NOTICE OF 2023 ANNUAL MEETING OF
STOCKHOLDERS

Meeting Information

DATE AND TIME Thursday, May 18, 2023 | 10:30 a.m., Central Daylight Time

LOCATION Virtual Meeting. You must register at www.proxydocs.com/LII to attend. After registering, you will receive further instructions by email, including a unique link to access the 2023 Annual Meeting.

Agenda		Board Recommendation
Proposal 1 To elect one Class III director for a two-year term expiring at the 2025 Annual Meeting of Stockholders and three Class I directors for a three-year term expiring at the 2026 Annual Meeting of Stockholders		FOR each director nominee
Proposal 2 To conduct an advisory vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement		FOR
Proposal 3 To conduct an advisory vote on the frequency of future advisory votes on executive compensation		1 YEAR
Proposal 4 To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2023 fiscal year		FOR
Transact any other business that may properly come before the 2023 Annual Meeting in accordance with the terms of our Bylaws

Voting Methods Available to You
INTERNET Visit the website on your proxy card		BY MAIL Mark, sign, date, and return your proxy card in the postage-paid envelope		Your vote is important. Please submit your proxy or voting instructions as soon as possible
TELEPHONE Call the number on your proxy card		DURING THE MEETING You must register at www.proxydocs.com/LII to virtually attend and vote during the 2023 Annual Meeting		Who May Vote Our stockholders of record at the close of business on March 28, 2023 are entitled to notice of, and to vote at, the 2023 Annual Meeting
The Proxy Statement, Proxy Card, and Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, accompany this notice and are available at www.lennoxinternational.com and www.proxydocs.com/LII.				By Order of the Board of Directors, John D. Torres Corporate Secretary

TABLE OF CONTENTS

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Cautionary Statement Regarding Forward-Looking Statements

This Proxy Statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) that are based on information currently available to management as well as management’s assumptions and beliefs as of the date hereof. All statements, other than statements of historical fact, included in this Proxy Statement constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the words “may,” “will,” “should,” “plan,” “predict,” “anticipate,” “believe,” “intend,” “estimate,” “expect,” and similar expressions. Statements that are not historical should also be considered forward-looking statements. Such statements reflect our current views with respect to future events. Readers are cautioned not to place undue reliance on these forward-looking statements. We believe these statements are based on reasonable assumptions; however, such statements are inherently subject to risks and uncertainties, including but not limited to the inability to execute on strategies related to environmental- and social-related goals and targets (including due to delays in scientific and technological developments), as well as the other specific uncertainties discussed in the risk factors set forth in Item 1A. Risk Factors of our Annual Report on Form 10-K. These risks and uncertainties may affect our performance and results of operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those in the forward-looking statements. We disclaim any intention or obligation to update or review any forward-looking statements or information, whether as a result of new information, future events, or otherwise unless required by law.

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General Information Regarding the

2023 Annual Meeting of Stockholders

Virtual Annual Meeting Date and Time

Benefits of a Virtual Annual Meeting

Attendance at the Virtual Annual Meeting

Only stockholders of record and beneficial owners of shares of our common stock as of the close of business on March 28, 2023, the record date, may attend and participate in the Annual Meeting, including voting and submitting questions to be answered at the Annual Meeting. At the close of business on the record date, there were 35,497,453 shares of our common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote.

HOW TO REGISTER FOR THE VIRTUAL ANNUAL MEETING

To attend the Annual Meeting, you must register at www.proxydocs.com/LII using the control number located on your Proxy Card, Notice Regarding the Availability of Proxy Materials, or voting instruction form. Upon completing your registration, you will receive further instructions by email, including a unique link that will allow you access to the Annual Meeting and to vote and submit questions to be answered at the Annual Meeting. If you are a beneficial owner of shares registered in the name of a broker, bank, or other nominee, as part of the registration process, you will also need to provide the registered name on your account and the name of your broker, bank, or other nominee.

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The Annual Meeting will start promptly at 10:30 a.m. CDT. Stockholders may begin to log in to the Annual Meeting 15 minutes prior to the start time. If you encounter any difficulties accessing the virtual Annual Meeting platform, including any difficulties voting, you may call the technical support number that will be included in your instructional email.

Questions at the Virtual Annual Meeting

If we receive substantially similar questions, to avoid repetition we will group those questions together and provide a single response. We will also post questions submitted by stockholders and our answers on our website for a period of 60 days following the Annual Meeting.

Matters to be Voted On

At the Annual Meeting, you will be asked to vote on four proposals. Our Board recommends you vote “for” each of the director nominees in Proposal 1, “for” Proposals 2 and 4, and for “one year” on Proposal 3. The proposals to be voted on at the Annual Meeting are:

		To elect one Class III director for a two-year term expiring at the 2025 Annual Meeting of Stockholders and three Class I directors for a three-year term expiring at the 2026 Annual Meeting of Stockholders;
		To conduct an advisory vote to approve the compensation of our named executive officers (“NEOs”) as disclosed in this Proxy Statement;
		To conduct an advisory vote on the frequency of future advisory votes on executive compensation; and
		To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2023 fiscal year.

Record Versus Beneficial Ownership of Shares

If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are the “stockholder of record” with respect to those shares. If you are a stockholder of record, we sent our proxy materials directly to you.

If your shares are held in a stock brokerage account or by a bank, you are considered the “beneficial owner” of shares held in street name. In that case, our proxy materials will be forwarded to you by your broker or bank, which is considered the stockholder of record with respect to those shares. Your broker or bank will also send you instructions on how to vote. If you have not heard from your broker or bank, please contact them as soon as possible.

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2022 Performance Highlights

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Environmental, Social, and Governance Highlights

Environmental

We are dedicated to sustainability and creating comfortable and healthier environments for our residential and commercial customers while reducing our and their carbon footprint.

A key focus for the business is accelerating sustainability through product innovation. In June 2022, Lennox was the first HVAC partner in the U.S. DOE Cold Climate Heat Pump Challenge to develop a next-generation heat pump that can more effectively heat homes in northern climates while reducing greenhouse gas emissions.

In 2021, the Science Based Target initiative (SBTi) approved our greenhouse gas emissions targets for Scopes 1, 2, and 3. For the year ended December 31, 2021, the Company’s Scope 3 emissions were reduced by 14% per product sold as compared to the year ended December 31, 2019. Learn more about our goals and progress in our most recent ESG report on our website.

See “Corporate Governance – ESG – Environmental Focus and Sustainability” for more information about our goals to reduce the Company’s environmental impact.

Social

Diversity, Equity & Inclusion. We promote an engaged workforce and champion diversity and inclusion among our employees, suppliers, and business operations. In addition to publishing our diversity metrics, we also published our EEO-1 report in our 2021 ESG Report.

Supply Chain. Over the past year, we have incorporated ESG into our supply chain management and supplier qualification audits. We are committed to working with diverse and ethical suppliers.

People & Benefits. This year, we added new benefits to further support employees by providing time to take care of their well-being and give back to their communities. For all full-time salaried employees in the U.S. and Canada, we now offer paid volunteer time off and well-being days.

Health and Safety. The health and safety of our employees is our utmost priority. We have implemented a robust health and safety program, resulting in reductions in safety incident rates.

Charitable Donations. We believe we have a responsibility to support and positively impact the local communities in which we live and work. In 2022, LII contributed nearly $2 million to a variety of charities for health and human services, environment, education, and youth, among other things.

Governance

Strong corporate governance is foundational to Lennox. We recognize integrity, accountability, and transparency are keys to a strong business today and tomorrow.

ESG Oversight. Our Board is responsible for oversight of our ESG strategy. We have adopted a rigorous reporting plan so that the full Board and relevant committees are briefed regularly on all aspects of ESG.

