DEF 14A of Deluxe Corp
Filed Mar 11, 2024 · FY20230000027996-24-000086
Our Director Nominees
Our Director Nominees
Our Director Nominees
| Name | Age | Director since | Independent | Other current public company boards | | William C. Cobb | 67 | 2020 | Yes | 1 | | Paul R. Garcia | 71 | 2020 | Yes | 2 | | Cheryl E. Mayberry McKissack | 68 | 2000 | Yes | 0 | | Barry C. McCarthy | 60 | 2018 | No | 0 | | Thomas J. Reddin | 63 | 2014 | Yes | 2 | | Martyn R. Redgrave | 71 | 2001 | Yes | 0 | | John L. Stauch | 59 | 2016 | Yes | 1 | | Telisa L. Yancy | 57 | 2021 | Yes | 0 |
ITEM 1: ELECTION OF DIRECTORS
ITEM 1: ELECTION OF DIRECTORS
Nominees for Election
Nominees for Election There are currently nine individuals serving on our board. Each director's term expires as of the date of the annual meeting of shareholders. Don McGrath is not standing for re-election at the meeting, as our Corporate Governance Guidelines provide that non-employee directors generally should not be nominated for re-election after turning 75. The board recommends that the eight individuals presented on the following pages, all of whom are current directors, be elected to serve on the board until the 2025 annual meeting of shareholders. With the exception of Mr. McCarthy, who serves as our President and CEO and therefore is not independent, all nominees have been determined by the board to meet the independence standards of the New York Stock Exchange (NYSE) (see the discussion of Director Independence in the "Board Structure and Governance" section of this Proxy Statement). Each of the individuals listed below has consented to being named as a nominee in this Proxy Statement and has indicated a willingness to serve if elected. However, if any nominee becomes unable to serve before the election, the shares represented by proxies may be voted for a substitute designated by the board, unless a contrary instruction is indicated in the proxy card. Pursuant to our Corporate Governance Guidelines, at any shareholder meeting at which directors are subject to an uncontested election (i.e., an election where the only nominees are those recommended by the board), any nominee for director who receives a greater number of "WITHHOLD" votes from his or her election than "FOR" votes shall submit to the board, within five (5) business days of certification of the shareholder vote by the Inspector of Elections, a written offer to resign from the board. The Corporate Governance Committee shall promptly consider the resignation offer and recommend to the full board whether to accept it. The board will act on the Corporate Governance Committee’s recommendation within 90 days following the certification of the shareholder vote by the Inspector of Elections, which action may include, without limitation, acceptance of the offer of resignation, adoption of measures intended to address the perceived issues underlying the vote, or rejection of the resignation offer. Thereafter, the board will disclose its decision whether to accept the director’s resignation offer and the reasons for rejecting the offer, if applicable, in a Current Report on Form 8-K to be filed with the United States Securities and Exchange Commission (SEC) within four business days after the board’s determination. The board recommends that you vote "FOR" the election of each of the following nominees:
Nominees for Election
| William C. Cobb Chairman and CEO, Frontdoor, Inc. Director since: 2020 Age: 67 Independent: Yes | Background •Chief Executive Officer (since June 2022), director, and Chairman (since 2018) of Frontdoor, Inc., a provider of home service plans (Nasdaq: FTDR) •Served as President and Chief Executive Officer of H&R Block, Inc. from 2011 to 2017, where he was also a director •Held various leadership positions at eBay Inc., including President, eBay North America Marketplaces •Served in various senior sales and marketing positions with PepsiCo, Inc. Qualifications •Extensive background in marketing, technology, and digital commerce, which will assist us as we continue to transform our company, particularly in the areas of Data Solutions •As a public-company CEO at Frontdoor and H&R Block, he has dealt with a broad range of human capital management, environmental, and social issues, and assumed responsibility for enterprise risk management •His history of service on public company boards, as well as his executive leadership roles with Frontdoor, H&R Block, eBay and PepsiCo, make him uniquely qualified to advise on an array of matters facing public companies Committees: Audit and Finance; Corporate Governance |
Nominees for Election
| Paul R. Garcia Retired Chairman and CEO, Global Payments Inc. Director since: 2020 Age: 71 Independent: Yes | Background •Retired Chairman and Chief Executive Officer of Global Payments Inc., a publicly traded, leading provider of credit card processing, check authorization, and other electronic payment processing services, from 2001 to 2014 •Former President and CEO of NaBanco, an electronic credit card processor Qualifications •As a pioneer in the financial services industry, he has extensive experience in the payments space, which is one of our major strategic areas of focus •Currently serves on the boards of directors of Repay Holdings Corporation (Nasdaq: RPAY) and United Health Group (NYSE: UNH) Committees: Compensation and Talent (Chair); Audit and Finance |
Nominees for Election
| Cheryl E. Mayberry McKissack CEO of Nia Enterprises LLC Director since: 2000 Independent Chair since: 2019 Age: 68 Independent: Yes | Background •Independent Chair of Deluxe since 2019 •Chief Executive Officer (2000-present) of Nia Enterprises LLC, a Chicago-based marketing, entrepreneurial business, and digital consulting firm, and President, Board Member, and co-owner of privately held Black Opal Inc., a cosmetics and skin care firm consisting of two brands, Black Opal and Fashion Fair cosmetics, co-owned under Nia Enterprises LLC •CEO of Ebony Media Operations LLC (May 2016-March 2017), a print and media company •COO of Johnson Publishing Company (JPC) and President of its affiliate, JPC Digital (2013-2016) •Provided project support to JPC under a consulting relationship between Nia Enterprises and JPC prior to her appointment as COO and President of JPC Digital, including launching the ebony.com website and several other transformational digital and business projects •Served as the Worldwide Senior Vice President and General Manager for Open Port Technology and was Vice President for the Americas and a founding member of the Network Systems Division for 3Com (formerly U.S. Robotics) Qualifications •Regarded as an expert on entrepreneurship and the art of selling; author of the book, The Entrepreneurial Sell, published in 2018 •Associate Adjunct Professor of Entrepreneurship at the Kellogg School of Business, Northwestern University, where she lectured for 10 years (2005-2015) •As a successful entrepreneur and digital technology executive, brings a unique perspective to the board •Given that two of our segments are Data Solutions and Promotional Solutions, her experience in SaaS marketing and new media solutions is a valuable complement to the skills she brings to the board as a small business owner and former executive of several technology and new business ventures Committees: Compensation and Talent; Corporate Governance |
Nominees for Election
| Barry C. McCarthy President and CEO of Deluxe Corporation Director since: 2018 Age: 60 Independent: No | Background •President and CEO of Deluxe Corporation since 2018 •Served in various senior executive positions during the previous 14 years, most recently, from 2014 to 2018, as Executive Vice President and Head of Network and Security Solutions, a $1.5 billion publicly reported segment of First Data Corporation, a financial services company since acquired by Fiserv Inc. Qualifications •Sole member of our management represented on the board •Leads the development and execution of our strategies by drawing on his strong background in product development, sales, payments, marketing, and technology innovation •Significant experience leading corporate transformations •Accomplished executive and financial technology leader with an extensive track record of developing and building innovative, tech-enabled solutions Committees: None |
Nominees for Election
| Thomas J. Reddin Managing Partner of Red Dog Ventures LLC Director since: 2014 Age: 63 Independent: Yes | Background •Principal of Red Dog Ventures LLC, a venture capital and advisory firm for early stage digital companies, which he founded in 2007, and of which he has been the Managing Partner since 2009 •Served as the Chief Executive Officer (2008-2009) of Richard Petty Motorsports •Chief Marketing Officer (1999-2000); President and Chief Operating Officer (2000-2005); and Chief Executive Officer (2005-2007) of LendingTree.com, an online lending exchange Qualifications •17 years of experience in the consumer goods industry, including 12 years at Kraft General Foods and five years at Coca-Cola USA, where he managed the Coca-Cola® brand as Vice President of Consumer Marketing and played a lead role in the introduction of bottled water in the U.S. market •Brings a wealth of experience in data and data analytics, cyber security, digital marketing, e-commerce, and product management, all of which are central to our growth strategy •His certification in Cybersecurity Risk Oversight, which he received from the Software Engineering Institute at Carnegie Mellon University and the National Association of Corporate Directors, and his prior position as the CEO of LendingTree.com, give him a valuable perspective in assisting with the board's oversight of our information security program •His extensive leadership experience, including serving on multiple public company boards and audit, compensation, nominating, and governance committees, further qualify him for his role as a member of the board •Currently serves on the boards of directors of Asbury Automotive Group, Inc. (NYSE: ABG), where he serves as Chair of the Board, Tanger Factory Outlet Centers, Inc. (NYSE: SKT), where he serves as Chair of the Compensation Committee, and previously served on the boards of Premier Farnell PLC, Valassis Communications, Inc. and R.H. Donnelley Corporation Committees: Compensation and Talent; Corporate Governance |
