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April 10, 2024

A Message from the Chair of our Board

Dear Fellow Shareholders:

We hope you will join us at our virtual 2024 Annual Meeting of Shareholders on May 23, 2024 at 12:00 p.m., Eastern Time. Your vote is important to us and we encourage you to promptly cast your votes in consideration of our recommendations.

Compass Diversified had another outstanding year. Our dividend adjusted common shareholder return in 2023 was 29.38%. To put this in perspective, our common stock’s performance exceeded the Russell 2000 Index by 1429 basis points (assuming the reinvestment of our distributions). We attribute this success to our competitive positioning, diversification and our recent focus on acquiring and managing more innovative and disruptive businesses with fundamentally faster growth rates. This strategic focus has boosted the power of our growth engine to produce a more consistent, faster level of earnings and cash flow growth. We have seen this effort begin to positively impact our performance as evidenced by our strong 2023 fourth-quarter and full-year results.

Our management team continued to demonstrate innovative thinking and the ability to motivate and align the organization’s employees, who are essential for guiding our Company through a transformative growth period. We are fortunate to have talented leaders and employees who are skilled at driving strong performance today, while also anticipating industry changes and preparing for our future success. Our people are our greatest asset and we appreciate their tremendous contributions and accomplishments during the past year.

As a Board, we actively partnered with management to oversee progress in key areas aligned with our strategy and core values, and we are proud of the following 2023 achievements:

On behalf of the Board and our entire organization, I would like to take this opportunity to acknowledge our former Chair and long-time director C. Seán Day (“Seán”), who served CODI with distinction from the time of our organization’s initial public offering in 2006 until his passing in 2023. It was a privilege to know him and work alongside him. We miss his leadership, counsel, and friendship.

 

In this Proxy Statement, you will learn more about our Board and governance practices, our approach to Environmental, Social, and Governance (ESG) topics, our executive compensation structure and other important aspects of our Company. I am optimistic about our future and what we can accomplish together in 2024. Thank you for your support and investment in this next stage of our journey.

Sincerely,

 

Larry L. Enterline,

Compass Diversified Holdings’ 2024 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on Thursday, May 23, 2024 at 12:00 p.m., Eastern Time. The Annual Meeting will be a completely virtual meeting, which will be conducted via live audio webcast. You will be able to attend the Annual Meeting online, vote your shares electronically and submit your questions during the Annual Meeting via a live audio webcast by visiting www.virtualshareholdermeeting.com/CODI2024.

These matters are more fully described in the enclosed Proxy Statement. Our board of directors (the “Board”) recommends that you vote FOR ALL eight (8) of the director nominees to be elected, FOR the resolution approving, on a non-binding and advisory basis, the Say-on-Pay Vote, and FOR the ratification of the independent auditor.

Shareholders of record at the close of business on March 26, 2024 will be entitled to notice of, and to vote at, the Annual Meeting and at any subsequent adjournment(s) or postponement(s) thereof. The share register will not be closed between the record date and the date of the Annual Meeting. A list of shareholders entitled to vote at the Annual Meeting will be available for inspection for the ten (10) days prior to the Annual Meeting at our principal executive offices located at: 301 Riverside Avenue, Second Floor, Westport, Connecticut 06880. In addition, the list of shareholders will also be available during the Annual Meeting through the meeting website for those shareholders who choose to attend. The notice of Annual Meeting, Proxy Statement and proxy are first being mailed or provided to shareholders on or about April 10, 2024.

There will not be a traditional in-person meeting. To be sure that your shares are properly represented at the meeting, whether or not you attend virtually, please submit your vote by telephone or online or, if you received paper copies of the Proxy Materials, promptly complete, sign, date and return the enclosed proxy card in the accompanying pre-addressed envelope. We must receive your proxy no later than 11:59 p.m., Eastern Time, on May 22, 2024.

Please carefully read the sections in the Proxy Statement on attending via live audio webcast and voting at the Annual Meeting to ensure that you comply with these requirements.

Important Notice Regarding Availability of Proxy Materials for the Annual Meeting. We are pleased to save costs and help protect the environment by using the Notice and Access method of delivery. Instead of receiving paper copies of our Proxy Materials in the mail, many shareholders will receive a Notice of Internet Availability of Proxy Materials which provides an internet website address where shareholders can access electronic copies of Proxy Materials and vote. This website also has instructions for voting by telephone and for requesting paper copies of the Proxy Materials and proxy card. Our 2024 Proxy Statement and Annual Report for the year ended December 31, 2023 are available free of charge at www.proxyvote.com. We encourage you to access and review such materials before voting.

By order of the Board.

