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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

(Amendment No.   )

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Check the appropriate box:

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ADVANCED ENERGY INDUSTRIES, INC.

(Name of Registrant as Specified In Its Charter)

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

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A Message from Our CEO

Dear Stockholders:

Please join us at Advanced Energy’s 2021 Annual Meeting of Stockholders at 9:00 a.m., Mountain Daylight Time, on Friday, April 30, 2021. The meeting will be held at our headquarters located at 1595 Wynkoop Street, Suite 800, Denver, Colorado, 80202.

I recently joined Advanced Energy as President and CEO. Advanced Energy is an impressive company, with strong technology, a commitment to engineering excellence, and a focus on customer satisfaction. It has a solid growth strategy, a strong organizational culture and a team executing at a very high level. Much of this foundation was put in place by my predecessor Yuval Wasserman, who remains an executive advisor to the company.

My goal is to accelerate the company’s revenue growth while maintaining strong bottom-line performance. We will do this by successfully applying AE’s leading-edge technology to solve our customers’ precision power needs. In addition, we will continue to make acquisitions which make strategic and financial sense.

Advanced Energy delivered record revenue and earnings in 2020. Despite the challenges presented by the COVID-19 pandemic, AE’s agility and operational excellence enabled the company to meet changing customer requirements and surpass $1.4 billion in revenue. Earnings more than doubled year over year and the company generated record cash flow from continuing operations. These results were enabled in part by the successful integration of Artesyn Embedded Power, including the achievement of operating milestones and synergy targets ahead of schedule.

AE is a technology leader in precision power conversion and controls. Over the past year, increased investment in technology enabled the company to introduce a record number of new products, win important new designs, and gain market share. We are well positioned to extend our leadership in the semiconductor equipment power market and transition from a fast follower to a market leader in hyperscale. We are also a major player in the industrial and medical market, where we are focused on gaining share.

Advanced Energy’s success is based on innovation, world-class talent, culture, and teamwork. I look forward to building on these strengths as well as advancing our initiatives on environmental, social, and governance (ESG) to deliver long-term value to our global stakeholders.

In summary, AE is well positioned to deliver growth and create shareholder value as a pure play power leader uniquely positioned to benefit from the drivers of the 4^th industrial revolution. I am proud to lead this team and am excited about the future of Advanced Energy. On behalf of our employees and the Board of Directors, we thank you for your continued support and confidence.

Best Regards,

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Stephen D. Kelley
President and Chief Executive Officer

March 10, 2021

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Notice of the Annual Meeting of Stockholders

To be held on April 30, 2021

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To Our Stockholders:

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You are cordially invited to attend the 2021 annual meeting of stockholders (the “Annual Meeting”) of Advanced Energy Industries, Inc. (“Advanced Energy” or the “Company”). Please see below for the meeting logistics and business matters to be addressed at the Annual Meeting.

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Logistics		Items of Business				​			​
When Friday, April 30, 2021 at 9:00 a.m. Mountain Daylight Time ​ Where Advanced Energy Industries, Inc. 1595 Wynkoop Street, Suite 800, Denver, Colorado 80202 ​ Who Can Vote All holders of our common stock at the close of business on March 8, 2021	​	​			​	Board Recommendation		​	Page
		​	1	Election of ten (10) directors;		​	“FOR”		​	5
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		​	2	Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2021;		​	“FOR”		​	24
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		​	3	Advisory approval of Advanced Energy’s compensation of its named executive officers;		​	“FOR”		​	27
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	​	​	4	Approval of an increase in the total number of shares of common stock authorized for issuance under the Employee Stock Purchase Plan from 1,000,000 shares to 1,500,000 shares.		​	“FOR”		​	​ 57
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		​	5	Any other matters of business properly brought before the Annual Meeting.		​	​		​	​
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		​	Each of matters 1 through 4 is described in detail in the accompanying proxy statement, dated March 10, 2021.
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		​	Your vote is important. All stockholders are cordially invited to attend the Annual Meeting in person. We will follow applicable protocols such as mask wearing and social distancing that are applicable and advisable considering the COVID-19 pandemic situation as it exists on the meeting date. If you do not plan to attend the Annual Meeting and vote your shares of common stock in person, please authorize a proxy to vote your shares in one of the following ways:
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		​	Place your vote via internet at www.proxypush.com/aeis		Call toll-free (if US or Canada) 1-866-390-9955			Mark, date, sign and mail your proxy card in the postage-paid envelope provided

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on April 30, 2021

This notice for the Annual Meeting, the proxy statement, the proxy card, and the Company’s 2020 Annual Report including the Annual Report on Form 10-K are available online at: www.proxydocs.com/aeis.

Any proxy may be revoked at any time prior to its exercise at the Annual Meeting.

	By Order of the Board of Directors,
Denver, Colorado	Thomas O. McGimpsey
March 10, 2021	Corporate Secretary

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Proxy Summary

This proxy statement and the accompanying proxy card and materials are first being sent to stockholders of Advanced Energy Industries, Inc. or made available electronically on or about March 11, 2021.

This summary highlights key information presented elsewhere in this year’s proxy statement. This section does not contain all the information that you should consider, and you should read the entire proxy statement before voting.

