DEF 14A of Charles River Laboratories International, Inc.
Filed Mar 29, 2024 · FY20230001104659-24-040854
Director Nominees
Director Nominees The following table provides summary information about each of our director nominees.
Director Nominees
| | | Director Since | | | Current Committee Memberships | | | | | | | | Name | Age | | Occupation | Independent | AC | CC | CGNC | FC | RAUC | SPCAC | STC | | James C. Foster | 73 | 1989 | Chair, President and CEO of Charles River Laboratories International, Inc. | | | | | | | | | | Nancy C. Andrews | 65 | 2020 | Executive Vice President and Chief Scientific Officer at Boston Children’s Hospital. Professor in Residence at Harvard Medical School. Former Professor of Pediatrics and Pharmacology & Cancer Biology, Duke University School of Medicine. Former Dean of Duke University School of Medicine and Vice Chancellor of Academic Affairs of Duke University. | | | | | | | | | | Reshema Kemps-Polanco | 51 | 2024 | Executive Vice President and Chief Commercial Officer, Novartis US | | | | | | | | | | Robert Bertolini | 62 | 2011 | Former President and CFO of Bausch and Lomb Incorporated and former Executive Vice President and Chief Financial Officer of Schering-Plough Corp. | | | | | | | | | | Deborah T. Kochevar | 67 | 2008 | Senior Fellow, The Fletcher School of Law and Diplomacy, Tufts University. Dean Emerita of Cummings School of Veterinary Medicine, Tufts University. Former Provost and Senior Vice President ad interim, Tufts University. | | | | | | | | | | George Llado, Sr. | 58 | 2020 | Former Senior Vice President and Chief Information Officer of Alexion Pharmaceuticals, Inc. | | | | | | | | | | Martin W. Mackay | 68 | 2017 | Co-Founder and Executive Chair of Rallybio Corporation. Former Chief of R&D, AstraZeneca and Former Chief of R&D, Alexion Pharmaceuticals, Inc. | | | | | | | | | | George E. Massaro | 76 | 2003 | Former Vice Chair, Huron Consulting Group, Inc. | | | | | | | | | | Craig B. Thompson | 71 | 2022 | President Emeritus, Former President and Chief Executive Officer of Memorial Sloan Kettering Cancer Center. Member of the Sloan Kettering Institute and the Department of Medicine, Memorial Sloan Kettering Cancer Center. | | | | | | | | | | Richard F. Wallman | 72 | 2011 | Former Senior Vice President and CFO, Honeywell International, Inc. | | | * | | | | | | | Virginia M. Wilson | 69 | 2019 | Retired Senior Executive Vice President and Chief Financial Officer, TIAA | | | | | | | | |
Director Nominees
Key: AC — Audit Committee; CC — Compensation Committee; CGNC — Corporate Governance and Nominating Committee; SPCAC — Strategic Planning and Capital Allocation Committee; STC — Science and Technology Committee; FC — Finance Committee; RAUC — Responsible Animal Use Committee; — Chairperson; — Member. Contingent upon his re-election to the Board at the Annual Meeting, Mr. Wallman has been appointed to serve as Chair of the Compensation Committee.
PROPOSAL ONE — ELECTION OF DIRECTORS
PROPOSAL ONE — ELECTION OF DIRECTORS Under the By-laws, the number of members of our Board of Directors is fixed from time to time by the Board, but may be increased or decreased either by the shareholders or by the majority of directors then in office, subject to the By-laws. Directors serve in office until the next annual meeting of shareholders and until their successors have been elected and qualified, or until their earlier death, resignation or removal. The Board has voted to nominate Mr. James C. Foster, Dr. Nancy C. Andrews, Mr. Robert Bertolini, Ms. Reshema Kemps-Polanco, Dr. Deborah T. Kochevar, Mr. George Llado, Sr., Dr. Martin W. Mackay, Mr. George E. Massaro, Dr. Craig B. Thompson, Mr. Richard F. Wallman, and Ms. Virginia M. Wilson for election at the Meeting. Mr. Richard Reese was not re-nominated by the Board because he has reached mandatory retirement age, in accordance with our Corporate Governance Guidelines. There are no family relationships between any of our directors or executive officers. In the event that any nominee shall become unable or unwilling to serve, the shares represented by the enclosed proxy may be voted for the election of such other person as the Board may recommend in that nominee’s place or the Board may reduce its size. Our Board has no reason to believe that any nominee will be unable or unwilling to serve. The Board of Directors unanimously recommends a vote “FOR” each of the eleven nominees for election as directors.
NOMINEES FOR DIRECTORS
NOMINEES FOR DIRECTORS The following table provides information as of the date of this Proxy Statement about each nominee. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes, and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty, and adherence to high ethical standards. They each have demonstrated business or scientific acumen and an ability to exercise sound judgment, as well as a commitment of service to Charles River and our Board.
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | James C. Foster (he/him/his) | 73 | Mr. Foster joined us in 1976 as General Counsel and over his tenure has held various staff and managerial positions. Mr. Foster was named President in 1991, Chief Executive Officer in 1992, and Chair in 2000. Mr. Foster has been a director since 1989. Mr. Foster was selected to serve as a director on our Board due to his role as our Chief Executive Officer, his depth of knowledge of us and our operations, his acute business judgment, extensive familiarity with the businesses in which we compete, and his lengthy experience with us. |
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | Nancy C. Andrews, M.D., Ph.D (she/her/hers) | 65 | Executive Vice President and Chief Scientific Officer at Boston Children’s Hospital since December 2021. Professor in Residence at Harvard Medical School. Served as Professor of Pediatrics and Professor of Pharmacology & Cancer Biology at Duke University from 2007 to December 2021 (and the Nanaline H. Duke endowed chair from 2013 to 2020). From 2007 to 2017, Dr. Andrews served as Dean of the Duke University School of Medicine and Vice Chancellor for Academic Affairs at Duke University. From 2003 to 2007, she served as Dean for Basic Sciences and Graduate Studies and Professor of Pediatrics at Harvard University Medical School. From 1999 to 2003, she served as director of the Harvard-Massachusetts Institute of Technology M.D./Ph.D. Program, and the principal investigator of its MSTP grant. From 1993 to 2006, she was a biomedical research investigator of the Howard Hughes Medical Institute. She is a member of the Scientific Advisory Board of Dyne Therapeutics. She is an elected member of the American Academy of Arts and Sciences, the National Academy of Medicine and the National Academy of Sciences, and currently serves as Home Secretary for the National Academy of Sciences. Dr. Andrews previously served on the Executive Committee of the MIT Corporation and as Chair of the Board of Directors of the American Academy of Arts and Sciences. She is a former Chair of the Board of Directors of the Burroughs Wellcome Fund and a former member of the Scientific Management Review Board at the National Institutes of Health. Dr. Andrews also serves on the boards of directors of Novartis International AG and Maze Therapeutics. Dr. Andrews has been a director since February 2020. Dr. Andrews was selected for the Board in recognition of her distinct perspective as an accomplished physician, scientific researcher, professor, and senior administrator at leading academic institutions and hospitals. She brings to the Board extensive scientific leadership and expertise in oncology, genetics, and pediatric research. Dr. Andrews’ training and experience are particularly suited to understanding and providing insights into the research and development process, which further enhances our position as the partner of choice for our clients’ early-stage drug development programs. |
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | Robert Bertolini (he/him/his) | 62 | President and Chief Financial Officer of Bausch & Lomb Incorporated from February 2013 to August 2013 (until its acquisition by Valeant Pharmaceuticals International, Inc. (n/k/a Bausch Health Companies Inc.)). Mr. Bertolini served as Executive Vice President and Chief Financial Officer at Schering-Plough Corp. from November 2003 until November 2009 (until its merger with Merck & Co) with responsibility for tax, accounting, and financial asset management. Prior to joining Schering-Plough, Mr. Bertolini spent 20 years at PricewaterhouseCoopers LLP, ultimately leading its global pharmaceutical industry practice. Mr. Bertolini served as a director of Bristol-Meyers Squibb Company from 2017 to May 2021, of Actelion from 2011 to 2017, and of Indorsia, Ltd., a Swiss public company, from 2017 until May 2020. Mr. Bertolini also previously served as a director of Genzyme Corporation. Mr. Bertolini has been a director since January 2011. Mr. Bertolini’s qualifications to serve as a director include his industry and financial expertise. He has extensive experience in building world-class finance and information technology functions and in leading business development and strategy. He has had responsibility for key financial areas including tax, accounting, and financial asset management, and extensive experience in audit, financial controls, and corporate governance. He has expertise in working with small and large health care companies on initial public offerings, licensing, and other strategic issues. As a result of his extensive background in public accounting and prior experience as a public company Chief Financial Officer, Mr. Bertolini qualifies as an “audit committee financial expert” under SEC guidelines. | | Reshema Kemps-Polanco (she/her/hers) | 51 | Reshema Kemps-Polanco is Executive Vice President and Chief Commercial Officer of Novartis US, the U.S. operations of global biopharmaceutical company Novartis AG, responsible for end-to-end commercialization across four therapeutic areas. Ms. Kemps-Polanco returned to Novartis in 2021 as EVP & US Head, Novartis Oncology. Prior to rejoining Novartis, Ms. Kemps-Polanco held several leadership positions at Johnson & Johnson from 2014 until 2021, most recently as President, Janssen U.S. Cardiovascular & Metabolism and Janssen Pharmaceuticals Puerto Rico. Ms. Kemps-Polanco began her pharmaceutical industry career at Novartis in 2012 in sales and held management positions of increasing responsibility. Ms. Kemps-Polanco is a board member of the Healthcare Leadership Council (HLC), a member of the Healthcare Businesswomen’s Association (HBA) Global Advisory Board, and the CEO Roundtable on Cancer. Ms. Kemps-Polanco has been a board member since January 2024. Ms. Kemps-Polanco was selected for the Board in recognition of her distinct perspective due to her extensive healthcare business leadership knowledge, her deep industry experience at two of the top-10 global pharmaceutical companies, her demonstrated ability to oversee large commercial organizations across multiple therapeutic areas, including sales and marketing expertise, as well as her over 25 years of experience in the life-sciences sector. |
