DEF 14A of Franklin Covey Co
Filed Dec 19, 2023 · FY20230000886206-23-000061
Nominees for Election to the Board of Directors
Nominees for Election to the Board of Directors Our Board currently consists of nine directors, six of whom are considered independent. Nominees for election to the Board of Directors shall be elected to serve until the next annual meeting of shareholders or until their successors shall have been elected and qualified or until such director’s earlier death, resignation, or removal. At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the nine nominees named in this Proxy Statement. We believe each of the nominees listed below bring extensive experience across a variety of disciplines that provides valuable breadth and depth to our Board. The biographies below describe the skills, qualities, attributes, and experiences of each of the nominees that led the Board to determine that it is appropriate to nominate these directors for election. We have a policy that members of our Board of Directors should retire from service at age 75 unless an extension is specifically approved. In accordance with this policy, an extension was approved for Joel C. Peterson, who is standing for election at our Annual Meeting.
Nominees for Election to the Board of Directors
| | Anne H. Chow, 57 Lead Independent Director Director Since: March 2016 Committees: Chair of the Corporate Governance and Nominating Committee and member of the Organization and Compensation Committee, and Growth Committee Other Directorships: 3M Ms. Chow is currently serving as Lead Independent Director of the Board of Directors at Franklin Covey. Anne is the founder of The Rewired CEO, a business services firm based in the Dallas, Texas area and has been serving as CEO since August 2022. Ms. Chow is also an Independent Director on 3M’s Board of Directors as well as Senior Fellow and Adjunct Professor of Executive Education at the Kellogg School of Management, Northwestern University. Reflective of her impact in driving success at the intersection of people, culture, and technology, she was named to Fortune’s Most Powerful Women in Business twice and Forbes inaugural CEO Next List of Leaders set to revolutionize American business among other recognition. In her prior role, Anne was the CEO of AT&T Business at AT&T from 2019 to 2022. As CEO of AT&T Business, Anne was responsible for the company’s Business Solutions organization which serves nearly 3 million business customers in more than 200 countries and territories around the world, including nearly all the world’s Fortune 1000 companies. Ms. Chow’s responsibilities included all AT&T’s business services across wireless, networking, cybersecurity, and advanced solutions, covering more than $35 billion in revenues. Since 2000, Ms. Chow has held a variety of executive leadership positions at AT&T, including Senior Vice President – Global Solutions and Sales Operations and Senior Vice President – Premier Client Group. With decades of strategic and operational experience in the technology and telecom industry, Anne has led many global organizations through major transformations, developing and executing innovative growth strategies while building role model relationships. Anne is passionate about business and culture transformation, education, diversity and inclusion, and cultivating next generation leaders and has extensive nonprofit governance and community advisory experience with organizations such as the Girl Scouts of the USA, Dallas Mavericks Advisory Council, Asian American Justice Center, APIA Scholars, and the New Jersey Chamber of Commerce. Ms. Chow holds a Master’s Degree in Business Administration with Distinction from The Johnson School at Cornell University, as well as a Bachelor of Science Degree and Masters of Engineering Degree in Electrical Engineering from Cornell University. Anne is also a graduate of the Pre-College Division of the Juilliard School of Music. Director Qualifications: The Company believes that Ms. Chow’s strong sales and enterprise relationship background as well as her extensive distribution and cross-functional global leadership experience provide valuable insight and skills to our Board of Directors. Ms. Chow’s significant leadership involvement with diversified entities throughout her career provides her with wide-ranging perspective and experience in the areas of management, operations, finance, and marketing. |
Nominees for Election to the Board of Directors
| | Craig Cuffie, 62 Independent Director Director Since: September 2021 Committees: Member of the Audit Committee, Organization and Compensation Committee, and Growth Committee Other Directorships: None Since June of 2022, Mr. Cuffie has served as Group Chief Procurement Officer at HSBC, one of the world’s largest banks. In his current role, Mr. Cuffie is responsible for Sourcing, Procurement, Expense Management, Corporate Travel, Sustainability, and Third-Party Management. Prior to joining HSBC, Mr. Cuffie served as Executive Vice President and Chief Procurement Officer at Salesforce, where he served as an executive member of the Global Cyber Security Governance Team, the Global Policy Governance Team, and the Global Crisis Incident Management Team. Mr. Cuffie’s service at Salesforce ran from 2017 to June of 2022. Prior to joining Salesforce, Craig founded Eagle Island Advisors in 2015, a boutique private equity firm focused on sourcing lower mid-market opportunities in the 3rd Party Logistics industry. From 2013 to 2015, Mr. Cuffie served as Vice-President of Global Operations at Jawbone, Inc., and was Chief Procurement Officer and Vice-President of Supply Chain at Clearwire from 2010 through 2013. Over his career, Mr. Cuffie has accumulated over 30 years of business experience with 20 years of global management responsibility. Craig’s business experience includes board of director service, supply chain, income statement management, manufacturing, and procurement in multiple geographies. Mr. Cuffie earned his Masters Degree in management from Renssalaer Polytechnic Institute and is a member of the Executive Leadership Council, the Stanford University Graduate School of Business, Global Supply Chain Forum, the Institute for Supply Chain Management, and the procurement 50 cohort of the World 50. While at Salesforce, Craig was an executive sponsor of BOLDforce and AbilityForce, Salesforces’ Employee Resource Groups focused on Black employees and employees with disabilities, respectively. Mr. Cuffie is a frequent speaker on Diversity and Inclusion, its value and impact to corporate America and society. Director Qualifications: Mr. Cuffie’s extensive financial and operational expertise, as well as international leadership and prior board experience, provides him with wide-ranging knowledge and experience. His professional involvement in various capacities during his career enabled Craig to gain experience in many areas including finance, organizational development, financial planning, and corporate governance. Mr. Cuffie’s substantial financial knowledge and leadership experience enable him to make valuable contributions to our Board of Directors and on the Audit Committee. |
Nominees for Election to the Board of Directors
| | Donald J. McNamara, 70 Independent Director Director Since: June 1999 Committees: Chair of the Audit Committee Other Directorships: Crow Holdings and A&O Hotels & Hostels Mr. McNamara is the founder of The Hampstead Group LLC, a private equity investor based in Dallas, Texas, and has served as its Chairman since its inception in 1989. He has over 35 years of successful investment experience, including Bass Brothers Enterprises, Marriott Corporation, and JMB Realty. Mr. McNamara currently serves as a Senior Advisor to TPG’s real estate platform, which includes $8 billion of assets collectively in its equity and debt platforms. Mr. McNamara received an undergraduate degree in architecture from Virginia Tech in 1976 and an MBA from Harvard University in 1978. Director Qualifications: Mr. McNamara’s experience in private equity provides him with considerable expertise in financial and strategic matters. This expertise enables him to make valuable contributions to the Company in the areas of raising capital, capital deployment, acquisitions and dispositions, and other major financial decisions. This experience also qualifies Mr. McNamara to serve as the Audit Committee financial expert. Don’s involvement with other entities throughout his career provides him with wide-ranging perspective and experience in the areas of management, operations, and strategy. In addition, Mr. McNamara has a meaningful understanding of our operations having served on our Board of Directors for over 20 years, enabling him to make contributions to our strategy, innovation, and long-range plans. |
Nominees for Election to the Board of Directors
