DEF 14A of Credit Acceptance Corp
Filed Apr 25, 2024 · FY20230000885550-24-000061
PROPOSAL #1 - ELECTION OF DIRECTORS
PROPOSAL #1 - ELECTION OF DIRECTORS
Glenda J. Flanagan; age 70; Executive Vice President and Chief Financial Officer, Healthy America, LLC
Glenda J. Flanagan; age 70; Executive Vice President and Chief Financial Officer, Healthy America, LLC In March 2022, Ms. Flanagan became Executive Vice President and Chief Financial Officer of Healthy America, LLC, a privately-held company based in Austin, Texas specializing in launching a national network of wellness centers to promote overall health and well-being. From May 2017 through February 2022, Ms. Flanagan was Executive Vice President and Senior Advisor of Whole Foods Market, Inc., the largest natural and organic foods supermarket retailer in the United States. Ms. Flanagan joined Whole Foods Market as Chief Financial Officer in 1988, prior to which she held positions in public accounting, retail and business consulting. Ms. Flanagan became a director of Credit Acceptance in March 2004. She is also a director of Vital Farms, Inc. Ms. Flanagan is a member of the Company’s Executive Compensation Committee (the “Compensation Committee”), Audit Committee, and Nominating Committee. Vinayak R. Hegde; age 54; Consumer Chief Marketing Officer, T-Mobile US, Inc. Mr. Hegde has served as the Consumer Chief Marketing Officer of T-Mobile US, Inc., a telecommunications company, since January 2023. Mr. Hegde served as President of Wheels Up Experience, Inc., a provider of on-demand private aviation, from October 2021 to November 2022, after serving as its Chief Marketplace Officer and that of its predecessor, Wheels Up Partners Holdings LLC, from May 2021 to October 2021. He served as President and Chief Operating Officer at Blink Health LLC, a digital health company, from July 2020 to March 2021. From September 2018 to July 2020, Mr. Hegde served as Vice President of Growth and Chief Marketing Officer of Airbnb Homes at Airbnb, Inc., which operates an online marketplace for short-term lodging. From October 2014 to September 2018, Mr. Hegde served as Senior Vice President and Global Chief Marketing Officer at Groupon, Inc., which operates online local commerce marketplaces. Prior to Groupon, he spent over 12 years at Amazon.com. Mr. Hegde became a director of Credit Acceptance in May 2021. He is also a director of SunPower Corporation. Mr. Hegde is a member of the Company’s Compensation Committee and Nominating Committee.
Compensation – Named Executive Officers
Compensation – Named Executive Officers Compensation for the named executive officers set in 2021 for 2021 through 2024 includes a base salary and equity-based incentive compensation provided pursuant to the Company’s Amended and Restated Incentive Compensation Plan (referred to in this Proxy Statement as the Incentive Plan). The compensation program attempts to balance short-term and long-term Company performance by eliminating annual cash awards in favor of higher base salaries and longer-term equity awards. The stock option awards granted in 2021 are intended to provide incentive compensation to named executive officers for 2021 through 2024, with no additional equity awards anticipated to be granted to named executive officers prior to the end of the four-year period except in limited circumstances including the appointment of new named executive officers. The restricted stock unit (“RSU”) awards that have been granted by the Compensation Committee are intended to provide incentive compensation to newly appointed named executive officers. Base Salaries. Base salaries at all levels in the organization are designed to provide a level of basic compensation and allow us to recruit and retain qualified team members. Our Chief Executive Officer’s base salary is determined by the Compensation Committee. Other named executive officers’ base salaries are determined by the Compensation Committee after reviewing recommendations supplied by our Chief Executive Officer. Base salaries were determined after considering the following: •the performance of Credit Acceptance; •an assessment of the named executive officer’s individual performance; •market data; •internal benchmarks; •equity compensation components of the named executive officer’s total compensation plan; and •roles and responsibilities for each named executive officer, including the ability of the executive officer to drive results. In January 2023, the Compensation Committee determined that named executive officer base salaries would remain unchanged for 2023, based on the determination that the overall compensation plan did not require adjustment and is working as intended. Similarly, in January 2024, the Compensation Committee determined that named executive officer base salaries will remain unchanged for 2024. Named executive officer base salaries for 2024 are as follows:
Compensation – Named Executive Officers
