DEF 14A of Hackett Group, Inc.
Filed Mar 22, 2024 · FY20230000950170-24-035239
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
General
General The Company’s articles of incorporation provide that the Board shall consist of no fewer than five directors and no more than fifteen directors. The Company’s bylaws provide that the number of directors, within such limits, shall be determined by resolution of the Board. The Board currently is composed of seven directors. The Board is divided into three classes. One class is elected each year for a term of three years. Three directors will be elected at the annual meeting. The Board has nominated Maria A. Bofill, David N. Dungan and Richard N. Hamlin, each are existing directors, for the positions. If elected, Ms. Bofill, and Messrs. Dungan and Hamlin will serve a three-year term expiring at the annual meeting in 2027. You can find more information about Ms. Bofill, and Messrs. Dungan and Hamlin below. Unless otherwise instructed on the proxy, it is the intention of the proxy holders to vote the shares represented by each properly executed proxy for the election of the nominees. The Board believes that the nominees will stand for election and will serve if elected. However, if any nominee fails to stand for election or is unable to accept election, proxies will be voted by the proxy holders for the election of such other person as the Board may recommend. Since this election is not contested, the Board’s nominees for director will be elected only if the votes cast for each such nominee’s election exceed the votes cast against such nominee’s election. If Ms. Bofill or Messrs. Dungan and Hamlin are not re-elected, our bylaws provide that they must tender their resignation to the Board. The Nominating and Corporate Governance Committee will then consider such resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject any such tendered resignation within 90 days after certification of the election results and will publicly disclose its decision and the rationale therefor. If the resignation is not accepted, the director will continue to serve until his successor is elected and qualified, until there is a decrease in the number of directors, or until the director’s earlier resignation or removal. The majority voting provisions for the election of directors apply only to uncontested elections in which the number of nominees does not exceed the number of directors to be elected. In the event of an election in which the number of nominees exceeds the number of directors to be elected, nominees will be elected by a plurality vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF MS. BOFILL AND MESSRS. DUNGAN AND HAMLIN AS DIRECTORS. Information as to the Nominee and Continuing Directors The following table sets forth certain information regarding the Board’s nominee for election as director and those directors who will continue to serve as such after the annual meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
| Name | Age (1) | Director Since (2) | Position held with the Company | Term Expires | | NOMINEES | | | | | | Maria A. Bofill(3) | 66 | 2021 | | 2024 | | David N. Dungan | 70 | 2000 | Vice Chairman and Chief Operating Officer | 2024 | | Richard N. Hamlin(3) | 76 | 2003 | | 2024 | | CONTINUING DIRECTORS | | | | | | Ted A. Fernandez | 67 | 1997 | Chairman and Chief Executive Officer | 2025 | | Robert A. Rivero(3) | 82 | 2016 | | 2025 | | Alan T.G. Wix(3) | 82 | 1999 | | 2025 | | John R. Harris(3) | 76 | 2006 | | 2026 |
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
(1) The ages shown are as of March 15, 2024. (2) The years shown reflect the year in which these persons were first elected or appointed as directors. Member of the Audit, Compensation and Nominating and Corporate Governance Committees. The principal occupations and other public company directorships for the past five years or more of the nominees for director and the four directors whose terms of office will continue after the annual meeting are set forth below. Specific experience, qualifications, attributes and skills that the Board believes qualify each current director, including the director nominees, for his or her position on the Board are also summarized below. This description is not intended as an exclusive description of the types of expertise or contributions provided by each director.
Nominees
Nominees Maria A. Bofill is a seasoned executive, having served in senior strategic finance and operational roles for public and privately held multinational companies. Her more recent experience with a professional services firm was in the talent acquisition industry focused on business development, industry networking, resource placement and high-impact leadership, where Ms. Bofill provided financial, operational and human resource insights in the development and implementation of growth and profitability strategies. She is retired and last served as the Director of Business Development for TTG Talent Solutions, a boutique talent acquisition and placement firm from February of 2020 to March of 2023 where she forged relationships with numerous corporate entities, community organizations and institutions of higher learning. In this capacity, she applied her seasoned leadership skills to employee placement and retention initiatives, including expanding the understanding of diversity, equity and inclusion platforms. Her work in the talent acquisition industry benefits the Company which seeks to source high quality resources in highly competitive and challenging employment markets. From June 2016 to September 2019, Ms. Bofill served as the Chief Financial Officer for Fyffes North America, Inc. From May of 2008 to June of 2016, she served as the Director of Finance and Administration and Treasurer of Fresh Quest, Inc. From October 2005 to May 2008, Ms. Bofill served as the Managing Principal of Octavian, Inc. From January 1988 to October of 2005, she served as the Vice President of Finance and Administration for the North America region of Fresh Del Monte Produce. The Company benefits from Ms. Bofill’s in-depth financial and accounting experience which provides additional depth to the Audit Committee. Her experience working with multinational organizations is a valuable asset to the Company and provides insight into international markets. David N. Dungan is a founder of the Company, along with Mr. Fernandez. He served as a Managing Director from the Company’s inception until March 2000 when he became a director and was named Chief Operating Officer (“COO”). Mr. Dungan was named Vice Chairman in February of 2006. Prior to founding the Company, Mr. Dungan served as the National Partner-in-Charge of the World Class Finance Practice of the Strategic Services Consulting Division of KPMG, LLP ("KPMG") from May 1994 to February 1997. Mr. Dungan joined KPMG in 1986 and, until May 1994, held various executive positions with that firm. Mr. Dungan provides the Board with broad financial and operational experience managing and leading a professional services firm focused on business consulting. Richard N. Hamlin is a consultant and investor. He previously served as the Chief Financial Officer of CommerceQuest, Inc. from July 2002 to August 2003. He provides the Board with extensive financial and accounting experience gained over a more than thirty-year career as a Certified Public Accountant at KPMG. Mr. Hamlin served as a partner of KPMG for twenty-one years, which included service on KPMG’s board of directors from 1994 to 1998, and later became a partner of KPMG Consulting. Mr. Hamlin’s work experience provides additional depth of capability to the Audit Committee. Mr. Hamlin also has prior experience on a public company board as a former member of the board of directors and Chairman of the Audit Committee of eTelecare Global Solutions. Mr. Hamlin provides operational perspective from outside of the business consulting industry, having served as the Chairman and Trustee of the Dakota Minnesota Eastern Railroad, a wholly-owned subsidiary of Canadian Pacific Railroad, from October 2007 through November 2008.
