Repplier 4,913. These shares were valued using the per share price of $17.30, the market value for such shares on November 15, 2019, and each of these directors elected to defer receipt of all their above shares under the Deferral Plan.
(2)Represents the value of the equity retainer awards granted during the year which amounted to 3,758 shares for each non-employee director using the per share price of $17.30, the market value for such shares on November 15, 2019. Ms. Holcomb, Mr. Lampert, Mr. Phillippy, Ms. Repplier, and Mr. Thaxton elected to have all their fiscal year 2020 equity retainer awards deferred under the Deferral Plan.

REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS

On an annual basis, each director and executive officer is obligated to complete a Director and Officer Questionnaire that requires disclosure of any transactions (with an aggregate value of at least $120,000) with the Company in which the director or executive officer or any member of his or her immediate family has an interest. In addition, any transactions with related persons or other circumstances that present potential conflicts of interest are to be reported to the Company’s compliance officer either directly or through an anonymous reporting service. When reported, the transactions or other conflicts are reviewed and approved by the Compensation and Governance Committee, if in the best interests of our Share Owners to do so. Neither of the Audit Committee, the Compensation and Governance Committee, nor the Board has formal written policies regarding its review and approval of these types of transactions.
There were no such transactions or conflicts reported during fiscal year 2020.
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REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board is responsible for providing independent, objective oversight of the Company’s accounting functions, internal control over financial reporting, and financial reporting processes. During the fiscal year ended June 30, 2020, the Audit Committee was comprised of at least three directors as required per the Audit Committee Charter. All members of the Audit Committee meet the independence and experience requirements of The NASDAQ Stock Market LLC and the Securities and Exchange Commission.
Management is responsible for the Company’s accounting functions, internal control over financial reporting, and financial reporting processes. The Company’s independent registered public accounting firm, Deloitte & Touche LLP (“Deloitte”), is responsible for auditing and expressing an opinion in accordance with auditing standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) on the Company’s consolidated financial statements.
In connection with these responsibilities, the Audit Committee met with management and Deloitte to review and discuss the June 30, 2020 financial statements including a discussion of the acceptability and quality of the accounting principles, the reasonableness of critical accounting policies, the clarity of disclosures in the financial statements, and such other matters as are required to be discussed with the Audit Committee under standards established by the Securities and Exchange Commission and the PCAOB. The Audit Committee also has received the written disclosures and the letter from Deloitte in accordance with the applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence, and has discussed with Deloitte its independence from the Company and management. In addition, the Audit Committee considered whether Deloitte’s independence would be jeopardized by providing non-audit services to the Company.
The Audit Committee reviewed the overall scope of the audits performed by the internal auditor and Deloitte. The Audit Committee met with the internal auditor and Deloitte, with and without management present, to discuss the results of the audits of the Company’s consolidated financial statements and the overall quality of the Company’s financial reporting.
It is not the duty of the Audit Committee to perform audits or to determine that the Company’s financial statements are complete and accurate and in accordance with generally accepted accounting principles; that is the responsibility of management and Deloitte. Members of the Audit Committee rely without independent verification on the information provided to them and on the representations made by management and Deloitte. Based on the Audit Committee’s discussions with management and Deloitte, and the Audit Committee’s review of the representations of management and Deloitte, the Audit Committee recommended to the Board, and the Board approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020, filed with the Securities and Exchange Commission.
Respectfully submitted,
THE AUDIT COMMITTEE
Gregory A. Thaxton (Chairperson)
Robert J. Phillippy
Michele M. Holcomb
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SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates (collectively the “Deloitte Entities”) audited the Company’s financial statements for the fiscal year ended June 30, 2020.
Representatives of the Deloitte Entities will be present at the Annual Meeting and will have the opportunity to make a statement and will be available to respond to appropriate questions.
Independent Registered Public Accounting Firm Fees

| Deloitte Entities |  |  |  |
| 2020 |  | 2019 |  |
Audit Fees(a) | $ | 1,241,780 |  |  | $ | 1,212,808 |  |  |
Audit-Related Fees(b) | 6,218 |  |  | 6,891 |  |  |
Tax Fees(c) | 17,522 |  |  | 94,001 |  |  |
All Other Fees(d) | — |  |  | 13,277 |  |  |
Total | $ | 1,265,520 |  |  | $ | 1,326,977 |  |  |

(a)Audit fees include fees and out of pocket expenses paid or expected to be paid for the audit of the annual financial statements and for the statutory audits of international subsidiaries.
(b)Audit-related fees consist primarily of fees paid or expected to be paid for the audit of various benefit plans.
(c)Tax Fees consist of fees paid or expected to be paid for tax compliance and related tax services.
(d)Other Fees consist of fees paid or expected to be paid for various customs reporting.
Consideration of Services Provided by the Independent Registered Public Accounting Firm
The Audit Committee approves all audit and non-audit services provided by the independent registered public accounting firm. The Audit Committee has established an approval process for services provided by the independent registered public accounting firm which complies with the requirements of the Sarbanes-Oxley Act of 2002. A description of the approval process is attached to this Proxy Statement as Appendix A. The Audit Committee has considered whether all services provided are compatible with maintaining the independent registered public accounting firm’s independence in accordance with this approval process and has determined that such services are compatible.
Ratification of Selection of Independent Registered Public Accounting Firm
The Audit Committee has selected the Deloitte Entities to be the Company’s independent registered public accounting firm for the fiscal year ended June 30, 2021. They were selected based on:
• performance on past audits, including the expertise of the engagement team;
• experience, client service, and responsiveness;
• leadership, management structure, and ethical culture; and
• the amount of fees charged in relation to scope of work performed.
Ratification is not required by law or the Company’s By-Laws. The Company is submitting the selection of the Deloitte Entities to the owners of our Common Stock for ratification as a matter of good corporate practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our Share Owners.
The Board of Directors recommends a vote “FOR” ratification of the selection of the Deloitte Entities as the Company’s independent registered public accounting firm.
17

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary
The Compensation and Governance Committee (the “Committee”) of our Board, which is responsible for overseeing the compensation program for all executive officers, plays a key role in designing and administering the Company’s executive compensation program. All principal elements of compensation paid to our executive officers are subject to approval by the Committee. The report of the Committee follows this Compensation Discussion and Analysis.
This Compensation Discussion and Analysis provides detailed information regarding our compensation programs and decisions for our chief executive officer, chief financial officer, and the three other most highly compensated executive officers, based on their compensation for the fiscal year ended June 30, 2020. These officers are referred to herein as our “named executive officers,” or “NEOs.” Your Company’s NEOs for fiscal year 2020 are: Donald D. Charron, Chairman of the Board and Chief Executive Officer; John H. Kahle, Vice President, General Counsel, Chief Compliance Officer, Secretary; Steven T. Korn, Vice President, North American Operations; Michael K. Sergesketter, Vice President, Chief Financial Officer; and Christopher J. Thyen, Vice President, New Platforms.
This Compensation Discussion and Analysis is intended to supplement the more detailed information concerning executive compensation that appears in the “Executive Compensation” section below. Our goal is to provide our Share Owners and the investing public with a better understanding of your Company’s executive compensation practices and the decisions made concerning the compensation payable to our executive officers, including our NEOs.
Advisory Vote on Executive Compensation
At our 2019 Annual Meeting, non-binding, advisory Share Owner voting was held to approve the compensation paid to our NEOs, commonly referred to as a say on pay vote. A substantial majority of votes cast voted in favor of the executive compensation program described in the Company’s 2019 proxy statement. As a result, the Committee and the Board determined that no changes needed to be made to our executive compensation policies and procedures as a result of the 2019 vote, and the Committee and the Board continued to apply the same general principles in determining the amounts and types of executive compensation. Additionally, at our 2018 Annual Meeting, a majority of our Share Owners voted in favor of the non-binding, advisory vote on our executive compensation being held every year. Taking into account the preference of our Share Owners, the Board determined that this frequency was appropriate and was consistent with our approach to executive compensation. Accordingly, we are holding a non-binding, advisory vote on executive compensation at our 2020 Annual Meeting and will continue to do so in subsequent years.
Compensation Philosophy
Your Company applies a consistent philosophy to compensation for all employees, including management. The goal is to create long-term Share Owner value by:
1.Rewarding Performance. All parts of compensation are designed to reward executive performance. Base salary is designed to reward annual achievements, demonstrated leadership abilities, and management experience and effectiveness. All other elements of compensation focus on motivating the executive to grow sales and achieve superior financial results.
2.Aligning with Share Owners’ Interest. Your Company’s objective is to align the interests of the executives with our Share Owners by strongly linking compensation to Company financial performance. Improved Company performance leads to improved stock prices and increased Share Owner value.
3.Retaining Executive Talent. Your Company’s objective is to retain our executives by using key elements of compensation that provide better opportunity for financial rewards when compared to other similar professional opportunities.
4.Strengthening Collaboration. Your Company’s objective is to strengthen collaboration by allocating a portion of employees’ compensation as a variable incentive based on results achieved together as a team.
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Components of Compensation
Your Company’s compensation program is comprised of the following primary components: (i) annual cash compensation, which includes base salary and performance-based cash incentive compensation, and (ii) long-term performance-based stock incentive compensation, each of which is described below.

Compensation Component |  | Purpose |  | Link to Compensation Philosophy
Annual base salary |  | To provide an appropriate level of fixed compensation that will promote executive recruitment and retention based on business responsibilities, personal performance, and leadership qualities. |  | Rewards performance. Retains executive talent.
Performance-based cash incentive compensation |  | Variable component used to incentivize, motivate, and link compensation with the Company’s financial success. |  | Rewards performance. Aligns interests with Share Owners’ interests. Retains executive talent. Strengthens collaboration.
Long-term performance-based stock incentive compensation |  | To motivate officers and key managers to focus on long-term financial performance of the Company. |  | Rewards performance. Aligns interests with Share Owners’ interests. Retains executive talent.
Additional discretionary cash and/or stock compensation |  | To recognize individual achievement in special situations. |  | Rewards performance. Retains executive talent. Strengthens collaboration.

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Total Direct Compensation
The following chart illustrates the allocation of fiscal year 2020 realized compensation for each NEO among each of the major compensation components.
The amounts in the above graph represent actual compensation realized in fiscal year 2020 as follows:
•Performance-Based Stock is the actual value of long-term performance shares earned during fiscal year 2020, based on the number of shares earned as calculated under the profit sharing incentive bonus plan and achievement of sales growth goals multiplied by the average of the high and low price of the Company’s Common Stock of $13.57 on August 24, 2020.
•Performance-Based Cash is the actual amount of cash incentive compensation earned during fiscal year 2020, pursuant to the Company’s profit sharing incentive bonus plan.
•Non-Performance-Based Compensation consists of base salary received in fiscal year 2020 and all other components of compensation that are valued the same as reported in the Summary Compensation Table that appears on page 29.
In making executive compensation decisions, the Committee does not have a fixed compensation allocation methodology but utilizes competitive benchmarks to determine market level allocations of fixed, variable, and stock compensation for each executive and NEO role, while also considering individual performance.
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Compensation Decisions
The annual compensation of our NEOs is based on the process described below in the “Compensation Process” section of this Compensation Discussion and Analysis and consists of components as delineated in the “Components of Compensation” section. The Committee does not utilize any specific target or formula for the NEOs’ total compensation.
The Committee took the following actions during fiscal year 2020 and early fiscal year 2021 in regards to NEO compensation.