Incentive Compensation. The 2021 through 2024 incentive compensation program for Messrs. Booth, Busk, Rostami, Smith, and Ulatowski attempts to balance short-term and long-term Company performance and is comprised of stock option awards and RSU awards with four year ratable vesting schedules. Stock Option Awards – On December 30, 2020, the Compensation Committee approved awards of 50,000 stock options each to Messrs. Booth, Smith, and Ulatowski and 46,000 stock options to Mr. Busk, in each case subject to shareholder approval of the amendment and restatement of the Incentive Plan. Shareholder approval was received at our annual meeting of shareholders on July 21, 2021. The exercise price of the options is $333.94, which is equal to the closing market price per share of Common Stock on the day prior to the date of the grant. Based on the terms of individual stock option grant agreements, the stock options: •vest and become exercisable in four equal annual installments beginning on the first anniversary of the date on which the options were granted by the Board, based on continuous employment and •expire six years from the date of the grant. On April 28, 2021, in connection with Mr. Booth’s election and appointment as our Chief Executive Officer and President effective May 3, 2021, the Compensation Committee approved the grant to Mr. Booth of an award of 110,000 stock options with an exercise price of $390.39 that will expire ten years from the date of the grant and will vest and become exercisable in four equal annual installments from the date of the grant subject to continuous employment through the relevant vesting date. On April 18, 2022, in connection with Mr. Rostami’s appointment to Chief Marketing and Product Officer, the Compensation Committee approved the grant to Mr. Rostami of an award of 16,000 stock options with an exercise price of $585.93 that will expire six years from the date of the grant and will vest and become exercisable in four equal annual installments from the date of the grant subject to continuous employment through the relevant vesting date. No stock option awards were granted to any of our named executive officers during 2023. RSU Awards – On April 18, 2022 and October 31, 2022, in connection with Mr. Rostami’s appointment to Chief Marketing and Product Officer, the Compensation Committee approved awards of 4,000 RSUs each to Mr. Rostami. The RSUs will vest and be settled in Common Stock in equal annual installments over a period of four years beginning on the first anniversary of the applicable grant date, subject to continuous employment through the relevant vesting dates. No RSU awards were granted to any of our named executive officers during 2023. The Compensation Committee believes that the incentive compensation programs for Messrs. Booth, Busk, Rostami, Smith, and Ulatowski appropriately align their compensation with the interests of shareholders because: •the amount of compensation received from stock option awards will be proportionate to the amount of shareholder wealth created, as measured by the appreciation in share price above the exercise price of the options; •the amount of compensation received from RSU awards will be proportionate to the amount of shareholder wealth created as measured by the share price; and •the RSU and stock option awards are long-term in nature, which will incentivize Messrs. Booth, Busk, Rostami, Smith, and Ulatowski to take actions that will benefit shareholders longer-term. The allocation between short- and long-term incentives was determined based on the discretion of the Compensation Committee. The Compensation Committee determined that no annual incentive opportunity was necessary for 2023. The ultimate allocation will depend on our future performance and future changes in our share price over the vesting period for our long-term incentive awards. We believe it is likely that a substantial percentage of the amount realized will be from long-term, equity-based incentives, which is consistent with the philosophy of the Compensation Committee that executive compensation should be linked to long-term shareholder value. Since the majority of the amounts to be realized by Messrs. Booth, Busk, Rostami, Smith, and Ulatowski will not be fully exercisable until at least December 30, 2024, the Compensation Committee believes this plan creates an incentive for Messrs. Booth, Busk, Rostami, Smith, and Ulatowksi to take actions and make decisions that will benefit us over the long-term. Such incentives are believed to be appropriate given the nature of the duties and responsibilities assigned to these executive officers.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE The following table sets forth certain summary information for the year indicated concerning the compensation awarded to, earned by, or paid to our named executive officers in respect of the year shown, as applicable.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards ($) (a) | Option Awards ($) (b) | All Other Compensation ($) (c) | Total ($) | | Kenneth S. Booth | 2023 | $1,000,000 | $— | $— | $16,500 | $1,016,500 | | Chief Executive Officer and | 2022 | 1,000,000 | — | — | 15,250 | 1,015,250 | | President (d) | 2021 | 888,176 | — | 29,623,631 | 14,538 | 30,526,345 | | Douglas W. Busk | 2023 | $640,000 | $— | $— | $17,798 | $657,798 | | Chief Treasury Officer | 2022 | 640,000 | — | — | 17,697 | 657,697 | | | 2021 | 630,056 | — | 8,827,323 | 21,440 | 9,478,819 | | Andrew K. Rostami | 2023 | $600,000 | $— | $— | $17,886 | $617,886 | | Chief Marketing and | 2022 | 403,846 | 4,229,400 | 3,203,550 | 16,840 | 7,853,636 | | Product Officer (e) | | | | | | | | Arthur L. Smith | 2023 | $700,000 | $— | $— | $17,819 | $717,819 | | Chief Analytics Officer | 2022 | 700,000 | — | — | 17,748 | 717,748 | | | 2021 | 689,272 | — | 9,594,916 | 21,440 | 10,305,628 | | Daniel A. Ulatowski | 2023 | $700,000 | $— | $— | $17,798 | $717,798 | | Chief Sales Officer | 2022 | 700,000 | — | — | 17,697 | 717,697 | | | 2021 | 689,272 | — | 9,594,916 | 21,440 | 10,305,628 |