| | Joel C. Peterson, 76 Director Director Since: May 1997 Committees: None Other Directorships: Packsize Mr. Peterson has been on the faculty of the Graduate School of Business at Stanford University since 1992, teaching courses in real estate investment, entrepreneurship, and leadership. Joel is the former Chairman of the Board of Overseers at the Hoover Institution at Stanford and started his second term as an Overseer in the fall of 2021. Mr. Peterson formerly served as the Chairman of the Board of JetBlue Airways, and is the Founding Partner and Chairman of Peterson Partners, a Salt Lake City-based investment management firm which has invested in over 200 companies through 13 funds in four primary asset classes: growth-oriented private equity, venture capital, real estate, and search funds. Prior to Stanford Business School and founding Peterson Partners, Mr. Peterson was Chief Executive Officer of Trammell Crow Company, then the world’s largest private commercial real estate development firm. Mr. Peterson earned an MBA from Harvard University and received his bachelor’s degree from Brigham Young University. Director Qualifications: Mr. Peterson brings chief executive leadership, extensive financial experience, and strong academic skills to our Board of Directors. Mr. Peterson’s roles in executive leadership, financial management, and private equity enable him to make key contributions in the areas of leadership, raising capital, capital deployment, strategy, operations, and growth. His experience with Peterson Partners and teaching courses on entrepreneurship adds valuable knowledge in growth and long-term strategic planning as well as accessing and deploying capital. Joel also has a deep understanding of the Company’s operations and background with nearly 27 years of experience on our Board of Directors. Further, prior to the FranklinCovey merger, Mr. Peterson served as a director of Covey Leadership Center from 1993 to 1997. |
Nominees for Election to the Board of Directors
| | Nancy Phillips, 55 Independent Director Director Since: May 2020 Committees: Chair of the Organization and Compensation Committee and member of the Corporate Governance and Nominating Committee, and Growth Committee Other Directorships: None Since December 2019, Ms. Phillips has served as Executive Vice President, Chief People Officer, at Paramount, overseeing the combined company’s global human resources organization. Nancy is responsible for driving Paramount’s human resources strategy and delivering global programs to create a positive employee experience and a culture of high performance. Ms. Phillips also oversees the company’s Human Resource (HR) business partners, talent acquisition, organizational effectiveness, learning and development, total rewards, people analytics, HR operations, and global security. Ms. Phillips previously served as the Executive Vice President, Chief Human Resources Officer at Nielsen from January 2017 to December 2019, as well as on the Nielsen Foundation’s Board of Directors. Under her leadership, Nielsen was ranked No. 2 on Forbes’ “Employers for Diversity” list and received multiple “Great Place to Work” awards globally. Prior to joining Nielsen, Nancy was Chief Human Resources Officer of Broadcom during 2015 and 2016 prior to its sale to Avago Technologies, the largest technology deal in history at that time. Before joining Broadcom, from 2010 to 2014, she led the HR organization for Hewlett Packard’s Imaging and Printing Group, as well as HP’s Enterprise Services business group, a global organization with more than 120,000 employees. Prior to her experience at HP, Ms. Phillips served as Executive Vice President and Chief Human Resources Officer for Fifth Third Bancorp, a diversified financial services company with $133 billion in assets from 2008 to 2010. Nancy also spent 11 years with the General Electric Company serving in a variety of HR leadership roles. Nancy is active in a range of professional associations, and in 2006 received a YWCA TWIN (Tribute to Women) award in Silicon Valley for her commitment to diversity and inclusion. A member of the Florida Bar, she began her professional career as an attorney. Ms. Phillips earned a B.A. in English from the University of Delaware and a J.D. from Samford University in Birmingham, Alabama. Director Qualifications: Ms. Phillips’ extensive experience in human resource management provides our Board with expertise in human capital management and compensation, which provides her with the knowledge to serve effectively on our Organization and Compensation and Corporate Governance and Nominating Committees. Nancy’s legal background provides additional insight and expertise to regulatory and other potentially complex human resource matters. |
Nominees for Election to the Board of Directors
| | Efrain Rivera, 66 Independent Director Director Since: September 2023 Committees: Audit Committee Other Directorships: Jones Lange LaSalle, Inc. Mr. Rivera was appointed to our Board of Directors on September 27, 2023. Since June 2011, Mr. Rivera has served as Senior Vice-President and Chief Financial Officer at Paychex. During Mr. Rivera’s tenure, Paychex has grown from $2 billion in revenue to approximately $5 billion and has transformed into a leading Human Capital Management firm with a market value approaching $45 billion. Prior to joining Paychex, Efrain served as Corporate Vice President and Chief Financial officer at Bausch & Lomb, where his responsibilities ranged from managing commercial operations in Latin America and Canada, to leading finance for the global vision care division, to overseeing the firm’s finance function. Mr. Rivera holds a Doctorate of Management from Weatherhead School of Management at Case Western Reserve University, an MBA from the William E. Simon Graduate School of Business at the University of Rochester, and a Juris Doctor degree from New York University. Mr. Rivera is a certified management accountant (CMA) and certified in financial management (CFM). Mr. Rivera currently serves on the Board of Directors of Jones Lange LaSalle, Inc. In 2022 Mr. Rivera was named a Business Icon by The Rochester Business Journal. Director Qualifications: Mr. Rivera’s extensive financial background and expertise, combined with his international leadership experience, provides him with wide-ranging knowledge and experience. His education and professional experience in various capacities enabled Mr. Rivera to gain experience in many areas including accounting, finance, internal control, financial planning, organizational development, strategic planning and corporate governance. Mr. Rivera’s substantial financial knowledge and leadership experience qualify him to serve as an audit committee financial expert and enable him to make valuable contributions to our Board of Directors and Audit Committee. During fiscal 2023, the Company engaged an independent placement firm to identify potential candidates for our Board. Mr. Rivera was recommended by the independent placement firm. |
Nominees for Election to the Board of Directors
| | Derek C.M. van Bever, 66 Independent Director Director Since: September 2019 Committees: Chair of the Growth Committee and member of the Audit Committee, and Corporate Governance and Nominating Committee Other Directorships: None Mr. van Bever is a Senior Lecturer of Business Administration in the General Management Unit at the Harvard Business School and is a director of the Forum for Growth and Innovation. Derek teaches courses in the Harvard MBA program, including Building and Sustaining a Successful Enterprise, and Leadership and Corporate Accountability. Mr. van Bever is co-chair of Harvard’s Executive Education course in Disruptive Innovation and is co-director of the Harvard Macy Institute’s Leading Innovation in Health Care and Education course. In 1983, Derek co-founded The Advisory Board Company, a global research, consulting, and technology firm serving hospital and university executives, and was chief research officer of The Corporate Executive Board, the world’s largest executive advisory network. Mr. van Bever’s research interests include the challenges facing leading companies seeking discontinuous renewal through market-creating innovation, as well as the new models for uniting faith, leadership, and corporate mission that are emerging in the economy. With his colleague Matthew S. Olsen, Derek is co-author of the book, Stall Points (Yale University Press, 2008), a quantitative and qualitative analysis of the growth experience of companies in the Fortune 100 across the past half-century. A 2008 Harvard Business Review article authored by Mr. van Bever on the book entitled When Growth Stalls won the McKinsey Award for that year. Derek received his Masters of Business Administration from the Harvard Business School in 1988, and is a 2011 graduate of Harvard Divinity School (HDS). Mr. van Bever is a member of the HDS Dean’s Council and recently received the 2019 Dean’s Leadership Award for his leadership in the school’s strategic planning efforts around its 2016 bicentennial. Director Qualifications: Mr. van Bever brings experience in thought leadership and expertise in business growth, innovation, subscription businesses, and strategy to our Board of Directors. In his role as chief research officer for The Corporate Executive Board, Derek directed teams studying best practices in strategy, innovation, talent management, finance, and governance in the large-corporate sector worldwide. The Company believes Mr. van Bever’s experience, thought leadership, and research abilities make him a valuable addition to its Board of Directors. |
Nominees for Election to the Board of Directors
