SCHEDULE 14A INFORMATION

(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant ☒                            Filed by a Party other than the Registrant ☐

Check the appropriate box:

DUCOMMUN INCORPORATED

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Ducommun Incorporated 2020 Proxy Statement

Ducommun Incorporated 2020 Proxy Statement

DUCOMMUN INCORPORATED

200 Sandpointe Avenue, Suite 700

Santa Ana, California 92707-5759

(657) 335-3665

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS^*

May 6, 2020

The Board of Directors unanimously recommends that you vote your shares “FOR” the election of each of the nominees named in the Proxy Statement and “FOR” each of the other proposals above.

Your vote is very important. Please read the proxy materials carefully and submit your votes as soon as possible by the internet, telephone, or mail. Submitting your votes by one of these methods will ensure your representation at the annual meeting regardless of whether you attend the meeting.

* We intend to hold our annual meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have due to the coronavirus or COVID-19 and as a result, and to protect the well-being of attendees, we are reserving the right to adjourn, postpone or change the means of convening the meeting, including solely by means of remote communication. If we hold our meeting by remote communication, the 2020 Annual Meeting of Shareholders would be conducted solely virtually, on the above date and time, via live audio webcast. We would publicly announce a determination to hold a Virtual Annual Meeting as soon as practicable before the meeting by press release and posting on our website at www.ducommun.com, as well as through an SEC filing. You or your proxyholder could participate, vote, and examine our list of stockholders at the Virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/DCO2020 and using your 16-digit control number, but only if the meeting is not held in person in California.

By order of the Board of Directors

Rajiv A. Tata

Secretary

Santa Ana, California

March 20, 2020

Ducommun Incorporated 2020 Proxy Statement

Table of Contents

Ducommun Incorporated 2020 Proxy Statement

RECENT PERFORMANCE

This summary of key metrics relating to our performance highlights information generally contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider and we encourage you to read the entire proxy statement before voting your shares. For additional and more complete information regarding the Company’s 2019 performance, please review the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

KEY METRICS

* Includes $14.8M of restructuring charges in 2018 and $8.8M of restructuring charges in 2017.

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Ducommun Incorporated 2020 Proxy Statement

OUR TOTAL RETURN vs. PEERS, RUSSELL 2000 AND SELECTED INDICES

* Data for each year depicted in the graph above is as of December 31 of each year.

** Peer group data does not include Sparton Corporation, which was acquired by Cerberus Capital Management, L.P. on March 4, 2019.

*** Included to depict the Company’s performance against the broad, general market.

(1) 2016 serving as the base period.

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Ducommun Incorporated 2020 Proxy Statement

HOW OUR PERFORMANCE

INCREASED SHAREHOLDER VALUE

* Based on 11,332,841 shares outstanding and closing price of $28.45 per share as of December 31, 2017.

** Based on 11,417,863 shares outstanding and closing price of $36.32 per share as of December 31, 2018.

*** Based on 11,572,668 shares outstanding and closing price of $50.53 per share as of December 31, 2019.

RECENT RECOGNITIONS

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Ducommun Incorporated 2020 Proxy Statement

DUCOMMUN INCORPORATED

200 Sandpointe Avenue, Suite 700

Santa Ana, California 92707-5759

(657) 335-3665

PROXY STATEMENT

We are providing you with these proxy materials in connection with the solicitation by the Board of Directors (the “Board” or “Board of Directors) of Ducommun Incorporated of proxies to be used at our 2020 Annual Meeting of Shareholders (the “Annual Meeting”). The Annual Meeting will be held on May 6, 2020, at 9:00 a.m., Pacific Time, at the Courtyard by Marriott Santa Ana, 8 MacArthur Place, Santa Ana, California 92707*. This Proxy Statement contains important information regarding the Annual Meeting, the proposals on which you are being asked to vote, information you may find useful in determining how to vote, and information about voting procedures. As used herein, “we,” “us,” “our,” or the “Company” refers to Ducommun Incorporated, a Delaware corporation. A Notice of Internet Availability of Proxy Materials, this Proxy Statement, accompanying proxy card or voting instruction card, and our 2019 Annual Report to Shareholders will be made available to our shareholders on or about March 20, 2020. Pursuant to rules adopted by the Securities and Exchange Commission (“SEC”) we are making our proxy materials available to our shareholders electronically via the Internet. The Notice of Internet Availability of Proxy Materials contains instructions on how to access an electronic copy of our proxy materials, including this Proxy Statement and our 2019 Annual Report to Shareholders. The Notice also contains instructions on how to request a paper copy of the Proxy Statement. We believe this process will allow us to provide you with the information you need in a timely manner, while conserving natural resources and lowering the costs of the Annual Meeting.

At the Annual Meeting^*, you will be asked to vote on the following proposals:

(1) Election of the two directors named in this Proxy Statement to serve on the Board of Directors until the Company’s 2023 Annual Meeting and until their successors have been elected and qualified;

(2) Approve the Company’s executive compensation on an advisory basis;

(3) Approve the Company’s 2020 Stock Incentive Plan;

(4) Ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the Company’s year ending December 31, 2020; and

(5) Transact any other business as may properly come before the meeting or any adjournment thereof.

The Board of Directors recommends that you vote your shares “FOR” the election of each of the nominees named in this Proxy Statement and “FOR” each of the other proposals.

* We intend to hold our annual meeting in person. However, we are sensitive to the public health and travel concerns our shareholders may have due to the coronavirus or COVID-19 and as a result, and to protect the well-being of attendees, we are reserving the right to adjourn, postpone or change the means of convening the meeting, including solely by means of remote communication. If we hold our meeting by remote communication, the 2020 Annual Meeting of Shareholders would be conducted solely virtually, on the above date and time, via live audio webcast. We would publicly announce a determination to hold a Virtual Annual Meeting as soon as practicable before the meeting by press release and posting on our website at www.ducommun.com, as well as through an SEC filing. You or your proxyholder could participate, vote, and examine our list of stockholders at the Virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/DCO2020 and using your 16-digit control number, but only if the meeting is not held in person in California.

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Ducommun Incorporated 2020 Proxy Statement

Holders of our common stock as of the close of business on March 9, 2020 (the “Record Date”) are entitled to notice of, and to vote at, the Annual Meeting. At the close of business on the Record Date, the Company had outstanding 11,641,809 shares of Common Stock, $.01 par value per share (the “Common Stock”). You can vote your shares in person at the Annual Meeting or by proxy. There are three ways to vote by proxy:

(1) By Telephone—You can vote by telephone by calling (800) 690-6903 and following the instructions on the Notice or proxy card;

(2) By Internet—You can vote over the Internet at www.proxyvote.com by following the instructions on the Notice or proxy card; or

(3) By Mail—If you received your proxy materials by mail, you can vote by mail by signing, dating and mailing the enclosed proxy card.

If your shares are held in the name of a bank, broker or other nominee, you must follow the instructions of your bank, broker or other nominee in order for your shares to be voted.

If you vote by proxy, the individuals named on the proxy card will vote your shares in the manner you indicate. In the election of directors, holders of Common Stock have cumulative voting rights. Cumulative voting rights entitle a shareholder to a number of votes equal to the number of directors to be elected multiplied by the number of shares held. The votes so determined may be cast for one candidate or distributed among one or more candidates. Votes may not be cast, however, for a greater number of candidates than the number of nominees named herein. On all other matters to come before the Annual Meeting, each holder of Common Stock will be entitled to one vote for each share owned, and you may specify whether your shares should be voted for or against each of the other proposals.

If you submit a proxy without indicating your instructions, your shares will be voted as follows: (1) “FOR” the election of each of the two directors named in the Proxy Statement to serve on the Board of Directors until the Company’s 2023 Annual Meeting of Shareholders and until their successors have been elected and qualified, (2) “FOR” approval of the Company’s executive compensation on an advisory basis, (3) “FOR” approval of the Company’s 2020 Stock Incentive Plan, (4) “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2020, and (5) in their discretion on such other business as may properly come before the Annual Meeting or any adjournment thereof. Any shareholder may revoke his or her proxy at any time prior to its use by (1) sending a written revocation to the Corporate Secretary, (2) submitting a later dated proxy, or (3) attending the Annual Meeting and voting in person.