Nominees for Election
| Martyn R. Redgrave Managing Partner and CEO of Agate Creek Partners LLC Director since: 2001 Age: 71 Independent: Yes | Background •Managing Partner and CEO of Agate Creek Partners LLC, a professional governance and consulting services company he cofounded in 2014 •Executive Vice President and Chief Administration Officer (2005-2012), Chief Financial Officer (2006-2007), and Senior Advisor (2012-2014) to L Brands, Inc. (formerly known as Limited Brands, Inc.), one of the world’s leading personal care, beauty, intimate apparel and specialty apparel retailers Qualifications •Served as Independent Chairman of our board (2012-2019) •In addition to bringing extensive operations management experience and financial and accounting acumen to the board, his background in overseeing the reporting systems and controls of complex business operations is particularly relevant to the work of our board •Throughout his career, has had direct involvement with matters similar to those encountered by our company, such as operations management, financial reporting and controls, enterprise risk management, information technology systems, data management and protection, and access to capital markets •Supervised CIOs and CISOs in large public and private companies as they dealt with various cybersecurity matters. Also has experience supervising legal, risk management, and compliance functions in connection with global risk management, supply chain, and ESG matters •His background also includes mergers and acquisitions and financial analysis, continuing areas of importance for us •Currently serves on the board of directors of Igniting Consumer Growth Acquisition Company Limited, a special purpose acquisition company focused on consumer facing companies •Served on the boards of directors of Francesca's Holdings Corporation (2015-2021) and Popeye's Louisiana Kitchen, Inc. (2013-2017, when the company was sold) Committees: Audit and Finance; Corporate Governance |
Nominees for Election
| John L. Stauch President and CEO of Pentair plc Director since: 2016 Age: 59 Independent: Yes | Background •Since 2018, President and Chief Executive Officer and a director of Pentair plc (NYSE: PNR), a leading water treatment company; served as Pentair's Executive Vice President and Chief Financial Officer from 2007-2018 •Chief Financial Officer of the Automation and Control Systems unit (2005-2007) of Honeywell International, Inc. •Served as Chief Financial Officer and Information Technology Director of PerkinElmer Optoelectronics and various executive, investor relations and managerial finance positions within Honeywell International, Inc. and its predecessor AlliedSignal, Inc. (1994-2005) Qualifications •His role as President and CEO of Pentair plc, and his prior service as CFO of Pentair for 11 years, renders him a financial expert, and he has extensive direct experience with many aspects of public company strategy and operations Committees: Audit and Finance (Chair); Compensation and Talent |
Nominees for Election
| Telisa L. Yancy Group President, American Family Insurance Director since: 2021 Age: 57 Independent: Yes | Background •Group President of American Family Insurance, a property/casualty insurance group, since January 2023 •Previous positions at American Family include serving as President, Direct to Consumer from 2021 to 2023, Chief Operating Officer Agency Business from 2019 to 2021, and Chief Marketing Officer from 2015 to 2019 •Held general management, sales, marketing, and operations leadership positions in a variety of industries Qualifications •Her background in understanding customers, products, and digital ecosystems enables her to provide guidance as we continue to transform our business and encourage cross-selling of products and services across our segments •Her operations leadership experience allows her to advise on customer service, operations, marketing, technology, and sales initiatives •Currently serves as a director of American Family Insurance and of the American Property and Casualty Insurance Association Committees: Audit and Finance; Compensation and Talent |
Non-Employee Director Compensation
Non-Employee Director Compensation The general policy of the board is that compensation for independent directors should be a mix of cash and equity, with the majority of compensation provided in the form of equity. After consultation with the Compensation Committee, the Corporate Governance Committee, consisting solely of independent directors, has the primary responsibility for reviewing director compensation and considering any changes in how we compensate our independent directors. The board reviews the committee's recommendations and determines the amount of director compensation. FW Cook and the Compensation group in the Human Resources department support the committee in recommending director compensation and creating director compensation programs. In addition, the committee may engage outside advisors, experts, and others for assistance. The director peer group is listed on page 31, and consisted of companies with some similar characteristics to our company, as described in detail below under "Executive Compensation Discussion and Analysis; Benchmarking Process." The committee generally targets cash and equity compensation at the median of the peer group. The Corporate Governance Committee reviews director compensation on an annual basis, taking into account factors such as workload and market data. We did not make any changes to director compensation in 2023, other than as a result of combining the Audit and Finance committees. The following table sets forth our 2023 fee structure for our directors, with the fees paid on a quarterly basis.
Non-Employee Director Compensation
| Board and Committee Retainers | Annual Fee ($) | | Board Retainer | 85,000 | | Retainers in Addition to Board Retainer: | | | Independent Chair | 110,000 | | Audit and Finance Committee Chair1 | 28,000 | | Compensation and Talent Committee Chair | 20,000 | | Corporate Governance Committee Chair | 15,000 | | Non-chair Audit and Finance Committee Member1 | 15,000 | | Non-chair Compensation and Talent Committee Member | 10,000 | | Non-chair Corporate Governance Committee Member | 10,000 |
Non-Employee Director Compensation
(1)The Audit and Finance committees were combined in October 2023. Through September 2023, the Finance Committee chair was paid a separate retainer equating to an annual fee of $15,000, and each non-chair Finance Committee member was paid a separate retainer equating to an annual fee of $10,000. Non-employee directors also receive $1,500 for each approved company site visit and director education program attended, up to an aggregate of five per year. Directors may receive additional compensation for the performance of duties assigned by the board or its committees that are considered beyond the scope of the ordinary responsibilities of directors or committee members. No such additional compensation was paid in 2023. Our shareholder-approved 2022 Stock Incentive Plan (Stock Plan) allows our non-employee directors to increase their ownership of our common stock and thereby further align their interests with those of other shareholders by electing to receive, in lieu of cash fees, shares of our common stock having an equal value, based on the closing price of our stock on the NYSE as of the quarterly payment date. The shares of stock are issued as of the quarterly payment date or, at the option of the director, credited to the director in the form of deferred RSUs. Directors may also elect to defer receipt of equity grants made to them in connection with their annual compensation. Each RSU entitles the holder to receive dividend equivalent payments equal to the dividend payment on one share of common stock. RSUs issued pursuant to this plan also convert into shares of common stock and become immediately issuable in connection with certain defined changes of control. Under the director deferral terms of the Stock Plan, non-employee directors also are eligible to receive other equity-based awards to further align their interests with shareholders and assist them in achieving and maintaining their established share ownership targets. Non-employee directors also have the opportunity to defer any equity grant awarded to them under terms similar to those described above for deferral of cash fees. Any stock options granted to non-employee directors must have an exercise price equal to the fair market value of our common stock on the date of grant. Non-employee directors did not receive any option grants in 2023, but each non-employee director re-elected to the board at last year's annual meeting received a grant of RSUs on April 26, 2023, with a grant date fair value of $149,997, which vest on the date of our 2024 annual shareholder meeting, or April 25, 2024, so long as the director's service has not ended. Each RSU entitles the holder to accrue dividend equivalent payments, provided that the dividend equivalent payments are held by us until the restricted stock unit vests, at which point they are paid to the holder. The RSUs would vest immediately upon a change of control, or upon the director's termination of service due to death, disability, or retirement in accordance with our Corporate Governance Guidelines. Equity grants to directors are recommended by the Corporate Governance Committee, in consultation with the Compensation and Talent Committee, and are approved by the board. The following table summarizes the compensation earned by each non-employee director in 2023.