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | Deborah T. Kochevar, D.V.M., Ph.D. (she/her/hers) | 67 | Senior Fellow, The Fletcher School of Law and Diplomacy, with a focus on Global One Health and health diplomacy, and Dean Emerita of Cummings School of Veterinary Medicine at Tufts University since 2019. From 2018 until 2019, Dr. Kochevar served as Provost and Senior Vice President ad interim and, from 2006 until 2018, as Dean of Cummings School of Veterinary Medicine at Tufts University. Previously, Dr. Kochevar was a long-time faculty member and administrator at the College of Veterinary Medicine and Biomedical Sciences, Texas A&M University, where she held the Wiley Chair of Veterinary Medical Education. Dr. Kochevar is a past president of the Association of American Veterinary Medical Colleges and American College of Veterinary Clinical Pharmacology. Dr. Kochevar is active in the American Veterinary Medical Association, having chaired its Council on Education and the Educational Commission for Foreign Veterinary Graduates. Dr. Kochevar serves as a director at Elanco Inc. Dr. Kochevar has been a director since October 2008. Dr. Kochevar was selected to the Board in recognition of her distinct perspective as a highly distinguished academic and educator in the life sciences. As a boarded diplomate of the American College of Veterinary Clinical Pharmacology, with a Ph.D. in cell and molecular biology combined with a D.V.M. degree, and with a deep knowledge base of comparative and translational medicine and complex animal models, Dr. Kochevar’s training and experience is particularly suited to understanding and providing insights into the veterinary medical, contract research and drug development support activities that we conduct. Dr. Kochevar also provides the Board with current industry and scientific insights through her ongoing involvement in biomedical professional and trade organizations and Global OneHealth. |
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | George Llado, Sr. (he/him/ his) | 58 | Former Senior Vice President and Chief Information Officer (CIO) of Alexion Pharmaceuticals, Inc. As an industry veteran with over 30 years of pharmaceutical business and technology and cyber-security experience, Mr. Llado, through his time at Alexion, contributed to the development and implementation of innovative technology, enabling data-driven insights across Alexion’s R&D, Commercial, Manufacturing Operations and Supply Chain functions. Prior to joining Alexion, Mr. Llado served as Vice President and business line CIO for Merck and Co., where he led the planning and development of IT solutions for the company’s Manufacturing Division. Before that, he was Merck’s Vice President, IT and business line CIO for the Global Commercial Organization and various corporate G&A functions. He led the large-scale merger integration of Merck and Schering-Plough across the IT and Shared Business Services organizations. He also held several other positions of increasing responsibility at Merck, and previously worked at Citibank, N.A. Mr. Llado serves on the Tracelink Inc. and the National Center for Women & Information Technology (NCWIT) Board. He also serves on the Temple Fox Business School IT Advisory Board. Mr. Llado has been a director since October 2020. Mr. Llado was selected to the Board in recognition of his extensive experience as a senior executive at global companies in the pharmaceutical industry, as well as his technology and cyber-security expertise. | | Martin W. Mackay, Ph.D. (he/him/his) | 68 | Dr. Mackay is co-founder, Executive Chair, former Chief Executive Officer, and current director of Rallybio Corporation, a biotechnology company incorporated in January 2018, which only recently became a public company in July 2021. From May 2013 to June 2017, Dr. Mackay served as the Global Head of Research & Development at Alexion Pharmaceuticals, Inc. and, from July 2010 to January 2013, Dr. Mackay served as the President of R&D at AstraZeneca PLC, where he led the research and development organization and had overall accountability for delivering new products from its pipeline. Dr. Mackay has served as a director of Novo Nordisk since March 2018. From October 2020 through April 2022, Dr. Mackay served as a director of 5:01 Acquisition Corp., a blank check company whose primary purpose was to effect a business combination, and which has never engaged in operating activities. Dr. Mackay has been a director of the Company since July 2017. Dr. Mackay’s extensive experience leading research and development organizations at both global pharmaceutical and biotechnology companies provides us with a unique combination of expertise. |
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | George E. Massaro (he/him/his) | 76 | Former Director and Vice Chair of Huron Consulting Group, Inc., a management consulting company from 2010 to 2020. Mr. Massaro was non-Executive Chair of the Board of Huron Consulting Group from July 2009 to May 2010, Director and Vice Chair of Huron Consulting Group since June 2004 (Vice Chair since March 2005), Chief Operating Officer of Huron Consulting Group, Inc. and Huron Consulting Services LLC from June 2003 until March 2005, and Managing Director of Huron Consulting Services LLC from August 2002 to May 2003. He was the Managing Partner of Arthur Andersen LLP’s New England practice from 1998 to 2002. Mr. Massaro also served as a director of Eastern Bank Corporation, an independent mutual bank holding company in New England from 2003 through 2017. Mr. Massaro has been a director since 2003. Mr. Massaro has more than 35 years of accounting and auditing experience with expertise in a broad range of areas. As a former managing partner of a major accounting firm, Mr. Massaro brings a deep knowledge of financial reporting, and auditing and tax matters applicable to a variety of industries. Mr. Massaro also provides business acumen from his numerous senior positions at Huron Consulting, as well as his service on boards of other companies. As a result of his extensive background in public accounting and prior experience at Arthur Andersen, Mr. Massaro qualifies as an “audit committee financial expert” under SEC guidelines. |
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | Craig B. Thompson, M.D. (he/him/his) | 71 | Former President and Chief Executive Officer of Memorial Sloan- Kettering Cancer Center from 2010 to September 2022. Dr. Thompson continues to oversee a research laboratory at the Sloan Kettering Institute focusing on cellular metabolism and its role in cancer. From 2006 to 2010, Dr. Thompson served as the Director of the Abramson Cancer Center at the University of Pennsylvania School of Medicine, and, from 1999 to 2011, he was a Professor of Medicine and Cancer Biology at the University of Pennsylvania. Dr. Thompson is currently a member of the Board of Directors of Regeneron Pharmaceuticals, Inc., and he previously served on the Board of Directors of Merck & Co. Inc. from 2009 to 2018. He is also a board member of the Howard Hughes Medical Institute, M.D. Anderson Cancer Center, Ohio State University Comprehensive Cancer Center, City of Hope Comprehensive Cancer Center, the Economic Club of New York, and a member of the Albert Lasker Medical Research Awards Prize Committee. Dr. Thompson is an elected member of the National Academy of Sciences, the National Academy of Medicine, the American Academy of Arts and Sciences, and the Association of American Physicians. Dr. Thompson holds a number of patents related to immunotherapy and apoptosis and has founded three biotechnology companies, including Agios Pharmaceuticals. Dr. Thompson has been a director since December 2022. Dr. Thompson was selected to the Board in recognition of his distinct perspective as a highly distinguished academic and educator in medicine as well as his extensive scientific and medical expertise relevant to life science industries, including the research and development activities of our clients. Dr. Thompson’s training and experience is particularly suited to understanding and providing insights into the contract research and drug development support activities we conduct. Dr. Thompson also provides the Board with current industry and medical insights. | | Richard F. Wallman (he/him/his) | 72 | From 1995 through 2003, Mr. Wallman served as the Senior Vice President and Chief Financial Officer of Honeywell International, Inc., a diversified technology company, and AlliedSignal, Inc. (prior to its merger with Honeywell). He is also a member of the boards of directors of Roper Technologies, Inc. and CECO Environmental Corp. and in the past five years has served as a member of the boards of Smile Direct Club, Extended Stay America, and Boart Longyear Limited, and Wright Medical Group, Inc. Mr. Wallman has been a director since January 2011. Mr. Wallman’s leadership experience, including his role as a Chief Financial Officer, and his financial and outside board experience, provide him with an informed understanding of the financial issues and risks that affect us. |
NOMINEES FOR DIRECTORS
| Name and Age as of the 2024 Annual Meeting | | Position, Principal Occupation, Business Experience and Directorships | | Virginia M. Wilson (she/her/hers) | 69 | Retired Senior Executive Vice President and Chief Financial Officer of TIAA, where she was responsible for leading finance and actuarial functions. Prior to joining TIAA in 2010, Ms. Wilson served as Executive Vice President and Chief Financial Officer of Wyndham Worldwide Corporation, leading Wyndham’s finance and technology organizations following its spin-off from Cendant Corporation in 2006. Previously, she served as Cendant’s Executive Vice President and Chief Accounting Officer and also served as Senior Vice President and Corporate Controller of both MetLife, Inc. and Transamerica’s life insurance division. Ms. Wilson began her career at Deloitte and is a Certified Public Accountant. She is a current member of the board of directors of Carrier Global Corporation and a former member of the board of directors of Conduent Incorporated. Ms. Wilson has been a director since October 2019. Ms. Wilson brings to the Board more than 30 years of financial management experience overseeing the accounting, actuarial, tax, and financial planning and reporting functions at large, multinational organizations. In addition, as a result of her background as a Certified Public Accountant and prior service as a public company Chief Financial Officer, Ms. Wilson qualifies as an “audit committee financial expert” under SEC guidelines. |
Nominee Qualifications and Attributes
Nominee Qualifications and Attributes Our director nominees’ primary skills, qualifications and attributes are highlighted in the following matrix. The matrix is intended as a high-level summary and not an exhaustive list of each director’s skills or contributions to the Board.