In order to conduct business at the Annual Meeting, a “quorum” must be established. A “quorum” is a majority in voting power of the outstanding shares of common stock entitled to vote at the Annual Meeting. Both shares of common stock that reflect abstentions and broker non-votes will be treated as present and entitled to vote for the purposes of establishing a quorum. “Broker non-votes” are shares held by a broker, bank or other nominee with respect to which the holder of record does not have discretionary power to vote on a particular proposal and with respect to which instructions were never received from the beneficial owner. Shares that constitute broker non-votes with respect to a particular proposal will not be considered present and entitled to vote on that proposal at the Annual Meeting even though the same shares will be considered present for purposes of establishing a quorum and may be entitled to vote on other proposals. However, in certain circumstances, such as the appointment of the independent registered public accounting firm, the broker, bank or other nominee has discretionary authority and, therefore, is permitted to vote your shares even if the broker, bank or other nominee does not receive voting instructions from you.

Agenda items relating to the election of directors, the approval of the Company’s executive compensation on an advisory basis, and the approval of the Company’s 2020 Stock Incentive Plan are not considered “routine” matters and as a result, your broker, bank or other nominee will not have discretion to vote on these matters at the Annual Meeting unless you provide applicable instructions to do so. Therefore, we strongly encourage you to follow the voting instructions on the materials you receive.

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Ducommun Incorporated 2020 Proxy Statement

In the election of each of the directors, the candidate receiving the highest number of votes will be elected. Abstentions and broker non-votes will have no effect on director elections. For all other proposals to be approved, the proposal must receive the affirmative vote of a majority of the shares of common stock present or represented by proxy and entitled to vote on the proposal. Abstentions will have the effect as a vote against Proposals 2, 3 and 4, whereas broker non-votes will not affect the outcome of Proposals 2 or 3.

We intend to solicit proxies by mail, interview, telephone, facsimile, and internet. D. F. King & Co., Inc. has been retained to assist in the solicitation of proxies for which it will be paid a fee of $7,500 plus reimbursement of out-of-pocket expenses. Brokers, nominees, banks, and other custodians will be reimbursed for their costs incurred in forwarding solicitation material to beneficial owners. All expenses incident to the proxy solicitation will be paid by the Company.

Important Notice Regarding the Availability of Proxy Materials for the

Shareholder Meeting to be Held on May 6, 2020.

The Notice of Annual Meeting, this Proxy Statement and the 2019 Annual Report to Shareholders are

available at

http://materials.proxyvote.com/264147.

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Ducommun Incorporated 2020 Proxy Statement

PROPOSAL 1: ELECTION OF DIRECTORS

Two directors (out of a total of seven) are to be elected at the Annual Meeting to serve for a three-year term ending at the Annual Meeting of Shareholders in 2023 and the election and qualification of their respective successors. The nominees for such positions are Stephen G. Oswald and Richard A. Baldridge. Robert D. Paulson, one of our existing Class 2020 directors, has served on the Board since 2003 and as the Company’s lead independent director since 2004. In accordance with the Company’s Corporate Governance Guidelines pertaining to director tenure and age, Mr. Paulson does not intend to stand for re-election at the Annual Meeting. On behalf of the Board and management, the Company thanks Mr. Paulson for his many years of invaluable leadership, guidance and contributions.

In the absence of a contrary direction, proxies in the accompanying form will be voted for the election of Messrs. Oswald and Baldridge. Management does not contemplate that Messrs. Oswald and Baldridge will be unable to serve as directors, but if that should occur, the person designated in the proxies will cast votes for such other persons in accordance with their best judgment. In the event that any person other than the nominees named herein should be nominated for election as a director, the proxy holders may vote for less than all of the nominees and in their discretion may cumulate votes. Should any of the directors whose terms continue past the Annual Meeting cease to serve as directors prior to the Annual Meeting, the authorized number of directors will be reduced accordingly. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” MESSRS. OSWALD AND BALDRIDGE.

Directors’ Qualifications

The Board of Directors believes that the Board, as a whole, should possess a combination of skills, professional experience, and diversity of backgrounds necessary to oversee the management of the Company, and support the interests of the Company’s shareholders. In addition, the Board believes that there are certain attributes that every director should possess, as presented in the recently revised Corporate Governance Guidelines. Accordingly, the Board and its Corporate Governance and Nominating Committee consider the qualifications of directors and director candidates individually, and in the broader context of the Board’s overall composition and the Company’s current and future needs.

The Corporate Governance and Nominating Committee is responsible for developing and recommending director membership criteria to the Board for approval. The criteria, which are presented in the Company’s Corporate Governance Guidelines, include independent and sound judgment, integrity, the ability to commit sufficient time and attention to Board activities, and the absence of potential conflicts with the Company’s interests. In addition, the Corporate Governance and Nominating Committee periodically evaluates the composition of the Board to assess the skills, experience, and perspective that are currently represented on the Board as well as those the Board believes will be valuable in the future given the Company’s current state and strategic plans.

As part of this periodic assessment, the Corporate Governance and Nominating Committee also evaluates the effectiveness of the overall Board dynamic. While the Company does not have a formal policy on board diversity, its recently revised Corporate Governance Guidelines reflect the Board’s belief that a blend of different perspectives contributes to the quality of the Board’s oversight, and is an essential component of effective governance. The Company, therefore, is committed to assuring that the Board’s diversity is reflected not just in the variety of the directors’ professional backgrounds and experiences, but also in the perspectives represented by directors of different personal characteristics, their gender, race, cultural heritage, and age in particular.

The Corporate Governance and Nominating Committee supports the Board’s commitment to engaging a diverse field of director candidates. As Board seats become available, the Corporate Governance and Nominating Committee will continue to actively identify qualified women and individuals from minority groups to include in the pool from which Board nominees are chosen. The Corporate Governance and Nominating Committee is confident that with this commitment, individuals with diverse perspectives and personal characteristics will have significantly better representation and visibility within the pool of director candidates from which future Board members will be selected and nominated.

In evaluating director candidates, and considering incumbent directors for renomination to the Board of Directors, the Corporate Governance and Nominating Committee has considered a variety of factors. These include each nominee’s independence, financial literacy, personal and professional accomplishments, and experience.

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Ducommun Incorporated 2020 Proxy Statement

The following information is furnished as of March 9, 2020, with respect to each person who is a nominee for election to the Board of Directors, as well as for the other five directors of the Company whose terms of office will continue after the Annual Meeting.

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Ducommun Incorporated 2020 Proxy Statement

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Ducommun Incorporated 2020 Proxy Statement

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Ducommun Incorporated 2020 Proxy Statement

The Board of Directors met seven times in 2019. All directors attended at least seventy five percent (75%) of all Board meetings and committee meetings of the Board of which they were members during 2019, including one hundred percent (100%) of the committee meetings of the Board which they were members during 2019. The Company strongly encourages all directors to attend the Annual Meeting of Shareholders, and all of the directors at the time attended the 2019 Annual Meeting of Shareholders. The Company has instituted a policy of holding regularly scheduled executive sessions of non-management directors following each regularly scheduled meeting of the full Board of Directors. Additional executive sessions of non-management directors may be held from time to time as required. The director serving as the presiding director during executive sessions currently is Mr. Paulson, the lead director of the Board of Directors. The graphic below depicts the attendance of directors at Board and committee meetings held in 2019:

The Board of Directors has determined that each of Ms. Drazba and Messrs. Baldridge, Churchill, Ducommun, Flatt, Haberland and Paulson qualify as independent directors under the independence standards of the New York Stock Exchange’s (“NYSE”) listing standards.

COMPENSATION OF DIRECTORS

Description of Director Compensation

Based on the Company’s improved operational and financial performance trajectory over the past three years, and to bring Director compensation in line with market levels, effective as of January 1, 2019, directors who are not employees of the Company or a subsidiary are paid an annual retainer and a fixed fee for each meeting of a committee of which they are a member as follows:

Under the Directors Deferred Income and Retirement Plan, which went into effect in 2009, a director may elect to defer payment of all or part of his or her fees for service as a director until the director retires from service on the Board of

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Ducommun Incorporated 2020 Proxy Statement

Directors. Deferred directors’ fees may be notionally invested, at the election of the director, in a fixed interest account or a phantom stock account which tracks the Common Stock of the Company with dividends (if any), and will be paid with earnings thereon following the retirement of the director. Upon retirement from the Board of Directors, Mr. Ducommun will receive an annual retainer fee of $25,000, which was in effect in 2009, for life or for a period of years equal to his service as a director prior to 1997 (when the accrual of additional years of service was terminated), whichever is shorter, provided that he retires after the age of 65, and is not an employee of the Company when he retires.