Sincerely,

 

Compass Diversified Holdings, a Delaware statutory trust, which we refer to as the Trust, owns its businesses through Compass Group Diversified Holdings LLC, a Delaware limited liability company, which we refer to as the Company. Except where the context indicates otherwise, “we,” “us,” and “our” refer to the Company and the Trust. References to “shareholders” refer to shareholders of the Trust. This Proxy Statement and the accompanying materials contain “forward-looking” statements regarding the Company and the Trust within the meaning of the applicable securities laws and regulations. Forward-looking statements generally are identified by words such as “may,” “might,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “likely,” “potential” or “continue” or other similar terms or expressions. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. These risks and uncertainties include, but are not limited to, the factors and risks detailed in our filings with the Securities and Exchange Commission (“SEC”), including the sections titled “Statement Regarding Forward-Looking Disclosures” and “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our expectations, objectives or plans will be achieved in the timeframe anticipated or at all. Investors are cautioned not to place undue reliance on our forward-looking statements and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Our business and affairs are managed under the direction of our Board. We currently have nine (9) directors. Our Board has the ability to decrease or increase its size to no less than five (5) or up to thirteen (13) directors, respectively. Pursuant to the Company’s Sixth Amended and Restated Operating Agreement dated as of August 3, 2021, as amended by the First Amendment dated as of February 11, 2022, which we refer to herein as the “LLC Agreement”, the Company’s Allocation Member (as defined in the LLC Agreement) has the right to appoint director(s) to the Board based on overall Board size and any such appointed directors are not required to stand for election by our shareholders. For our 2024 Annual Meeting, eight (8) directors, all of whom are independent, have been nominated for election by our shareholders and Mr. Elias J. Sabo, our Chief Executive Officer, is currently serving as a director appointed by the Allocation Member.

Our Board was historically divided into three classes serving staggered three-year terms. As part of a continued emphasis on strong corporate governance practices, in February of 2022, the Board approved an amendment to the LLC Agreement to declassify the Board. Therefore, at each year’s annual shareholders’ meeting, each director (other than any director appointed by the Allocation Member) will be elected for a term of office to expire at the next annual meeting following his or her election.

The Trust’s common shares are listed on the New York Stock Exchange, or NYSE, under the symbol “CODI.” Under the rules of the NYSE, independent directors must comprise a majority of our Board. In addition, the rules of the NYSE require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and governance committees be independent. Audit committee and compensation committee members must also satisfy the independence criteria set forth in Rule 10A-3 and Rule 10C-1, respectively, under the Securities Exchange Act of 1934, as amended. Under the rules of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board, or any other board committee: (i) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries, or (ii) be an affiliated person of the listed company or any of its subsidiaries. In determining independence of a member of the compensation committee, the following factors must be considered pursuant to Rule 10C-1: (i) the source of compensation of the director, including any consulting, advisory or other compensatory fee paid by the issuer to such director, and (ii) whether the director is affiliated with the issuer, a subsidiary of the issuer or an affiliate of a subsidiary of the issuer.

Pursuant to our governing documents, our Board will always consist of at least a majority of independent directors and all directors serving on our standing committees will also be independent. Our Board has evaluated information requested from and provided by each director concerning his or her background, employment, and affiliations, including family relationships, and reviewed the materiality of any relationship that each of our directors has with the Trust or the Company, either directly or indirectly. Based on this review, the Board has determined that the following directors are “independent directors” as defined by the NYSE: Mr. Alexander S. Bhathal, Mr. James J. Bottiglieri, Mr. Gordon M. Burns, Mr. Harold S. Edwards, Mr. Larry L. Enterline, Ms. Heidi Locke Simon, Ms. Nancy B. Mahon, and Ms. Teri R. Shaffer. We have three standing committees: the audit committee (“Audit Committee”), the compensation committee (“Compensation Committee”) and the nominating and corporate governance committee (“Nominating/Governance Committee”). Our Board has also determined that those directors who serve on our Audit Committee, Compensation Committee and Nominating/Governance Committee satisfy the independence standards for those committees established by the rules of the NYSE and the applicable SEC rules.

Eight (8) directors will be elected at the Annual Meeting and each will serve for a one-year term that expires at our 2025 Annual Meeting of shareholders. Each of Mr. Alexander S. Bhathal, Mr. James J. Bottiglieri, Mr. Gordon M. Burns, Mr. Larry L. Enterline, Mr. Harold S. Edwards, Ms. Heidi Locke Simon, Ms. Nancy B. Mahon, and Ms. Teri R. Shaffer was nominated by the Board for election by our shareholders upon the recommendation of the Board’s Nominating/Governance Committee. Proxies cannot be voted for a greater number of persons than the number of nominees named.