For more information regarding our commitment to leadership in ESG matters, please see our website at www.lennoxinternational.com under the heading “ESG.” Information in our ESG Report is not incorporated by reference in this Proxy Statement.

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Proposals Requiring Your Vote

Proposal 1

Election of Directors

Our Bylaws provide that our Board may be composed of no less than three and no more than 15 members. The size of our Board is currently fixed at 9 members, divided into three classes, with each class serving a three-year term.

Under our Bylaws and our Restated Certificate of Incorporation, the Board classes are to be as nearly equal in number as the number of outstanding directors permits. Due to Max H. Mitchell’s resignation from the Board on November 28, 2022, Class III has been reduced by one director. To balance the number of directors in each class, the Board has nominated Janet K. Cooper (currently a Class I director) for re-election as a Class III director for a two-year term expiring at the 2025 Annual Meeting of Stockholders.

Upon the recommendation of the Board Governance Committee, the Board has nominated three Class I directors for re-election of a three-year term expiring at the 2026 Annual Meeting of Stockholders. The Board has nominated the directors using the process and criteria described in the “Corporate Governance—Director Nomination Process and Nominee Criteria” section of this Proxy Statement.

For each director and director nominee, we have included a biographical description below that includes the specific experience, attributes, and skills that led to the Board’s conclusion that such person should serve as a director of the Company at this time in light of our business and structure.

If you do not wish to vote your shares for any particular nominee, you may withhold your vote. If any director nominee becomes unavailable to serve, the persons named in the accompanying Proxy Card may vote for any alternate designated by the incumbent Board, or the number of directors constituting the Board may be reduced.

The Board has nominated the following director for re-election as a Class III director for a two-year term expiring at the 2025 Annual Meeting of Stockholders:

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The Board has nominated the following directors for re-election as Class I directors for three-year terms expiring at the 2026 Annual Meeting of Stockholders:

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THE BOARD RECOMMENDS A VOTE “FOR”

THE ELECTION OF EACH OF THE ABOVE NOMINEES.

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The following Class II directors’ terms will continue until the 2024 Annual Meeting of Stockholders:

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The following Class III directors’ terms will continue until the 2025 Annual Meeting of Stockholders:

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Proposal 2

Advisory Vote to Approve the

Compensation of Our Named Executive Officers

In accordance with Section 14A of the Exchange Act, we are asking our stockholders to vote to approve the compensation of our Company’s NEOs (the “Say-on-Pay vote”), as disclosed in this Proxy Statement. The Say-on-Pay vote is an advisory vote on the resolution below and is not binding. Although the vote is non-binding, the directors value stockholders’ opinions and will consider the voting results of this proposal when making future compensation decisions. Say-on-Pay advisory votes are currently conducted annually. Our next advisory vote on the frequency of Say-on-Pay votes will take place at our annual meeting of stockholders in 2023.

As described more fully in the “Compensation Discussion and Analysis” section of this Proxy Statement, the Company designed its market-competitive NEO compensation program to reward successful execution of its business strategy and achievement of desired business results, with a focus on creating alignment with the interests of our stockholders. The program seeks to achieve these goals on both an annual and long-term basis through an appropriate combination of base pay, annual incentives, and long-term incentives.

For our NEOs, the majority of compensation is both stock-based and contingent on performance. The annual incentive payout is based on Company financial performance metrics of core net income and free cash flow, and for NEOs that are business segment leaders, a combination of Company and business segment performance. Our long-term incentives currently include: (1) performance share units, which are designed to link compensation to the Company’s three-year financial performance as measured by return on invested capital and core net income growth; (2) stock appreciation rights, which are designed to incentivize NEOs to grow our business and deliver increased returns to our stockholders; and (3) restricted stock units, which are designed to support our retention efforts.

At our 2022 Annual Meeting, the advisory vote on the compensation of the Company’s NEOs received the approval of approximately 75% of the stockholders voting for or against this proposal, well below the average of 96% of shareholder support we have received since 2015. Following the vote, we increased our shareholder engagement efforts to seek feedback and better understand our investors’ perspectives on our executive compensation program. We reached out to our top

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50 shareholders who voted against our Say-on-Pay proposal. Below is an overview of the key concerns voiced during the shareholder outreach, and actions the Company took in response:

Concerns we heard:				Actions taken:
Retention equity granted in 2021, including lack of performance criteria and shorter vesting provisions.				Amidst the Company’s leadership transition in 2021, the Company granted one-time, first-ever retention awards to NEOs. The Company has no plans of granting similar awards in the future.
Single-trigger equity vesting in CIC agreements.   Legacy excise tax gross-ups in CIC agreements.				In 2022, the Company terminated existing CIC agreements with NEOs and adopted a CIC severance plan, which included double-trigger equity vesting and eliminated excise tax gross-ups for all employees. The plan also reduced cash severance payable to the CEO & NEOs and eliminated enhanced pension benefits.
Similar metrics for short-term and long-term incentive plans.				The Company added a revenue metric to the 2023 short-term incentive plan.
Lack of formal stock holding requirements.				Effective 2022, the Company revised its executive stock ownership requirements to require NEOs to retain net shares until they have met the ownership requirement. The Company also increased the minimum stock ownership requirement for the CEO to six times annual base salary.

Following the filing of this Proxy Statement, the Company is conducting another round of shareholder outreach to our top 50 investors, who collectively represent more than half of our outstanding common stock. The purpose will be to highlight the effectiveness of the Company’s executive compensation programs, provide updates on executive compensation components that were modified in 2022, and to request additional feedback.

The Company also has several governance policies in place to align executive compensation with stockholder interests and mitigate risk. These policies include: stock ownership guidelines; a prohibition on hedging and pledging of Company stock; a clawback policy; and post-employment non-competition and non-solicitation restrictions. These policies are discussed in detail in the “Compensation Discussion and Analysis” section of this Proxy Statement.

In 2022, the Company had a strong year despite global supply chain disruptions. The Company posted record highs for revenue and GAAP earnings per share from continuing operations. Results of our 2022 performance include the following:

Financial results, including those from prior periods, are described in more detail in our Form 10-K for the fiscal year ended December 31, 2022. For further detail and a reconciliation of Segment Profit to Operating Income, see Note 3 in the Notes to the Consolidated Financial Statements in our Form 10-K for the fiscal year ended December 31, 2022. All total stockholder return calculations assume reinvestment of dividends.

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We are asking stockholders to approve the following advisory resolution at the Annual Meeting:

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE

APPROVAL OF THE COMPENSATION OF THE NEOs AS DISCLOSED IN

THIS PROXY STATEMENT.

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Proposal 3

Advisory Vote on the Frequency of Future Advisory Votes

on the Compensation of Our Named Executive Officers

Under the Dodd-Frank Act and Security and Exchange Commission (“SEC”) regulations, stockholders are entitled to vote on how frequently we should seek an advisory vote on the compensation of the NEOs, commonly referred to as a “Say on Frequency” vote. By voting on this proposal, stockholders may indicate whether they prefer to vote on NEO compensation every one, two, or three years. Pursuant to the Dodd-Frank Act, this stockholder vote on the frequency of the stockholder vote, which must be held at least once every six years, is an advisory vote only, and it is not binding on the Company or the Board.

The Company’s last Say on Frequency vote occurred at the 2017 Annual Meeting. At that meeting, stockholders voted in favor of holding an advisory vote to approve NEO compensation every year. Since that time, we have held a vote on NEO compensation on an annual basis. It is expected that the next Say on Frequency vote will occur at the 2029 Annual Meeting.

Although the vote is non-binding, the Compensation and Human Resources Committee and the Board value the opinions of the stockholders and will consider the outcome of the vote when determining the frequency of the stockholder vote on NEO compensation.