2019 Director Compensation Table

The following table presents the compensation earned or paid by the Company to the non-employee directors for the year ended December 31, 2019.

Director Stock Ownership Policy

The Board of Directors has adopted a stock ownership requirement covering all non-employee directors. Under the policy, non-employee directors must acquire and hold shares of the Company’s common stock equal in value to at least six times the annual Board cash retainer paid to all non-employee directors. Non-employee directors have five years from the later of the adoption of the policy or their initial election to meet this stock ownership guideline. All directors are in compliance or have additional time in which to comply with the stock ownership guideline.

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Ducommun Incorporated 2020 Proxy Statement

BOARD LEADERSHIP STRUCTURE

The Company’s Bylaws provide the Board with the discretion to elect a Chairman who may or may not be an officer of the Company. This provides the Board with flexibility to decide what leadership structure is in the best interests of the Company at any point in time and the Board periodically reviews the structure of Board and Company leadership as part of the succession planning process. Below is an overview of our Board leadership structure:

At the Company’s 2018 Annual Meeting, the Board appointed Mr. Oswald to the position of Chairman, and Mr. Oswald has since held both the Chairman and Chief Executive Officer roles as did his predecessor, Anthony J. Reardon, from 2012 through 2016. The independent members of the Board of Directors have determined that having the same person serve as Chairman and Chief Executive Officer will provide a more efficient leadership structure for the Company when combined with an active lead director to assure the quality of the Company’s governance, promote alignment between the Board and management on corporate strategy and facilitating management’s effective execution of that strategy. In the future, however, the roles of Chairman and Chief Executive Officer may be filled by the same or different individuals.

The Board of Directors also believes that strong, independent leadership and oversight of management is an important component of an effective Board of Directors. To that end, the Board has elected Dean M. Flatt to succeed Mr. Paulson as the lead independent director with leadership authority and responsibilities effective May 6, 2020, immediately following the election of directors at the Annual Meeting. Mr. Flatt, together with the other members of the Board of Directors, review the agenda for all Board meetings, and Mr. Flatt will develop the agenda for, and lead, all executive sessions of the independent directors and provide consolidated feedback from those meetings to the Chairman and Chief Executive Officer. The Board of Directors regularly meets in executive session without management present during each Board meeting and outside of regularly scheduled Board meetings on key issues as required.

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Ducommun Incorporated 2020 Proxy Statement

The lead director facilitates open communication between management and the independent directors, and ensures that the independent directors are fully informed of and prepared to discuss issues deemed most important to the Board. The responsibilities and authority of the lead director include:

THE BOARD’S ROLE IN RISK OVERSIGHT

The Board of Directors oversees risk management as a whole and through its Committees. The Board regularly reviews information regarding, and risks associated with, the Company’s operations and liquidity. While the full Board of Directors has the ultimate oversight responsibility for the risk management process, various Board Committees also have responsibilities for risk management in certain areas. In particular, the Audit Committee reviews risks related to financial reporting and internal controls. The Audit Committee also, at least annually, reviews and assesses enterprise-wide risks and risk mitigation plans implemented by management. Management regularly reports on each such risk to the Audit Committee or the full Board of Directors, as appropriate, and additional review or reporting on enterprise risks is conducted as needed or as requested by the Board of Directors or the Audit Committee. The Compensation Committee annually reviews the Company’s overall compensation programs and their effectiveness in aligning executive pay with performance in the interests of shareholders. The Corporate Governance and Nominating Committee reviews and makes recommendations to the Board concerning the Company’s leadership structure and director independence. The Innovation Committee is responsible for assisting the Board of Directors in fulfilling its oversight responsibilities concerning technology-related opportunities and issues of strategic importance to the Company.

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Ducommun Incorporated 2020 Proxy Statement

The Compensation Committee reviews the risks associated with the Company’s compensation policies and practices for executive officers and employees generally. The Compensation Committee did not identify any risks arising from these policies and practices which are reasonably likely to have a material adverse effect on the Company. In the course of its review, the Compensation Committee considered various features of the compensation policies and practices that discourage excessive risk taking, including, but not limited to, the following:

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Ducommun Incorporated 2020 Proxy Statement

COMMITTEES OF THE BOARD OF DIRECTORS

The Board is responsible for overseeing the Company’s enterprise risk management program, including cybersecurity risks, and fulfills this responsibility both directly and indirectly through its standing committees, each of which assists the Board in overseeing a part of the Company’s overall risk management.

As depicted above, the Company has four standing Board Committees: the Audit Committee, the Compensation Committee, the Corporate Governance and Nominating Committee, and the Innovation Committee. The current membership of each Committee is as follows:

* Committee Chair

The Audit Committee, which met six times during 2019, among other things, oversees the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications, performance and independence, and the performance of the Company’s internal audit

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Ducommun Incorporated 2020 Proxy Statement

function. The current members of the Audit Committee are: Jay Haberland (Committee Chair) Richard Baldridge, and Robert Ducommun. All of the members of the Audit Committee meet the independence criteria of the NYSE’s listing standards. The Board of Directors, in its business judgment, has determined that each of Messrs. Baldridge, Ducommun, and Haberland are “financially literate,” under the NYSE listing standards and that Mr. Haberland is an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K under the Exchange Act. The Audit Committee is governed by a charter which was adopted by the Board of Directors, and which is available on the Company’s website at https://www.ducommun.com in the Corporate Governance section of the Investor Relations webpage and in print to any shareholder that requests it. Any such request should be addressed to Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, California 92707-5759, Attention: Corporate Secretary.

The Compensation Committee, which met four times during 2019, among other things, reviews and approves compensation for executive officers, grants stock options and other stock-based awards, administers stock option and stock-based award programs, reviews and recommends retirement plans, reviews and approves employment agreements and severance arrangements for executive officers, and oversees the evaluation of management of the Company. The current members of the Compensation Committee are: Dean Flatt (Committee Chair), Shirley Drazba, Jay Haberland and Robert Paulson. All of the members of the Compensation Committee meet the independence criteria of the NYSE’s listing standards. The Compensation Committee is governed by a charter which was adopted by the Board of Directors, and which is available on the Company’s website at https://www.ducommun.com in the Corporate Governance section of the Investor Relations webpage and in print to any shareholder that requests it. Any such request should be addressed to Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, California 92707-5759, Attention: Corporate Secretary.

The Corporate Governance and Nominating Committee, which met three times during 2019, among other things, reviews and recommends to the Board of Directors the nominees for election as directors of the Company and oversees the corporate governance of the Company. The current members of the Corporate Governance and Nominating Committee are: Robert Ducommun (Committee Chair), Gregory Churchill, Dean Flatt, and Robert Paulson. All of the members of the Corporate Governance and Nominating Committee meet the independence criteria of the NYSE’s listing standards. The Corporate Governance and Nominating Committee is governed by a charter which was adopted by the Board of Directors, and which is available on the Company’s website at https://www.ducommun.com in the Corporate Governance section of the Investor Relations webpage and in print to any shareholder that requests it. Any such request should be addressed to Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, California 92707-5759, Attention: Corporate Secretary.

The Innovation Committee, which met three times during 2019, is responsible for assisting the Board of Directors in fulfilling its oversight responsibilities concerning technology-related opportunities and issues of strategic importance to the Company. The current members of the Innovation Committee are: Gregory Churchill (Committee Chair), Richard Baldridge, Shirley Drazba, and Stephen Oswald. All of the members of the Innovation Committee, with the exception of Mr. Oswald, meet the independence criteria of the NYSE’s listing standards. The Innovation Committee is governed by a charter which was adopted by the Board of Directors, and which is available on the Company’s website at https://www.ducommun.com in the Corporate Governance section of the Investor Relations webpage and in print to any shareholder that requests it. Any such request should be addressed to Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, California 92707-5759, Attention: Corporate Secretary.