Summary Compensation Table
(a)Reflects the grant date fair value of stock awards determined in accordance with Financial Accounting Standards Board and Accounting Standards Codification (“FASB ASC”) Topic 718 using the closing market price of Common Stock reported on Nasdaq as of the grant date of awards. The table includes 4,000 RSUs granted to Mr. Rostami on April 18, 2022 and 4,000 RSUs granted to Mr. Rostami on October 31, 2022. The RSU awards that were granted by the Compensation Committee are intended to provide incentive compensation to newly appointed named executive officers. (b)Reflects the grant date fair value of stock option awards determined in accordance with FASB ASC Topic 718. The table includes 16,000 stock options granted to Mr. Rostami on April 18, 2022. Additionally, the table includes 50,000 stock options granted to each of Messrs. Booth, Smith, and Ulatowski on December 30, 2020; 46,000 stock options granted to Mr. Busk on December 30, 2020; and 110,000 stock options granted to Mr. Booth on April 28, 2021, all of which were subject to shareholder approval. Shareholder approval was subsequently received at our annual meeting of shareholders on July 21, 2021, which is the grant date for financial accounting purposes. The assumptions used to calculate the value of option awards are set forth in Note 14 to the consolidated financial statements contained in Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 10, 2023. The stock option grants are intended to provide incentive compensation to named executive officers for 2021 through 2024, with no additional equity awards anticipated to be granted to existing named executive officers prior to the end of the four-year period except in limited circumstances including the appointment of new named executive officers. (c)The amounts reported in this column for fiscal year 2023 consist of the following: $16,500 for each of Messrs. Booth, Busk, Rostami, Smith, and Ulatowski in Company matching contribution under the 401(k) Profit Sharing Plan; $1,298 for Messrs. Busk, Rostami, Smith, and Ulatowski under the Credit Acceptance Corporation Profit Sharing Variable Compensation Program (the “Profit Sharing Program”), which is available to all team members except the Chief Executive Officer; and $88 for Mr. Rostami and $21 for Mr. Smith in employee reimbursements during the year for the payment of taxes on service or other awards. The Profit Sharing Program is a broad-based program designed to reward team members for increased Company profitability by way of a quarterly payment. (d)Mr. Booth was the Company’s principal executive officer and principal financial officer in 2022 and 2023. (e)Mr. Rostami first became a named executive officer of the Company in 2022.
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END The following table provides information with respect to the stock options held by our named executive officers as of December 31, 2023.
2023 Outstanding Equity Awards at Fiscal Year-End
2023 Outstanding Equity Awards at Fiscal Year-End
2023 Outstanding Equity Awards at Fiscal Year-End
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (a) | Market Value of Shares or Units of Stock That Have Not Vested ($) (b) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Kenneth S. Booth (c) | 55,000 | 55,000 | $390.39 | 4/28/2031 | — | $— | — | $— | | Kenneth S. Booth (d) | 37,500 | 12,500 | 333.94 | 12/30/2026 | — | — | — | — | | Douglas W. Busk (d) | 29,500 | 11,500 | 333.94 | 12/30/2026 | — | — | — | — | | Andrew K. Rostami (e)(f) | 4,000 | 12,000 | 585.93 | 4/18/2028 | 6,000 | 3,196,380 | — | — | | Arthur L. Smith (d) | 37,500 | 12,500 | 333.94 | 12/30/2026 | — | — | — | — | | Daniel A. Ulatowski (d) | 37,500 | 12,500 | 333.94 | 12/30/2026 | — | — | — | — |
2023 Outstanding Equity Awards at Fiscal Year-End
(a)Represents RSUs granted under the Incentive Plan. (b)Value is equal to the closing market price reported on Nasdaq of $532.73 per share as of December 31, 2023, multiplied by the number of unvested RSUs held. (c)Stock options vest and become exercisable in four equal annual installments beginning on April 28, 2022, the first anniversary of the date on which the options were granted by the Board. (d)Stock options vest and become exercisable in four equal annual installments beginning on December 30, 2021, the first anniversary of the date on which the options were granted by the Board. (e)Stock options vest and become exercisable and 4,000 RSUs, of which 3,000 remained unvested as of December 31, 2023, vest and convert to shares in four equal annual installments beginning on April 18, 2023, the first anniversary of the date on which the options and RSUs were granted by the Board. (f)4,000 RSUs, of which 3,000 remained unvested as of December 31, 2023, vest and convert to shares in four equal annual installments beginning on October 31, 2023, the first anniversary of the date on which the RSUs were granted by the Board.