Date |  | Action Taken
July 2019 |  | • Awarded long-term performance share opportunities for fiscal year 2020. • Certified fiscal year 2019 economic profit results and sales growth attainment, resulting in issuance of long-term performance shares and profit sharing incentive bonus plan payments.
May 2020 |  | • Reviewed and approved compensation of NEOs.
July 2020 |  | • Approved the award of long-term performance share opportunities for fiscal year 2021. • Certified fiscal year 2020 economic profit results resulting in issuance of long-term performance shares and profit sharing incentive bonus plan payments.

Annual Cash Compensation
1. Base Salary. Base salaries for our NEOs are based on the scope of their responsibilities, their performance, the period over which they have performed those responsibilities, and other subjective factors as noted below in the “Compensation Process” section of this Compensation Discussion and Analysis. Decisions regarding salary increases or decreases take into account the executive’s effort, performance, local demand, current salary, and market benchmarks. Base salaries of the Chief Executive Officer (“CEO”) and Chairman of the Board (“Chairman”) are reviewed as appropriate by the Committee, and the Committee makes adjustments as it deems necessary. Base salaries of our other executive officers are reviewed by the CEO on an annual basis. Adjustments to the base salaries of our other executive officers are initiated by the CEO and approved by the Committee. In fiscal year 2021, Mr. Korn’s base salary was increased significantly due to a promotion to President, Global EMS Operations, with expanded global responsibilities. Annualized base salaries in effect as of the date of this Proxy Statement and the percentage change from annualized base salaries in effect as of the date of last year’s proxy statement, for each of our NEOs were as follows:

Named Executive Officer |  | Annualized Base Salary |  | % Increase
Donald D. Charron |  | $ | 709,752 |  |  | — | %
John H. Kahle |  | $ | 397,800 |  |  | — | %
Steven T. Korn |  | $ | 375,000 |  |  | 16.0 | %
Michael K. Sergesketter |  | $ | 331,932 |  |  | 3.0 | %
Christopher J. Thyen |  | $ | 309,828 |  |  | 2.5 | %

2. Cash Incentive Compensation. Executive officers and full-time salaried employees are eligible to participate in the profit sharing incentive bonus plan which provides participants with an opportunity to receive a cash payment if certain profitability levels (tiers) for the fiscal year are achieved. The profit sharing incentive bonus plan measures economic profit at two levels within the Company: (1) worldwide for Company-wide performance (“Worldwide”); and (2) at a business unit level for the performance of designated operations within the Company (“Business Unit”).
The goal of the profit sharing incentive bonus plan is to link compensation with the long-term financial success of the Company and Share Owner return. A key aspect of the Plan to accomplish this goal includes the fact that substantially all full-time salaried employees participate in the same profit sharing incentive bonus plan which puts all management employees in the same position to encourage growth of economic profit. Substantially all full-time employees have some portion of their compensation “at-risk,” and the variable incentive portion of pay is linked to financial results. The total of base salary and variable incentive compensation approximates a market value for a role. The variable incentive represents a significant part of a Plan participant’s total compensation, thus putting more compensation at-risk and giving them greater incentive to improve economic profit and increase their total compensation.
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The profit sharing incentive bonus plan establishes potential cash incentive amounts as a range of percentages of the participant’s salary, with the payout percentage increasing with higher levels of profitability. The profit sharing incentive bonus plan also establishes different payout percentage ranges across several participant categories, setting higher payout percentage ranges for participants who, by virtue of their responsibilities, are expected to have a greater effect on the Company’s profitability. The following matrix summarizes the cash incentive payout percentages at each economic profit tier for the various participant categories:

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

For a particular fiscal year, the Committee sets each tier to a specific amount of economic profit. Economic profit is equal to the amount of net income less the cost of capital. The cost of capital represents the economic cost of a reasonable return on capital that is used in the business. New capital expenditures are excluded in computing the cost of capital for an appropriate period of time (currently 12 months) to encourage needed capital investments. Separate economic profit tiers are set for the Worldwide and Business Unit plans. The economic profit tiers are set by the Committee after considering many factors, including comparisons to economic performance of numerous public companies. Net income must be earned before bonus is earned. The economic profit tiers are established so that performance attained between the tier 4 and tier 3 levels approximates the median economic profitability performance of these public companies. Also, this payout approximates market value for an employee’s role. According to the Company’s compensation philosophy, the Company is comfortable paying below market when results are low, and over market when results exceed expected standards. Economic profit performance above tier 3 should result in a participant exceeding market value, and economic profit performance below tier 4 should result in total compensation being below market value. Achievement of a 100% cash incentive payout for executive officers is very difficult because the profit sharing incentive bonus plan is designed to pay maximum cash incentives only if the Company achieves economic profitability near the top quartile of these public companies. The Committee approves the economic profit tiers within 90 days after the commencement of each fiscal year, usually in late July or early August. The Committee may, within such 90-day time period, make adjustments for non-operating income and loss and other profit-computation elements as it deems appropriate to provide suitable incentives for eligible employees. While the Committee may make adjustments beyond the 90-day period, any such adjustments will not be applicable to our NEOs.
Our NEOs may earn cash incentives from zero to 100% of base salary, except for the CEO, whose cash incentives can range from zero to 110% of base salary. The Committee has set the target cash incentive for our NEOs at approximately 40% (tier 4 level) which is a cash incentive payout reflecting our desired level of compensation at risk. During fiscal year 2020, all NEOs participated at the Worldwide level. For the past three years, cash incentive payouts for our NEOs averaged 47%, except for the CEO, whose cash incentive payouts averaged 50%.
At the end of each fiscal year, but before cash incentives under the profit sharing incentive bonus plan may be paid, the Committee certifies the actual economic profit that was achieved and approves the payment of the cash incentive. The Committee does not have the discretion to increase, but can decrease, the amount of any cash incentive for NEOs under the profit sharing incentive bonus plan. There were no decreases in fiscal year 2020.
Cash incentives earned under the profit sharing incentive bonus plan for a particular fiscal year are accrued annually and paid in multiple installments over the succeeding fiscal year, unless local country requirements dictate otherwise. In the United States, 50% of the accrued bonus is payable in August and 12.5% is payable in each of the following months of September, January, April, and June. This schedule varies in the Company’s global locations based on local pay practices and regulations. Cash incentives totaling less than $2,000 are paid in a lump sum in August. Except for provisions relating to retirement, death, permanent disability, and certain other circumstances described in a participant’s employment agreement, participants must be actively employed on each payment date to be eligible to receive any unpaid installments. If a participant’s termination of employment is caused by retirement, death, disability, or certain other circumstances described in a participant’s employment agreement, the participant (or beneficiary, in the event of the participant’s death) will be entitled to receive all cash incentive payments for the previous fiscal year and a pro rata share for the current fiscal year, all to be paid in full within 2½ months after the end of the Company’s fiscal year.
Based on the fiscal year 2020 economic profit results, our NEOs will each receive a payout of 30%, except for the CEO, who will receive 40%, of their fiscal year 2020 base salary under the profit sharing incentive bonus plan.
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Stock Compensation
The Company’s 2014 Stock Option and Incentive Plan (the “2014 Plan”) permits a variety of stock incentive benefits consisting of restricted stock, restricted share units, unrestricted share grants, incentive stock options, non-qualified stock options, stock appreciation rights, performance shares, and performance units. The Committee granted performance shares during fiscal year 2020. The Committee’s view is that performance shares represent one of the more effective forms of stock incentive compensation available under the 2014 Plan by tying compensation directly to the economic profitability of the Company.
Performance Shares
Performance shares consist of a long-term award with one-third (1/3) of the award vesting annually over the succeeding three-year period. The performance share awards set forth the maximum number of shares of your Company’s stock which the participant is eligible to receive if the applicable profitability levels and sales growth goals for the fiscal year have been achieved. The maximum number of shares awarded to each of our NEOs is determined by the Committee based on the relative level of responsibilities of the NEOs and within an overall projected total cost of the awards based on anticipated financial performance for the upcoming fiscal year, as well as the other subjective factors noted below in the “Compensation Process” section of this Compensation Discussion and Analysis.
Based on our profitability levels and sales growth goal achievement, our NEOs have earned 100% of the shares awarded for each of the past three years.
The long-term performance share awards act as an incentive for longer term stock price appreciation by driving higher profits, which creates higher cash incentive percentages and greater payouts to the participants. The NEOs have no voting or dividend rights with respect to the performance shares until earned.
Based on the fiscal year 2020 economic profit results, we issued our NEOs the following shares applicable to fiscal year 2020 performance under the 2014 Plan:

Named Executive Officer |  |  |  | FY 2020 LTPS Grant (Shares Issued) (1)
Donald D. Charron |  |  |  | 53,288
John H. Kahle |  |  |  | 8,930
Steven T. Korn |  |  |  | 10,774
Michael K. Sergesketter |  |  |  | 10,695
Christopher J. Thyen |  |  |  | 10,077

(1) Shares have not been reduced by the number of shares withheld to satisfy tax withholding obligations.
The “Stock Awards” column of the Summary Compensation Table on page 29 includes the targeted value of performance shares granted during fiscal year 2020, estimated based on an assumed payout at a target (Tier 4) level of our profit sharing incentive bonus plan, achievement of the sales growth attainment component, and using the share price as of the date granted, which was $14.39 as reported by NASDAQ on August 19, 2019. The performance share awards granted in August 2020 will be earned based on fiscal year 2021 performance and therefore are not included in the table below.
The table below compares that targeted value with the actual value of performance shares earned during fiscal year 2020 as set forth above, based on the number of shares earned as calculated under the profit sharing incentive bonus plan and the average of the high and low price of the Company’s Common Stock as reported by NASDAQ for the August 24, 2020 vesting date, which was $13.57.
We are providing this information to give additional context to the fiscal year 2020 compensation of our NEOs by showing the impact that our actual fiscal year 2020 financial performance and change in share price had on the value of realized compensation.

| Performance Shares |  |  |  |
Named Executive Officer | Targeted Value for August 2019 Awards |  | Realized (Earned and Vested Value) |  | Realized Value as a Percentage of Targeted Value
Donald D. Charron | $ | 766,814 |  |  | $ | 722,852 |  |  | 94.3 | %
John H. Kahle | $ | 128,503 |  |  | $ | 121,135 |  |  | 94.3 | %
Steven T. Korn | $ | 155,038 |  |  | $ | 146,149 |  |  | 94.3 | %
Michael K. Sergesketter | $ | 153,901 |  |  | $ | 145,078 |  |  | 94.3 | %
Christopher J. Thyen | $ | 145,008 |  |  | $ | 136,695 |  |  | 94.3 | %

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The maximum number of performance shares granted in August 2020 for the fiscal year 2021 performance period to each of our NEOs under the 2014 Plan was as follows:

Named Executive Officer |  |  |  | FY 2021 LTPS Award (Maximum # of Shares)
Donald D. Charron |  |  |  | 71,935 |
John H. Kahle |  |  |  | 10,125 |
Steven T. Korn |  |  |  | 16,377 |
Michael K. Sergesketter |  |  |  | 12,515 |
Christopher J. Thyen |  |  |  | 11,732 |

Other Compensation and Employee Benefits
Retirement Plan
Our NEOs participate in a defined contribution, participant-directed retirement plan in which all domestic employees are eligible to participate (the “Retirement Plan”). The Retirement Plan is intended to attract employees and promote employee retention by providing a long-term savings opportunity. The Retirement Plan provides for voluntary employee contributions as well as a discretionary annual Company contribution as determined by the Committee. The Committee considers Company profitability among other factors when determining the contribution. The total Company contribution is allocated based on the total eligible compensation of eligible participants. Each eligible participant’s Company contribution percentage is identical, including our NEOs. The Company’s contribution percentage for fiscal year 2020 was approximately 3% of eligible compensation, up to the annual compensation limit under Section 401(a) of the Internal Revenue Code. Participant contributions are fully vested immediately, and Company contributions are fully vested after five years of participation according to the following schedule. All NEOs are fully vested in the Retirement Plan as they have been participants for greater than five years.