| | : Mr. Walker’s extensive experience with Franklin Covey and leadership experience as our Chief Executive Officer provide him with significant knowledge and valuable insights regarding our industry, sales strategy, content, operations, and strategic priorities. His education and professional experience enable Mr. Walker to provide valuable contributions to the Board and to facilitate effective communication between our management and the Board of Directors. Mr. Whitman’s extensive experience in sales and working with clients also provides him with the knowledge to make valuable contributions to the Board of Directors in the areas of strategy, growth, technology deployment, and organizational development. | | | Paul S. Walker, 48 Director Director Since: July 2023 Committees: None Other Directorships: None Mr. Walker currently serves as the Company’s President and Chief Executive Officer, and was appointed to our Board of Directors effective July 1, 2023. Mr. Walker began his career with the Company in 2000 in the role of business developer, and quickly moved to become a Client Partner and then an Area Director. In 2007, Mr. Walker became General Manager of the North America Central Region. In 2014, Paul assumed responsibility for the Company’s United Kingdom operations in addition to his role as General Manager of the Central Region. In 2016, Mr. Walker relocated to the Company’s Salt Lake City, Utah headquarters where he served as Executive Vice President of Global Sales and Delivery and as President of the Company’s Enterprise Division until November 2019 when he was appointed President and Chief Operating Officer. During his time at Franklin Covey, Paul has led many digital transformation projects, including the transition to the All Access Pass. Mr. Walker graduated from Brigham Young University with a Bachelor of Arts in Communications. Director Qualifications: Mr. Walker’s extensive experience with Franklin Covey and leadership experience as our Chief Executive Officer provide him with significant knowledge and valuable insights regarding our industry, sales strategy, content, operations, and strategic priorities. His education and professional experience enable Mr. Walker to provide valuable contributions to the Board and to facilitate effective communication between our management and the Board of Directors. Mr. Walker’s extensive experience in sales and working with clients also provides him with the knowledge to make valuable contributions to the Board of Directors in the areas of strategy, growth, technology deployment, and organizational development. |
Nominees for Election to the Board of Directors
| | Robert A. Whitman, 70 Chairman of the Board of Directors Director Since: May 1997 Committees: None Other Directorships: None Mr. Whitman has served as the Chairman of the Board of Directors since June 1999 and served as Chief Executive Officer of the Company from January 2000 through August 2021. Mr. Whitman currently serves as Chairman of the Board of Directors. Mr. Whitman previously served as a director of the Covey Leadership Center from 1994 to 1997. Prior to joining us, Mr. Whitman served as President and Co‑Chief Executive Officer of The Hampstead Group LLC from 1992 to 2000 and is a founding partner at Whitman Peterson. Mr. Whitman received his Bachelor of Arts Degree in Finance from the University of Utah and his MBA from the Harvard Business School. Director Qualifications: Mr. Whitman’s leadership experience as the Chief Executive Officer of the Company for 21 years and his in-depth knowledge of our strategic priorities and operations enable him to provide valuable contributions to the Board of Directors in his role as Chairman of our Board. Mr. Whitman’s extensive experience in finance, private-equity investing, and leadership also provides him with the knowledge to make valuable contributions to the Board of Directors in the areas of finance, raising capital, and capital deployment. |
The Organization and Compensation Committee
| • | review periodically the form and amount of non-employee director compensation and make recommendations to our Board with respect thereto; and |
Fiscal 2023 Director Compensation
Fiscal 2023 Director Compensation Director compensation is set by the Organization and Compensation Committee and approved by the Board of Directors and our management does not play a role in setting Board compensation. During fiscal 2023, we compensated members of the Board of Directors using a combination of cash and equity-based compensation. Board policy requires that each director who is not an employee of the Company maintain beneficial ownership of the Company’s common stock and/or unvested stock units, equal in value to at least five times the annual Board cash retainer during their tenure on the Board. New directors have up to five years of service on the Board in which to meet this ownership requirement. Paul S. Walker, our current CEO, does not currently receive compensation for his service on the Board. Robert A. Whitman, our Executive Chairman and Chairman of the Board of Directors and previous CEO, did not receive compensation for his service as a director in fiscal 2023. Following Mr. Whitman’s September 1, 2023 transition to serving solely as Chairman of the Board, Mr. Whitman will receive only receive compensation for his service on the Board. The fiscal 2023 compensation received by Mr. Walker and Mr. Whitman is shown in the Fiscal 2023 Summary Compensation Table, contained in the “Executive Compensation” section of this proxy statement. During fiscal 2023, the other directors were paid the following amounts for services provided:
Fiscal 2023 Director Compensation
| Compensation Element | Amount | | Annual restricted stock award | $120,000 | | Annual cash retainer | 65,000 | | Committee retainer, paid for service on each committee | 10,000 | | Lead independent director annual retainer | 30,000 | | Audit committee chair annual retainer | 15,000 | | Compensation committee chair annual retainer | 10,000 | | Nominating committee chair annual retainer | 5,000 |
Fiscal 2023 Director Compensation
We reimbursed the Directors for their out-of-pocket travel and related expenses incurred while attending Board and committee meetings.
Fiscal 2023 Director Compensation Table
Fiscal 2023 Director Compensation Table
Fiscal 2023 Director Compensation Table
| A | B | C | D | E | F | G | H | | Name | Fees earned or paid in cash ($) | Stock Awards(4) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in pension value and nonqualified deferred compensation earnings ($) | All other Comp ($) | Total ($) | | Anne H. Chow (1) | 130,000 | 120,000 | - | - | - | 12,000 | 262,000 | | Craig Cuffie | 95,000 | 120,000 | - | - | - | - | 215,000 | | Dennis G. Heiner(2) | 7,500 | - | - | - | - | - | 7,500 | | Donald J. McNamara | 90,000 | 120,000 | - | - | - | - | 210,000 | | Joel C. Peterson | 65,000 | 120,000 | - | - | - | - | 185,000 | | Nancy Phillips | 105,000 | 120,000 | - | - | - | - | 225,000 | | Efrain Rivera(3) | - | - | - | - | - | - | - | | Derek C.M. van Bever | 100,000 | 120,000 | - | - | - | - | 220,000 | | Paul S. Walker | - | - | - | - | - | - | - | | Robert A. Whitman | - | - | - | - | - | - | - |
Fiscal 2023 Director Compensation Table
Amounts reported in column C represent the fair value of stock-based compensation granted to each non-employee member of the Board of Directors. All Board of Director unvested stock awards are made annually in January following the Annual Meeting and have one-year vesting terms. In January 2023, each non-employee member of the Board received an unvested stock award of 2,647 shares that had a fair value of $120,000. The number of shares awarded to each member of the Board of Directors was determined by dividing the fair value of the share award by $45.34 per share, which was the closing price of our common stock on the date that the award was granted. At August 31, 2023, the directors held a total of 15,882 shares of unvested stock. For further information on the stock-based compensation awards presented in Column C, refer to Note 13 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023 as filed with the SEC on November 13, 2023.
Fiscal 2023 Director Compensation Table
| (1) In addition to compensation received for service on our Board of Directors, Ms. Anne Chow may also deliver speeches and presentations on our behalf. During fiscal 2023, Ms. Chow presented at one event and received $12,000 in additional compensation, which is shown in column G on the Director Compensation Table above. |
Fiscal 2023 Director Compensation Table
| (2) Mr. Heiner retired from our Board of Directors in fiscal 2023 and did not stand for election at our Annual Meeting of Shareholders held on January 20, 2023. |
Fiscal 2023 Director Compensation Table
| (3) Mr. Rivera was appointed to our Board of Directors on September 27, 2023 and therefore did not receive any compensation during fiscal 2023. |
Fiscal 2023 Director Compensation Table
| (4) At August 31, 2023, the aggregate number of unvested stock awards held by each current non-employee director was as follows: Anne H. Chow, 2,647 shares; Craig Cuffie, 2,647 shares; Donald J. McNamara, 2,647 shares; Joel C. Peterson, 2,647 shares; Nancy Phillips, 2,647 shares; Derek C.M. van Bever, 2,647 shares; and all directors as a group, 15,882 shares. |
Fiscal 2024 Director Compensation
Fiscal 2024 Director Compensation Effective September 1, 2023, Robert A. Whitman transitioned from his roles of Executive Chairman and Chairman to serve solely as Chairman of the Board of Directors. Following this transition, Mr. Whitman will only receive compensation associated with his service on the Board of Directors. Mr. Whitman will receive an annual cash retainer of $190,000 for his service as Chairman and will receive the same compensation, including equity compensation, as the other Board members for services provided. No other changes were approved for fiscal 2024 Board of Director compensation.
