DEF 14A of Credit Acceptance Corp
Filed Apr 24, 2025 · FY20240000885550-25-000046
PROPOSAL #1 - ELECTION OF DIRECTORS
PROPOSAL #1 - ELECTION OF DIRECTORS
Glenda J. Flanagan; age 71; Executive Vice President and Chief Financial Officer, Healthy America, LLC
Glenda J. Flanagan; age 71; 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 55; 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. Mr. Hegde is a member of the Company’s Compensation Committee and Nominating Committee.
Compensation – Named Executive Officers
Compensation – Named Executive Officers The compensation for named executive officers described below consists of two long-term compensation programs. Compensation earned in 2024 was pursuant to a long-term compensation program approved by the Compensation Committee on December 30, 2020 that was in effect for 2021 through 2024. On December 3, 2024 (or January 14, 2025, in the case of our Chief Executive Officer), the Compensation Committee approved a new long-term compensation program that is intended to provide incentive compensation to named executive officers for 2025 through 2034. Both compensation programs include 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). Compensation for named executive officers for 2021 through 2024 intended to balance short-term and long-term Company performance by eliminating annual cash incentive awards in favor of higher base salaries and longer-term equity awards. The stock option awards granted in 2021 were intended to provide incentive compensation to named executive officers for 2021 through 2024, and no additional equity awards were granted to named executive officers during the four-year period except in limited circumstances including the appointment of new executive officers or the promotion of executive officers to new roles. Compensation for named executive officers for 2025 through 2034 intends to promote an ownership-driven focus by restructuring the form of equity awards to better align compensation with maximizing the Company’s long-term intrinsic value. The Compensation Committee believes that since our inception, the long-term share ownership of our founder, executive officers, and the Board of Directors has fostered an intense, long-term focus on maximizing intrinsic value, and that this long-term compensation plan will solidify that focus. The restricted stock unit (“RSU”) awards granted on December 3, 2024 (or January 14, 2025, for our Chief Executive Officer) are intended to provide incentive compensation for the period 2025 through 2034, with no additional equity awards anticipated to be granted to named executive officers prior the end of the 10-year period except in circumstances including significant changes in performance, responsibility, or role. 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. On December 3, 2024, the Compensation Committee introduced a new long-term compensation plan, which included an initial base salary increase for 2025 for the named executive officers besides Mr. Booth, for whom a base salary increase was approved on January 14, 2025. Based on the criteria stated above, the Compensation Committee approved the following base salary changes:
Compensation – Named Executive Officers
The base salaries for Messrs. Booth, Lum, Smith, and Ulatowski were last changed in 2021 and thus were unchanged for 2024. The base salary for Mr. Martin was last changed in 2024 (from $400,000 to $525,000 effective as of January 29, 2024) in connection with his appointment as our Chief Financial Officer. Starting in 2026, base salaries are expected to increase annually by 3%, barring certain circumstances such as significant changes in wage inflation, performance, responsibility, role, or market conditions. Incentive Compensation. 2025 – 2034 Program: RSU Awards – The 2025 through 2034 incentive compensation program for Messrs. Booth, Lum, Martin, Smith, and Ulatowski consists of RSU awards with 10-year vesting schedules. On December 3, 2024 (or January 14, 2025, in the case of our Chief Executive Officer), in connection with the 10-year executive compensation plan described above, the Compensation Committee approved awards of 106,299 RSUs to Mr. Booth, 23,884 RSUs to Mr. Lum, 22,583 RSUs to Mr. Martin, and 28,290 RSUs to Messrs. Smith and Ulatowski. Based on the terms of individual RSU grant agreements, the RSUs will vest over a period of 10 years beginning on January 31, 2026, and on each of the nine subsequent anniversaries of such date based on continued employment. While the RSU awards to the other named executive officers are subject to a 10-year vesting schedule that is solely time-based, the RSU award to Mr. Booth will be subject to (1) a time-based vesting schedule for the first four vesting years and (2) a performance-based vesting schedule for the last six vesting years. The Compensation Committee will establish the performance measurement criteria at a future date or multiple future dates in order to drive performance based on the needs of the business at that time. The number of RSUs granted to the named executive officers was determined by calculating the shares necessary for them to earn their 10-year target annual incentive compensation if the Company’s stock price were to increase at a compound annual growth rate of 11% (which exceeds