Continuing Directors
Continuing Directors Ted A. Fernandez founded the Company in 1997 based on a strategy he developed from his extensive history in the professional services industry, which included an eighteen-year career with KPMG. From 1979 to 1994, Mr. Fernandez held several industry executive and client service positions with KPMG. His career at KPMG culminated in the role of the National Managing Partner of KPMG’s Strategic Services Consulting Division from May 1994 to January 1997. Mr. Fernandez also served as a member of KPMG’s Management Committee from 1995 to 1997. He brings an in-depth knowledge of the professional services industry, especially business consulting, and organizational leadership within that industry. He also provides extensive financial and accounting experience to the Board. Mr. Fernandez provides the Board with day to day knowledge of the Company’s business and markets. He also provides broad and deep experience with strategic plan development and execution. Mr. Fernandez has served as the Chairman of the Board and Chief Executive Officer (“CEO”) since founding the Company. John R. Harris is a private investor and director at several companies. He is Chairman of HIFU Prostate Cancer Services, Inc., a privately held company and leading provider of non-invasive high intensity ultrasound treatment for localized prostate cancer, since 2015. Mr. Harris also serves on the board of directors of Vivakor, Inc., a publicly traded socially responsible operator, acquirer and developer of technologies and assets in the oil and gas industry, as well as, related environmental solutions. He has in-depth experience in public company operations and management, having served as the former President and Chief Executive Officer of eTelecare Global Solutions, a provider of outsourced customer care services, from February 2006 until October 2009. Mr. Harris served as Chief Executive Officer of Seven Worldwide Inc., a digital content management company, from December 2003 to January 2005. From July 2002 to December 2003, he served as Chief Executive Officer and President of Delinea Corporation, an application and business process management company serving the energy industry. From August 2001 to July 2002, Mr. Harris served as Chief Executive Officer and President of Exolink. From September 1999 to September 2001, he served as Chairman and Chief Executive Officer of Ztango, Inc. Mr. Harris has an extensive history of senior executive leadership positions and board participation in the information technology, media, telecommunications and outsourcing industries. Mr. Harris spent twenty-five years with Electronic Data Systems (“EDS”), during which he held a variety of executive leadership positions including Group Executive and President of EDS’s four strategic business units serving the telecommunications and media industries. He also served as EDS’s Corporate Vice President, Marketing & Strategy. Mr. Harris provides significant public company board experience through his prior service on the boards of, and as an advisor to, companies including BancTec, Applied Graphic Technologies, Genuity, CapRock Communications, Startek, Premier Global and Sizmek (formerly DG Fast Channel Service Source International, Inc. and Mobivity Holding Corp.). Robert A. Rivero held numerous operating management positions with KPMG from 1965 to 1999 as a Senior Managing Partner of KPMG ranging from Office Managing Partner, Regional Partner in Charge and ultimately, National Senior Partner in Charge, leading nine different business units (both domestic and overseas). Since 2003, Mr. Rivero has served as the chief executive officer of RAR Management Services, LLC which provides advisory services to CEOs, assists companies in the development and implementation of strategic action plans for growth and profitability, and provides solutions to international business operating challenges. The Company benefits from Mr. Rivero’s broad experience base within the professional services industry. He also brings additional in-depth knowledge of financial and accounting experience to the Board. With experience advising senior executives of large international companies and having lived and managed operations in Europe, Latin America & Southeast Asia, Mr. Rivero’s knowledge of international markets is a valuable asset to the Board. Alan T.G. Wix was the Chairman of Fiva Marketing, Ltd. from April 2003 to December 2008. Mr. Wix served as the Chairman of the Board of Farsight PLC from April 1999 until June 2005. Mr. Wix served as the Chief Executive Officer of Farsight PLC from April 1999 until June 2002. Mr. Wix brings to the Board an extensive history of senior executive leadership at a major financial institution, having retired in August 1998 as Managing Director Core IT Development of Lloyds TSB, a position he held from January 1993. From April 1990 to January 1993, Mr. Wix held the position of Head of Development at Lloyds TSB. Prior to being elevated to that position, Mr. Wix held a variety of positions within the information systems division of Lloyds TSB. He has in-depth operational experience leading a significant division of an institution with global reach. He also has extensive experience as a purchaser of technology and business consulting services, and, as such, provides perspective on customer experience. Mr. Wix is a native of the United Kingdom and spent his professional career in the United Kingdom. He continues to make his home there. His knowledge of the European marketplace provides valuable international perspective to the Board.