Shareholder-Minded Compensation Practices
| • | Stock Ownership Guidelines – Our stock ownership guidelines require an ownership threshold of five times base salary for our CEO, three times base salary for our CFO, and two times base salary for our other NEOs. Each NEO is targeted to reach the applicable threshold within five years of the policy becoming applicable to the NEO and from the date the NEO first has shares awarded as part of their annual compensation. NEOs are prohibited from selling any shares until after these established guidelines are met. The Compensation Committee annually reviews executives’ progress toward meeting these guidelines. For fiscal 2023, the stock ownership of Mr. Young, Mr. Whitman, and Mr. Covey met or exceeded the applicable threshold, and Mr. Walker and Ms. Colosimo are also currently expected to meet their ownership threshold within the allotted time. |
Shareholder-Minded Compensation Practices
| • | No Employment Agreements for NEOs and Limited Change-in-Control Benefits – The Company does not enter into employment agreements with its NEOs and has a change-in-control policy for its NEOs that provides for a specific potential change-in-control severance benefit of only one times total targeted annual cash compensation without any excise tax gross-ups and potential acceleration of all the NEOs’ outstanding equity awards. Our NEOs are subject to the same general (non-change-in-control) severance policies as all Company employees. |
Shareholder-Minded Compensation Practices
| • | Pay-for-Performance Awards – The fiscal 2023 STIP cash awards and LTIP performance-based equity awards were designed to incentivize specific achievement levels in our results of operations and pay out only if those specified operating improvements are achieved. |
Guiding Philosophy, Principles and Objectives of our Executive Compensation Program
| • | Encourage Long-Term Company-Wide Focus: We believe that compensation should encourage and reward both the achievement of annual objectives and longer-term, Company-wide performance improvement. We use a service-based and performance-based award program to focus NEO efforts on long-term growth in shareholder value. We believe that paying a significant portion of variable compensation to our NEOs in the form of equity-based compensation that vests over a period of time, based on performance, also encourages a long-term, Company-wide focus. Value is realized through delivering results today, but in a way that builds the foundation for delivering even stronger results in the future. We believe that this practice will lead to our NEOs having a considerable investment in our shares over time. This investment in turn advances both a culture of teamwork and partnership and encourages a stewardship mentality for the Company among our key leaders. |
Guiding Philosophy, Principles and Objectives of our Executive Compensation Program
| compensation program for attracting and retaining talent, the Compensation Committee generally considers the competitive market for talent. We believe that our compensation programs should enable us to attract and retain talented people and incentivize them to contribute their finest talents to achieving our objectives. We are pleased that, even in the context of the very demanding results they must achieve, our executive officers have an average tenure of over 19 years with our Company (ranging from one to 37 years). |
Analysis of Fiscal 2023 Compensation Decisions and Actions
Management Input Regarding Compensation Decisions: Our Compensation Committee meets in executive session to discuss the performance of our CEO and each of the other NEOs. Our CEO submitted year-end variable compensation calculations (certified by our CFO) and recommendations to the Committee for our other executives, including the NEOs. These calculations and recommendations precisely followed the payout guidelines established for incentive compensation relating to financial performance. General Market Assessment: Our Compensation Committee evaluates our NEO compensation program at a high level against market practices. In fiscal 2023, the Compensation Committee asked Mercer, the Committee’s compensation consultant, to assess our NEO compensation program, identify considerations that could inform compensation decisions, and advise as to current market practices, trends, and plan designs. Mercer reviewed data from its own research and databases and used this information primarily as supplemental data to assist the Compensation Committee in understanding current market practices related to executive compensation. Mercer has advised us that our compensation program (1) contains features that reinforce significant alignment with shareholders and a long-term focus, (2) blends subjective assessment and policies in a way that addresses known and perceived risks at levels consistent with market compensation for similar-sized and comparable professional services and content companies, and (3) has been aligned with corporate performance. The Compensation Committee has assessed Mercer’s independence, as required under NYSE rules, and considered and assessed all relevant factors, including those required by the SEC that could give rise to a potential conflict of interest during fiscal 2023. The Compensation Committee did not identify any conflicts of interest raised by the work performed by Mercer. In making pay decisions for fiscal 2023, the Compensation Committee considered how executive compensation should drive desired performance toward our business objectives. The Compensation Committee also considered the specific business opportunities and challenges facing the Company compared to those of our competitors and similar-sized companies. However, the Compensation Committee did not specifically benchmark elements of compensation when making its fiscal 2023 executive compensation decisions. Finally, the Compensation Committee generally considered the past performance of our NEOs, including performance against previous individual and corporate objectives, expected contribution to future corporate objectives and whether the NEOs’ performance was achieved consistent with our governing values. The Compensation Committee made final judgments regarding the appropriate compensation level for each NEO based on these additional inputs. The following peer group was used for fiscal 2023. These companies were selected based on size, industry, and types of professional services offered, and remained the same as the peer group used in fiscal 2022. Annual revenues for the peer group, which is one of the factors considered in selecting the peers, range from approximately $100 million to $1.0 billion. The data for this peer group was regressed due to the overall revenue of the peer group, to be more comparable with our revenue. With our fiscal 2023 revenues totaling $280.5 million, we believe with the previously stated regression, this peer group is appropriate for comparative purposes. This peer group is one of many tools used by the Compensation Committee for assessing executive compensation and was comprised of the following companies for fiscal 2023:
Analysis of Fiscal 2023 Compensation Decisions and Actions
Base Salaries The Company pays a base salary to each of our NEOs to provide a base level of fixed income for services rendered. The Compensation Committee annually reviews base salary market data and if appropriate, will adjust base salaries to remain at competitive levels. The Committee continues to emphasize performance-based variable pay as the primary means by which NEOs may increase their total compensation absent increases in responsibilities. Based on a compensation plan made by the Compensation Committee for Mr. Walker when he became CEO, Mr. Walker’s annual base salary rate was increased from $500,000 to $575,000 effective November 14, 2022. The Compensation Committee determined not to increase the base salaries for the other NEOs because their salaries were determined to be competitively positioned. For specific information about the NEOs’ base salaries for fiscal 2023, see the “Salary” column in the “Fiscal 2023 Summary Compensation Table” below. Annual Performance-Based Variable Pay Fiscal 2023 Performance-Based Cash Variable Pay Plan: The Company provides annual performance-based cash incentive opportunities to link our NEOs’ interests to specific financial and strategic goals established by the Compensation Committee. In fiscal 2023, this STIP for our NEOs included two components for the payout calculation: (1) annual financial performance objectives (70% of payout) and (2) metric-based executive team performance objectives (30% of payout). Effective September 1, 2022, Mr. Walker’s target STIP payout opportunity was increased to $460,000 based on a compensation plan approved by the Compensation Committee. The target STIP payout opportunities at 100% for our NEOs, determined by the Compensation Committee based on the considerations described above, were: $460,000 for Mr. Walker; $235,000 for Mr. Young; $200,000 for Mr. Whitman; $220,000 for Mr. Covey and $250,000 for Ms. Colosimo. The STIP reinforces our strong pay-for-performance philosophy and rewards the achievement of specific business and financial goals during the fiscal year. STIP opportunities can range from 0% to 200% of target based on performance. Financial Performance Component (70%): The threshold necessary for NEOs to earn 100% of the financial performance component of their target STIP payout in fiscal 2023 was an increase in Qualified Adjusted EBITDA to $45.0 million, compared with the $30.0 million goal in the previous fiscal year. Qualified Adjusted EBITDA is calculated as reported Adjusted EBITDA which is adjusted for the impact of foreign exchange and potentially other items. The Company uses Qualified Adjusted EBITDA in its analysis and decision-making because it provides information that facilitates consistent internal comparisons to the historical operating performance of prior periods, and we believe the measure provides greater transparency to evaluate operational activities and financial results. Adjusted EBITDA is also the primary measure by which internal business segment performance is evaluated and is regularly communicated to our analysts. Refer to the table in Appendix B for the reconciliation of Adjusted EBITDA to consolidated net income (loss), a comparable GAAP financial measure. In fiscal 2023, Qualified Adjusted EBITDA was $49.5 million, which exceeded the $48.0 million maximum threshold, and was 17% higher than the $42.2 million of Adjusted EBITDA achieved in fiscal 2022. This performance resulted in a payout of 200% of the 70% financial performance component (a maximum payout of the financial performance component of the STIP). The following table shows the potential payouts to our NEOs based on the degree of attainment of fiscal 2023 STIP Qualified Adjusted EBITDA objectives (and assuming metric-based executive team performance objectives were achieved). Pro-rata calculations are on a straight-line basis between the performance levels.