our cost of capital) over the 10-year period from 2025 to 2034. Accordingly, in order for Messrs. Booth, Lum, Martin, Smith, and Ulatowski to earn the intended targeted incentive compensation under the 2025 through 2034 incentive compensation program, the Company’s share price must grow at a compound annual growth rate of 11% over the 10-year period. The actual amounts earned can be significantly more or less than the targeted amounts, depending on the shareholder value created, which aligns management and long-term shareholder interests. For Messrs. Lum, Martin, Smith, and Ulatowski, upon vesting, 75% of vested RSUs will be classified as “Base RSUs” and 25% of vested RSUs will be classified as “Retirement RSUs.” For Mr. Booth, upon vesting, 25% of vested RSUs will be classified as “Base RSUs” and 75% of vested RSUs will be classified as “Retirement RSUs.” Settlement in Common Stock will occur as follows: •Vested Base RSUs: 50% will be settled in Common Stock on the annual vesting date and 50% will be settled in Common Stock on the one-year anniversary of the vesting date. By providing for this timing of settlement for vested Base RSUs, the structure of the program is similar to that of a program with year-over-year annual grants with annual ratable vesting. •Vested Retirement RSUs: 100% will be settled in Common Stock five years after termination of employment, unless age at termination of employment is 60 years or older, in which case the settlement in Common Stock will occur two years after termination of employment. The Compensation Committee believes that the incentive compensation program for Messrs. Booth, Lum, Martin, Smith, and Ulatowski appropriately aligns their compensation with the interests of shareholders for the following reasons: •Equity compensation is granted up front in lieu of what may have been granted annually over the next 10 years. This much larger grant today strengthens the culture of long-term ownership that has been so important to our historical success because team members are owners; while at the same time the vesting and settlement schedule for Base RSUs is similar to what it would have been under a program with annual equity grants. •The amount of compensation received from the RSU awards will be proportionate to the amount of shareholder wealth created, as measured by changes in our share price over the long-term vesting and settlement periods of the awards. •Vesting conditions for the RSU awards are long-term in nature, which will incentivize Messrs. Booth, Lum, Martin, Smith, and Ulatowski to take all actions that will maximize shareholder value over the long term and to remain employed over the longer vesting term. They will not be distracted by shorter term incentives and considerations. •In the case of the RSU award to Mr. Booth, the Compensation Committee retains the option, if necessary, to drive specific performance behaviors during the latter portion of the 10-year incentive compensation program through its ability to determine performance-based vesting criteria at a future date or multiple future dates. •The delayed settlement of the Retirement RSUs will make Messrs. Booth, Lum, Martin, Smith, and Ulatowski meaningful shareholders for years after their retirement, which we expect will provide additional motivation for them to take actions that ensure the long-term success of the Company. •It minimizes and allows us to accurately calculate the economic cost of equity awards by funding those awards with repurchased shares. Therefore the economic cost of each share that ultimately vests can be calculated as the average repurchase price of each share compounded at our cost of capital until the date of vesting. The number of RSUs granted to Messrs. Booth, Lum, Martin, Smith, and Ulatowski that can vest over the next 10 years represents 1.8% of outstanding shares as of the Record Date, which equates to an annual average increase of approximately 18 basis points in shares outstanding per year. The allocation between short- and long-term incentives for the named executive officers was determined based on the discretion of the Compensation Committee. The long-term incentive program is also expected to be in lieu of annual cash incentives except in circumstances including significant changes in performance, responsibility, or role. Promotion Grant – In January 23, 2024, in connection with Mr. Martin’s appointment as our Chief Financial Officer, the Compensation Committee approved a grant of 600 RSUs to Mr. Martin. All 600 RSUs vested and were settled in Common Stock on January 23, 2025. 2021 – 2024 Program: Stock Option Awards – The 2021 through 2024 incentive compensation program for Messrs. Booth, Martin, Lum, Smith, and Ulatowski consisted of stock option awards with four-year ratable vesting schedules. On December 30, 2020, the Compensation Committee approved awards of 50,000 stock options each to Messrs. Booth, Smith, and Ulatowski, 40,000 stock options to Mr. Lum, and 19,500 stock options to Mr. Martin, in each case subject to shareholder approval of the amendment and restatement of the Incentive Plan. Shareholder approval was received at our 2021 annual meeting of shareholders. 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: •vested 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.