Overview
Overview The Company’s executive compensation program that applies to its three named executive officers, Messrs. Fernandez, Dungan and Ramirez, rewards the named executive officers for the achievement of exceptional operating results by providing significant incentive opportunities tied to the attainment of specific financial performance goals. The design of the program has been substantially consistent since it was created by the Compensation Committee in 2005 based on recommendations from Mercer, a nationally recognized executive compensation consulting firm. The program consists of base salaries and cash and equity incentive bonus opportunities that the Company believes are market competitive for companies of similar size within its industry. Our executive compensation program consists of two primary elements: (1) short-term compensation in the form of annual compensation, consisting of base salaries, annual cash incentive compensation and employee benefits; and (2) long-term incentive compensation in the form of performance-based restricted stock units which, after being earned through the achievement of performance targets, then vest over a three-year period. Performance-based cash awards and restricted stock awards are tied to the achievement of adjusted diluted net earnings per share targets based on a Board-approved annual operating plan. Adjusted diluted net earnings per share is defined as net income before income from discontinued operations, if applicable, and excludes restructuring charges and asset impairments, acquisition-related adjustments, non-cash stock compensation expense, the amortization of intangible assets, non-recurring charges and included a tax rate based on Generally Accepted Accounting Principles ("GAAP"). Adjusted diluted net earnings per share is based on weighted average common and common equivalent shares outstanding. In addition, the Compensation Committee retains the right to exclude the impact of certain nonrecurring events from the adjusted diluted net earnings per share calculation when, in the opinion of the Compensation Committee, inclusion would not accurately reflect the core operating performance of the Company. The Committee believes that adjusted diluted net earnings per share is the best measure of core operating performance for determining incentive compensation. On an annual basis, the Compensation Committee evaluates and establishes the threshold and target achievement levels for the Company’s incentive compensation program for its named executive officers, which consist of its CEO, COO and CFO, which it refers to as “Commence,” “Goal” and “Superior.” If the Company’s performance falls short of the established goals for business growth, then the bonus compensation paid in connection with the program is reduced or no bonuses are paid at all. Payouts are interpolated if results fall between performance levels and extrapolated for performance exceeding the Superior level. The Company believes the targets established for its named executive officers are challenging. This program has been in effect for nineteen years. In two of those years, no bonuses were paid to the named executive officers as the Commence performance target was not achieved. In eight of those years, including for 2023, a bonus was paid based on results which were between the Commence and the Goal targets. Including 2020, during which a modified executive compensation program was utilized in light of the impact of the COVID-19 pandemic on our business, in two of those years, the Goal target was achieved. In seven of those years, over which average adjusted diluted earnings per share growth was 110%, the Company’s performance exceeded the Superior target. Excluding 2010, when adjusted diluted earnings per share growth was 476%, the average adjusted diluted earnings per share growth over the other six years in which Superior targets were achieved was 50%. The Compensation Committee targets an even balance between the cash and equity incentive award opportunities included in the Company’s compensation programs overall, but weights the equity component in the named executive officer compensation program more heavily in the case of its CEO and COO. Performance-based equity grants issued to employees, other than the Company’s named executive officers, typically vest over a three or four-year period, based on the recipient’s individual compensation program. This is with the exception of two programs designed for the Company’s senior leadership. The first of those programs was introduced in 2020, and vests a portion of the participant’s annual equity opportunity after the conclusion of the compensation year subject to the achievement of a minimal level of Company profitability and the achievement of personal management objectives established for the individual. For 2024, fourteen individuals will participate in this program. Mr. Fernandez and Mr. Dungan do not participate in this program. The second of these programs offers the participant the opportunity to receive a significant equity grant if the person achieves an extraordinary long-term financial goal for which the person has three or four years to achieve. The equity grant, if awarded, would vest on the first anniversary of the grant date. Mr. Fernandez, Mr. Dungan and Mr. Ramirez do not participate in this program. All equity grants, other than those issued upon hiring or for retention purposes, are issued based on the achievement of Company, group or individual performance goals, any combination thereof, or extraordinary individual contribution. Vesting is contingent on continued employment. The Company regards this vesting period as an important retention tool. More importantly, the Company believes that incentive compensation that is paid in the form of equity that vests over three or four years serves as a meaningful long-term incentive, the ultimate value of which is directly correlated to the price of the Company’s common stock at the end of the vesting period. This rewards employees for increasing shareholder value. A heavier weighting on the incentive equity component ties a greater portion of the Company’s CEO and COO’s ultimate compensation to the ability to deliver increased shareholder value over the vesting period. To further ensure the alignment of the CEO’s interests with those of the Company’s shareholders, the Board has adopted stock ownership guidelines that require the CEO to own a number of shares equal in value to six times his annual base salary. The CEO is currently in compliance with these guidelines. In mid-2023, the Committee introduced a program that allowed Messrs. Fernandez and Dungan to have an opportunity to earn a performance-based equity grant in the form of restricted stock units that would vest over a three year period equal to the actual dilutive impact from the planned ACV investments in 2023. This program produced no payouts for 2023. It is being modified and continued for 2024. (See "Executive Compensation Decisions for 2024" on page 20 of this Proxy Statement). The Committee believes that this new program further aligns the performance goals and compensation opportunities for Messrs. Fernandez and Dungan with the importance our shareholders place on the growth of our recurring revenue services. Annual Compensation Annual compensation of the Company’s named executive officers consists of base salaries, annual incentive compensation and employee benefits.