Nominee Qualifications and Attributes
| | | | | | | | | | | | | | | James C. Foster | Nancy C. Andrews | Robert Bertolini | Reshema Kemps-Polanco | Deborah T. Kochevar | George Llado, Sr. | Martin W. Mackay | George E. Massaro | Craig B. Thompson | Richard F. Wallman | Virginia M. Wilson | | Public Company CEO or CFO | ● | | ● | | | | ● | | | ● | ● | | Industry* | ● | | ● | ● | | ● | ● | | | | | | Senior Business Management | ● | ● | | ● | ● | ● | ● | ● | ● | | ● | | Business Development / Corporate Strategy | ● | | ● | | ● | | ● | ● | | ● | ● | | Finance / Accounting | | | ● | | | | | ● | | ● | ● | | International Business Management | ● | | | ● | ● | ● | ● | ● | | | ● | | R&D / Scientific | | ● | | | ● | | ● | | ● | | | | Information Technology / Digital / Cyber | | | | | | ● | | | | | ● | | ESG | | | | | ● | ● | | | ● | | | | Human Capital Management | ● | ● | | | ● | ● | ● | | | | | | Risk Management | ● | ● | ● | | ● | ● | ● | ● | ● | ● | ● | | Diversity** | | ● | | ● | ● | ● | | | | | ● | | Military Veteran | | | | ● | | | | | ● | | |
Nominee Qualifications and Attributes
* Includes experience in any of the biotechnology, pharmaceutical, medical device, diagnostic device, or manufacturing industries. ** Includes gender, race, and LGBTQIA+ self-identification.
Dr. Mackay is a Strong and Qualified Choice for Director
Dr. Mackay is a Strong and Qualified Choice for Director Our Board recognizes that certain shareholders may have questions about the public company commitments of Dr. Mackay, given he is the Executive Chair of Rallybio Corporation and currently serves on a total of three public company boards, including the Company. Since Rallybio Corporation became a public company in July 2021, Dr. Mackay’s commitment and service to the Company has continued to be considerable and unwavering. The Board believes that Dr. Mackay is exceptionally qualified to continue to serve on the Board and that he brings a unique background that is critical to the overall experience of the Board. Dr. Mackay’s extensive industry experience, including his service on various boards in the pharmaceutical and biotechnology industry, provides him with a distinct perspective on our business and the products and services we provide to our clients. Dr. Mackay also offers the Board his specialized expertise in areas such as: senior business management, including business administration and vision and strategy-setting; industry research and development, including scientific expertise and focus; business development and corporate strategy, including experience at the executive level in the strategic and tactical aspect of consummating transactions; • international business management, including experience leading a global business; • human capital management, including overseeing the development, implementation, and administration of human resource programs, policies and procedures across many functions throughout a large organization; and • risk management, including experience developing, evaluating and communicating risk policies and processes. Dr. Mackay is a highly engaged member of our Board and has effectively managed his commitments throughout his tenure with the Company. He has attended each meeting of the board and the respective committees on which he has served since 2021 and has attended all but one board meeting and one committee meeting since joining the Board in 2017. Dr. Mackay is consistently prepared, acts as a fully active participant in the Board’s meetings and deliberations and is available for consultation with the other directors and serves an important role in the strong oversight of management. Dr. Mackay’s annual evaluations, conducted by the Corporate Governance and Nominating Committee of the Board, have consistently reflected his strong performance and contributions to the Company, including his exceptional and inclusive leadership skills. Dr. Mackay currently chairs our newly-established Responsible Animal Use Committee of the Board, further demonstrating the critical position he holds as leader and advisor to the Company on our most strategically important matters. After thorough consideration and evaluation of Dr. Mackay’s performance as a director, the Board unanimously recommends the re-election of Dr. Mackay at the 2024 Annual Meeting. As with any director of the Company, in the event that Dr. Mackay’s engagement as a director declines, the Corporate Governance and Nominating Committee will reevaluate its recommendation. Tenure and Age Distribution In addition to the skills, qualifications and attributes noted above, we believe the composition of our director nominees will ensure a balance of deep knowledge of the Company along with fresh perspectives.
Dr. Mackay is a Strong and Qualified Choice for Director
| Tenure | | Age | | | Newer Tenured (<5 years) | 5 | <60 years | 2 | | Medium Tenured (6-10 years) | 1 | 60-70 years | 5 | | Longer Tenured (>10 years) | 5 | >70 years | 4 |
Dr. Mackay is a Strong and Qualified Choice for Director
Board Diversity Diversity in gender and race/ethnicity is considered in the selection and retention of our directors, as it is important that our directors can provide the Board with a range of informative viewpoints and perspectives. The below graphic highlights the self-identified diversity of our director nominees.
2023 DIRECTOR COMPENSATION
2023 DIRECTOR COMPENSATION We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on our Board. Linking a portion of their compensation to stock aligns the interests of directors with the interests of shareholders. In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties to us, as well as the skill levels required by us of members of the Board. The following table sets forth all of the compensation awarded to, earned by, or paid to our directors for the year ended December 30, 2023. Please note that Mr. Foster receives no compensation for his role as director, and the entirety of his compensation is reported in the Summary Compensation Table located on pages 60-61 of this Proxy Statement.
2023 DIRECTOR COMPENSATION
| Name | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | All Other Compensation ($)(5) | Total ($) | | Craig B. Thompson(1) | 75,833 | 181,017 | 180,933 | 0 | 437,783 | | George E. Massaro | 115,000 | 127,727 | 128,296 | 0 | 371,023 | | Robert Bertolini | 90,000 | 127,727 | 128,296 | 0 | 346,023 | | Virginia M. Wilson | 90,000 | 127,727 | 128,296 | 0 | 346,023 | | C. Richard Reese | 85,000 | 127,727 | 128,296 | 0 | 341,023 | | Nancy C. Andrews | 83,750 | 127,727 | 128,296 | 0 | 339,773 | | Deborah T. Kochevar | 83,750 | 127,727 | 128,296 | 0 | 339,773 | | Richard F. Wallman | 83,750 | 127,727 | 128,296 | 0 | 339,773 | | Martin Mackay | 80,000 | 127,727 | 128,296 | 0 | 336,023 | | George Llado, Sr. | 68,750 | 127,727 | 128,296 | 0 | 324,773 |
2023 DIRECTOR COMPENSATION
Amounts include cash and equity compensation paid to Dr. Thompson to reflect his services to the Board beginning upon his election in December 2022 that were not paid until January 2023. Reflects the aggregate dollar amount of all fees earned for services as a director, including annual retainer fees, committee, and/or committee chair fees. A description of the applicable fees can be found in the narrative below this table. For the following directors, each elected to receive all of their cash retainers in the form of an equivalent value of restricted stock units (RSUs) instead of cash: Mr. Bertolini, Dr. Mackay, and Mr. Reese. Amounts reflect the grant date fair value of the RSUs granted to directors in fiscal year 2023 as part of their annual equity grant in May 2023, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718. See Item 8 “Financial Statements and Supplementary Data—Note 1 to our Consolidated Financial Statements” and Item 8 “Financial Statements and Supplementary Data—Note 15 to our Consolidated Financial Statements” included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023 for a discussion of the assumptions used by us in the Black-Scholes valuation model. As of December 30, 2023, each then current director held the aggregate number of unvested RSUs as follows: Dr. Andrews—664, Mr. Bertolini—1,132, Dr. Kochevar—664, Mr. Llado—664, Dr. Mackay—1,097, Mr. Massaro—664, Mr. Reese—1,106, Dr. Thompson—908, Mr. Wallman—664, and Ms. Wilson—664. (4) Amounts reflect the grant date fair value of (a) directors’ stock options granted in fiscal year 2023 as part of their annual equity grant in May 2023, and (b) stock options granted in January 2023 to Dr. Thompson (who joined the Board in December 2022 and received pro-rated equity grant in January 2023), in all instances computed in accordance with FASB ASC Topic 718, and calculated using the Black-Scholes valuation model utilizing our assumptions. See Notes 1 and 15 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023, for a discussion of the assumptions used by us in the Black-Scholes valuation model. As of December 30, 2023, each then current director held the aggregate number of option awards as follows: Dr. Andrews—7,514, Mr. Bertolini—6,941, Dr. Kochevar—4,402, Mr. Llado—5,393, Dr. Mackay—6,871, Mr. Massaro—4,402, Mr. Reese— 6,941, Dr. Thompson—2,261, Mr. Wallman— 6,941, and Ms. Wilson—6,941. (5) None of our directors received perquisites or other personal benefits equal to or exceeding $10,000 in the aggregate. In 2023, we paid each non-employee director an annual base cash fee of $65,000 for service as our director. Members of the Audit Committee were paid an additional annual cash fee of $5,000 in recognition of the additional meetings the Audit Committee holds. Additional cash fees are paid to the Lead Director ($45,000), Chair of the Audit Committee ($25,000), Chair of the Compensation Committee ($20,000), Chair of the Corporate Governance and Nominating Committee ($20,000), Chair of the Finance Committee ($20,000), Chair of the Responsible Animal Use Committee ($20,000), Chair of the Science and Technology Committee ($20,000), and Chair of the Strategic Planning and Capital Allocation Committee ($20,000) for their added responsibilities. No additional fees are paid for attending meetings of the Board or any committee of the Board. We reimburse expenses incurred by directors in attending meetings of the Board of Directors and of its respective committees. The Board believes there is a greater opportunity for alignment of the Board’s compensation structure with the interests of the Company’s shareholders in creating sustained, long-term value by affording the Company’s independent directors the opportunity to receive all or a significant percentage of their compensation in the form of RSUs, with the ability to defer receipt of those RSUs for an extended period of time. Accordingly, (1) directors are permitted to elect in advance to receive their annual cash fees in the form of equivalent value RSUs; and (2) we have established the Charles River Laboratories International, Inc. Non-Employee Directors Deferral Plan, which allows directors, if they so choose, to defer receipt of all or a portion of their RSUs for up to a period of five years or may elect to defer them upon retirement from the Board. Our non-employee director equity compensation policy for each unaffiliated non-employee director provides for (1) equity having an intended value of approximately $255,500 on the first day of the month following his or her initial election or appointment to the Board; provided, however, that the value of the equity award will be paid pro rata based on the number of months that have elapsed during the Board term, and (2) equity having an intended value of approximately $255,500 on an annual basis following our annual meeting of shareholders. In fiscal 2023, equity grants were issued half in restricted stock or RSUs and half in the form of stock options (utilizing Black-Scholes pricing models). Under our shareholder-approved Amended and Restated 2018 Incentive Plan, in a single year, no non- employee director may receive equity awards with a grant date fair value that, when combined with any cash or other compensation granted in the same year, exceeds an aggregate amount of $800,000 (excluding the aggregate grant date fair value of any initial award made to such non-employee director upon his or her initial election or appointment to the Board, which will not exceed $600,000). Director Stock Ownership Requirement In order to further align the interests of directors and shareholders, the Board has mandated that, to the extent permissible, directors have a significant financial stake in the Company. Accordingly, as set forth in the Corporate Governance Guidelines, we require that each director own a minimum number of shares of vested Company stock with a value equivalent to five (5) times the annual cash retainer that such director is eligible to receive during his or her then current term as a member of the Board. Newly elected directors have five (5) years from election to comply with the new requirement, and in the interim the prior requirement is applicable. Board members who are subject to third party restrictions on their stock holdings (e.g., certain academic institutions) shall be permitted to own stock in an amount that is appropriate for them in light of such other restrictions. As of the date of this Proxy Statement, all of our directors who have served at least three years on the Board are in compliance with the prior holding requirement.