Compensation – Named Executive Officers
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 vest and become exercisable in four equal annual installments from the date of the grant subject to continuous employment through the relevant vesting date and will expire ten years from the date of the grant. On April 28, 2021, in connection with Mr. Martin’s appointment as our principal accounting officer effective May 3, 2021, the Compensation Committee approved the grant to Mr. Martin of an award of 2,250 stock options with an exercise price of $390.39 that will vest and become exercisable in four equal annual installments from the date of the grant subject to continuous employment through the relevant vesting date and will expire six years from the date of the grant. Equity Grant Practices. The timing of the Company’s equity grants to the named executive officers is set without regard to anticipated earnings or other major announcements by the Company. There have been no stock option awards granted to any of our named executive officers since 2021.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE The following table sets forth certain summary information for the year indicated concerning the compensation awarded to, earned by, or paid to our named executive officers in respect of the year shown, as applicable.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards ($) (a) | All Other Compensation ($) (b) | Total ($) | | Kenneth S. Booth | 2024 | $1,000,000 | $— | $18,553 | $1,018,553 | | Chief Executive Officer and | 2023 | 1,000,000 | — | 16,500 | 1,016,500 | | President (c) | 2022 | 1,000,000 | — | 15,250 | 1,015,250 | | Jonathan L. Lum | 2024 | $560,000 | $11,509,938 | $18,241 | $12,088,179 | | Chief Operating Officer (d) | | | | | | | Jay D. Martin | 2024 | $515,411 | $11,209,392 | $18,227 | $11,743,030 | | Chief Financial Officer (c)(d) | | | | | | | Arthur L. Smith | 2024 | $700,000 | $13,633,234 | $18,237 | $14,351,471 | | Chief Analytics Officer | 2023 | 700,000 | — | 17,819 | 717,819 | | | 2022 | 700,000 | — | 17,748 | 717,748 | | Daniel A. Ulatowski | 2024 | $700,000 | $13,633,234 | $18,241 | $14,351,475 | | Chief Sales Officer | 2023 | 700,000 | — | 17,798 | 717,798 | | | 2022 | 700,000 | — | 17,697 | 717,697 |
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 28,290 RSUs granted to each of Messrs. Smith and Ulatowski on December 3, 2024; 23,884 RSUs granted to Mr. Lum on December 3, 2024; 22,583 RSUs granted to Mr. Martin on December 3, 2024; and 600 promotion RSUs granted to Mr. Martin on January 23, 2024. The RSU awards that were granted by the Compensation Committee (other than the promotion RSUs) are intended to provide incentive compensation for the period 2025 through 2034 with no additional equity awards anticipated to be granted to the officer prior to the end of the 10-year period except in circumstances including significant changes in performance, responsibility, or market conditions. (b)The amounts reported in this column for fiscal year 2024 consist of the following: $17,250 for each of Messrs. Booth, Lum, Martin, Smith, and Ulatowski in Company matching contributions under the 401(k) Profit Sharing Plan; $941 for Messrs. Lum, Martin, 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 $1,303 for Mr. Booth, $50 for Messrs. Lum and Ulatowski, $46 for Mr. Smith, and $36 for Mr. Martin in employee reimbursements during the year for the payment of taxes on service or other awards. The Profit Sharing Program is a broad-based program designed to reward team members for increased Company profitability by way of a quarterly payment. (c)Mr. Booth was the Company’s principal executive officer and principal financial officer in 2022 and 2023. Mr. Booth ceased to serve as the Company’s principal financial officer when Mr. Martin assumed the role effective January 23, 2024. (d)Messrs. Lum and Martin first became named executive officers of the Company in 2024.
2024 GRANTS OF PLAN-BASED AWARDS
2024 GRANTS OF PLAN-BASED AWARDS The following table sets forth information concerning each grant of an award made to our named executive officers in 2024.