Incentive Compensation
Incentive Compensation The Company’s annual incentive program reflects the Compensation Committee’s belief that a significant portion of the named executive officers’ compensation should be tied to Company performance. For 2023, variable, non-guaranteed performance-based compensation paid to Messrs. Fernandez, Dungan and Ramirez represented 68%, 62%, and 47%, respectively, of their total compensation. The annual incentive component of the Company’s executive compensation program consists of annual performance-based cash incentive awards and performance-based equity incentive grants in the form of restricted stock units of which, if earned based on performance, then one third vests annually over a three-year period commencing on the first anniversary of the grant date. These performance-based cash and equity opportunities are tied to the achievement of adjusted diluted net earnings per share targets based on a Board-approved operating plan. Each participant in the Company’s executive compensation program has target cash and equity incentive opportunities expressed as a percentage of salary. Cash and equity payouts are based on the dollar amount of the opportunity earned based on target levels achieved. For our CEO and COO, the equity opportunities have historically been more heavily weighted than the cash opportunities, including in 2023 and for 2024. Performance-based equity incentive awards earned are expressed in a dollar amount and divided by the Company’s share price on the date of grant to calculate the equity incentive grant in the form of restricted stock units, the value of which is ultimately determined by the Company’s stock price on the date of vesting. Messrs. Fernandez and Dungan also have an incentive tied to the increase in the Company’s ACV-based revenue. If the target is achieved, the payout for this incentive would be in restricted stock units that vest over a three-year period. (See "Executive Compensation Decisions for 2024" on page 20 of this proxy statement).
Executive Compensation Decisions for 2023
Executive Compensation Decisions for 2023 Base Salary The Compensation Committee believes that the base salaries of the Company’s CEO, COO and CFO remained at market competitive levels for companies of similar size within the Company’s industry. The CEO’s and COO’s base salaries were last increased in 2005 and 2006, respectively, before their salaries were increased for the 2024 fiscal year. The CFO’s base salary was last increased in 2020. Incentive Compensation Each participant in the Company’s executive compensation program has cash and equity incentive opportunities expressed as a percentage of salary that are tied to specified performance targets. For 2023, incentive compensation awarded to Messrs. Fernandez, Dungan and Ramirez in the form of cash and restricted stock units subject to a three-year vesting period represented 68%, 62%, and 47%, respectively, of their total compensation as reported in the Summary Compensation Table. At its meeting held on February 16, 2023, the Compensation Committee reviewed and approved the 2023 base salaries and cash and equity incentive plan targets for the Company’s named executive officers as well as the Company’s other senior leaders. The Compensation Committee specifically approved a program for its named executive officers that would pay annual cash and equity bonuses in connection with the achievement of 2023 adjusted diluted earnings per share performance targets. For 2023, the “Goal” and “Superior” targets established by the Compensation Committee were $1.69 and $1.80, respectively. These targets represented a 13% and 20% improvement over the Company’s prior year actual adjusted diluted net earnings per share results, respectively. The non-equity (cash) and equity bonus incentive opportunities for our named executive officers at the Commence, Goal and Superior target levels for 2023, as a percentage of base salary, as seen below:
Executive Compensation Decisions for 2023
| Name | Principal Position | Non-Equity (Cash) Incentives | | | Equity Incentives(1) | | | | | | Commence | Goal | Superior | Commence | Goal | Superior | | Ted A. Fernandez | Chairman, Chief Executive Officer | 0% | 120% | 210% | 0% | 204% | 300% | | David N. Dungan | Vice Chairman, Chief Operating Officer | 0% | 96% | 168% | 0% | 153% | 225% | | Robert A. Ramirez | Executive Vice President, Chief Financial Officer | 0% | 60% | 90% | 0% | 60% | 90% |
Timing of Equity Incentive Plan Awards and Discretionary Equity Awards
Timing of Equity Incentive Plan Awards and Discretionary Equity Awards The Company does not have a program, plan or practice to time equity awards, including option grants, to its named executive officers or directors in coordination with the release of material non-public information. The Company consistently presents to its Compensation Committee for approval all year-end cash and equity bonus awards based on the previous year’s results at the first Compensation Committee meeting of the year. However, the timing of this approval may be changed in the event of extraordinary circumstances. The Company’s equity plan expressly prohibits the repricing of options and SARs.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1)(2) | Non-Equity Incentive Plan Compensation ($)(1) | Total ($) | | Ted A. Fernandez | 2023 | 750,000 | 1,023,570 | 602,100 | 2,375,670 | | (Chairman, Chief | 2022 | 750,000 | 2,748,240 | 2,042,100 | 5,540,340 | | Executive Officer) | 2021 | 750,000 | 3,027,600 | 2,304,000 | 6,081,600 | | David N. Dungan | 2023 | 525,000 | 537,374 | 337,176 | 1,399,550 | | (Vice Chairman, Chief | 2022 | 525,000 | 1,442,826 | 1,143,576 | 3,111,402 | | Operating Officer) | 2021 | 525,000 | 1,589,490 | 1,290,240 | 3,404,730 | | Robert A. Ramirez | 2023 | 400,000 | 200,280(3) | 160,560 | 760,840 | | (Executive Vice President | 2022 | 400,000 | 443,040 | 443,040 | 1,286,080 | | Finance and Chief Financial Officer) | 2021 | 400,000 | 489,600 | 489,600 | 1,379,200 |
SUMMARY COMPENSATION TABLE
See “Compensation Discussion and Analysis” beginning on page 15 of this proxy statement for a discussion of how the non-equity (cash) incentive amounts are determined. These non-equity (cash) and equity grants are performance-based and were determined based on the achievement of annual adjusted diluted net earnings per share targets. Also see the “Grants of Plan-Based Awards” table on page 23 of this proxy statement for additional detail on non-equity (cash) and equity incentive compensation earned based on fiscal 2023 performance. (2) Amounts shown in this column are based on the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, as amended, of grants of performance-based restricted stock units to the named executive officers in the applicable fiscal year. Assumptions used in the calculation of the amounts in this column are described in Note 10 to our audited consolidated financial statements contained in our Form 10-K for the fiscal year ended December 29, 2023. Includes 5,468 restricted stock units granted on February 17, 2023 which vested in full one year from the date of grant subject to Mr. Ramirez’ satisfaction of the achievement of personal management objectives established.
