CODI DEF 14A Report ended May 26, 2021

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

COMPASS DIVERSIFIED HOLDINGS

(Exact name of registrant as specified in its charter)

COMPASS GROUP DIVERSIFIED HOLDINGS LLC

(Exact name of registrant as specified in its charter)

N/A

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

2021

Proxy
Statement

Notice of Annual Meeting of Stockholders

to be held May 26, 2021

If you are a shareholder of record or hold shares through a broker, bank or other nominee and are voting
by proxy, your vote must be received by 11:59 p.m., Eastern Time, on May 25, 2021 to be counted.

To vote by proxy:

Electronically Attending the Special Meeting

Your Vote is important

We are sensitive to the public health and travel concerns of our shareholders and employees and the protocols that federal, state and local governments have imposed, and may continue to impose, due to COVID-19 (Coronavirus). The Annual Meeting, therefore, is being hosted via live audio webcast. There will not be a traditional in-person meeting. A summary of the information you need to attend the Annual Meeting online is provided below:

• Any shareholder can attend the Annual Meeting via live audio webcast at virtualshareholdermeeting.com/CODI2021 .

• We encourage you to access the Annual Meeting online prior
to its start time.

• The Annual Meeting starts at 12:00 p.m., Eastern Time.

• Shareholders may vote while attending the Annual Meeting
on the live audio webcast.

• Please have the control number that appears on the proxy card or Notice of Internet Availability that you have been provided in order to join the Annual Meeting.

• Instructions on how to attend and participate via live audio webcast are posted at
virtualshareholdermeeting.com/CODI2021 .

• Questions regarding how to attend and participate via live audio webcast may be answered by calling 800-321-8022 on the day of the Annual Meeting.

Letter from Our Chairman
of the Board

Dear Fellow Shareholders,

The past year has caused people around the world to rethink many things. Do we need to “go to work” to work? Are t he health consequences of highly mobile populations manageable? Can the planet’s scarce resources support rapidly growing populations? Have we underestimated the social costs (as well as the benefits) of massive corporations, rapid and anonymous investment flipping and some of the local impacts of global trade? And so forth.

We believe that the year’s events and debates are only reaffirming the financial, social and environmental value of our operating thesis. As old-fashioned as it may sound:

• We believe in making significant, long-term investments in high quality middle-market companies to enable them to invest in their people, culture and growth opportunities;

• We believe in enabling investors who don’t have more privileged access to markets to have similar opportunities through our permanent capital structure;

• We believe that our people value the inclusive capital and stable careers we support; and

• We believe that our strong financial results in a very tough year are both a reflection of the excellence of our teams, to whom my fellow directors and I are deeply grateful—and confirmation that good values and encouragement are better motivators than fear.

As a source of duration capital for good companies, we have always factored environmental, social and governance issues into our investment decisions as well as into how we govern ourselves. We are proud that we, together with our portfolio companies, support jobs for women, LGBTQ persons, underrepresented minorities from almost every background, and people from a wide variety of national origins. We believe this diverse mix keeps us vibrant, sets an important example, and helps us create sustainable value.

As CODI’s board chair, I ask for your voting support for the items described in this proxy statement so we can continue creating values-based value. I am also pleased to invite you to participate in our virtual Annual Meeting of Shareholders (“Annual Meeting”) on May 26, 2021 at 12:00 p.m., Eastern Time. Information on participating and voting is provided in this proxy statement. I hope you are enjoying some of the products and services of our portfolio companies and invite your input throughout the year.

Sincerely,

C. Sean Day

Board Chair

April 13, 2021

Letter from Our Partner and
Chief Executive Officer

Dear Fellow Shareholders,

Although you have probably read “dear fellow shareholders” many times in CEO letters, for us at CODI those words are much more significant and unusual.

Consider these remarkable facts. No one at CODI is just given shares or awarded stock options or other equity-based pay. Read that sentence again and ask yourself how many NYSE-listed public companies can say that. We buy our shares the same way our investors do.

And, in case you missed it, we are buying. Our managers, partners and employees have acquired ~$4 million worth of our stock using after-tax proceeds from their pay in just the past two years. We eat our own cooking here.

And, in case you missed this as well, I, our CEO and our CFO and COO have never sold any of our CODI shares. Never. That is the same for the majority of the members of our board of directors as well who have never sold any of the shares they hold.

You don’t need me to tell you how much of a difference being real owners makes—but I will anyway. Since our IPO we have made total distributions of ~a billion dollars, achieved total gains of ~a billion dollars and distributed 136%+ of our IPO price! We believe in the business model and the values our board chair described to you in his letter preceding this one.

A key point here is that, at CODI, we don’t have to rely on governance structures or scores to create a real values and value-focused ownership culture—we are that. And frankly we don’t believe that structures can ever fully make up for a lack of real buy in.

So “dear fellow shareholders” has real significance to me, to my colleagues, and to our company. I thank you for your faith and investment in us and join Sean in asking for your voting support for the items described here so we can continue differentiating our model, our culture and our value creation.

Sincerely,

	​	​	Elias J. Sabo Partner and Chief Executive Officer

April 13, 2021

Notice of Annual Meeting
of Shareholders

Compass Diversified Holdings’ 2021 Annual Meeting of Shareholders (the “Annual Meeting”) will be held on Wednesday, May 26, 2021 at 12:00 p.m., Eastern Time. In light of the ongoing and evolving nature of COVID-19 (Coronavirus) and continuing public health concerns, the Annual Meeting will be a completely virtual meeting, which will be conducted via live audio webcast. You will be able to attend the Annual Meeting online, vote your shares electronically and submit your questions during the Annual Meeting via a live audio webcast by visiting www.virtualshareholdermeeting.com/CODI2021.

The Annual Meeting is being held for the following purposes:

1 to elect three directors to the Company’s board of directors as Class III directors for a three-year term ending at the 2024 Annual Meeting of Shareholders;

2 to approve, on a non-binding and advisory basis, the resolution approving the compensation of our named executive officers as disclosed in the proxy statement;

3 to ratify the appointment of Grant Thornton LLP to serve as the independent auditor for Compass Diversified Holdings and Compass Group Diversified Holdings LLC for the fiscal year ending December 31, 2021; and

4 to transact such other matters as may properly come before the meeting and any postponement(s) or adjournment(s) thereof.

These matters are more fully described in the enclosed proxy statement. The board of directors recommends that you vote FOR ALL the director nominees to be elected, FOR the resolution approving the compensation of our named executive officers and FOR the ratification of the indep endent auditor.

Shareholders of record at the close of business on March 29, 2021 will be entitled to notice of, and to vote at, the Annual Meeting and at any subsequent adjournment(s) or postponement(s) thereof. The share register will not be closed between the record date and the date of the Annual Meeting. A list of shareholders entitled to vote at the Annual Meeting is available for inspection at our principal executive offices located at 301 Riverside Avenue, Second Floor, Westport, Connecticut 06880. The notice of annual meeting, proxy statement and proxy are first being mailed or provided to shareholders on or about April 13, 2021.

There will not be a traditional in-person meeting. To be sure that your shares are properly represented at the meeting, whether or not you electronically attend, please submit your vote by telephone or online or, if you received paper copies of the Proxy Materials, promptly complete, sign, date and return the enclosed proxy card in the accompanying pre-addressed envelope. We must receive your proxy no later than 11:59 p.m., Eastern Time, on May 25, 2021.

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

Important Notice Regarding Availability of Proxy Materials for the Annual Meeting. Our 2021 proxy statement and annual report for the year ended December 31, 2020 are available free of charge at www.proxyvote.com.

By order of the board of directors.

Sincerely,

	​	​	Carrie W. Ryan Secretary

Compass Diversified Holdings, a Delaware statutory trust, which we refer to as the Trust, owns its businesses and investments through Compass Group Diversified Holdings LLC, a Delaware limited liability company, which we refer to as the Company. Except where the context indicates otherwise, “we,” “us,” and “our” refer to the Company and the Trust. References to “shareholders” refer to shareholders of the Trust.

Table of Contents

1 Proposal 1
Election of Directors

2 Our Board

7 Board of Directors, Executive Officers a nd Committees

13 Corporate Governance

14 Certain Relationships and Related Par ty Transactions

17 Director Compensation

19 Proposal 2
Advisory Vote Regarding Executive Co mpensation

20 Our Pay

21 Compensation Discussion and Analysis

28 Compensation Committee Report

29 Proposal 3
Ratification of Appointment of
Independent Auditor

30 Our Auditors

31 Audit Committee Report

32 Our Shareholders

32 Share Ownership of Directors, Executive Officers and Principal Shareholders

34 Shareholder Proposals for the 2021 Annual Meeting of Shareholders

34 United States Securities and Exchange Commission Reports

34 Other Matters

34 Delivery of Documents to Shareholders Sharing an Address

35 Proxy Statement for Annual Meeting of Shareholders

35 Purpose of Meeting

35 Attending and Voting at the Annual Meeting

36 Appointment of Proxy

37 Approval of Proposals and Solicitation

Election
of Directors

Our Board recommends that you vote FO R ALL th e director nominees listed, Mes srs. Da y, Enterline and Ewing, to be ele cted t o our Board as Class III directors fo r a three-yea r term ending at our 2024 An nual Mee ting of Shareholders.

PROPOSAL 1

1 Compass diversified

Board Composition

Our Board consists of eight directors, five of whom are the Company’s independent directors. All of the directors serving on our standing committees are independent. All of our directors are also shareholders of the Company. Our Board has the ability to decrease or increase its size to no less than five or up to thirteen directors, respectively. Seven of our directors are elected by our shareholders and one director is appointed by the Company’s Allocation Member. The Board is divided into three classes serving staggered three-year terms. The terms of office of Classes I, II and III expire at different times in annual succession, with one class being elected at each annual meeting of shareholders. Messrs. Day, Enterline and Ewing are Class III directors and are up for re-election at this year’s Annual Meeting. Mr. Edwards and Ms. McCoy are Class I directors and will serve until the 2022 Annual Meeting of Shareholders. Messrs. Bottiglieri and Burns are Class II directors and will serve until the 2023 Annual Meeting of Shareholders. Pursuant to the LLC Agreement, the Company’s Allocation Member has the right to appoint one director to the Board. Mr. Sabo, our chief executive officer, is currently serving as a director appointed by the Allocation Member. Any appointed director will not be required to stand for election by the shareholders.

Director Independence

Pursuant to our governing documents, our Board will always consist of at least a majority of independent directors. Our Board has reviewed the materiality of any relationship that each of our directors has with the Trust or the Company, either directly or indirectly. Based on this review, the Board has determined that the following directors are “independent directors” as defined by the NYSE: Messrs. Bottiglieri, Burns, Edwards, Enterline and Ewing.

Election of Directors

The Class III directors will be elected at the Annual Meeting and will serve for a three-year term that expires at our 2024 Annual Meeting of Shareholders. Messrs. Day, Enterline and Ewing have been nominated for re-election as Class III directors. Each of Mr. Day, Mr. Enterline and Mr. Ewing was nominated by the Board upon the recommendation of the nominating and corporate governance committee. Proxies cannot be voted for a greater number of persons than the number of nominees named.

Our Board

2021 Proxy Statement 2

The following describes the business experience and education of Messrs. Day, Enterline and Ewing.