Our Meeting Agenda

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PROPOSAL		REFERENCE	BOARD RECOMMENDATION	EFFECT OF BROKER NON-VOTES AND ABSTENTIONS		VOTES REQUIRED FOR APPROVAL
1	Election of ten (10) directors	Page 5	FOR ALL NOMINEES	No Effect		Plurality of votes present (by proxy or in person) - subject to the resignation policy described on Page 15
2	Ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2021	Page 24	FOR	No Effect		Majority of votes cast at the Annual Meeting (by proxy or in person)
3	Advisory approval on the compensation of our named executive officers	Page 27	FOR	No Effect		Majority of votes cast at the Annual Meeting (by proxy or in person)
4	Approval of an increase in the total number of shares of common stock authorized for issuance under the Employee Stock Purchase Plan from 1,000,000 shares to 1,500,000.	Page 57	FOR	No Effect		Majority of votes cast at the Annual Meeting (by proxy or in person)

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We do not know of any other matters to be submitted to the stockholders at the Annual Meeting. If any other matters properly come before the Annual Meeting, the proxy holders intend to vote the shares they represent on such matters as the Board of Directors may recommend. The proposed corporate actions on which the stockholders are being asked to vote at the Annual Meeting are not corporate actions for which stockholders of a Delaware corporation have the right to exercise appraisal rights under the Delaware General Corporation Law.

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Our Governance Best Practices

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WHAT WE DO	​	WE DO NOT DO
√   To ensure effective management oversight, our Board Governance Guidelines specify that the Chairman of the Board and CEO positions be held by separate persons. √   A substantial portion of compensation is performance-based. √   We maintain a highly independent, and increasingly diverse, Board of Directors. √   We maintain robust stock ownership requirements for executives.	​	x  There are no interlocking relationships among our directors. x  There are no excise tax gross-up arrangements with any of our executive officers. x  We do not guarantee incentive awards. x  Our policies prohibit hedging of company stock. x  We do not provide significant perquisites or separate pension programs to our executive officers.
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Advanced Energy’s Environmental, Social and Governance Initiatives

We are dedicated to improving lives through science-based innovation by creating industry-leading power conversion solutions. From smartphone and video streaming to medical equipment and robots, our products and solutions are used to create the essential technologies that touch our everyday life. But how we do business is as important as the products we produce. We drive business success by delighting our customers, empowering our employees, and supporting our communities. Sustainability is key to our strategy in the products we make, the way we operate, and how we govern as a public company. We incorporate environmental, social, and governance (ESG) responsibility across our business with the same focus and dedication we approach all our initiatives.

We are excited to share our “value driven” ESG initiatives, areas of focus, and accomplishments. Our results and ongoing efforts related to ESG are an integral part of our commitment to deliver long-term value to our global stakeholders. This commitment is driven from the highest level of the Company including our Chief Executive Officer, executive management team, and Board of Directors. We have demonstrated this commitment by tying a portion of the management team’s fiscal 2021 performance shares to ESG metrics. We look forward to making a difference in the markets and communities we serve.

In 2020, our Board officially added oversight of the Company’s sustainability program to the Nominating, Governance & Sustainability Committee (“NG&S”). As indicated in its charter, this committee is directed to review the Company’s progress towards achieving its sustainability goals as well as to review environmental, governance, and social trends that could impact the Company’s operations, performance, and reputation. We believe that our goals to increase the energy efficiency of our products, and to improve the efficiency of our operations, reflect our efforts to reduce the environmental impact and carbon emissions that may be linked to the industries we serve.

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Energy-efficient Products. Our products take in electrical power from the grid and convert it to an optimal usable form. Efficiency of energy conversion is a key performance factor for our customers. We are committed to producing products with industry-leading energy conversion efficiency in order to minimize overall energy usage by our customers.

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Energy-efficient Operations. We operate multiple manufacturing facilities around the world. We strive to lower our energy usage in these factories wherever possible and seek to utilize renewable energy sources. For example, in our new Malaysia factory nearly all of the required electrical power is generated from renewable sources. Additionally, our Philippines factory employs novel alternatives to reduce the need for thermal testing and was inducted into the Hall of Fame for Outstanding Environmental Performance by the Philippine Economic Zone Authority (PEZA) for sustained environmental compliance and innovative systems. Our factories in China and the Philippines monitor greenhouse gas emissions and report to the CDP on an annual basis. In 2020, our CDP Climate Change Report indicated a grade which was above average for companies in North America.

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Recycling. We are committed to recycling the waste generated from our business activities as much as possible. As part of our commitment to help the industry embrace sustainability and increase recycling, Advanced Energy is one of the six launching key suppliers on Applied Materials’ SuCCESS2030 initiative to work towards a more sustainable supply chain.

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Charitable Contributions. Our charitable contributions committee, founded in 2010, and supported and led by our employees, provides financial support for 501(c)(3) corporations, nonprofit institutions and organizations that improve education, the environment and health and social services across the communities in which we operate.

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Diversity and Inclusion. We have approximately 10,000 employees located across the globe. Each person’s background and unique skill set are fundamental to our success. In 2020, the Company announced the AE Diversity Scholarship Program, a scholarship aimed at developing emerging talent and promoting greater ethnic, racial and gender diversity in STEM fields.