Corporate Governance
Corporate Governance We are committed to operating our business with integrity and accountability. We meet independence standards established by the NYSE and the SEC. Each member of our Board, other than Mr. Foster (who is also our Chief Executive Officer) and Dr. Mackay, is independent and has no significant financial, business or personal ties to us or management, and all of our required Board committees are composed of independent directors. Our Board adheres to our Corporate Governance Guidelines and the Code, which have been communicated to employees and posted on our website. We are diligent in complying with established accounting principles and are committed to providing financial information that is transparent, timely and accurate. We have established global processes through which employees, either directly or anonymously, can notify management (and the Audit Committee of the Board) of alleged accounting and auditing concerns or violations, including fraud. Our internal Disclosure Committee meets regularly and operates pursuant to formal disclosure procedures and guidelines to support our public reporting. Copies of our Corporate Governance Guidelines and our Related Person Transactions Policy are available on our website at www.criver.com under the “Investor Relations—Corporate Governance” caption. Reports and documents on our corporate website are not incorporated by reference into this Proxy Statement. Some of these reports contain cautionary statements regarding forward-looking information that should be carefully considered. Our statements and reports about our objectives may include statistics or metrics that are estimates, make assumptions based on developing standards that may change and provide aspirational goals that are not intended to be promises or guarantees. The statements and reports may also change at any time, and we undertake no obligation to update them, except as required by law. Corporate Governance Snapshot Below is a summary of some of the key elements of our strong governance policies and practices:
Corporate Governance
| ✓ Majority voting standard in uncontested director elections with a mandatory resignation policy that requires incumbent director nominees to submit a resignation that becomes effective upon the failure to receive a majority vote and the Board’s acceptance of the resignation | | ✓ Expectation of director attendance with all directors attending over 75% of Board and respective Committee meetings in 2023 | | ✓ Mandatory director retirement age of 75 with grandfather provision permitting any director who was a member of the Board as of December 17, 2019, to retire at age 78 | | ✓ Proxy Access provision in our by-laws by which eligible stockholders may nominate director candidates for inclusion in our proxy statement and proxy card | | ✓ Annual director and committee assessments to ensure that the Board and its Committees are performing effectively and in the best interests of the Company and its stockholders | | ✓ Commitment to ESG principles through which we strive to promote and support business practices that are environmentally sustainable, socially conscious and aligned with strong corporate governance practices, including Board oversight of ESG risk | | ✓ Lead Independent Director to provide independent oversight and is responsible for ensuring that the Board is acting in conformity with good corporate governance practices and in our long-term best interests | | ✓ Code of Business Conduct and Ethics that outlines the key laws and policies that apply to our business, as well as an individual’s responsibilities for maintaining a positive and ethical work environment and our resources for issues involving legal compliance or ethical business conduct | | ✓ Independent Board Committee Chairs to provide independent oversight of each Committee | | ✓ Information security risk oversight by Board (Audit Committee) | | ✓ Corporate strategy and risk oversight by Board, which oversees the process and performs this oversight role using several different levels of review | | ✓ Political Contribution Policy that, among other things, prohibits the use of Company resources: to fund or support political parties, officials or candidates without prior approval from CEO, CFO and General Counsel; and for employees’ personal political activities | | ✓ Stock Ownership Requirements require our officers and directors to hold shares as follows: | | ✓ Clawback Policy on the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws. | | Position | Stock Ownership Requirement | | | Director | 5x cash retainer | | | CEO | 6x base salary | | | Direct Reports to CEO | 3x base salary | | | Senior Vice President (not reporting to CEO) | 2x base salary | | | Vice President | 1x base salary | |
Corporate Governance
Code of Business Conduct and Ethics All of our employees and officers, including our Chief Executive Officer and Chief Financial Officer, and members of our Board, are required to abide by our global Code. Our Code outlines the key laws and policies that apply to our business, as well as an individual’s responsibilities for maintaining a positive and ethical work environment, and our resources for issues involving legal compliance or ethical business conduct. The Code is the foundation of our comprehensive Legal Compliance program, a global function that helps promote compliance with all corporate policies and procedures, an open relationship among colleagues that contributes to good business conduct and an abiding belief in the importance of the integrity of our employees. Our Code, together with related policies and procedures, covers areas of legal and professional conduct, including employment policies, conflicts of interest, intellectual property, data privacy and the protection of confidential information, as well as adherence to all laws and regulations applicable to the conduct of our business. Employees are required to report any conduct that they believe to be an actual or apparent violation of the Code. Consistent with the Sarbanes-Oxley Act of 2002, we maintain procedures to receive, retain and treat complaints regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The full text of our Code is available on our website at www.criver.com, under the “Investors— Corporate Governance” caption. We will disclose any future material amendments to the Code and any waivers granted to any director or officer within the period required following the date of such amendment or waiver on our website. Director Qualification Standards; Director Independence Our Board has adopted a formal set of Director Qualification Standards (Standards) with respect to the determination of director independence. The Standards specify the criteria by which the independence of our directors will be determined, including strict guidelines for directors and their immediate families with respect to employment or affiliation with us or our independent registered public accounting firm. In accordance with these Standards, we must determine that the director has no material relationship with us other than as a director. The Standards also prohibit Audit Committee members from any direct or indirect financial relationship with us, and limit the scope of commercial relationships of all directors with us. Directors may not be given personal loans or extensions of credit by us, and all directors are required to deal at arm’s length with us and our subsidiaries and to disclose any circumstance that might be perceived as a conflict of interest. The full text of our Standards is available on our website at www.criver.com under the “Investor Relations—Corporate Governance” caption, within our Corporate Governance Guidelines. The Board has determined that nine of the eleven directors standing for reelection or election to the Board are independent under these Standards. The Board has determined that Mr. Foster does not qualify as an independent director due to his employment as our Chief Executive Officer. The Board has also determined that Dr. Mackay does not qualify as an independent director as a result of his serving as an executive officer of a Company client. In the course of the Board’s determination of the independence of each director other than Mr. Foster and Dr. Mackay, it considered any transactions, relationships and arrangements as required by the Standards. In particular, the Board evaluated: • for each of our non-employee directors, the annual amount of sales to and/or purchases from any organization of which he or she serves as an executive officer; and • for Dr. Kochevar, the annual amount of sales (net of any charitable contributions made by us) to and/or purchases from the academic institution of which she serves as Dean Emerita and Senior Fellow. In 2023, this included approximately $14,000 in payments the Company made to Tufts University pursuant to a longstanding royalty arrangement established in 1996 that predates Dr. Kochevar’s relationship with either Tufts or the Company, and approximately $844,000 in arms- length sales from the Company to Tufts University for Research Models and Services. In all such evaluations as to independent directors, we determined that the applicable amounts were below the greater of (1) $1 million or (2) two percent (2%) of the consolidated gross annual revenue of each of those organizations. In addition, with respect to all of our non-employee directors, the Board considered the amount of our discretionary charitable contributions to organizations of which he or she serves as an officer, director or trustee, and determined that our contributions constituted less than the greater of (1) $1 million or (2) two percent (2%) of such organization’s total annual gross revenue in each of the organization’s last three completed fiscal years. In conducting this analysis, the Board considered all relevant facts and circumstances, utilizing information derived from our records and responses to questionnaires completed by the directors in connection with the preparation of this Proxy Statement. For information about the entities our non- employee directors serve or have served as either (1) an executive officer or (2) an officer, director or trustee of a charitable institution (other than any such charitable institution with which the Company has no transactions, relationships, or arrangements), you are directed to their biographies adjacent to their pictures above in this Proxy Statement. The independent members of the Board typically meet in executive session following each regularly scheduled meeting of the full Board and, as they determine necessary, following meetings of our Board committees. Our Lead Director, Mr. Massaro, leads executive sessions of the Board.