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

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The Retirement Plan is fully funded, and participants may choose to invest their balances among any combination of the following investment options shown in the table below. The annual return of each fund for the fiscal year ended June 30, 2020 is included in the table below.

Fund Name | Asset Class | AATR (1 year) 7/1/19 - 6/30/20
JPMorgan Lg Cap Gr R6 | Domestic Stock - Large Growth | 20.53%
Small-Cap Index Fund Inst | Domestic Stock - Small Cap | -11.73%
Kimball Electronics | Company Stock | -28.86%
International Growth Adm | International Stock | 13.34%
Inst Index Fund Inst | Domestic Stock - Small Cap | -2.59%
Retirement Savings Trust III | Short Term Reserves | 1.17%
Prime Money Mkt Fund | Short Term Reserves | 0.51%
Inst Target Ret 2015 Fund | Balanced Funds (Stocks and Bonds) | 0.96%
Inst Target Ret 2020 Fund | Balanced Funds (Stocks and Bonds) | -0.37%
Inst Target Ret 2025 Fund | Balanced Funds (Stocks and Bonds) | -1.25%
Inst Target Ret 2030 Fund | Balanced Funds (Stocks and Bonds) | -2.11%
Inst Target Ret 2035 Fund | Balanced Funds (Stocks and Bonds) | -2.98%
Inst Target Ret 2040 Fund | Balanced Funds (Stocks and Bonds) | -3.86%
Inst Target Ret 2045 Fund | Balanced Funds (Stocks and Bonds) | -4.66%
Inst Target Ret 2050 Fund | Balanced Funds (Stocks and Bonds) | -4.65%
Inst Target Ret 2055 Fund | Balanced Funds (Stocks and Bonds) | -4.64%
Inst Target Ret 2060 Fund | Balanced Funds (Stocks and Bonds) | -4.63%
Inst Target Ret 2065 Fund | Balanced Funds (Stocks and Bonds) | -4.76%
Inflation-Protect Sec Adm | Bonds | 6.07%
Inst Target Ret Inc Fund | Balanced Funds (Stocks and Bonds) | 1.69%
Real Estate Index Admiral | Real Estate | -11.89%
Windsor II Fund Adm | Domestic Stock | -10.03%
Delaware Small Cap Core I | Domestic Stock - Small Cap | -12.42%
Met West Total Rt Bd Inst | Bonds | 6.58%
Total Bond Mkt Index Inst | Bonds | 6.36%
Total Intl Stock Ix Admiral | International Stock | -10.36%
AATR: Average annual total returns |  |

For those eligible employees who, under the 1986 Tax Reform Act, are deemed to be highly compensated, their individual Company contribution under the Retirement Plan is reduced. See the following “Nonqualified Deferred Compensation” section.
Nonqualified Deferred Compensation
For our NEOs, other executive officers, and other key employees who are deemed to be highly compensated under the 1986 Tax Reform Act, there is a fully-funded, nonqualified, Supplemental Employee Retirement Plan (“SERP”) under which we contribute to the account of each participant an amount equal to the reduction in their Company contribution under the Retirement Plan arising from the provisions of the 1986 Tax Reform Act. In addition, participants may voluntarily defer up to 50% of their eligible compensation under the SERP. A participant’s deferrals are fully vested. Company contributions are subject to the same vesting schedule as the Retirement Plan and are made within 2½ months after the end of the fiscal year. The Company’s contribution percentage for fiscal year 2020 was approximately 3% of eligible compensation in excess of the annual compensation limit under Section 401(a) of the Internal Revenue Code. Investment options are the same as those under the Retirement Plan except for the exclusion of the Retirement Savings Trust III and the Company Stock Fund. Payments of a participant’s elective deferrals and Company contributions are made as elected by the participant in lump sum or in installment payments over a period of 5 or 10 years commencing upon retirement or termination of employment, whichever occurs first. These amounts may be paid earlier in the event of death of the participant or an unforeseen emergency affecting the participant as determined by the committee appointed to administer the SERP. The SERP is intended to promote retention by providing a long-term savings opportunity on a tax-efficient basis. The assets of the SERP are held in a grantor trust in what is commonly referred to as a “rabbi trust” arrangement. This means that the assets of the SERP are subject to the claims of the Company’s general creditors in the event of the Company’s insolvency. For more information about amounts deferred by the NEOs, see the Nonqualified Deferred Compensation Table in the “Executive Compensation — Nonqualified Deferred Compensation” section in this Proxy Statement.
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Other Compensation
The Company provides our NEOs with other benefits, which the Committee believes are reasonable, competitive, and consistent with the Company’s overall compensation program directives. They are designed to promote the executives’ physical and mental well-being in order to help them function more effectively in their respective positions.
These benefits and the rationale for providing each are as follows:

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

No loans of Company funds have ever been made to any executive officer for any purpose. The exact amounts received from these benefits are not predetermined.
Employment and Severance Agreements
The Company has entered into written employment agreements with each of the NEOs. These employment agreements were intended to bring the Company more in line with competitive practices within the industries in which it operates and were designed to enhance the retention of executives and protect the interests of the Company by way of covenants not to compete. The agreements do provide for acceleration of certain benefits and payment of severance in certain circumstances, as described in the section entitled “Executive Compensation — Employment Agreements with NEOs and Potential Payments Upon Termination or Change-In-Control” section of this Proxy Statement.
Compensation Process
The Committee sets the Chairman and CEO’s compensation and approves the compensation of the other executive officers in consultation with the Chairman and CEO who directly supervises those executive officers throughout the year. The Committee gives significant consideration to the recommendation of the Chairman and CEO, but the final compensation decisions affecting our executive officers are within the Committee’s discretion. No other roles are taken by the executive officers in setting their compensation, except for discussion of their individual performance with the Chairman and CEO and Vice President of Human Resources. During fiscal year 2020, a new process was implemented to set individual performance goals for each executive with the accomplishment of those goals tied to the payout of a portion of the amounts earned under the Company’s profit sharing incentive bonus plan. This process will be effective for the fiscal year 2021. In addition, executives are given performance feedback through a survey of manager, peer and subordinates by a third party human resources consultant, which results in a personal development plan reviewed and approved by the Chairman and CEO and Vice President of Human Resources.
Judgment is used in making compensation decisions. Flexibility is critical in the assessment process to allow for adjustments due to new business conditions and to adjust for the evolving business environment. There is no predetermined formula for allocating compensation between cash and non-cash, current and long-term, or fixed and variable elements.
Key considerations affecting the determination of executive compensation include:
1.Responsibilities — the scope and breadth of the duties and level of responsibility undertaken.
2.Leadership — demonstrated ability to lead an organization.
3.Performance — with an emphasis on consistent, sustained performance.
4.Potential — demonstrated capacity to grow into more responsible leadership positions.
5.Execution of Strategy — record of getting things done according to plans.
6.Personal Development — demonstrated willingness to learn and grow professional and leadership skills.
7.Promotion of Company Culture and Values — demonstrated commitment to modeling of Company Mission and Guiding Principles and ethical behavior.
8.Company Results — demonstrated teamwork and support of Company goals and performance.
9.Benchmarking — comparison of executive compensation to industry or other relevant compensation benchmarks.
10.Retention — compensation at sufficient levels to retain talented executives.
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During fiscal year 2020, the Committee utilized a third-party compensation consulting firm, Aon Consulting, in setting executive compensation. Aon Consulting was engaged directly by the Committee to perform a benchmarking of total direct compensation levels for key executive leaders and advise on peer incentive pay practices. The data included information on base pay, stock awards, and other forms of compensation awarded at the following comparable benchmarked companies:

| 1. | TTM Technologies, Inc. | 6. | Littlefuse, Inc. | 10. | Key Tronic Corp.
| 2. | Plexus Corp. | 7. | OSI Systems, Inc. | 11. | Bel Fuse, Inc.
| 3. | Trimble, Inc. | 8. | Knowles Corp. | 12. | Novanta, Inc.
| 4. | Benchmark Electronics, Inc. | 9. | Methode Electronics, Inc. | 13. | CTS Corp.
| 5. | IPG Photonics Corp. |  |  |  |

This information and recommendations from Aon Consulting were used by the Committee when making compensation decisions to ensure that the types and amounts of executive compensation were reasonable and competitive.
Tax and Accounting Considerations
Section 162(m)
The Committee takes into account the tax and accounting treatment of executive compensation arrangements when structuring our executive compensation program. One of those considerations is Section 162(m) of the Internal Revenue Code, which sets a limit of $1 million on the amount the Company can deduct for compensation paid to our “covered employees.” Historically, compensation meeting the requirements of “qualified performance-based compensation” under Section 162(m) did not count toward the $1 million limit. However, the Tax Cuts and Jobs Act (“Tax Reform”), which was enacted on December 22, 2017, made a number of changes to Section 162(m), generally effective for taxable (fiscal) years beginning after December 31, 2017, including the repeal of the “qualified performance-based compensation” exemption, subject to certain transition rules (which apply to remuneration provided pursuant to written binding contracts which were in effect on November 2, 2017 and which are not subsequently modified in any material respect). Tax Reform also expanded the definition of “covered employees” by including both the chief financial officer and certain former named executive officers as “covered employees.”
Our general philosophy has been to attempt to qualify compensation for tax deductibility under Section 162(m) of the Internal Revenue Code, wherever we deem appropriate, recognizing that, under certain circumstances, the limitations may be exceeded. Historically, treatment as “qualified performance-based compensation” has been sought to the extent practicable and only to the extent that it is consistent with our overall compensation objectives. However, there can be no guarantee that any compensation paid to our “covered employees” in excess of $1 million will be or remain exempt from Section 162(m). In any event, the Committee retains full discretion to construct compensation packages that will best attract, retain, and reward successful executive officers. Therefore, the Committee may award compensation that is not fully deductible under Section 162(m) if the Committee believes it will contribute to the achievement of our business objectives.
Section 409A
Section 409A of the Internal Revenue Code affects the payments of certain types of deferred compensation to key employees and includes requirements relating to when payments under such arrangements can be made, acceleration of benefits, and timing of elections under such arrangements. Failure to satisfy these requirements will generally lead to an acceleration of the timing for including deferred compensation in an employee’s income, as well as certain additional taxes, penalties, and interest. The Company intends for, but does not currently require, its nonqualified deferred compensation arrangement to meet the effective requirements of Section 409A.
Recovery of Compensation from Executive Misconduct
The Company has adopted a “Claw Back” policy providing that if the Company determines that an executive officer has engaged in fraudulent or intentional misconduct resulting in a restatement of the Company’s financial results, the executive would be obligated and the Company would take all possible actions to recover any portion of performance-based or incentive compensation paid or awarded to the executive that is greater than the amount that would have been paid or awarded if calculated based on the restated financial results.