●	Volunteerism. We offer each employee eight hours of paid time off to volunteer with a self-selected 501(c)(3) organization.

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Community Involvement. We work closely with community organizations, including supporting STEM education in local schools, working with universities around the world to facilitate their innovative research projects, participating in local chambers of commerce and partnering with local nonprofit organizations.

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Human Rights. Respecting the human rights of our employees and all those involved in our business operations is a core principle for Advanced Energy. Our Code of Conduct, which also applies to our suppliers, specifically prohibits activities involving slave or forced labor, human trafficking, and child labor.

●	Supply Chain. We are committed to sustainable and responsible sourcing of the materials that make up our products. We work with our suppliers to confirm that minerals originating within DRC +9 are conflict-free.

●	Employee Training and Helplines. We actively and regularly train all our employees on ethical business practices and provide a 24-hour hotline to address ethics issues should they arise.

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Governance. Advanced Energy is firmly committed to strong and effective corporate governance practices and accountability to its stockholders. We routinely review our governance practices against evolving best practices and consider feedback and input from our stockholders. We encourage you to review our Board Governance Guidelines on our website: https://www.advancedenergy.com/about-us/leadership-team/board-governance-guidelines/.

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Nominees

The nominees presented below represent a broad group of experienced business leaders. The below table provides a summary of our nominees’ background and responsibilities.

Board Highlights

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Qualifications

The Board respects its responsibility to provide oversight, counseling and direction to the management of the Company in the interest and for the benefit of the stockholders. Accordingly, it seeks to be composed of directors with diverse skills, experience, qualifications and characteristics. It is critical that directors understand the markets in which the Company operates, specifically semiconductor capital equipment, data center, telecom, and industrial and medical power markets. It is equally important that, collectively, the directors have successful experience in each of the primary aspects of our business, including engineering, research and development, finance and audit, product strategy and development, customer relations, supply chain management and sales and marketing. The following are certain qualifications, experience and skills for Board members which are important to the Company’s business and its future:

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Grant H. Beard brings to the Board significant management level experience together with experience in the private equity/merchant banking industry. He currently serves as a senior executive Operating Partner for Blue Point Capital and as an Executive in Residence at Summit Partners. Mr. Beard served as Chairman and CEO of Wynnchurch Industries, LLC and has served in various executive level positions including Chairman, President and CEO of Wolverine Advanced Materials LLC and President and CEO of Constar International Inc. and Trimas Corporation. Mr. Beard’s experience also includes serving as Operating Partner at private equity/merchant banking groups Anderson Group and Blue Point Capital.

Frederick A. Ball brings to the Board extensive experience in senior management, operations, finance and auditing, having recently served as the Chief Financial Officer of a leading provider of cloud-based marketing software. He has also served as CFO, Chief Operating Officer and Senior Vice President of various public and private technology companies. Mr. Ball’s greater than 10 years of experience as an accountant with PricewaterhouseCoopers also provides finance and accounting expertise. In addition, he served on two other public company boards as either a chair or member of their audit, compensation, and nominating and governance committees. Mr. Ball’s balance of experience enables him to work very productively with both the Board and senior management, particularly on strategic, finance and audit, and executive compensation matters.

Anne T. DelSanto brings to the Board significant experience as a veteran technology executive with more than three decades driving organizations towards exponential growth and will provide valuable insight relative to the Company’s growth strategies and Data Center Computing and Telecom Networking markets. Her considerable experience with enterprise and cloud providers and deep industry knowledge enhances the breadth of our Board’s insights in these areas. In addition, Ms. DelSanto serves on the Boards of Juniper Networks, Inc. and New Relic, Inc., and is a member of the nominating and governance committee, and Compensation Committee, respectively.

Tina M. Donikowski brings to the Board broad senior management, operations and global experience having served for 38 years in leadership positions at General Electric Company, most recently as Vice President, Global Locomotive Business, GE Transportation. Ms. Donikowski’s experience provides the Board with valuable input on strategic, operational, market and product strategies and initiatives. In addition, Ms. Donikowski’s experience as a board member of Atlas Copco AB, a large industrial multi-national corporation based in Sweden, CIRCO International and TopBuild as well as boards of other companies, provides our Board with valuable insight in terms of a broad range of governance topics and international developments.

Ronald C. Foster brings to the Board significant knowledge and experience in the semiconductor and high-tech industry. Mr. Foster served as the Chief Financial Officer and Vice President of Finance at Micron Technology, Inc., and has significant experience in executive level management positions in the semiconductor and high-tech industries. Mr. Foster also brings significant experience in financial management, accounting and finance issues as he has served in the role of CFO for various companies focused on the semiconductor industry.

Edward C. Grady brings to the Board his knowledge and experience in both the semiconductor capital equipment and solar equipment industries, as he has served as Chairman and Chief Executive Officer of an early stage solar equipment company, and has served as CEO of two companies providing services to the semiconductor industry. He shares with the Board and senior management the insight and understanding he has developed from his leadership at several companies, including in the areas of product strategy and development, service and organizational development. Mr. Grady also served on the boards of several other technology companies, providing cross-board experience.