CODE OF BUSINESS CONDUCT AND ETHICS

The Board has adopted a Code of Business Conduct and Ethics that is applicable to all directors, employees, and officers (including the Company’s Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer). Among other things, the Code of Business Conduct and Ethics requires directors, employees, and officers to avoid any activity that may result in a conflict of interest with the Company; maintain the confidentiality of information entrusted to them by the Company or its customers (except when disclosure is authorized or legally mandated); to deal fairly with the Company’s customers, suppliers, competitors, and employees; protect the Company’s assets and ensure their efficient use; and maintain the Company’s books, records, accounts and financial statements in reasonable detail, fairly reflect the Company’s transactions, and conform to both applicable legal requirements and to the Company’s system of internal controls. The Code of Business Conduct and Ethics is available on the Company’s website at https://www.ducommun.com in

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the Corporate Governance section of the Investor Relations webpage and in print to any shareholder that requests it. Any such request should be addressed to Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, California 92707-5759, Attention: Corporate Secretary. We intend to post on the Company’s website amendments, if any, to the Code of Business Conduct and Ethics, as well as any waivers thereunder, with respect to our officers and directors as required to be disclosed by the SEC and NYSE rules.

The Board has also adopted a Code of Ethics for Senior Financial Officers that is applicable to the Chief Executive Officer, President, Chief Financial Officer, Treasurer and Controller of the Company, and the President, Vice President of Finance and Controller of each subsidiary of the Company. The Code of Ethics for Senior Financial Officers, among other things, requires the Company’s Senior Financial Officers to provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the SEC and in other public communications made by the Company and to promptly report violations of the Code to the Audit Committee. The Code of Ethics for Senior Financial Officers is available on the Company’s website at https://www.ducommun.com in the Corporate Governance section of the Investor Relations webpage and in print to any shareholder that requests it. Any such request should be addressed to Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, California 92707-5759, Attention: Corporate Secretary. We intend to post on the Company’s website amendments, if any, to the Code of Ethics for Senior Financial Officers, as well as any waivers thereunder, with respect to our officers and directors as required to be disclosed by the SEC and NYSE rules.

CORPORATE GOVERNANCE GUIDELINES

The Board adopted Corporate Governance Guidelines, which among other things, specify the criteria to be considered for director candidates; impose tenure limits on directors; require the independent directors to hold periodic meetings without executive management present; and reflect the Board’s belief that a blend of different perspectives contributes to the quality of the Board’s oversight, and are an essential ingredient of effective governance. In 2018, the Board revised the Company’s Corporate Governance Guidelines to emphasize its belief that diversity and a blend of different perspectives contributes to a vital and complementary board dynamic, which is essential to effective governance. As such, the Company is committed to assuring that the Board’s diversity is reflected not only in the variety of directors’ professional backgrounds and experiences, but also in the perspectives represented by directors of different personal characteristics, their gender, race, cultural heritage, and age. The Corporate Governance Guidelines are available on the Company’s website at https://www.ducommun.com in the Corporate Governance section of the Investor Relations webpage and in print to any shareholder that requests it. Any such request should be addressed to Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, California 92707-5759, Attention: Corporate Secretary.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2019, no member of the Compensation Committee of the Board of Directors was or had been an officer or employee of the Company, or had any relationship requiring disclosure hereunder. In addition, during 2019, no executive officer of the Company served as a member of the compensation committee or as a director of another entity, and no executive officer of such other entity served on the Compensation Committee of the Board of Directors or as a director of the Company.

NOMINATING PROCESS

The Corporate Governance and Nominating Committee will consider director candidates recommended by security holders of the Company, provided that any security holder recommending a director candidate must have beneficially owned more than five percent (5%) of the Company’s voting common stock continuously for at least one (1) year as of the date the recommendation is made and any such security holder may submit the name of only one person each year for consideration as a director candidate. All such security holders’ recommendations of director candidates must be submitted to the Secretary of the Company in writing no later than October 31 of the year preceding the annual meeting of shareholders, and must include (i) the full name, address and Social Security number of the director candidate recommended, (ii) the full name,

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address and taxpayer identification number of each of the security holders, and (iii) an affidavit of each of the security holders that they satisfy the minimum beneficial ownership of common stock requirements set forth above. The Corporate Governance and Nominating Committee considers and evaluates candidates recommended by security holders in the same manner that it considers and evaluates other director candidates.

The Corporate Governance and Nominating Committee believes that all Committee-recommended nominees for election as a director of the Company must, at a minimum, have (i) experience and expertise, sound judgment, and a record of accomplishment in areas relevant to the Company’s business activities, (ii) unquestionable integrity, (iii) a commitment to representing the interests of the Company’s shareholders in fulfillment of the Company’s goals and objectives, (iv) independence, and the absence of potential conflicts with the Company’s interests in fulfilling their responsibilities, (v) the willingness to devote sufficient time, energy, and attention in carrying out their duties and responsibilities, and (vi) the willingness to serve on the Board for an extended period of time. In identifying candidates to serve on the Board, the Corporate Governance and Nominating Committee first determines the evolving needs of the Board, taking into account such factors as it deems appropriate, including the current composition of the Board, the range of talents, experiences and skills that would best complement those already represented on the Board, the balance of management and independent directors, the diversity in perspectives represented by directors of different personal characteristics, gender, race, cultural heritage, and age, and the need for financial or other specialized expertise, as discussed in greater detail above under “Directors’ Qualifications.” In support of this process, the Board conducts periodic self-assessments to identify areas of impact that the directors believe are important to the Company’s overall governance and for the execution of its long-term strategy. The assessment, in turn, helps the Board determine whether its current mix of experience, skills and perspectives are addressing the identified areas of impact, and reveal capabilities that will be needed to address those areas of impact in the near future. The results of the assessment completed in 2018 revealed the need for additional expertise in the development and execution of technology based product and market strategies, and in the creation and deployment of innovative development, fabrication and management processes. As a result, the Corporate Governance Committee, with the assistance of an outside search firm, Spencer Stuart, identified Ms. Drazba from within a competitive pool of candidates, and recommended to the Board that she be appointed as a director.

The Corporate Governance and Nominating Committee also believes that at least a majority, and preferably two-thirds, of the Company’s directors should be independent under the NYSE rules, and that at least one member of the Board must be an “audit committee financial expert” as defined by SEC rules. All persons to be considered for nomination as a director of the Company by the Corporate Governance and Nominating Committee must complete a questionnaire, provide such additional information as the Corporate Governance and Nominating Committee may request, and meet in person with directors of the Company.

CORPORATE ENVIRONMENTAL, SOCIAL AND GOVERNANCE

Ducommun is committed to improving the lives of its employees, customers, business partners, shareholders and the communities in which we operate. To that end, we believe a strong focus on corporate responsibility, environmental and social issues and conducting our business in an ethical, transparent and accountable manner creates value for all of our stakeholders.

Operating Responsibly

Ducommun understands the importance of building trust with our investors, customers, vendors and suppliers and that the foundation for doing so begins with its employees. To establish this trust and reflect this commitment, the Company relies on an anonymous hotline to support its Code of Business Conduct and Ethics and empower its employees to provide suggestions, and report concerns or instances of misconduct. Honesty and trust are foundational core values at Ducommun, and in keeping with these values, we offer employees regular ethics training and monthly ethics bulletins to promote a culture of high ethical standards where employees are free to voice any concerns.

The Company is also committed to respecting human rights and establishing high levels of ethical conduct throughout its supply chain. To that end, and in support of the United States Government’s policy prohibiting trafficking in persons, the

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Company is committed to complying with Executive Order 13627 “Strengthening Protections Against Trafficking in Persons in Federal Contracts” and title XVII of the National Defense Authorization Act for Fiscal Year 2013. As such, we expect our employees and suppliers to not engage in the use of forced, bonded or indentured labor, involuntary prison labor, and slavery, and to not procure commercial sex acts, or engage in trafficking of persons. Moreover, in accordance with the California Transparency in Supply Chains Act of 2010, which requires retailers and manufacturers doing business in California to disclose efforts to eradicate slavery and human trafficking from their direct supply chain, Ducommun is committed to ensuring that its employees and suppliers take appropriate steps to mitigate the risk of human trafficking and slavery from occurring in any aspects of its supply chain.