NON-EMPLOYEE DIRECTOR COMPENSATION 2023
NON-EMPLOYEE DIRECTOR COMPENSATION 2023
NON-EMPLOYEE DIRECTOR COMPENSATION 2023
| Name | Fees Earned or Paid in Cash 1 ($) | Stock Awards 2 ($) | Total ($) | | William C. Cobb | 113,750 | 149,997 | 263,747 | | Paul R. Garcia | 116,250 | 149,997 | 266,247 | | Cheryl E. Mayberry McKissack | 215,000 | 149,997 | 364,997 | | Don J. McGrath | 115,000 | 149,997 | 264,997 | | Thomas J. Reddin | 105,000 | 149,997 | 254,997 | | Martyn R. Redgrave | 107,750 | 149,997 | 257,747 | | John L. Stauch | 123,000 | 149,997 | 272,997 | | Telisa L. Yancy | 110,000 | 149,997 | 259,997 |
NON-EMPLOYEE DIRECTOR COMPENSATION 2023
(1)Directors may elect to receive their fees in the form of stock, including the right to defer such stock into RSUs. Any stock or deferred RSUs issued under a deferral election are equal in value to the cash fees foregone by the director. As a result, amounts reflected are the total fees earned by the directors, including amounts elected to be received in the form of stock or RSUs. In 2023, Mr. Stauch and Ms. Yancy elected to receive their compensation in the form of stock. (2)Amounts in this column reflect the aggregate grant date fair value of stock awards granted during the fiscal year ended December 31, 2023, other than those granted in lieu of retainer fees, which are included in the first column, and computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718. The grant date fair value is based on the closing price of our common stock on the NYSE on the grant date. All directors received 10,402 RSUs on April 26, 2023, when the closing price of our common stock was $14.42 The RSUs vest on April 25, 2024, the date of our annual shareholder meeting, and these were the only unvested RSUs outstanding for our directors as of December 31, 2023.
CEO Realizable Pay Versus Target Pay 2021-2023
CEO Realizable Pay Versus Target Pay 2021-2023 In keeping with our pay for performance philosophy, the Committee designed our compensation program to ensure that the realized value our executives receive is closely aligned with company performance. Since 2021, with strengthening operational performance, our executives have led a successful business transformation, including delivering on sales-driven growth in each of the prior three years. At the same time, the actual pay our executives realized has been less than target. For example, the PSU payout for the performance cycle ending in 2023 was below target. As a result, during the past three years, our CEO’s realizable pay was materially lower than the target pay opportunity, as described in the following charts: The following assumptions and calculations were used for purposes of the charts above: •Average 2021-2023 market capitalization was calculated as a simple average of market values as of December 31, 2021, 2022, and 2023, respectively (i.e., $1.4, $0.7, and $0.9 billion, respectively). •Cumulative target pay for 2021-2023 includes base salary paid during each of the three years, target AIP pay for each year, the grant date fair values of long-term equity incentives awarded, and the target value of the 2021 Retention and Incentive Program award. Equity-based awards are valued as determined under ASC 718. •Cumulative realizable pay for 2021-2023 includes base salary paid during each of the three years, actual AIP pay received for each year, the market value of shares released for long-term equity incentive awards, the intrinsic value of long-term equity award shares outstanding as of December 31, 2023, and the payment value of the performance units actually earned under the 2021 Retention and Incentive Program. This calculation uses the $21.45 per share closing stock price as of December 31, 2023, and assumes that unvested PSUs are earned at target.
Fiscal 2023 Incentive Programs
Fiscal 2023 Incentive Programs As evidenced by the charts above, we believe our incentive programs reward performance and align the interests of management with those of our shareholders. In 2023, we again utilized both short- and long-term incentives, via our AIP and Stock Plan, in designing our compensation program. In structuring our incentive programs, the Committee also considers the general economic outlook, individual performance and responsibilities, experience, and competitive data. The performance metrics for the 2023 AIP and our long-term equity incentive program are summarized in the table below.
Fiscal 2023 Incentive Programs
| Incentive Program | Objective | Award Type | Performance Metrics and Weightings | | AIP | Encourages and rewards valuable contributions to our annual financial and operational performance objectives | 100% cash, with the option to defer into RSUs, 50% of which are matched by the company, with a two-year cliff vesting schedule | 30% enterprise and/or business unit adjusted revenue1 | | | | | 30% enterprise adjusted EBITDA1 | | | | | 20% enterprise adjusted earnings per share1 | | | | | 20% Strategic Initiatives | | Long-Term Equity Incentives | Helps retain talent and drives stock performance for shareholders; rewards stock performance on both an absolute basis and relative to our Peer Group | Combination at target of 50% RSUs, and 50% PSUs, with PSU payouts determined based on achievement of defined performance metrics, subject to a relative TSR modifier | 50% of PSUs - three-year cumulative revenue target using a year-over-year fixed growth rate | | | | | 50% of PSUs - three-year cumulative free cash flow target using a year-over-year fixed growth rate | | | | | Final PSU results are subject to a relative TSR modifier based on relative TSR ranking as compared to an index2 |
Fiscal 2023 Incentive Programs
(1)Specific fixed growth rates are assigned to the revenue and free cash flow plan measures. Enterprise and/or business unit adjusted revenue, and enterprise adjusted EBITDA are non-GAAP financial measures. For a reconciliation of each non-GAAP financial measure to its most directly comparable GAAP counterpart, see Annex A. (2)TSR index consists of publicly-traded companies on the Russell 3000 Index in the Commercial & Professional Services (2020) and Software & Services (4510) GICS industries at the start of the performance period. At the conclusion of the performance period, once a payout result has been determined the payout may then be increased, decreased, or remain unchanged based on relative performance within the index. The payout modification range is -25% to +25%.
Compensation Philosophy
| | | | Performance Based | | | | | Named Executive Officer | Base Salary (cash) | RSUs (equity) | AIP (cash) | PSUs (equity) | Total Performance Based | Total Equity Based | | CEO | 12.6% | 36.2% | 15.0% | 36.2% | 51.2% | 72.4% | | All Other NEOs | 28.7% | 24.9% | 21.5% | 24.9% | 46.4% | 49.8% |
President and CEO Compensation and Other NEO Compensation
| Element | Objectives | Key Features | | Base Salary | •Provides competitive pay to attract and retain experienced and successful executives with the requisite experience to drive significant growth | •Base salary is targeted at a blend of median comparison Peer Group data and size-adjusted median general industry survey data | | AIP | •Encourages and rewards valuable contributions to our annual financial and operational performance objectives •Rewards high performance and achievement of annual corporate goals | •Annual incentive is targeted at a blend of median comparison Peer Group data and size-adjusted median general industry survey data •Awarded based on the following goals: 30% enterprise/business unit adjusted revenue, 30% enterprise adjusted EBITDA, 20% enterprise adjusted earnings per share, and 20% strategic initiatives which are defined on page 33 •Annual incentive award targets are based on position and range from 75% to 120% of actual base salary and are capped at 200% of target value •For 2023, target opportunity remained constant for all NEOs, and awards were paid out at 108.5% of target for enterprise plan participants | | Long-Term Equity Incentives | •Helps retain talent and drives stock performance for shareholders; rewards stock performance on both an absolute basis and relative to peers •Target pay mix includes 50% time-based vesting RSUs and 50% PSUs | •Long term incentives are targeted at a blend of median comparison Peer Group data and size-adjusted median general industry survey data •RSUs accrue dividend equivalents that are only paid out upon vesting •Metrics for the PSUs are weighted equally between three-year cumulative revenue and three-year cumulative free cash flow targets using a year-over-year fixed growth rate specific to each metric, with final payout results for both metrics subject to a relative TSR modifier •2023 awards were targeted at or near the market median and were made considering individual performance and our Peer Group and market data, as well as our President and CEO's recommendations for the other NEOs | | Retirement Benefits | •Directly rewards continued service and indirectly rewards individual performance | •Retirement benefits include participation in a 401(k) savings plan and an optional non-qualified compensation deferral plan |
President and CEO Compensation and Other NEO Compensation
For a discussion of payments and benefits that our NEOs would receive under various termination scenarios, please refer to the "Severance and Change of Control Arrangements" section in this Proxy Statement.
Benchmarking Process
Benchmarking Process Based on FW Cook's recommendation, the Committee used two sources of data to benchmark compensation: (1) data from the publicly-available proxy statements of a peer group of companies (Peer Group) which the Committee believes, after consultation with FW Cook, are of comparable size range in various industries that share common business traits with us; and (2) market data drawn from published, broad-based, third-party general industry survey data from Aon Radford and Willis Towers Watson General Industry Survey. Data selected from the surveys is scoped based on our revenue.