The Board has determined that continuing the practice of an annual advisory stockholder vote on NEO compensation is the most appropriate approach for the Company and its stockholders. In formulating its recommendation, our Board considered that an annual advisory vote on NEO compensation will allow our stockholders to provide direct and timely input on our compensation principles, policies, and practices.

If no voting specification is made on a properly returned or voted proxy card, the proxies named on the proxy card will vote FOR ONE YEAR for the frequency of the future advisory stockholder votes on NEO compensation. The alternative receiving the greatest number of votes — ONE YEAR, TWO YEARS, or THREE YEARS — will be the frequency that stockholders approve.

THE BOARD RECOMMENDS A VOTE FOR “ONE YEAR” ON PROPOSAL THREE REGARDING THE FREQUENCY OF FUTURE STOCKHOLDER VOTES ON THE COMPENSATION OF THE NEOs.

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Proposal 4

Ratification of the Appointment of KPMG LLP

as Our Independent Registered Public

Accounting Firm for the 2023 Fiscal Year

The Audit Committee of the Board has appointed KPMG LLP to continue as our independent registered public accounting firm for the 2023 fiscal year. We are asking our stockholders to ratify the appointment of KPMG LLP as our independent registered public accounting firm. If our stockholders do not ratify this appointment, the Audit Committee will consider the reasons for the rejection and whether it should select a different firm; however, it is not required to do so. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that a change would be in the best interests of the Company and our stockholders.

A representative of KPMG LLP will be present at the Annual Meeting and will be available to respond to appropriate questions. The representative will also have an opportunity to make a statement at the Annual Meeting if he or she desires to do so.

THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF

KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING

FIRM FOR THE 2023 FISCAL YEAR.

Audit and Non-Audit Fees

The following table sets forth the fees for audit and other services rendered by KPMG LLP for each of the last two fiscal years (in thousands).

Audit Committee Approval of Audit and Non-Audit Services

The Audit Committee pre-approves all audit services provided by our independent registered public accountants. In addition, all non-audit services provided by KPMG LLP are pre-approved in accordance with our policy that prohibits our independent registered public accountants from providing services specifically prohibited by the SEC. For permissible non-audit services, the Audit Committee has delegated pre-approval authority to the Audit Committee Chair. In addition, the Audit Committee has approved annual maximum amounts for tax advisory and tax return services. No engagements are commenced until the Audit Committee Chair’s approval has been received. All approved services are reported to the full Audit Committee at each quarterly meeting. In accordance with the foregoing, all services provided by KPMG LLP in 2021 and 2022 were pre-approved by the Audit Committee.

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Audit Committee Report

The Audit Committee maintains effective working relationships with the Board, management, the Company’s internal auditors, and KPMG LLP, the Company’s independent registered public accounting firm (the “Independent Accountants”). As set forth in the Audit Committee Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that our Company’s consolidated financial statements and disclosures are complete and accurate and in accordance with U.S. generally accepted accounting principles and applicable rules and regulations. The Independent Accountants are responsible for auditing the Company’s consolidated financial statements and expressing an opinion as to the conformity of these financial statements with U.S. generally accepted accounting principles and on the Company’s internal control over financial reporting.

The Audit Committee has (1) reviewed and discussed the Company’s audited consolidated financial statements for the year ended December 31, 2022 with the Company’s management and with the Independent Accountants; (2) discussed with the Independent Accountants the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board; and (3) received the written disclosures and the letter from the Independent Accountants required by applicable requirements of the Public Company Accounting Oversight Board regarding the Independent Accountants’ communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the Independent Accountants the Independent Accountants’ independence and considered whether the provision of non-audit services by the Independent Accountants to the Company is compatible with the Independent Accountants’ independence.

Members of the Audit Committee rely, without independent verification, on the information provided and on the representations made by management and the Independent Accountants. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions referred to above do not assure that the audits of the Company’s consolidated financial statements have been carried out in accordance with generally accepted auditing standards, that the consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles or that the Company’s Independent Accountants are in fact “independent.”

Based upon the reviews and discussions described above, and subject to the limitations on the role and responsibilities of the Audit Committee referred to in this report and in the Audit Committee Charter, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Submitted by the Audit Committee of the Board:

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Corporate Governance

Board of Directors

Director Independence

Our Corporate Governance Guidelines require that a majority of our directors be “independent,” and that the Compensation and Human Resources, Board Governance, and Audit Committees consist exclusively of independent directors as defined under the NYSE listing standards, the Exchange Act, and any other applicable laws or regulations regarding independence. No director qualifies as “independent” unless the Board affirmatively determines that the director has no material relationship with the Company.

Applying these standards, the Board has determined that all of our Board members are independent, except Alok Maskara, our Chief Executive Officer (“CEO”). All of the members of the Board’s Compensation and Human Resources, Board Governance, and Audit Committees are independent directors (see the table under “Board Committees” below).

In making its determination as to the independence of our directors, the Board Governance Committee and the Board considered that (a) Mr. Teske served as Interim CEO of the Company for less than two months from March 23, 2022 to May 9, 2022 and (b) Ms. Rucker serves as a member of the Board of Directors of HP Inc., and Mr. Wall serves as a special advisor to the CEO of HP Inc., which provides computer equipment and related items to the Company in the ordinary course of business. The Board affirmatively determined that no director had a material relationship with the Company despite these facts.

Board Meetings and Leadership Structure

Mr. Teske serves as independent Chair of the Board. As independent Chair, Mr. Teske, among other things, presided at all meetings of the Board, including executive sessions of the independent directors, served as liaison between the CEO and the independent directors, assisted in planning agendas for Board meetings, and advised on the presentation of information provided to the Board.

The Board met seven times in 2022. All directors attended more than 75% of the total number of all meetings of the Board and committees of the Board on which they served. Our Corporate Governance Guidelines include a policy that Board members are expected to attend the Annual Meeting. All of the individuals serving as directors at the time of our 2022 Annual Meeting of Stockholders attended our 2022 Annual Meeting of Stockholders, and we expect all current directors to attend the 2023 Annual Meeting.

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Board Oversight of ESG

Our Board and Board Committees oversee all aspects of our Company sustainability and ESG goals, policies, and initiatives as shown in more detail in the table below:

Governance

Full Board

Public Policy

Audit

Governance

Compensation & HR

Shareholder Rights

Executive Compensation

Accounting and Tax Transparency

Board Composition and Diversity

Risk Management

Business Ethics and Compliance

Public Policy

Cyber Security and Data Privacy

Environmental

Full Board

Public Policy

Audit

Governance

Compensation & HR

Product Efficiency and Innovation

Energy Management

Waste Management

Refrigerant Management

Climate Change and GHG Emissions

Water Stewardship

Product Lifecycle Management and Materials Sourcing

Social

Full Board

Public Policy

Audit

Governance

Compensation & HR

Culture and Values

Employee Health and Safety

Employee Diversity, Inclusion, and Engagement

Pay Equity

Employee Training and Development

Benefits & Pension

Product Safety

Supply Chain

Community Involvement and Charitable Giving

Board Committees

The standing committees of the Board are as follows: Audit, Board Governance, Compensation and Human Resources, and Public Policy. The Board has adopted charters for each of these committees, copies of which are available on our website at www.lennoxinternational.com by following the links “About Us — Corporate Governance — Committee Charters.” Each of these Board committees is led by a different independent director and all members of our Board committees are independent directors.

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The following table provides current membership information for each of the Board committees and indicates which directors our Board determined are independent, as defined by the NYSE.