Environmental, Health and Safety

In support of Ducommun’s pledge to deliver exceptional value to all stakeholders, we commit to the following with respect to our environmental management practices:

1. We will continuously strive to avoid adverse impact and harm to the environment in the communities in which we do business, and to identify business partners who share these values.

2. Ensure compliance with all applicable laws and regulations pertaining to the environment and natural resources.

3. We will continually improve our Environmental Management System, employee awareness, and performance as a priority of our operational system.

4. We will establish meaningful goals and objectives in the pursuit of Environmental, Health and Safety excellence.

Ducommun also places a premium on the safety of its employees. To that end, the Company established an incident investigation policy to identify the root cause of accidents that result in lost time, implement corrective measures, and improve training to reduce occupational accidents. In addition, the Company tracks the number of lost time incidents incurred by its employees as a measure of the effectiveness of its health and safety programs. Lost time incidents are defined as incidents that resulted in days away from work and is similar to the days away, restricted or transferred metric utilized by the Occupational Safety and Health Administration. For the year ended December 31, 2019 compared to the year ended December 31, 2018, the number of lost time cases decreased by forty percent (40%) and Company’s lost work incident rate decreased by forty-one percent (41%), as depicted in the graphs below:

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Community Investment

Ducommun is committed to being an active member of the communities in which it operates by contributing not only financial resources, but volunteering time to ensure these communities are stronger and better environments in which to live and work. The Company accomplishes this by focusing on educational opportunities for the children of its employees and the general public and supporting the nation’s honored veterans.

Ducommun teamed with the Los Angeles Chargers (“LA Chargers”) of the National Football League and the University of California, Irvine (“UCI”) to establish the STEM on the Sidelines™ program, which serves as a contest to promote Science, Technology, Engineering and Mathematics (“STEM”) in local Los Angeles and Orange County high schools. Over the course of a few weeks, students were tasked to code and build a device that launches mini footballs at a target. The Final Competition for Season 2 was held December 8, 2019 at Dignity Health Sports Park, home of the LA Chargers, with 173 student participants from 34 Orange and Los Angeles County high schools. Students worked in teams of four to six, using STEM skills to build and program a mini-football launcher to score maximum points when launched at a specific target, with a focus on design and engineering for length and accuracy. Ducommun congratulates the students from Tustin High School and San Gabriel High School, the 2019 STEM on the Sidelines™ winners from Orange and Los Angeles counties.

In addition, in 2019, the Company was proud to sponsor the Medal of Honor convention in Tampa Bay, Florida, hosted by the Congressional Medal of Honor Society. The Medal of Honor, established by Congress and signed into law by President Abraham Lincoln, is our nation’s highest and most prestigious personal military decoration, and is bestowed upon individuals for valor in action against enemy forces. Ducommun is proud to honor and support those who have sacrificed for the benefit of our country.

Customer Recognitions

Ducommun’s efforts to build trust with our employees, investors, customers, vendors and suppliers contributed to the Company superior performance in 2019. The Company was honored to be recognized as supplier of the year by Viasat, Inc. and as a Premier Award Winner by Raytheon for supplier excellence, marking the first time in five years the Company was recognized by its customers.

Orange County Business Journal Recognition

In 2019, Ducommun was proud to be named to the Orange County (California) Business Journal’s 2019 List of Fastest-Growing Public Companies, ranking 11th in the Large Public Companies category. To qualify for the recognition, companies are required to have more than $500 million in revenue and achieve a minimum of 15% revenue growth in the two years ended June 30, 2019. Ducommun’s revenues exceeded this threshold as the Company experienced a 23% increase in revenues over that two-year time period.

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Investment in our Employees

The Ducommun Scholarship program is an exclusive benefit for the children and grandchildren of full-time Ducommun employees who plan to continue education in college or vocation school programs. Students are awarded scholarships based on their academic record, demonstrated leadership and participation in school and community activities, honors, work experience, statement of goals and aspirations, and an outside appraisal. In 2019, Ducommun awarded a total of twenty-two scholarships, an increase from eight scholarships awarded in 2018. Ducommun also increased scholarship award amounts from $2,500 in 2018 to $3,000 in 2019. In addition, Ducommun added six new scholarships of $2,000 each for vocational programs in 2019. Scholars are selected by an independent scholarship firm which administers the application, review process, and award selection.

SECURITY HOLDERS AND OTHER INTERESTED PARTIES COMMUNICATIONS WITH

THE BOARD OF DIRECTORS

Security holders and other interested parties may communicate with the Company’s Board in writing by mail, addressed to Board of Directors, Ducommun Incorporated, 200 Sandpointe Avenue, Suite 700, Santa Ana, CA 92707-5759. Persons wishing to communicate with the Board should include their full name and address. Security holders and other interested parties wishing to communicate with the Board should also include the number of shares of common stock beneficially owned, and the name of the record holder of the common stock if different from themselves (e.g., the name of any broker or bank holding the stock). The Company intends to forward all communications from security holders and other interested parties in the manner described above to the Corporate Governance and Nominating Committee members, who will then determine whether the communications should be distributed to the entire Board. If the Board receives a substantial number of communications from security holders and other interested parties, the Corporate Governance and Nominating Committee may delegate to the secretary of the Company the screening of these communications to remove solicitations and communications unrelated to the Company’s business. Should shareholders or other interested parties desire to communicate with the Company’s lead director or non-management directors as a group, such communications should be addressed to either the presiding director or the non-management directors at the address set forth above.

DELINQUENT SECTION 16 REPORTS

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the Company’s officers and directors, and persons who own more than 10% of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC and to furnish copies of such forms to the Company. Based solely on a review of the copies of such forms furnished to the Company, and on written representations that no Form 5’s were required, the Company believes that during its past year all of its officers, directors, and greater than 10% owners complied with the filing requirements of Section 16(a) except that Jay L. Haberland failed to timely report one transaction on Form 4 (with respect to

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the grant of restricted stock units) and Jerry L. Redondo failed to timely report one transaction on Form 4 (with respect to the withholding of shares upon vesting of restricted stock units to satisfy the Company’s payroll tax withholding obligations), both of which were subsequently filed.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Since the beginning of fiscal 2019, we were not a participant in any transaction, in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock or any of the immediate family members of any of the foregoing persons had or will have a direct or indirect material interest.

Although we do not have a written policy for the review of related party transactions, we have designed our internal control framework to identify any related party transactions, including periodic disclosure certifications and monitoring controls. Any identified transactions are then reviewed to confirm that they comply with internal policies, procedures, and applicable regulations.

EXECUTIVE OFFICERS

Our named executive officers have the appropriate balance of skills, knowledge and experience to position the Company for growth and maximize shareholder value going forward. Below is a graphic depicting the average age and tenure of our named executive officers:

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The tables below show the beneficial ownership of our common stock by beneficial owners of more than 5% of our common stock, each of our directors and nominees for director, each executive officer named in the Summary Compensation Table contained in this Proxy Statement, and all directors and executive officers as a group. This information is as of March 9, 2020, except as otherwise indicated in the notes to the tables, and does not account for any tax withholding of shares that may occur after March 9, 2020 in connection with the vesting of restricted stock units and/or settlement of performance stock units that will vest and/or settle within 60 days of March 9, 2020, as described in the notes to the tables. Unless otherwise indicated, such shareholders have sole voting and investment power (or share such power with their spouse) with respect to the shares set forth in the tables. The Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company.

For the purposes of the tables, beneficial ownership of shares has been determined in accordance with Rule 13d-3 of the SEC, under which a person is deemed to be the beneficial owner of securities if she or he has or shares voting or investment power with respect to such securities or has the right to acquire ownership thereof within 60 days. Applicable percentage of ownership is based upon 11,641,809 shares of common stock outstanding as of March 9, 2020, and the relevant number of shares of common stock issuable upon exercise of stock options or other awards which are exercisable or have vested or will be exercisable within 60 days of March 9, 2020. The amounts shown in the tables do not purport to represent beneficial ownership for any purpose other than compliance with SEC reporting requirements.