REPORT OF THE COMPENSATION AND GOVERNANCE COMMITTEE

The Compensation and Governance Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for fiscal year 2020. This report is provided by the following independent directors who comprise the Committee: Gregory J. Lampert (Chairperson), Colleen C. Repplier, and Holly A. Van Deursen.
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COMPENSATION RELATED RISK ASSESSMENT

The Board believes that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on the Company. In addition, the Compensation and Governance Committee believes that the mix and design of the elements of executive compensation do not encourage management to assume excessive risks.
The Compensation and Governance Committee extensively reviewed the elements of executive compensation to determine whether any portion of executive compensation encouraged excessive risk taking and concluded:
•the profit sharing incentive bonus plan’s focus on the long-term financial success of the Company, as well as the payout over the subsequent fiscal year, discourages short-term risk taking;
•Profit sharing incentive bonus plan profitability tiers are appropriately set to calibrate variable incentive payouts at the targeted cash incentive level to the median levels of peer group performance and bonus payouts calibrated to superior results;
•performance share awards are appropriately linked to profitability; and
•equity ownership guidelines discourage excessive risk taking.
Furthermore, as described under “Compensation Discussion and Analysis — Compensation Process,” compensation decisions include judgment by the Committee, which mitigates the influence of purely objective calculations on excessive risk taking. The Compensation and Governance Committee reviews the Company’s compensation policies and practices on an annual basis to consider how effectively the policies and practices are providing incentives at an appropriate level of risk to executive employees.

EXECUTIVE COMPENSATION

The Company believes in an incentive compensation system that applies to all employees, including management, based on the fundamental philosophies of rewarding performance, aligning with Share Owners’ interests by directly linking compensation to financial performance, and talent retention and strengthening collaboration. For management, the system includes three components: a base salary, performance-based cash compensation, and performance-based stock incentive compensation. The incentive components are pegged to attainment of economic profit, which includes a cost of capital component, and the stock compensation incentive also includes a sales growth component, both as compared to specific goals.
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Summary Compensation Table
The Summary Compensation Table appearing below sets forth information regarding the compensation paid and/or awarded to our chairman of the Board and chief executive officer, chief financial officer, and the three other most highly compensated executive officers, for or during the years ended June 30, 2020, 2019, and 2018. These officers are referred to herein as our “named executive officers,” or “NEOs.”
The Summary Compensation Table appearing below contains values calculated and disclosed according to SEC reporting requirements. The “Stock Awards” column reflects awards with a grant date during each fiscal year.

Name and Principal Position | Year |  | Salary |  | Stock Awards |  | Non-Equity Incentive Plan Compensation |  | All Other Compensation |  | Total
|  |  | ($) |  | ($) (1) |  | ($) (2) |  | ($) (3) |  | ($)
Donald D. Charron | 2020 |  | $ | 709,752 |  |  | $ | 766,814 |  |  | $ | 283,901 |  |  | $ | 30,639 |  |  | $ | 1,791,106 |
Chairman of the Board and Chief Executive Officer | 2019 |  | $ | 695,770 |  |  | $ | 1,317,125 |  |  | $ | 292,223 |  |  | $ | 33,143 |  |  | $ | 2,338,261 |
| 2018 |  | $ | 678,800 |  |  | $ | 1,360,623 |  |  | $ | 461,584 |  |  | $ | 40,406 |  |  | $ | 2,541,413 |
John H. Kahle | 2020 |  | $ | 397,800 |  |  | $ | 128,503 |  |  | $ | 119,340 |  |  | $ | 39,689 |  |  | $ | 685,332 |
Vice President, General Counsel, Chief Compliance Officer, Secretary | 2019 |  | $ | 397,800 |  |  | $ | 335,757 |  |  | $ | 167,076 |  |  | $ | 45,268 |  |  | $ | 945,901 |
| 2018 |  | $ | 397,800 |  |  | $ | 490,477 |  |  | $ | 270,504 |  |  | $ | 46,747 |  |  | $ | 1,205,528 |
Steven T. Korn | 2020 |  | $ | 323,179 |  |  | $ | 155,038 |  |  | $ | 96,954 |  |  | $ | 19,080 |  |  | $ | 594,251 |
Vice President, North American Operations | 2019 |  | $ | 316,813 |  |  | $ | 264,279 |  |  | $ | 133,061 |  |  | $ | 26,274 |  |  | $ | 740,427 |
| 2018 |  | $ | 309,234 |  |  | $ | 283,522 |  |  | $ | 210,279 |  |  | $ | 16,440 |  |  | $ | 819,475 |
Michael K. Sergesketter | 2020 |  | $ | 322,265 |  |  | $ | 153,901 |  |  | $ | 96,679 |  |  | $ | 24,905 |  |  | $ | 597,750 |
Vice President, Chief Financial Officer | 2019 |  | $ | 314,683 |  |  | $ | 259,327 |  |  | $ | 132,167 |  |  | $ | 41,277 |  |  | $ | 747,454 |
| 2018 |  | $ | 305,693 |  |  | $ | 273,548 |  |  | $ | 207,871 |  |  | $ | 31,332 |  |  | $ | 818,444 |
Christopher J. Thyen | 2020 |  | $ | 302,272 |  |  | $ | 145,008 |  |  | $ | 90,681 |  |  | $ | 28,694 |  |  | $ | 566,655 |
Vice President, New Platforms | 2019 |  | $ | 296,317 |  |  | $ | 247,638 |  |  | $ | 124,453 |  |  | $ | 32,624 |  |  | $ | 701,032 |
| 2018 |  | $ | 289,228 |  |  | $ | 266,997 |  |  | $ | 196,675 |  |  | $ | 24,686 |  |  | $ | 777,586 |

(1) Stock awards consist of performance shares:
•The compensation reported in the above table represents targeted performance share compensation for each of our NEOs, which does not reflect compensation actually received or earned by the NEOs in the respective years. The amounts included above represent the value at the grant date based on the probable outcome of the performance conditions, which is estimated based on the combination of the bonus percentage attainment component calculated under the Company’s profit sharing incentive bonus plan, adjusted to a three-year average bonus percentage, and a growth attainment component, which is the Company’s growth in sales revenue based on comparison of its three-year compounded annual growth rate (“CAGR”) with the Electronics Manufacturing Services Industry’s three-year CAGR. or 100% of the maximum award opportunity for Long-Term Performance Shares (“LTPS”).
•The performance shares awarded that will be reported for fiscal year 2021 as valued on the August 24, 2020 grant date based on the probable outcome of the performance conditions were for Mr. Charron $983,351, for Mr. Kahle $138,409, for Mr. Korn $223,874, for Mr. Sergesketter $171,080, and for Mr. Thyen $160,376.
•The assumptions used to calculate the grant date fair values are set forth in Note 10 - Stock Compensation Plans to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
(2) Amounts consist of cash incentive compensation earned for services rendered in the applicable fiscal year. The amounts are paid in five installments over the succeeding fiscal year, pursuant to the profit sharing incentive bonus plan, with 50% payable in August and 12.5% payable in each of the following months of September, January, April, and June.
(3) Includes benefits received by the NEOs from executive financial services programs, supplemental medical reimbursement, the value of the services and related benefits provided pursuant to the Executive Preventive Healthcare Program, Company contributions earned for the Retirement Plans and SERP plans, and de minimus Christmas bonus and life insurance premiums paid by the Company. SERP and Retirement Plan Company contribution amounts earned for fiscal year 2020 and paid in fiscal year 2021 for Messrs. Charron, Kahle, Korn, Sergesketter, and Thyen were $29,810, $15,514, $12,604, $12,568, and $11,789, respectively.
See the “Compensation Discussion and Analysis” section in this Proxy Statement for further information about the material terms of the NEOs’ compensation plans.
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Grants of Plan-Based Awards in Fiscal Year 2020

|  |  | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) |  |  |  |  |  |  | Estimated Future Payouts Under Equity Incentive Plan Awards (2) |  |  |  |  |  | Grant Date Fair Value of Stock and Option Awards (3)
|  | Grant |  | Threshold |  | Target |  | Maximum |  | Threshold |  | Target |  | Maximum |  |
Name |  | Date |  | ($) |  | ($) |  | ($) |  | (#) |  | (#) |  | (#) |  | ($)
Donald D. Charron |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit Sharing Incentive Bonus Plan |  |  |  | $ | — |  |  | $ | 354,876 |  |  | $ | 780,727 |  |  |  |  |  |  |  |  |
LTPS(4) |  | 08/19/19 |  |  |  |  |  |  |  | — |  |  | 53,288 |  |  | 53,288 |  |  | $ | 766,814 |
John H. Kahle |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit Sharing Incentive Bonus Plan |  |  |  | $ | — |  |  | $ | 159,120 |  |  | $ | 397,800 |  |  |  |  |  |  |  |  |
LTPS(4) |  | 08/19/19 |  |  |  |  |  |  |  | — |  |  | 8,930 |  |  | 8,930 |  |  | $ | 128,503 |
Steven T. Korn |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit Sharing Incentive Bonus Plan |  |  |  | $ | — |  |  | $ | 129,272 |  |  | $ | 323,179 |  |  |  |  |  |  |  |  |
LTPS(4) |  | 08/19/19 |  |  |  |  |  |  |  | — |  |  | 10,774 |  |  | 10,774 |  |  | $ | 155,038 |
Michael K. Sergesketter |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit Sharing Incentive Bonus Plan |  |  |  | $ | — |  |  | $ | 128,906 |  |  | $ | 322,265 |  |  |  |  |  |  |  |  |
LTPS(4) |  | 08/19/19 |  |  |  |  |  |  |  | — |  |  | 10,695 |  |  | 10,695 |  |  | $ | 153,901 |
Christopher J. Thyen |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Profit Sharing Incentive Bonus Plan |  |  |  | $ | — |  |  | $ | 120,909 |  |  | $ | 302,272 |  |  |  |  |  |  |  |  |
LTPS(4) |  | 08/19/19 |  |  |  |  |  |  |  | — |  |  | 10,077 |  |  | 10,077 |  |  | $ | 145,008 |