2023 OPTION EXERCISES AND STOCK VESTED
2023 OPTION EXERCISES AND STOCK VESTED The following table provides information with respect to shares acquired on option exercising or vesting by our named executive officers during 2023.
2023 Options Exercises and Stock Vested
2023 Options Exercises and Stock Vested
2023 Options Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) (a) | Value Realized on Vesting ($) (b) | | Andrew K. Rostami | — | $— | 2,000 | $886,470 |
2023 Options Exercises and Stock Vested
(a) Includes vesting of time-based RSUs. The RSUs for Mr. Rostami vested and were settled in Common Stock upon vesting on April 18, 2023 and October 31, 2023. (b) The amounts are calculated based on the closing price reported on Nasdaq as of the date vested, or the business day preceding the scheduled vesting date if the scheduled vesting occurs on a weekend or holiday.
2023 NONQUALIFIED DEFERRED COMPENSATION
2023 NONQUALIFIED DEFERRED COMPENSATION
2023 Nonqualified Deferred Compensation
2023 Nonqualified Deferred Compensation
2023 Nonqualified Deferred Compensation
| Name | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($) (a) (b) | Aggregate Withdrawals / Distributions ($) (b) | Aggregate Balance at Last Fiscal Year-End ($) (c) | | Kenneth S. Booth | $— | $— | $(179,858) | $(3,146,635) | $— | | Douglas W. Busk | — | — | (165,006) | (2,886,809) | — | | Arthur L. Smith | — | — | (187,245) | (3,275,875) | — | | Daniel A. Ulatowski | — | — | (187,245) | (3,275,875) | — |
2023 Nonqualified Deferred Compensation
(a)The amounts relate to RSUs granted under the Incentive Plan prior to December 31, 2022 which, under the terms of the grants, are settled in shares on a date that is later than the date on which they vest. The reported amount of aggregate earnings for each individual is calculated as the number of RSUs held by such individual as of December 31, 2022 and not settled or released during 2023 multiplied by the difference between the closing market price of Common Stock reported on Nasdaq of $532.73 per share as of December 31, 2023 and $474.40 per share as of December 31, 2022, plus, with respect to any RSUs held by such individual as of December 31, 2022 and settled or released on any date during 2023, the difference between the closing market price as of December 31, 2022 and the closing market price on the date of such settlement or release, multiplied by the number of such RSUs settled or released on that date. (b)On January 30, 2023, Messrs. Booth, Busk, Smith, and Ulatowski had 7,012, 6,433, 7,300, and 7,300 vested RSUs, respectively, settled in shares of common stock. Messrs. Booth, Busk, Smith, and Ulatowski had their RSUs granted to them on January 30, 2017. The aggregate withdrawals/distributions reported are calculated based on the number of RSUs settled multiplied by the closing market price per share reported on Nasdaq of $448.75 as of January 30, 2023. (c)The grants of these RSUs were disclosed in the Summary Compensation Table and Grant of Plan-Based Awards table in the year of grant.
POTENTIAL PAYMENTS ON TERMINATION/CHANGE IN CONTROL
POTENTIAL PAYMENTS ON TERMINATION/CHANGE IN CONTROL None of our named executive officers have individual agreements with us providing for cash severance payments or benefits continuation on any termination of employment, including on a termination prior to or following a change in control. Treatment of Equity Upon Termination of Employment. If a named executive officer terminates employment for any reason prior to the vesting period for stock option or RSU awards, any unvested stock options or unvested RSU awards are forfeited. The Compensation Committee may waive or change the remaining restrictions or add additional restrictions with respect to any stock option or RSU award that would otherwise be forfeited, as it deems appropriate. Treatment of Equity Upon a Change in Control. In the event of a change in control, outstanding equity awards including option awards that are assumed or substituted in connection with a change in control will become vested and exercisable upon a termination without cause or resignation for good reason during the 24-month period following the change in control (i.e., “double-trigger vesting”). Outstanding awards that are not assumed or substituted by an acquiror or successor in connection with a change in control will become fully vested and exercisable immediately upon the occurrence of the change in control. Notwithstanding the foregoing, in the event of a change in control, the Compensation Committee may, in its discretion, provide that each option will be cancelled in exchange for the excess of the per share transaction price over the option exercise price (spread value) upon the occurrence of a change in control. The following table sets forth the potential amounts payable to our named executive officers in the event of a change in control with respect to stock option and RSU awards held by our named executive officers as of December 31, 2023.