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023 The following table sets forth information on the cash and equity grant awards issued to the named executive officers under the Company’s executive compensation plan for fiscal 2023.
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
| Name | Grant Date | Cash (Non-Equity) Incentive Compensation Awards ($) | Equity (Restricted Stock Unit) Incentive Compensation (#)(1) | Grant Date Fair Value of Stock Awards ($) | | Ted A. Fernandez | February 16, 2024 | 602,100 | 43,742 | 1,023,570 | | David N. Dungan | February 16, 2024 | 337,176 | 22,965 | 537,374 | | Robert A. Ramirez | February 16, 2024 | 160,560 | 8,900(2) | 200,280 |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
(1) See “Compensation Discussion and Analysis” beginning on page 15 of this proxy statement for a discussion of the performance criteria and how these performance-based awards are determined. One third of each equity grant vests annually beginning with the first anniversary of the grant date. (2) Includes 5,468 restricted stock units granted on February 17, 2023 which vested in full one year from the date of grant subject to Mr. Ramirez’ satisfaction of the achievement of personal management objectives established. See “Executive Compensation Decisions for 2024” on page 20 of this proxy statement for more information about these restricted stock units. Equity Compensation Plan Information The Company maintains The Hackett Group, Inc. 1998 Stock Option and Incentive Plan, as amended (the “Plan”) and The Hackett Group, Inc. Employee Stock Purchase Plan, as amended (the “ESPP”). The table below sets forth the following information as of December 29, 2023, for (1) all compensation plans previously approved by the Company’s shareholders and (2) all compensation plans not previously approved by the Company’s shareholders:
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
| • | The number of securities to be issued upon the exercise of outstanding options, warrants and rights and the vesting of unvested restricted stock units; |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
| • | The weighted-average exercise price of such outstanding options, warrants and rights; and |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
| • | The number of securities remaining available for future issuance under the plans, other than securities to be issued upon the exercise of such outstanding options, warrants and rights and the vesting of restricted stock units. |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights and the Vesting of Unvested Restricted Stock Units (#) | Weighted Average Exercise Price of Outstanding Options and Unvested Restricted Stock Units, Warrants and Rights ($) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column 1) (#)(3) | | Restricted stock units issued under equity compensation plans approved by shareholders(1) | 1,204,782(4) | — | 1,860,487(2) | | Stock options issued under equity compensation plans approved by shareholders(1) | —(4) | — | 438,445 | | Equity compensation plans not approved by shareholders | — | — | — | | Total | 1,204,782 | | 2,298,932 |
GRANTS OF PLAN-BASED AWARDS FOR FISCAL YEAR 2023
The equity compensation plans approved by the Company’s shareholders are the Plan and the ESPP. The Plan authorizes the issuance of compensation equity awards in the form of restricted stock, restricted stock units, stock options and SARs. Since fiscal year 2005, the Company’s primary equity compensation plan component has been restricted stock units. As such, the Company believes it is important to highlight in this table statistical information related to the restricted stock units issued, outstanding and unvested as well as the shares available under the sublimit for issuance of restricted stock and restricted stock units under the Plan. (2) As of the Record Date, the number of shares available for issuance pursuant to awards of restricted stock or restricted stock units was 1,473,576. (3) This amount does not include 197,779 shares available for issuance under the ESPP. As of the Record Date, the number of issued and unvested restricted stock units was 1,069,382. There were no outstanding stock options, either vested or unvested.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth information concerning unvested restricted stock units for each named executive officer outstanding as of the end of fiscal 2023. (Does not include equity awards granted after fiscal year-end. See the “Grants of Plan-Based Awards” table on page 23 of this Proxy Statement and “Executive Compensation Decisions for 2023” on page 19 of this proxy statement for information on payments and grants made following the 2023 fiscal year-end related to 2023 performance-based compensation.)