(1) Represents potential cash incentive payments under the profit sharing incentive bonus plan with respect to fiscal year 2020 performance. The awards do not contain minimum thresholds. The target amount is determined based on a payout at the Tier 4 level (40% - 50%) of base salary. See the column captioned “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table for the actual payout amounts under the profit sharing incentive bonus plan for fiscal year 2020 performance. See “Compensation Discussion and Analysis — Components of Compensation — Compensation Decisions — Annual Cash Compensation — Cash Incentive Compensation” for additional information regarding the terms of the profit sharing incentive bonus plan.
(2) Represents LTPS awards issued pursuant to the 2014 Stock Option and Incentive Plan. The awards do not contain minimum thresholds. The target amount is determined based on a combination of a payout at the Tier 4 level and sales growth attainment, adjusted to a three- year average, which is 100% of the maximum award opportunity. See “Compensation Discussion and Analysis — Components of Compensation — Compensation Decisions — Stock Compensation — Performance Shares” for additional information regarding the terms of performance share awards.
(3) Amounts represent the grant date fair value of the target number of performance shares granted calculated using the closing price of the Company’s Common Stock of $14.39 as reported by NASDAQ on the grant date of August 19, 2019.
(4) LTPS awards represent the tranches of performance shares awarded during fiscal years 2018, 2019, and 2020 which could be earned for the fiscal year 2020 performance period. Based on fiscal year 2020 performance, each of the NEO’s earned the maximum amount of shares awarded for fiscal year 2020.
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Outstanding Equity Awards at Fiscal Year End 2020

|  | Stock Awards |  |
|  | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested |
Name |  | (#)(1) |  | ($)(2)
Donald D. Charron |  | 110,651 |  |  | $ | 1,498,215 |
John H. Kahle |  | 18,433 |  |  | $ | 249,583 |
Steven T. Korn |  | 22,424 |  |  | $ | 303,621 |
Michael K. Sergesketter |  | 22,296 |  |  | $ | 301,888 |
Christopher J. Thyen |  | 20,974 |  |  | $ | 283,988 |

(1) Unearned and unvested equity incentive plan awards consist of the following:

|  |  |  | Stock Award and Initial Grant Date |  |  |  |  |  |  |  |  |  |  |  |  |  |
Name |  |  |  | LTPS 8/19/2019 |  | LTPS 8/20/2018 |  | LTPS 8/21/2017 |  |  |  |  |  |  |  |  |  |
Donald D. Charron |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shares (#) |  |  |  | 61,872 |  |  | 32,228 |  |  | 16,551 |  |  |  |  |  |  |  |  |  |  |
Vesting Date(s) |  |  |  | (a) |  | (b) |  | 8/24/2020 |  |  |  |  |  |  |  |  |  |
John H. Kahle |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shares (#) |  |  |  | 10,180 |  |  | 5,435 |  |  | 2,818 |  |  |  |  |  |  |  |  |  |  |
Vesting Date(s) |  |  |  | (a) |  | (b) |  | 8/24/2020 |  |  |  |  |  |  |  |  |  |
Steven T. Korn |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shares (#) |  |  |  | 12,567 |  |  | 6,546 |  |  | 3,311 |  |  |  |  |  |  |  |  |  |  |
Vesting Date(s) |  |  |  | (a) |  | (b) |  | 8/24/2020 |  |  |  |  |  |  |  |  |  |
Michael K. Sergesketter |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shares (#) |  |  |  | 12,531 |  |  | 6,495 |  |  | 3,270 |  |  |  |  |  |  |  |  |  |  |
Vesting Date(s) |  |  |  | (a) |  | (b) |  | 8/24/2020 |  |  |  |  |  |  |  |  |  |
Christopher J. Thyen |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shares (#) |  |  |  | 11,754 |  |  | 6,123 |  |  | 3,097 |  |  |  |  |  |  |  |  |  |  |
Vesting Date(s) |  |  |  | (a) |  | (b) |  | 8/24/2020 |  |  |  |  |  |  |  |  |  |

(a)Three remaining annual vesting dates beginning 8/24/2020.
(b)Two remaining annual vesting dates beginning 8/24/2020.
LTPS awards represent the number of shares available for issuance pursuant to performance share awards assuming the targeted performance. At the targeted performance level, 100% of the shares eligible to be received under the LTPS award would be issued. The initial grant date shown is the grant date of the initial annual tranche of the award. The LTPS awards are three-year awards. The remaining tranches for each LTPS award listed above will have grant dates occurring annually at the beginning of each performance period at approximately the same date each year.
(2) Calculated using the $13.54 closing price of KE Common Stock as reported by NASDAQ on June 30, 2020.
Option Exercises and Stock Vested in Fiscal Year 2020

|  | Stock Awards |  |
|  | Number of Shares Acquired on Vesting (#)(1) |  | Value Realized on Vesting ($)(2)
Name |  |  |  |
Donald D. Charron |  | 65,692 |  |  | $ | 961,353 |
John H. Kahle |  | 16,746 |  |  | $ | 245,065 |
Steven T. Korn |  | 13,181 |  |  | $ | 192,894 |
Michael K. Sergesketter |  | 12,934 |  |  | $ | 189,279 |
Christopher J. Thyen |  | 12,351 |  |  | $ | 180,748 |

(1)Shares acquired upon vesting during fiscal year 2020 include tranches of prior years LTPS awards granted on August 20, 2018 and issued on August 19, 2019. Shares have not been reduced by the following shares withheld to satisfy tax withholding obligations: Mr. Charron 21,568 shares; Mr. Kahle 4,786 shares; Mr. Korn 3,767 shares; Mr. Sergesketter 3,697 shares; and Mr. Thyen 3,530 shares.
(2)The value realized is calculated by multiplying the average of the high and low price of our Common Stock as reported by NASDAQ on the August 19, 2019 vesting date of $14.63 by the number of shares that vested.
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Nonqualified Deferred Compensation in Fiscal Year 2020

|  | Executive Contributions in Last FY |  | Registrant Contributions in Last FY |  | Aggregate Earnings in Last FY |  | Aggregate Withdrawals/ Distributions |  | Aggregate Balance at Last FYE
Name |  | ($)(1) |  | ($)(2) |  | ($)(3) |  | ($) |  | ($)(4)
Donald D. Charron |  | $ | — |  |  | $ | 26,326 |  |  | $ | 328,558 |  |  | $ | — |  |  | $ | 3,598,481 |
John H. Kahle |  | $ | 29,019 |  |  | $ | 11,655 |  |  | $ | 196,568 |  |  | $ | — |  |  | $ | 2,042,003 |
Steven T. Korn |  | $ | 22,945 |  |  | $ | 7,418 |  |  | $ | 59,366 |  |  | $ | — |  |  | $ | 819,958 |
Michael K. Sergesketter |  | $ | 44,224 |  |  | $ | 7,283 |  |  | $ | 34,476 |  |  | $ | — |  |  | $ | 778,912 |
Christopher J. Thyen |  | $ | 72,577 |  |  | $ | 6,396 |  |  | $ | 111,704 |  |  | $ | — |  |  | $ | 1,592,588 |