Our Nominating/Governance Committee considers multiple aspects of diversity among directors and director nominees, including professional skills and experiences, industry knowledge, subject matter expertise, gender, ethnicity and age. We believe that diversity of viewpoints, backgrounds and experiences can improve the Board’s ability to engage with management, our shareholders and other stakeholders.

Our director nomination process allows for the Board to design recruitment procedures that meet the Board’s and the Company’s strategic priorities at a given point in time. Our annual Board self-evaluation process serves as an effective mechanism for monitoring the need for Board refreshment, while maintaining a balance of tenure at the Board. Over the past few years, we have been implementing incremental changes to our Board structure, overall director composition, and corporate governance policies and standards, as highlighted by the following key changes:

The following describes the experience, education and other qualifications of each of the director nominees to be voted on for election at the 2024 Annual Meeting. Each of the eight (8) nominees currently serves on our Board.

The following describes the experience, education and other qualifications of the director appointed by our Allocation Member to serve as a member of our Board again for fiscal year 2024.

The name and age of each director, nominee and executive officer and the positions held by each of them as of March 26, 2024 are as follows:

Ryan J. Faulkingham has served as Chief Financial Officer and Co-Compliance Officer of the Company since November 2013. He also serves on the Investment Committee of the Company’s Manager, as well as the organization’s ESG Committee. Mr. Faulkingham joined the Company in 2008 and previously was the Company’s Director of Financial Reporting. Prior to joining us in 2008, Mr. Faulkingham served as a Vice President at Merrill Lynch & Co., a financial management and advisory company, where he prepared regulatory filings, performed technical accounting research and implemented policies to ensure compliance with internal control standards. From 2003 to 2006, he served as Manager, Accounting and External Reporting at WebMD Health Corp., a medical information company, serving as a key contributor to the company’s 2005 initial public offering and lead finance member for numerous mergers and acquisitions. Prior to that, Mr. Faulkingham had a career in public accounting first at Arthur Andersen LLP and later at KPMG LLP, both public accounting firms. He received a BS in Accounting from Lehigh University and an MBA from Fordham University. Mr. Faulkingham serves as a director for our Velocity Outdoor Inc. subsidiary and as an observer to the boards of directors of all our other subsidiary companies.

Our Board has adopted corporate governance guidelines that set forth our corporate governance objectives and policies and govern the functioning of the Board.

We have also adopted a code of ethics that sets forth our commitment to ethical business practices. Our code of ethics applies to our directors and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, as well as the officers and employees of our Manager involved in the oversight of the day-to-day operations of the Company and its subsidiaries. We intend to disclose any amendments to, or waivers from, our code of ethics by posting such information on our website listed below or by filing with the SEC a Current Report on Form 8-K, in each case, if such disclosure is required by rules of the SEC or the NYSE.

Our corporate governance guidelines and code of ethics are available on our website at www.compassdiversified.com and in print from us without charge upon request by writing to: Investor Relations at Compass Group Diversified Holdings LLC, 301 Riverside Avenue, Second Floor, Westport, Connecticut 06880.

Our Board recognizes the importance of effective risk oversight to the organization’s continued success and in fulfilling its fiduciary responsibilities to the Company and its shareholders. The members of the Company’s senior leadership team, including our Chief Executive Officer, Co-Chief Compliance Officers, General Counsel, Chief Financial Officer, Senior Vice President of Internal Audit, and the Chief Operating Officer and Vice President and Director of ESG of our Manager, are responsible for the day-to-day management of risk, and the regular reporting to the Board or the appropriate committee, regarding the Company’s major risk exposures (such as strategic and competitive risks, financial risks, brand and reputation risks, cybersecurity and technology risks, legal and compliance risks, regulatory risks, ESG risks, and operational risks) and the steps management has taken to monitor and control such exposures. Our Board is responsible for promoting an appropriate culture of risk management throughout the organization, overseeing our aggregate risk profile and monitoring how the Company addresses specific risks. In furtherance of this responsibility, the Board has continually added directors with general risk oversight experience, and specific expertise in areas such as cybersecurity, sustainability and global corporate citizenship.