C. Sean Day Chairman since April 2006	​	Experience: ∙ President of Seagin International (1999 to present) ∙ Chairman of our Manager’s predecessor (1999 to 2006) ∙ Previous positions with Navios Corporation and Citicorp Venture Capital Other Boards: ∙ Teekay GP L.L.C., the general partner of Teekay LNG Partners L.P. (NYSE:TGP) (present) ∙ Kirby Corporation (NYSE:KEX) (present). ∙ Chairman, Teekay Tankers Ltd. (NYSE:TNK) (2007 to 2013); Teekay LNG LLC (2004 to 2015); Teekay Offshore Partners L.P. (NYSE:TOO) (2006 to 2017), Teekay Corporation (NYSE:TK) (1999 to 2017) Education: ∙ Graduate of the University of Cape Town and Oxford University Qualifications: ∙ Operating executive and investor experience ∙ Substantial experience as a director of other companies, both public and private ∙ Valuable insight on governance practices and risk management ∙ Knowledge of global investment decisions and related risks

Larry L. Enterline Director since July 2019	​	Committees: Audit; Nominating & Corporate Governance Independent Experience: ∙ Chief Executive Officer of Vulcan Holdings Inc., a private investment holding and consulting services company (April 2010 to present) ∙ Chief Executive Officer of Fox Factory Holding Corp., a former subsidiary of the Company (Mar ch 20 11 to June 2019) ∙ Chief Executive Officer of COMSYS IT Partners Inc., an IT staffing and solutions company (February 2006 to April 2010) ∙ Served in various management roles earlier in his career, including Senior Vice President of Worldwide Sales and Service Organization at Scientific Atlanta Inc., a Georgia-based manufacturer of cable television, telecommunications and broadband equipment Other Boards: ∙ Fox Factory Holding Corp. (NASDAQ:FOXF) (2013 to 2021); Executive Chairman (June 2019 to A pril 202 1) Education: ∙ Graduate of Case Western Reserve University and Cleveland State University Qualifications: ∙ Significant insight regarding operations, supply chain optimization and continuous improvement ∙ Unique perspective due to having led a business through a significant growth transition and eventual initial public offering ∙ Capabilities in the areas of strategic planning and organizational development

D. Eugene Ewing Lead Independent Director since July 2019 Director since April 2006	​	Committees: Audit (Chair); Compensation Independent Experience: ∙ Managing member of Deeper Water Consulting, a private wealth and business consulting company (March 2004 to present) ∙ Formerly with Fifth Third Bank ∙ Partner in Arthur Andersen LLP Other Boards: ∙ Protect Home Medical Corp. (TSXV:PTQ) (2018 to present) ∙ Serves on an advisory board to the Gatton College of Business & Economics at the University of Kentucky (present) ∙ Darling Ingredients, Inc. (NYSE:DAR) (May 2014 to May 2020) Education: ∙ Graduate of the University of Kentucky Qualifications: ∙ Substantial experience with complex finance, accounting and reporting issues, SEC filings, taxation matters and corporate transactions ∙ Outstanding leadership and valuable insight

Directors Not Up For Re-Election

The following paragraphs describe the business experience and education of our Class I and II directors and the Allocation Member’s appointed director (in each case, not standing for re-election).

Harold S. Edwards Director since April 2006	​	Committees: Compensation (Chair); Nominating & Corporate Governance Independent Experience: ∙ President and Chief Executive Officer of Limoneira Company (November 2003 to present) ∙ President of Puritan Medical Products, a division of Airgas Inc. ∙ Held management positions with Fisher Scientific International, Inc., Cargill, Inc., Agribrands International and the Ralston Purina Company Other Boards: ∙ Limoneira Company (NASDAQ:LMNR) (2009 to present) ∙ Calavo Growers, Inc. (NASDAQ:CVGW) (2005 to present) ∙ Inventure Foods, Inc. (NASDAQ:SNAK) (2014 to 2017) Education: ∙ Graduate of Lewis & Clark College and The Thunderbird School of Global Management at Arizona State University Qualifications: ∙ Hands-on management perspective, particularly in the areas of operations, executive compensation, succession planning and issues confronting a diversified array of companies.

Certain Information Regarding our Directors and Executive Officers

The n ame and age of each direc tor, nominee and execut ive officer and the position s held by each of the m as of March 31, 2021 are as follows:

Ryan J. Faul kingham has served as Ch ief Financial Officer and Co-Compliance Officer o f the Company since No vember 2013. He also serves on the Investment Committee of the Company’s Manager. Mr. Faulkin gham joined the Compan y in 2008 and previously was the C ompany’s Director of Fin ancial Reporting. Prior to joining us in 2008, Mr. Faulkingham served as a Vice President at Merril l Lynch & Co., a finan cial management and a dvisory company, where he prepared regulatory filin gs, performed technical accounting research and impl emented policies to ensu re compliance with inter nal control standards. F rom 2003 to 2006, he served as Man ager, Accounting and Exter nal Reporting at WebMD Healt h Corp., a medical info rmation company, servi ng as a key contribut or to the company’s 200 5 initial public offering and lead finance member for numerous mergers an d acquisitions. Prior to that, Mr. Faulk ingham had a career in public acco unting first at Arthur Andersen LLP and later at KPMG LLP, bot h public accounting firms. He rece ived a BS in Accountin g from Lehigh Univers ity and an MBA from Fordham University. Mr. Faulkingham serves as a director for our Velocity Outdoor Inc. and Liberty Safe & Security Products, Inc. subsidiaries, and as an observer to the boards of directors of all our other subsidiary companies.

Boa rd Leadership Structure and Role in Risk Oversight

G enerally

The LLC Agreemen t provides that the ch airperson of the Board is elected by a ma jority of the Board and must also be a memb er of the Board. The cha irperson is not required to b e an employee of the C ompany. Likewise, the LLC Agreement provides t hat, so long as the Management Services Agreement is in effect, the Company’s Manager shall second personnel to serve as the chief executive officer and chief financial officer of the Company, subject to the formal election of such individuals by the Company’s Board. Although there i s no requirement that the chief executive officer and the chairperson be separate positions, the Board

Board Of Directors, Executive
Officers and Committees

has currently chos en to separate the chi ef executive officer a nd chairperson positions. The Bo ard believes the current separation of these rol es helps to ensure good Bo ard governance and fosters independent oversight to protect the long-term interests of the Compa ny’s private and insti tutional shareholders. In addition, the Board belie ves this separation is p resently appropriate as it allows our chief execut ive officer to focus pri marily on leading the Company’s day-to-day bus iness and affairs while the Board’s chairperson can focus on leading the Board in its consideration of strat egic issues and monito ring corporate governan ce and shareholder matters . In furtherance of its dedication to strong corporate governance, the Board created the new position of independent lead director in July 2019.

Risk Oversight

The Company’s Board has overall responsibility for risk oversight. The Company’s general counsel presents, and the Board assesses, at least annually, the critical risks associated with the businesses of the Company and each of its subsidiaries. The Board also performs a major ity of its role in risk oversight through the audit committee. The aud it committee charter provi des that the audit comm ittee shall assist the B oard in fulfilling its oversight responsibility re lating to the evalua tion of enterprise risk issues. In addition, the a udit committee, pursuant to its charter, discusses with management, counsel, the vice president of intern al audit and internal audit service providers, as the case may be, an d the independent auditors, the Company’s major risk exposures (whether f inancial, operational or both) and the steps ma nagement has taken to monitor and control such exposures, includi ng the Company’s risk assessment and risk ma nagement policies. The Company’s internal aud it department supervis es the day-to-day risk management responsibilities of the Company and repo rts directly to the au dit committee, which is com prised solely of indepe ndent directors. In add ition, during each quarterl y meeting of the audit committee, the members of the audit committee meet w ith the Company’s vice president of internal a udit and independent auditors , in each case, without man agement present, to dis cuss the specific areas o f risk identified duri ng the quarter, if any. The audit committee is authorized to utilize outsid e lawyers, internal staf f, independent expert s, and other consultant s to assist and advise the committee in connecti on with its responsibilitie s, including the eval uation of the Company ’s major risk exposures. The Company’s managem ent team, including C ompany counsel, regular ly evaluates the risk s inherent to the busi nesses of the Company’s subsidiaries and reports the results of such evaluations to the ful l Board for consideration at least annually and more frequently if the particular facts and circumstances dictate. The Board oversees environmental,

social and governance (ESG) matters generally as part of its oversight of our business strategy and risk management, and the Board’s standing committees each oversee specific ESG matters that fall within their respective areas of responsibility. For example, the audit committee has oversight responsibility for compliance matters and the nominating and corporate governance committee has responsibility for ensuring that the Company maintains strong governance practices. The Board and its standing committees regularly discuss with management a variety of ESG topics that are significant to our business and stakeholders. The Board believes that the foregoing processes for overseeing risk e nsures that independe nt directors are aware of t he Company’s major ris k exposures.

Board Meetin gs and Committees

Our Board met thirteen times during 2020. A ll directors attended over 95% of the combined Board and c ommittee meetings on which they served in 2020. Alth ough we have no formal policy regarding directo r attendance at the annu al meeting of the shareho lders, directors are encou raged to attend. All of the Company’s directors attended the 2020 Annual Meeting of Shareholders.

The LLC Agreement gives o ur Board the authority to delegate its powers to committees appointed by the Board. All of our st anding committees are comp osed solely of indepe ndent directors, as def ined by the applicable NYSE c ommittee membership ind ependence standards. Ou r committees are required to conduct meetings and t ake action in accordance with the directions of the Board, the provisio ns of our LLC Agreeme nt and the terms of th e respective committee char ters. We have three stand ing committees: the aud it committee, the compen sation committee and the nominating and corpo rate governance committee. Each of the audit committ ee, compensation committee and nominating and co rporate governance commi ttee may not delegate any of its authorit y to subcommittees unle ss otherwise authori zed by the Board. Copies o f all current committee charters are availa ble on our website at www.compassdiversified.com , and in print from us without charge upon requ est by writing to Inve stor Relations at our p rincipal executive off ices located at 301 Riverside Avenue, Second Floor, We stport, Connecticut 06880. Th e information on our we bsite is not, and shal l not be deemed to be, incorporated by reference into this proxy state ment or incorporated in to any other filings t hat the Company or the Trust makes with the SEC.

Audit Committee

The audit committee is comprised entirely of independe nt directors who meet the independence requirement s of the NYSE and Rule 10A-3 of the Exchange Act, and includes at least one “audit committee f inancial expert,” as requ ired by applicable SEC regu lations. Our standing audit committee is established in accordance with Section 3(a)(58 )(A) of the Exchange Act. The audit committee is responsible for, among other things:

• retaining and overseeing our indepen dent accountants;

• assisti ng the Board in its oversig ht of the integrity of our financial state ments, the qualification s, independence and per formance of our indep endent auditors and ou r compliance with leg al and regulatory requi rements;

• reviewing a nd approving the plan and scope of the inte rnal and external audit ;

• pre-approving any a udit and non-audit serv ices provided by our in dependent auditors;

• approving the fees to be paid to our inde pendent auditors;

• rev iewing with our chie f executive officer and chief financial officer and independent aud itors the adequacy and e ffectiveness of our in ternal controls;

• reviewing and approving the calculation of the profit allocation payments made to the Allocation Member;

• pre paring the audit comm ittee report to be filed with th e SEC;

• reviewing hedging transactions; and

• reviewi ng and assessing annua lly the audit committee’s performance and the ad equacy of its chart er.