2024 Grants of Plan-Based Awards
2024 Grants of Plan-Based Awards
2024 Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Equity Incentive Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Value of Stock and Option Awards ($)(a) | | Name | Grant Date | Threshold (#) | Target (#) | Maximum (#) | | | | Kenneth S. Booth | N/A | — | — | — | — | $— | | Jonathan L. Lum | 12/3/2024 | — | — | — | 23,884 | 11,509,938 | | Jay D. Martin | 1/23/2024 | — | — | — | 600 | 326,418 | | Jay D. Martin | 12/3/2024 | — | — | — | 22,583 | 10,882,974 | | Arthur L. Smith | 12/3/2024 | — | — | — | 28,290 | 13,633,234 | | Daniel A. Ulatowski | 12/3/2024 | — | — | — | 28,290 | 13,633,234 |
2024 Grants of Plan-Based Awards
(a) The grant date value of stock option awards is calculated in accordance with FASB ASC Topic 718. The assumptions used to calculate the value are set forth in Note 13 to the consolidated financial statements contained in Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 12, 2025.
OUTSTANDING EQUITY AWARDS AT 2024 FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT 2024 FISCAL YEAR-END The following table provides information with respect to the stock options and unvested RSUs held by our named executive officers as of December 31, 2024.
2024 Outstanding Equity Awards at Fiscal Year-End
2024 Outstanding Equity Awards at Fiscal Year-End
2024 Outstanding Equity Awards at Fiscal Year-End
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | 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) | 82,500 | 27,500 | $390.39 | 4/28/2031 | — | $— | — | $— | | Kenneth S. Booth | 50,000 | — | 333.94 | 12/30/2026 | — | — | — | — | | Jonathan L. Lum (d) | 37,500 | — | 333.94 | 12/30/2026 | 23,884 | 11,212,583 | — | — | | Jay D. Martin (e) | 19,500 | — | 333.94 | 12/30/2026 | 23,183 | 10,883,491 | — | — | | Jay D. Martin (c) | 1,688 | 562 | 390.39 | 4/28/2027 | — | — | — | — | | Arthur L. Smith (d) | 37,500 | — | 333.94 | 12/30/2026 | 28,290 | 13,281,023 | — | — | | Daniel A. Ulatowski (d) | 50,000 | — | 333.94 | 12/30/2026 | 28,290 | 13,281,023 | — | — |
2024 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 $469.46 per share as of December 31, 2024, multiplied by the number of unvested RSUs held. (c)Stock options vest and become exercisable in four equal annual installments beginning on April 28, 2022, the first anniversary of the date on which the options were granted by the Board. (d)RSUs vest over a period of 10 years beginning on January 31, 2026, and on each of the nine subsequent anniversaries of such date, and are settled in Common Stock upon vesting, one year after vesting, or at some point after the individual's retirement from the Company, based on the terms of individual RSU grant agreements. (e)Includes 22,583 RSUs that vest over a period of 10 years beginning on January 31, 2026, and on each of the nine subsequent anniversaries of such date, and are settled in Common Stock upon vesting, one year after vesting, or at some point after the individual's retirement from the Company, based on the terms of individual RSU grant agreements. The remaining 600 RSUs vested and were settled in Common Stock on January 23, 2025, the first anniversary of the date on which the RSUs were granted by the Board.
2024 OPTION EXERCISES AND STOCK VESTED
2024 OPTION EXERCISES AND STOCK VESTED The following table provides information with respect to shares acquired on option exercising or vesting by our named executive officers during 2024.
2024 Options Exercises and Stock Vested
2024 Options Exercises and Stock Vested
2024 Options Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (a) | Number of Shares Acquired on Vesting (#) (b) | Value Realized on Vesting ($) (b) | | Arthur L. Smith | 12,500 | $2,753,451 | — | $— |
2024 Options Exercises and Stock Vested
(a) The value realized upon exercise of stock options is calculated by subtracting the stock option exercise price from the fair market value (sale price) on the exercise date, and multiplying the difference by the number of shares. (b) None of our named executive officers had RSUs vest during 2024.