Our General Counsel updates the Board regularly on material legal and regulatory matters and presents, and the Board assesses, at least annually, the critical legal and regulatory risks associated with the business of the Company and each of its subsidiaries, the overall risk environment for the Company’s business, as well as the steps taken by the appropriate management team, if any, to mitigate such risks. The Board also performs a significant portion of its role in risk oversight through the Audit Committee. The Audit Committee charter provides that the Audit Committee shall assist the Board in fulfilling its oversight responsibility relating to the evaluation of enterprise risk issues and regularly discuss with management, counsel, the internal audit leadership and internal audit service providers, as the case may be, and the independent auditors, the Company’s major risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies. The Company’s internal audit department reinforces the day-to-day risk management responsibilities of the Company’s senior leadership team through its internal audit review processes which are performed at the Company level, as well as at each Company subsidiary. The internal audit department tailors its review to provide enhanced evaluations, on a rotating basis, in specific areas which have included, without limitation, fraud, cybersecurity, adequacy of insurance, gift and entertainment and other spending, offsite satellite office controls, and business continuity. Our internal audit team reports directly to the Audit Committee, which is comprised solely of independent directors. In addition, during each quarterly meeting of our Audit Committee, the members of the Audit Committee meet with the Company’s Senior Vice President of Internal Audit, independent auditors and counsel, in each case, without management present, to discuss the specific areas of risk identified during the quarter, if any.

The Audit Committee is authorized to utilize outside lawyers, internal staff, independent experts, and other consultants to assist and advise the committee in connection with its responsibilities, including the evaluation of the Company’s major risk exposures. The Company’s Co-Chief Compliance Officers regularly, and no less than quarterly, brief the Audit Committee, who in turn reports to the full Board on matters of ethics and compliance.

In addition, if there are particular areas of exposure or applicable emerging areas of risk, for which directors do not already have expertise or familiarity, the Company leverages the expertise of management and/or outside advisors to provide training sessions to our Board. For example, during fiscal year 2022, our Board received specific training from an outside third party regarding the SEC’s proposed rules regarding the Enhancement and Standardization of Climate-Related Disclosures for Investors and during fiscal year 2023, our Board received specific training from an outside third party regarding the SEC’s proposed rules on Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure by Public Companies, in each case, prior to the adoption of such rules. Such trainings were in addition to the regular trainings provided to our Board and executive management team regarding business ethics, anti-corruption, and cyber awareness.

The Board is involved in strategic planning and review throughout the year. Additionally, during one quarter of each year, the Board meets in a separate session dedicated to a discussion of the Company’s strategy. The Chair and Chief Executive Officer review developments against the Company’s strategy at Board meetings and management provides updates to the Board between regularly-scheduled sessions, as necessary. In addition, the Board approves specific initiatives throughout the year, including acquisitions and divestitures over a certain monetary threshold. The Board (or the appropriate committee) reviews trends identified as significant risks and other items of strategic interest such as ESG and cybersecurity on a regular basis at each quarterly meeting. The Board’s annual schedule includes at least one meeting per year during which a subsidiary chief executive officer presents to the Board regarding such subsidiary’s business, operations, strategy, and culture, on a rotating basis. This provides the Board with the opportunity to engage directly with subsidiary leadership.

Our Board is actively engaged in management succession planning and views Chief Executive Officer succession planning as one of its core responsibilities. The Board regularly meets with the Company’s Chief Executive Officer to discuss and review our Manager’s succession strategy and leadership pipeline for key roles. Chief Executive Officer succession planning discussions are led by our Chair and Board members have regular direct access to and interaction with current members of senior management and future leaders of the organization. The Manager has developed and shared with the Board a succession plan for the key members of management, as well as a contingency plan if the Chief Executive Officer were to depart unexpectedly.

Our Board and its committees exercise broad oversight over issues important to the Company, including ESG topics, as part of the Board’s oversight of our business strategy and risk management. The full Board has oversight over the organization’s ESG strategy, as detailed in the section titled “Our Commitment to ESG.” In furtherance of this, the organization’s Vice President and Head of ESG presents to and engages with the Board at each quarterly meeting regarding the Company’s progress versus its established ESG strategy and objectives. The Board’s standing committees each oversee specific environmental, social and governance matters that fall within their respective areas of responsibility. For example, the Audit Committee has oversight responsibility for compliance with the organization’s periodic reporting and disclosure obligations, including the reporting and disclosure of human capital and climate related items as mandated by the SEC and other regulatory bodies. The Nominating/Governance Committee has responsibility for overseeing the organization’s policies with respect to social issues, corporate social responsibility, global corporate citizenship, and human rights, as set forth in the Company’s code of ethics, anti-corruption, and human rights and labor policies, and for also ensuring that the Company maintains strong governance practices.