Me ssrs. Ewing, Bottiglieri, and Enterline served on o ur audit committee during 2020. The Board has determined that each of Mr. E wing, the audit committee chairman, and Mr. Bottiglieri qualify as audi t committee financial exp erts, as defined by the SEC. The audit committ ee met six times duri ng 2020.

Compensation Committee

T he compensation committ ee is comprised entirely of independent direct ors who meet the comp ensation committee indep endence requirements o f the NYSE. In accordance with the compensatio n committee charter, the m embers are “outside directors ” as defined in Section 162( m) of the Internal Rev enue Code of 1986, as amend ed, and “non-employee directors” within the meaning of Section 16 o f the Exchange Act. The responsibilities of the compensation committee include, among other things:

• re viewing our Manage r’s performance of its obligations under the Man agement Services Agreem ent;

• reviewing the r emuneration of our Manag er and approving the r emuneration paid to our Manager as reimbursemen t for the compensation paid by our Manager t o our chief financia l officer and the chief financial officer’s st aff;

• determining the compensation of our i ndependent directors;

• granting rights to i ndemnification and reim bursement of expense s to the Manager and a ny seconded individuals ; and

• making recommendati ons to the Board regardin g equi ty-base d and ince ntive compensation pl ans, policies and progr ams .

In early 2021, consistent with prior years, the Company conducted a survey of the director compen sation practices of other companies that it consid ered reasonably comparable to the Company. The compensation committee t argets cash and equity compensation for the Company’s directors at t he average of its peer group . The compensation committee also consi dered the time commitment , responsibilities, and rela ted burdens of Board serv ice over the Company’s history. Based upon this review, the c ompensation committee rec ommended to the full Board that the annual compensation p aid to non-management directors and th e annual compensation paid to th e chairman of the Board not to be increased for fiscal year 2021. For a discussion of director compensation see the section titled “DIRECTOR COMPENSATION.” The full Board ratified the compensat ion committee’s recommendati on on February 11, 2021. The Company’s Manager is responsible for establi shing the form and a mount of compensatio n paid to our chief financial officer and his staff by our Manager. Th e Company’s compensatio n committee is responsibl e for approving the r emuneration paid to our Mana ger as reimbursement fo r the compensation p aid by our Manager to our chief financial of ficer and his staff. Mr. Sabo, our chief executive of ficer, in his capacity a s the managing member of our Manager, p articipates in the estab lishment of the form an d amount of compensat ion paid to our chief financial officer and his staff by our Mana ger.

In early 2020, the com pensation committee engaged Mercer (USA) Inc., to perform a review of the Company’s non-management director compensation relative to the compensation paid to non-management directors by certain entities identified as being within the Company’s peer group. Mercer (USA) Inc. provided a peer analysis but did not make specific compensation recommendations. The compensation committee typically engages a third party to perform a review of non-management director compensation every other year.

Messrs . Edwards, as compensation committee chairman, Ewing and Burns served on our compe nsation committee during 2020 and currently serve in such roles. The com pensation committee met two ti mes during 2020.

Nominatin g and Corporate Govern a nce Committee

The nomina ting and corporate gov ernance committee is comp rised entirely of indepe ndent directors who meet the independence requi rements of the NYSE. T he nominating and co rporate governance commi ttee is responsible for, am ong other things:

• rec ommending the nu mber of directors to com prise the Board and recommending candidates for membership on each committee of the Board;

• identif ying and evaluating in dividuals qualified to become members of the Boar d, other than the Allocation Member’s appointed director and his or her alternate, a nd soliciting recommendatio ns for director nomine es from the chairman and chief executive officer of the Company;

• recommending to the Bo ard the director nominee s for each annual shareh olders’ meeting, other t han the Allocation Member’s appointed director;

• rec ommending to the Board t he candidates for fillin g vacancies that may occ ur between annual shareh olders’ meetings, other than the Allocation Member’s appoin ted director;

• reviewing independent director compensation and Board processes, self-evaluations and policies;

• monitoring the performance of the Board and its individual members;

• reviewing and approving related party transactions, including transactions with the Manager and its affiliates;

• overseeing com pliance with our code o f ethics, anti-corruption policy, and conduct b y our officers and direc tors; and

• monitoring developments in the law and practice of cor porate governan ce.

Messr s. Burns, as nominating and corporate governance committee chairman, Bottiglieri, Edwards, and Enterline served on our nominat ing and corporate gove rnance committee during 2020 and currently serve in such roles. The nomi nating and corporate governance committee met one time d uring 2020.

Independent Lead Director

The independent lead director position ensures the Board of Directors has a director in a leadership position that is “independent” under all applicable rules of the NYSE and the

SEC. The independent lead director is elected annually by the independent directors. The Company’s independent directors initially appointed Mr. Ewing as the independent lead director of the Company’s Board in July 2019 and he currently serves in such role. The specific responsibilities of the independent lead director are as follows:

• chair the meetings of the independent directors when the Chairman is not present or unable to preside due to conflicts of interest;

• ensure the full participation and engagement of all Board members in deliberations;

• lead the Board in all deliberations involving any matter for which a conflict of interest exists with the Chairman;

• encourage all directors to engage the Chairman with interests and concerns;

• work with the Chairman to develop the Board and Committee agendas and approve the final agendas; and

• be available for consultation and direct communication with major shareholders if and when the Chairman is unavailable.

Compensatio n Committee Interlocks a nd Insider Participation

None of the members of our compensation co mmittee, Messrs. Burns, Edwards, and Ewing, are, or have been, an officer or employee o f the Company. Durin g 2020, no member of our compensati on committee had any relationship with the Company requirin g disclosure under Item 404 of Regulation S-K. No ne of our executive officers serves on a board o f directors or compensa tion committee of a comp any that has an executi ve officer serving on o ur Board or compensation committee.

Material Legal Proceedings Involving Directors and Executive Officers

Currently, there are no material proceedings to which any of our directors, officers, affiliates, any owners of record or beneficially of more than five percent of any class of voting securities, or any associate of any such director, officer, affiliate, or security holder is a party adverse to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries.

Executiv e Sessions of our Board

Our corporate governan ce guidelines provide th at the non-management directors will meet withou t management directors in regularly scheduled exe cutive sessions at

least quarterly and at such ot her times as they deem a ppropriate. The indepen dent directors meet in ex ecutive session at least quarterly. In accordance with our corporate go vernance guidelines, t he chairman of the B oard, audit committee, nom inating and corporate governance committee, com pensation committee, or the independent lead director will preside at these executiv e sessions of the non-ma nagement directors and independent directors as determined by the non- executive directors bas ed upon the subject matter to be discussed. Mr. D ay presided, and conti nues to preside, over ses sions of the non-manag ement directors. Mr. Ewing presided and continues to preside over sessions of the independent directors. Our non-manag ement directors met nine times during 2020.

Nominatio ns of Directors

As provid ed in its charter, the no minating and corporate governance committee will identify and recommend to the Board nominees for election or re-electio n to the Board. The nominating and corporate governance committee casts a wide net in seeking director candidates, including reviewing candidates fo r the Board recommended by executive search firms, the Company’s existing Board and manage ment team, who know the Company best, as well as candidates recommended by investors, shareholders , and others, all in accordance with th e following criteria and as discussed in the section titled “Shareholder Nominations of Directors ” below.

The nominat ing and corporate gover nance committee, in making its recommendations regardi ng Board nominees, may consider some or all of the following fact ors, among others:

• the ca ndidate’s judgment, s kill, and experience wit h other organizations o f comparable purpose, co mplexity and size, and subject to similar legal restrictions and oversig ht;

• the relationship of the candidate’s exper ience to the experience of other Board members;

• the extent to which the candidate would b e a valuable addition t o the Board and any com mittees thereof;

• whether or not the person ha s any relationships th at might impair his o r her independence, i ncluding any busines s, financial or family relationships with th e Manager or the Compa ny; and

• the candidate’ s ability to contribut e to the effective mana gement of the Compan y, taking into account the needs of the Compan y and such factors as the individual’s exper ience, perspective, skills, and knowledge of the industries in which t he Company operates .

In recommending candidates for election as directors , the nominating and corporate governance co mmittee will also take into consideration the n eed for the Board to have

a majority of directors that are independent u nder the requirements of the NYSE and other applicable laws, and at least three directors that are independent und er these requirements and are not appointed by the Allocation Member p ursuant to the terms of the LLC Agreement or otherwise affilia ted with our Manager.

In addition, the nominatin g and corporate governa nce committee will recommend candidates for election as directors based on the following criteria and qualifications:

• Fi nancial Literacy. Such perso n should be “financi ally literate” as such qu alification is interpret ed by the Board in its b usiness judgment.

• Le adership Experience. Such p erson should possess si gnificant leadership e xperience, such as experi ence in business, finance /accounting, law, education or government, and shall possess qualities reflecting a proven record of accomplishment and ability to work with others.

• Commitment t o our Company’s Values. S uch person shall be co mmitted to promoting our financial success and pre serving and enhancing our reputation and sh all agree with our values as embodied in our cod e of ethics.

• Absence of Conflicting Commitments . Such person should n ot have commitments t hat would conflict with the time commitments of a director of our Com pany.

• Complementary A ttributes. Such person sha ll have skills and tal ents which would be a valuable addition to t he Board and any committees thereof and that shall complement the skills and talents of our e xisting directors.

• Reput ation and Integrity. Such person shall be of hi gh repute and integri ty .

As a Company that has interests in many diverse operating entities, seeking leadership that is diverse in the wide array of ways in which diversity can manifest itself, including diversity of personal attributes as well as diversity of experiences, skills, ages, cultural and religious beliefs, is always valuable. Accordingly, each of the Company’s ten operating businesses, under the direction of the Company as its majority shareholder, elects its own board of directors and appoints its own executive management team. Several diverse individuals, based on gender, ethnicity, religion, nationality, and military service experience currently hold leadership positions at the Company’s subsidiaries, either as members of a subsidiary board of directors and/or within the executive management teams. At the Company level specifically, although there is no written formal policy regarding the consideration of diversity in identifying director nominees, diversity i s one of the criteria e valuated wholistically throughout our organization, in conjunction with our subsidiaries and specifically by the nomi nating and corporate g overnance committee when s electing Board nominees and

re-electing Board memb ers. The nominating and corporate governance committee regularly engages in active discussions regarding diversity among directors and director nominees, including diversity of attributes, such as race, gender, ethnicity, sexual orientation, as well as diversity of viewpoint, experiences, skills, ages, cultural beliefs and backgrounds. The nominatin g and corporate govern ance committee charter pr ovides that the committee endeavor to solicit a s director candidates in dividuals possessing s kills and talents whic h would complement t he skills and talents of the Company’s exi sting directors. In additio n, before recommending th at the Board nominate each new director candidate or re-nominate each inc umbent director, the no minating and corporate governance committee assess es to what extent suc h individual’s contr ibutions will enhance the effectiveness of the Bo ard and its committees given its overall current compo sition. Each year, the Board asse sses the effectiveness o f its diversity effor ts, among other items, during its annual self -evaluation process. T he nominating and cor porate governance committee evaluates annually the composit ion of the Board and each long-standing committee. Under t he Company’s corporate governance guidelines, directors must inform the chairman of the Bo ard and the chairman of the nominating and corporate governance comm ittee in advance of accepti ng an invitation to serve on another public com pany board or any committee thereof.