2024 NONQUALIFIED DEFERRED COMPENSATION
2024 NONQUALIFIED DEFERRED COMPENSATION
2024 Nonqualified Deferred Compensation
2024 Nonqualified Deferred Compensation
2024 Nonqualified Deferred Compensation
| Name | Executive Contributions in Last Fiscal Year ($) | Registrant Contributions in Last Fiscal Year ($) (a) | Aggregate Earnings in Last Fiscal Year ($) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($) | | Jonathan L. Lum | $— | $7,007,864 | $— | $— | $7,007,864 | | Jay D. Martin | — | 6,626,134 | — | — | 6,626,134 | | Arthur L. Smith | — | 8,300,640 | — | — | 8,300,640 | | Daniel A. Ulatowski | — | 8,300,640 | — | — | 8,300,640 |
2024 Nonqualified Deferred Compensation
(a)The amounts relate to a subset of the RSUs granted to Messrs. Lum, Martin, Smith, and Ulatowski under the Incentive Plan during 2024, which, under the terms of the grants, will settle in Common Stock on a date that is later than the date on which they vest (as described in the Compensation Discussion and Analysis section of this Proxy Statement). The reported amount of contributions for each individual is calculated as the number of RSUs awarded to Messrs. Lum, Martin, Smith, and Ulatowski with a delayed settlement date, multiplied by the closing market price of Common Stock reported on Nasdaq of $469.46 per share as of December 31, 2024. These amounts are a subset of, and not in addition to, the amounts disclosed in the “Stock Awards” column of the Summary Compensation Table and are disclosed in this table solely because of the awards’ delayed settlement date.
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”), unless otherwise provided by an award agreement. The RSUs granted pursuant to the 2025-2034 incentive program provide that, assuming the RSU is assumed or substituted by an acquiror or a successor in connection with a change in control, the award will vest with respect to the amount of RSUs that would have vested over the next three vesting dates provided by the award following the date of termination as if the named executive officer had remained employed or, if less, the remaining unvested number of RSUs subject to the award. 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, 2024.
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 | $2,174,425 | $— | $2,174,425 | | Jonathan L. Lum | — | 11,212,583 | 11,212,583 | | Jay D. Martin | 44,437 | 10,883,491 | 10,927,928 | | Arthur L. Smith | — | 13,281,023 | 13,281,023 | | Daniel A. Ulatowski | — | 13,281,023 | 13,281,023 |
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 $469.46 per share as of December 31, 2024 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 $469.46 per share as of December 31, 2024. (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 $469.46 per share as of December 31, 2024, 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.
2024 CHIEF EXECUTIVE OFFICER PAY RATIO
2024 CHIEF EXECUTIVE OFFICER PAY RATIO The following table provides information with respect to the ratio of 2024 total compensation of our Chief Executive Officer serving in 2024 to that of our median team member.
2024 CHIEF EXECUTIVE OFFICER PAY RATIO
| | 2024 Total Compensation | | Chief Executive Officer (a) | $1,018,553 | | Median Team Member (a)(b) | $87,832 | | Ratio of Chief Executive Officer to Median Team Member Compensation | 12:1 |
2024 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, 2024 by examining 2024 W-2 gross wages for all team members, excluding our Chief Executive Officer, who were employed by us as of December 31, 2024. The population of team members examined included full-time and part-time team members, including those hired during 2024. We believe W-2 gross wages is a consistently applied compensation measure that reasonably reflects the total annual compensation of our team members.
2024 DIRECTOR COMPENSATION
2024 DIRECTOR COMPENSATION 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 In 2024, Ms. Flanagan and Messrs. Hegde, Quinn, Tryforos, and Vassalluzzo received quarterly payments of the annual retainer in the amount of $25,000. In 2024, 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 2024, 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 2024. On September 4, 2024, the Compensation Committee approved awards of 442 RSUs to Ms. Flanagan and Messrs. Quinn, Tryforos, and Vassalluzzo and 92 RSUs to Mr. Hegde 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 2024 was reduced by the value of unvested equity awards held by non-employee directors as of June 30, 2024 that were granted prior to June 30, 2023. As of June 30, 2024, Ms. Flanagan and Messrs. Quinn, Tryforos, and Vassalluzzo held no unvested equity awards that had been granted prior to June 30, 2023, and Mr. Hegde held 2,500 unvested stock options that had been granted prior to June 30, 2023. 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 vested over a five year performance period starting in 2019, based upon the compound annual growth rate of Adjusted EPS over the performance period. As of December 31, 2024, all of the 1,500 RSUs 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 Common Stock. The following table sets forth certain information regarding the compensation earned during 2024 by each non-employee director who served on the Board in 2024.