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Security Ownership of Certain Beneficial Owners

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Security Ownership of Directors and Management

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PROPOSAL 2: RESOLUTION TO APPROVE EXECUTIVE COMPENSATION

ON AN ADVISORY BASIS

We are asking shareholders to approve on an advisory basis the Company’s named executive officer compensation as reported in this Proxy Statement. As described below in the “Compensation Discussion and Analysis” section of this Proxy Statement, the Compensation Committee has structured our executive compensation program to achieve the following key objectives:

Our pay-for-performance compensation approach consists of a mix of shorter-term and longer-term incentive compensation, including annual cash incentives, stock options vesting in annual increments over three years, and performance stock units cliff vesting at the end of three-year performance periods. Consistent with our emphasis on pay-for-performance, in 2019:

We urge shareholders to read the “Compensation Discussion and Analysis” below, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and related compensation tables and narrative, appearing on pages 30 through 54, which provide detailed information on the compensation of our named executive officers. The Compensation Committee and the Board of Directors strongly believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our executive officers reported in this Proxy Statement has supported and contributed to the Company’s success.

In accordance with Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as a matter of good corporate governance, we are asking shareholders to approve the following advisory resolution at the Annual Meeting of Shareholders:

RESOLVED, that the shareholders of Ducommun Incorporated (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2020 Annual Meeting of Shareholders.

This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee will carefully review and consider the voting results when evaluating our executive compensation program. At the 2017 Annual Meeting, the Company’s shareholders approved, on an advisory basis, that future advisory resolutions on the Company’s named executive officer compensation be conducted every year. The Company considered the outcome of this advisory vote and determined that the Company will conduct annual “say-on-pay” resolutions until the next advisory shareholder vote on this matter is required under Section 14A of the Exchange Act, or until the Board of Directors otherwise determines that a different frequency for such votes is in the best interest of the Company’s shareholders. Following the vote to be conducted at the Company’s 2020 Annual Meeting of Shareholders, it is anticipated that the next advisory vote to approve named executive officer compensation will be conducted at the Company’s 2021 Annual Meeting of Shareholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” PROPOSAL 2.

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2019 Compensation Discussion and Analysis

Table of Contents

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2019 Compensation Discussion and Analysis

Executive Summary

This Compensation Discussion and Analysis describes the compensation awarded to, earned by, or paid to the Company’s chief executive officer, chief financial officer and three most highly compensated executive officers during 2019, who are listed below (the “named executive officers” or “NEOs”):

2019 Operations and Performance

The following graph and table compare the Total Shareholder Return on $100 invested in Ducommun Incorporated’s common stock with the Total Shareholder Return on $100 invested in the Russell 2000 Index, companies identified in the Benchmarking and Peer Groups section of this Compensation and Disclosure Analysis, the NYSE Composite Index and the Dow Jones Industrial Average for the three year performance period for the years ended December 31, 2017 through December 31, 2019, with the year ended December 31, 2016 serving as the base period. The Russell 2000 Index measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000 Index, a larger index of publicly traded companies that represents almost 98% of the investable U.S. stock market. The total returns include the reinvestment of cash dividends.

* Data for each year depicted in the graph above is as of December 31 of each year.

** Peer group data does not include Sparton Corporation, which was acquired by Cerberus Capital Management, L.P. on March 4, 2019.

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In addition, 2019 continued to be a period of positive transition and transformation for the Company, which is reflected in the following operational and financial performance highlights for the year:

•   Revenues(1) were $721.1 million for 2019, as compared to $629.3 million for 2018, a year over year increase of 14.6%, reflecting continued growth based on the momentum built in 2017;
•   Operating income(1)(2) was $56.2 million for 2019, as compared to $23.9 million for 2018, an increase of 135.1% from 2018;   •   Operating income margin increased by 390 basis points (“bps”) from 3.9% of revenues in 2018, to 7.8% of revenues in 2019;
•   Backlog, defined as customer placed purchase orders and long-term agreements with firm fixed price and firm delivery dates of 24 months or less, was $910.2 million at the end of 2019, compared to $863.6 million at the end of 2018, reflecting a 5.4% increase in demand for the Company’s products in its commercial aerospace end-use markets and defense technologies end-use markets;
•   Gross profit(1) was $152.2 million for 2019, or 21.1% of revenues, as compared to $122.6 million for 2018, or 19.5% of revenues, an improvement of 160 bps, reflecting the Company’s improved operating performance; and   •   We acquired Nobles Worldwide, Inc. (“Nobles”), a privately held global leader in the design and manufacture of high performance
ammunition handling systems for military aircraft, helicopters, ground vehicles and shipboard systems that added a suite of proprietary products to our overall product offering.

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Enhancement of Shareholder Value

The success of the Company’s pay-for-performance philosophy in compensating its named executive officers, including but not limited to its use of annual cash incentives based on performance targets whose growth is essential for achieving superior long-term shareholder value, and long term equity incentives that further align executive and shareholder interests is demonstrated in the graph below indicating a continued upward trajectory in the Company’s market capitalization between the years 2017 and 2019:

* Based on 11,332,841 shares outstanding and closing price of $28.45 per share as of December 31, 2017.

** Based on 11,417,863 shares outstanding and closing price of $36.32 per share as of December 31, 2018.

*** Based on 11,572,668 shares outstanding and closing price of $50.53 per share as of December 31, 2019.

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Pay for Performance

The Company’s philosophy in the compensation of its named executive officers is oriented towards a pay-for-performance approach. In 2019, as reported in the Summary Compensation Table and other tables below, performance-based compensation (defined, for this purpose, as all compensation contingent on the achievement of performance goals and/or increases in the Company’s stock price), at target, represented a significant percentage of the total compensation of each of the named executive officers:

2019 Pay Mix

* “Equity Incentives” includes the fair value of equity grants in 2019, based upon grant date fair value as disclosed in the 2019 Summary Compensation Table. “Cash Incentive” includes annual cash incentives to the NEOs, at target, as disclosed in the 2019 Grants of Plan-Based Awards Table. “Salary” reflects salaries paid to the NEOs during 2019, as disclosed in the 2019 Summary Compensation Table. “Equity” includes performance and restricted stock units granted to the NEOs as disclosed in the 2019 Grants of Plan-Based Awards Table.

Significant elements of total compensation of the named executive officers that are performance based are as follows:

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As discussed above, the Company’s executive compensation program reflects strong pay for performance alignment.

The Company’s financial performance was the most significant factor affecting compensation of the named executive officers in 2019. Such performance affected compensation as follows:

Best Pay Practices

The Company’s executive compensation program includes a number of positive pay practices.

Last Year’s Say on Pay Vote

The Company provided shareholders a “say-on-pay” advisory vote to approve its named executive compensation in 2019, as required under Section 14A of the Exchange Act. At the 2019 Annual Meeting, shareholders expressed substantial support for the compensation of the Company’s named executive officers, with over 97% of the votes cast (excluding abstentions) in approval of the “say-on-pay” advisory vote. The Compensation Committee carefully evaluated the results of the 2019 advisory vote in connection with its evaluation of the Company’s executive compensation programs more generally. Ultimately however, the Compensation Committee did not make any changes to the Company’s executive compensation program and policies as a result of the 2019 “say-on-pay” vote.

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The following table depicts the results of the say-on-pay vote at the Company’s last three Annual Meetings, which demonstrate consistent and overwhelming support for the Company’s executive compensation programs:

Shareholder Engagement

We have historically been highly engaged with our shareholders on various topics of interest to them. In 2017, we engaged on specific topics of interest to our shareholders, including board diversity. As a result, in 2018, we updated our Corporate Governance Guidelines, as discussed in more detail in the section of this proxy statement under the correspondingly named heading, and appointed Shirley G. Drazba to our Board, who brings extensive experience in creating high value creation opportunities for the Company’s product lines, as well as experience in leading strategic acquisitions to enhance product portfolios and market positioning. Based upon our “say-on-pay” vote results, we have historically had significant shareholder support for our executive compensation program. As a part of our ongoing dialogue with our shareholders, we will keep the channels of communication open and engage in any areas of concern to our shareholders, including compensation.