Audit Committee

The Audit Committee assists the Board in fulfilling its oversight responsibilities relating to the integrity of our financial statements and related systems of internal controls, our compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications, independence and performance and the performance of our internal audit function. The Audit Committee also has the direct responsibility for the appointment, compensation, retention, and oversight of our Independent Accountants.

The Board has determined that each Audit Committee member is independent, as independence is defined for audit committee members by the SEC and the NYSE. The Board has also determined that each Audit Committee member is “financially literate” as defined by the NYSE, has accounting or related financial management expertise, and is an audit committee financial expert as defined by the SEC. The Audit Committee met nine times in 2022.

Board Governance Committee

The Board Governance Committee assists the Board by identifying individuals qualified to become Board members, developing qualification criteria for Board membership, making recommendations to the Board regarding the appropriate size of the Board and appointment of members to the Board’s committees, developing and recommending to the Board any changes to the Corporate Governance Guidelines and Code of Business Conduct applicable to our Company, and overseeing the evaluation of our Board and each of the Board’s committees. The Board Governance Committee also conducts an individual peer review for any directors who are scheduled to be re-nominated. The Board has determined that each member of the Board Governance Committee is independent as independence is defined by the NYSE. The Board Governance Committee met three times in 2022.

Compensation and Human Resources Committee

The Compensation and Human Resources Committee determines the compensation philosophy and oversees the compensation programs for the Company’s executive officers and the non-employee members of the Board. This Committee’s responsibilities include oversight of the short- and long-term

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incentive plans and the senior management succession plans. The Committee also reviews the funding requirements and investment policies for the defined benefit and defined contribution retirement plans, and the performance of investment funds, investment advisors, and investment managers under those plans. The Committee may delegate its responsibilities to a subcommittee comprised of Committee members.

Although the Committee seeks input from the CEO on various elements of executive compensation, the Committee determines and approves the final compensation elements and amounts to be provided to the Company’s NEOs. The independent members of the Board (rather than the Committee) have direct responsibility for approving CEO and Board compensation; however, the Committee reviews and recommends proposed changes to CEO and Board compensation to the independent members of the Board for approval. See “Executive Compensation — Compensation Discussion and Analysis” for information concerning the Committee’s philosophy and objectives in overseeing executive compensation. The Board has affirmatively determined that each member of the Committee is independent as defined for compensation committee members by the NYSE. The Board has also determined that each member of the Committee is a “non-employee director” for purposes of Section 16b-3 of the Exchange Act. The Committee met seven times in 2022.

The Committee’s charter authorizes the Committee to retain third-party compensation consultants and to obtain advice and assistance from internal or external legal, accounting, or other advisors. For 2022, the Committee retained Pearl Meyer. Pearl Meyer does not provide any other services to the Company. See “Executive Compensation — Compensation Discussion and Analysis” for further information regarding our executive compensation programs and the scope of services provided by Pearl Meyer. The Committee has concluded that Pearl Meyer’s work does not raise any conflicts of interest that require disclosure under applicable SEC regulations.

Public Policy Committee

The Public Policy Committee is responsible for overseeing the Company’s (a) actions in furtherance of corporate environmental and social responsibilities and other sustainability issues of significance to investors and other key Company stakeholders and (b) health and safety issues. The Board has determined that each Public Policy Committee member is independent as defined by the NYSE. The Public Policy Committee met twice in 2022.

Director Nomination Process and Nominee Criteria

The Board is responsible for nominating candidates for Board membership. The Board has delegated the director screening and recruitment process to the Board Governance Committee. In this capacity, the Board Governance Committee develops and periodically reviews the qualification criteria for Board membership, identifies new director candidates, and makes recommendations to the Board regarding the appropriate size of the Board and appointment of members to the Board’s committees. The Board Governance Committee typically retains a third-party search firm to assist in identifying and evaluating potential new director candidates. We strive to maintain a well-rounded Board with a diversity of experience, functional expertise, and industry knowledge. Required qualifications for Board membership vary according to the particular areas of expertise, experience and skills being sought to complement the existing Board composition at the time of any vacancy.

According to our Corporate Governance Guidelines, the Board Governance Committee considers the following factors in evaluating candidates, in addition to other factors that the Board Governance Committee deems relevant:

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Our Corporate Governance Guidelines specifically state that the Board believes in the value of Board diversity and is committed to developing a diverse pool of potential candidates for Board service. Consequently, when nominating new directors, the Board will seek the best qualified candidates. To achieve a high performing Board, diversity is essential, including diversity of professional experience, race, ethnicity, gender, age, and cultural background. The Board and the Board Governance Committee will consider race, ethnicity, and gender diversity when developing a pool of potential candidates for future Board service. Our current Board reflects this effort. Among other things, four of the Company’s directors are female, and two of the Company’s directors are racially diverse.

In addition, we believe that diversity with respect to tenure is important to benefit from both fresh perspectives and deep experience and knowledge of our Company and our business. Therefore, we aim to maintain an appropriate balance of tenure among our directors. In furtherance of its succession planning responsibility, the Board has appointed a third of its directors (three new directors) since 2019. The average tenure of our directors is 9.72 years.

When a vacancy occurs on the Board, a majority of the directors then in office may fill the vacancy or the size of the Board may be reduced. The Board Governance Committee considers nominees for election to the Board recommended by stockholders in the same manner as other candidates.

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Experience and Skills of our Directors

Our directors bring a well-rounded variety of experience and skills and represent a mix of deep knowledge of the Company and fresh perspectives. The experience and skills that the Board considers in evaluating its membership, and which inform Board succession planning and our director nomination processes, are highlighted in the following table. The table also identifies which directors have particularly strong experience and skills in the areas described below. Further information about each individual director is set forth in the director biographies in this proxy statement.

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Stockholder Nominations for Director

A stockholder wishing to nominate a candidate for election to the Board at a meeting of the stockholders (“Nominating Stockholder”) is required to give written notice to our Corporate Secretary of his or her intention to make a nomination in accordance with the terms of our Bylaws. The Nominating Stockholder must be a holder of record of stock of the Company entitled to vote at the annual meeting of stockholders and must appear at the annual meeting of stockholders to nominate such person. The Nominating Stockholder must include a written consent from its proposed director nominee. The proposed director nominee must also represent and agree that he or she (1) has not and will not give any assurance or commitment not disclosed to the Company on how he or she would vote on any issue or question, (2) has not and will not become party to any agreement not disclosed to the Company regarding direct or indirect compensation (other than from the Company) for his or her service as a director, and (3) if elected, will comply with all applicable policies and guidelines of the Company. We must receive the notice of nomination at least 60 days but no more than 90 days prior to the annual meeting of stockholders. However, if we give less than 70 days’ notice of the date of the annual meeting of stockholders, the notice of nomination must be received within 10 days following the date on which notice of the date of the annual meeting of stockholders was mailed or such public disclosure was made to our stockholders.

Pursuant to our Bylaws, the notice for the proposed director nominee must contain certain information about the nominee, the Nominating Stockholder and any person “acting in concert” with the Nominating Stockholder, including descriptions of any arrangements or understanding related to the nomination, the information that would be required if such person was making a stockholder proposal (as described under “Other Information – Stockholder Proposals for the 2024 Annual Meeting of Stockholders”), and other information sufficient to allow the Board Governance Committee to determine if the candidate meets our qualification criteria for Board membership. The Board Governance Committee may require the proposed director nominee to furnish additional information in order to determine that person’s eligibility to serve as a director. A nomination that does not comply with the above procedure will be disregarded. Nominating Stockholders whose nominations comply with the foregoing procedure and who meet the criteria described above under the heading “Director Nomination Process and Nominee Criteria” and in our Corporate Governance Guidelines, will be evaluated by the Board Governance Committee in the same manner as the Board Governance Committee’s nominees.