Our Company's Peer Group
Our Company's Peer Group The Committee used Peer Group data to assist in determining the compensation of NEOs to the extent those NEO positions are comparable to the named executive officer positions at other companies within our Peer Group. For purposes of compensation decisions made in 2023, our Peer Group consisted of the following companies:
Our Company's Peer Group
| 2023 Peer Group | | | | | | ACCO Brands | CBIZ | Equifax | Insperity | Pitney Bowes | | Black Knight | Cimpress | Evertec | Iron Mountain | Quad Graphics | | Bread Financial | Conduent | EVO Payments | Jack Henry & Associates | Shopify | | Broadridge Financial | Dun & Bradstreet | Fair Isaac | Paychex | WEX |
Our Company's Peer Group
The Committee selected this Peer Group after consultation with FW Cook. In selecting companies for our Peer Group, the Committee considered various criteria, including, but not limited to, range of revenue size and market capitalization, industry relevance, business cycle and financial performance. Because there were no publicly held, stand-alone direct U.S. competitors across all of our businesses at the time of the survey, the Committee focused on similarly complex companies having similar customers, or who provide technology-based business solutions. Based on these considerations, and in an effort to ensure that all of our strategic focus areas were covered by our Peer Group, in April 2023, the Committee removed two companies (Black Knight and EVO Payments) and replaced them with two new companies (Brady Corp. and Matthews International) that the Committee felt are more closely aligned with our business areas. The following table lists the companies that were in the updated Peer Group when the Committee set 2024 compensation levels for our executive officers.
Our Company's Peer Group
| 2024 Peer Group | | | | | | ACCO Brands | CBIZ | Equifax | Iron Mountain | Pitney Bowes | | Brady Corp. | Cimpress | Evertec | Jack Henry & Associates | Quad Graphics | | Bread Financial | Conduent | Fair Isaac | Matthews International | Shopify | | Broadridge Financial | Dun & Bradstreet | Insperity | Paychex | WEX |
Annual Cash Incentive Compensation
Annual Cash Incentive Compensation
AIP Design
AIP Design Our AIP is designed to reward achievement of specified financial performance goals that we consider to be important contributors to shareholder value. At or prior to the beginning of each year, we typically set goals consistent with our annual operating plan (AOP). For 2023, the target pay opportunity was stated as a percent of base salary and, for the NEOs, was based on the market median of target annual incentive awards for comparable positions published in broad-based surveys and for the Peer Group. Deviations from the median can be the result of experience in the position, individual performance, or the individual's scope of responsibilities. Annual incentive awards earned may exceed the target amount if performance goals are exceeded and may be less than the target amount if the performance goals are not fully attained. The Committee annually reviews the performance metrics and their relative weighting. In all cases, the Committee retains the right to exercise its discretion in making a payout due to extraordinary circumstances. No such discretion was used in the 2023 AIP payout decisions. In 2023, the AIP design for the enterprise plan, in which all of our NEOs other than Mr. Reed and Ms. Engelhardt participate, consisted of four components. The first three components were based on our performance against the enterprise adjusted revenue goal (30%), enterprise adjusted EBITDA goal (30%), and enterprise adjusted earnings per share goal (20%). The fourth component consisted of a group of key initiatives (Strategic Initiatives) (20%) developed to assess our progress in transforming our business, consistent with our strategic growth initiatives. For Mr. Reed and Ms. Engelhardt, who are participants in a business unit plan, the adjusted revenue goal is split into two components — enterprise adjusted revenue (15%) and the respective business segment adjusted revenue (15%) — with all other metrics relating to EBITDA, earnings per share, and Strategic Initiatives weighted the same as those in the enterprise plan. Awards earned under the AIP are paid in cash. However, each of our AIP participants may also voluntarily choose to receive up to 100% of the AIP payout in deferred RSUs, in which case we provide a 50% match on the deferred RSUs. We refer to these RSUs collectively as "bonus deferred RSUs," which vest on the second anniversary of the date of the grant. Due to tax laws, decisions to defer an annual incentive award must be made by December 31st of the preceding year. No NEOs elected to receive bonus deferred RSUs for the 2023 plan year. After a review of market practices, it was determined that this deferral program would no longer be offered, and it was discontinued at the conclusion of 2023.
Annual Operating Plan
Annual Operating Plan The Committee established AIP performance goals based on our AOP. We set challenging goals that would be attainable only as a result of exceptional performance in order to drive the achievement of our short- and long-term objectives. The following table illustrates the 2023 threshold and maximum performance levels for the AIP compared to the AOP, as well as the corresponding payout percentages, versus the target award opportunity, at each level of performance. Actual AOP outcomes against targets are set forth in the "2023 Outcomes Against Goals" section below.
Annual Operating Plan
| Performance Level | Enterprise Adjusted EBITDA | Enterprise Adjusted EPS | Enterprise Adjusted Revenue | Business Unit Adjusted Revenue | Payout (% of target) | | Maximum | ≥ 120.0% of AOP | ≥ 125.0% of AOP | ≥ 110.0% of AOP | ≥ 110.0% of AOP | 200% | | Target | AOP | AOP | AOP | AOP | 100% | | Threshold | 94.7% of AOP | 89.1% of AOP | 92.5% of AOP | 92.5% of AOP | 50% | | Below Threshold | — | — | — | — | 0% |
2023 Outcomes Against Goals
| Factors1 (Revenue and EBITDA Dollars in Millions) | Target ($) | Actual ($) | Weighting (%) | Actual Performance (% of target) | Payout2 (% of target) | | Enterprise Adjusted Revenue | 2,207 | 2,192 | 15% for Mr. Reed and Ms. Engelhardt; 30% for other NEOs | 99.3% | 95.6% | | Payments Adjusted Revenue3 | 719 | 691 | 15% | 96.1% | 74.0% | | Checks Adjusted Revenue3 | 705 | 721 | 15% | 102.3% | 122.9% | | Enterprise Adjusted EBITDA | 439 | 455 | 30% | 103.6% | 117.8% | | Enterprise Adjusted Earnings Per Share | $3.76 | $3.97 | 20% | 105.6% | 122.2% |
2023 Annual Incentive Plan Payout
2023 Annual Incentive Plan Payout Based on the outcomes against goals, the Committee recommended, and our board approved, a blended AIP payout of 108.5% for Messrs. McCarthy, Zint, and Jeyaprakasam, 109.3% for Ms. Engelhardt and 105.2% for Mr. Reed, as set forth in the table below.
2023 Annual Incentive Plan Payout
| Name | 2023 Base Salary ($) | Target as a % of Base Salary | Award at Target ($) | Payout as a % of Target | Actual Payout ($) | | Barry C. McCarthy | 943,750 | 120% | 1,132,500 | 108.5% | 1,228,763 | | William C. Zint | 475,000 | 75% | 356,250 | 108.5% | 386,531 | | Tracey G. Engelhardt | 575,000 | 75% | 431,250 | 109.3% | 471,169 | | Michael A. Reed | 618,750 | 75% | 464,063 | 105.2% | 488,194 | | Yogaraj Jeyaprakasam | 556,250 | 75% | 417,188 | 108.5% | 452,649 |
2023 Annual Incentive Plan Payout
The amounts earned by all NEOs under the AIP for 2023 are included in the "Non-Equity Incentive Plan Compensation" column of the SCT appearing later in this Proxy Statement.
Long-Term Equity Incentive Compensation
Long-Term Equity Incentive Compensation
Overview
| Grant Type | Purpose | Weight | Performance Metrics | Vesting | | PSUs | Provide incentive to grow top line revenue and bottom line cash flow, while attaining a competitive total shareholder return over a three-year performance period | 50% | 50% of PSUs - three-year cumulative revenue target using a year-over-year fixed growth rate | three-year cliff | | | | | 50% of PSUs - three-year cumulative free cash flow target using a year-over-year fixed growth rate | | | | | | Final PSU results are subject to a relative TSR modifier based on relative TSR ranking as compared to an index | | | RSUs | Provide motivation and retentive value through three-year ratable vesting schedules | 50% | N/A | three-year ratable |
Overview
PSU performance is based on two equally weighted three-year cumulative metrics, revenue and free cash flow. A fixed growth rate target percent is applied to each of the two metrics. Results will be calculated by comparing the final three-year cumulative target to actual performance results over the same period, resulting in a percentage of target goal obtained. Upon completion of the performance period, final PSU payout results are then subject to a three-year relative TSR modifier, resulting from a formula that may increase or decrease final participant payouts by up to 25%. Payout modification is based on a relative TSR ranking within an index of publicly traded companies in the Russell 3000 (Commercial & Professional Services and Software Services GICS industries). Additionally, awards are subject to reasonable adjustments, including unknown or unanticipated items, whether favorable or unfavorable, to the calculation of the performance goals as determined by the Committee. Examples include, but are not limited to, acquisitions, partnerships, divestitures, changes in tax law, or other regulatory changes. Historically, if targets are attained, the PSUs have been converted to shares. However, the PSU award agreements allow our board discretion to pay out any earned amounts in cash or stock. For PSUs granted in 2023, the payout amount could vary from zero to 200% of the target award value, depending upon the performance level achieved for the three-year period ending December 31, 2025. No PSUs are paid out unless minimum performance thresholds are met for the three-year performance period. RSUs vest in equal one-third increments on each of the first three anniversaries of the grant date. These awards are intended to further align the interests of the recipients with those of our shareholders, while promoting executive retention. These awards accrue dividend equivalents that are only paid out upon vesting. For more information on the treatment of long-term equity incentive awards in the event of the holder's involuntary termination or a change of control, see "Severance and Change of Control Arrangements." All annual equity awards made to the NEOs and other recipients are targeted to be on the same annual grant date, except for awards made in conjunction with an individual's promotion or hire date, as required by board approval, or as necessary to facilitate retention of key employees.