(1)These amounts are included in the fiscal year 2020 amounts in the “Salary” column of the Summary Compensation Table.
(2)Represents Company contributions paid in September 2019, which are included in the fiscal year 2019 amounts in the “All Other Compensation” column of the Summary Compensation Table.
(3)Earnings do not represent above-market or preferential rates and are not included in the Summary Compensation Table for fiscal year 2020 or prior years.
(4)The Aggregate Balance is the balance in the NEO’s SERP account as of June 30, 2020. The balance includes executive contributions in fiscal year 2020 and prior fiscal years, which are included in the “Salary” column of the Summary Compensation Table. The balance also includes Company contributions in fiscal year 2020 and prior fiscal years, which are included in the “All Other Compensation” column of the Summary Compensation Table. As of June 30, 2020, all of our NEO’s are fully vested in the SERP plan.
Activity disclosed in the table above relates solely to the Company’s SERP which is its only nonqualified deferred compensation arrangement for executive officers. See the “Components of Compensation — Other Compensation and Employee Benefits — Nonqualified Deferred Compensation” section of the Compensation Discussion and Analysis for further information about the material terms of the SERP.
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Employment Agreements with NEOs and Potential Payments Upon Termination or Change-In-Control
Your Company has outstanding Employment Agreements with Messrs. Charron, Kahle, Korn, Sergesketter, and Thyen, which remained effective on June 30, 2020. Each of the Employment Agreements with our executive officers is in the same form. Pursuant to the Employment Agreements, if the executive’s employment is terminated by the Company without Cause (as defined below) or by the executive for Good Reason (as defined below), the Company will provide compensation and benefits to the executive as follows:
(i)base salary through the date of termination of employment;
(ii)(a) unless the executive’s termination occurs during the one-year period before a Change in Control (as defined below) of the Company or during the two-year period following a Change in Control, severance pay equal to the sum of the executive’s annual base salary at the highest rate in effect during the three years immediately preceding the last day of employment and the higher of either the executive’s target cash incentive for the period in which the last day of employment occurs or the executive’s average annual cash incentive award for the three annual cash incentive periods immediately preceding the last day of employment, plus a reimbursement payment of $50,000 (subject to cost-of-living adjustment) in lieu of continued welfare and fringe benefits; or
(b) if the executive’s termination occurs during the one-year period preceding a Change in Control or the two-year period following a Change in Control, severance pay equal to two times the amount determined in (ii)(a) above;
(iii)reimbursement for up to $25,000 of the costs of outplacement services during the first twelve months following the termination date;
(iv)Service-Based Incentive Plan Rights. As of the Termination Date,
(a) Executive’s Options and related Stock Appreciation Rights awarded under the 2014 Stock Option and Incentive Plan will become fully vested and exercisable; and
(b) The restricted period will end for executive’s Restricted Shares awarded under the Equity Plan; as soon as practicable within sixty (60) days following the termination date, the Company will make a single payment to executive, equal to the aggregate value of all benefits under the plans identified in this subsection (iv), in the form of cash, shares, or a combination of cash and shares, as determined by the compensation committee of the Board of Directors, in its sole discretion. That single payment will constitute payment in full and complete satisfaction of executive’s rights and benefits under all of executive’s award agreements and the applicable plans.
(v)Performance-Based Incentive Plan Rights.
(a) After the termination date, executive will continue to have the same rights to the Performance Shares or Performance Units awarded under the 2014 Stock Option and Incentive Plan to the same extent as immediately before the termination date. Executive will become vested in and receive payment of benefits under the plan in the same amounts and at the same times as if executive had continued in active employment through the end of the applicable performance periods and vesting dates.
(b) After the termination date, the Company will pay the executive any unpaid bonus amounts under the profit sharing incentive bonus plan, or any subsequent replacement plan, due for the fiscal year immediately preceding the termination date and a prorated amount of the bonus for bonus period in which the termination date occurs. The prorated bonus payment will be in an amount equal to the product of (i) the bonus otherwise payable for the bonus period and (ii) a fraction, the numerator of which is the number of days from the first day of the bonus period to the last day of employment, and the denominator of which is the number of days in the bonus period. Executive will receive payments under the plan at the same times as if the executive had continued in active employment through the end of the applicable performance periods.
(vi)payment of all SERP benefit amounts, which will become fully vested.
“Cause” means a determination, by at least three-quarters of the members of the Board, that one or more of the following has occurred:
• the executive’s willful and continued failure to perform substantially the duties of executive’s position or to follow lawful instructions of a senior executive or the Board that continues for five days after the executive receives written notice identifying such failure;
• the executive’s conviction of a felony or of another crime that reflects adversely on the Company;
• the executive’s engaging in fraudulent or dishonest conduct, gross misconduct that is injurious to the Company, or any misconduct that involves moral turpitude; or
• the executive’s material breach of his obligations under the employment agreement.
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“Good reason” means one or more of the following has occurred:
•a material adverse change in the nature or scope of the executive’s responsibilities;
•a reduction in the executive’s salary rate or target cash incentive amount;
•a reduction of 5% or more in the aggregate benefits provided to the executive and his dependents under the Company’s employee benefit plans;
•a significant diminution in the executive’s position, authority, duties, or responsibilities;
•a relocation of the executive’s principal site of employment to a location more than fifty (50) miles from the principal site of employment; or
•failure by the Company to obtain an assumption agreement regarding the executive’s employment agreement from any successor of the Company.
In the event of termination of employment for a reason other than by the Company for Cause or by the executive for Good Reason, the executive will receive his base salary through the date of termination and will be entitled to any benefits under the regular terms of the welfare, retirement, profit sharing incentive bonus, SERP, and equity and incentive plans.
“Change in Control” generally means the consummation of any of the following:
•the acquisition, by any one person or more than one person acting as a group, of ownership interests representing more than 50% of the total fair market value or of the total voting power of all ownership interests (the “Majority Ownership”) of the Company, any affiliate of the Company that employs the executive, any entity that has a Majority Ownership of either the Company or such affiliate, or any entity in an uninterrupted chain of Majority Ownership culminating in the ownership of the Company or such affiliate (each, a “Relevant Company”) through merger, consolidation, or stock transfer;
•the acquisition during any 12-month period, by any one person or more than one person acting as a group, of ownership interests in a Relevant Company possessing 35% or more of the total voting power of all ownership interests in the Relevant Company;
•the acquisition of ownership during any 12-month period, by any one person or more than one person acting as a group, of 40% or more of the total gross fair market value of the assets of a Relevant Company; or
•the replacement of a majority of members of the Board during any 12-month period, by members whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election.
Any occurrence that does not constitute a change in the ownership or effective control, or in the ownership of a substantial portion of the assets, of a Relevant Entity within the meaning of Section 409A(a)(2)(A)(v) of the Internal Revenue Code and its interpretive regulations does not constitute a “Change in Control.”
Upon a Change in Control of the Company, the Company will pay to the executives an amount in cash, shares, or a combination thereof at the Company’s discretion equal to the value at the effective date of the Change in Control of all options, stock appreciation rights, restricted stock, performance shares, performance units, and profit sharing incentive bonus plan payments, all of which will become fully vested. In addition, the executive will become fully vested in the SERP and will receive all benefit amounts under that plan. Further, upon a Change in Control, as an incentive for the executive to remain available to assist with transition matters, the Company will offer the executive a retention bonus equal to 40% of the executive’s annual salary, payable in two equal installments, the first after three months following the Change in Control and the second after an additional three months, in each case as long as the executive remains an employee during such time (or if the executive’s employment is terminated by the Company without Cause or by the executive for Good Reason).
The Employment Agreements also provide that in the event the executive incurs any gross income inclusion, interest or additional tax pursuant to Section 409A of the Internal Revenue Code on any payments from the Company, then the Company will make a supplemental payment to the executive in an amount sufficient to pay the resulting tax liability as well as the tax liability on the supplemental payment. In addition, under the Employment Agreements, if any of the Company’s payments to the executive are subject to excise tax (or any interest or penalties incurred due to excise tax) imposed by Section 4999 of the Internal Revenue Code, the executive will be entitled to reimbursement for the amount of the excise tax (plus interest and penalties). The Committee may, however, decide to reduce or eliminate that reimbursement or to reduce the executive’s compensation to the extent necessary to avoid Section 4999 taxation, if the aggregate compensation payable because of a Change in Control would exceed 5% of the net proceeds of the transaction.
In addition, the Employment Agreements impose non-competition and non-solicitation obligations on the executives during the term of their employment and for a period of 12 months (or a shorter period not less than 6 months, for an executive employed for fewer than 12 months) following termination of employment for any reason.
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The table below reflects the amount of compensation payable to each of the NEOs in the event of termination of such NEO’s employment or, in certain circumstances described above, upon the consummation of a Change in Control. The amounts shown assume that such termination was effective as of June 30, 2020, and thus includes amounts earned through such time and are estimates of the amounts that would be paid to the NEOs upon their termination. The actual amounts to be paid can only be determined at the time of such NEO’s separation from the Company and could therefore be more or less than the amounts set forth below.

Name | Change in Control |  | Without Cause or with Good Reason |  | Death or Disability |  | Other Termination(4) |
Donald D. Charron |  |  |  |  |  |  |  |
Lump Sum(1) | $ | 2,699,204 |  |  | $ | 1,146,546 |  |  | $ | — |  |  | $ | — |  |
Accelerated Benefits(2) | $ | 1,782,116 |  |  | $ | 1,782,116 |  |  | $ | 1,005,434 |  |  | $ | — |  |
Retention Bonus(3) | $ | 283,901 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
TOTAL | $ | 4,765,221 |  |  | $ | 2,928,662 |  |  | $ | 1,005,434 |  |  | $ | — |  |
John H. Kahle |  |  |  |  |  |  |  |
Lump Sum(1) | $ | 1,420,608 |  |  | $ | 665,357 |  |  | $ | — |  |  | $ | — |  |
Accelerated Benefits(2) | $ | 368,923 |  |  | $ | 368,923 |  |  | $ | 240,236 |  |  | $ | 240,236 |  |
Retention Bonus(3) | $ | 159,120 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
TOTAL | $ | 1,948,651 |  |  | $ | 1,034,280 |  |  | $ | 240,236 |  |  | $ | 240,236 |  |
Steven T. Korn |  |  |  |  |  |  |  |
Lump Sum(1) | $ | 1,369,979 |  |  | $ | 606,918 |  |  | $ | — |  |  | $ | — |  |
Accelerated Benefits(2) | $ | 400,575 |  |  | $ | 400,575 |  |  | $ | 242,820 |  |  | $ | — |  |
Retention Bonus(3) | $ | 150,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
TOTAL | $ | 1,920,554 |  |  | $ | 1,007,493 |  |  | $ | 242,820 |  |  | $ | — |  |
Michael K. Sergesketter |  |  |  |  |  |  |  |
Lump Sum(1) | $ | 1,256,139 |  |  | $ | 559,422 |  |  | $ | — |  |  | $ | — |  |
Accelerated Benefits(2) | $ | 398,567 |  |  | $ | 398,567 |  |  | $ | 241,483 |  |  | $ | — |  |
Retention Bonus(3) | $ | 132,773 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |
TOTAL | $ | 1,787,479 |  |  | $ | 957,989 |  |  | $ | 241,483 |  |  | $ | — |  |
Christopher J. Thyen |  |  |  |  |  |  |  |
Lump Sum(1) | $ | 1,185,417 |  |  | $ | 529,015 |  |  | $ | — |  |  | $ | — |  |
Accelerated Benefits(2) | $ | 374,659 |  |  | $ | 374,669 |  |  | $ | 227,117 |  |  | $ | — |  |
Retention Bonus(3) | $ | 123,931 |  |  | $ | — |  |  |  |  | $ | — |  |
TOTAL | $ | 1,684,007 |  |  | $ | 903,684 |  |  | $ | 227,117 |  |  | $ | — |  |

(1)Payment is calculated based on executive’s annual base salary as of June 30, 2020 plus cash incentive compensation at the target level. The amounts include severance, benefits allowance, outplacement reimbursement, and, for a termination upon a Change in Control, the amount estimated to be payable to the NEO for reimbursement of the federal excise tax on excess parachute payments (Section 4999 of the Internal Revenue Code). This excise tax is payable if the value of certain payments that are contingent upon a Change in Control, referred to as parachute payments, exceeds a safe harbor amount. The computation of the excise tax is complex and is subject to various questions of interpretation. The amount of reimbursement included for excise tax reflects the Company’s best estimate at this time. In addition, there is estimated to be no tax liability pursuant to Section 409A of the Internal Revenue Code and accordingly no amounts are included for reimbursement of this tax.
(2)Represents the value of unvested LTPS awards, the vesting of which would accelerate as a result of the specified event of termination. LTPS awards are valued by multiplying $13.54, the closing price of the Company’s Common Stock as reported by NASDAQ on June 30, 2020, by the number of unvested shares that would vest upon the specified event of termination. The amount also includes the accrued but unpaid cash incentive compensation due under the profit sharing incentive bonus plan for fiscal year 2020. These amounts will be paid in a lump sum upon the specified event of termination.
(3)Amount payable in two installments: 50% — 3 months after a Change in Control; and 50% — 6 months after a Change in Control.
(4)Includes termination by the Company for Cause and voluntary resignation by the NEO, including retirement prior to attaining the minimum retirement age of 62 in the U.S. In the event of a termination of Mr. Kahle by the Company for cause, he would receive no accelerated benefits. If Mr. Kahle leaves the Company voluntarily, his departure would be considered a retirement and he would receive the indicated accelerated benefits.
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The amounts shown in the table above do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include accrued salary, health benefits, and distribution of account balances under the Retirement Plan. Also excluded from the table above are amounts for payments of fully vested SERP contributions and balances which can be found in the table in the “Executive Compensation — Nonqualified Deferred Compensation” section in this Proxy Statement. As of June 30, 2020, all of our NEO’s were fully vested in the SERP plan.
CEO Pay Ratio
In accordance with Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and Item 402(u) of Regulation S-K (“Item 402(u)”), we are providing the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee. This pay ratio is a reasonable estimate calculated based on the SEC rules and our payroll and employment records using the methodology described below. In calculating the pay ratio, SEC rules allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions reflecting their unique employee populations. Therefore, our reported pay ratio may not be comparable to that reported by other companies due to differences in industries, scope of international operations, business models and scale, as well as the different estimates, assumptions, and methodologies applied by other companies in calculating their respective pay ratios.
As of June 30, 2020, we employed approximately 6,400 employees worldwide that meet the definition of employee under Item 402(u), other than our CEO.
We determined our median employee by reviewing the annualized base salaries as of June 30, 2020 of our considered population, which excludes our CEO, plus their target incentive compensation for the fiscal year ended June 30, 2020. For employees located outside the U.S., their compensation was converted to U.S. dollars using the spot exchange rate as of June 30, 2020. The median employee was determined to be a production operator located outside the U.S. The total compensation of the median employee for fiscal year 2020, which was determined using the same methodology as used to determine our CEO total compensation in the Summary Compensation table, was $15,458. The average foreign exchange rate for fiscal year 2020 was used to convert the median employee’s actual fiscal year 2020 compensation into U.S. dollars.
The total compensation of our CEO was $1,791,106 for fiscal year 2020, as set forth in the Summary Compensation Table. The ratio of our CEO’s total compensation to our median employee’s total compensation for fiscal year 2020 was 116:1.
The CEO Pay Ratio was based on the fiscal year 2020 total compensation of our median employee, determined in the same manner and using the same methodology used to determine the “Total Compensation” shown for our CEO in the Summary Compensation Table. The elements included in the CEO’s total compensation are fully discussed above in the footnotes to the Summary Compensation Table.
To set some context for the above CEO pay ratio, as a large global manufacturing company, the nature of our operations relies significantly on employees outside the United States. Of the 6,400 employees included in our analysis, approximately 80% are located outside the United States. The compensation elements and pay levels of our employees differ from country to country based on market trends as well as fluctuations in currency exchange rates. We regularly conduct competitive market pay analysis in all of our countries we operate in to ensure we are competitive with local market practices.
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EQUITY COMPENSATION PLANS INFORMATION

The following table provides certain information with respect to our equity compensation plans in effect as of June 30, 2020.