Analysis of Fiscal 2023 Compensation Decisions and Actions
| Potential payouts for fiscal 2023 STIP Qualified Adjusted EBITDA objectives (70%) | | | | | | Qualified Adjusted EBITDA less than $39.0 million and not meeting performance objectives | If Qualified Adjusted EBITDA as calculated was > $39.0 million and< $45.0 million and meeting performance objectives | Targeted Qualified Adjusted EBITDA of $45.0 million and meeting performance objectives | If Qualified Adjusted EBITDA (including STIP expense) was > $45.0 million and < $48.0 million and meeting performance objectives | Qualified Adjusted EBITDA (including STIP expense) equal to or greater than $48.0 million and meeting performance objectives | | 0% | Pro-rata calculation | 100% | Pro-rata calculation | 200% |
Analysis of Fiscal 2023 Compensation Decisions and Actions
Performance Objectives Component (30%): The performance objectives component of the STIP represents 30% of the STIP award. Goals under this component are objectives with specific measures related to the transition to a subscription-based business model as well as recurring All Access Pass revenue. Each key strategic goal is individually weighted based on difficulty and on the effort required to achieve the goal, with most goals weighted between 25% and 35% of this portion of the STIP award opportunity. We believe that the goals established for each NEO were “stretch” goals tied to over-achieving compared to our annual plan in support of the Company’s long-term strategy of building its subscription business. Each goal was typically linked to what we refer to internally and was previously mentioned as our “Wildly Important Goals” which are cascaded throughout the Company, and progress toward each of these goals was tracked regularly. As a point of context as to the rigor of these non-disclosed goals, in recent years, we have achieved various levels of payout under this 30% component: 95% achievement in fiscal 2022; 100% achievement in fiscal 2021; 48% achievement in fiscal 2020; 84% achievement in fiscal 2019; and 100% achievement in fiscal 2018. Based on performance against these objectives, and the performance of the Company’s subscription business, NEOs were paid 43.3% of the performance objectives component in fiscal 2023. The Adjusted EBITDA portion of the payout combined with the achievement of 43.3% of the 30% performance objective component resulted in a total payout of 183% of STIP for fiscal 2023. These payouts are reflected in the “Fiscal 2023 Summary Compensation Table” found in this document under the heading “Non-Equity Incentive Plan Compensation.” For more information about the NEOs’ award opportunities under the STIP for fiscal 2023, refer to the “Fiscal 2023 Grants of Plan-Based Awards” table below. No other annual variable cash compensation awards were earned by the NEOs during fiscal 2023. Equity Compensation We believe that granting long-term equity awards over the years has created a strong alignment of interests between NEOs and shareholders, as reflected in our strong financial performance from fiscal 2010 through fiscal 2023. The same program and philosophy were reflected in our use of LTIP equity-based awards in fiscal 2023. Fiscal 2023 LTIP – Service-Based and Performance-Based Equity Grants: A significant portion of our NEOs’ total targeted compensation for fiscal 2023 was provided in the form of performance-based stock awards that vest upon the achievement of key financial objectives included in our longer-term financial plan over a period of years. If the minimum threshold performance target is not achieved within the allotted time frame, then the performance-based award tranche is forfeited, and no shares are awarded to participants. A smaller portion of our NEOs’ total targeted compensation for fiscal 2023 was provided in the form of service-based stock awards that vest upon the completion of three years of service. During fiscal 2023, the Compensation Committee granted performance-based and service-based equity awards to our NEOs. Shares may be earned under the fiscal 2023 LTIP award following the completion of a three-year measurement/service period, which ends on August 31, 2025, as described below:
Analysis of Fiscal 2023 Compensation Decisions and Actions
| (1) 75% percent of the fiscal 2023 LTIP award is based on Qualified Adjusted EBITDA performance, as defined earlier. We believe that Qualified Adjusted EBITDA is one of the most important measures of our financial results and is important in both the short- and long-term. Therefore, this measure is used in both our STIP and LTIP award plans. The Compensation Committee sets the Qualified Adjusted EBITDA award thresholds at levels which are expected to peak in the final year of the award measurement period. Qualified Adjusted EBITDA for purposes of the fiscal 2023 LTIP is based on the highest level of Qualified Adjusted EBITDA achieved for any rolling four-quarter period during the three-year measurement period ending August 31, 2025; and |
Analysis of Fiscal 2023 Compensation Decisions and Actions
| (2) 25% of the fiscal 2023 LTIP award vests after three years of service, which will vest, if at all, on August 31, 2025. |
Analysis of Fiscal 2023 Compensation Decisions and Actions
Consistent with prior years, the performance-based LTIP tranche has a 50% minimum performance threshold, a 100% expected (or target) threshold, and a 200% maximum limit threshold. The number of shares awarded in settlement of the performance-based tranche is a straight-line pro-rata calculation between the 50% minimum threshold and the 100% target, and a different straight-line pro-rata calculation between the 100% target and the 200% maximum threshold. Since the vesting of the performance-based LTIP award tranche has a measurement period of three years, as of August 31, 2023, the fiscal 2023 performance-based LTIP award remained unvested. The performance targets for the fiscal 2023 LTIP award (and the corresponding payout levels for achieving the targets) are as follows: Qualified Adjusted EBITDA Performance Measures
Analysis of Fiscal 2023 Compensation Decisions and Actions
We believe that our LTIP equity-based program aligns a significant portion of our executive compensation with improving performance, which increases intrinsic value to our shareholders. For further information regarding our specific LTIP awards and other share-based compensation instruments (including applicable performance achievement), please refer to the notes to our financial statements found in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023, and the footnotes to the Outstanding Equity Awards at Fiscal 2023 Year-End table that are provided below. For more information about the NEOs’ award opportunities under the LTIP for fiscal 2023, see the “Fiscal 2023 Summary Compensation Table” and the “Fiscal 2023 Grants of Plan-Based Awards” table below. On August 31, 2023, the performance-based tranches of the fiscal 2019 LTIP award and the time-based tranche and performance-based tranche of the fiscal 2021 LTIP award vested to the award recipients. Due to the impact of the COVID-19 pandemic and uncertainties related to the economic recovery from the pandemic, on October 2, 2020, the Compensation Committee lengthened the service period for the performance-based tranches of the fiscal 2019 LTIP award by two years. The end of the measurement period was extended from August 31, 2021 to August 31, 2023, and the Qualified Adjusted EBITDA thresholds were each increased by $2.0 million from the amounts originally approved. The award thresholds for the maximum number of shares to vest in the fiscal 2019 LTIP were $44.0 million for Qualified Adjusted EBITDA and $185.0 million for subscription sales. The award threshold for the maximum payout of the performance tranche of the fiscal 2021 LTIP award was $47.0 million of Qualified Adjusted EBITDA. Based on the results achieved through the end of the measurement period on August 31, 2023, the maximum number of shares of the performance-based tranches of these LTIP awards were earned by the award participants. Refer the table entitled “Fiscal 2023 Option Exercises and Stock Vested” for further information on the number of shares earned by the NEOs from these two LTIP awards. Qualified Retirement Benefits: Each of our NEOs participates in our 401(k) plan, which is our tax-qualified retirement plan available to all eligible U.S. associates. We match participant contributions dollar-for-dollar on the first one percent of salary contributed to the 401(k) plan and 50 cents on the dollar for the next four percent of salary contributed. Our match for executives is the same received by all associates who participate in the 401(k) plan. Contributions to the 401(k) plan from highly compensated employees are currently limited to a maximum of 12% of their compensation, subject to statutory limits. Other Benefits: The Compensation Committee evaluates the market competitiveness of the executive benefit package to determine the most critical and essential benefits necessary to retain executives. Based on market information received from Mercer, the Compensation Committee determined to include executive life insurance for certain NEOs. In addition, several years ago, the Company agreed to provide Mr. Whitman, our former CEO who served as Executive Chairman in fiscal 2023, with supplemental disability insurance. For fiscal 2023, the Compensation Committee was provided with the estimated value of these items (which value is included in the Fiscal 2023 Summary Compensation Table below), and determined, as in prior years, that these amounts were not material in determining our NEOs’ fiscal 2023 compensation.
Analysis of Fiscal 2023 Compensation Decisions and Actions
| • | Supplemental Disability Insurance: The Company has provided Mr. Whitman with long-term disability insurance which, combined with our current group policy, provides, in the aggregate, monthly long-term disability benefits equal to about 100 percent of his fiscal 2023 target cash compensation. This Company-provided policy for Mr. Whitman ended on September 1, 2023 when he transitioned from his roles as Executive Chairman and Chairman to serve solely as the Chairman of the Board. |
Analysis of Fiscal 2023 Compensation Decisions and Actions
Severance Policy: We have implemented a severance policy to establish, in advance, the appropriate treatment for terminated NEOs and to help ensure market competitiveness. The severance policy uses the same benefit formula for our NEOs as it uses for all our associates. We do not “gross-up” severance payments to compensate for taxes. For more information about the terms of this severance policy, see the section below entitled “Executive Compensation – Potential Payments Upon Termination or Change-in-Control.” Employment Agreements and Change-in-Control Severance Agreements: We do not have employment agreements with any of our NEOs, but we are a party to change-in-control severance agreements with each of our NEOs. However, consistent with our conservative approach, the severance amount is only one times the executive’s total targeted annual cash compensation without any excise tax gross-ups and potential acceleration of all the NEOs’ outstanding equity awards. For more information about the terms of these change-in-control severance agreements, see the section below entitled “Executive Compensation – Potential Payments Upon Termination or Change-in-Control.”