2023 Long-Term Equity Incentive Awards
2023 Long-Term Equity Incentive Awards The following table details the target grant date fair value used by the Committee to determine the number of PSUs and RSUs awarded to the NEOs in 2023, which are disclosed in the "Grants of Plan-Based Awards" table on page 41. The actual value of equity awards that may be realized by the NEOs will depend on their continued service and our future stock price performance.
2023 Long-Term Equity Incentive Awards
| Name | Target Grant Value ($) | Target PSUs Granted (#) | RSUs Granted (#) | | Barry C. McCarthy | 5,500,000 | 140,665 | 140,665 | | William C. Zint | 850,000 | 21,739 | 21,739 | | Tracey G. Engelhardt | 1,200,000 | 30,691 | 30,691 | | Michael A. Reed | 1,000,000 | 25,575 | 25,575 | | Yogaraj Jayaprakasam | 900,000 | 23,018 | 23,018 |
2021-2023 PSU Award Payouts
2021-2023 PSU Award Payouts Our 2021-2023 PSU awards used equally weighted performance metrics of (i) FY 2023 total revenue (FY 2023 Total Revenue for 2021-2023 PSUs), and (ii) three-year TSR as compared to a peer group, as represented in the following charts.
2021-2023 PSU Award Payouts
| FY 2023 Total Revenue | | | | | | Threshold | Target | Maximum | | FY 2023 Total Revenue for 2021-2023 PSUs ($ in billions) | $1.900 | $1.940 | $2.000 | | Payout | 50 % | 100% | 200% |
2021-2023 PSU Award Payouts
| 3-Year TSR (through 12/31/2023) | | | | | | Threshold | Target | Maximum | | Relative TSR Ranking in Peer Group | 25% Peer Group percentile | 50% Peer Group percentile | 75% Peer Group percentile | | Payout | 40 % | 100% | 200% |
2021-2023 PSU Award Payouts
After the conclusion of FY 2023, we calculated the blended performance payout for the 2021-2023 PSU awards at 76.85%. The actual outcome for FY 2023 Total Revenue for 2021-2023 PSUs was $1.918 billion, compared to a target of $1.940 billion, resulting in a payout of 72%. FY 2023 Total Revenue for 2021-2023 PSUs is a non-GAAP financial measure; for a reconciliation of this non-GAAP measure to its most directly comparable GAAP counterpart, see Annex A. The payout for the three-year relative TSR metric was 81.7%. Actual performance was in the 42nd percentile, based on the company's TSR performance compared to that within an index of publicly traded companies in the Russell 3000 (Commercial & Professional Services and Software Services GICS industries), as of the beginning of the performance period.
Compensation Consultant Services and Independence
Compensation Consultant Services and Independence The Committee has the authority to engage independent advisors to assist it in fulfilling its responsibilities. The Committee has retained FW Cook, a national executive compensation consulting firm, to provide advice with respect to compensation for our NEOs and other officers. FW Cook performs services solely on behalf of the Committee and does not provide any other services to us. Management has no separate relationship with FW Cook. Pursuant to SEC rules, the Committee assessed the independence of FW Cook, including based on information provided by FW Cook, and concluded that no conflict of interest exists that would prevent FW Cook from independently representing the Committee. FW Cook performed the following services for the Committee in 2023: prepared and reviewed market benchmarking data for the President and CEO and other NEOs to assist the Committee in determining appropriate levels of compensation; reviewed the methodology on which compensation is based and designed; prepared and reviewed market data on the design and competitiveness of non-employee director compensation; informed the Committee of current updates regarding trends in executive and director compensation; reviewed tally sheets; assessed incentive risk and other proxy disclosures; and reviewed regulatory and governance guidance and pay-for-performance updates. FW Cook attended meetings upon invitation and participated in executive sessions without management present.
Management of Compensation-Related Risk
Management of Compensation-Related Risk In establishing and reviewing our executive compensation program, the Committee considers whether the program encourages unnecessary or excessive risk-taking and has concluded that it does not. We have a robust process of evaluating our compensation plans, programs and practices, which includes a risk analysis of myriad compensation design features. This evaluation occurs annually and is reviewed by FW Cook and provided to the Committee for review. The Committee reviewed our material compensation programs and noted numerous ways in which risk is effectively managed or mitigated. All such plans were deemed to have substantial risk mitigating features, including the following: a balanced mix of fixed and variable pay and short- and long-term incentives; use of multiple performance measures; a portfolio of long-term incentives, including time-based and performance-based measures; caps, discretion in payment, oversight by non-plan participants and significant stock ownership guidelines; pre-approval requirements for executive stock transactions; and the existence of policies prohibiting stock hedging and pledging and requiring executive incentive compensation recoupment in specified circumstances. The Committee also considers the effect compensation plans could have on risks to the company, including how compensation programs for employees generally impact individual behavior that could exacerbate these enterprise risks. Board and management processes are in place to oversee risk associated with compensation programs and practices, including, but not limited to, regular business reviews, alignment of compensation plan goals with our annual and long-term strategic goals and performance expectations, review of enterprise risk management by the board as part of the annual strategy and budget reviews, and other appropriate internal controls. The Committee concluded that our compensation plans, programs and policies, considered as a whole, including applicable risk-mitigation features, are not reasonably likely to have a material adverse effect on our results or operations.
Equity Award Grant Practices
Equity Award Grant Practices We have a formal equity grant practice in place to ensure that equity awards will be made on specified dates. The Committee reviews and approves annual equity-based awards, including those made to senior executives who are reporting officers under Section 16 of the Exchange Act, in the first calendar quarter of each year (near the time of their annual performance reviews). We generally schedule board and Committee meetings at least a year in advance and, as noted above, make annual equity awards to our NEOs around the same time every year. We do not time our equity awards to take advantage of market conditions or the release of earnings or other major announcements by us.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards1 ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation2 ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings3 ($) | All Other Compensation4 ($) | Total ($) | | Barry C. McCarthy President and Chief Executive Officer | 2023 | 943,750 | — | 5,329,797 | — | 1,228,763 | — | 34,409 | 7,536,719 | | | 2022 | 918,750 | — | 4,871,517 | — | 4,573,000 | — | 12,218 | 10,375,485 | | | 2021 | 900,000 | — | 5,239,543 | 1,200,004 | 470,880 | — | 12,518 | 7,822,945 | | William C. Zint Senior Vice President, Chief Financial Officer | 2023 | 475,000 | — | 823,691 | — | 386,531 | — | 19,415 | 1,704,637 | | | 2022 | 326,521 | — | 149,989 | — | 191,730 | — | — | 668,240 | | Tracey G. Engelhardt Senior Vice President, Division President, Check & Promotion | 2023 | 575,000 | — | 1,162,882 | — | 471,169 | 6,436 | 59,324 | 2,274,811 | | Michael A. Reed Senior Vice President, Division President, B2B Payments | 2023 | 618,750 | — | 969,037 | — | 488,194 | — | 12,748 | 2,088,729 | | | 2022 | 575,000 | — | 1,082,575 | — | 967,500 | — | — | 2,625,075 | | | 2021 | 496,250 | — | 624,739 | 165,001 | 192,545 | — | 300 | 1,478,835 | | Yogaraj Jeyaprakasam Senior Vice President, Chief Technology and Digital Officer | 2023 | 556,250 | — | 872,152 | — | 452,649 | 3,324 | 18,424 | 1,902,799 | | | 2022 | 333,333 | — | 1,993,141 | — | 450,000 | — | 115,788 | 2,892,262 |
SUMMARY COMPENSATION TABLE