Our Board considers cybersecurity and cyber risk as part of its risk oversight function and has delegated oversight of cybersecurity risks to the Audit Committee. Two of our directors serving on our Audit Committee, Ms. Locke Simon and Ms. Shaffer, hold CERT Cybersecurity Oversight Certification from Carnegie Mellon. The Audit Committee has oversight responsibility for risks and incidents relating to cybersecurity threats, including compliance with disclosure requirements and related effects on financial and other risks, and it reports any findings and recommendations, as appropriate, to the full Board. Senior management regularly discusses cyber risks and trends, no less than quarterly, and, if they should arise, will discuss any material incidents with the Audit Committee. Both the Board and the Audit Committee periodically review the measures we have implemented to identify and mitigate cybersecurity risks. As part of such reviews, our Board and Audit Committee receive periodic reports and presentations, no less than quarterly, from members of the team responsible for overseeing cybersecurity risk management. These periodic reviews address various topics including evolving regulatory standards, recent developments, vulnerability assessments, third-party reviews, and other information security topics that senior management deems necessary. We have also established protocols by which certain cybersecurity incidents that meet established reporting thresholds are escalated internally and, where appropriate, reported to the Audit Committee or the Board in a timely manner. See Part I. Item IC. Cybersecurity of our Annual Report on Form 10-K for the fiscal year ended at December 31, 2023 for more information regarding our cybersecurity practices.

Our Board knows that the caliber of the information it collects is important to the caliber of the work it does. The Board therefore has created numerous practices to enable it to stay informed, and information from shareholders comprises an important part of this mix.

Our Chair and the chairs of our committees have shareholder engagement roles and are available for appropriate engagement. Shareholders can interact with our directors at our Annual Meeting. Shareholders and others can use our confidential and anonymous Ethics and Compliance reporting hotline: https://www.whistleblowerservices.com/codiwb/ and if information provided is of a type that the Board needs to consider, it will be sent to them.

Shareholders and other interested parties can send emails to our Board via BOD@compassdiversified.com. In addition, communications to our Board, to non-management directors as a group or to any director individually may be made by writing to the following address:

Attention: [Board of Directors] [Board Member]

c/o Carrie W. Ryan, General Counsel & Secretary

301 Riverside Avenue, Second Floor

Westport, Connecticut 06880

Communications sent to the physical mailing address are forwarded to the relevant director if addressed to an individual director, or to the Chair of our Board, if addressed to the Board.

Our Nominating/Governance Committee, which is composed entirely of independent directors, is responsible for reviewing and approving, prior to our entry into any such transaction, all transactions in which we are a participant and in which any of the following related persons have or will have a direct or indirect material interest:

Pursuant to the written terms of our code of ethics, any transaction required to be disclosed pursuant to Item 404 of Regulation S-K (“related person transactions”) must be brought to the attention of and reviewed and approved for potential conflicts of interest by our Nominating/Governance Committee. The Company may not enter into or engage in any related person transaction with a related person without such approval. Additionally, all related person transactions are to be considered and conducted in a manner such that no preferential treatment is given to any such dealing of transactions. All related person transactions involving an acquisition from or sale to an affiliate of our Manager, including any entity managed by an affiliate of our Manager, must be submitted to the Nominating/Governance Committee for pre-approval. Details of related person transactions will be publicly disclosed as required by applicable law.

Our Manager (of which our Chief Executive Officer serves as the managing member) manages the day-to-day operations of the Company and oversees the management and operations of our subsidiary businesses. Our relationship with our Manager is governed principally by the Management Services Agreement.

While our Manager provides management services to the Company, our Manager is also permitted to provide services, including services similar to the management services provided to us, to other entities. In this respect, the Management Services Agreement and the obligation to provide management services does not create a mutually exclusive relationship between our Manager and the Company or our businesses. As such, our Manager, and our management team, will be permitted to engage in other business endeavors. Mr. Faulkingham, as Chief Financial Officer of the Company, devotes a substantial portion of his time to our affairs.

Our Manager receives management fees, offsetting management fees, fees under integration services agreements, if any, and reimbursement for certain expenses it incurs on behalf of the Company related to the foregoing, and uses such proceeds to pay the compensation, overhead, out-of-pocket and certain other expenses of our Manager, to satisfy its contractual obligations and otherwise distributes such proceeds to the members of our Manager, which includes Mr. Sabo, our Chief Executive Officer, in accordance with our Manager’s organizational documents. No other officers or directors of the Company own equity in our Manager.

Our Compensation Committee is responsible for periodically evaluating and making recommendations to the Board concerning the total compensation package for non-management directors. To effectively align the interests of our directors and shareholders, our 2023 non-management director compensation included a balanced combination of cash retainers and compensation which our directors are encouraged to use to purchase shares of Trust common stock.