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | Outstanding Restricted Stock Awards | | | Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | | Ted A. Fernandez | 245,799(1) | 5,596,843 | | David N. Dungan | 129,044(2) | 2,938,332 | | Robert A. Ramirez | 46,781(3) | 1,065,203 |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
(1) Includes 245,799 performance-based restricted stock units granted in 2021, 2022 and 2023 for 2020, 2021 and 2022 fiscal year performance, respectively. In 2024, 109,811 of the restricted stock units will vest. Excludes 43,742, restricted stock units granted on February 16, 2024, for 2023 fiscal year performance, one third of which will vest annually on the anniversary of the date of grant. See “Executive Compensation Decisions for 2023” on page 19 of this proxy statement for more information about these restricted stock units. (2) Includes 129,044 performance-based restricted stock units granted in 2021, 2022 and 2023 for 2020, 2021 and 2022 fiscal year performance, respectively. In 2024, 57,652 of the restricted stock units will vest. Excludes 22,965, restricted stock units granted on February 16, 2024, for 2023 fiscal year performance, one third of which will vest annually on the anniversary of the date of grant. See “Executive Compensation Decisions for 2023” on page 19 of this proxy statement for more information about these restricted stock units. Includes 45,076 performance-based restricted stock units granted in 2021, 2022 and 2023 for 2020, 2021 and 2022 fiscal year performance, respectively, and includes a discretionary grant of 1,705 restricted stock units granted in 2020. In 2024, 24,851 of the restricted stock units will vest. Excludes 3,431, restricted stock units granted on February 16, 2024, for 2023 fiscal year performance, one third of which will vest annually on the anniversary of the date of grant. Excludes 5,128 restricted stock units granted on February 16, 2024, which vest in full one year from the date of grant subject to Mr. Ramirez’ satisfaction of the achievement of established personal management objectives. See “Executive Compensation Decisions for 2023” on page 19 of this proxy statement for more information about these restricted stock units.
OPTION EXERCISES AND STOCK VESTED (During fiscal year-ended December 29, 2023)
OPTION EXERCISES AND STOCK VESTED (During fiscal year-ended December 29, 2023) The following table sets forth information concerning the vesting of stock awards in the form of restricted stock units, for each named executive officer during fiscal 2023. Value realized is based on the closing price for the Company’s common stock on the date of exercise or vesting, respectively.
OPTION EXERCISES AND STOCK VESTED (During fiscal year-ended December 29, 2023)
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting ($) | | Ted A. Fernandez | 81,050 | 1,756,354 | | David N. Dungan | 42,552 | 922,102 | | Robert A. Ramirez | 14,164 | 306,934 |
OPTION EXERCISES AND STOCK VESTED (During fiscal year-ended December 29, 2023)
(1) Reflects the total number of vested restricted stock units. The following table provides additional information regarding the vested restricted stock units:
OPTION EXERCISES AND STOCK VESTED (During fiscal year-ended December 29, 2023)
| Name | Total Number of Restricted Stock Units Vested (#) | Net Restricted Stock Units Received After Tax Withholding (#) | | Ted A. Fernandez | 81,050 | 49,157 | | David N. Dungan | 42,552 | 23,361 | | Robert A. Ramirez | 14,164 | 10,715 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL The tables below quantify (in U.S. dollars) the potential payments upon termination or a change in control of the Company for each of the named executive officers actively employed by the Company at the end of fiscal year 2023. All amounts are calculated assuming (i) a termination date of December 29, 2023 and (ii) the price per share of the Company’s securities was the closing market price as of that date. These payments are subject to the terms of the employment agreements that are summarized under “Narrative Disclosure to Summary Compensation Table and Plan-Based Awards Table” on page 26 of this proxy statement.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
| Mr. Fernandez’s Benefits and Payments Upon Termination | Death ($) | Disability ($) | By the Company for Cause ($) | By the Executive for Good Reason ($) | Change of Control ($) | | Compensation: | | | | | | | Base Salary | — | 750,000 | — | 750,000 | — | | Annual Bonus | — | 602,100 | — | 602,100 | — | | Restricted Stock Units (unvested and accelerated)(1) | 5,596,843 | 5,596,843 | — | 5,596,843 | 5,596,843 | | Change of Control Payment | — | — | — | — | 9,331,740 | | Benefits and Perquisites: | | | | | | | Health Insurance Premiums | — | 23,708 | — | 23,708 | 23,708 | | Life, Accidental Death and Disability Premiums | — | 4,436 | — | 4,436 | 4,436 | | Life Insurance Premium | — | 19,829 | — | 19,829 | 19,829 | | Gross-up Payment | — | — | — | — | — | | Total | 5,596,843 | 6,996,916 | — | 6,996,916 | 14,976,556 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
| Mr. Dungan’s Benefits and Payments Upon Termination | Death ($) | Disability ($) | By the Company for Cause ($) | By the Executive for Good Reason ($) | Change of Control ($) | | Compensation: | | | | | | | Base Salary | — | 525,000 | — | 525,000 | — | | Annual Bonus | — | 337,176 | — | 337,176 | — | | Restricted Stock Units (unvested and accelerated)(2) | 2,938,332 | 2,938,332 | — | 2,938,332 | 2,938,332 | | Change of Control Payment | — | — | — | — | 5,277,121 | | Benefits and Perquisites: | | | | | | | Health Insurance Premiums | — | 16,247 | — | 16,247 | 16,247 | | Life, Accidental Death and Disability Premiums | — | 1,111 | — | 1,111 | 1,111 | | Life Insurance Premium | — | — | — | — | — | | Gross-up Payment | — | — | — | — | — | | | | | | | — | | Total | 2,938,332 | 3,817,866 | — | 3,817,866 | 8,232,811 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