(1)Amounts in this column reflect the aggregate grant date fair value computed in accordance with ASC Topic 718 for awards of stock during the fiscal years ended December 31, 2023, 2022 and 2021. Assumptions used in the calculation of these amounts are included in Note 11 to our Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. These amounts reflect an accounting expense and do not necessarily correspond to the actual value that may be realized by the NEOs. Stock awards included in this column are comprised of the following: •Annual long-term equity incentive compensation consisting of RSUs and PSUs received under the Stock Plan (2023 awards) and the 2020 Long-Term Incentive Plan (2022 and 2021 awards); and •2021 AIP cash deferrals received as bonus deferred RSUs under the 2020 Long-Term Incentive Plan. As described in the CD&A section, for those NEOs who chose to defer any part of their bonus, the following table reflects each NEO's bonus deferred RSUs received in lieu of cash under the AIP:
SUMMARY COMPENSATION TABLE
| Name | AIP Match Rate | Plan Year | Grant Date | Grant Price ($) | Units Granted in Lieu of Cash Plus Match (#) | Value at Grant ($) | | Barry C. McCarthy | 50% | 2021 | 1/27/2022 | 28.78 | 24,542 | 706,319 |
SUMMARY COMPENSATION TABLE
The portion of each executive's AIP compensation paid in cash is included in the "Non-Equity Incentive Plan Compensation" column. The value of the PSUs included in this column for 2023 assumes target performance over the measurement period. Assuming threshold, target and maximum performance, the value of the PSUs, which includes cumulative revenue PSUs and cumulative free cash flow PSUs, are as follows:
SUMMARY COMPENSATION TABLE
| Name | Threshold ($) | Target ($) | Maximum ($) | | Barry C. McCarthy | 1,375,000 | 2,750,001 | 5,500,002 | | William C. Zint | 212,499 | 424,997 | 849,995 | | Tracey G. Engelhardt | 300,005 | 600,009 | 1,200,018 | | Michael A. Reed | 249,996 | 499,991 | 999,983 | | Yogaraj Jeyaprakasam | 225,001 | 450,002 | 900,004 |
SUMMARY COMPENSATION TABLE
For more information regarding the 2023 grants of RSUs and PSUs, refer to the Grants of Plan-Based Awards Table. (2)Amounts listed in this column reflect cash amounts paid to the NEOs under the AIP. (3)This amount reflects the above-market value of earnings on compensation deferred by the NEOs in our non-qualified Deferred Compensation Plan. Earnings on deferred compensation are considered above-market to the extent they exceed that which would have occurred if the amount had been invested at 120% of the applicable federal long-term rate in the given year of compensation. (4)For all NEOs, amounts in the "All Other Compensation" column for 2023 include 401(k) contributions of $11,550 and tax gross-ups related to reimbursements for personal travel to a company-sponsored event of $4,274 (Mr. McCarthy), $2,368 (Mr. Zint), $2,177 (Ms. Engelhardt), $494 (Mr. Reed), and $2,009 (Mr. Jeyaprakasam). For Ms. Engelhardt, the amount also includes a cash payment of $39,423 for unused paid time off as of December 31, 2022, which was paid to all eligible employees when the company changed to an unlimited flexible time off policy effective January 1, 2023. For Mr. McCarthy, the amount also includes an HSA contribution, premiums for a supplemental long-term disability coverage policy ($12,018) and both personal ($5,182) and spousal ($1,184) travel to company-sponsored events.
GRANTS OF PLAN-BASED AWARDS
GRANTS OF PLAN-BASED AWARDS
GRANTS OF PLAN-BASED AWARDS
| | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units3 (#) | Grant Date Fair Value of Stock and Option Awards4 ($) | | Name & Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 | | | Estimated Future Payouts Under Equity Incentive Plan Awards2 | | | | | | | Award Type | Threshold ($) | Target ($) | Max ($) | Threshold (#) | Target (#) | Max (#) | | | | Barry C. McCarthy | | | | | | | | | | | 2/15/2023 | RSU | | | | | | | 140,665 | 2,750,001 | | 2/15/2023 | CFCF PSU | | | | 35,166 | 70,332 | 140,665 | | 1,289,889 | | 2/15/2023 | CR PSU | | | | 35,167 | 70,333 | 140,666 | | 1,289,907 | | | AIP Cash | 169,875 | 1,132,500 | 2,265,000 | | | | | | | William C. Zint | | | | | | | | | | | 2/15/2023 | RSU | | | | | | | 21,739 | 424,997 | | 2/15/2023 | CFCF PSU | | | | 5,435 | 10,869 | 21,738 | | 199,337 | | 2/15/2023 | CR PSU | | | | 5,435 | 10,870 | 21,740 | | 199,356 | | | AIP Cash | 53,438 | 356,250 | 712,500 | | | | | | | Tracey G. Engelhardt | | | | | | | | | | | 2/15/2023 | RSU | | | | | | | 30,691 | 600,009 | | 2/15/2023 | CFCF PSU | | | | 7,673 | 15,345 | 30,690 | | 281,427 | | 2/15/2023 | CR PSU | | | | 7,673 | 15,346 | 30,692 | | 281,446 | | | AIP Cash | 64,688 | 431,250 | 862,500 | | | | | | | Michael A. Reed | | | | | | | | | | | 2/15/2023 | RSU | | | | | | | 25,575 | 499,991 | | 2/15/2023 | CFCF PSU | | | | 6,394 | 12,787 | 25,574 | | 234,514 | | 2/15/2023 | CR PSU | | | | 6,394 | 12,788 | 25,576 | | 234,532 | | | AIP Cash | 69,609 | 464,063 | 928,125 | | | | | | | Yogaraj Jeyaprakasam | | | | | | | | | | | 2/15/2023 | RSU | | | | | | | 23,018 | 450,002 | | 2/15/2023 | CFCF PSU | | | | 5,755 | 11,509 | 23,018 | | 211,075 | | 2/15/2023 | CR PSU | | | | 5,755 | 11,509 | 23,018 | | 211,075 | | | AIP Cash | 62,578 | 417,188 | 834,375 | | | | | |
GRANTS OF PLAN-BASED AWARDS
(1)Reflects the estimated range of potential payouts under the AIP for 2023. The threshold amount assumes 50% of target payout on the Adjusted EBITDA goal, which metric has a 30% weighting. The actual cash payouts under the AIP are reflected in the Non-Equity Incentive Plan Compensation column of the SCT. (2)For all NEOs, the PSUs were granted under our Stock Plan as part of our long-term equity incentive compensation. The PSUs are subject to the following performance conditions: three-year cumulative revenue (CR PSUs), and three-year cumulative free cash flow (CFCF PSUs), both of which are subject to a relative TSR modifier during the period January 1, 2023 through December 31, 2025. These PSUs vest, if at all, upon satisfaction of the conditions and subsequent approval of the Committee. (3)For all NEOs, the RSUs granted under our Stock Plan vest in equal one-third increments on each of the first three anniversaries of the grant date. (4)Dollar values represent the accounting grant date fair value of PSUs and RSUs. The value of the RSUs are based upon the closing price on the grant date of $19.55. For all PSU awards, the values are based upon a Monte Carlo simulation value of $18.34 per share. For more information on the awards described in the Grants of Plan-Based Awards Table, refer to the "Annual Incentive Compensation" and "Long-Term Equity Incentive Compensation" sections in the CD&A, as well as "Severance and Change of Control Arrangements" for how these awards are treated under various termination and change of control scenarios.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | Option Awards | | | | | Stock Awards | | | | | | | Name | Grant Date1 | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable2 | Option Exercise Price ($) | Option Expiration Date | Grant Date/PSU Period1 | | Number of Shares or Units of Stock Held That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)3 | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)3 | | Barry C. McCarthy | 11/26/2018 | 235,018 | — | 48.92 | 11/26/2025 | 2/19/2020 | 4 | 4,794 | 102,831 | | | | | 4/1/2019 | 128,205 | — | 44.69 | 4/1/2029 | 3/1/2021 | 4 | 12,115 | 259,867 | | | | | 2/19/2020 | 150,287 | 50,095 | 39.11 | 2/19/2030 | 1/27/2022 | 5 | 24,542 | 526,426 | | | | | 3/1/2021 | 52,084 | 52,083 | 41.27 | 3/1/2031 | 2/16/2022 | 4 | 52,035 | 1,116,151 | | | | | | | | | | 2/15/2023 | 6 | 140,665 | 3,017,264 | | | | | | | | | | 1/1/2021- 12/31/2023 | 7 | | | 15,702 | 314,197 | | | | | | | | 1/1/2021- 12/31/2023 | 7 | | | 17,816 | 356,498 | | | | | | | | 1/1/2022- 12/31/2024 | 8 | | | 17,345 | 372,050 | | | | | | | | 1/1/2022- 12/31/2024 | 9 | | | 13,876 | 297,640 | | | | | | | | 1/1/2023- 12/31/2025 | 10 | | | 35,166 | 754,311 | | | | | | | | 1/1/2023- 12/31/2025 | 11 | | | 35,167 | 754,332 | | William C. Zint | 3/1/2021 | 1,953 | 1,953 | 41.27 | 3/1/2031 | 3/1/2021 | 4 | 1,272 | 27,284 | | | | | | | | | | 2/16/2022 | 4 | 3,469 | 74,410 | | | | | | | | | | 2/15/2023 | 6 | 21,739 | 466,302 | | | | | | | | | | 1/1/2023- 12/31/2025 | 10 | | | 5,435 | 116,581 | | | | | | | | 1/1/2023- 12/31/2025 | 11 | | | 5,435 | 116,581 | | Tracey G. Engelhardt | 2/23/2017 | 3,885 | — | 75.61 | 2/23/2024 | 2/18/2020 | 4 | 505 | 10,832 | | | | | 2/21/2018 | 4,793 | — | 73.21 | 2/21/2025 | 