Shareholder Nom inations of Directors

The Board understands that shareholders have a financial stake in the success of the Company and therefore the Board takes seriousl y any director suggestion or nomination coming from a shareholder. To make a director nomina tion, a shareholder must give written notice to ou r Secretary at our prin cipal executive offices located at 301 Riverside Avenue, Second Floor, West port, Connecticut 06880, Att ention: Investor Relatio ns. In order for a noti ce to be timely, it mus t be delivered to our Secre tary at the principal ex ecutive office described in the preceding sentence not less than 120 days or more than 150 days pr ior to the first anni versary of the precedin g year’s annual meeting. In the event that the da te of the annual meetin g is more than 30 day s before or more than 7 0 days after such anniv ersary date, notice by a shareholder must be so delivered not earlier than the close of business on the 120th day prio r to such annual meetin g or the 10th day foll owing the day on whi ch public announcement of the date of such meeting is first mad e by the Trust.

When d irectors, other than the Allocation Member’s appointed director, are to b e elected at a special mee ting, such notice must b e given not earlier than the 120th day prior to such special meeting an d not later than the c lose of business on the later of the 90th day prior to such sp ecial meeting or the 10t h day following the da y on which a public

a nnouncement is first m ade of the date of t he special meeting and of the nominees prop osed by the Board to be elected at such meeting.

In addition to any other requirements, for a s hareholder to properly b ring a nomination for director before either an annual or special meetin g, the shareholder mus t be a shareholder of record on both the date of the shareholder’s n otice of nomination and the record date relating to th e meeting.

The sh areholder submitting the recommendation mu st subm it:

• the shareholder’s n ame and address as they a ppear on the share register of the Trust, as well as the name and address of the beneficial owner, if a ny, on whose behalf t he nomination is made;

• the number of shares of Trust common stock which are o wned beneficially and of record by such shareho lder; and

• a descr iption of all arrangements or understandings betwee n the shareholder and each n ominee and any other perso n or persons pursuant t o which the recommendati on is being made by the sharehold er.

In addition, any such notice from a sharehol der recommending a directo r nominee must include the follow ing informa tion:

• the cand idate’s name, age, bus iness address and reside nce address;

• the candid ate’s principal occupati on or employment;

• the number of shares of Tru st common stock that are benefic ially owned by the candidate; ca ndidate;

• a copy of th e candidate’s resum e;

• a written conse nt from the candidat e to being named in t he proxy statement as a nominee and to ser ving as director, if elec ted; and

• any other inf ormation relating to s uch candidate that wou ld be required to be d isclosed in solicitations of proxies for electio n of directors under the federal securities laws, including Regulation 14A of the Exchange A ct.

We may require any proposed nominee to furnis h any additional informa tion that we reasonably re quire to enable our nomi nating and corporate go vernance committee to dete rmine the eligibility o f the proposed nominee t o serve as a director. Ca ndidates are evaluated b ased on the standards, guidelines and criteria d iscussed above as well as other factors contained in the nominating an d corporate governance committee’s charter, our corporate governance gui delines, our other policies and guidelines and th e current needs of the Bo ard.

Corporate Governance

Corporate Governance

Corporate Governance Guid elines and Code of Ethic s

Our Board has adopted cor porate governance guide lines that set forth ou r corporate governance ob jectives and policies and govern the functioning of the Board. Our corpo rate governance guidelin es are available on our website at w ww.compassdiversified.co m and in print from us withou t charge upon request b y writing to Investor Relations at Compa ss Gro up Diversified Holdi ngs LLC, 301 Riverside Avenue, Second Floo r, Westport, Connecticut 06880.

We have also adopted a code of e thics that sets forth our commitment to et hical business practices. O ur code of ethics applies to our directors, offi cers and employees, incl uding our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions; it als o applies to the officers a nd employees of our Ma nager involved in the oversight of the day- to-day operations of the Company and its sub sidiaries. Our code of e thics is available on our website at www.compassdiversified.com and in print from us withou t charge upon request by writing to Investor Rel ations at Compass Group Diversified Holdings LL C, 301 Riverside Avenue, Second Floor, Westpo rt, Connecticut 06880. We intend to disclose any amendments to, or waivers from, our code of ethics by posting such information on our website listed above or by filing with the SEC a Current Report on Form 8-K, in each case, if such disclosure is required by rules of the SEC or the NYSE.

Communications with our Board

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

Our Board has therefore created numerous ways to receive shareholder input. Our Chairman and Independent Lead Director have shareholder engagement roles and are available for appropriate engagement. Shareholders can interact with our directors at our annual meeting. Shareholders and others can use our reporting hotline, and if information provided is of a type that the Board needs to consider, it will be sent to them. Shareholders can send emails to the Board via BOD@compassdiversified.com . In addition, communica tions to our Board, to non-management directo rs as a group or to an y director individuall y may be made by writ ing to the following a ddress:

Attention: [Board of Directors] [Board Member]
c/o Carrie W. Ryan, Secre tary
301 Riverside Avenue, Second Floor
Westpo rt, Connecticut 06880

Commun ications sent to the phy sical mailing address are f orwarded to the relevant di rector, if addressed to an in dividual director, or to t he chairman of our Bo ard and our independent lead director, if addressed to the Boar d.

Certain Relation ships and
Related Party T ransactions

Policy for App roval of Related Person Tr ansactions

Our nominat ing and corporate gover nance committee, which is c omposed entirely of indep endent directors, is re sponsible for reviewing and approving, prior to our entry into any such transaction, all transactions in which we are a participant and in which any of the foll owing related parties hav e or will have a direct o r indirect material interes t:

• our chief executiv e officer and/or chief financial officer;

• our di rectors; and

• other memb ers of the management team involved in the o versight of the day-to -day operations of the C ompany and i ts subsidi aries.

Pursuant to the written terms of our code o f ethics, any transacti on required to be disclo sed pursuant to Item 404 of Regulation S-K (“related party transacti ons”) must be brought to the attention of and reviewed and approved f or potential conflicts of interest by, our nomin ating and corporate gov ernance committee. The Comp any may not enter into or engage in any rela ted party transaction wit h a related party witho ut such approval. Additi onally, all related p arty transactions are to be considered and conducted in a manner such that no preferential treatment i s given to any such dealin g of transactions. All relat ed party transactions inv olving an acquisition from or sale to an affiliate o f our Manager, includin g any entity managed by an affiliate of our Manager, must be submitted to the nominating and corporate governance comm ittee for pre-approval. Details of related party transactions will be pu blicly disclosed as requi red by applicable law.

Rela tionships with Related Parti es

Our Manager

Our Manag er (of which our chief executive officer serves as the managing member) manages the day-to -day operations of the Co mpany and oversees the management and operation s of our subsidiary bus inesses. Our relationshi p with our Manager is governed principally by the Management Ser vices Agreement.

While o ur Manager provides man agement services to th e Company, our Manager i s also permitted to prov ide services, includin g services similar to th e management services provided to us, to oth er entities. In this resp ect, the Management Services Agreement and the obligation to provid e management services do es not create a mutually exclusive relationship between our Manager a nd the Company or our businesses. As such, our Manager, and our manag ement team, will be permitted to engage in other business endeavo rs. Mr. Faulkingham, as chief financial officer of the Company, devotes a substantial po rtion of his time to our affairs.

Our Mana ger receives management fees, offsetting mana gement fees, fees under any integration services agreements and expen se reimbursements rela ted to the foregoing, and uses such proceeds to pay the compensation , overhead, out-of-poc ket and other expenses of our Manager, to sa tisfy its contractual oblig ations and otherwise distributes such proceeds to the members of o ur Manager, which inclu des Mr. Sabo, our chief exe cutive officer, in accorda nce with our Manager’s organizational document s.

Contractual Arrangeme nts with Related Parties

Loa n Agreements with each of our Subsidiaries

The Com pany is a party to a loan agreement with eac h of our subsidiaries p ursuant to which the Company will make lo ans and financing comm itments to each of ou r subsidiaries.

Management Servi ces Agreement

The Compa ny and our Manager are parties to the Manageme nt Services Agreement p ursuant to which we pay our Manager a quart erly management fee eq ual to 0.5% (2.0% annu alized) of the Compa ny’s adjusted net asset s as of the last day of each fiscal quarter i n respect of the services per formed by our Manager. T he management fee pai d to our Manager is req uired to be paid prior to the payment of any distributions to shareho lders. The management fee is offset by fees paid to our Manager by our businesses under ma nagement services agreeme nts that our Manager e ntered into with, or was assigned with respect to, our businesses, which we refer to as offsettin g management services a greements. Concurrent with the June 2019 sale of our Clean Earth subsidiary, our Manager agreed to waive the management fee on cash balances held at the Company, commencing with the quarter ended June 30, 2019 and continuing until the quarter during which the Company next borrows under the 2018 Revolving Credit Facility. In March 2020, as a proactive measure to provide the Company with additional cash liquidity in light of the COVID-19 pandemic, the Company elected to draw down $20 0 milli on on our 2018 Revolving Credit Facility. The Company and our Manager entered into a waiver agreement whereby the Manager agreed to waive the portion of the management fee attributable to the cash balances held at the Company as of March 31, 2020. In addition, due to the unprecedented uncertainty as a result of the COVID-19 pandemic, the Manager agreed to waive 50% of the management fee calculated at June 30, 2020 that was paid in July 2020. Further, for the third quarter of 2020, the Company and the Manager entered into a waiver agreement whereby the Manager agreed to waive the portion of the management fee attributable to the cash balances held at the Company as of Sept ember 30, 20 20. The Manager has also granted a waiver under the Management Services Agreement for the period through December 31, 2021 so that the Manager will receive a 1% annual management fee related to BOA Technology, rather than the 2% fee provided for in the Management Services Agreement. Such waiver reduced the management fee paid to the Manager for the fourth quarter of 2020. Additionally, during the third quarter of 2018, our Manager waived $0.6 million in management fees attributable to assets acquired in September of 2018 related to acquisitions by Velocity Outdoor. We incurred app roximately $29.4 million o f management fees under t he Management Services Agreement during fiscal year 2020. The Company reimbursed the Manager approximately $5.2 million, principally for occupancy and staffing costs incurred by the Manger on behalf of the Company, during the year ended December 31, 2020.

Offsetting Managem ent Services Agreements

O ur Manager has entered int o and may, at any tim e in the future, enter into offsetting mana gement services agreeme nts directly with the businesses that we own relating to the perfor mance by our Manager of offsetting managemen t services for such bu sinesses. All fees, if any, paid by the bus inesses that we own to our Manager pursuant to an offsetting manag ement services agreeme nt during any fiscal quar ter offset, on a dollar-for-do llar basis, the managem ent fee otherwise due and payable by the Com pany to our Manager under the Management Serv ices Agreement for such fiscal quarter. The Mana ger is a party to offs etting management se rvices agreements with all of the Company’s s ubsidiaries. Offsetting management fees were appr oximately $5.3 million dur ing fiscal year 2020.