Fiscal 2023 Summary Compensation Table
Fiscal 2023 Summary Compensation Table
Fiscal 2023 Summary Compensation Table
| | | | | | Non-Equity | | | | | | | | Stock | Incentive Plan | All Other | | | Name and | | Salary | Bonus | Awards | Compensation | Compensation | Total | | Principal Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | | Paul S. Walker | 2023 | 546,154 | - | 1,304,459 | 845,107 | 17,527 | 2,713,247 | | President and CEO | 2022 | 497,115 | - | 853,235 | 744,375 | 21,281 | 2,116,006 | | | 2021 | 425,000 | - | 425,000 | 569,500 | 15,408 | 1,434,908 | | Stephen D. Young | 2023 | 350,000 | - | 350,052 | 431,740 | 17,869 | 1,149,661 | | CFO | 2022 | 350,000 | - | 398,220 | 466,475 | 22,670 | 1,237,365 | | | 2021 | 350,000 | - | 350,000 | 470,000 | 12,756 | 1,182,756 | | Robert W. Whitman | 2023 | 200,000 | - | 1,000,097 | 367,438 | 34,922 | 1,602,457 | | Executive Chairman | 2022 | 214,423 | - | 1,137,679 | 397,000 | 77,230 | 1,826,332 | | | 2021 | 575,000 | - | 1,150,000 | 1,150,000 | 79,251 | 2,954,251 | | M. Sean Covey | 2023 | 330,000 | - | 220,005 | 424,292 | 127,549 | 1,101,846 | | President - Education | 2022 | 327,692 | - | 250,309 | 436,700 | 141,274 | 1,155,975 | | Division | 2021 | 300,000 | - | 200,000 | 400,000 | 132,593 | 1,032,593 | | Jennifer C. Colosimo | 2023 | 375,000 | - | 250,147 | 455,263 | 16,850 | 1,097,260 | | President - Enterprise | 2022 | 375,000 | | 227,555 | 496,250 | 19,453 | 1,118,258 | | Division | | | | | | | |
Fiscal 2023 Summary Compensation Table
Salary: The amounts reported in the “Salary” column represent base salaries paid in cash to each NEO for the fiscal year indicated. Stock Awards: The amounts reported in the “Stock Awards” column for fiscal 2023 represent the aggregate grant date fair value (computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC Topic 718), based on the probable outcome of any applicable performance criteria, excluding the effect of estimated forfeitures, for the stock awards granted to NEOs as LTIP awards during fiscal 2023. The probable outcome of the awards granted during fiscal 2023 with performance conditions were based on the Company meeting the 100% target for the financial performance condition. Assuming the maximum performance level is achieved, the value of each LTIP award in this column would be as follows: Mr. Walker, $2,282,672; Mr. Young, $612,544; Mr. Whitman, $1,750,095; Mr. Covey, $385,010; and Ms. Colosimo, $437,609 (for further information regarding these stock awards and the assumptions made in their valuation, refer to Note 13, Stock-Based Compensation Plans, in our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year that ended on August 31, 2023). Non-Equity Incentive Plan Compensation: The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent the amounts paid to each NEO under the STIP for the fiscal year indicated. Payments are based on achieving strategic objectives established annually and meeting annual financial targets. All Other Compensation: The amounts reported for fiscal 2023 in the “All Other Compensation” column are set forth in the “Fiscal 2023 All Other Compensation Table” below.
Fiscal 2023 Grants of Plan-Based Awards
Fiscal 2023 Grants of Plan-Based Awards The following table sets forth the plan-based equity and cash awards that were granted to our NEOs during fiscal 2023. We granted the following types of awards in fiscal 2023: annual incentive-based cash awards (STIP); LTIP equity awards in the form of performance-based awards; and LTIP equity awards in the form of service-based awards.
Fiscal 2023 Grants of Plan-Based Awards
| | | Estimated Future Payouts | | | | | | All Other | Grant Date | | | | Under Non-Equity Incentive | | | Estimated Future Payouts Under | | | Stock Awards: | Fair Value | | | | Plan Awards | | | Equity Incentive Plan Awards | | | Number of | of Stock and | | | | | | | | | | Shares or | Option | | | | Threshold | Target | Maximum | Threshold | Target | Maximum | Stock Units | Awards(d) | | Name | Grant Date | ($) | ($) | ($) | (#) | (#) | (#) | (#) | ($) | | Mr. Walker | | | | | | | | | | | STIP(a) | 10/14/22 | - | 460,000 | 920,000 | - | - | - | - | - | | LTIP shares(b) | 12/09/22 | - | - | - | 4,384 | 8,768 | 17,535 | - | 415,779 | | LTIP shares(c) | 12/09/22 | - | - | - | - | - | - | 2,923 | 138,609 | | LTIP shares(b) | 10/14/22 | - | - | - | 5,978 | 11,956 | 23,911 | - | 562,530 | | LTIP shares(c) | 10/14/22 | - | - | - | - | - | - | 3,986 | 187,541 | | Mr. Young | | | | | | | | | | | STIP(a) | 10/14/22 | - | 235,000 | 470,000 | - | - | - | - | - | | LTIP shares(b) | 10/14/22 | - | - | - | 2,790 | 5,580 | 11,160 | - | 262,539 | | LTIP shares(c) | 10/14/22 | - | - | - | - | - | - | 1,860 | 87,513 | | Mr. Whitman | | | | | | | | | | | STIP(a) | 10/14/22 | - | 200,000 | 400,000 | - | - | - | - | - | | LTIP shares(b) | 11/10/22 | - | - | - | 7,487 | 14,974 | 29,947 | - | 750,048 | | LTIP shares(c) | 11/10/22 | - | - | - | - | - | - | 4,992 | 250,049 | | Mr. Covey | | | | | | | | | | | STIP(a) | 10/14/22 | - | 220,000 | 440,000 | - | - | - | - | - | | LTIP shares(b) | 10/14/22 | - | - | - | 1,754 | 3,507 | 7,014 | - | 165,004 | | LTIP shares(c) | 10/14/22 | - | - | - | - | - | - | 1,169 | 55,001 | | Ms. Colosimo | | | | | | | | | | | STIP(a) | 10/14/22 | - | 250,000 | 500,000 | - | - | - | - | - | | LTIP shares(b) | 10/14/22 | - | - | - | 1,970 | 3,939 | 7,875 | - | 187,610 | | LTIP shares(c) | 10/14/22 | - | - | - | - | - | - | 1,313 | 62,537 |
Fiscal 2023 Grants of Plan-Based Awards
(a)These amounts relate to the STIP cash awards for the annual performance period ending August 31, 2023. The actual payouts made to the NEOs for this program are shown in the “Non-Equity Incentive Plan Compensation” column of the “Fiscal 2023 Summary Compensation Table” above. (b)These amounts relate to the LTIP equity awards granted to the NEOs under the Franklin Covey Co. 2022 Omnibus Incentive Plan in the form of performance-based awards, which vest based on the highest rolling four-quarter levels of Qualified Adjusted EBITDA achieved during the measurement period, which ends on August 31, 2025. (c)These amounts relate to the LTIP equity awards granted to the NEOs in the form of service-based awards, which are expected to vest on August 31, 2025. (d)The amounts reported in the “Grant Date Fair Value of Stock and Option Awards” column for fiscal 2023 represent the aggregate grant date fair values (computed in accordance with ASC Topic 718), based on the probable outcome of any applicable performance conditions, excluding the effect of estimated forfeitures, for the awards granted to NEOs as LTIP awards. For the performance-based awards, the fair value on the grant date was based on the assumption that the target award would most likely vest to participants.
Outstanding Equity Awards at Fiscal 2023 Year-End
Outstanding Equity Awards at Fiscal 2023 Year-End The following equity awards granted to our NEOs were outstanding as of August 31, 2023.