POTENTIAL PAYMENTS ON TERMINATION/CHANGE IN CONTROL
| | Accelerated Vesting of Equity Awards | | | | Name | Unvested Stock Options ($) (a) | Unvested Restricted Stock Units (b) | Total | | Kenneth S. Booth | $10,313,575 | $— | $10,313,575 | | Douglas W. Busk | 2,286,085 | — | 2,286,085 | | Andrew K. Rostami | — | 3,196,380 | 3,196,380 | | Arthur L. Smith | 2,484,875 | — | 2,484,875 | | Daniel A. Ulatowski | 2,484,875 | — | 2,484,875 |
POTENTIAL PAYMENTS ON TERMINATION/CHANGE IN CONTROL
(a)The amounts reported are calculated based on the number of unvested stock options held by each named executive officer, multiplied by the difference between the closing market price reported on Nasdaq of $532.73 per share as of December 31, 2023 and the exercise price of the stock options, assuming that one of the circumstances described above resulting in accelerated vesting occurred on such date. No value is reported when the exercise price of the stock options is higher than the closing market price reported on Nasdaq of $532.73 per share as of December 31, 2023. (b)The amount reported is calculated based on the number of unvested RSUs held by the named executive officer, multiplied by the closing market price reported on Nasdaq of $532.73 per share as of December 31, 2023, assuming the restrictions applicable to granted RSUs shall lapse and all other terms and conditions shall be deemed to have been satisfied, pursuant to the Incentive Plan and applicable award agreement.
2023 CHIEF EXECUTIVE OFFICER PAY RATIO
2023 CHIEF EXECUTIVE OFFICER PAY RATIO The following table provides information with respect to the ratio of 2023 total compensation of our Chief Executive Officer serving in 2023 to that of our median team member.
2023 CHIEF EXECUTIVE OFFICER PAY RATIO
| | 2023 Total Compensation | | Chief Executive Officer (a) | $1,016,500 | | Median Team Member (a)(b) | $80,857 | | Ratio of Chief Executive Officer to Median Team Member Compensation | 13:1 |
2023 CHIEF EXECUTIVE OFFICER PAY RATIO
(a)Annual total compensation was calculated consistent with the disclosure requirements for annual compensation under the Summary Compensation Table. (b)We identified our median team member as of December 31, 2023 by examining 2023 W-2 gross wages for all team members, excluding our Chief Executive Officer, who were employed by us as of December 31, 2023. The population of team members examined included full-time and part-time team members, including those hired during 2023. We believe W-2 gross wages is a consistently applied compensation measure that reasonably reflects the total annual compensation of our team members.
2023 DIRECTOR COMPENSATION
2023 DIRECTOR COMPENSATION During 2023, the Compensation Committee approved changes to the Company's compensation program for non-employee directors. Effective July 1, 2023, our non-employee directors are eligible to receive the following: •an annual retainer of $100,000 payable quarterly in arrears •an annual equity award with a value of $200,000 in the form of RSUs granted pursuant to our Incentive Plan; and •business-related travel expenses Prior to July 1, 2023, non-employee directors were eligible to receive a quarterly retainer of $12,500 or payments of $1,500 for each Board meeting attended and $500 for each committee meeting attended and stock-based awards under our Incentive Plan in addition to business-related travel expenses. For the period January 1, 2023 through June 30, 2023, Ms. Flanagan and Mr. Hegde received a quarterly retainer, Mr. Tryforos received payments for each Board and committee meeting attended, and Mr. Vassalluzzo opted not to receive quarterly retainers or payments for each Board and committee meeting attended. For the period July 1, 2023 through December 31, 2023, Messrs. Hegde, Tryforos, and Vassalluzzo and Ms. Flanagan received quarterly payments of the annual retainer in the amount of $25,000. Mr. Quinn received a prorated retainer payment following his election as a director on October 27, 2023. In 2023, the Company reimbursed Ms. Flanagan and Messrs. Quinn, Tryforos, and Vassalluzzo for certain business-related travel expenses in connection with their service on the Board. Additionally, in 2023, the Company paid directly certain business-related travel expenses of Ms. Flanagan and Messrs. Quinn, Tryforos, and Vassalluzzo in connection with their service on the Board. Mr. Hegde did not incur travel expenses in 2023. On August 22, 2023, the Compensation Committee approved awards of 423 RSUs to Messrs. Tryforos and Vassalluzzo and 100 RSUs to Ms. Flanagan in connection with the annual equity award for their service as directors. The RSUs will vest and be settled in Common Stock in equal annual installments over a period of three years beginning on the first anniversary of the applicable grant date, subject to continuous service through the relevant vesting date. The annual equity grant for 2023 was reduced by the value of unvested equity awards held by non-employee directors as of June 30, 2023. As of June 30, 2023, Messrs. Tryforos and Vassalluzzo held no unvested equity awards; Ms. Flanagan held 300 unvested RSUs; and Mr. Hegde held 5,000 unvested stock options. On October 27, 2023, the