The elements of our annual non-management director compensation for fiscal 2023 were as follows:

All cash retainers are paid in equal installments, quarterly in arrears. Directors do not receive additional compensation for attendance at Board or committee meetings. Directors (including the Board Chair) are reimbursed for reasonable out-of-pocket expenses incurred in attending meetings of the Board or its committees. The Company also reimburses directors for all reasonable and authorized business expenses related to service to the Company by the directors, in their capacity as directors, including director training, continuing education programs, director certification programs, and membership to organizations that provide thought leadership and peer-to-peer networking opportunities for directors, as applicable, in accordance with the policies of the Company as in effect from time to time.

While directors may elect to receive such amount in cash, the annual “equity retainer” portion of our non-management directors’ compensation is strongly encouraged to be used by our directors to purchase shares of Trust common stock. Consequently, each non-management director who elects to use such award to purchase shares of Trust common stock receives that number of shares of Trust common stock that can be purchased with such amount at the market price for shares of Trust common stock on the date of purchase. During 2023, and historically, such “equity retainer” was paid to our directors in January of each year, in respect of their service for the prior fiscal year.

Consistent with prior years, in early 2024, the Compensation Committee conducted a survey of the director compensation practices of other companies that it considered reasonably comparable to the Company. The Compensation Committee also considered the time commitment, responsibilities, and related burdens of Board service over the Company’s history. Based upon this review, the Compensation Committee recommended to the full Board that (i) the “equity retainer” portion of the non-management director compensation for fiscal year 2024 be increased from $110,000 per annum to $120,000 per annum and that such “equity retainer” be paid to directors following their election at each of the Company’s annual shareholders’ meetings in respect of their service for the twelve-month calendar period up and until the next annual meeting of shareholders, and (ii) the cash retainer portion of the non-management director compensation for fiscal year 2024 remain at $100,000 per annum. The full Board ratified the Compensation Committee’s recommendations.

Pursuant to our LLC Agreement, neither the Allocation Member’s Appointed Director(s), nor any executive officer of the Company serving as a director who is an employee of our Manager, may be paid compensation as a director or chair of any committee or subcommittee of the Board; provided, however, these directors may be reimbursed for their expenses, if any, incurred with respect to their attendance at each meeting of the Board, as well as any expenses reasonably incurred in their capacities as directors. Accordingly, Mr. Sabo, our Chief Executive Officer and the Allocation Member’s Appointed Director, does not receive compensation from the Company for his role as a director. Mr. Sabo is reimbursed by the Company for his expenses, if any, incurred with respect to his attendance at each meeting of the Board and any expenses reasonably incurred in his capacity as a director.

The following table sets forth the compensation paid or accrued by us for our directors in 2023:

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our shareholders to vote to approve, on a non-binding and advisory basis, the compensation of our named executive officer as disclosed in this Proxy Statement in accordance with applicable SEC rules. We are providing this vote as required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (15 U.S.C. 78n-1).

Our compensation policy is designed to enable us to attract, motivate, reward and retain the management talent required to achieve our objectives, and thereby increase shareholder value. Please see the section titled “EXECUTIVE COMPENSATION – Compensation Discussion and Analysis” and the related compensation tables herein for additional details about our executive compensation policy, including information about the fiscal year 2023 compensation of our named executive officer.

We are asking our shareholders to indicate their support for our named executive officer’s compensation as described in this Proxy Statement. This Proposal 2 gives our shareholders the opportunity to express their views on our named executive officer’s compensation (sometimes referred to as the “Say-on-Pay Vote”). This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officer and the philosophy, policies and practices described in this Proxy Statement. We believe that our overall compensation policy accomplishes our compensation goals of attracting and retaining a qualified and talented Chief Financial Officer. Accordingly, we will ask our shareholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officer, as disclosed in the Company’s Proxy Statement for the 2024 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC.”

The Say-on-Pay Vote is advisory, and therefore not binding on the Company, our Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our shareholders and to the extent there is any significant vote against the named executive officer’s compensation as disclosed in this Proxy Statement, we will consider the results of the vote in future compensation deliberations and evaluate whether any actions are necessary to address shareholder concerns. We currently hold our advisory vote on executive compensation annually. Thus, we expect to hold our next advisory vote on executive compensation at the 2025 Annual Meeting of Shareholders.

Our Board recommends that you vote, on a non-binding and advisory basis, FOR the resolution approving the compensation of our named executive officer as disclosed in this Proxy Statement.

Compass Diversified owns and actively manages a diverse group of innovative and disruptive middle market businesses in the industrial and branded consumer sectors and we expect to expand into the healthcare sector. We are an experienced acquirer and manager of middle-market North American companies. Since 2006, we have acquired and operated twenty-four businesses and have supported our subsidiaries who have consummated thirty-four add-on acquisitions during that same period. Currently, our subsidiary businesses include seven branded consumer businesses and three industrial businesses.