Outstanding Equity Awards at Fiscal 2023 Year-End
| | | Option Awards | | | Other Stock Awards | | | | | | | | | | | | | Equity Incentive | | | | | | | | | Equity Incentive | Plan Awards: | | | | | | | | | Plan Awards: | Market or | | | | Number of | | | Number of | Market Value | Number of | Payout Value of | | | | Securities | | | Shares or Units | of Shares or | Unearned Shares, | Unearned Shares, | | | | Underlying | Option | | of Stock That | Units of Stock | Units, or Other | Units, or Other | | | | Unexercised | Exercise | Option | Have Not | That Have Not | Rights That Have | Rights That Have | | | Grant | Options (#) | Price | Expiration | Vested | Vested | Not Vested | Not Vested | | Name | Date | Exerciseable | ($) | Date | (#) | ($)(f) | (#) | ($)(f) | | Mr. Walker | 12/09/22(a) | - | - | - | - | - | 17,398 | 742,373 | | | 12/09/22(b) | - | - | - | 2,900 | 123,743 | - | - | | | 10/14/22(a) | - | - | - | - | - | 23,911 | 1,020,282 | | | 10/14/22(b) | - | - | - | 3,986 | 170,083 | - | - | | | 02/04/22(c) | - | - | - | - | - | 27,446 | 1,171,121 | | | 02/04/22(d) | - | - | - | 4,575 | 195,215 | - | - | | | 10/18/19(e) | - | - | - | - | - | 14,699 | 627,206 | | Mr. Young | 10/14/22(a) | - | - | - | - | - | 11,159 | 476,155 | | | 10/14/22(b) | - | - | - | 1,860 | 79,366 | - | - | | | 02/04/22(c) | - | - | - | - | - | 12,809 | 546,560 | | | 02/04/22(d) | - | - | - | 2,135 | 91,100 | - | - | | | 10/18/19(e) | - | - | - | - | - | 14,699 | 627,206 | | Mr. Whitman | 11/10/22(a) | - | - | - | - | - | 29,947 | 1,277,838 | | | 11/10/22(b) | - | - | - | 4,992 | 213,009 | - | - | | | 02/04/22(c) | - | - | - | - | - | 36,595 | 1,561,509 | | | 02/04/22(d) | - | - | - | 6,100 | 260,287 | - | - | | | 10/18/19(e) | - | - | - | - | - | 48,293 | 2,060,662 | | Mr. Covey | 10/14/22(a) | - | - | - | - | - | 7,014 | 299,287 | | | 10/14/22(b) | - | - | - | 1,169 | 49,881 | - | - | | | 02/04/22(c) | - | - | - | - | - | 8,051 | 343,536 | | | 02/04/22(d) | - | - | - | 1,342 | 57,263 | - | - | | | 10/18/19(e) | - | - | - | - | - | 8,400 | 358,428 | | Ms. Colosimo | 10/14/22(a) | - | - | - | - | - | 7,875 | 336,026 | | | 10/14/22(b) | - | - | - | 1,438 | 61,359 | - | - | | | 02/04/22(c) | - | - | - | - | - | 7,319 | 312,302 | | | 02/04/22(d) | - | - | - | 1,220 | 52,057 | - | - | | | 10/18/19(e) | - | - | - | - | - | 1,890 | 80,646 |
Outstanding Equity Awards at Fiscal 2023 Year-End
(a)These awards are LTIP awards granted in the form of performance-based awards in fiscal 2023. Amounts in this table with respect to the fiscal 2023 grant reflect an estimated payout of a number of shares based on the maximum level of achievement with respect to the applicable performance metrics, as performance through August 31, 2023, was above the target performance level. The vesting requirements and general terms of these awards are described in the preceding Compensation Discussion and Analysis.
Outstanding Equity Awards at Fiscal 2023 Year-End
| (b) These awards are LTIP awards granted in the form of time-based, or service-based, awards in fiscal 2023, which are expected to vest on August 31, 2025. The vesting conditions and general terms for this award are described in the preceding Compensation Discussion and Analysis. |
Outstanding Equity Awards at Fiscal 2023 Year-End
| (c) These awards are LTIP awards granted in the form of performance-based awards in fiscal 2022. Amounts in this table with respect to the fiscal 2022 grant reflect an estimated payout of a number of shares based on the maximum level of achievement with respect to the applicable performance metrics, as performance through August 31, 2023, was above the target performance level. The minimum threshold, target, and maximum award levels for this award are $42.0 million, $48.0 million, and $55.0 million, respectively. |
Outstanding Equity Awards at Fiscal 2023 Year-End
| (d) These awards are LTIP awards granted in the form of time-based, or service-based, awards in fiscal 2022, which are expected to vest on August 31, 2024. |
Outstanding Equity Awards at Fiscal 2023 Year-End
| (e) These awards are LTIP awards granted in the form of performance-based awards in fiscal 2020. Amounts in this table with respect to the fiscal 2020 grant reflect an estimated payout of a number of shares based on the maximum level of achievement with respect to the applicable performance metrics, as performance through August 31, 2023, was above the target performance level. These shares vest based on the achievement of specified levels of Qualified Adjusted EBITDA and Subscription and Related Sales. The original minimum threshold, target, and maximum award levels for the Qualified Adjusted EBITDA tranche were $40.0 million, $47.0 million, and $52.0 million, respectively. The minimum threshold, target, and maximum award levels for the Subscription and Related Sales tranche are $165.0 million, $185.0 million, and $205.0 million, respectively. Due to the impact of the COVID-19 pandemic and uncertainties related to the economic recovery from the pandemic, on October 2, 2020, the Compensation Committee lengthened the service period for the performance-based tranches of the fiscal 2020 LTIP award by two years. The measurement period was extended from August 31, 2022 to August 31, 2024, and the Qualified Adjusted EBITDA thresholds were each increased by $2.0 million from the amounts described above. There were no changes to the Subscription and Related Sales tranches. |
Outstanding Equity Awards at Fiscal 2023 Year-End
(f)Values were determined by multiplying the target number of performance awards, or the number of service-based awards, by the closing price per share of the Company’s common stock on the NYSE on August 31, 2023 of $42.67.
Fiscal 2023 Option Exercises and Stock Vested
Fiscal 2023 Option Exercises and Stock Vested
Fiscal 2023 Option Exercises and Stock Vested
| | Option Awards | | Other Stock Awards | | | | Number of | | Number of | | | | Shares | Value | Shares | Value | | | Acquired on | Realized on | Acquired on | Realized on | | | Exercise | Exercise | Vesting | Vesting | | Name | (#) | ($) | (#)(a) | ($)(b) | | Mr. Walker | - | - | 62,340 | 2,660,048 | | Mr. Young | - | - | 57,935 | 2,472,086 | | Mr. Whitman | - | - | 190,354 | 8,122,405 | | Mr. Covey | - | - | 33,107 | 1,412,676 | | Ms. Colosimo | - | - | 25,097 | 1,070,889 |
Fiscal 2023 Option Exercises and Stock Vested
(a)On August 31, 2023 the performance-based tranches of the fiscal 2019 LTIP award and the time-based tranche and performance-based tranches of the fiscal 2021 LTIP award vested to the award recipients. The performance-based tranches of these LTIP awards vested at the maximum levels for the respective awards. (b)The value realized was determined by multiplying the number of shares acquired upon vesting from the 2019 and 2021 LTIP awards by $42.67, which was the closing share price of the Company’s common stock on August 31, 2023.
Potential Payments Upon Termination or Change-in-Control
Potential Payments Upon Termination or Change-in-Control Severance Benefits Upon Termination Without Cause Our NEOs are subject to the same general (non-change-in-control) severance policies as all Franklin Covey associates. Under our severance policy, Company associates, including each of the NEOs, who are terminated involuntarily by the Company without cause receive a lump-sum payment equal to one week’s salary for every $10,000 of their annual total targeted cash compensation. Additionally, we pay COBRA medical and dental premiums for the term of the severance period up to 18 months, as stipulated by COBRA regulations. As a condition of receipt of severance benefits, the NEO must agree to abide by specific non-compete, non-solicitation, and confidentiality requirements. The target total severance payment equals the target annual cash compensation plus target COBRA premiums for the severance period. The amounts below assume that each NEO experienced a qualifying termination of employment on August 31, 2023 (the last business day of fiscal 2023).