Stephen D. Kelley brings more than 30 years of management experience in the global semiconductor and electronics industry as well as broad management experience in strategic planning, business development, technology, manufacturing and operations. Mr. Kelley has held various executive level positions at numerous companies and has led financial transformation in addition to focusing on product development, revenue

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growth, efficiency gains and profit increases and currently serves as the Company’s President and Chief Executive Officer.

Lanesha T. Minnix brings to the Board leadership and public company experience. Ms. Minnix currently serves as the Chief Legal Officer and Corporate Secretary of Flowserve Corporation, a publicly traded manufacturer of engineered and industrial pumps, valves and seals for a range of industries. Prior to joining Flowserve, Ms. Minnix served as Senior Vice President and General Counsel for BMC Stock Holdings, Inc. a leading provider of diversified building products and services. Her broad exposure to advanced industrial markets and her legal and business skills will add significant value to the Board.

Thomas M. Rohrs brings to the Board executive management and operations experience in the semiconductor capital equipment industry, particularly in the areas of research and development, supply chain management and product development. The Board and senior management benefit from his strategic thinking and prior involvement in the semiconductor capital equipment and solar equipment industries. Mr. Rohrs also has significant experience serving on several other public company boards, where he has been Chairman, as well as a member of the compensation and nominating committees.

John A. Roush brings to the Board significant management level experience in the medical and industrial markets together with public company experience. Mr. Roush most recently served as Chief Executive Officer of a leading global supplier of precision photonic components and subsystems to original equipment manufacturers in the medical and advanced industrial markets. The Board and senior management benefit from his extensive experience in the industrial markets, which are a strategic focus area for the Company, and his knowledge of leading a public company.

The Board believes that the qualities and skills listed above for each of the nominees, qualifies each such nominee for service as a director of Advanced Energy.

Independence

The Board of Directors has determined that each of the nominees, other than Stephen D. Kelley (i.e., Grant H. Beard, Frederick A. Ball, Anne T. DelSanto, Tina M. Donikowski, Ronald C. Foster, Edward C. Grady, Lanesha T. Minnix, Thomas M. Rohrs and John A. Roush), is an “independent director” within the meaning of the Nasdaq Stock Market Rules. Under these rules, to be considered independent, the Board must affirmatively determine, among other things, that neither the director nor any immediate family member of the director has had any direct or indirect material relationship with the Company within the last three years. The Board of Directors has made an affirmative determination that none of the independent directors has had any relationship with Advanced Energy or with another director that would interfere with the exercise of his or her independent judgement in carrying out his or her responsibilities as a director. The independent directors, if all of them are elected at the Annual Meeting, will constitute a majority of the Board of Directors. There is no family relationship amongst any of the directors and executive officers of the Company. The Company’s executive officers serve at the discretion of the Board.

Involvement in Certain Legal Proceedings

During the past ten years none of the persons currently serving as executive officers and/or directors of the Company has been the subject matter of any of the following legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K including: (a) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any criminal convictions; (c) any order, judgment, or decree permanently or temporarily enjoining, barring, suspending or otherwise limiting their involvement in any type of business, securities or banking activities; (d) any finding by a court, the Securities and Exchange Commission (the “SEC”) or the Commodities Futures Trading Commission to have violated a federal or state

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securities or commodities law, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud; or (e) any sanction or order of any self-regulatory organization or registered entity or equivalent exchange, association or entity. Further, no such legal proceedings are believed to be contemplated by governmental authorities against any director or executive officer.

Required Vote

Our Board has adopted a Director resignation policy (the “Policy”), which is included in the Company’s Board Governance Guidelines. The Policy applies to uncontested elections of directors, in other words, an election of directors where the number of nominees for election does not exceed the number of directors to be elected. A copy of the Policy is available on the Company’s website at http://www.advancedenergy.com within the Company’s Board Governance Guidelines. Under the Policy, any nominee for director in an uncontested election who does not receive a majority vote “FOR” that director’s election to the Board relative to the number of votes cast with respect to that director’s election (excluding broker non-votes, abstentions and failures to vote with respect to that director’s election) will promptly tender a written offer of resignation to the Board. The Policy provides that the Nominating, Governance & Sustainability Committee of the Board will promptly consider the director’s offer of resignation and make a recommendation to the Board. Pursuant to the Policy, the Board would then act on that recommendation within 90 days of receiving the recommendation. When deciding what action to recommend or take regarding the director’s resignation, the Policy permits each of the Nominating, Governance & Sustainability Committee and the Board to consider any factors they deem relevant, including the best interests of the Company and its stockholders.

Under Delaware law, a nominee who receives a plurality of the votes cast at the Annual Meeting will be elected as a Director (subject to the Policy described above). The “plurality” standard means the nominees who receive the largest number of “FOR” votes cast are elected as directors of the Company. Thus, the number of shares not voted for the election of a nominee (and the number of “withhold” votes cast with respect to that nominee) will not affect the determination of whether that nominee has received the necessary votes for election under Delaware law. However, the number of “withhold” votes with respect to a nominee will affect whether or not our Policy will apply to that individual. If any nominee is unable or declines to serve, proxies will be voted for the balance of those named and for such person as shall be designated by the Board to replace any such nominee. However, the Board does not anticipate that this will occur.