LLC Agree ment

The Company has two types of equity int erests: trust interests and allocation interests. The Trust is the sole o wner of 100% of the trus t interests of the Compa ny. Pursuant to the LL C Agreement, the Trust owns an identical number of t rust interests in the Co mpany as exist for th e number of outstanding shares of stock of the Trust. Sostratus LLC, who we refer to as the Allocation Member, owns 100% of the Company’s allocation interests. The LLC Agreeme nt sets forth the All ocation Member’s rights wi th respect to its profit allocation interest amo ng other things.

The Company will pay a p rofit allocation with re spect to its businesses to the Allocation Memb er upon the occurrence of cer tain events, if the Company’s profits with respect to a business e xceed an annualized hurdle rat e of 7%, which hurdl e is tied to such busin ess’s adjusted net asset s (as defined in the LLC A greement) relative to t he sum of all of our subsidiaries’ adjusted n et assets. The calculati on of profit allocation with respect to a partic ular business will be ba sed on:

• such business ’s contribution-based pr ofit, which generally w ill be equal to such bu siness’s aggregate con tribution to the Compa ny’s profit during th e period such business is owned by the Comp any; and

• the Company ’s cumulative gains an d losses to date.

Generall y, a profit allocation payment will be made in the eve nt that the amount of profit allocation exceeds the annualized hurdle rate of 7% in the foll owing manner: (i ) 100% o f the amount of pro fit allocation in excess of the hurdle rate of 7% but that is less than the hurdle rate of 8.75%, which amount is intended to provide the Allocation Member w ith an overall profit a llocation of 20% once the hurdle rate of 7% has been surpassed; and (ii) 20% of the amount of profi t allocation in excess of the hurdle rate of 8.75%. The

Company’s audit committee, which is comprised solely of independent directors, approves the calculation of any profit allocation payment to be made to the Allocation Member. Certain members of our Manager, including Mr. Sabo and Mr. Faulkingham beneficially owned (through the Allocation Member) 45% of the Allocation Interests at December 31, 2020, and 50% of the Allocation Interests at December 31, 2019. Of the remaining 55% at December 31, 2020 and 50% at December 31, 2020, 5.0% was held by CGI Diversified Holdings LP, 5.0% was held by the Chairman of our Board of Directors, and the remaining Allocation Interests were held by the former founding partners of the Manager.

Profit allocation payments are triggered upon the occurren ce of certain “Holding Events” as defined in the Company’s LLC Agreement. The five-year anniversary of the acquisition of Sterno Products occurred in October 2019 and constituted a Holding Event. In accordance with the LLC Agreement, the Company declared and paid a distribution to the Allocation Member of $9.1 million in February of 2020. The ten-year anniversary of Liberty occurred in March 2020 and constituted a Holding Event. The Allocation Member elected to defer the distribution of the $3.3 million profit allocation payment that would otherwise be due and owning it until after the end of 2020. The ten-year anniversary of Ergo occurred in September 2020 and constituted a Holding Event. The Allocation Member elected to defer the distribution of the $2.0 million profit allocation payment that would otherwise be due and owing it until after the end of 2020. Additionally, the Company paid to the Allocation Member approximately $16.6 million in each of May and October of 2019 as profit allocation payments in respect of the sale of FHF Holdings Ltd., which we refer to as Manitoba Harvest, which constituted a Holding Event. The Company paid the Allocation Member approximately $43.8 million in each of August and October of 2019 in respect of the sale of CEHI Acquisition Corporation, which we refer to as Clean Earth, which constituted a Holding Event. The Company did not make a payment to the Allocation Member duri ng 2018.

Integration Services Agreements

Our Manager acts as an advisor to the Company during acquisitions. In the first year of an acquired businesses’ ownership, our Manager will provide integration services to the new company. Integration services include reviewing, evaluating and otherwise familiarizing itself with the business, operations, properties, financial condition and prospects; familiarizing the management team with the Company’s periodic reporting, corporate governance and Sarbanes Oxley Act of 2002, as amended (“SOX”) obligations; reviewing the policies and procedures and, where appropriate, aligning such policies and procedures with other of the Company’s subsidiaries;

and assisting in establishing a new board of directors, including identifying and engaging outside and independent director resources, if appropriate. During 2020, the Company acquired Marucci Sports and BOA Technology. Our Manager acted as an advisor in these acquisitions and is entitled to receive integration services fees. For Marucci Sports, the integration services agreement became effective on April 20, 2020. The total integration services fees due to the Manager in respect of the Marucci Sports acquisition are $2.0 million, of which $1.0 million has been paid. For BOA Technology, the integration services agreement became effective on October 16, 2020. The total integration services fees due to the Manager in respect of the BOA Technologies acquisition are $4.4 million, of which approximately $1.1 million has been paid. For each of the foregoing, payments are made equally on a quarterly basis over a twelve-mon th period.

During 2018, the Company acquired Foam Fabricators, Inc. Our Manager acted as an advisor in the acquisition and received integration service fees of approximately $2.3 million, which were payable quarterly over a twelve-month period as services were rendered through February 28, 2019. All Integration Services Agreements are approved by the Company’s nominating and corporate governance committee, which is comprised solely of independent directors, in accordance with our governance documents.

Other

In August 2019, the son-in-law of the chairman of our Board joined the Company’s Manager as an employee. He is not an executive officer of the Manager. The Company, which is not a participant in the transaction, does not reimburse the Manager for the compensation paid by the Manager for this individual and does not have any input regarding the compensation payable to this individual or any other aspect of his employment with the Manager.

Director Compensation

Director Compensation

Our Compensation Committee is responsible for periodically evaluating and making recommendations to the Board concerning the total compensation package for Directors, and believes that a balanced use of cash and equity is effective at aligning the interests of Directors and shareholders. To help the company maintain cash flexibility during the response to the COVID-19 pandemic, our Directors voluntarily reduced their cash compensation by 50% for one quarter, leading to a year-over-year reduction in average director compensation between 2019 and 2020. The following graph demonstrates our historical balanced and moderate director compensation:

For fiscal year 2020, our non-management directors were each eligible to receive annual cash retainers of $100,000, our independent lead director was eligible to receive a cash retainer of $120,000 and our chairman was eligible to receive a cash retainer of $157,500, in each case payable in equal quarterly installments, and each committee chairperson received an additional annual retainer for service as a committee chairperson. As previously disclosed, our non-management directors each voluntarily reduced their cash compensation by 50% for one quarter of 2020 to provide the company with additional cash flexibility during the COVID-19 pandemic. As a result, our non-management directors each received annual cash retainers of $87,500, our independent lead director received a cash retainer of $105,000 and our chairman received a cash retainer o f $137,813.

The chairperson of the audit committee, nominating and corporate governance committee and compensation committee were also eligible to receive an annual cash retainer of $40,000, $10,000 and $10,000, respectively, payable in equal quarterly installments. These fees were also cut in half for one quarter during 2020, and as a result the chairperson of the audit committee received $35,000, the chairperson of the nominating and corporate governance committee received $8,750, and the chairperson of the compensation committee received $8,750.

Directors do not receive additional compensation for attendance at committee meetings. Directors (including the chairman) are reimbursed for reasonable out-of-pocket expenses incurred in attending meetings of the Board or committees and for any expenses reasonably incurred in their capacity as directors. The Company also reimburses directors for all reasonable and authorized business expenses related to service to the Company by the directors in accordance with the policies of the Company as in effect from time to time.

Our non-management directors also receive, on or around January 1 of each year, in respect of their service for the prior fiscal year, $100,000, or $120,000 if serving as the chairman of the Board, which is encouraged to be used to purchase shares of Trust common stock. Consequently, each non-management director who elects to use such award to purchase shares of Trust common stock receives that number of shares of Trust common stock that can be purchased with $100,000, or $120,000, as applicable, at the market price on the date of purchase. No changes were made to our director compensation structure for fiscal year 2021.

The following table p rovides compensation paid or accrued by us for our non-management d irectors in 2020:

(1) Represen ts 6,096 fully vested shares for C. Sean Day and 5,079 fully vested shares f or each other director. Th ese shares were purchased by the Company on behalf of the directors on January 4, 2021.

(2) The Company doe s not have any stock opti on, non-equity incentive or deferred compensation a rrangements for any of its directors.

Advisory Vote Regarding
Executive
Compensation

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

PROPOSAL 2

19 Compass diversified

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

Our compensation policy is designed to enable us to attract, motivate, reward and retain the management talent required to achieve our objectives, and thereby increase shareholder value. Please see the section titled “EXECUTIVE COMPENSATION – Compensation Discussion and Analysis” and the related compensation tables herein for additional details about our executive compensation policy, including information about the fiscal year 2020 compensation of our named executive officers.

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

“ RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officer, as disclosed in the Company’s Proxy Statement for the 2021 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC.”

The Say-on-Pay Vote is advisory, and therefore not binding on the Company, the compensation committee or our Board. Our Board and our compensation committee value the opinions of our shareholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider the results of the vote in future compensation deliberations and evaluate whether any actions are necessary to address shareholder concerns.

The Company will include a proposal seeking shareholder approval, on a non-binding and advisory basis, of the compensation of our named executive officers in the proxy statement every year until the 2023 Annual Meeting of Shareholders. In 2023, the Company will include a proposal seeking shareholder approval, on a non-binding and advisory basis, of the frequency at which the Company shall thereafter seek shareholder approval, on a non-binding and advisory basis, of the compensation of the named executive officers.

Our Pay

2021 Proxy Statement 20

Comp ensation Discussion an d Analysis

Executive Summary

• Compass Diversified had a strong year, producing net income of $1.6 billion, an increase of 7.6% over 2019 and adjusted EBITDA of $249.2, an increase of 10.2% over 2019.

• We are externally managed and have no employees of our own. Management, including the services of our CEO and our CFO, are seconded from our Manager. The cost of our management is instead borne through management fee payments, which are used to compensate the team managing Compass Diversified. The cost of the CFO and his staff are reimbursed by Compass Diversified.

• We regularly engage with our shareholders, and they have demonstrated increasing support for our business model. Our support for say-on-pay increased by more than 18 percentage points in 2020 over 2019.

• Following the global COVID-19 pandemic, our management took action to care for our employees, reduce expenses, and make our business more resilient. We took steps to protect our workforce and provide for their well-being, limited business travel, and worked to strengthen our balance sheet.

• We gave our portfolio companies additional financial flexibility to manage through the initial stages of the pandemic. We agreed to waive management fees due on cash balances on March 30 and September 30, and agreed to waive an additional $3.9 million in management fees in 2020. These management fees otherwise would have been available for executive compensation within our Manager.

• We were able to execute on our business strategy despite the pandemic. We executed on our acquisition strategy through the purchase of BOA Technology in October 2020 and the integration of Marucci Sports, which was acquired in March 2020. We believe that our ability to execute on our strategy despite difficult business conditions is a competitive advantage.

Our Business

Compass Diversified offers public market investors access to a private equity investing model. We are an experienced acquirer and manager of middle-market North American companies. Since 2006, we have acquired and operated twenty-one businesses. Currently, our portfolio contains six branded consumer businesses and four niche industrial subsidiaries. Symbiotically, the public company structure gives us an advantage in that our capital structure gives us a much more stable funding base than traditional private equity. This funding base allows us to take longer-term views and positioning us to deliver returns across a wide range of economic climates. Our investors have been rewarded with more than a billion dollars in realized gains since our 2006 IPO.