Communications with Directors

Stockholders and all other interested parties may send written communications to the Board by email to directors@lennoxintl.com, or by regular mail to 2140 Lake Park Blvd., Richardson, Texas 75080, Attention: Board of Directors, c/o Corporate Secretary.

Communications received by the Corporate Secretary will be delivered to one or more members of the Board or management, as determined by the Corporate Secretary. Any allegations of accounting, internal controls, or auditing-related complaints or concerns will be directed to the Chair of the Audit Committee.

ESG

Environmental Focus and Sustainability

We are a global leader in energy-efficient climate-control solutions dedicated to sustainability and creating comfortable and healthier environments for our residential and commercial customers, while reducing their carbon footprint. We lead the field in innovation with our air conditioning, heating, indoor air quality, and refrigeration systems.

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In 2021, we set aggressive targets to reduce our greenhouse gas (GHG) emissions in line with the Science Based Target initiative (SBTi), a global coalition dedicated to curbing global warming based on climate science. SBTi has approved our targets, confirming our commitment to sustainability. Our targets, measured from a baseline in 2019, include reducing absolute Scope 1 and 2 emissions by 37.5% by 2034 and reducing Scope 3 emissions by 30%.

In 2014, we set goals to reduce the Company’s consumption of energy and water and to reduce the Company’s manufacturing waste by 25% by 2024. We have already exceeded our water and waste reduction goals and expect to meet our energy reduction goal. Our substantial progress towards meeting and exceeding these 2024 goals has been achieved by investing capital dedicated to sustainability projects, engaging our employees to identify and complete environmentally progressive projects, and encouraging employees to adopt conservation-minded behaviors. We are in the process of creating new targets for water, waste, and energy reduction.

When we published our first ESG report covering the 2019 calendar year, we aligned our performance disclosures with the Sustainability Accounting Standards Board (SASB) and Task Force for Climate Financial Disclosure (TCFD), two of the most globally recognized ESG frameworks. In 2021, we also adopted the United Nations Sustainable Development Goals (UN SDGs) most relevant to the Company’s business. These frameworks and goals allow investors to compare companies across meaningful topics, again demonstrating our commitment to ESG.

For more information regarding our commitment to leadership in ESG matters, please see our website at www.lennoxinternational.com under the heading “ESG.” Information in our ESG Report is not incorporated by reference in this Proxy Statement.

Risk Management

While the Board oversees the Company’s risk management, our management is responsible for the development, implementation, and maintenance of our risk management processes. Management provides periodic reports to the Board and Board committees on its assessment of strategic, operational, legal and compliance, information security, and financial reporting risks to the Company. The Board and Board committees, as appropriate, review and consider the management reports provided on the Company’s enterprise risk and risk management strategy.

Enterprise Risk Management

Our Enterprise Risk Management program, which identifies and addresses risk, is typically presented to the full Board twice a year. The Audit Committee oversees the guidelines and policies that govern the Company’s processes to assess and manage significant enterprise risk exposure.

Compensation Risk

The Board reviews the Company’s compensation policies and practices to determine if risks arising from those policies and practices are reasonably likely to have a material adverse effect on the Company. All of the Company’s material incentive compensation plans are reviewed at least annually. Based on these reviews, the Board has not identified any risks arising from the compensation policies and practices that are reasonably likely to have a material adverse effect on the Company. See “Executive Compensation — Compensation Discussion and Analysis” for more information about the design of our compensation program and risk mitigation compensation practices we have incorporated into our compensation program, including stock ownership guidelines and claw-back provisions.

Cyber-Security/Information Security Risk

On an ongoing basis, the Company analyzes and assesses information security risks associated with our business. That assessment is primarily the responsibility of the Company’s information technology department, with input from our Data Protection & Cybersecurity Steering

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Committee, comprised of employees with relevant expertise. The Company seeks to adhere to the NIST Cyber-Security Framework, which provides best practice guidance on how to prevent, detect, and respond to cyberattacks. As part of the Company’s information security risk management program, the Company routinely tests our controls and information systems to help maintain compliance with our security policies and procedures and industry standards and requires that IT infrastructure associated with sensitive customer credit card information be audited and certified by a quality security party. We also provide information security training for our employees and business partners. In addition, the Company maintains information security risk insurance.

Twice a year, management updates the Board on the Company’s information security policies and procedures, including, training, risk assessment, internal controls, security software, evaluation and testing, insurance, incident response plans, and forward-looking information security strategies. Additionally, our policies require our Board to be notified of breaches to our information systems based on pre-defined severity thresholds. Five of our directors, Janet K. Cooper, Alok Maskara, Gregory T. Swienton, Todd J. Teske, and Shane D. Wall, have experience and expertise in addressing cybersecurity issues.

Other Corporate Governance Policies and Practices

Code of Business Conduct

The Company has adopted a Code of Business Conduct that applies to all its directors and employees, including its senior financial and principal executive officers. The Code of Business Conduct covers a variety of matters, such as acting with integrity and compliance with laws, including anti-corruption laws. Amendments to and waivers, if any, of the Code of Business Conduct as it pertains to the executive officers will be disclosed on our website. The Code of Business Conduct is available on the Company’s website at www.lennoxinternational.com by following the links “About Us — Ethics & Compliance — Code of Business Conduct.”

Corporate Governance Guidelines

The Company has adopted Corporate Governance Guidelines that are available on the Company’s website at www.lennoxinternational.com by following the links “About Us — Corporate Governance — Corporate Governance Guidelines.”

Insider Trading Policy

The Company has adopted an insider trading policy and procedures designed to promote compliance with insider trading laws.

Executive Session Meetings

The non-management directors of our Board, all of whom are independent, meet regularly in executive session without the presence of management. In 2022, the independent Chair of the Board chaired the executive session meetings of our independent directors.

Whistleblower Procedures

The Audit Committee has established procedures for the handling of complaints regarding accounting, internal accounting controls, or auditing matters, including procedures for confidential and anonymous submission by our employees of concerns regarding such matters. The Company’s Code of Business Conduct prohibits retaliation against employees who report violations or suspected violations of the Code of Business Conduct.

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Director Compensation

In 2022, our director compensation program consisted of annual retainers and long-term incentive compensation. The Company uses a combination of cash, stock, and long-term equity awards to provide market-competitive compensation to members of our Board.

Each year, the Committee reviews benchmark data from our Compensation Peer Group and other general industry surveys to assess the competitiveness of our director compensation program. If the Committee believes changes are warranted to the Board compensation program, the Committee recommends the proposed changes to the independent members of the Board for approval.

2022 Annual Compensation

In 2022, we provided the following annual retainers, which are paid in quarterly installments, and long-term incentive awards to members of our Board.

Non-Employee Directors’ Compensation and Deferral Plan

Under this plan, non-employee directors may receive all or a portion of their annual retainer for service on the Board in Company common stock.

Long-Term Incentive Compensation

Non-employee directors receive 100% of their long-term incentive in the form of RSUs under the 2019 Equity and Incentive Compensation Plan. In 2022, we awarded each non-employee director 567 RSUs. Generally, the RSUs vest three years following the date of grant provided that the director remains on our Board throughout the vesting period.

Perquisites and Other Compensation

We allow our non-employee directors to participate in our employee rebate program, which provides rebates on eligible residential heating and air conditioning equipment, accessories, and supplies. We also reimburse all non-employee directors for their reasonable expenses incurred in connection with attendance at Board or Board committee meetings.

Stock Ownership Guidelines

Pursuant to our Corporate Governance Guidelines, each non-employee director is required to own shares of our common stock having a value of at least five times their annual retainer within five years after their first election to the Board. Directors must retain their net shares (after income tax withholding) until they have met their ownership requirement. Unvested RSUs and shares of common stock owned count towards this requirement.