CEO Pay Ratio Disclosure
CEO Pay Ratio Disclosure
CEO Pay Ratio Disclosure
| • | The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Company to disclose the ratio of the CEO’s annual total compensation (under the Summary Compensation Table definition) to that of the Company’s median employee (excluding the CEO) using the same methodology. |
CEO Pay Ratio Disclosure
| • | Our CEO’s annual total compensation for fiscal 2023, as disclosed in the Summary Compensation Table, is $2,713,247. The annual total compensation for our median employee is $93,837. The ratio between the CEO’s and median employee’s annual total compensation as of August 31, 2023, is approximately 29:1. |
CEO Pay Ratio Disclosure
| • | To determine the median employee, we prepared a list of our employee population as of June 30, 2023. We included the global employee population (approximately 1,160 employees), whether employed on a full-time, part-time, temporary, or seasonal basis. |
CEO Pay Ratio Disclosure
| • | We established a consistently applied compensation measure consisting of total cash paid from July 1, 2022, through June 30, 2023. We annualized compensation for employees hired during that time. Non-U.S. employee compensation was converted to U.S. dollars based on applicable exchange rates as of June 30, 2023. |
CEO Pay Ratio Disclosure
| • | We believe that the ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of SEC Regulation S-K. Given the rule’s flexibility, the method the Company used to determine the median employee may be different from its peers, so other companies’ CEO pay ratios may not be comparable. |
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE
Pay Versus Performance Table
Pay Versus Performance Table The following table sets forth information concerning: (1) the compensation of our Chief Executive Officers (Mr. Walker and Mr. Whitman) and the average compensation for our other Named Executive Officers, both as reported in the Summary Compensation Table and with certain adjustments to reflect the “compensation actually paid” to such individuals, as defined under SEC rules, for each of the fiscal years ended August 31, 2023, 2022 and 2021 and (2) our cumulative total shareholder return (TSR), the cumulative TSR of our selected peer group (S&P 600 Commercial & Professional Services Index TSR), and the Company’s Net Income and Qualified Adjusted EBITDA for the covered years in accordance with SEC rules for each covered fiscal year:
Pay Versus Performance Table
| (a) | (b) | (b) | (c) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | | | | | | | | Value of Initial Fixed $100 | | | | | | | | | | | | Investment Based on: | | | | | | | | | | | | | S&P 600 | | | | | | | | | Average | Average | | Commercial & | | | | | | | | | Summary | Compensation | | Professional | | | | | Summary | Summary | Compensation | Compensation | Compensation | Actually | | Services Index | | | | | Compensation | Compensation | Actually | Actually | Table Total for | Paid to | Total | Total | | | | | Table Total for | Table Total for | Paid to | Paid to | Non-CEO | Non-CEO | Shareholder | Shareholder | Net | Adjusted | | | Mr. Whitman | Mr. Walker | Mr. Whitman | Mr. Walker | NEOs | NEOs | Return | Return | Income | EBITDA | | Year | ($) | ($) | ($)(1) | ($)(1) | ($)(1) | ($)(1)(2) | ($) | ($)(3) | ($000) | ($000)(4) | | 2023 | - | 2,713,247 | - | 2,922,337 | 1,237,806 | 900,191 | 216.16 | 119.32 | 17,781 | 48,066 | | 2022 | - | 2,116,006 | - | 3,128,299 | 1,334,483 | 2,150,488 | 240.98 | 118.56 | 18,430 | 42,197 | | 2021 | 2,954,251 | - | 15,489,154 | - | 1,140,890 | 4,072,481 | 220.21 | 142.48 | 13,623 | 27,958 |
Pay Versus Performance Table
| (1) The following individuals are our Named Executive Officers for each fiscal year: |
Pay Versus Performance Table
| Year | CEO | Non-CEO NEOs | | 2023 | Paul S. Walker | Stephen D. Young, Robert W. Whitman, M. Sean Covey, and Jennifer C. Colosimo | | 2022 | Paul S. Walker | Stephen D. Young, Robert W. Whitman, M. Sean Covey, and Jennifer C. Colosimo | | 2021 | Robert W. Whitman | Stephen D. Young, Paul S. Walker, M. Sean Covey, and Colleen Dom |
Pay Versus Performance Table
| (2) Compensation actually paid to our NEOs represents the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year, adjusted as follows: |
Pay Versus Performance Table
| | 2021 | | 2022 | | 2023 | | | Adjustments | Mr. Whitman | Average Non-CEO NEOs | Mr. Walker | Average Non-CEO NEOs | Mr. Walker | Average Non-CEO NEOs | | Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table for Applicable FY | ($1,150,000) | ($293,750) | ($853,235) | ($503,441) | ($1,304,459) | ($455,075) | | Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Remain Unvested as of Applicable FY End, determined as of Applicable FY End | $5,433,750 | $1,295,504 | $1,523,239 | $898,776 | $2,063,393 | $696,929 | | Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Vested during Applicable FY, determined as of Vesting Date | $0 | $0 | $0 | $0 | $0 | $0 | | Increase/deduction for Awards Granted during Prior FY that were Outstanding and Unvested as of Applicable FY End, determined based on change in ASC 718 Fair Value from Prior FY End to Applicable FY End | $5,255,106 | $1,259,291 | $328,787 | $407,398 | ($244,368) | ($187,755) | | Increase/deduction for Awards Granted during Prior FY that Vested During Applicable FY, determined based on change in ASC 718 Fair Value from Prior FY End to Vesting Date | $2,996,047 | $670,547 | $13,502 | $13,273 | ($305,476) | ($391,715) | | Deduction of ASC 718 Fair Value of Awards Granted during Prior FY that were Forfeited during Applicable FY, determined as of Prior FY End | $0 | $0 | $0 | $0 | $0 | $0 | | TOTAL ADJUSTMENTS | $12,534,903 | $2,931,591 | $1,012,293 | $816,005 | $209,090 | ($337,615) |
Pay Versus Performance Table
| (3) Total Shareholder Return is cumulative for the measurement periods beginning on August 31, 2020 and ending on August 31 of each of 2023, 2022 and 2021, respectively, calculated in accordance with Item 201(e) of Regulation S-K. The S&P 600 Commercial & Professional Services Index is the same index we use in our performance graph in the Company’s Annual Report on Form 10-K for the year ended August 31, 2023. |
Pay Versus Performance Table
| (4) Adjusted EBITDA is a non-GAAP financial measure. For more information on the Company’s use of this metric and a reconciliation to GAAP, see “Adjusted EBITDA Reconciliation To Net Income (Loss) in Appendix B of this proxy statement. |
Narrative Disclosure to Pay Versus Performance Table
Narrative Disclosure to Pay Versus Performance Table The line graphs below compare the compensation actually paid to our CEOs and the average of the compensation actually paid to our remaining NEOs with (i) our cumulative TSR and the S&P 600 Commercial & Professional Services Index TSR, (ii) our Net Income, and (iii) our Qualified Adjusted EBITDA, in each case, for the fiscal years ended August 31, 2021, 2022, and 2023. TSR amounts reported in the graph assume an initial fixed investment of $100, and that all dividends, if any, were reinvested.
Compensation Actually Paid vs Total Shareholder Return
Compensation Actually Paid vs Total Shareholder Return As shown in the chart below, the CEOs’ and remaining NEOs’ compensation actually paid aligned with the Company’s Total Shareholder Return. When the Company’s stock price increased significantly from the beginning of fiscal 2021 to the end of fiscal 2021, the amount of compensation actually paid was also high. This is primarily due to the Company’s use of equity awards in the LTIP, which increase in value with increases in the Company’s share price, and is consistent with shareholder experience during this time. The chart also compares the Company’s cumulative TSR and the cumulative TSR of the selected peer group and shows we outperformed the peer group during the periods presented.
Compensation Actually Paid vs Net Income
Compensation Actually Paid vs Net Income The chart below compares the CEOs’ and other NEOs’ compensation actually paid to our net income. Due to the proportion of compensation paid to our CEOs and other NEOs under the Company’s LTIP, which uses equity-based awards, compensation actually paid correlates more closely to our share price than to net income and the Company does not pay specifically based on a net income performance measure.
Compensation Actually Paid vs Qualified Adjusted EBITDA
Compensation Actually Paid vs Qualified Adjusted EBITDA The chart below compares the CEOs’ and other NEOs’ compensation actually paid to our Qualified Adjusted EBITDA. Qualified Adjusted EBITDA comprises the largest portion of the performance metrics for determining our LTIP and STIP awards, but due to the proportion of compensation paid to our CEOs and other NEOs under the Company’s LTIP, compensation actually paid correlates more closely to our share price than to Qualified Adjusted EBITDA.
Pay Versus Performance Tabular List
Pay Versus Performance Tabular List The performance measures listed below represent the most important performance measures used by us to link compensation actually paid to our NEOs to performance for the fiscal year ended August 31, 2023 and are described further in our Compensation Discussion and Analysis above.
Pay Versus Performance Tabular List
| Qualified Adjusted EBITDA | | All Access Pass Revenue | | Strategic Measures (revenue retention, etc.) |
Election of Directors
Election of Directors At the Annual Meeting, nine directors are to be elected to serve until the next annual meeting of shareholders or until their successors shall be duly elected and qualified. Our director nominees have a great diversity of experience and bring to our Board a wide variety of skills, qualifications, and viewpoints that strengthen their ability to carry out their oversight role on behalf of our shareholders. They have developed their skills and gained experience across a broad range of industries and disciplines in both established and growth markets. The biographies contained in the section of this Proxy Statement entitled, “Nominees for Election to the Board of Directors” describe the many areas of individual expertise that each director nominee brings to our board. Unless the shareholder indicates otherwise, each proxy will be voted in favor of the nine nominees listed below. Each of the nominees is currently serving as a director of the Company. If any of the nominees should be unavailable to serve, which is not now anticipated, the proxies solicited hereby will be voted for such other persons as shall be designated by the present Board of Directors.