Compensation Committee approved an award of 334 RSUs to Mr. Quinn in connection with his service as a director. The amount of the annual equity award was prorated based on the commencement of his services on October 27, 2023. The RSUs will vest and be settled in Common Stock in equal annual installments over a period of three years beginning on the first anniversary of the applicable grant date, subject to continuous service through the relevant vesting date. Stock Option Award – On May 3, 2021, the Compensation Committee approved an award of 10,000 stock options under the Incentive Plan to Mr. Hegde in connection with the commencement of his service as a director. The stock options granted to Mr. Hegde will expire ten years from the date of the grant and will vest and become exercisable in four equal annual installments from the date of the grant, subject to continuous service through the relevant vesting date. RSU Award – On March 7, 2019, the Compensation Committee approved an award of 1,500 RSUs to Ms. Flanagan under the Incentive Plan. The RSUs awarded to Ms. Flanagan vest over a five year performance period starting in 2019, based upon the compound annual growth rate of Adjusted EPS over the performance period. Vesting for each year of the performance period will be determined as follows: Year 1 •If the compound annual growth rate of Adjusted EPS is at least 5%, one-fifth (20.0%) of the RSUs shall vest. •If the compound annual growth rate of Adjusted EPS is at least 5%, one-fifth (20.0%) of the RSUs shall vest. In addition, any RSUs that were eligible to vest in Year 1, but did not vest in Year 1, shall vest. Year 3 •If the compound annual growth rate of Adjusted EPS is at least 5%, one-fifth (20.0%) of the RSUs shall vest. In addition, any RSUs that were eligible to vest in Year 1 and Year 2, but did not vest in Year 1 or Year 2, shall vest. •If the compound annual growth rate of Adjusted EPS is less than 5%, no RSUs shall vest. Year 4 •If the compound annual growth rate of Adjusted EPS is at least 5%, one-fifth (20.0%) of the RSUs shall vest. In addition, any RSUs that were eligible to vest in Year 1, Year 2, and Year 3 but did not vest in Year 1, Year 2, or Year 3 shall vest. •If the compound annual growth rate of Adjusted EPS is less than 5%, no RSUs shall vest. Year 5 •If the compound annual growth rate of Adjusted EPS is at least 5%, one-fifth (20.0%) of the RSUs shall vest. In addition, any RSUs that were eligible to vest in Year 1, Year 2, Year 3, and Year 4 but did not vest in Year 1, Year 2, Year 3, or Year 4 shall vest. •If the compound annual growth rate of Adjusted EPS is less than 5%, no RSUs shall vest. In 2023, under the formula described above, the compounded annual growth rate in Adjusted EPS from 2022 to 2023 was greater than 5%, so 100% of the 300 RSUs eligible to vest for Ms. Flanagan were vested upon the approval of the Compensation Committee in January 2024. As of the Record Date, all of the 1,500 RSUs awarded in March 2019 to Ms. Flanagan have vested. The vested RSUs are subject to a post-vesting holding period that will lapse on January 30, 2026, at which time vested RSUs will settle in shares of Common Stock. The following table sets forth certain information regarding the compensation earned during 2023 by each non-employee director who served on the Board in 2023.
2023 Director Compensation
2023 Director Compensation
2023 Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Equity Awards ($) (a)(b) | Total ($) | | Glenda J. Flanagan | $75,000 | $47,262 | $122,262 | | Vinayak R. Hegde | 75,000 | — | 75,000 | | Sean E. Quinn | 17,935 | 135,133 | 153,068 | | Thomas N. Tryforos | 64,000 | 199,918 | 263,918 | | Scott J. Vassalluzzo | 50,000 | 199,918 | 249,918 |
2023 Director Compensation
(a)The amounts reported in this column represent the aggregate grant fair value of any stock awards granted during the fiscal year ended December 31, 2023, as computed in accordance with FASB ASC Topic 718 using the closing market price of Common Stock reported on Nasdaq as of the grant date of awards. The table includes 423 RSUs granted to Messrs. Tryforos and Vassalluzzo on August 22, 2023; 100 RSUs granted to Ms. Flanagan on August 22, 2023; and 334 RSUs granted to Mr. Quinn on October 27, 2023. The RSU awards that were granted by the Compensation Committee are intended to provide incentive compensation in connection with their service as directors. (b)As of December 31, 2023, Ms. Flanagan held 1,200 vested RSUs and 400 unvested RSUs; Messrs. Tryforos and Vassalluzzo held 423 unvested RSUs; and Mr. Quinn held 334 unvested RSUs. Mr. Hegde held 5,000 vested stock options and 5,000 unvested stock options.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K (the “PVP Requirements”), we are providing the following information about the relationship between compensation reported in the summary compensation table (“SCT”) and compensation actually paid (“CAP”) as calculated under the PVP Requirements to our principal executive officer (“PEO”) and our other named executive officers (“NEOs”) and certain financial performance measures. The disclosure covers our four most recent fiscal years, and will expand next year to a rolling five years.