3/1/2021 | 4 | 1,514 | 32,475 | | | | | 4/1/2019 | 10,684 | — | 44.69 | 4/1/29 | 2/16/2022 | 4 | 9,250 | 198,413 | | | | | 2/18/2020 | 15,579 | 5,193 | 39.62 | 2/18/30 | 2/15/2023 | 6 | 30,691 | 658,322 | | | | | 3/1/2021 | 6,511 | 6,510 | 41.27 | 3/1/31 | 1/1/2021- 12/31/2023 | 7 | | | 1,963 | 39,280 | | | | | | | | 1/1/2021- 12/31/2023 | 7 | | | 2,227 | 44,562 | | | | | | | | 1/1/2022- 12/31/2024 | 8 | | | 3,084 | 66,152 | | | | | | | | 1/1/2022- 12/31/2024 | 9 | | | 2,467 | 52,917 | | | | | | | | 1/1/2023- 12/31/2025 | 10 | | | 7,673 | 164,586 | | | | | | | | 1/1/2023- 12/31/2025 | 11 | | | 7,673 | 164,586 | | Michael A. Reed | 2/18/2020 | 19,473 | 6,491 | 39.62 | 2/18/2030 | 2/18/2020 | 4 | 631 | 13,535 | | | | | 3/1/2021 | 7,162 | 7,161 | 41.27 | 3/1/2031 | 3/1/2021 | 4 | 1,666 | 35,736 | | | | | | | | | | 2/16/2022 | 4 | 11,563 | 248,026 | | | | | | | | | | 2/15/2023 | 6 | 25,575 | 548,584 | | | | | | | | | | 1/1/2021- 12/31/2023 | 7 | | | 2,159 | 43,202 | | | | | | | | 1/1/2021- 12/31/2023 | 7 | | | 2,449 | 49,004 | | | | | | | | 1/1/2022- 12/31/2024 | 8 | | | 3,855 | 82,690 | | | | | | | | 1/1/2022- 12/31/2024 | 9 | | | 3,084 | 66,152 | | | | | | | | 1/1/2023- 12/31/2025 | 10 | | | 6,394 | 137,151 | | | | | | | | 1/1/2023- 12/31/2025 | 11 | | | 6,394 | 137,151 | | Yogaraj Jeyaprakasam | | | | | | 5/13/2022 | 4 | 12,490 | 267,911 | | | | | | | | | | 5/13/2022 | 12 | 22,204 | 476,276 | | | | | | | | | | 2/15/2023 | 6 | 23,018 | 493,736 | | | | | | | | | | 1/1/2022- 12/31/2024 | 8 | | | 4,164 | 89,318 | | | | | | | | 1/1/2022- 12/31/2024 | 9 | | | 3,331 | 71,450 | | | | | | | | 1/1/2023- 12/31/2025 | 10 | | | 5,755 | 123,445 | | | | | | | | 1/1/2023- 12/31/2025 | 11 | | | 5,755 | 123,445 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
(1)For better understanding of this table, we have included an additional column showing the grant dates of options, RSUs, and PSUs. (2)All unexercisable options vest ratably over a four-year period following the grant date. (3)Based on the $21.45 per share closing price of our common stock on December 29, 2023. (4)RSUs vest ratably over four years. (5)RSUs vest in full on two-year anniversary of grant date. (6)RSUs vest ratably over three years. (7)The PSUs granted for the 2021-2023 performance period exceeded their payout thresholds. The total revenue threshold was 50% and paid out at 72%. The relative TSR threshold was 40% and paid out at 81.7%. Amounts in the table represent actual payouts, which are discussed in more detail in the "Long-Term Equity Incentive Compensation" section in the CD&A. (8)PSUs with total revenue metrics are shown assuming achievement of the threshold goal of 50%. (9)PSUs with TSR metrics are shown assuming achievement of the threshold goal of 40%. (10)PSUs with cumulative free cash flow metrics are shown assuming achievement of the threshold goal of 50%. A more detailed discussion can be found in the "Long-Term Equity Incentive Compensation" section in the CD&A. (11)PSUs with cumulative revenue metrics are shown assuming achievement of the threshold goal of 50%. A more detailed discussion can be found in the "Long-Term Equity Incentive Compensation" section in the CD&A. (12)RSUs vest ratably over two years.
2023 STOCK VESTED
2023 STOCK VESTED
2023 STOCK VESTED
| | RSUs | | PSUs | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting1 ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting1 ($) | | Barry C. McCarthy | 37,908 | 728,489 | — | — | | William C. Zint | 1,801 | 34,143 | — | — | | Tracey G. Engelhardt | 12,198 | 228,699 | — | — | | Michael A Reed | 6,339 | 121,623 | — | — | | Yogaraj Jeyaprakasam | 26,368 | 386,555 | — | — |
2023 STOCK VESTED
(1)Value realized equals the closing price of our common stock on the vesting date multiplied by the number of shares vested.
Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation Our Deferred Compensation Plan permits eligible employees to defer annually the receipt of up to 100% of base salary, and up to 50% of annual cash bonuses. In connection with this plan, we have created a non-qualified grantor trust (commonly known as a Rabbi Trust) through which our obligations under the plan are funded. No assets are set aside for individual participants in the plan, and the trust assets remain subject to the claims of our creditors. Amounts deferred under the plan are payable on the earliest to occur of a change of control of our company, the participant's termination of employment, disability or death, or the date for payment selected by the participant, unless a delay in payments is otherwise required by Section 409A. Deferred amounts are credited with gains and losses based on the performance of deemed investment options (i.e., phantom funds) selected by the participant. We also may make ERISA excess payments and/or contributions of benefit plan equivalents to participants' accounts if IRS limits or the deferrals made by a participant under this plan have the effect of reducing the contributions they otherwise would receive from us under our qualified benefit plans. The following table summarizes activity under these plans for each of the NEOs during 2023.
NON-QUALIFIED DEFERRED COMPENSATION TABLE
NON-QUALIFIED DEFERRED COMPENSATION TABLE
NON-QUALIFIED DEFERRED COMPENSATION TABLE
| | Executive Contributions in Last Fiscal Year | Aggregate Earnings in Last Fiscal Year1 | Aggregate Withdrawals/Distributions in Last Fiscal Year | Aggregate Balance at Last Fiscal Year-End | | Name | ($) | ($) | ($) | ($) | | Barry C. McCarthy | — | — | — | — | | William C. Zint | — | — | — | — | | Tracey G. Engelhardt | — | 7,703 | — | 7,703 | | Michael A Reed | — | — | — | — | | Yogaraj Jeyaprakasam | 146,155 | 5,975 | — | 152,130 |
NON-QUALIFIED DEFERRED COMPENSATION TABLE
(1)Amounts represent earnings on contributions and deferrals made in 2023 and in prior years. Participants in this plan allocate their deferrals into phantom funds similar to the funds available under our qualified retirement plans. Any amounts reported reflect the performance of these phantom funds. The measurement funds available under the Deferred Compensation Plan, and their annualized returns as of December 31, 2023, are as follows:
NON-QUALIFIED DEFERRED COMPENSATION TABLE
| Fund | Asset Category | Ticker | Rate of Return (%) | | Vanguard Federal Money Market Investor | Money Market-Taxable | VMFXX | 5.09 | | Vanguard VIF Total Bond Market Index | Intermediate Core Bond | N/A | 5.58 | | Vanguard Large-Cap Index Fund Admiral Shares | Large Blend | VLCAX | 27.28 | | Vanguard VIF Equity Index | Large Blend | N/A | 26.11 | | Vanguard Growth Index Admiral | Large Growth | VIGAX | 46.77 | | Vanguard Small Cap Index Admiral | Small Blend | VSMAX | 18.20 | | Vanguard Developed Markets Index Admiral | Foreign Large Blend | VTMGX | 17.67 | | Vanguard Emerging Markets Stock Index Admiral | Diversified Emerging Markets | VEMAX | 9.21 |
CEO Pay Ratio
CEO Pay Ratio We are required by SEC rules and regulations to disclose a reasonable estimate of the ratio of the annual total compensation for our President and CEO to the annual total compensation of our median employee. For the year ended December 31, 2023, the annual total compensation for Mr. McCarthy was $7,536,719, as shown in the SCT, plus $21,811 for the cost of his employer-sponsored health and welfare benefits. The annual total compensation for our median employee was $70,570 calculated in accordance with SEC rules. For 2023, the annual total compensation of Mr. McCarthy was 103.9 times that of our median employee. As of the measurement date, November 1, 2023, we had a total of 5,215 employees, of which 4,897 were employed in the U.S. and 318 were employed in Canada. As permitted by SEC rules and regulations, we excluded leased employees and independent contractors. To determine our median employee, we used base salary for the 12-month period ending October 31, 2023, as our compensation measure that we applied consistently to all employees. We annualized this amount for permanent employees who commenced employment during that period. We also chose to include the cost of the median employee's employer-sponsored health and welfare benefits, including medical, dental and life insurance, as well as short- and long-term disability coverage, in the calculation of our median employee's total annual compensation. For Canadian employees, we converted their pay amounts to U.S. dollars using the spot rate as of November 1, 2023.