Since our founding in 1998, our strategy and philosophy have always remained the same — we look to acquire companies that we could own forever and that exhibit a clear “reason to exist.” We are passionate about partnering with outstanding management teams and supporting them with patient growth capital. As our Company has evolved, we have recognized that a hallmark of outstanding management is a recognition and understanding of the importance of ESG. Sustainability and corporate responsibility have become increasingly important factors in our business. Today, ESG is embedded in all aspects of our investment process from the original investment selection to the subsequent value creation and eventual divestiture with a goal of continuous improvement.

We create value for our investors in two ways: First, we identify, perform due diligence on, negotiate and consummate additional platform acquisitions of small to middle market businesses in attractive industry sectors in accordance with acquisition criteria established by the board of directors. Second, we focus on helping our management teams grow earnings and cash flow from their businesses. We believe that the scale and scope of our businesses give us a diverse base of cash flow upon which to furth er build.

Our current portfolio of companies includes many brands that are household names. Those brands include Sterno, Ergobaby, Liberty Safe, Marucci, BOA and 5.11, and in the past we’ve managed brands such as CamelBak, Fox, and Manitoba Harvest. Even if you have not heard of Compass Diversified, you are likely familiar with one or more of our brands.

Our Structure and Management

“Compass Diversified,” as we refer to it, is comprised of three separate, independent business entities that work closely together: Compass Group Management LLC, the privately held external manager of the organization, which we refer to as the “Manager”, Compass Diversified Trust, which we refer to as the “Trust” and Compass Group Diversified Holdings LLC, which we refer to as the “Company.” Although the shares issued to the public are technically at the Trust level (NYSE: CODI), the Trust and the Company file consolidated reports with the SEC.

The Company has access to substantial financial resources which are utilized for the acquisition and management of middle market businesses. Upon completion of an acquisition, we immediately begin to work with the acquired company’s management team to identify the most critical and time sensitive needs and opportunities and to urgently address them.

Unlike private equity firms who seek acquisition financing on a transaction-by-transaction basis, our unique structure allows for the efficient and quick consummation of transactions, without financing contingencies. In addition, companies acquired by us have ongoing access to substantial growth capital. Finally, our ownership perspective as a holding company is not impacted by artificial timing criteria such as fund life. Rather, we continuously work with our subsidiary management teams to evaluate strategic alternatives and assess the appropriate individual course of action for each of those companies, without regard to external and unrelated factors.

Our management services are provided by Compass Group Management LLC, which we refer to as our Manager. W e entered into the Sixth Amended and Restated Management Services Agreement, whic h we refer to as the Ma nagement Services Agre ement, with our Manager as of September 30, 2014. The Management Services Agreement defines the duti es and responsibilities of our Manager, its relationship with the Company, and the areas over which the Company’s Board of Directors has ultimate oversight and authority. The Manager, in exchange for a management fee, is tasked with performing the services necessary for the day-to-day business, operations and affairs of the Company’s business, as the Company currently does not have any employees and does not expect to have any employees in the foreseeable future.

The services necessary for the operation of the Company’s business are performed by employees of our Manager under the leadership of Messr s. Sabo and Faulkingham, who are employed by our Man ager and are seconded to the Company as chief executive officer and chief financial officer, respectively. This means that they have been assigned by ou r Manager to work for the Company during t he term of the Manage ment Services Agreemen t between us and our Manag er. The pay ratio disclosure rules of Item 402(u) of Regulation S-K require an issuer to disclose the ratio of the total compensation of the median employee of the issuer and its consolidated subsidiaries, if any, to the total compensation of the issuer’s chief executive officer. Because we are externally managed and have no employees, we do not believe such pay ratio disclosure would provide meaningful information to our shareholders and, therefore, do not provide a pay ratio disclosure in our proxy statement.

Our Performance

In 2020, our business delivered for shareholders. Our core differentiators of actionable expertise, clear alignment and permanent capital generated exceptionally strong performance, including:

• Reported Cash Provided by Operating Activities of $148.6 million, and non-GAAP CAD of $110.6 million; and

• Cash flow available for distribution and reinvestment (or “CAD”) increasing 6% for the full year 2020 as compared to 2019, notwithstanding the divestitures of Clean Earth and Manitoba in 2019;

• Our total Adjusted EBITDA at our subsidiaries, pro forma for the full year impact of the acquisitions and divestitures, increasing 2% for the full year 2020 as compared to 2019;

• Receiving ratings upgrades at S&P and Moody’s.

Cash flow available for distribution and reinvestment and Adjusted EBITDA are non-generally accepted accounting principle (“GAAP”) metrics. See pages [114-120] of our Annual Report on Form 10-K under the heading “Reconciliation of Non-GAAP Financial Measures” for reconciliations to the most directly comparable GAAP financial measures.

Response to COVID-19 Pandemic

COVID-19 had a significant impact on our portfolio of businesses, through the nature of the impact varied by business. Impacts ranged from the temporary closure of retail stores in our 5.11 business, to supply chain issues affecting some of our niche industrial businesses, to macro trends affecting multiple businesses driven by travel restrictions and stay-at-home orders.

During 2020, we worked with management at each of our businesses to reduce our controllable costs, including short-term actions to reduce labor costs, eliminating non-essential travel and reducing discretionary spending, while implementing various measures to ensure that we could continue operating during the COVID-19 pandemic. The health of our team and various stakeholders is our highest priority, and we have taken multiple steps to provide support and a safe work environment. Additionally, our businesses proactively managed working capital and we reduced our capital spending plan for the year, without deferring many key strategic ongoing initiatives.

The Manager also made decisions to give Compass Diversified and its portfolio businesses additional flexibility in responding to the pandemic. Those actions included waiving 50% of the second quarter management fee – a fee that would otherwise have contributed towards executive compensation for seconded managers – as well as entering into a waiver agreement whereby our Manager agreed to waive the portion of the management fee attributable to the cash balances held at the Company as of March 31, 2020 and again at September 30, 2020. The Manager has waived approximately $20 million over the past 2 years to ensure that the Company has adequate liquidity levels to continue to operate in these challenging and unprecedented times.

The cash compensation paid to the Company’s non-management directors was reduced by 50% during one quarter in fiscal year 2020.

Overview of our Executive Compensation

O ur Manager determines and pays the compensatio n of the executive officers seco nded to us, as well as the employees of our Manager performing services on our behalf. We do no t reimburse our Manag er for the compensatio n paid to our chief e xecutive officer, Elias J. Sabo. We do, however, pay our Manager a quarterly managemen t fee and our Manager u ses the proceeds from t he management fee to pay employees performing services on our behalf, to cover the Manager’s operating expenses and to pay distributions to Mr. Sabo in respect of his equity ownership interest in and role as the managing member of our Manager.

During the fiscal year ended December 31, 2020, we incurred approximately $29.4 million of management fees (excluding $3.9 million in fees waived by the Manager to assist portfolio companies in managing their response to COVID-19) under the Management Services Agreement. For a discussion of the terms of our Management Services Agreement, see the section titled “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS – Contractual Arrangements with Related

Parties – Management Services Agreement.” The C ompany has the right to require the Manager to replace Mr. Sabo as the Comp any’s chief executive officer, subject to the terms of the Management Serv ices Agreement with our Manager. We regularly communicate with our shareholders regarding our executive compensation practices.

Pursuant to t he Management Services A greement with our Mana ger, we reimburse our Ma nager for the compens ation paid to our ch ief financial officer, Ryan J. Faulkingham. S uch reimbursement is a pproved by the Company’ s compensation committee. The terms and conditi ons of Mr. Faulkingham’s employment are governe d by an employment ag reement between Mr. Fau lkingham and our Man ager. A description of Mr. Faulkingham’s compens ation is set forth bel ow. The Company’s Board and compensation committee oversee the calculation and payment of the management fee.

The discussion that follows relates to the c ompensation policies and philosophy for Mr. Faulk ingham only, as the c ompensation distributions paid to the Comp any’s chief executive officer are not reimbursed by the Company.

Shareholder Engagement

A majority of our shareholders have approved, on an advisory basis, the executive compensation of our named executive officers (Say-on-Pay), since the inception by us of an advisory vote regarding the executive compensation of our named executive officer. In 2020, we received 80.5% support on our advisory Say-on-Pay vote. Over the past few years, we have steadily increased our shareholder outreach efforts on topics including executive compensation and our management structure, and we have initiated communications with certain institutional shareholders to better understand the reasons behind certain votes and address any shareholder concerns. In addition, to improve our ability to reach smaller investors, we have engaged an additional third-party investor relations firm to assist with, among other things, continuing shareholder engagement. The Company intends to continue engaging directly with shareholders on these topics.

Elements of Our Executive Compensation and How E ach Relates to Our Over all Compensation Objecti ves

Mr. Faulkingham’s emplo yment agreement provid es that his annual comp ensation is to be pai d through a combinatio n of a base salary a nd an annual cash bonus . Both elements are desi gned to be competitive w ith comparable employers in our industry and i ntended to provide in centives and reward Mr. Fa ulkingham for his cont ributions to the Compa ny.

Objectives of Our Ex ecutive Compensation and What it is Designed to Reward

The primary ob jective of the aforeme ntioned elements of o ur executive compensa tion is to attract and ret ain a qualified and ta lented individual to s erve as chief financial officer. Through paymen t of a competitive bas e salary, we recognize p articularly the experien ce, skills, knowledge an d responsibilities required of t he chief financial offi cer position. An annual cash bonus is designed to reward ou r chief financial off icer’s individual perfor mance during the year an d can therefore be variable from year to year.

How We Determine the Amount of Each Element of Executive Compensation for our Chief Financial Officer

To d etermine the amount of our chief financial officer’s compensati on, we consider competit ive market practices by revi ewing publicly availab le information across our industry and related indust ries. We do not use compensation consulta nts currently in determining our chief financial officer’s compensation. When establishin g Mr. Faulkingham’s 2021 b ase salary, the compe nsation committee and ma nagement considered several fac tors including: his s eniority, the functio nal role of his position, the level of his respo nsibility, the ability to re place him, and his base s alary during the prio r year. The compensatio n committee also considered feedback received from our shareholders who engage in regular communications with our management team, the most recent advisory votes on executive com pensation, which were supported by a majority of our shareholders in each of fiscal years 2020, 2019 and 2018, and whether such compensation co ntinues to achieve the objective of appropriate ly rew arding our chief financial officer for his contributions to our business, includi ng its growth and pr ofitability.

Our chief fi nancial officer’s com pensation is reviewed on an annual basis. Fac tors considered in determi ning increases to our chief financial officer salary level are the e mployment market for ch ief financial officers o f public entities comparabl e to the Company in size and industry, the breadth and scope of t he responsibilities of the chief financial officer within our organizati on, his performance in prior years (as assessed by our compensation committee in accordance with the factors outlined below) and the retention of our chief financial officer. We expect the salary of our current chief financial officer, Mr. Faulkingham, to increase annually with adjustments largely reflecting additional responsibilities assumed, growth of the Company and the related increase in the complexit y of the position of chi ef financial officer wit hin our organization, to appropriately reward Mr. Faulkingham

for his contributions to our growth and profitabilit y, thereby retaining hi s services and to com pensate for cost of living increases.