Symbiotically, our public company structure gives us an advantage in that our capital structure provides our subsidiaries with a much more stable funding base than stand-alone private, leveraged entities. This funding base allows us to take longer-term views and positions us to deliver returns across a wide range of economic climates. Our shareholders have been rewarded with more than a billion dollars in realized gains since our 2006 initial public offering.

Since our Manager’s founding in 1998, and the Company’s subsequent initial public offering in 2006, our strategy and philosophy have always remained the same — we look to acquire and manage companies that we could own forever and that exhibit a clear “reason to exist.” In 2018, we further refined and enhanced our strategy, with the objective of owning and managing high-growth, innovative and disruptive businesses. We are passionate about partnering with outstanding management teams and supporting them with patient growth capital. We have found that companies who strategically plan for the long term have outperformed those who only focus on the short term.

We create value for our shareholders in two ways: First, we identify, perform due diligence on, negotiate and consummate platform acquisitions of middle market businesses with high growth potential, primarily in the verticals of industrial, branded consumer and healthcare, in accordance with acquisition criteria established by our Manager and our Board. Second, we focus on helping our subsidiaries grow earnings and cash flow. We believe that the scale and scope of our businesses give us a diverse base of cash flow upon which to further build.

Our subsidiaries include many brands that are household names. Those brands include The Honey Pot, Sterno, Ergobaby, Lugano, BOA, PrimaLoft, and 5.11, and in the past we’ve managed brands such as Marucci Sports, Camelbak, Fox, Liberty Safe, and Manitoba Harvest. Even if you have not heard of Compass Diversified, you are likely familiar with one or more of our brands.

As our Company has evolved, our approach has shifted from merely building the business case for awareness of ESG to actively embedding ESG as a cornerstone of our core business strategy. ESG issues play a pivotal role in our analysis of potential acquisitions, assessing both risks and opportunities, and serve as a lever to increase value in the companies we own. Our ESG strategy is driven by three main objectives: (1) gaining long-term value through the identification of companies with robust ESG credentials, (2) safeguarding our acquisitions from ESG-related risks by choosing companies prepared for various challenges, and (3) realizing ESG benefits by pinpointing and leveraging opportunities for added value. Our ESG framework is built on two principal pillars and is reinforced by eight critical areas, all of which are rooted in stringent governance practices.

 

This framework enables a comprehensive and flexible approach to both the acquisition and management of our subsidiaries, affirming that key ESG factors are integral to long-term value creation. This facilitates oversight of our acquisitions and enhances our

responsiveness to stakeholder needs. Developed following a materiality assessment we performed in 2022, our framework underwent a significant update in 2023. We engaged an external third party to refine our materiality assessment, including performing an assessment of double materiality at the Company level. Simultaneously, the external third party conducted initial formal materiality assessments for four of our subsidiary businesses.

The following Summary Compensation Table summarizes the total compensation accrued for our named executive officers in each of 2023, 2022 and 2021 and should be read in conjunction with the Compensation Discussion and Analysis.

 

 

 

The Compensation Committee makes recommendations to the Board of Directors concerning the compensation of the Company’s named executive officer. We have reviewed and discussed with management the Compensation Discussion and Analysis to be included in the Company’s Schedule 14A Proxy Statement, filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended. Based on the reviews and discussions referred to above, the Compensation Committee recommended to the Board, and the Board has approved, the inclusion of the Compensation Discussion and Analysis referred to above in the Company’s 2024 Proxy Statement.

Members of the Compensation Committee

The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Exchange Act or the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference in such filing.

 

Our Board has recommended and asks that you ratify the appointment of Grant Thornton LLP as the independent auditor for the Company and the Trust for the fiscal year ending December 31, 2024, in accordance with the recommendation of our Audit Committee.

Grant Thornton LLP was appointed by our Audit Committee to audit the annual financial statements of the Company and the Trust for the fiscal years ended December 31, 2023 and December 31, 2022, respectively. Based on its past performance during these audits, the Audit Committee of the Board has appointed Grant Thornton LLP as the independent auditor to perform the audit of our financial statements and internal control over financial reporting for fiscal year 2024. Grant Thornton LLP is a registered public accounting firm. Information regarding Grant Thornton LLP can be found at: www.grantthornton.com.

The affirmative vote of a majority of the outstanding shares present in person or represented by proxy at the Annual Meeting and entitled to vote is required to ratify the appointment of Grant Thornton LLP. If you do not ratify the appointment of Grant Thornton LLP, our Board will reconsider the appointment of Grant Thornton LLP and may, in its sole discretion, make a new proposal for independent auditor.