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As of December 31, 2022, all non-employee directors were in compliance with these stock ownership guidelines.

2022 Director Compensation Table

The following table provides information regarding compensation earned in 2022 by each non-employee director excluding Todd J. Teske. Mr. Teske served as our interim Chief Executive Officer for less than two months, from March 23, 2022 to May 9, 2022, and his compensation for service as a director is fully reflected in the 2022 Summary Compensation Table.

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The following table provides information regarding the aggregate number of outstanding RSUs held by each non-employee director as of December 31, 2022. RSUs generally vest on the third anniversary of the date of grant.

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Executive Compensation

Compensation Discussion and Analysis

2022 CD&A At-A-Glance

This Compensation Discussion and Analysis (“CD&A”) reviews the philosophy, objectives, and elements of our executive compensation program, and describes the 2022 compensation earned by our named executive officers (“NEOs”). It also describes the process followed by the Compensation and Human Resources Committee (the “Committee”) for making pay decisions, as well as its rationale for specific pay decisions for 2022 executive compensation.

At our 2022 Annual Meeting, the advisory vote on the compensation of the Company’s NEOs received the approval of approximately 75% of the stockholders voting for or against this proposal, well below the average of 96% of shareholder support we have received since 2015. Following the vote, we increased our shareholder engagement efforts to seek feedback and better understand our investors’ perspectives on our executive compensation program. We reached out to our top 50 shareholders who voted against our Say-on-Pay proposal. The Company appreciates the valuable input received from shareholders on all topics, which has provided a better perspective on their priorities.

Below is an overview of the key concerns voiced during the shareholder outreach, and actions the Company took in response:

Concerns we heard:				Actions taken:
Retention equity granted in 2021, including lack of performance criteria and shorter vesting provisions.				Amidst the Company’s leadership transition in 2021, the Company granted one-time, first-ever retention awards to NEOs. The Company has no plans of granting similar awards in the future.
Single-trigger equity vesting in change-in-control (CIC) agreements.   Legacy excise tax gross-ups in CIC agreements.				In 2022, the Company terminated existing CIC agreements with NEOs and adopted a CIC severance plan, which included double-trigger equity vesting and eliminated excise tax gross-ups for all employees. The plan also reduced cash severance payable to the CEO & NEOs and eliminated enhanced pension benefits.
Similar metrics for short-term and long-term incentive plans.				The Company added a revenue metric to the 2023 short-term incentive plan.
Lack of formal stock holding requirements.				Effective 2022, the Company revised its executive stock ownership requirements to require NEOs to retain net shares (after tax withholdings) until they have met the ownership requirement. The Company also increased the minimum stock ownership requirement for the CEO to six times annual base salary.

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Following the filing of this Proxy Statement, the Company will conduct another round of shareholder outreach to our top 50 investors, who collectively represent more than half of our outstanding common stock. The purpose will be to highlight the effectiveness of the Company’s executive compensation programs, provide updates on executive compensation components that were modified in 2022, and request additional feedback.

Our business continued to strengthen in 2022 with the Company delivering year-over-year revenue growth of 13%. Operating income increased 11%, GAAP net income increased 7% to $497 million, and GAAP earnings per share from continuing operations was up 12% to $13.88.

More information about our 2022 business achievements, and the resulting compensation actions taken by the Committee are summarized below.

2022 Named Executive Officers (“NEOs”)

Leadership Transitions

The Company seamlessly executed its leadership transition plan during 2022. As announced by the Board in July 2021, Todd Bluedorn, then Chairman of the Board and CEO, advised the Board that he intended to resign by mid-2022. After 15 years of distinguished service, Mr. Bluedorn resigned effective on March 23, 2022.

The Board appointed Todd J. Teske as Chairman of the Board, effective March 23, 2022, and Alok Maskara as President and CEO, effective May 9, 2022. The Board also appointed Mr. Teske as Interim President and CEO of the Company, effective March 23, 2022, until Mr. Maskara’s start date of May 9, 2022. Mr. Teske had previously served as Lead Independent Director of the Board since 2015 and as a member of the Board since 2011. While serving as Interim CEO, Mr. Teske did not serve as a member of any of the Board’s committees and received monthly compensation of $150,000, inclusive of travel and living expenses.

In connection with Mr. Maskara’s appointment to President and CEO, the Board approved the following compensation arrangement:

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The compensation arrangement provided to Mr. Maskara is market competitive. A one-time sign-on award is customary practice when hiring a CEO who, at the time served as the CEO of a publicly traded company and forfeited substantial unvested incentive compensation. Half of this award is performance based, and the total award generally replicates the amount and timing of annual and long-term incentive compensation forfeited by Mr. Maskara at his prior employer. It has been 15 years since the Company provided a sign-on award to an incoming chief executive officer. Mr. Maskara does not participate in the Company’s legacy defined benefit Supplemental Retirement Plan, as that plan was closed to new participants in 2018.

In addition to the successful CEO leadership transition, on May 4, 2022, the Company promoted Joseph Nassab to President of our Commercial business segment. Mr. Nassab previously served as Vice President and General Manager of Allied Air, where he delivered exceptional growth and profitability for over a decade. In connection with his promotion and newly expanded responsibilities, Mr. Nassab received a RSU award with a grant date value of $500,000, which vests on the third anniversary of the grant date. Under Mr. Nassab’s leadership, we’ve taken aggressive actions to improve operational performance of the Commercial business segment and started construction on a second factory.

In November 2022, the Company announced the retirement of Doug Young, the long-standing President of our Residential business segment, effective June 30, 2023, and the appointment of Gary Bedard as President of our Residential business segment, effective January 1, 2023. Mr. Young’s availability during the first half of 2023 will help ensure a seamless transition that maintains momentum on critical initiatives across the Residential business. Mr. Bedard most recently served as President of our Refrigeration business segment since 2017. Prior to leading the Refrigeration business segment, Mr. Bedard served as Vice President and General Manager of our flagship Lennox Residential business unit.

Executive Summary

The Company’s executive compensation program is designed to attract, retain, and motivate leadership talent, align with short- and long-term business goals, maintain market competitiveness and increase stockholder value by maintaining a strong alignment between pay and performance.

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Highlights of our 2022 financial performance and a description of the linkage between executive compensation and financial performance are set forth below.

Financial Highlights

In 2022, the Company posted record highs for revenue and earnings per share, while gross profit and segment profit margin improved over the prior year. Highlights of our 2022 performance include the following:

Financial results, including those from prior periods, are described in more detail in our Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 21, 2023 (“Form 10-K”). For further detail and a reconciliation of segment profit to operating income, see Note 3 in the Notes to the Consolidated Financial Statements in our Form 10-K. All total stockholder return calculations assume reinvestment of dividends.

Compensation Highlights

The Committee believes that the design of the Company’s executive compensation program provides a direct link between Company performance and the compensation to our NEOs. Our executive compensation program has three primary elements: base salary, short-term incentives (as part of our Short-Term Incentive (“STI”) Program), and long-term equity incentives (as part of our Long-Term Incentive (“LTI”) Program). Each of these compensation elements serves a specific purpose in our compensation strategy. Base salary is an essential component to any market-competitive executive compensation program. Short-term incentives reward the achievement of annual goals, while long-term incentives drive our NEOs to focus on continuous stockholder value creation.

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For 2022, Company performance against the STI earnings goals was approximately at target, however the performance against the STI cash flow goals fell short of threshold achievement, resulting in an STI payout of approximately 59% of target. Certain NEOs with STI goals tied to their business segment performance had higher payouts. Performance goals were not adjusted, and no discretionary payments were made to NEOs.