2019 Named Executive Officer Compensation

Compensation Objectives

The Company’s compensation programs are designed to provide competitive levels of compensation that relate pay to the achievement of the Company’s financial goals, recognize individual initiative and performance, and assist the Company in attracting and retaining qualified executives. The Company intends for overall compensation of the named executive officers to be at levels that are broadly competitive with other companies of similar size and complexity of operations.

The Company does not target any specific mix of cash versus non-cash compensation for its named executive officers. Instead, each element of compensation (salary, annual cash incentive and long-term equity incentives) is awarded and targeted at amounts that are each intended to be market competitive and consistent with the principles described above and internal pay equity within the Company.

Compensation Determinations

Decisions relating to compensation of the Company’s executive officers generally are made by the Compensation Committee of the Board of Directors. Each member of the Compensation Committee is an independent director of the Company.

Each element of compensation of the chief executive officer is set by the Compensation Committee. Each element of compensation of the other named executive officers is recommended by the chief executive officer and reviewed and approved by the Compensation Committee.

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Compensation Elements

The following are the primary elements of named executive officer compensation:

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Base Salaries

The Company pays salaries to its named executive officers in consideration of the performance of specific roles and responsibilities and competitive market practices. In establishing the salaries for the named executive officers in 2019, the Compensation Committee considered the compensation assessment prepared by Willis Towers Watson PLC (“WTW”) of base salary levels which indicated that the base salary of the chief executive officer was generally consistent with the 50^th percentile of the Company’s compensation peer group data and the 75^th percentile of the published survey compensation data, while the base salaries of the other named executive officers was generally consistent with the 25^th percentile of the Company’s compensation peer group data and the 50^th percentile of the published survey compensation data. The Compensation Committee made the following base salary changes for 2019:

Annual Cash Incentives

Annual cash incentives are awarded based on the Company’s actual financial performance compared to targets (weighted 70% for operating income, 10% for net sales and 20% for adjusted cash flow from operations), provided that the Company exceeds an adjusted net income threshold. The Compensation Committee chose adjusted operating income, net sales and adjusted cash flow from operations as the performance targets because it believes that growth in these measures is essential to the Company’s objective to provide superior long-term total shareholder return. The Compensation Committee approves the thresholds, targets and maximums for the financial performance measures, and the formula for funding the bonus pool at the beginning of each year.

Performance metric levels are set in line with our annual operating budget for the year. Annual cash incentives were targeted at 100% of salary for the Chief Executive Officer, 55% of salary for the Chief Financial Officer, 50% of salary for the Senior Vice President, Operations, 45% of salary for the Chief Human Resources Officer, and 40% of salary for the Controller and Chief Accounting Officer. In establishing the annual cash incentive target amounts, the Compensation Committee considered the results of WTW’s compensation assessment which indicated the Company’s annual cash incentive target percentages were set appropriately. Annual cash incentive payouts can range from zero to a maximum of three times the targeted percentage for each Named Executive Officer.

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Cash flow is measured at three periods during the fiscal year: the first two interim periods are weighted at 4% each and the final, year-end period is weighted at 12%, resulting in a total weighting of 20% for the metric. The threshold, target and maximum performance goals on a full-year basis for 2019 were $38.4 million, $48 million and $57.6 million, respectively, and actual cash flow from operations for 2019 was $59.5 million. While the Company’s year-end cash flow was higher than the maximum, actual performance during the interim periods fell between target and maximum levels, which resulted in a final funding of 235% of the cash flow target. As a result, when weighted, overall funding for the cash flow metric was 47%.

Based on the above, performance against the 2019 Bonus Plan financial metrics resulted in a payout level of 287% of target. The annual cash incentive determination for each of the named executive officers is reflected in the table below.

* The Company has a convention of rounding payout amounts up to the nearest thousand.

Long-Term Incentives

Long-term incentives, in the form of stock options, performance stock units and restricted stock units, are granted annually to the named executive officers to attract, motivate and retain these employees. Stock options are performance-based since the stock options will be valuable to the named executive officers only to the extent of any increase in the Company’s stock price after the grant date. Performance stock units are earned only if the Company achieves the specified performance metrics. Restricted stock units are used to provide a direct ownership interest in the Company and a long-term incentive for the named executive officers to remain in the employment of the Company. In addition, such awards align executive and shareholder interests as they increase or decrease in value with changes to the Company’s stock price.

With the exception of our CEO, the Company’s target long-term incentive program consists of 49% performance stock units earned based on the achievement of key performance criteria; 34% time-based restricted stock units; and 17% stock options as depicted in the graph below. For 2019, our Chief Executive Officer’s long-term equity award weightings consisted of 54% performance stock units; 24% restricted stock units; and 22% stock options to reinforce the Company’s emphasis on performance-based compensation.

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As depicted above, the Compensation Committee intends for the preponderance of long-term incentives to be tied to the long-term financial performance of the Company and its stock. For 2019, the Compensation Committee made the following regular cycle annual long-term equity incentive grants to the named executive officers:

In determining the aggregate value of long-term incentives to grant for 2019, the Compensation Committee considered the results of WTW’s compensation assessment as to the value of long-term incentives provided at the 25^th percentile of the Company’s compensation peer group data and the 50^th percentile of the published survey compensation data. The Compensation Committee awarded the chief executive officer and the other named executive officers a mix of performance-based and time-based long-term equity incentives that was generally consistent with the market. Such decisions were made after taking into consideration the total prior long-term equity incentives made by the Company and the number of shares available under the Company’s stock incentive plans.

The Compensation Committee has implemented a process whereby all normal cycle long-term incentives are awarded in the spring of each year, and long-term equity incentive grants in 2019 were made consistent with this process. However, long-term equity incentive grants may be made at other times in the event of the new hire of an executive officer or a special award to recognize individual performance. In addition, the timing of the award of normal cycle long-term equity incentives may be changed in the future, as needed, to meet changing circumstances.

Stock Options

The Compensation Committee establishes the grant dates for stock options and does not determine these dates based on knowledge of material nonpublic information or in response to the Company’s stock price. In 2019, the Company granted stock options, which vest annually over a three-year period, to the named executive officers to encourage a focus on long-term goals and objectives that are in the interest of shareholders and to reward the achievement of long-term growth in the Company’s stock price.

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Performance Stock Units (FY2019-FY2021 Performance Period)

In 2019, performance stock units were awarded which may be earned based upon the achievement of annual adjusted diluted earnings per share targets during each year of the performance period over a three-year performance period (from January 1, 2019 to December 31, 2021), subject to a three-year relative total shareholder return modifier applied at the end of the three-year performance period. The performance stock units will cliff vest at the end of the three-year performance period in amounts from 0% to 200% of the target units depending on the Company’s performance, as follows:

In the event that the Company’s performance relative to the performance metrics falls between two of the data points listed in the table above, the percentage of target performance stock units that vest will be determined by linear interpolation between the two data points, rounded to the nearest whole unit. The adjusted diluted earnings per share is calculated, as determined by the Compensation Committee, by adjusting diluted earnings per share for changes in accounting standards, discontinued operations, to exclude gain or loss on the sale of any business or product line, any asset impairment write-offs or charges (whether of goodwill, intangible or tangible assets), transaction-related costs or expenses (including but not limited to the effects of Financial Accounting Standards Board Accounting Standards Codification Topic 805), debt refinancing costs and restructuring and other non-recurring expenses.

Relative Total Shareholder Return Modifier

After the end of the three-year performance period, the Company’s relative total shareholder return will be calculated as compared to the Russell 2000 Index for the same performance period. As depicted in the table below, the total number of units earned will then be determined by multiplying the number of units earned on the adjusted diluted earnings per share metric by a modifier between 0.75-1.25 to determine the final award. The relative total shareholder return modifier will not be greater than 1.0 unless the Company’s absolute total shareholder return over the performance period is positive.

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Ducommun Incorporated 2020 Proxy Statement

For the performance periods ending in 2019, 2018, and 2017, performance stock units vested at the following levels as a percentage of target:

For the 2019 performance stock units, the Compensation Committee set the threshold adjusted diluted earnings per share level to be equal to actual adjusted diluted earnings per share for 2019, such that the Company must improve adjusted diluted earnings per share relative to the end of the most recently completed fiscal year prior to the grant before any performance stock units will be eligible to vest.