| Mr. Ramirez’s Benefits and Payments Upon Termination | Death ($) | Disability ($) | By the Company for Cause ($) | By the Executive for Good Reason ($) | Change of Control ($) | | Compensation: | | | | | | | Base Salary | — | — | — | 200,000 | 400,000 | | Annual Bonus | — | — | — | — | — | | Stock Options and Restricted Stock Units (unvested and accelerated)(3) | 1,065,203 | 1,065,203 | — | 1,065,203 | 1,065,203 | | Benefits and Perquisites: | | | | | | | Health Insurance Premiums | — | 23,904 | — | 23,904 | 23,904 | | Life, Accidental Death and Disability Premiums | — | 4,144 | — | 4,144 | 4,144 | | Life Insurance Premium | — | 11,089 | — | 11,089 | 11,089 | | Gross-up Payment | — | — | — | — | — | | Total | 1,065,203 | 1,104,340 | — | 1,304,340 | 1,504,340 |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Includes value of 245,799 unvested restricted stock units outstanding at year end. The outstanding restricted stock units would vest upon a change of control, Mr. Fernandez’s death, disability, resignation for good reason or involuntary termination without cause. Includes value of 129,044 unvested restricted stock units outstanding at year end. The outstanding restricted stock units would vest upon a change of control, Mr. Dungan’s death, disability, resignation for good reason or involuntary termination without cause. Includes value of 46,781 unvested restricted stock units outstanding at year end. The outstanding restricted stock units would vest upon a change of control, Mr. Ramirez’s death, disability, resignation for good reason or involuntary termination without cause. In certain cases, the tax laws deny an income tax deduction for payments that are contingent upon a change in control. Benefits under the employment agreements will be delayed or modified if such delays or modifications are necessary to comply with the rules governing deferred compensation plans under Section 409A of the Internal Revenue Code.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION Director Compensation for 2023 Directors who are officers or employees of the Company or any subsidiary of the Company receive no additional compensation for serving on the Board or any of its committees. Each outside director receives an annual $40,000 cash retainer, paid quarterly. All directors are reimbursed for travel expenses incurred in connection with attending Board and committee meetings. The Company’s outside directors also receive an annual restricted stock unit grant equal in value to $72,000 on the date of grant. All restricted stock units granted under this program will vest in full on the one-year anniversary of the date of grant and will also vest upon involuntary termination of service, including change of control. Upon reaching ten years of service on the Board, outside director members receive a restricted stock unit grant equal in number of units to his or her annual service grant for that year. Each of the Company’s outside directors is allowed to elect to defer the receipt of their shares upon vesting for three years, five years or until death, disability or termination of service on the Board.
Director Compensation for Fiscal 2023
Director Compensation for Fiscal 2023
Director Compensation for Fiscal 2023
| Name | Fees Earned or Paid in Cash ($) | Stock Awards (1) ($) | Total ($) | | Maria A. Bofill | 40,000 | 72,000 | 112,000 | | Richard N. Hamlin | 40,000 | 72,000 | 112,000 | | John R. Harris | 40,000 | 72,000 | 112,000 | | Robert A. Rivero | 40,000 | 72,000 | 112,000 | | Alan T.G. Wix | 40,000 | 72,000 | 112,000 |
Director Compensation for Fiscal 2023
(1) Amounts shown in this column are based on the aggregate grant date fair value as computed in accordance with FASB ASC Topic 718, as amended, for restricted stock units during fiscal 2023. The aggregate number of restricted stock unit awards and the aggregate number of stock option awards outstanding at fiscal year-end appears in the “Outstanding Director Equity Awards at 2023 Fiscal Year-End” table below. Director Compensation for 2024 For 2024, the Company’s Outside Director Compensation Program will remain unchanged.
PAY RATIO
PAY RATIO Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO). The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934 (the "Exchange Act"). In identifying our median employee, our calculation included the base salary for each employee as of December 29, 2023, commissions paid in 2023 and any cash and equity performance and non-performance-based bonus compensation paid or granted, respectively, to such employees in 2024, based on their performance for fiscal year 2023. Bonus information for 2023 was not available for all employees as of the Record Date as several of our practices conduct performance reviews during the first quarter of the year and approve raises and pay bonuses in April. For employees in these practices we estimated 2023 cash and equity bonuses. The amount included for equity performance and non-performance-based bonus compensation grants equaled the fair market value of the shares underlying such grant as of the grant date, however, these grants are subject to time vesting which requires continued employment of the grantee for a period of time ranging from one year, or three to four years. Cash compensation for these purposes included base salary or wages plus overtime pay, cash bonuses, cash commissions and comparable cash elements of compensation in non-U.S. jurisdictions, if applicable, and was calculated using internal payroll and/or tax records. Salaries or wages paid in non-U.S. jurisdictions were converted to U.S. dollars using exchange rates in effect as of December 29, 2023. We did not apply any cost-of-living adjustments as part of the calculation. We selected the median employee based on 1,228 full-time and part-time workers who were employed as of December 29, 2023. The fiscal year 2023 annual total compensation as determined under Item 402 of Regulation S-K for our CEO was $2,375,670. The 2023 annual total compensation as determined under Item 402 of Regulation S-K for our median employee was $110,001. The ratio of our CEO’s annual total compensation to our median employee’s total compensation for fiscal year 2023 is 22 to 1. We have employees in countries with differing labor market characteristics. As such, for purposes of comparability we have also calculated the total annual compensation for our median employee in the United States where we have 661 employees and generate the majority of our revenue and profitability. The total annual compensation for the median U.S. based employee is $189,100 The ratio of our CEO’s annual total compensation to our median U.S. based employee’s total compensation for fiscal year 2023 is 13 to 1.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE As required by Item 402(v) of Regulation S-K, we are providing the following information concerning pay versus performance.