Stockholder Input

The Committee considers input from stockholders, including the result of the annual Say-on-Pay vote, in determining compensation policies and decisions. At our 2022 Annual Meeting, the advisory vote on the compensation of the Company’s NEOs received the approval of approximately 75% of the stockholders voting for or against this proposal, well below the average of 96% of shareholder support we have received since 2015. Following the vote, we increased our shareholder engagement efforts to seek feedback and better understand our investors’ perspectives on our executive compensation program. We reached out to all top 50 shareholders who voted against our Say-on-Pay proposal.

Concerns we heard:				Actions taken:
Retention equity granted in 2021, including lack of performance criteria and shorter vesting provisions.				Amidst the Company’s leadership transition in 2021, the Company granted one-time, first-ever retention awards to NEOs. The Company has no plans of granting similar awards in the future.
Single-trigger equity vesting in CIC agreements.   Legacy excise tax gross-ups in CIC agreements.				In 2022, the Company terminated existing CIC agreements with NEOs and adopted a CIC severance plan, which included double-trigger equity vesting and eliminated excise tax gross-ups for all employees. The plan also reduced cash severance payable to the CEO & NEOs and eliminated enhanced pension benefits.
Similar metrics for short-term and long-term incentive plans.				The Company added a revenue metric to the 2023 short-term incentive plan.
Lack of formal stock holding requirements.				Effective 2022, the Company revised its executive stock ownership requirements to require NEOs to retain net shares until they have met the ownership requirement. The Company also increased the minimum stock ownership requirement for the CEO to six times annual base salary.

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Promptly following the filing of this Proxy Statement, the Company will conduct another round of shareholder outreach to its top 50 investors, who collectively represent more than half of its outstanding common stock. The purpose will be to highlight the effectiveness of the Company’s executive compensation programs, provide updates on executive compensation components that were modified in 2022, and to request additional feedback.

Positive Governance Practices

The Committee assesses trends and developments in executive compensation practices and implements those that best fit with the Company’s business strategy and our stockholders’ long-term interests. Below are some of the practices we have incorporated into our executive compensation program:

		What We Do						What We Don’t Do
		Median compensation philosophy						No excise tax gross-ups
		Pay-for-performance linkage						No hedging of Company stock
		Long-term balance in compensation structure						No pledging of Company stock
		Use of independent compensation consultant						No dividends on equity awards in annual grant
		Annual risk assessment						No repricing of stock appreciation rights or options
		Rigorous stock ownership guidelines						No cash buyouts of underwater stock appreciation rights or options
		Clawback provisions						No significant annual perquisites
		Non-Competition / Non-Solicitation restrictions
		Annual review of share utilization
		Regular market assessment of our peer group
		Change-in-Control double-trigger for severance and equity vesting

What Guides Our Program

Pay-for-Performance

We maintain a pay-for-performance philosophy designed to reward successful execution of our business strategy and achievement of desired business results, with a focus on aligning compensation with stockholders’ interests. When our financial results exceed performance goals, monetary rewards to our NEOs generally pay out at higher levels. When our financial results fall below performance goals, monetary awards to our NEOs generally pay out at lower levels or not at all.

Recent payouts under our STI and LTI Programs demonstrate the strong link between Company performance and payments made to our NEOs. In 2022, the Company’s overall profitability and free cash flow performance resulted in below target level payouts under our annual STI program for NEOs with performance goals tied solely to overall Company performance. While the Company’s

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performance against earnings goals approximated target achievement, it fell short of the threshold performance goal on cash flow, which resulted in an overall payout of 59% of target.

Under our LTI Program, record weighted average return on invested capital of 47.5% for the 2020-2022 performance period exceeded the maximum payout goal for that metric, while the core net income compound annual growth rate of 7.3% for that same period was above threshold achievement. As a result, our NEOs received a PSU payout of approximately 130% under our LTI plan, consistent with our pay-for-performance approach and results-oriented compensation.

The graph below illustrates the directional alignment of pay and performance by showing changes in CEO annual compensation (using totals from the Summary Compensation Table, excluding changes in pension value) versus changes in total stockholder return (“TSR”) over the last several years. While pension values are disclosed in the Summary Compensation Table pursuant to applicable reporting requirements, we excluded the annual change in pension value for purposes of analyzing pay for performance for the following reasons:

The SEC followed this same approach in the new Pay versus Performance disclosure by requiring companies to include pension benefits actually attributable to service during the relevant periods, but not the impact of changes in interest rates. See the Company’s Pay versus Performance disclosure for more information.

$ amounts are in thousands. CEO pay excludes changes in pension value for all years. For 2022, CEO pay includes Bluedorn, Teske and Maskara. TSR represents the change in a $100 investment from December 31, 2017, assuming reinvestment of dividends.

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The volatility in the chart above is primarily due to Mr. Bluedorn not receiving an LTI grant in December 2021 because of his impending resignation, and the subsequent one-time sign-on award to Mr. Maskara in 2022 as compensation for incentive compensation forfeited from his prior employer. The chart below averages CEO pay for 2021 and 2022 to provide a more appropriate picture of CEO compensation since the CEO transition spanned calendar years.

$ amounts are in thousands. CEO pay excludes changes in pension value for all years. For 2022, CEO pay includes Bluedorn, Teske and Maskara. TSR represents the change in a $100 investment from December 31, 2017, assuming reinvestment of dividends.

Key Strategic Objectives

The strategic objectives of our executive compensation program are to:

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The following table lists each element of executive compensation and how the Committee believes it correlates to our compensation philosophy and key objectives:

Pay Positioning and Compensation Mix

For 2022, the Committee targeted all elements of compensation for the Company’s NEOs at the 50^th percentile of the market and granted a majority of the NEOs’ total target compensation in the form of incentive compensation. The following chart shows the 2022 average total target direct compensation mix for the CEO and NEOs. For purposes of determining target compensation mix for the CEO, data has been annualized and does not include one-time sign-on awards.

CEO & NEOs – Target Compensation Mix

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The Decision-Making Process

Role of the Compensation and Human Resource Committee

The Committee establishes and administers our executive compensation program, practices, and policies. The Committee receives input from management and its independent compensation consultant, and considers competitive practices, our business objectives, stockholder interests, regulatory requirements, and other relevant factors to develop our executive compensation program in an effort to most effectively drive the achievement of the Company’s business objectives.

Role of Senior Management

The Committee obtains input from management and the Committee’s independent consultant when making NEO compensation decisions. The CEO makes recommendations to the Committee with respect to all elements of compensation for each NEO, excluding himself. The CEO’s recommendations on NEO pay are developed in consultation with the Chief Human Resources Officer and the Committee’s independent compensation consultant and are considered with market data. The Committee determines and approves the final compensation elements and amounts to be provided to the NEOs.

The Committee reviews and recommends proposed changes to CEO compensation to the independent members of the Board for approval. All independent members of the Board (rather than just the Committee) have responsibility for approving CEO compensation.

Role of the Independent Compensation Consultant

In 2022, the Committee engaged Pearl Meyer to provide analysis, advice, and recommendations on executive compensation to the Committee. At the Committee’s request, Pearl Meyer performed the following services in 2022:

The Committee analyzed and considered the information provided by management and its consultants to determine the program design and the level and mix of each compensation element for the NEOs. The Committee conducted an independence assessment of Pearl Meyer in accordance with SEC rules. Based on this review, we are not aware of any conflict of interest raised by the work performed by the consultant that would prevent Pearl Meyer from serving as independent consultants to the Committee. Pearl Meyer reported directly to the Committee and did not provide any additional services to the Company or its management.

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Market Competitive Compensation

To maintain a market-competitive program, the Committee uses benchmarking data when establishing executive compensation. Benchmarking against a representative peer group assists the Committee in assessing the competitiveness of our executive compensation program.