Stockholders do not have the right to cumulate their votes for the election of directors. Unless otherwise instructed, the proxy holders will vote the proxies received by them “FOR” each of the ten (10) nominees. Votes withheld from a nominee will be counted for purposes of determining whether a quorum is present but will not be counted as an affirmative vote for such nominee.

The Board of Directors recommends a vote “FOR” the election of each of the nominees named above.

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Non-employee director equity compensation has historically been denominated as a fixed number of units rather than a specific dollar amount. With respect to the fixed number of units awarded on April 30, 2020, the Company’s closing stock price on that day was $55.60.

As part of the Compensation Committee’s continuous review and monitoring of non-employee director compensation market data from comparisons to peer programs, and based on analysis from Semler Brossy, the Compensation Committee revised its granting of equity compensation to non-employee directors from a fixed number of units to a designated award value in August 2020. As a result, and indicated in the table below, the two new directors elected on October 1, 2020, were granted restricted stock units at a designated award value. The Company’s closing stock price on October 1, 2020 was $64.04. The Compensation Committee will continue to review and monitor non-employee director compensation, use market data for comparisons to peer programs, and work with Semler Brossy to ensure the program remains appropriate.

The following table details director compensation for 2020.

(1)

On April 30, 2020, Messrs. Beard, Ball, Foster, Grady, Rohrs and Roush and Ms. Donikowski were each granted 3,500 restricted stock units (RSUs) for their service on the Board. On October 1, 2020, Ms. DelSanto and Ms. Minnix were each granted 1,772 RSUs, representing roughly 7/12th of the value of restricted stock granted to other directors on April 30, 2020, for their service on the Board. All RSUs vest on April 30, 2021 and were the only outstanding unvested equity awards held by our directors as of December 31, 2020.

(2)	Mr. Wasserman retired as President and CEO effective March 1, 2021, and is no longer a director or officer of the Company.

Board of Directors Meetings

Each Director attended well above 75% of the aggregate number of meetings of the Board of Directors (held during the period for which he or she was a director) and the committees (held during the period for which he or she was a committee member).

The Board of Directors held sixteen meetings in 2020. During 2020, six executive sessions of the Board of Directors were held. The Board’s committees consist of the Audit and Finance Committee, Nominating, Governance & Sustainability Committee, Compensation Committee and Pricing Committee.

Members of the Board of Directors are welcomed and encouraged, but not required, to attend the Annual Meeting. The Company’s annual meeting of stockholders held on April 30, 2020 (the “2020 Annual Meeting”) was attended in person or by telephone by eight of the then-members of the Board of Directors.

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Report of the Audit and Finance Committee

In accordance with the Audit and Finance Committee’s written charter duly adopted by the Board of Directors, we have reviewed Advanced Energy’s audited financial statements, as of and for the year ended December 31, 2020, and met together and separately with both management and Ernst & Young LLP, the Company’s independent registered public accounting firm for 2020, to discuss Advanced Energy’s audited financial statements as of and for the year ended December 31, 2020. In addition, the Audit and Finance Committee has discussed with the independent registered public accounting firm the matters outlined in Statement on Auditing Standards No. 1301, as amended (Communication with Audit Committees), to the extent applicable and received the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). Further, the Audit and Finance Committee received the written disclosures and the letter from the independent accountants required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit and Finance Committee concerning independence, and discussed with the independent registered public accounting firm the independent accountant’s independence.

Based on its review and discussion of the foregoing matters and information, the Audit and Finance Committee recommended to the Board of Directors that the audited financial statements referenced above be included in Advanced Energy’s 2020 Annual Report on Form 10-K. The Audit and Finance Committee has recommended the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2021, subject to stockholder ratification.

The Audit and Finance Committee

Ronald C. Foster, Chairman

Tina M. Donikowski

Edward C. Grady

Grant H. Beard

This report of the Audit and Finance Committee is not deemed “soliciting material” and is not deemed filed with the SEC or subject to Regulation 14A or the liabilities under Section 18 of the Exchange Act.

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Director Nominations

The Nominating, Governance & Sustainability Committee evaluates and interviews potential director candidates. All members of the Board may interview the final candidates. The Nominating, Governance & Sustainability Committee of the Board considers candidates for director nominees proposed by directors and stockholders, as described in more detail below. This committee may retain recruiting professionals to assist in identifying and evaluating candidates for director nominees. The committee has no stated specific or minimum qualifications that must be met by a Board candidate. However, as set forth in the Company’s Board Governance Guidelines, the Nominating, Governance & Sustainability Committee strives for a mix of skills and diverse perspectives (functional, cultural and geographic) that is effective for the Board. To that end, the Board added Anne T. DelSanto and Lanesha T. Minnix to the Board in 2020. In selecting nominees, the Nominating, Governance & Sustainability Committee assesses the independence, character and acumen of candidates. The committee also endeavors to establish a number of areas of collective core competency of the Board and assess whether a candidate possesses skills including business judgment, leadership, strategic vision and knowledge of management, accounting, finance, industry, technology, manufacturing, international markets and marketing that would be complementary to the Board. Additional criteria include a candidate’s personal and professional ethics, integrity and values, as well as his or her willingness to devote sufficient time to prepare for and attend meetings and participate effectively on the Board.

The Board Governance Guidelines provide that the Nominating, Governance & Sustainability Committee is responsible for reviewing with the Board, from time to time, the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. In assessing the diversity of the Board, the Nominating, Governance & Sustainability Committee assesses such factors as leadership, character, reputation, integrity, judgment, diversity, age, understanding of and experience in manufacturing, technology expertise, finance and marketing acumen and exposure and experience in international markets. The Board values a diverse set of viewpoints and experiences, and also considers gender and ethnic diversity. These factors, which are among the factors the Board and the Nominating, Governance & Sustainability Committee considers useful to a well-functioning board, are reviewed in the context of assessing the perceived needs of the Board at any particular point in time and in its search for potential nominees.

The Nominating, Governance & Sustainability Committee will consider any and all director candidate recommendations by our stockholders that are submitted in accordance with the procedures set forth in the Company’s Amended and Restated By-laws. The Nominating, Governance & Sustainability Committee will apply the same processes and criteria in evaluating director candidates recommended by stockholders as it applies in evaluating director candidates recommended by directors, members of management or any other person. If you are a stockholder and wish to recommend a candidate for nomination to the Board of Directors, you should submit your recommendation in writing to the Nominating, Governance & Sustainability Committee, in care of the Corporate Secretary of Advanced Energy at 1595 Wynkoop St., Suite 800, Denver, Colorado 80202. Your recommendation must include all of the information set forth in Article III, Section 6(a) of the Amended and Restated By-laws of Advanced Energy, including but not limited to, your name and address, the number of shares of Advanced Energy common stock that you own, the name of the person you recommend for nomination, the reasons for your recommendation, a summary of the person’s business history and other qualifications as a director of Advanced Energy and whether such person has agreed to serve, if elected, as a director of Advanced Energy. Please also see the information under the section entitled “Proposals of Stockholders” on page 59 of this proxy statement.

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Board Governance Structure

The Board Governance Guidelines set forth the Board’s policy that the positions of Chairman of the Board and Chief Executive Officer should be held by separate persons to aid in the Board’s oversight of management. The Board Governance Guidelines are available on our website at https://www.advancedenergy.com/about-us/leadership-team/board-governance-guidelines/. The Company believes this Board leadership structure is most appropriate for the Company because it provides the Board with increased independence. Additionally, we separate the roles of Chairman of the Board and Chief Executive Officer in recognition of the differences between the two roles as they are presently defined. The principal responsibility of the Chief Executive Officer is to manage the business of the Company. The principal responsibilities of the Chairman of the Board are to manage the operations of the Board of Directors and its committees and provide oversight and counsel to the Chief Executive Officer on behalf of the Board.

Senior management manages material risks and reviews such risks with the Chief Executive Officer, and if warranted, the Board. As part of its general oversight role, the Board reviews business reports from management that routinely outline operational risks that may exist from time to time. Consistent with this oversight role, the Board received regular updates from management as to potential impacts to operations, including the Company’s labor force and supply chain vulnerabilities, from the COVID-19 pandemic. In addition, for risks related more specifically to the financial operations of the Company, such as credit risk and liquidity risk, the Audit and Finance Committee examines reports from management and reviews such risks in light of the Company’s business operations.

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through March 25, 2019, the date of the Audit and Finance Committee’s dismissal of Grant Thornton, (i) there were no disagreements with Grant Thornton on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Grant Thornton’s satisfaction, would have caused Grant Thornton to make reference to the subject matter of the disagreements in connection with its reports, and (ii) there were no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

On March 27, 2019, Advanced Energy engaged Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019, which engagement was approved by the Audit and Finance Committee and effective on March 27, 2019.

During the Company’s fiscal years ended December 31, 2018 and December 31, 2017, and during the subsequent interim period through March 27, 2019, neither the Company, nor anyone on its behalf, consulted Ernst & Young LLP regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that Ernst & Young LLP concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement” (as defined in Regulation S-K Item 304(a)(1)(iv)) or a “reportable event” (as defined in Regulation S-K Item 304(a)(1)(v)).

Independent Registered Public Accounting Firm Fees and Services

The following table presents fees billed to Advanced Energy for professional services rendered by Ernst & Young LLP, our registered public accounting firm for 2020 and 2019. All of the fees in the following table were approved by the Audit Committee in conformity with its pre-approval process. Pre-approval generally is provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and generally is subject to a specific budget. The independent registered public accounting firm and Advanced Energy’s management are required to periodically report to the Audit and Finance Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, including the fees for the services performed to date. In addition, the Audit and Finance Committee also may pre-approve particular services on a case-by-case basis, as required.

(1)

Audit Fees consisted of fees for (a) professional services rendered for the annual audit of Advanced Energy’s consolidated financial statements and internal controls over financial reporting, (b) review of the interim consolidated financial statements included in quarterly reports, and (c) services that are typically provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

(2)	Audit Related Fees consisted of fees for assurance and related services that were reasonably related to the performance of the audit or review of Advanced Energy’s consolidated financial statements and are not reported under “Audit Fees.”

(3)	Tax Fees consisted of fees for tax advice and/or tax planning during 2020 and 2019.

(4)	Other Fees are not applicable.

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Required Vote

Ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for Advanced Energy for 2021 requires the affirmative “FOR” vote of a majority of the shares of common stock cast on this proposal. For purposes of determining the number of votes cast on this proposal, only those votes cast as either “FOR” or “AGAINST” are included. Abstentions and broker non-votes are not considered votes cast on this proposal.

Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they so desire.

The Board of Directors recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as Advanced Energy’s independent registered public accounting firm for 2021.

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objectives in order to allocate a significant percentage of each of our named executive officers’ compensation to performance-based measures.

As discussed in the Compensation Discussion and Analysis beginning on page 31 of this proxy statement, we believe that our executive compensation program properly links executive compensation to Company performance and aligns the interests of our executive officers with those of our stockholders. For example:

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Required Vote

Advisory approval of the Company’s named executive officer compensation requires the affirmative “FOR” vote of a majority of the shares of common stock cast on this proposal. For purposes of determining the number of votes cast on this proposal, only those votes cast as either “FOR” or “AGAINST” are included. Abstentions and broker non-votes are not considered votes cast on this proposal. The vote on this proposal is advisory in nature and, therefore, is not binding on the Company; provided, however, the Board and Compensation Committee will review the results of and take into consideration such results when making future executive compensation decisions.

The Company will ask its stockholders to consider an advisory vote on the compensation of our named executive officers every year until otherwise determined by a vote of our stockholders pursuant to applicable Securities and Exchange Commission rules.

The Board of Directors recommends a vote “FOR” the approval of the Company’s named executive officer compensation.

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(2)

Information as to the amount and nature of beneficial ownership was obtained from the Schedule 13G filed with the SEC on February 10, 2021 by The Vanguard Group. The Vanguard Group reports sole voting power over zero shares, shared voting power over 88,963 shares, sole dispositive power over 3,952,822 shares and shared dispositive power over 120,349 shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(3)

Information as to the amount and nature of beneficial ownership was obtained from the Schedule 13G filed with the SEC on February 12, 2021 by Ameriprise Financial, Inc. Ameriprise Financial, Inc. reports shared voting power over 2,616,155 shares and shared dispositive power over 2,659,619 shares. The address for Ameriprise Financial, Inc. is 145 Ameriprise Financial Center Minneapolis, MN 55474.

(4)

Information as to the amount and nature of beneficial ownership was obtained from the Schedule 13G filed with the SEC on February 8, 2021 by FMR LLC. FMR LLC reports sole voting power over 379,672 shares and sole dispositive power over 1,849,599 shares. The address for FMR LLC is 245 Summer Street, Boston, Massachusetts 02210.

(5)

Information as to the amount and nature of beneficial ownership was obtained from the Schedule 13G filed with the SEC on February 2, 2021 by Victory Capital Management Inc. Victory Capital Management Inc. reports sole voting power over 1,182,433 shares and sole dispositive power over 1,215,828 shares. The address for Victory Capital Management Inc. is 4900 Tiedeman Rd. 4th Floor, Brooklyn, OH 44144.

(6)	Includes beneficial ownership of the following numbers of shares that may be acquired within 60 days of February 1, 2021 pursuant to stock options granted or assumed by Advanced Energy:

*Mr. Wasserman retired as President and CEO effective March 1, 2021.

**Mr. Brinker left the Company on November 30, 2020.

(7)	Includes beneficial ownership of the following numbers of shares that will be acquired within 60 days of February 1, 2021 pursuant to stock awards (also called “restricted stock units”) granted or assumed by Advanced Energy:

*Mr. Wasserman retired as President and CEO effective March 1, 2021.

**Mr. Brinker left the Company on November 30, 2020.

(8)	The shares reported in the table do not include awards that will be granted to each non-employee director if such person is reelected to the Board of Directors at the Annual Meeting.

(9)	The shares reported in the table for Mr. Brinker are as reflected in the Form 4 filed on July 21, 2020.

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Fiscal Year 2020 Business Performance

2020 has been a transformational year for Advanced Energy as the first full year of operations with Artesyn Embedded Power. This highly strategic acquisition has strengthened our position as a leader in electrical power conversion, increased our addressable market and revenues, and broadened and diversified our markets. It has enabled greater exposure to industrial and medical markets and established new positions in data center computing and telecom & networking. Most importantly, it positions us for accelerated earnings growth as we continue to execute on our plan to deliver significant synergies as a combined company.

In addition, during the year, the company significantly grew its semiconductor revenues and gained share in key product areas. In data center and hyperscale markets, the company added additional hyperscale customers and achieved significant revenue growth year over year. Strong operational execution resulted in the ability to overcome challenges created by the pandemic and adapt to shifting customer demand to deliver record revenues. Acceleration of integration plans enabled the company to improve gross margins

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throughout the year and exceed initial synergy savings in roughly half of the anticipated timeframe, contributing to record Non-GAAP operating income*, earnings per share*, and operating cash flow.

Highlights of our consolidated fiscal year 2018, 2019 and 2020 financial performance and key business metrics are provided below.

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*Note: A reconciliation of the non-GAAP measures is provided in Appendix A to this proxy statement.

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Compensation Philosophy and Objectives

The Company’s executive compensation program is based on the same objectives that guide the Company in establishing all of its compensation programs:

Overview of Executive Compensation Program

The Compensation Committee

The Compensation Committee is responsible for establishing, implementing, and monitoring adherence with the Company’s compensation philosophy. Accordingly, the Compensation Committee strives to develop and maintain competitive, progressive programs that reward executives for continuous improvement in key financial metrics that drive Company performance and stockholder value. The Compensation Committee also recognizes the need for compensation programs to attract, retain and motivate high caliber employees, foster teamwork, and maximize the long-term success of Advanced Energy by appropriately rewarding our executives for their achievements. The Compensation Committee evaluates risk and rewards associated with the Company’s overall compensation philosophy and structure. In accordance with the Compensation Committee Charter, the Compensation Committee may delegate authority to subcommittees when appropriate.

The Compensation Committee has the authority to engage independent advisors to assist it in making determinations with respect to the compensation of our executives and other employees. For the 2020 fiscal year the Compensation Committee engaged Semler Brossy to conduct a competitive review of executive compensation and advise the Committee on other compensation related matters. Semler Brossy has not provided any other services to the Company or the Compensation Committee and has not received compensation other than with respect to the services provided to the Compensation Committee. In connection with its engagement of Semler Brossy the Compensation Committee evaluated Semler Brossy’s independence from management including the independence of the individual representatives of Semler Brossy who served as the Compensation Committee’s consultants and determined that Semler Brossy is independent based on the Nasdaq Stock Market’s independence factors, as well as free of conflicts of interest.

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Role of Executive Officers in Compensation Decisions

The Compensation Committee meets with the Company’s Chief Executive Officer and other senior executives to obtain recommendations with respect to the Company’s compensation programs and practices for executives and other employees. The Compensation Committee takes management’s recommendations into consideration but is not bound by management’s recommendations with respect to executive compensation. The compensation for the Chief Executive Officer is recommended by the Compensation Committee to the Board for its review and ratification. While management attends certain meetings of the Compensation Committee, the Compensation Committee also holds executive sessions not attended by any members of management or by non-independent directors.

Use of Market Data for Comparison Against Peer Companies

One factor that the Compensation Committee considers when making compensation decisions is the compensation paid to executives of a peer group of companies. The Compensation Committee also considers other factors discussed below under the heading “Components of Executive Compensation.”

The Compensation Committee reviews the peer companies annually to take into account the volatility of the industries in which Advanced Energy participates. While the Compensation Committee attempts to maintain consistency year to year, adjustments are made as needed. In consultation with Semler Brossy, the Compensation Committee reviewed its list of peer companies on July 29, 2020 that was used for comparative review for 2020 compensation and made no changes. The list of peer companies consists of the following 15 publicly traded companies of roughly similar size to Advanced Energy, all of which are from related industries, including the semiconductor and electronic equipment industries, and compete with Advanced Energy for executive talent:

Components of Executive Compensation

For 2020, the principal components of compensation for named executive officers were: (1) base salary, (2) annual performance-based cash compensation under the 2020 STI Plan, (3) long term performance-based equity incentive compensation under the 2020 LTI Plan, and (4) other benefits, each of which is described in more detail below. In determining the amount and relative allocation among each component of compensation for each named executive officer, the Compensation Committee considered, among other factors, the Company’s and each executive officer’s performance during the year, historical rates of executive compensation, data obtained from management’s recruitment activities, the comparative review and analysis provided by Semler Brossy and alignment with the Company’s overall compensation philosophy. As we mentioned above, a majority of our named executive officers target compensation in 2020 was performance-based compensation under our 2020 STI Plan and 2020 LTI Plan, consistent with our “pay for performance culture”.

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Base Salary

Base salaries are set at levels that the Compensation Committee deems to be sufficient to attract and retain highly talented executive officers capable of fulfilling the Company’s key objectives. Base salaries of our named executive officers are also set with the goal of rewarding executive officers on a day-to-day basis for their time and services. For 2020, the Compensation Committee decided to increase each of the named executive officers’ base salary based on a combination of merit increase, peer company compensation and general market trends. The base salaries of each of our named executive officers in 2020 were as follows:

(1)	This includes a salary increase of 7% that took effect on May 20, 2020 for Mr. Brinker’s promotion to President and Chief Operating Officer.

(2)	Mr. Huth received an increase of 15% on March 10, 2020 for his promotion to Chief Revenue Officer.

2020 Short Term Incentive Plan Compensation

The 2020 STI Plan provides the Company’s named executive officers with an opportunity to earn an annual cash bonus based on the Company’s achievement of certain financial performance goals and, in the case of Mr. Wasserman, a portion is based on the achievement of individual strategic goals.

To address volatility in the markets the Company serves, the Compensation Committee decided to change the 2020 Short Term Incentive Plan to provide for two six-month performance periods (January 1 - June 30 and July 1 - December 31) instead of one fiscal year performance period (January 1 - December 31). The change to two six-month performance periods applied to revenue and Non-GAAP operating measures and was implemented before the onset of the COVID-19 pandemic, and financial goals for the second half of 2020