PAY VERSUS PERFORMANCE
| | Kenneth S. Booth | | Brett A. Roberts | | | | Value of Initial Fixed $100 Investment Based on: (d) | | | | | Year | SCT Total for PEO ($) (a) | CAP to PEO ($) (b) | SCT Total for PEO ($) (a) | CAP to PEO ($) (b) | Average SCT Total for NEOs ($) (c) | CAP to NEOs ($) (b) (c) | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) | GAAP Net Income ($ in millions) | Economic Profit ($ in millions) (e) | | 2023 | $1,016,500 | $3,552,673 | n/a | n/a | $677,825 | $1,415,826 | $120.40 | $152.34 | $286.1 | $260.5 | | 2022 | 1,015,250 | (22,614,425) | n/a | n/a | 4,418,311 | 1,709,981 | 107.24 | 125.51 | 535.8 | 476.6 | | 2021 | 30,526,345 | 59,123,384 | $359,911 | (46,514,489) | 10,101,413 | 15,536,684 | 155.47 | 148.00 | 958.3 | 574.1 | | 2020 | n/a | n/a | 1,039,250 | (15,506,950) | 1,895,287 | 1,754,780 | 78.25 | 116.40 | 421.0 | 471.3 |
PAY VERSUS PERFORMANCE
(a)During 2023 and 2022, our PEO was Mr. Booth. During 2021, our PEOs were Mr. Roberts (until his retirement effective May 3, 2021) and Mr. Booth (beginning on May 3, 2021). During 2020, our PEO was Mr. Roberts. (b)Compensation actually paid, as computed under SEC rules, requires starting with the “Total” column of the SCT and making certain adjustments to reflect adjusted values to equity awards based on stock prices as of year end or the relevant vesting dates, and in the case of our stock option awards, various other accounting valuation assumptions. The following tables reflect the adjustments made to SCT total compensation to compute CAP for our PEO and average CAP for our non-PEO NEOs:
PAY VERSUS PERFORMANCE
| | PEOs | | | | | | | 2023 | 2022 | 2021 (Booth) | 2021 (Roberts) | 2020 | | Compensation per SCT | $1,016,500 | $1,015,250 | $30,526,345 | $359,911 | $1,039,250 | | Adjustments related to Stock Options | | | | | | | Deduction for Amounts Reported under the “Option Awards” Column in the SCT | — | — | (29,623,631) | — | — | | Increase for Fair Value of Awards Granted during Year that Remain Unvested as of Year end | — | — | 53,755,806 | — | — | | Increase for Fair Value of Awards Granted during Year that Vested during year | — | — | 4,392,539 | — | — | | Increase/deduction for Change in Fair Value from prior Year-end to current Year-end of Awards Granted Prior to Year that were Outstanding and Unvested as of Year-end | 2,890,227 | (17,456,114) | — | — | — | | Increase/deduction for Change in Fair Value from prior Year-end to Vesting Date of Awards Granted Prior to year that Vested during year | (354,054) | (6,173,561) | — | — | — | | Adjustments related to RSUs and restricted shares | | | | | | | Increase/deduction for Change in Fair Value from prior Year-end to current Year-end of Awards Granted Prior to Year that were Outstanding and Unvested as of Year-end | — | — | — | — | (17,314,200) | | Increase/deduction for Change in Fair Value from prior Year-end to Vesting Date of Awards Granted Prior to year that Vested during year | — | — | 72,325 | 1,585,200 | 768,000 | | Deduction of Fair Value of Awards Granted Prior to Year that were Forfeited during year | — | — | — | (48,459,600) | — | | Compensation Actually Paid | $3,552,673 | $(22,614,425) | $59,123,384 | $(46,514,489) | $(15,506,950) |
PAY VERSUS PERFORMANCE
| | Non-PEO NEOs | | | | | | 2023 | 2022 | 2021 | 2020 | | Compensation per SCT | $677,825 | $4,418,311 | $10,101,413 | $1,895,287 | | Adjustments related to Stock Options | | | | | | Deduction for Amounts Reported under the “Option Awards” Column in the SCT | — | (1,885,347) | (9,403,018) | — | | Increase for Fair Value of Awards Granted during Year that Remain Unvested as of Year end | — | 1,630,624 | 10,463,258 | — | | Increase for Fair Value of Awards Granted during Year that Vested during year | — | — | 4,304,688 | — | | Increase/deduction for Change in Fair Value from prior Year-end to current Year-end of Awards Granted Prior to Year that were Outstanding and Unvested as of Year-end | 499,504 | (1,554,222) | — | — | | Increase/deduction for Change in Fair Value from prior Year-end to Vesting Date of Awards Granted Prior to year that Vested during year | 166,584 | (916,535) | — | — | | Adjustments related to RSUs | | | | | | Deduction for Amounts Reported under the “Stock Awards” Column in the SCT | — | (2,117,650) | — | — | | Increase for Fair Value of Awards Granted during Year that Remain Unvested as of Year end | — | 2,134,800 | — | — | | Increase/deduction for Change in Fair Value from prior Year-end to current Year-end of Awards Granted Prior to Year that were Outstanding and Unvested as of Year-end | 87,495 | — | — | (175,547) | | Increase/deduction for Change in Fair Value from prior Year-end to Vesting Date of Awards Granted Prior to year that Vested during year | (15,582) | — | 70,343 | 35,040 | | Compensation Actually Paid | $1,415,826 | $1,709,981 | $15,536,684 | $1,754,780 |
PAY VERSUS PERFORMANCE
(c)Our non-PEO NEOs consisted of the following individuals: 2023: Messrs. Busk, Rostami, Smith, and Ulatowski 2022: Messrs. Mohan, Rostami, and Smith and Ms. Rummler 2021: Messrs. Busk, Charles A. Pearce, Smith, and Ulatowski 2020: Messrs. Booth, Pearce, Smith, and Ulatowski (d)This assumes that $100 was invested in Common Stock and in a market index representing our peer group on January 1, 2020, and assumes the reinvestment of dividends. The peer group market index used for this purpose is the Dow Jones U.S. Financial Services Index. (e)Economic profit is an important financial performance measure used by the Company to evaluate business decisions and strategies and our financial performance, and is used to link certain compensation actually paid to our non-PEO NEOs to Company performance (Company-Selected Measure). The following is a reconciliation of GAAP net income to economic profit:
PAY VERSUS PERFORMANCE
| (In millions) | For the Years Ended December 31, | | | | | | 2023 | 2022 | 2021 | 2020 | | GAAP net income | $286.1 | $535.8 | $958.3 | $421.0 | | Floating yield adjustment (after-tax) | (310.1) | (196.5) | (148.5) | (169.6) | | GAAP provision for credit losses (after-tax) | 566.9 | 370.7 | 6.5 | 428.8 | | Senior notes adjustment (after-tax) | (4.2) | (2.1) | (2.1) | 4.0 | | Income tax adjustment | (3.1) | 12.2 | 12.6 | 2.1 | | Adjusted net income | 535.6 | 720.1 | 826.8 | 686.3 | | Adjusted interest expense (after-tax) | 209.5 | 130.4 | 128.5 | 149.5 | | Adjusted net income plus interest expense (after-tax) | 745.1 | 850.5 | 955.3 | 835.8 | | Less: cost of capital | 484.6 | 373.9 | 381.2 | 364.5 | | Economic profit | $260.5 | $476.6 | $574.1 | $471.3 |
PAY VERSUS PERFORMANCE
Relationship between Pay and Performance. Below are graphs showing the relationship of “compensation actually paid” to our PEOs and non-PEO NEOs in 2020 through 2023 to (1) TSR of both the Company and the Dow Jones U.S. Financial Services Index, (2) the Company’s net income, and (3) the Company’s economic profit, which is our company-selected measure. Company Performance Metrics. Listed below are the financial performance measures, including the Company-Selected Measure, which in our assessment represent the most important financial performance measures we used in 2023 to link CAP to the Company’s named executive officers to Company performance. For 2023, the Company used fewer than three financial performance metrics to link CAP to the Company’s named executive officers to Company performance.
PAY VERSUS PERFORMANCE
| Measure | Nature | Explanation | | Economic Profit | Financial Measure | Economic profit is a non-GAAP financial measure we use to evaluate our financial results and determine profit-sharing for team members, which is available to all team members including named executive officers, with the exception of our Chief Executive Officer. | | Share price | Financial Measure | Our stock option awards provide value only if the market price of our Common Stock increases above the exercise price of the stock options. |