Executive Summary
The above stock performance graph compares the annual percentage change in the Company’s cumulative total shareholder return on its Common Stock during a period commencing on December 29, 2018 and ending on December 30, 2023 (as measured by dividing (1) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the Company’s share price at the end and the beginning of the measurement period; by (2) the share price at the beginning of the measurement period) with the cumulative total return of the S&P 500 Index and the S&P 500 Health Care Index during such period. The Company has not paid any dividends on the Common Stock, and no dividends are included in the representation of the Company’s performance. The stock price performance on the graph above is not necessarily indicative of future price performance. The graph is not “soliciting material,” is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. Information used in the graph was obtained from Standards & Poor’s Institutional Market Services, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information. Elements of Our Compensation Program/2023 Advisory Vote on Executive Compensation Charles River shareholders provided strong majority support for our named executives’ compensation at our 2023 annual meeting of shareholders (87.4% of shares voted in support of this matter). We attribute this level of support to several long-standing characteristics of our executive compensation program that we believe enhance the performance orientation of the program: • Base Salaries: We have kept base salary increases in line with market rates, averaging 6.0% and, in general annualized merit increases for our executives (excluding promotional increases) are consistent with the average annualized merit increases allotted to our North American workforce. • Annual Cash Incentive Awards: Our Compensation Program includes an annual cash bonus element that closely links a significant portion of executive pay to the achievement of short-term performance targets that are critical to meeting our stated financial objectives for the year. These targets are typically tied to specific financial metrics derived from our fiscal year operating plan. • Special Cash Award. As reported in our 2023 Proxy Statement, Ms. Pease was granted a one- time signing bonus in 2022 in accordance with her appointment as Corporate Vice President and Chief Financial Officer. This bonus was paid in two installments in the gross amount of $800,000, with an initial installment of $200,000 paid in May 2022 and the second installment of $600,000 paid in May 2023. • Long-Term Equity Incentive Awards, including Performance Share Units: Our officers typically receive three types of equity awards, and where appropriate and applicable, special equity awards (such as with respect to executive transitions): • Performance Share Units (PSUs), which vest on a “cliff basis” after three years, if service and performance requirements are met and which are paid out in shares based upon two separate performance metrics: (1) first fiscal year non-GAAP earnings per share (EPS) and (2) three-year rTSR, as further described on pages 54-56 of this Proxy Statement in the discussion related to Long-Term Equity Incentive Awards. PSUs are intended to comprise approximately 60% of the intended value of long-term equity incentive awards provided to executive officers in any fiscal year (with the exception of Mr. Foster, for whom the percentage is 80%). • Time-based stock options, which vest over four years. Stock options are intended to comprise approximately 20% of the intended value of long-term equity incentive awards provided to officers in any fiscal year. • Time-based restricted stock/RSUs, which vest over four years (except in limited circumstances when special awards are granted). Restricted stock/RSUs are intended to comprise approximately 20% of the intended value of long-term equity incentive awards provided to officers in any fiscal year (with the exception of Mr. Foster, who does not receive any RSUs). • No 280G Excise Tax Gross-Ups. For the limited number of our executives with whom we have change in control agreements (which included each of our named executives), these agreements do not provide allow for any “gross-up” payment by the Company of any of the excise taxes imposed by Section 4999 of the Internal Revenue Code due to “golden parachute” payments. Clawback Policy. We maintain a Financial Statement Compensation Recoupment Policy (also known as a Clawback Policy) policy that complies with NYSE listing standards and Section 10D of the Securities Exchange Act of 1934. This policy applies to all of our executive officers. Under this Clawback Policy, in the event of a restatement of Charles River’s financial statements resulting from material noncompliance with financial reporting requirements under the U.S. Federal securities laws, Charles River will recover erroneously awarded compensation from applicable executive officers, subject to specified criteria. Inclusion of “double-trigger” vesting in our recent equity compensation plans. Our 2018 Incentive Plan includes “double-trigger” vesting provisions that provide for accelerated vesting only upon both the occurrence of a change of control and a qualifying termination of employment within a reasonable period following the change in control. • Perquisites: We offer no significant perquisites or cash equivalents. • Stock Ownership: Stock ownership guideline for the CEO is 6 times base salary, and for executive officers is 3 times base salary. We believe that all of these aspects of our Program are appropriate in light of, and consistent with, economic and market environments, our financial performance, the corporate actions taken, and executive compensation trends. Furthermore, our focus on near-term financial and operational objectives properly align management’s incentives with the interests of our shareholders. For example, our pay mix maintains a continued focus on variable, or “at risk,” compensation. On average, approximately 83.6% of 2023 target annual compensation for our named executives was based on long-term equity incentives, that reflects a rTSR performance metric that appropriately modifies the value ultimately realized as discussed on pages 54-56 of this Proxy Statement, and performance- based bonuses (89.7% for our CEO). Furthermore, annual base salary for our named executives remains a relatively small portion (16.4%) of our named executives’ core intended compensation (10.3% for our CEO). Furthermore, as seen in the graph below, the alignment between executive pay and our performance is demonstrated by the close correlation from 2014 to 2023 between (1) the total compensation paid (consistent with the Summary Compensation Table) to our CEO in those years and (2) our non-GAAP earnings per share from continuing operations during that period. As illustrated, compensation generally increased with strong performance and decreased when performance declined. For purposes of this graph, “Other” refers to the total average amounts set forth in the following columns in the Summary Compensation Table on pages 60-61 of the Proxy Statement: (1) Change In Pension Value and Non-qualified Deferred Compensation Earnings; and (2) All Other Compensation. Information with respect to 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021 and 2022 compensation is set forth in our 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and 2023 Proxy Statements, respectively.
Compensation Elements
| Core Elements | Supplemental Elements | | • Base Salary • Annual Cash Incentive Awards (EICP Plan) • Long-Term Equity Incentive Awards | • Deferred Compensation Plan • Termination and Change in Control Agreements • Retirement Plan |
Compensation Elements
(1) Due to rounding, the columns may add to more or less than 100%. (2) The targeted compensation mix for Ms. Pease excludes a one-time signing bonus award, as described in the section entitled “Executive Compensation and Related Information—2023 Grants of Plan Based Awards—Description of Certain Awards Granted in 2023” and 2023 Summary Compensation Table, respectively. Compensation Setting Process As described above on pages 20-21 of this Proxy Statement, the Committee engaged Pay Governance as its independent compensation consultant to advise the Committee on matters related to 2023 executive compensation. Pay Governance generally assists the Committee in fulfilling its responsibilities under its charter, including advising on proposed compensation packages for our senior executives, compensation program design and market practices generally, guidance on how to appropriately compensate officers, regularly attending Committee meetings and other topics as the Committee deems appropriate. The Committee has authorized Pay Governance to interact with management on behalf of the Committee, as needed, in connection with advising the Committee. With respect to fiscal year 2023 compensation determinations, Pay Governance specifically assisted in the following: • evaluating and recommending adjustments to our peer groups; • benchmarking and analyzing executive compensation levels and recommending pay strategies (but not necessarily specific pay levels) for 2023, including providing executive compensation insights and market trends; • performing initial and ongoing calculations related to PSU grants to our corporate officers, including tracking and reviewing calculations of Total Shareholder Return relative to peers; • assisting with the calculations of compensation information to be included in our Proxy Statement, including requirements for pay versus performance disclosure; • providing assistance in reviewing the Compensation Discussion & Analysis; • providing analyses related to the Company’s long-term incentive structure and design compared to market practice; • providing advice with respect to the Committee’s analysis of director compensation, including competitive market data; and providing assistance in understanding the executive compensation market trends and the perspective of institutional shareholders and proxy advisors. Pay Governance is directly accountable to the Committee, which has sole authority to engage, dismiss, and approve the terms of engagement of the compensation consultant. During 2023, Pay Governance did not provide any other services to the Company. Only two of the senior executives of the Company (one Named Executive) are regularly involved in assisting the Committee in setting compensation parameters. In her role as our Corporate Executive Vice President & Chief People Officer, Ms. Victoria Creamer assists the Committee by providing data to the Committee’s consultants, developing or modifying compensation plans and programs based on the Committee’s direction, making recommendations to the Committee, and supporting the Committee’s efforts to obtain the information and data required to make well-reasoned decisions regarding the compensation elements which comprise the Program. In his capacity as Chair, President and Chief Executive Officer, Mr. Foster regularly participates in strategic discussions with the Committee regarding the design and scope of the Program to help ensure that the compensation elements, policies, and practices underlying the Program are properly aligned with the Company’s short-term financial and long-term strategic objectives. Mr. Foster also provides recommendations to the Committee regarding modifications that would allow the Program to function more effectively in the context of our evolving business organization, and assists the Committee in evaluating the individual performance of each executive officer (other than himself) to ensure that their respective levels of compensation take such performance into account. As a matter of process, Mr. Foster and Ms. Creamer frequently collaborate to analyze internal and externally provided compensation data and information, and to provide recommendations to the Compensation Committee. Total Compensation Strategy and Peer Group The Committee strives in its methodology to provide total core compensation to our named executives that reflects an appropriate market benchmark and a select peer group of companies which are similar to the Company (the peer group). The peer group is primarily comprised of companies operating in the area of life sciences and drug discovery and development, with a particular focus on ensuring that the peer group takes into account the presence of companies, both domestically and internationally, who compete directly with the Company for scientific and management talent. We draw upon data for comparable companies from public disclosures for the companies in the peer group and from reputable ongoing compensation surveys of similarly sized companies in the industries listed above. Each year, the Committee reviews and approves the peer group as well as a target Total Compensation Strategy. The Committee does not target a specific competitive percentile for the named executives, but rather relies on a variety of factors in making pay decisions beyond market data, such as each executive’s experience, performance