Pay Versus Performance Outcomes
Pay Versus Performance Outcomes The following table provides specified executive compensation and financial performance measures for our four most recently completed fiscal years.
Pay Versus Performance Outcomes
| Year | Summary Compensation Table Total for CEO ($) | Compensation Actually Paid to CEO1 ($) | Average Summary Compensation Table Total for Other NEOs ($) | Average Compensation Actually Paid to Other NEOs2 ($) | Value of Initial Fixed $100 Investment Based On: | | Net Income (in millions)5 ($) | Adjusted EBITDA (in millions)6 ($) | | | | | | | Total Shareholder Return3 ($) | Peer Group Total Shareholder Return4 ($) | | | | 2023 | 7,536,719 | 8,979,508 | 1,992,744 | 2,238,170 | 52.1 | 123.6 | 26.2 | 417.1 | | 2022 | 10,375,485 | 3,607,005 | 2,220,306 | 852,747 | 38.6 | 102.7 | 65.5 | 418.1 | | 2021 | 7,822,945 | 8,028,794 | 2,050,605 | 1,802,766 | 69.3 | 143.0 | 62.8 | 407.8 | | 2020 | 5,256,659 | (1,110,314) | 1,812,604 | 701,061 | 61.2 | 131.3 | 5.3 | 364.5 |
Pay Versus Performance Outcomes
(1)The dollar amounts reported in this column represent the amount of Compensation Actually Paid (“CAP”) to our President and CEO, Barry C. McCarthy, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. McCarthy during the applicable year. To calculate CAP to Mr. McCarthy, for each of the years shown, the following deductions and additions were made to the SCT total compensation:
Pay Versus Performance Outcomes
| Reconciliation of CEO SCT Total to CAP | | | | | | Year | SCT Total ($) | Equity Deductions from SCT Total(a) ($) | Equity Additions to SCT Total(b) ($) | CAP ($) | | 2023 | 7,536,719 | (5,329,797) | 6,772,586 | 8,979,508 | | 2022 | 10,375,485 | (4,871,517) | (1,896,963) | 3,607,005 | | 2021 | 7,822,945 | (6,439,546) | 6,645,395 | 8,028,794 | | 2020 | 5,256,659 | (4,274,576) | (2,092,397) | (1,110,314) |
Pay Versus Performance Outcomes
(a)Represents the grant date fair values of equity-based awards granted each year, as shown in the Stock Awards and Option Awards columns of the SCT. (b)For each year, reflects the sum of the equity fair value categories described as follows, calculated in accordance with Item 402(v) of Regulation S-K:
Pay Versus Performance Outcomes
| Year | Year-end fair value of awards granted in the year and outstanding and unvested at year-end ($) | Prior year-end to year-end change in fair value of awards granted in prior years and outstanding and unvested at year-end ($) | Fair value as of vesting date of awards granted and vested in the year ($) | Prior year-end to vesting-date change in fair value of awards granted in prior years that vested in the year ($) | Prior year-end fair value of awards granted in prior years that were forfeited in the year ($) | Value of dividends or other earnings paid on awards not otherwise reflected in the fair values ($) | Total Equity Additions to SCT Total ($) | | 2023 | 6,013,429 | 646,150 | — | 34,383 | — | 78,623 | 6,772,586 | | 2022 | 2,406,099 | (4,384,367) | — | (58) | — | 81,363 | (1,896,963) | | 2021 | 4,552,443 | 607,333 | — | 1,345,862 | — | 139,757 | 6,645,395 | | 2020 | 2,823,913 | (3,329,142) | — | (1,671,035) | — | 83,867 | (2,092,397) |
Pay Versus Performance Outcomes
(2)The dollar amounts reported in this column represent the average amount of CAP to the non-CEO named executive officers (“Other NEOs”) as a group, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the Other NEOs during the applicable year. The Other NEOs reflected in this and the preceding column consist of the following individuals: 2023 — William C. Zint, Tracey G. Engelhardt, Michael A. Reed, and Yogaraj Jeyaprakasam; 2022 — William C. Zint, Scott C. Bomar, Christopher L. Thomas, Yogaraj Jeyaprakasam, and Michael A. Reed; 2021 — Scott C. Bomar, Keith A. Bush, Christopher L. Thomas, Michael A. Reed, and Jeffrey L. Cotter; and 2020 — Keith A. Bush, Christopher L. Thomas, Michael A. Reed, and Jeffrey L. Cotter. To calculate CAP to our Other NEOs for each of the years shown, the following deductions and additions were made to the SCT total compensation:
Pay Versus Performance Outcomes
| Other NEOs Reconciliation of Average SCT Total to Average CAP | | | | | | Year | SCT Total ($) | Equity Deductions from SCT Total(a) ($) | Equity Additions to SCT Total(b) ($) | CAP ($) | | 2023 | 1,992,744 | (956,940) | 1,202,366 | 2,238,170 | | 2022 | 2,220,306 | (1,197,255) | (170,304) | 852,747 | | 2021 | 2,050,605 | (1,228,600) | 980,761 | 1,802,766 | | 2020 | 1,812,604 | (1,171,147) | 59,604 | 701,061 |
Pay Versus Performance Outcomes
(a)Represents the grant date fair value of equity-based awards granted each year, as shown in the Stock Awards and Option Awards columns of the SCT. (b)For each year, reflects the sum of the equity fair value categories described as follows, calculated in accordance with Item 402(v) of Regulation S-K:
Pay Versus Performance Outcomes
| Year | Year-end fair value of awards granted in the year and outstanding and unvested at year-end ($) | Prior year-end to year-end change in fair value of awards granted in prior years and outstanding and unvested at year-end ($) | Fair value as of vesting date of awards granted and vested in the year ($) | Prior year-end to vesting-date change in fair value of awards granted in prior years that vested in the year ($) | Prior year-end fair value of awards granted in prior years that were forfeited in the year ($) | Value of dividends or other earnings paid on awards not otherwise reflected in the fair values ($) | Total Equity Additions to SCT Total ($) | | 2023 | 1,079,683 | 112,881 | — | (8,953) | — | 18,755 | 1,202,366 | | 2022 | 544,028 | (414,256) | — | (43,365) | (271,588) | 14,877 | (170,304) | | 2021 | 885,667 | 116,547 | — | 142,783 | (177,089) | 12,853 | 980,761 | | 2020 | 737,637 | (594,542) | — | (68,673) | (18,243) | 3,425 | 59,604 |
Pay Versus Performance Outcomes
(3)Assuming an initial investment of $100 on December 31, 2019, TSR assumes reinvestment of all dividends, if any, and reflects changes in the company’s share price since the assumed initial investment date. (4)Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the Dow Jones U.S. Support Services (DJUSIS) Index. (5)Dollar values represent the amount of net income reported in our audited financial statements for the applicable year. (6)See Annex A for a reconciliation of adjusted EBITDA, a non-GAAP financial measure, to the most directly comparable GAAP financial measure.