2024 Director Compensation
2024 Director Compensation
2024 Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Equity Awards ($) (a)(b) | Total ($) | | Glenda J. Flanagan | $100,000 | $199,978 | $299,978 | | Vinayak R. Hegde | 100,000 | 41,624 | 141,624 | | Sean E. Quinn | 100,000 | 199,978 | 299,978 | | Thomas N. Tryforos | 100,000 | 199,978 | 299,978 | | Scott J. Vassalluzzo | 100,000 | 199,978 | 299,978 |
2024 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, 2024, 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 442 RSUs granted to Ms. Flanagan and Messrs. Quinn, Tryforos, and Vassalluzzo on September 4, 2024 and 92 RSUs granted to Mr. Hegde on September 4, 2024. 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, 2024, Ms. Flanagan held 1,500 vested RSUs and 508 unvested RSUs; Messrs. Tryforos and Vassalluzzo held 724 unvested RSUs; and Mr. Quinn held 664 unvested RSUs. Mr. Hegde held 92 unvested RSUs, 7,500 vested stock options, and 2,500 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.
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) | | 2024 | $1,018,553 | $(2,289,737) | n/a | n/a | $13,133,539 | $11,924,232 | $106.09 | $198.91 | $247.9 | $200.3 | | 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 2024, 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 | | | | | | | | 2024 | 2023 | 2022 | 2021 (Booth) | 2021 (Roberts) | 2020 | | Compensation per SCT | $1,018,553 | $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 | (1,601,679) | 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 | (1,706,611) | (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 | $(2,289,737) | $3,552,673 | $(22,614,425) | $59,123,384 | $(46,514,489) | $(15,506,950) |
PAY VERSUS PERFORMANCE
| | Non-PEO NEOs | | | | | | | 2024 | 2023 | 2022 | 2021 | 2020 | | Compensation per SCT | $13,133,539 | $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 | (9,424) | 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 | (867,963) | 166,584 | (916,535) | — | — | | Adjustments related to RSUs | | | | | | | Deduction for Amounts Reported under the “Stock Awards” Column in the SCT | (12,496,450) | — | (2,117,650) | — | — | | Increase for Fair Value of Awards Granted during Year that Remain Unvested as of Year end | 12,164,530 | — | 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 | $11,924,232 | $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: 2024: Messrs. Lum, Martin, Smith, and Ulatowski 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, | | | | | | | 2024 | 2023 | 2022 | 2021 | 2020 | | GAAP net income | $247.9 | $286.1 | $535.8 | $958.3 | $421.0 | | Floating yield adjustment (after-tax) | (420.4) | (310.1) | (196.5) | (148.5) | (169.6) | | GAAP provision for credit losses (after-tax) | 627.3 | 566.9 | 370.7 | 6.5 | 428.8 | | Loss on sale of building (after-tax) | 18.3 | — | — | — | — | | Senior notes adjustment (after-tax) | — | (4.2) | (2.1) | (2.1) | 4.0 | | Income tax adjustment | 5.8 | (3.1) | 12.2 | 12.6 | 2.1 | | Adjusted net income | 478.9 | 535.6 | 720.1 | 826.8 | 686.3 | | Adjusted interest expense (after-tax) | 323.0 | 209.5 | 130.4 | 128.5 | 149.5 | | Adjusted net income plus interest expense (after-tax) | 801.9 | 745.1 | 850.5 | 955.3 | 835.8 | | Less: cost of capital | 601.6 | 484.6 | 373.9 | 381.2 | 364.5 | | Economic profit | $200.3 | $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 2024 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 2024 to link CAP to the Company’s named executive officers to Company performance. For 2024, 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 RSU awards provide value proportionate to the amount of shareholder wealth created, as measured by the share price. Our stock option awards provide value only if the market price of our Common Stock increases above the exercise price of the stock options. |