Name |  | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants, and Rights |  | Weighted Average Exercise Price of Outstanding Options (3) |  | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity Compensation Plans |  |  |  |  |  |
Approved by Share Owners (1) |  | 443,536 |  |  | — |  |  | 3,075,624 |
Not approved by Share Owners (2) |  | 94,320 |  |  | — |  |  | 902,926 |
Total |  | 537,856 |  |  | — |  |  | 3,978,550 |

(1)Consists of performance share awards under the Kimball Electronics, Inc. 2014 Stock Option and Incentive Plan. The number of performance shares assumes the maximum number of shares which the participant is eligible to receive if applicable profitability levels are achieved.
(2)Consists of phantom stock units granted to non-employee directors under the Kimball Electronics, Inc. Non-Employee Directors Stock Compensation Deferral Plan (the “Deferral Plan”), which are participating securities and are payable in common stock upon a director’s retirement or termination from the Board or death. The Deferral Plan is a nonqualified plan approved by the Board of Directors on October 20, 2016, which allows non-employee directors to defer all, or a portion of, their retainer fees in stock until retirement or termination from the Board or death. The Deferral Plan allows for issuance of up to 1.0 million shares of the Company’s common stock.
(3)There is no exercise price for performance share awards or phantom stock units.

PROPOSAL TO APPROVE, IN A NON-BINDING, ADVISORY VOTE, THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS

As required by Section 14A of the Exchange Act, we are asking the owners of our Common Stock to approve the compensation paid to our NEOs, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion in this Proxy Statement. This proposal, commonly known as a say on pay proposal, gives our Share Owners the opportunity to express their views on our executive compensation.
The goals of our compensation programs are to create long-term Share Owner value by rewarding executive performance, to retain our executives by using key elements of compensation that provide substantial opportunity for financial rewards in comparison to other professional opportunities, and to align the interests of our executives with our Share Owners by linking compensation to financial performance. We compensate our executive officers using a combination of salary, performance-based cash incentive compensation, and performance share awards. Our compensation programs are designed to align our executives’ contributions to ultimately achieve our goal of maximizing Share Owner value. We believe that our executive compensation programs accomplish this goal.
The Compensation Discussion and Analysis in this Proxy Statement describes our executive compensation program and the decisions made by the Compensation and Governance Committee for fiscal year 2020 in more detail.
We are asking our Share Owners to indicate their support for our NEOs’ compensation as described in this Proxy Statement. This vote is not intended to address any specific item of compensation but rather the overall compensation of our NEOs and the philosophy, policies, and practices described in this Proxy Statement. Accordingly, we recommend that our Share Owners vote “FOR” the following resolution at the annual meeting:
“RESOLVED, that Share Owners of the Company’s Common Stock approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2020 Annual Meeting of Share Owners pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table, and the other related tables and disclosure.”
As an advisory vote, this proposal will not be binding upon us or our Board of Directors or Compensation and Governance Committee. However, we expect that the Compensation and Governance Committee, which is responsible for designing and administering your Company’s executive compensation program, will consider the outcome of the vote when making future compensation decisions for our NEOs.
The Board of Directors recommends that Share Owners vote “FOR” the advisory proposal approving the compensation paid to our NEOs as disclosed in this Proxy Statement.
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SUBMISSION OF NOMINATIONS AND PROPOSALS FOR 2021

Proposals which are desired to be presented at the 2021 Annual Meeting by Share Owners and included in the Company’s Proxy Statement for that meeting must be received by the Company at its principal executive offices, 1205 Kimball Blvd., Jasper, Indiana 47546, no later than June 1, 2021. Such proposals, however, must meet certain requirements under the regulations of the SEC to be included in the Company’s Proxy Statement. A Share Owner wishing to nominate a candidate for election as a director or to bring any other proposal before the 2021 Annual Meeting of Share Owners (but not include the nomination or proposal in the Company’s Proxy Statement) must cause written notice of the proposal to be received by the Secretary of the Company at its principal executive office no earlier than July 23, 2021, and no later than August 12, 2021. The written notice must also meet additional requirements as stated in the Company’s By-Laws, a copy of which is available upon written request directed to the Secretary of the Company.

MEETING AND VOTING INFORMATION

Proxy Statement
This Proxy Statement and the accompanying proxy are being provided to the Share Owners of the Company on or about September 29, 2020, and are furnished in connection with the Board of Directors’ solicitation of proxies to be used at the Annual Meeting of Share Owners to be held November 10, 2020, at the time and place and for the purpose of considering and acting upon the matters specified in the Notice of Annual Meeting of Share Owners accompanying this Proxy Statement. The Board has fixed the close of business on September 8, 2020, for determining our Share Owners entitled to notice of and to vote at the meeting and any adjournments thereof. Only Share Owners of record at the close of business on that date will be entitled to vote. As of September 8, 2020, there were 25,143,289 shares outstanding, each share entitled to one vote.
We are pleased to be furnishing our proxy materials to our Share Owners via the Internet under the e-proxy rules adopted by the SEC. As a result, on or about September 29, 2020, we mailed to many of our Share Owners a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this Proxy Statement and our 2020 Annual Report to Share Owners, which includes our Annual Report on Form 10-K as filed with the SEC for the fiscal year ended June 30, 2020 (our “2020 Annual Report”). The Notice contains instructions on how to access those documents and vote online. The Notice also contains instructions on how each of those Share Owners can request and receive a paper copy of our proxy materials, including this Proxy Statement, our 2020 Annual Report, and a proxy card. All Share Owners who do not receive a Notice will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically. Using this distribution process conserves natural resources and reduces the costs of printing and distributing these proxy materials.
This Proxy Statement, the form of the proxy card, and voting instructions are being made available to Share Owners on or about September 29, 2020, at www.proxyvote.com. Our 2020 Annual Report is being made available at the same time and by the same method. The 2020 Annual Report is not to be considered as part of the proxy solicitation materials or as having been incorporated by reference. Share Owners may receive, without charge, a copy of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, including financial statements but excluding exhibits, as filed with the SEC. Please address requests for a copy of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, to our Secretary at Kimball Electronics, Inc., 1205 Kimball Blvd., Jasper, Indiana 47546.
The SEC’s rules permit us to deliver a single Notice or set of proxy materials to one address shared by two or more of our Share Owners. This delivery method is referred to as “householding” and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one Notice or set of proxy materials to multiple Share Owners who share an address, unless we received contrary instructions from the impacted Share Owners prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate copy of the Notice or proxy materials, as requested, to any Share Owners at the shared address to which a single copy of those documents was delivered. If you prefer to receive separate copies of the Notice or proxy materials, contact Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you are currently a Share Owner sharing an address with another Share Owner and wish to receive only one copy of future Notices or proxy materials for your household, please contact Broadridge at the above phone number or address.
If you have received a printed set of proxy materials, a proxy, being solicited on behalf of the Board, has been enclosed along with a return envelope, which requires no postage if mailed in the United States.
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Any of our Share Owners who properly deliver a proxy may revoke their proxy at any time prior to the voting thereof by either filing a written revocation with the Secretary of the Company, submitting another properly delivered proxy by telephone, via the Internet, or by mail with a later date, requesting the return of the proxy from the Secretary prior to the vote, or attending the meeting and voting in person, although attendance at the meeting will not by itself revoke a previously granted proxy.
The entire cost of soliciting proxies will be borne by your Company. In addition to the use of the mails, proxies may be solicited by personal interview, telephone, and electronic mail by directors, officers, and employees of your Company without extra compensation. Your Company will also reimburse brokerage houses, custodians, nominees, and fiduciaries for actual expenses incurred in forwarding proxy material to beneficial owners.
Voting Information
The presence of a quorum requires that a majority of outstanding shares of Common Stock be present at the meeting by proxy or in person. Withholding authority, abstentions, and “broker non-votes” will be counted as present for purposes of determining the presence or absence of a quorum for the transaction of business.
Under current regulations, banks and brokers are not permitted to vote uninstructed shares on certain items (for example, in the election of directors) on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors, no votes will be cast on your behalf. Your bank or broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the selection of the Company’s independent registered public accounting firm.
If you are a Share Owner of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting. All properly delivered proxies will be voted. In the absence of contrary direction, the proxies will be voted “FOR” the election of each of the named nominees to the Board of Directors, “FOR” the ratification of the selection of the Company’s independent registered public accounting firm, and “FOR” the advisory proposal approving the compensation paid to our Named Executive Officers. Shares held by participants in the Company’s retirement plan will be voted in accordance with the participant’s direction in his or her proxy unless such proxy is not timely received, in which case the trustee of the retirement plan will vote the shares in the same proportion as the shares for which the trustee received timely participant direction.
With a quorum present at the meeting and assuming the nomination of the directors is uncontested, directors will be elected by a majority of the votes cast by the shares entitled to vote in the election at the meeting (i.e., the nominees receiving the highest number of votes cast in each category will be elected). The election of directors will not be affected if you choose not to vote your shares or if you withhold authority to vote your shares and will not be affected by broker non-votes.
The proposal to ratify the selection of the Company’s independent registered public accounting firm for fiscal year 2021 will be ratified and approved if the number of shares of Common Stock voted “FOR” the proposal represents a majority of the total shares cast on the proposal. Abstentions will have no effect on this proposal.
The other proposal to approve (by a non-binding, advisory vote) the compensation paid to the Company’s Named Executive Officers for fiscal year 2021, will be ratified and approved if the number of shares of Common Stock voted “FOR” the proposal represents a majority of the total shares cast on the proposal. Abstentions and Broker non-votes will have no effect on these proposals.
If you are a registered Share Owner, you can simplify your voting and save your Company expense by voting via telephone or the Internet. Instructions explaining how to vote by telephone or the Internet are provided on the Notice and the proxy card. These documents include a control number to verify a Share Owner’s identity, allowing the Share Owner to access online proxy materials, vote the shares, and confirm that the voting instructions have been recorded properly. If you vote via telephone or the Internet, please do not return a signed proxy card. If your shares are held in the name of a bank or broker, you may be able to vote via telephone or the Internet by following the instructions on the Notice or proxy form you receive from your bank or broker.
The Board of Directors knows of no other matters that may come up for action at the Annual Meeting. However, if any other matter properly comes before the meeting, the persons named in the proxy form will vote in accordance with their judgment on such matter using the discretionary authority granted in the proxy form.
39

PERSONAL ATTENDANCE AT THE ANNUAL MEETING OF SHARE OWNERS
PLEASE NOTE THAT IF YOU DECIDE TO ATTEND IN PERSON, YOU WILL BE ADMITTED ONLY ON THE FOLLOWING CONDITIONS:

A. | PRESENTATION OF A PHOTO IDENTIFICATION, AND
B. | YOUR NAME MUST BE ON OUR SHARE OWNER LIST OR A RECENT BROKERAGE STATEMENT SHOWING SHARE OWNERSHIP AS OF SEPTEMBER 8, 2020 MUST BE PRESENTED.