ratings, internal equity, and strategic value of the executive’s position to the Company. Fiscal Year 2023 Compensation Analysis Methodology For fiscal year 2023, in conjunction with the changes to the peer group described below, the Committee (with the assistance of Pay Governance) continued to utilize a regression model to analyze the competitiveness of current executive compensation for each executive position. Accordingly, our target Total Compensation Strategy utilizes a methodology whereby target Total Direct Compensation is evaluated against the size appropriate benchmark data that factors in our Company’s relative size compared to the size of peer group companies and that is established for each position by reference to the peer group. Total Direct Compensation in 2023 for our named executives generally approximated the range of competitive market data suggested by the executive’s associated market benchmark and took into account the various qualitative factors listed above. The peer group identified by Pay Governance and approved by the Compensation Committee consists of industry comparators, both larger and smaller in revenue size than Charles River; accordingly, Pay Governance has developed a method of adjusting proxy compensation data for the peer group using common statistical regression methods to result in an appropriate correlation between the proxy data and Charles River’s corporate revenue, such that the regressed proxy revenue is commensurate to Charles River’s revenue. This size adjusted peer group proxy data is then blended with size appropriate, custom compensation survey data (with proxy data weighted 75% and survey data weighted 25% for the named executive benchmarks) to derive a “market composite benchmark” for evaluating our executive compensation. The Committee adopted this “market composite benchmark” methodology and a peer group that is relatively large in number of component companies, in part, due to industry consolidation presenting a challenge to maintaining a consistent group of peer companies year over year. For evaluating 2023 compensation decisions, the proxy peer group consisted of the following 37 companies:
Compensation Elements
Custom compensation survey data included information from 20 peer group companies (noted with *), as well as from Dentsply Sirona Inc. (XRAY); Horizon Therapeutics Public Company Limited (HZNP); Incyte Corporation (INCY); Parexel International Corporation (PRXL); Perrigo Company plc (PRGO); PRA Health Sciences, Inc. (PRAH); Resmed Inc. (RMD); and Zimmer Biomet Holdings, Inc.(ZBH) For evaluating 2024 compensation levels, the proxy peer group is not expected to change. However, PerkinElmer is now named Revvity. Annual Base Salary Our compensation philosophy embraces the premise that establishing base salaries at a reasonable level helps to promote retention and acts as an appropriate balance to other forms of variable or “at risk” compensation. We pay base salaries within a range designed to approximate the market benchmark of executives with similar responsibilities in the peer group and surveys. Actual base salaries are determined after considering the competitive data, overall competitive position as compared to our compensation philosophy, prior base salary and other compensation, the performance of the individual, any promotions or significant changes in responsibility, the Company’s overall salary annual increase budget, and internal equity considerations. None of these considerations is given specific weight. In setting base salaries for our named executives, the Committee historically has taken into account the lengthy tenure of executive officers, as well as their continued long-time superior performance, which has resulted in base salaries generally gravitating towards the top of the range approximating the targeted market benchmark. Base salaries for our named executives for 2023 (approved by the Committee on January 26, 2023 but effective on April 23, 2023) were as follows:
Compensation Elements
Annual Cash Incentive Awards Our Compensation Program includes an annual cash bonus element that closely links a significant portion of executive pay to the achievement of short-term performance targets that are critical to meeting our stated financial objectives for the year. These targets are typically tied to specific financial metrics derived from our fiscal year operating plan. However, where appropriate, the Committee also approves non-financial goals that are designed to focus individuals on attaining objectives which include near-term, non-financial objectives that are also critical to the achievement of long-term strategic goals and ultimately promote the positive long-term financial performance of the Company. Our annual cash incentive awards are structured to appropriately reduce or eliminate the amount of such awards if performance falls short of the established performance targets, and to appropriately increase the amount of such awards if performance exceeds established targets, subject to a maximum incentive award opportunity. It is intended that the target award, when aggregated with the base salary, will provide a competitive level of cash compensation when each named executive achieves the performance objectives established for him or her by the Committee. Actual bonus awards are determined according to each named executive’s performance in relation to his or her approved objectives, which are primarily based upon corporate and/or business unit performance. To implement our annual cash incentive awards, the Committee administers the Executive Incentive Compensation Plan (EICP), which applies to executive officers and other key employees of the Company. We have designed the EICP to reward executives for their contributions to the success of the Company based on predetermined corporate/business unit, functional, and/or individual objectives. The Committee annually establishes performance objectives and corresponding performance ranges for the named executives. These performance objectives and ranges are generally developed through our annual financial planning process, whereby we assess the future operating environment and build projections of anticipated results to align the performance expectations of this plan with the overall business objectives of the Company. Target award percentages for the named executives are 70% of base salary for Corporate Executive Vice Presidents, 80% for the Chief Operating Officer, and 100% of base salary for the Chief Executive Officer. The participant’s total target award opportunity percentage is divided among a variety of weighted performance objectives which may change from year to year and historically have included a mixture of non- GAAP operating income (OI), revenue, non-GAAP earnings per share (EPS), non-GAAP free cash flow (FCF), return on net operating assets (RNOA), return on invested capital (ROIC) and other key Company performance metrics. The Committee believes that these financial metrics are very good measurements for assessing how the Company is performing from a financial standpoint. Avoiding duplication of performance metrics in different compensation elements allows our executives to be accountable for a variety of performance metrics while mitigating the risk of doubly rewarding or penalizing executives for similar results. At the end of each fiscal year, we compare the Company’s (and applicable business units’ in years when business unit performance is relevant) final performance for the fiscal year against the Company’s (or business units’) targeted performance approved by the Board of Directors, except where an adjustment to the targeted performance is warranted due to an unanticipated intervening event which would have an unintended and significant impact on the payout. These measurements determine the EICP payout levels. To determine a participant’s actual EICP award amount, the performance objective’s payment level is multiplied by the participant’s target award percentage. On March 6, 2023, the Committee approved performance metrics for senior leadership that included OI and revenue, which was neutralized for the impacts of fluctuating foreign exchange rates. The approved performance metrics were, in general, aligned to the business segments under their leadership of the Company. However, at this time the applicable performance targets had not been established because the Company was still evaluating the projected impact of the 2023 NHP Supply Disruption. Also on March 6, 2023, the Committee approved to align leadership with the broader employee experience by ensuring consistency in compensation philosophy and implementation, while maintaining a pay for performance approach to funding that motivates and ties to shareholder interests. Specifically, the Committee approved targets based on the following principles: Align all executives and employees on each of the Company’s short-term incentive plans (including the EICP) to have 50% of their metrics on global Company-wide metrics (revenue and OI) in order to reinforce our commitment to be unified as a Company, with the remaining 50% aligned to the business segment metrics (revenue and OI) for the business areas they support. All executives and employees share a set of common payout scales, allowing for equal payout opportunities. Minimum and maximum performance levels for 2023 EICP payouts were set based on a metric with minimum performance level set at 85% of target performance objectives for OI and 90% for revenue, and maximum performance levels set at 108% of target performance objectives for revenue and 110% for OI. The maximum payout achievable for 2023 was 200% of target. On May 15, 2023, the Committee approved the applicable performance targets for the OI and revenue performance objectives, which were aligned to the top of the guidance ranges provided in the Company’s earnings release with respect to the first fiscal quarter of 2023. The Committee decided to approve these performance targets after the first quarter earnings release to provide additional time needed to evaluate the potential full-year impact of the 2023 NHP Supply Disruption to the Company’s performance. The Committee has the discretion to employ its judgment in determining individual awards, and in fact approves the entire EICP award for each named executive. In addition to the quantitative factors, final individual EICP awards for the named executives incorporate both (1) the Chief Executive Officer’s recommendations (other than for himself), and (2) the Committee’s assessment of each named executive’s overall individual performance and contribution. In addition, the Committee, in its sole discretion, may modify or change the EICP at any time. For 2023, the Committee did not make discretionary adjustments to EICP payouts for the named executives. With respect to the 2023 fiscal year, the target amounts were adjusted to neutralize the impacts of fluctuating foreign exchange rates. With respect to the 2023 fiscal year, the following table shows the fiscal year 2023 target EICP cash bonus, performance goals, goal attainment levels, and cash bonuses actually paid (in February 2024) for each of our named executives:
Compensation Elements
| Name | Actual % of Cash Incentive Award vs. Target - 2016 | Actual % of Cash Incentive Award vs. Target - 2017 | Actual % of Cash Incentive Award vs. Target - 2018 | Actual % of Cash Incentive Award vs. Target - 2019 | Actual % of Cash Incentive Award vs. Target - 2020 | Actual % of Cash Incentive Award vs. Target - 2021 | Actual % of Cash Incentive Award vs. Target - 2022 | 2023 Cash Incentive Award | Actual % of Cash Incentive Award vs. Target - 2023 | | James C. Foster | 152.5% | 102.7% | 188.7% | 141.5% | 108.0% | 137.2% | 73.0% | $1,130,074 | 76.35% | | Flavia H. Pease | — | — | — | — | — | — | 55.2% | $324,223 | 73.52% | | William D. Barbo | 130.3% | 121.4% | 141.0% | 104.2% | 108.0% | 134.8% | 72.3% | $329,977 | 82.01% | | Birgit Girshick | — | — | 168.8% | 129.7% | 108.0% | 127.4% | 73.0% | $442,830 | 76.35% | | Joseph W. LaPlume | — | — | — | 120.6% | 108.0% | 137.2% | 73.0% | $291,810 | 76.35% |
Compensation Elements