For the purposes of setting 2022 compensation, our Company’s compensation peer group, as reviewed and approved by the Committee, included the following 15 companies (the “Compensation Peer Group”):

The Committee selected the Compensation Peer Group using the following criteria:

In 2022, the Committee analyzed the Compensation Peer Group on the criteria above and adjusted the group by replacing the Crane Company and Kennametal Incorporated, as Crane is in the process of a spin-off and Kennametal annual revenues dropped to below 50% of the Company’s annual revenue. With the addition of Masco Corporation and Xylem Inc., Lennox revenues are at the 50^th percentile of the peer group and market capitalization is at the 44^th percentile.

In addition to comparing our NEO compensation to the compensation of our Compensation Peer Group, the Committee also references published compensation data and other studies of compensation trends and market practices (this data and practices, including our Compensation Peer Group, is collectively referred to as the “Market”).

Beyond traditional Market analysis, the Committee also utilizes various other compensation analyses to assist with its decision-making process. Below are examples of information the Committee reviews and considers, as appropriate, when making compensation decisions:

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Market Competitive Three-Year CEO Compensation

In setting CEO compensation, the Committee evaluates elements of pay against our Compensation Peer Group with a focus on driving pay for performance and enhancing stockholder value. When assessing overall CEO pay compared to peers using data provided in the Summary Compensation Table, the Company believes it is appropriate to include pension benefits earned during the year but exclude changes in pension value related solely to declining interest rates for the following reasons:

The table below backs out the estimated change in pension value due solely to declining interest rates for the Company and our Compensation Peer Group, but includes the estimated benefits earned from additional years of service and compensation for each CEO. When limiting the pension value to benefits actually earned based on years of service and compensation, our CEO three-year average compensation for 2020 – 2022 is generally at the 50^th percentile of our compensation peer group.

Three-Year Average CEO Pay Relative to Compensation Peer Group (2020 - 2022)

Note: Pension benefit received for additional year of service and compensation for CEO is included in estimates above.

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The SEC followed this same approach in the new Pay versus Performance disclosure by requiring companies to include pension benefits actually attributable to service during the relevant periods but not the impact of changes in interest rates. See the Company’s Pay versus Performance disclosure for more information.

Components and Analysis of 2022 Executive Compensation

Base Salary

In establishing each NEO’s annual base salary, the Committee considered market data, each individual’s experience and responsibilities, our annual merit budget for all employees, achievement of performance objectives, internal equity and recommendations provided by the CEO for his direct reports.

The following table provides detail regarding base salaries for each NEO:

In setting NEO base salaries, the Committee uses the 50^th percentile of the market as a guideline and may adjust the base salaries based on a number of factors, which may include merit increases, the executive’s unique job responsibilities, management experience, individual contributions, number of years in his or her position and market position of current salary.

Short-Term Incentive Program

Our STI program as established under the Lennox International Inc. 2019 Equity and Incentive Compensation Plan, is an annual cash-based program for our NEOs designed to reward the successful performance of our Company, our business segments, and each individual NEO. In February 2022, the Committee approved financial metrics and performance goals required to be achieved for any payouts to be made under our STI Program. Under the STI Program, once the calculated STI amount is determined based on performance against the pre-approved goals, 25% of that amount may be modified up or down from 0% to 225% based on each NEO’s individual performance. However, the individual performance modifier may not increase the STI payout above

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225% of the NEO’s STI target. The chart below illustrates how STI payouts are calculated for our NEOs:

Financial Performance. The following table summarizes the 2022 STI Program performance goals and payout opportunities, along with Company and business segment performance for each metric as approved by the Committee.

2022 Short-Term Incentive Program Summary — Financial Performance

($ in thousands)

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Goal Setting. The Board is focused on setting targets that align with investor expectations. For 2022, the Company core net income goal at target was 24% higher than the target goal in 2021 and 10% higher than 2021 actual results. The Company free cash flow goal at target was 23% higher than the target goal in 2021 and approximately equivalent to 2021 actual results given increased investments in the business. For Residential, the segment earnings goal at target for 2022 was 26% higher than the target goal in 2021 and the controllable cash flow goal at target was 34% higher than the target goal in 2021. For Refrigeration, the segment earnings goal at target for 2022 was 31% higher than the target goal in 2021 and the controllable cash flow goal at target was 18% higher than the target goal in 2021.    For Allied, the business unit earnings goal at target for 2022 was 12% higher than the target goal in 2021 and the controllable cash flow goal at target was 34% higher than the target goal in 2021.

Individual Performance. Once the calculated STI amount is determined based on performance against the pre-approved earnings and cash flow goals, 25% of that amount may be modified up or down from 0% to 225% based on each NEO’s individual performance. When determining whether to modify an NEO’s calculated STI amount the Committee considered each NEO’s performance against specific financial, operational, and strategic objectives, as well as each NEO’s contribution to our environmental, social, and governance (ESG) goals. The Company’s ESG goals include reducing the environmental impact of our products and operations, reducing the number of safety incidents in our operations, and enhancing the diversity and inclusiveness of our workforce. The CEO reviewed with the Committee the individual performance of each NEO (other than himself). Based on exceptional performance in the Allied business unit which grew revenue and profit, the Committee approved a $29,220 increase to the STI payout for Mr. Nassab.

Targets and Payouts. Under the STI Program, target payout opportunities are determined as a percentage of base salary earned during the year. The target payout opportunities are based on market data using the 50th percentile as a guideline. Each NEO’s target percentage fits within this guideline and was unchanged for 2022.

Based on analysis of the market data and internal equity considerations, the Committee (or with respect to the CEO, the independent Board members) set the following STI targets for 2022. Based on financial and individual performance, the Committee (or with respect to the CEO, the independent Board members) approved the following 2022 payouts for each NEO:

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2022 Short-Term Incentive Targets and Payouts

We include the short-term incentive payments made to the NEOs for 2022, which were approved by the Committee on February 23, 2023 and paid on March 15, 2023, in the Summary Compensation Table under “Non-Equity Incentive Plan Compensation.”

Long-Term Incentive Program

We have a LTI Program designed to incentivize those employees who have principal responsibility for our long-term profitability. We believe participation in our LTI Program aligns the interests of our NEOs with the interests of our stockholders.

We use a mix of performance share units (“PSUs”), restricted stock units (“RSUs”) and stock appreciation rights (“SARs”) in our LTI Program. PSUs and SARs reward performance, as measured by achievement of specified financial objectives for PSUs and stock price growth for SARs. RSUs help us retain key members of management through time-based vesting. The Committee allocated the mix of elements in our LTI Program in a manner designed to drive Company performance, retain key talent, and provide competitive compensation.

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For 2022, the long-term incentive award allocations for our NEOs were as follows:

The Committee determines the grant date for all long-term incentive awards and has a long-standing practice of granting all awards at its regularly scheduled December meeting. The Committee sets the exercise price of our SARs at 100% of fair market value, which is defined as the average of the high and low New York Stock Exchange (“NYSE”) trading prices of our common stock on the date of grant.

The target award values under our LTI are based on market data for similar positions using the 50th percentile as a guideline. The number of shares available for grant under the 2019 Equity and Incentive Compensation Plan is also considered. In December 2022, the Committee established the target award values at or near the 50th percentile of the market for all NEOs. When determining the award sizes for each NEO, the Committee and independent Board members considered the NEO’s time in position, individual performance and potential, the NEO’s impact on the financial performance of the Company and internal equity.

Once the Committee determined the target long-term incentive award values for each NEO for the 2022 grants, 50% of the value was provided as PSUs, 30% as RSUs and 20% as SARs.

The following table summarizes the target award values and number of awards granted for each NEO: