SMid Cap Industrials: Skin in the Game: Management Alignment and Value Creation

Research evidence excerpt

SMid Cap Industrials: Skin in the Game: Management Alignment and Value Creation

J P M O R G A N North America Equity Research

16 June 2026

SMid Cap Industrials

Skin in the Game: Management Alignment and Value

Creation

We continue to view management as a key enabler of future growth and critical to North America Small and Mid Cap

execution. Building on our earlier management alignment note (see here), Industrials

including our expanded coverage (currently 33 names), we take a deeper dive into Tomohiko Sano AC

the drivers of leadership decisions and shareholder outcomes across our coverage. (1-212) 622-1099

Our analysis focuses on compensation structure, both in absolute terms and tomohiko.sano@jpmorgan.com

relative to guidance, alongside ownership requirements, actual ownership levels, Brendan Shea, CFA

and recent management transitions. These findings reinforce our view that (1-212) 622-0770

understanding management incentive structures is critical for identifying brendan.shea@jpmorgan.com

companies best positioned to deliver sustainable shareholder value. Liam Glass

(1-212) 464-5541

• Incentives That Matter: STIP & LTIP Directly Linked to EBITDA and liam.glass@jpmorgan.com

Growth: STIP metrics are tightly linked to adj. EBITDA, revenue growth, and Ethan Coyle

FCF, with select companies (AWI, ALLE) using formula-driven hurdles and (1-212) 270-0613

ethan.coyle@jpmchase.com

others incorporating metrics such as TRIR or EVA. LTIP is delivered via PSUs J.P. Morgan Securities LLC

and RSUs vesting over 3-5 years, tied to TSR, ROIC, and operating income

growth, KPIs we view as critical inputs for evaluating management's execution

capability and likelihood of delivering on guidance and long-term targets.

• Leadership Transitions: Operational Resets and Strategic Pivots Unlock