As we continue to emphasize the importance of making progress toward our ESG goals, beginning in 2023, our CEO, with concurrence of the Compensation Committee, is eligible to make adjustments of up to 5% to cash bonus payouts for leaders, based on progress toward those goals. As we continue to track toward the Company’s long term ESG goals, no payout adjustments were made. Long-Term Equity Incentive Awards Long-term incentive (LTI) compensation, in the form of performance share units (PSUs), stock options, and restricted stock grants or restricted stock units (RSUs), allows individuals to share in any appreciation in the value of our common stock. We design the amounts and types of long-term equity awards to reward performance and create incentives to meet long-term objectives. Because the Committee particularly values long-term shareholder value creation, we target long-term equity incentives to provide total compensation opportunities that, if achieved, would result in market competitive pay levels for our executives. The Committee reviews and approves long-term equity incentive awards to named executives on an annual basis. The Committee believes that PSU, stock option, and RSU awards align the recipient’s interests with those of the shareholders. The Committee typically targets the second quarter of our fiscal year, shortly after our annual meeting of shareholders, for granting annual stock awards to eligible recipients, absent an extraordinary event. The Committee believes this aligns timing of equity grants with the planning of annual salary increases (also in the second quarter of our fiscal year), allowing our managers to take a holistic view of total compensation. The Committee seeks to structure equity grants so that they are awarded during an open window period as designated by our Insider Trading Policy, or, if Committee approval is provided during a non- window period, are typically made effective on the first business day following our press release with respect to financial results for the prior quarter. This policy is intended to ensure that options are awarded at a time when the exercise price fully reflects all recently disclosed information. In the case of new hires eligible to receive equity grants, grants are generally made on the first business day of the month following the date the individual commences employment. All grants to executive officers are made by the Committee itself and not pursuant to any delegated authority. We have never had any programs, policies, or practices which are intended to time stock option grants with the release of material, non-public information in a manner that would provide advantageous option exercise prices to grant recipients. Option exercise prices are, in all cases, equal to the closing price of our common stock on the date of grant. At the beginning of fiscal year 2023, as requested by the Committee, Company management, in consultation with the independent compensation consultant, recommended to the Committee target values of long-term equity awards that are intended to be granted in a combination of stock options, RSUs, and PSUs. In May 2023, when the annual awards were actually granted, the value of the approved long-term equity award is converted into a combination of stock options, RSUs, and PSUs using the current appropriate pricing models (Black-Scholes for stock options and the Monte Carlo method for PSUs) and the closing stock price on the date of the grant for RSUs. We use this method to align the actual granted values with the values intended during the planning process. In determining award levels for annual equity awards to named executives, the Committee takes into account the values of awards made to similarly situated individuals in the peer group, the individual market benchmark for each executive’s position, our overall performance, the individual performance of the named executive in the immediately preceding year, and other similar factors. An absolute target value of long-term equity awards (determined in dollars) is approved by the Committee. This value is then allocated between the types of LTI awards the Company is awarding during that particular year. These determinations are typically evaluated during the first month of the fiscal year and approved at the Committee’s meeting in February. The intended value of the May 2023 grant was apportioned to the named executives as follows: approximately 60% in the form of PSUs, approximately 20% in the form of time-vested RSUs, and approximately 20% in the form of time-vested stock options, with the exception of the Chief Executive Officer, who received approximately 80% in the form of PSUs and approximately 20% in the form of time- vested stock options, thereby further reinforcing the linkage between compensation and performance. With our more recent equity grants, we have generally included a full career retirement provision for equity awards that provides for the continued vesting of unvested equity grants for North American employees who retire after meeting the following specified criteria: • the employee has attained age 55; • the employee has a minimum of 10 years of service with the Company; • the numerical sum of the employee’s age and years of service is equal to at least 70; and • the employee has given notice of his or her intent to retire specifying the exact intended date of retirement and remained employed by the Company until the earlier of (a) the one-year anniversary of the date of such notice or (b) the date on which the employee experienced a termination of employment due to death or disability, or is terminated by the Company without cause. The material features of the PSUs granted to our named executives in 2023 are as follows: • measurement is based on a three-year performance period running from the beginning of the fiscal year in which the award is made to the end of the third fiscal year after (and including) the year in which the award is made. For PSUs awarded in May 2023, the performance period is January 1, 2023 through December 27, 2025. • the initial PSU award (the Target Award) represents a target number of shares of the Company’s common stock, with the final number of shares to be determined and paid out after the conclusion of the three-year performance period based upon two performance metrics: • non-GAAP EPS for the fiscal year in which the award is made; and • rTSR at the end of the PSU award’s three-year performance period. • target performance levels for each of the two performance metrics are as follows: • non-GAAP EPS: the Company’s target non-GAAP EPS for the first fiscal year of the performance period. • rTSR: the Company’s TSR falling exactly at the 55th percentile as compared to the TSR of the TSR comparator group) over the full three-year performance period. For this purpose, TSR refers to share price appreciation plus any dividends accrued during the reference period of time. For the 2023 PSU awards, the TSR comparator group included the companies that make up the S&P500 Health Care group. On January 26, 2023, the Committee approved the following payout schedule for the 2023 PSU award grants made in May 2023. However, at that time the applicable EPS performance targets had not yet been established as the Company was still evaluating the projected impact of the 2023 NHP Supply Disruption. At the end of the first fiscal year of the performance period, actual non-GAAP EPS will be measured against the target non-GAAP EPS for that fiscal year. The Base Award is calculated from the Target Award along a slope, ranging between a high of 150% (if non-GAAP EPS is 110% or higher than target non-GAAP EPS), or a low of zero (if non-GAAP EPS is less than 90% of target non-GAAP EPS);
Compensation Elements
| 2023 PSU Grant Base Award Calculation | | | | Future Final Award Levels (as % of Target Award) | | | | | | | | rTSR ≤30th percentile | rTSR = 55th percentile | rTSR ≥75th percentile | | Target Non-GAAP EPS | Actual Non-GAAP EPS | Actual Non-GAAP EPS as % of Target | Base Award (as % of Target Award) | Minimum (Base Award × 65%) | Target (Base Award × 100%) | Maximum (Base Award × 135%) | | $10.40 | $10.67 | 102.5% | 112.5% | 73.1% | 112.5% | 151.9% |
Compensation Elements
| 2021 PSU Grant Base Award Calculation | | | | Final Award Levels | | | | | | | rTSR = 31st percentile | | | Target Non-GAAP EPS | Actual Non-GAAP EPS | Actual Non-GAAP EPS as % of Target | Base Award (as % of Target Award) * | rTSR Adjustment | Final Award (as % of Target Award) | | $9.50 | $10.32 | 108.6% | 143% | 81% | 115.8% |
Compensation Elements
While the 2021 PSUs resulted in a granting of a final award 15.8% higher in number of shares of stock issued as compared to target, the realized value of these PSUs was actually 37.4% less than the intended value on the date of the original grant, due to a 34.8% decrease in share price over the measurement period, aligning with the 31st percentile ranking in rTSR over the three-year performance measurement term. Our 2022 PSUs had a first-year performance that was below the target levels and, while final award levels will not be determined until the end of fiscal year 2024, if such final awards were determined as of the end of fiscal year 2023, payout percentage would have been below 100%.
Supplemental Elements of the Compensation Program
Supplemental Elements of the Compensation Program We have a number of supplemental elements in the Compensation Program which are considered by the Committee, but do not factor directly into the annual determination of executive compensation. These elements have features and roles in the Program which led to their initial implementation and they continue to be important to the Program generally. Post-Termination Benefits and Agreements As described in more detail in this Proxy Statement under “Executive Compensation and Related Information—Potential Payments upon Termination or Change in Control,” the Compensation Program includes both (1) an Officer Separation Plan and (2) Change in Control Agreements. Historically, Company policy has been to provide eligibility under both the Officer Separation Plan to officers with the position of corporate vice president or higher, and a Change in Control Agreement to officers with the position of corporate executive vice president or higher. Both of these compensatory elements operate similarly: upon specified events which result in either the termination of the officer and/or a change in control of the Company, particular benefits will accrue to the officer (although payments made under the Change in Control Agreements will generally reduce or offset payments and benefits to which the officer may be entitled under the Officer Separation Plan). Each of the named executives is eligible to receive benefits under the Officer Separation Plan and each has a Change in Control Agreement. The Company views these compensatory elements as serving three important purposes: • there is a critical recruitment and retention aspect; • these policies protect the benefits of executive officers who have provided long and meritorious service to the Company, particularly if there is an unexpected employment termination by the Company due to ongoing changes in our employment needs; and • these elements avoid personal distractions and encourage employees to remain focused on our business in the event of a rumored or actual takeover. The Committee periodically conducts formal and informal market checks and believes that both the levels of payment to be made under these programs and the applicable triggers are appropriate and consistent with current general market practices. Deferred Compensation Plan Contributions As described in more detail in this Proxy Statement under “Executive Compensation and Related Information—2023 Non-qualified Deferred Compensation”, the named executives in the United States receive a compensatory element in connection with our Deferred Compensation Plan. For Mr. Foster, who was a participant in the Company’s now discontinued Executive Supplemental Life Insurance Retirement Plan (ESLIRP), the Company credits to his accounts the present value of the annual Company accrual as it would have been calculated under the ESLIRP. These credits can vary significantly year-to-year as the ESLIRP formula is dependent on the average of the highest five consecutive years of compensation. When he incurs several consecutive years of relatively flat or decreasing executive compensation, the highest five consecutive year compensation average remains relatively static and the credit is small or zero. Conversely, when there are several consecutive years of increasing compensation, the cumulative effect of those years may result in a single year credit spike. Such variations can be seen, for instance, in the amounts credited to Mr. Foster over the past decade: $7,310 (2011), $0 (2012), $0 (2013), $0 (2014), $360,047 (2015), $2,607,660 (2016), and $1,223,422 (2017), with increases of $907,510, $2,238,068, $224,652, $0, and $0 in 2018, 2019, 2020, 2021, and 2022 respectively, as noted under “All Other Compensation” in the Summary Compensation Table on pages 60-61 of this Proxy Statement. In 2023, there was no additional credit provided to Mr. Foster. For Ms. Girshick, Ms. Pease, and Messrs. Barbo and LaPlume, the Company currently provides an annual contribution to their Deferred Compensation Plan account equal to 10% of the sum of their base salary plus the lesser of (1) their target annual bonus or (2) actual annual bonus. We provide a Deferred Compensation Plan because the Company wishes to permit our executive employees to defer the obligation to pay taxes on certain elements of their compensation while also potentially receiving earnings on deferred amounts. The Deferred Compensation Plan was implemented to motivate and ensure the retention of employees by providing them greater flexibility in structuring the timing of their compensation payments. The employer contributions to the Deferred Compensation Plan ultimately have their origins in the legacy ESLIRP program, which was a long-standing element of our executive compensation package.