The annu al cash bonus element o f our executive compen sation policy is determ ined on a discretionary ba sis and is largely based upon the job performa nce of our chief fina ncial officer in comple ting his responsibilities. In determining the amoun t of Mr. Faulkingham’s a nnual cash bonus, our c ompensation committee as sesses his performance i n respect of: (i) the nature and quality of the internal and finan cial reporting controls; (ii) management of th e Company’s financial accounting staff; (iii) th e performance of the C ompany’s financial accoun ting function and its ability to perform ass igned tasks on a timel y basis; (iv) his and the financial accounting staff’s interactions with the Company’s outside i ndependent auditors on the strength of the controls environment, t he strength of the Co mpany’s finance functio n generally and the le vel of cooperation received by such independent aud itors in the conduct o f the Company’s audit; (v) his and the fin ancial accounting staff’s interaction with the man agement of the busin esses in which the Co mpany owns a controlli ng interest; and (vi) h is lead role in capital ra ises and in investor rel ations. Our chief fin ancial officer’s bonus i s not based upon the p erformance of the Comp any and is unrelated t o the amount of his b ase salary.

Summary C ompensation Table – Fiscal Year 2020

The f ollowing Summary Compe nsation Table summarize s the total compensati on accrued for our named executive officers in each of 2020, 2019 and 2018 and shou ld be read in conjunctio n with the Compensation Discussion and Analysis .

(1) Mr. Sabo, who became our chief executive officer on May 3, 2018, was seconded to us by our Manager and does not receive compensation directly from us. We pay our Manager a quarterly management fee and Mr. Sabo, as a member of our Manager, receives cash distributions from our Manager periodically after payment of all compensation and other expenses to our Manager’s employees. The amount of such distribution is derived by the Manager and is not within our control. Concurrent with the June 2019 sale of Clean Earth CGM agreed to waive the management fee on cash balances held at the Company, commencing with the quarter ended June 30, 2019 and continuing until the quarter during which the Company next borrows under the 2018 Revolving Credit Facility. In March 2020, as a proactive measure to provide the Company with additional cash liquidity in light of the COVID-19 pandemic, the Company elected to draw down $200 million on our 2018 Revolving Credit Facility. The Company and CGM entered into a waiver agreement whereby CGM agreed to waive the portion of the management fee attributable to the cash balances held at the Company as of March 31, 2020. In addition, due to the unprecedented uncertainty as a result of the COVID-19 pandemic, CGM agreed to waive 50% of the management fee calculated at June 30, 2020 that was paid in July 2020. Further, for the third quarter of 2020, the Company and CGM entered into a waiver agreement whereby CGM agreed to waive the portion of the management fee attributable to the cash balances held at the Company as of September 30, 2020. CGM has also entered into a waiver of the MSA for a period through December 31, 2021 to receive a 1% annual management fee related to BOA, rather than the 2% called for under the MSA, which reduced the management fee paid for the fourth quarter of 2020. Additionally, during the third quarter of 2018, our Manager waived $0.6 million in management fees attributable to assets acquired in September related to the acquisitions by Velocity Outdoor. We incurred approximately $29.4 million, $32.3 million and $38.8 million of management fees under the Management Services Agreement during each of 2020, 2019 and 2018, respectively, and approximately $5.3 million, $5.0 million and $5.5 million of offsetting management fees under our Offsetting Management Services Agreements during each of 2020, 2019 and 2018, respectively. See the sections titled “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS – Contractual Arrangements with Related Parties – Management Services Agreement” and “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS – Contractual Arrangements with Related Parties – Offsetting Management Services Agreements” for additional information about the Management Services Agreement and our Offsetting Management Services Agreements. Accordingly, no compensation information for Mr. Sabo is reflected in the above summary compensation table.

(2) Mr. Sabo and Mr. Faulkingham do not pa rticipate in any sto ck award, stock option, non-equity incentive or nonq ualified deferred st ock compensation plans .

(3) Includes the following p ayments paid on behalf of Mr. Faulkingham:

Grants of Plan-Based Awards

None of our na med executives participa te in or have account balances in any plan-ba sed award programs.

Empl oyment Agreements

Emplo yment Agreement with Ryan J. F aulkingham. During fiscal year 2013, our Manager entered in to an employment agreement with Mr. Faulkingham. T he Manager has seconded Mr. Faulkingham to the C ompany to act as its chi ef finan cial officer.

During fiscal year 2020, Mr. Faulkingham received base salary in the amount of $450,000 per annum. Mr. F aulkingham’s base sala ry will remain at $450,000 per annum for fiscal year 2021, as recommended by the Manager and ratified and approved by the Company’s compensation committee during its February 11, 2021 meeting. The Manager h as the right to increase, but not decrease, Mr. Faulkingh am’s base salary duri ng the term of his emp loyment agreement. The employment agreement with our Manager provides that Mr. Faulkingham is entitled to receive an ann ual bonus as determined in the sole judgment of our Manager, subject to ratification and approval of the reimbursement of such amount by the compensation committee o f our Board. The employm ent agreement prohibi ts Mr. Faulkingham from ( i) co mpeting with the Company or the Manager, and (ii) soliciting any of the Manager’s or the Comp any’s employees for a p eriod of one year after th e termination of his employment. The emplo yment agreement also req uires that Mr. Faulkingham protect the Company’s confide ntial information .

Anti-Hedging and Anti-Pledging Policy

To prevent speculation or hedgin g of executive officers ’ and directors’ interest s in our equity, Com pass Diversified Hold ings, Compass Group D iversified Holdings LLC (Including Subsidiaries ) and Compass Group Mana gement LLC Policy Regard ing Insider Trading, Tippin g and Other Wrongful Di sclosures, which we refer to as our Insider Tra ding Policy, prohibits short sales, hedging transactions and short- term trading (unless p ursuant to stock option exercises or other employ ee benefit plan acquisition s) of CODI stock, and the pu rchase or sale of options , p uts, calls, exchange-traded options, or any d erivative security th at has similar characteristics, by our executive officers and directors. Our Insider Tra ding Policy also requires our executive officers and directors to obtain prior written approval from our compliance officer before holding CODI securities in a margin account or pledging CODI securities as collateral for a loan.

Outstanding E quity Awards at Fiscal Year-End; Option Exercises and Stock Vested

None o f our named executives h ave ever held options to purchase interests in us or other awards wit h values based on the value of our interest s.

Pension Benefits

None of our named executives p articipate in or have account balances in quali fied or nonqualified d efined benefit plans sponsored by us.

Nonqualifi ed Deferred Compensation

None o f our named executives participate in or hav e account balances in nonq ualified defined contr ibution plans or other deferred compensation p lans maintained by us .

Potential Payments up on Termination or Chan ge-in-Control

The follo wing summarizes potential pa yments payable to our named executive officers upon termination of employm ent or a change-in-cont rol.

Employment Agreement with Ry an J. Faulkingham.

Pu rsuant to his employm ent agreement, if Mr. F aulkingham is terminated (i) by the Manager other than for death or disability or for “p roper cause” or (ii) by Mr. Faulkingham for “good reason,” the Manager shall pay Mr. Faulkingham all amounts to which he may be entitled up to the termination date. However, conditioned upon Mr. Faulkingham’s execution (and, if applicable, non-revocation) of a full waiver and release of all claims against the Manager and its affiliates and their respective officers, directors, shareholders, employees and agents containing standard terms for such an agreement, the Manager shall pay Mr. Faulkingham, in a lump sum, less legally required withholdings, an amount equal to the Mr. Faulkingham’s base salary rate at the termination date plus the discretionary bonus, if any, paid to Mr. Faulkingham for the immediately preceding year. Were such a circumstance and subsequent execution of a full release and waiver to occur on December 31, 2020, Mr. Faulkingham would have been entitled to receive $950,000.

If Mr. Faulkingham terminates his employment for other than “good reason” or if the Manager terminates his employment for “proper cause”, Mr. Faulkingham’s only rights and benefits are to receive (i) base salary compensation accrued through the termination date and (ii) unpaid reimbursable expenses incurred for the benefit of the Manager prior to the termination date.

In Mr. Faulkingham’s Employment Agreement “proper cause” is defined to mean: (a) any breach by Mr. Faulkingham of any material provision of the Employment Agreement; (b) an act of dishonesty, gross negligence or willful misconduct, or a willful or reckless violation of a material regulatory requirement, or of any material written policy or procedure applicable to the Company, the Manager or its affiliates by Mr. Faulkingham, if such act has a material adverse impact on the financial interests or business reputation of the Company, the Manager or its affiliates; (c) any breach of Mr. Faulkingham’s duty of loyalty or other fiduciary duties to the Company, the Manager or its affiliates; (d) a willful failure of Mr. Faulkingham to follow the reasonable directives of the Managing Member of the Manager or the Board of Directors of the Company pertaining to legal compliance or audits of the Company, the Manager or its affiliates; (e) Mr. Faulkingham’s conviction of, or plea of nolo contendere to, a crime which the Manager reasonably determines materially and adversely affects the reputation of the Company, the Manager or any of its affiliates or Mr. Faulkingham’s ability to perform the services required under the Employment Agreement; or (f) the commission of an act of fraud, embezzlement, or misappropriation by Mr. Faulkingham with respect to his relations with the Company, the Manager or any of their respective employees, customers, agents, or representatives.

“Good reason” is defined in in Mr. Faulkingham’s Employment Agreement to mean: (a) a breach by the Manager of any of the material provisions of the Employment Agreement that is not remedied; (b) a material diminution in Mr. Faulkingham’s duties, authority, and responsibilities other than changes (i) to which Mr. Faulkingham has consented; or (ii) that have been eliminated or cured; or (c) the relocation without Mr. Faulkingham’s consent of his principal place of employment more than sixty (60) miles from the Manager’s Westport, Connecticut or Irvine, California locations.

CEO Pay Ratio

The Company has no employees of its own; its Chief Executive Officer and Chief Financial Officer are employees of our Manager and have been seconded to us. The Company does not compensate its chief executive officer for the services that he provides to the Company as chief executive officer. The management fee paid to our Manager covers all expenses related to the services performed by our Manager, including the compensation of our Chief Executive Officer and other personnel providing services to us. As the CEO receives no compensation from the Company for his services, it is not possible to calculate a CEO Pay Ratio.

Compensation Committee Report

We have reviewed an d discussed with manage ment the Compensation Discussion and Analys is provisions to be in cluded in the Company’s 2021 Proxy Statement filed pursuant to Section 14(a) o f the Exchange Act. Ba sed on the reviews and discussions referred to abo ve, we recommend to the Board that the Compensatio n Discussion and Analysis referred to above be incl uded in the Company’s 2021 Proxy Statement.

Me mbers of the Compensa tion Committee
Harold S. E dwards, Chairman
D. Eugene Ewing
Gordon M. Burns

The informati on contained in the repor t above shall not be dee med to be “soliciting mate rial” or to be “filed” with the SEC, nor shal l such information be in corporated by reference i nto any future filing und er the Exchange Act or the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference in such filing.

Ratification of Appointment
of Independent
Auditor

Our Board recommends that you vote, based
on the recommendation of the audit committee, FOR the ratification of the appointment of Grant Thornton LLP to serve as the independent auditor for the Company and the Trust for the fiscal year ending December 31, 2021.