PAY VERSUS PERFORMANCE
| | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year | Summary Compensation Table Total for CEO(1)(2) | Compensation Actually Paid to CEO(3) | Average Summary Compensation Table Total for Non-CEO Named Executive Officers(1)(2) | Average Compensation Actually Paid to Non-CEO Named Executive Officers(3) | Total Shareholder Return(4) | Peer Group Total Shareholder Return(5) | Net Income(6) | Adjusted Diluted Earnings Per Share(7)(8) | | 2023 | $2,375,670 | $4,557,509 | $1,080,195 | $1,813,398 | $156 | $139 | 34,151 | $1.55 | | 2022 | $5,540,340 | $5,954,698 | $2,198,741 | $2,343,269 | $137 | $105 | 40,802 | $1.52 | | 2021 | $6,081,600 | $4,262,516 | $2,391,965 | $1,780,479 | $135 | $90 | 41,545 | $1.31 | | 2020 | $1,826,932 | $1,612,923 | $908,539 | $875,380 | $93 | $89 | 5,473 | $0.69 |
PAY VERSUS PERFORMANCE
(1) For each year shown, the CEO was Ted A. Fernandez and the other named executive officers were David N. Dungan and Robert A. Ramirez. (2) The values reflected in this column reflect the “Total” compensation set forth in the Summary Compensation Table (“SCT”) on page 22. See the footnotes to the SCT for further detail regarding the amounts in this column. (3) See “Computation of Compensation Actually Paid” below for a discussion of the amounts included in this column. (4) Reflects the cumulative total shareholder return (“TSR”) of the Company for the year ended December 31, 2020, the two-years ended December 31, 2021 and the three years ended December 31, 2022, and the four-years ended December 31, 2023, assuming a $100 investment at the closing price on December 31, 2019 and the reinvestment of all dividends. (5) Reflects the cumulative total shareholder return of the peer group utilized in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the year ended December 29, 2023 that consists of Alithya Group Inc. (formerly known as Edgewater Technology, Inc.), Huron Consulting Group, Inc. and Information Services Group, Inc. for the year ended December 31, 2020, the two-years ended December 31, 2021 and the three years ended December 31, 2022, and the four-years ended December 31, 2023, assuming a $100 investment at the closing price on December 31, 2019 and the reinvestment of all dividends. (6) Amounts in thousands. (7) The Company only uses adjusted diluted earnings per share to determine the performance-based compensation paid to its named executive officers. As such, it represents, in the Company’s assessment, the most important financial performance measure that is not otherwise disclosed in the table above used by the Company to link Compensation Actually Paid to the registrant’s named executive officers for the years presented in the table. For the definition of adjusted diluted earnings per share see “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 16 of this proxy statement.
Computation of Compensation Actually Paid
Computation of Compensation Actually Paid The amounts shown in this column are computed in accordance with Item 402(v) of Regulation S-K. “Compensation Actually Paid” for our CEO and “Average Compensation Actually Paid” for our other named executive officers was computed as follows:
Computation of Compensation Actually Paid
| | CEO | | | | Other NEOs | | | | | | 2023 | 2022 | 2021 | 2020 | 2023 | 2022 | 2021 | 2020 | | SCT Total Compensation | $2,375,670 | $5,540,340 | $6,081,600 | $1,826,932 | $1,080,195 | $2,198,741 | $2,391,965 | $908,539 | | Minus SCT Stock Awards Value | (1,023,570) | (2,748,240) | (3,027,600) | (678,068) | (368,827) | (942,933) | (1,039,545) | (231,175) | | Plus Value of Unvested Equity Awards Granted in respective year | 2,852,216 | 3,207,073 | 959,387 | 560,879 | 978,598 | 1,101,172 | 327,084 | 229,377 | | Change in Value of Unvested Equity Awards during respective year | 289,289 | (7,063) | 247,995 | (80,738) | 101,282 | (2,640) | 100,625 | (25,943) | | Change in Value of Equity Awards Vested in respective year | 63,904 | (37,412) | 1,134 | (16,082) | 22,150 | (11,071) | 350 | (5,418) | | Total Compensation Actually Paid | $4,557,509 | $5,954,698 | $4,262,516 | $1,612,923 | $1,813,398 | $2,343,269 | $1,780,479 | $875,380 |
Relationship Between Compensation Actually Paid and Net Income/Adjusted Diluted Earnings Per Share
Relationship Between Compensation Actually Paid and Net Income/Adjusted Diluted Earnings Per Share The following is provided to describe the relationship between executive compensation and financial performance of the Company, as well as the relationship between the Company’s TSR and the TSR for the Company’s peer group, in each case over the years covered in the table above.
Relationship Between Compensation Actually Paid and Net Income/Adjusted Diluted Earnings Per Share
| Year | Compensation Actually Paid to CEO(3)(4) | Year over Year Increase (Decrease) | Average Compensation Actually Paid to Non-CEO Named Executive Officers(3)(4) | Year over Year Increase (Decrease) | Net Income(6) | Year over Year Increase (Decrease) | Adjusted Diluted Earnings Per Share | Year over Year Increase (Decrease) | | 2023 | $4,557,509 | -23% | $1,813,398 | -23% | $34,151 | -16% | $1.55 | 2% | | 2022 | $5,954,698 | 40% | $2,343,269 | 32% | $40,802 | -2% | $1.52 | 16% | | 2021 | $4,262,516 | 164% | $1,780,479 | 103% | $41,545 | 659% | $1.31 | 90% | | 2020 | $1,612,923 | -20% | $875,380 | 3% | $5,473 | -76% | $0.69 | -31% |