DIRECTIONS TO THE ANNUAL MEETING OF SHARE OWNERS
From Evansville, Indiana (via I-64 East) or from Louisville, Kentucky (via I-64 West):
Take exit 57B (US-231 North).
Go North on US-231 approximately 13 miles.
Turn left onto 12th Avenue.
Turn left onto Kimball Blvd. and the Kimball Electronics Headquarters will be on your right.
From Indianapolis, Indiana (via Hwy 37 South):
Take Highway 37 South for approximately 47 miles.
Continue on I-69 South for approximately 27 miles.
Take exit 87 toward US-231 South to Loogootee for approximately 17 miles.
Follow US-231 south through Jasper for approximately 20 miles.
Turn right onto 12th Avenue.
Turn left onto Kimball Blvd. and the Kimball Electronics Headquarters will be on your right.
40

SHARE OWNERSHIP INFORMATION

Under the regulations of the SEC, persons who have power to vote or invest in or dispose of shares of the Company, either alone or jointly with others, are deemed to be beneficial holders of such shares. The total number of our shares listed in the table for all executive officers and directors as a group is 1,111,623 shares of Common Stock (4.45% of the outstanding), as of the date noted below.
Set forth in the following table are the beneficial holdings, as of August 21, 2020, of the Company’s Common Stock on the basis described above for: (i) each person known to your Company who may be deemed to beneficially own more than 5% of your Company’s outstanding shares; (ii) each director; (iii) each “Named Executive Officer” (NEO) as listed in the Summary Compensation Table appearing elsewhere in this Proxy Statement; and (iv) all directors and executive officers as a group:

| Shares Beneficially Owned(a)(b) |  |  |  |
Name | Sole Voting and Investment Power |  | Shared Voting and Investment Power |  | Percent of Outstanding Shares
Holders of more than 5% of the Outstanding Shares |  |  |  |  |
Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, Texas 78746 | 2,144,878 |  | (e) | None |  | 8.58 | %
BlackRock, Inc. 55 East 52nd Street New York, New York 10055 | 1,860,740 |  | (f) | None |  | 7.45 | %
Directors and Named Executive Officers: |  |  |  |  |
Donald D. Charron | 466,428 |  | (c) | None |  | 1.87 | %
Michele M. Holcomb | — |  | (g) | None |  | (d)
Robert J. Phillippy | — |  | (g) | None |  | (d)
Holly A. Van Deursen | 3,758 |  |  | None |  | (d)
Colleen C. Repplier | 11,085 |  | (g) | None |  | (d)
Gregory J. Lampert | 14,696 |  | (g) | None |  | (d)
Gregory A. Thaxton | — |  | (g) | None |  | (d)
John H. Kahle | 213,265 |  | (c) | None |  | (d)
Steven T. Korn | 93,487 |  | (c) | None |  | (d)
Michael K. Sergesketter | 96,440 |  | (c) | None |  | (d)
Christopher J. Thyen | 137,410 |  | (c) | None |  | (d)
All executive officers and directors as a Group (16 persons) | 1,111,623 |  | (c) | None |  | 4.45 | %

(a)Based on information obtained from the executive officers, directors, and beneficial owners (according to the definition of “beneficial ownership” under the regulations of the SEC). On August 21, 2020, there were outstanding 24,987,321 shares of Common Stock.
(b)The “Sole Voting and Investment Power” column includes shares owned by the spouses living in the households of the individuals listed. The “Shared Voting and Investment Power” column includes shares held by limited partnerships, foundations, and trusts over which listed individuals have shared voting and investment power. Beneficial ownership is disclaimed as to such shares and as to all other shares over which the named person does not have full beneficial rights.
(c)Shares include performance shares which are receivable as of August 21, 2020, as follows: Donald D. Charron 53,288 shares; John H. Kahle 8,930 shares; Steven T. Korn 10,774 shares; Michael K. Sergesketter 10,695 shares; Christopher J. Thyen 10,077 shares; and all executive officers, as a group 120,517 shares. These share amounts have not been reduced by the following shares withheld to satisfy tax withholding obligations upon their vesting on August 24, 2020: Donald D. Charron 15,336 shares; John H. Kahle 2,570 shares; Steven T. Korn 3,101 shares; Michael K. Sergesketter 3,078 shares; and Christopher J. Thyen 2,901 shares. The percentage of shares owned by each person, or group, is determined by including in the number of shares outstanding those performance shares issuable to such person or group as of August 21, 2020.
(d)Totals are under one percent of the outstanding shares.
(e)This information is derived from the Schedule 13G/A filed by such Share Owner with the SEC on February 12, 2020, indicating beneficial ownership as of December 31, 2019. The Share Owner reports that it has the sole power to vote or direct the vote of 2,065,117 shares and the sole power to dispose or direct the disposition of 2,144,878 shares but also notes that it is an investment advisor registered under the Investment Advisors Act of 1940 and furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-advisor to certain other commingled funds, group trusts, and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an advisor or sub-advisor to certain Funds. In its role as investment advisor, sub-advisor and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, “Dimensional”) may possess voting and/or investment power over the securities of the Company that are owned by the Funds and may be deemed to be the beneficial owner of the Company’s shares held by the Funds. However, all of the Company’s shares reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership of such securities.
(f)This information is derived from the Schedule 13G/A filed by such Share Owner with the SEC on February 5, 2020, indicating beneficial ownership as of December 31, 2019. The Share Owner reports that it has the sole power to vote or direct the vote of 1,799,415 shares and the sole power to dispose or direct the disposition of 1,860,740 shares but also notes that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Company’s shares and that no one person’s interest in the Company’s shares is more than 5% of the total outstanding shares of the Company. BlackRock, Inc. reports that the following of its subsidiaries acquired the shares: BlackRock (Netherlands) B.V., BlackRock Advisors, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., and BlackRock Investment Management, LLC.
(g)Shares do not include phantom stock units. Each phantom stock unit is equivalent of one share of common stock. Such units of phantom stock were acquired under the Kimball Electronics, Inc. Non-Employee Directors Stock Compensation Deferral Plan. Phantom stock units granted as of August 21, 2020: Colleen C. Repplier 30,797 units; Gregory J. Lampert 27,213 units; Gregory A. Thaxton 10,906 units; Robert J. Phillippy 16,139 units; and Michele M. Holcomb 3,758 units.
41

Share Ownership Guidelines
The Compensation and Governance Committee established stock ownership guidelines for directors and senior executives. The guidelines outline the expectations of directors and executives to maintain beneficial ownership of Company stock having a value expressed as a multiple of their director fees or their base salary, as the case may be, for as long as they remain a director or executive officer. Directors and executive officers are allowed a reasonable time, in the judgment of the Committee, to attain the expected beneficial ownership set forth in the guidelines. “Beneficial Ownership” includes, in addition to shares held directly by directors or executives, those shares held by a spouse, minor children or grandchildren, trusts, retirement plans, and unearned shares awarded under the Company’s 2014 Stock Option and Incentive Plan. The ownership status of each director and executive is reviewed annually by the Committee. The multiples are as follows:

Position | Value as a Multiple of Base Salary or Fees
Director | X 3
Chairman, CEO | X 5
Vice President | X 3

DELINQUENT SECTION 16(A) REPORTS

Section 16(a) of the Exchange Act requires that Company directors, executive officers, and greater-than-ten-percent Share Owners file with the SEC and the Company an initial statement of beneficial ownership and certain statements of changes in beneficial ownership of Common Stock of the Company. Based solely on its review of such forms received by the Company and written representation from the directors and executive officers that no other reports were required, the Company is unaware of any instances of noncompliance or late compliance with such filings during the fiscal year ended June 30, 2020.
42

APPENDIX A

APPROVAL PROCESS FOR SERVICES PERFORMED BY THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Objective
To ensure the independent registered public accounting firm is independent in both fact and appearance with respect to the audit of the financial statements of Kimball Electronics, Inc. (the “Company”).
Process
The independent registered public accounting firm of Kimball Electronics, Inc. reports to and is engaged by the Audit Committee of the Company. The service and fees are approved by the Audit Committee. The Audit Committee will not engage the independent registered public accounting firm for any non-audit service that is specifically prohibited by the Securities and Exchange Commission rules on auditor independence nor will approval be granted for any non-audit service that individually or in the aggregate, in the Audit Committee’s opinion, impairs the independence of the independent registered public accounting firm with respect to the audit of the financial statements of the Company.
The Audit Committee has delegated authority to the Audit Committee Chairperson to grant approval required by this policy for any service engagements that arise between Audit Committee meetings. During the next regularly scheduled Audit Committee meeting, or sooner as appropriate, the Audit Committee Chairperson updates the full committee of approved independent registered public accounting firm services for informational purposes.
The independent registered public accounting firm has reviewed the policy and believes that the policy will not adversely affect the firm’s independence.
A-1

VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 11/09/2020 for shares held directly and by 11:59 P.M. ET on 11/05/2020 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. KIMBALL ELECTRONICS, INC. 1205 KIMBALL BLVD. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS JASPER, IN 47546 If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 11/09/2020 for shares held directly and by 11:59 P.M. ET on 11/05/2020 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY For Withhold For All To withhold authority to vote for any All All Except individual nominee(s), mark “For All Except” and write the number(s) of the The Board of Directors recommends you vote FOR nominee(s) on the line below. the following: 0 0 0 1. Election of Directors Nominees 01 Robert J. Phillippy 02 Gregory A. Thaxton The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. To ratify the selection of Deloitte and Touche LLP as the Company's independent registered public accounting firm for the fiscal year 2021. 0 0 0 3. To approve, by a non-binding, advisory vote, the compensation paid to the Company's Named Executive Officers. 0 0 0 NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. 0000473763_1 R1.0.1.18 Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report are available at www.proxyvote.com KIMBALL ELECTRONICS, INC. Annual Meeting of Share Owners November 10, 2020 9:00 AM This proxy is solicited by the Board of Directors The Share Owner hereby appoints Donald D. Charron as proxy, with the power to appoint his substitute, and hereby authorizes him to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of KIMBALL ELECTRONICS, INC. that the Share Owner is entitled to vote at the Annual Meeting of Share Owners to be held at 09:00 AM, EST on 11/10/2020, at the Kimball Electronics Headquarters, 1205 Kimball Blvd., Jasper, IN 47546, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. 0000473763_2 R1.0.1.18 Continued and to be signed on reverse side