CEO Performance Restricted Stock Unit Grant

In 2019, our CEO was awarded performance restricted stock units which may vest based upon the achievement of revenue targets over a three-year performance period (from January 1, 2019 to December 31, 2021) established pursuant to the strategic plan approved by the Company’s Board of Directors. Following the end of the performance period, the Compensation Committee will determine the amount of revenue that was achieved by the Company relative to the Company’s strategic plan and the percentage and number of the performance restricted stock units earned as a result thereof based on the following threshold, target and maximum performance levels:

2019 Restricted Stock Units

The Company awarded restricted stock units to the named executive officers in 2019 to reward the achievement of long-term growth in the Company’s stock. Restricted stock units, which vest one-third annually over a three-year period, also are intended to provide a long-term incentive for the named executive officers to remain in the employment of the Company.

Performance Stock Units (FY2017-FY2019 Performance Period)

The three-year performance period for performance stock units awarded in 2017 ended on December 31, 2019. The threshold, target, and maximum performance levels for performance stock units awarded in 2017, and the actual performance in each of the years 2017 to 2019, was as follows:

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Ducommun Incorporated 2020 Proxy Statement

Performance stock units vested with respect to the three-year performance period from January 1, 2017 to December 31, 2019 at approximately 195% of target in recognition that (i) the Company exceeded the threshold for diluted earnings per share in 2017, 2018 and 2019, and (ii) the Company’s relative total shareholder return compared to the Russell 2000 Index was in the 84^th percentile, resulting in a 25% increase due to the impact of the modifier.

Compensation Consultant

The Compensation Committee retained WTW as an independent compensation consultant directly reporting to the Compensation Committee. WTW did not provide any other services to the Company in 2019 other than those services with respect to executive compensation services to the Compensation Committee. The Compensation Committee has reviewed the independence of WTW and completed an assessment of any potential conflicts of interest raised by WTW’s work for the Compensation Committee by considering the following six factors and other factors it deemed relevant: (i) the provision of other services to the Company by WTW; (ii) the amount of fees received from the Company by WTW, as a percentage of the total revenue of WTW; (iii) the policies and procedures of WTW that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the relevant WTW consultants with a member of the Compensation Committee; (v) any Company stock owned by the WTWs consultants; and (vi) any business or personal relationship of the WTW consultants or WTW with any of the Company’s executive officers, and concluded that WTW is independent and there are no such conflicts of interest.

Benchmarking and Peer Groups

The Compensation Committee generally has the compensation consultant prepare a formal executive compensation assessment every year. In February 2019, WTW assessed the Company’s executive compensation compared to a peer group and published compensation survey data, and made recommendations as appropriate for changes in the Company’s executive compensation program (“WTW’s compensation assessment”). The peer group consisted of twelve (12) companies in the following GIC industries: aerospace and defense (9 companies), trading companies and distributors (1 company) and industrial machinery (2 companies), identified as market comparators by WTW and the Compensation Committee. The peer group companies had 50th percentile annual sales of $1.34 billion and 25th percentile annual sales of $771 million in the most recent year as of the date of WTW’s compensation assessment. The Company’s annual sales were $629.3 million in 2018 (the most recent full fiscal year at the time of WTW’s compensation assessment). As discussed below, the Company generally targets the 25th percentile of the peer group data in assessing and establishing compensation for the named executive officers. The peer group approved in 2018 and used for 2019 pay decisions consisted specifically of the following:

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Ducommun Incorporated 2020 Proxy Statement

The following graph compares the yearly percentage change in the Company’s cumulative total shareholder return assuming the reinvestment of any dividends with the cumulative total return of the Russell 2000 Index and the median of the Company’s peer group*:

Comparison of 3 Year Cumulative Total Return

Assumes Initial Investment of $100

December 2019**

* Peer group data does not include Sparton Corporation, which was acquired by Cerberus Capital Management, L.P. on March 4, 2019.    

** Data for each year depicted in the graph above is as of December 31 of each year.

As will be discussed in the proxy statement for the 2021 Annual Meeting, the Compensation Committee made certain changes to the peer group used to determine 2020 compensation for the named executive officers.

In addition, WTW’s compensation assessment compared the Company’s executive compensation to published survey compensation data for general industry and manufacturing industry companies with annual revenues of between $500 million to $1 billion, based on the advice of WTW that such compensation survey data would provide a reasonable basis for benchmarking the Company’s executive compensation. The compensation survey data was gathered from the 2018 Top Management Compensation Survey – U.S., Durable Goods Manufacturing or All Industry data cuts, published by Willis Towers Watson Data Services, and the 2017 Executive Benchmark Database, published by William M. Mercer. Aggregate compensation data from the surveys was provided to the Compensation Committee.

With respect to the Chief Executive Officer, the Chief Financial Officer, the General Counsel, and the SVP of Operations, the Compensation Committee reviewed and continues to rely upon both the peer group data and the published survey compensation data. With respect to the other executive officer, the number of proxy disclosed representative positions in the peer group data was considered insufficient and the Compensation Committee relied (and continues to rely) to a greater extent on the published survey compensation data included in WTW’s compensation assessment. In reviewing the peer group data and the published survey compensation data, the Compensation Committee evaluated the relative percentile ranking of the Chief Executive Officer and the other executive officers with respect to salary, total cash compensation, and total direct compensation. In connection with this evaluation, the Compensation Committee determined the appropriate levels of salary, total cash compensation and total compensation with reference to the 25th percentile of the peer group data (which had annual revenues of approximately $771 million) and the 50th percentile for the published survey compensation data (which had annual revenues of generally falling between $500 million and $1 billion). The Compensation Committee also considers each named executive officer’s scope of responsibility, years of experience, demonstrated performance and marketability, and impact level within the Company relative to other executives in making compensation decisions.

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Ducommun Incorporated 2020 Proxy Statement

Severance and Change in Control Agreements and Practices

The Company has entered into a key executive severance agreement with each of its executive officers providing for cash severance and double trigger equity acceleration upon a qualifying termination in connection with a change in control or limited cash severance upon a qualifying termination outside the context of a change in control. Key executive severance agreements are considered to be a necessary part of the process in the recruitment and retention of qualified executives. The Company does not provide gross-ups for taxes under the key executive severance agreements. The key executive severance agreements are used by the Company to allow its executives to focus on shareholder interests in considering strategic alternatives and to provide income protection for executives in the event of an involuntary termination of employment. Please refer to the section entitled “Potential Payments Upon Termination or Change of Control” below for further discussion of these agreements.

Clawback Policy

The Company has a clawback policy that applies in the event that the Board of Directors determines there has been a restatement due to material noncompliance with financial reporting requirements under U.S. generally accepted accounting principles or SEC rules. If the Board of Directors determines that there has been such a restatement, the Board of Directors has the right, for the benefit of the Company, to recover all incentive payments and all vested performance-based equity awards made to executive officers who are found personally responsible for the material restatement, to the extent that such payments and vested awards were increased due to the inaccurate financial statements. The clawback policy applies to incentive payments and vested performance-based equity awards made to executive officers after October 28, 2016 during the three full years prior to the filing of the report with the SEC announcing the restatement.

Securities Trading Policy: Prohibition on Pledging and Hedging

To ensure alignment of the interests of our directors, officers, and employees, including our named executive officers, with our shareholders, the Company’s Insider Trading Policy does not permit any director, officer, or employee of the Company, including any of the Company’s executive officers, to either (1) margin Company securities or pledge Company securities as a loan or (2) engage in any hedging transactions involving Company securities. Hedging includes the purchase or sale of financial instruments that are designed to hedge or offset any decrease in the market value of securities, including prepaid variable forward contracts, equity swaps, collars and exchange funds.

Other Compensation

Other compensation and personal benefits paid or made available to the named executive officers are not material. The Company provides an automobile allowance to the named executive officers, as well as medical, dental, life and other insurance benefits. In addition, 401(k) matching contributions are provided to the named executive officers on a non-discriminatory basis with other employees of the Company.

Executive Officer Stock Ownership Policy

The Board of Directors has adopted a stock ownership policy covering certain executive officers of the Company. Under the policy, certain executive officers must acquire and hold shares of the Company’s stock equal in value to a multiple of their annual salary as follows:

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