Representatives of Grant Thornton LLP are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

The chart below sets forth the total amount billed to us by Grant Thornton LLP for services performed for fiscal years 2023 and 2022, respectively, and breaks down these amounts by category of service:

The Audit Committee has established policies and procedures for its appraisal and approval of audit and non-audit services. The Audit Committee has also delegated to the chair of the Audit Committee the authority to approve additional audit and non-audit services and, subject to compliance with all applicable independence requirements, to approve the engagement of additional accounting firms to provide such services, with subsequent ratification and approval by the Audit Committee. While all other audit-related, tax and other fees may be approved by the Audit Committee prospectively, the Audit Committee or its chair has pre-approved all of the services provided by Grant Thornton LLP since its engagement.

In making its recommendation to ratify the appointment of Grant Thornton LLP as the independent auditor for the fiscal year ending December 31, 2024, the Audit Committee has considered whether the services provided by Grant Thornton LLP are compatible with maintaining the independence of Grant Thornton LLP and has determined that such services do not interfere with Grant Thornton LLP’s independence.

Our Board recommends that you vote, based on the recommendation of the Audit Committee, FOR the ratification of the appointment of Grant Thornton LLP to serve as the independent auditor for the Company and the Trust for the fiscal year ending December 31, 2024.

Our Audit Committee is composed of four independent directors, all of whom are financially literate. In addition, the Board has determined that each of Ms. Shaffer, chair of the Audit Committee, Mr. Bottiglieri and Ms. Locke Simon qualifies as “audit committee financial expert” as defined by the applicable SEC rules. The Audit Committee operates under a written charter, which reflects the NYSE listing standards and Sarbanes Oxley Act of 2002, as amended, requirements regarding audit committees. A copy of the current Audit Committee charter is available on the Company’s website at www.compassdiversified.com.

The Audit Committee’s primary role is to assist the Board in fulfilling its responsibility for oversight of (1) the quality and integrity of the consolidated financial statements and related disclosures, (2) compliance with legal and regulatory requirements, (3) the independent auditor’s qualifications, independence and performance, and (4) the performance of internal audit and control functions.

The Company’s management is responsible for the preparation of the financial statements, the financial reporting process and the system of internal controls. The independent auditors are responsible for performing an audit of the financial statements in accordance with auditing standards generally accepted in the U.S. and issuing an opinion as to the conformity of those audited financial statements to U.S. generally accepted accounting principles. The Audit Committee monitors and oversees these processes.

The Audit Committee has adopted a policy designed to ensure proper oversight of our independent auditor. Under the policy, the Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing any other audit review (including resolution of disagreements among management, the Manager, and the auditor regarding financial reporting), or attestation services. In addition, the Audit Committee is responsible for pre-approving any non-audit services provided by the Company’s independent auditors. The Audit Committee’s charter also ensures that the independent auditor discusses with the Audit Committee important issues such as internal controls, critical accounting policies, any instances of fraud and the consistency and appropriateness of our accounting policies and practices.

The Audit Committee has reviewed and discussed with management and Grant Thornton LLP, the Company’s independent auditor, the audited financial statements as of and for the year ended December 31, 2023. The Audit Committee has also discussed with Grant Thornton LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. In addition, the Audit Committee has received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence and has discussed with the independent auditor the independent auditor’s independence. The Audit Committee also considered whether the non-audit services provided by Grant Thornton LLP to us during 2023 were compatible with its independence as auditor.

Based on these reviews and discussions, the Audit Committee has recommended to the Board, and the Board has approved, the inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Members of the Audit Committee

The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Exchange Act or the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference in such filing.

The following table sets forth information regarding the beneficial ownership of shares of Trust common stock by each person who is known to us to be the beneficial owner of more than five percent of the outstanding shares of Trust common stock, each of our directors, nominees and executive officers, and our directors, nominees and executive officers as a group, in each case, as of March 26, 2024 (except otherwise noted below), based on 75,323,361 shares of Trust common stock issued and outstanding as of such date. All holders of shares of Trust common stock are entitled to one vote per share on all matters submitted to a vote of holders of shares of Trust common stock. The voting rights attached to shares of Trust common stock held by our directors, nominees, executive officers or major shareholders do not differ from those that attach to shares of Trust common stock held by any other holder. Under Rule 13d-3 of the Exchange Act, “beneficial ownership” includes shares for which the individual, directly or indirectly, has voting power, meaning the power to control voting decisions, or investment power, meaning the power to cause or direct the sale of the shares. The address for each director and executive officer is 301 Riverside Avenue, Second Floor, Westport, Connecticut 06880.