PROPOSAL 3

29 Compass diversified

General

Our Board has recommended a nd asks that you ratify the appointment of Grant Thornto n LLP as the independen t auditor for the Co mpany and the Trust for the fiscal year endin g December 31, 2021. You would be so acting bas ed on the recommendation of our audit committee.

Grant Thornton LLP was appoin ted by our audit committ ee to audit the annual fi nancial statements of the Company and the Trust for the fiscal years ended December 31, 2020 and December 31, 2019. Based on its past performance during these audits, t he audit committee of t he Board has appointed Grant Thorn ton LLP as the indepe ndent auditor to perfo rm the audit of our f inancial statements an d internal control over financial reporting for fiscal year 2021. Grant Thornton L LP is a registered public accounting firm. Infor mation regarding Grant T hornton LLP can be found at: www.grantthornton.co m .

The affirmative vot e of a majority of th e outstanding shares pre sent in person or rep resented by proxy at the Annual Meeting is required to ratify the appointmen t of Grant Thornton LL P. If you do not ratify the appointment of Grant Thornto n LLP, our Board will reconsider its appointment of Grant Thornton LLP and may, in its sole discretion, make a new proposal f or independent audit or.

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

Fees

The chart below sets f orth the total amount billed to us by Grant Tho rnton LLP for services performed for fiscal years 20 20 and 2019, respectively, a nd breaks down these am ounts by category of ser vice:

(1) “Audit Fees” are the aggregate fees billed by Grant Thornton LLP for professional s ervices rendered in connection wi th the audit of our c onsolidated financial sta tements included in o ur annual reports on Fo rm 10-K and for the review of financial st atements included in our quarterly reports on Form 10-Q, or for services that are normally pro vided by the auditors in connection with statu tory and regulatory fi lings or engagements.

(2) “Audit-Related Fees” are the aggregate fees billed by Grant Tho rnton LLP for assurance and related services that are reasonably related t o the performance of t he audit or review of our financial statem ents and are not reported under “Audit Fees,” above.

(3) “Tax Fees” are the aggregate fees billed by Grant Tho rnton LLP for professi onal services rendered in connection with tax c ompliance, advice and pl anning. The 2020 and 2019 fees were rendered for general tax compliance advice for one or more Company subsidiaries.

(4) “All Other Fees” in 2020 related to executive compensation benchmarking performed by Grant Thornton LLP.

Pre-Approval Policies and Pro cedures

The audit committee has established policies an d procedures for its appra isal and approval of audi t and non-audit service s. The audit committee h as also delegated to t he chairman of the audit c ommittee the authority to approve additional aud it and non-audit services and, subject to compli ance with all applicable independence require ments, to approve the engagement of additional accounting firms to provide such services. While all other audit-relate d, tax and other fees ma y be approved by the a udit committee prospective ly, the audit committee or its chairman has p re-approved all of the services provided by Grant Thornton LLP since its engagement.

In makin g its recommendation to ratify the appointment of Grant T hornton LLP as the indepe ndent auditor for the fiscal year ending Decemb er 31, 2021, the audit c ommittee has considered whether the services provided by Grant Thornton LLP are compatible with ma intaining the indepe ndence of Grant Thornto n LLP and has determi ned that such services d o not interfere with G rant Thornton LLP’s i ndependence.

Our Auditors

Audit Committee Report

O ur audit committee is c omposed of three independe nt directors, all of whom are financially lit erate. In addition, the Board has determined that each of Mr. Ew ing, an independent d irector and the chairm an of the audit committ ee, and Mr. Bottiglieri, an independent director, qualify as audit c ommittee financial experts as defined by the SEC. T he audit committee operates under a written charter, wh ich reflects the NYSE list ing standards and Sarbanes Oxley Act of 2002, as amended, require ments regarding audit committees. A copy of t he current audit committee chart er is available on the Company’s website at ww w.compassdiversified.co m .

The audit committee ’s primary role is t o assist the Board in fu lfilling its responsibili ty for oversight of (1 ) the quality and int egrity of the consoli dated financial stateme nts and related disclos ures, (2) compliance wi th legal and regulator y requirements, (3) the independent auditor’s qualifications, indep endence and performance, and (4) the performan ce of our internal audi t and control functio ns.

The Company’s mana gement is responsible f or the preparation of the financial statements, the financial reporting pr ocess and the system o f internal controls. Th e independent auditors are responsible for perfo rming an audit of the financial statements in accordance with audi ting standards general ly accepted in the United States and issuing an opin ion as to the conformi ty of those audited fin ancial statements to U. S. generally accepted accoun ting principles. The audit committee monitors and oversees these proce sses.

The audit committee has adopted a policy des igned to ensure proper oversight of our indep endent auditor. Under t he policy, the audit c ommittee is directly responsib le for the appointment , compensation, reten tion and oversight of t he work of any registered public accounting firm engaged for the purpos e of preparing or issu ing an audit report or p erforming any other au dit review (including resolution of disagreeme nts among management , the Manager, and the auditor regarding fina ncial reporting), or attes tation services. In additi on, the audit committ ee is responsible for pre- approving any non-audi t services provided b y the Company’s indep endent auditors. The aud it committee’s charter a lso ensures that the ind ependent auditor discus ses with the audit co mmittee important issues su ch as internal controls , critical accounting policie s, any instances of fr aud and the consistency and appropriateness o f our accounting policies and practices.

The audit committee has reviewed and discussed with man agement and Grant Thor nton LLP, the Company ’s independent auditor, the audited financial st atements as of and fo r the year ended December 31, 2020. The audit co mmittee has also discussed with Grant Thornton LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. In addition, the audit committee has received the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the audit committee concerning independence, and has discussed with the independent auditor the independent auditor’s independence. The audit committee also co nsidered whether the non-a udit services provided by Grant Thornton LLP to us during 2020 were compatib le with its independe nce as auditor.

Based on these reviews and disc ussions, the audit comm ittee has recommended to t he Board, and the Board h as approved, the incl usion of the audited fi nancial statements in the Company’s Annual Repo rt on Form 10-K for the year ended December 31, 2020.

Members of the Audit Committee
D. Eugene Ewing, Chairman
James J. Bottiglieri
Larry L. Enterline

The informa tion contained in the repo rt above shall not be de emed to be “soliciting mat erial” or to be “filed ” with the SEC, nor sha ll such information be incorporated by reference into any future filing under the Exchange Act or the Securities Act of 1933, as amended, except to the extent that we sp ecifically incorporate it by reference in such fili ng.

Our Shareholders

Share Ownership o f Directors, Executiv e Officers and Principal Shareholders

The follow ing table sets forth information regarding the beneficial owners hip of shares of Trus t common stock by each person w ho is known to us to be the beneficial own er of more than five p ercent of the outstandi ng shares of Trust common sto ck, each of our directors and executive officers, and our directors and executive officers as a g roup as of March 31, 2021, based on 64,900,000 sh ares issued and outstandin g. All holders of shares of Trust common stock are entitl ed to one vote per share on all matters submitted to a vote of holders of shares of Trust common stoc k. The voting rights attached to shares of Trus t common stock held by our directors, executive o fficers or major sharehol ders do not differ from t hose that attach to sh ares of Trust common stock held by any other holder. Under Rule 13d-3 of the Excha nge Act, “beneficial o wnership” includes sh ares for which the indiv idual, directly or ind irectly, has voting pow er, meaning the power to control voting decision s, or investment pow er, meaning the power to cause the sale of the shares, whether or not the shares are held for the individual’s bene fit. The address for each director and executive officer is 301 Riverside Avenue, Second Fl oor, Westport, Connecticut 06880.

* Less than 1%.

(1) CGI Diversified Holdings, LP is owned by Anholt Investments Ltd. (“Anholt”), its sole limited partner, and Navco Management, Ltd. (“Navco”), its general partner. Anholt and Navco are wholly owned by Kattegat Limited, a Bermudian exempt company. Kattegat Limited was formed for the purpose of holding and managing the endowed assets of The Kattegat Trust and is wholly owned by The Kattegat Trust. Path Spirit Limited (“Path”) is the trust protector for The Kattegat Trust. CGI Diversified Holdings, LP, Anholt, Navco and Path share voting and investment power with respect to all 8,291,206 shares. Th e mailing address for CGI Diversified Holdings, LP, Anholt and Navco is Belvedere Building , 4th Floor, 69 Pitts Bay R oad, Hamilton HM08, Bermuda. Path Spirit Limited is the ultimate controlli ng person of CGI Magyar Holdings LLC. The a ddress for Path is 10 N orwich Street, London, E C4A 1BD, United Kingdom. This information is based on a Form 4 filed by CGI Diversified Holdings, LP on March 11, 2021 and a Form 13D/A filed by CGI Diversified Holdings, LP on February 7, 2017.

(2) The address for American Century Investment Management, Inc. is 4500 Main Street 9th Floor, Kansas City, Missouri, 64111. This information is based on a Schedule 13G/A filed by American Century Investment Management, Inc on February 11, 2021. American Century Investment Management, Inc has sole investment power over 4,607,798 shares, shared investment power over 0 shares, sole voting power over 4,424,426 shares and shared voting power over 0 shares.

(3) 464,650 of these shares are beneficially owned d irectly by Mr. Day and 156,563 a dditional shares are beneficia lly owned by Mr. Day thro ugh the Day Family 2007 Irrevocable Trust.

(4) 17,000 of these shares are bene ficially owned by Mr. E wing and directly owned by Mr. Ewing’s spouse.

(5) 12,552 of these shares are ben eficially owned directly by Mr. Burns, 23,617 of th ese shares are beneficially owned by Mr. Burns thr ough the Gordon M. Burns 2009 Revocable Trust.

(6) 787 of these shares are beneficially owned by Mr. Faulkingham and directly by Mr. Faulkingham’s spouse.

(7) 229,601 of these shares are owned by Compass Group Management LLC (“CGM”), as to which Mr. Sabo is the managing and controlling member of CGM. Mr. Sabo disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest.

The following table sets forth information regarding the beneficial ow nership of our Series B Fixed-to-Floating Rate Cumulative Preferred Shares (the “Series B”) by each of our directors and executive officers, and our directors and executive officers as a group as of March 31, 2021, based on 4,000,000 shares of Series B issued and outstanding. Our Series B is not convertible into common stock and the holders of the shares of the Series B are only entitled to limited voting rights, as provided in the share designation. The address for each director and executive officer is 301 Riverside Avenue, Second Floor, Westport, Connecticut 06880.

* Less than 1 %.

(1) All of these shares are be neficially owned by Mr. Burns through the Gordo n M. Burns 2009 Revocabl e Trust.

The following table sets forth information regarding the beneficial ownership of our Series C Cumulative Preferred Shares (the “Series C”) by each of our directors and executive officers, and our directors and executive officers as a group as of March 31, 2021, based on 4,600,000 shares of Series C issued and outstanding. Our Series C is not convertible into common stock and the holders of the shares of the Series C are only entitled to limited voting rights, as provided in the share designation. The address for each director and executive officer is 301 Riverside Avenue, Second Floor, Westport, Connecticut 06880.

* Less than 1%.

(1) All of these sh ares are beneficially owned by Mr. Burns through th e Gor don M. Bur ns 2009 R evocable Trust.

The following table sets forth certain informati on as of Ma rch 31, 20 21 regarding the ben eficial ownership of t he Company’s two clas ses of equity interest s