Other Factors Underlying the Ongoing Implementation of the Compensation Program
Members of senior management have four years from the time they attain the executive level listed above to comply with the ownership requirements. Stock options are not counted toward the holding requirement. Only vested full value shares (i.e. restricted stock (units) and PSUs) count towards the holding requirement. The Committee periodically reviews stock ownership levels of members of our executive management to ensure compliance. As of the date of this Proxy Statement, our current named executives were in compliance with the holding requirements (and, as demonstrated in the Beneficial Ownership table on pages 34-35 of this Proxy Statement, in many cases, far exceed the required holding). Clawback Policy We maintain a Financial Statement Compensation Recoupment Policy (also known as a clawback) policy that complies with NYSE listing standards and Section 10D of the Securities Exchange Act of 1934. This policy applies to all of our executive officers. Under this Clawback Policy, in the event of a restatement of Charles River’s financial statements resulting from material noncompliance with financial reporting requirements under the U.S. Federal securities laws, Charles River will recover erroneously awarded compensation from applicable executive officers, subject to specified criteria. The action permitted to be taken by the Board under the Clawback Policy is in addition to any and all other rights of the Board and/or the Company under applicable law and contract. Derivatives Trading; Hedging; Pledging and Insider Trading Policy We grant equity incentives for the reasons discussed above, including aligning the interests of our employees with those of shareholders. Our Insider Trading Policy prohibits employees (including our named executives) and directors from trading in our derivative securities, such as puts or calls on our common stock, or to pledge our stock, since such activities may diminish the alignment we are trying to foster, as well as expose the Company to potential embarrassment. The Insider Trading Policy also prohibits all employees (including our named executives) and directors from engaging in hedging transactions, such as purchasing prepaid variable forwards, equity swaps, collars and exchange funds. Our Insider Trading Policy also prohibits the purchase or sale of Charles River securities while in possession of material, non-public information, or otherwise using such information for one’s personal benefit. Our executives and directors are permitted to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 of the Securities Exchange Act of 1934 so that they can prudently diversify their asset portfolios and exercise their stock options prior to their scheduled expiration dates.
2023 Summary Compensation Table
2023 Summary Compensation Table The following table sets forth all of the compensation awarded to, earned by, or paid to our current named executives (our principal executive officer, our principal financial officer, and our three other highest paid executive officers) for the fiscal years ended December 30, 2023, December 31, 2022, and December 25, 2021.
2023 Summary Compensation Table
| Name and Principal Position(1) | Year | Salary ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Bonus ($) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($) | All Other Compensation ($)(5) | Total ($) | | James C. Foster Chair, President, Chief Executive Officer and Director | 2023 | 1,461,866 | 9,138,724 | 2,294,372 | 0 | 1,130,074 | 0 | 71,887 | 14,096,924 | | | 2022 | 1,399,442 | 8,759,995 | 2,179,888 | 0 | 1,030,973 | 0 | 77,574 | 13,447,872 | | | 2021 | 1,353,841 | 8,359,896 | 2,062,193 | 0 | 1,871,457 | 0 | 58,194 | 13,705,581 | | Flavia H. Pease(6) Corporate Executive Vice President, Chief Financial Officer | 2023 | 621,915 | 1,722,601 | 432,719 | 600,000 | 324,223 | 0 | 109,867 | 3,811,326 | | | 2022 | 403,844 | 2,883,429 | 828,323 | 200,000 | 159,430 | 0 | 9,124 | 4,484,150 | | William D. Barbo(7) Corporate Executive Vice President | 2023 | 568,144 | 1,522,274 | 382,395 | 0 | 329,977 | 0 | 105,945 | 2,908,735 | | | 2022 | 545,738 | 1,467,715 | 365,944 | 0 | 278,303 | 0 | 104,508 | 2,762,209 | | | 2021 | 527,176 | 1,373,282 | 339,892 | 0 | 503,947 | 0 | 101,922 | 2,846,219 | | Birgit Girshick Corporate Executive Vice President, Chief Operating Officer | 2023 | 704,811 | 2,964,471 | 744,677 | 0 | 442,830 | 0 | 132,882 | 4,989,672 | | | 2022 | 650,000 | 2,412,795 | 601,505 | 0 | 379,600 | 0 | 121,630 | 4,165,529 | | | 2021 | 502,351 | 1,615,375 | 399,892 | 0 | 579,716 | 0 | 99,340 | 3,196,674 | | Joseph LaPlume Corporate Executive Vice President Corporate Development and Strategy | 2023 | 539,000 | 1,702,429 | 427,670 | 0 | 291,810 | 0 | 97,547 | 3,058,456 | | | 2022 | 514,613 | 1,628,579 | 406,020 | 0 | 265,720 | 0 | 91,013 | 2,905,945 | | | 2021 | 494,323 | 6,467,972 | 379,892 | 0 | 480,025 | 0 | 95,488 | 7,917,700 |
2023 Summary Compensation Table
(1) References to our named executives in this Proxy Statement reflect the self-identified preferred pronoun usage of such named executives. (2) These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in fiscal year 2023, fiscal year 2022, and fiscal year 2021, respectively, computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718. The grant date fair value of PSUs is determined consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date, based on the probable outcome of the performance conditions, computed in accordance with FASB ASC Topic 718. For a detailed description of the assumptions used for purposes of determining grant date fair value, see Item 8 “Financial Statements and Supplementary Data—Note 1 to our Consolidated Financial Statements” and Item 8 “Financial Statements and Supplementary Data—Note 15 to our Consolidated Financial Statements” included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023. The maximum potential value of the PSUs awarded in 2023, based on the grant date fair value (assuming the highest level of performance achievement) is as follows: Mr. Foster, $18,277,448; Ms. Pease, $2,585,251; Mr. Barbo, $2,284,374; Ms. Girshick, $4,448,970; and Mr. LaPlume, $2,555,000. (3) These amounts represent the aggregate grant date fair value of stock option awards granted in fiscal year 2023, fiscal year 2022, and fiscal year 2021, respectively, computed in accordance with FASB ASC Topic 718. For a detailed description of the assumptions used for purposes of determining grant date fair value, see Item 8 “Financial Statements and Supplementary Data—Note 1 to our Consolidated Financial Statements” and Item 8 “Financial Statements and Supplementary Data—Note 15 to our Consolidated Financial Statements”, included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023. (4) Reflects payments under our EICP plan for the respective fiscal year, which are paid the following February. For fiscal year 2023, the amounts in this column include the following: (a) 2023 employer contributions under our defined contribution plans (the U.S. 401(k) Plan (Mr. Foster, $13,200; Ms. Pease, $12,438; Mr. Barbo, $13,200; Ms. Girshick, $13,200; and Mr. LaPlume, $13,105)); (b) miscellaneous personal benefits and perquisites, which (1) in the case of each of Ms. Girshick, Mr. Barbo, Ms. Pease, and Mr. LaPlume, aggregates to an amount less than $10,000; and (2) in the case of Mr. Foster, includes $46,841 representing the value of pre-retirement life insurance benefit provided under the Deferred Compensation Plan, $2,901 for home security expenses, $3,681 for telecommuting and home office benefits; and $4,248 in executive medical expenses. On a limited number of occasions during 2023, some of the named executives used tickets purchased by us to attend certain events; however, there was no incremental cost to us attributable to the named executives’ use of these tickets. Includes amounts credited to the named executives’ Deferred Compensation Plan account balances (net of FICA taxes). For fiscal year 2023 amounts credited are as follows: Ms. Pease, $96,141; Mr. Barbo, $89,221; Ms. Girshick, $115,393; and Mr. LaPlume, $82,333. Ms. Pease commenced her employment with us in April 2022 and was not a named executive in 2021. Ms. Pease received a one-time signing bonus in the gross amount of $800,000. The initial $200,000 was paid within 30 days of her start date, with the remaining $600,000 paid in May 2023. Mr. Barbo plans to retire from the Company at the end of 2024.
2023 Grants of Plan Based Awards
2023 Grants of Plan Based Awards The following table sets forth the information regarding grants of plan-based awards made to our named executives during 2023. There can be no assurance that the Grant Date Fair Value of Stock and Option Awards will ever be realized.
2023 Grants of Plan Based Awards
| Name | Type of Award(*) | Grant Date | Date of Board or Compensation Committee Action to Approve Grant(1) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(2) | | | Estimated Possible Payouts Under Equity Incentive Plan Awards(3) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(6) | | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | | | James C. Foster | EICP | 1/26/2023 3/6/2023 | 1/26/2023 | $148,012 | $1,480,124 | $2,960,247 | | | | | | | | | | SO | 5/26/2023 | 1/26/2023 | | | | | | | | 28,176 | 194.12 | $2,294,372 | | | PSU | 5/26/2023 | 1/26/2023 | | | | 14,531 | 44,710 | 89,420 | | | | $9,138,724 | | Flavia H. Pease | EICP | 1/26/2023 3/6/2023 | 1/26/2023 | $44,100 | $441,000 | $882,000 | | | | | | | | | | SO | 5/26/2023 | 1/26/2023 | | | | | | | | 5,314 | 194.12 | $432,719 | | | RSU | 5/26/2023 | 1/26/2023 | | | | | | | 2,215 | | | $429,976 | | | PSU | 5/26/2023 | 1/26/2023 | | | | 2,055 | 6,324 | 12,648 | | | | $1,292,626 | | William D. Barbo | EICP | 1/26/2023 3/6/2023 | 1/26/2023 | $40,236 | $402,362 | $804,723 | | | | | | | | | | SO | 5/26/2023 | 1/26/2023 | | | | | | | | 4,696 | 194.12 | $382,395 | | | RSU | 5/26/2023 | 1/26/2023 | | | | | | | 1,958 | | | $380,087 | | | PSU | 5/26/2023 | 1/26/2023 | | | | 1,816 | 5,588 | 11,176 | | | | $1,142,187 | | Birgit Girshick | EICP | 1/26/2023 3/6/2023 | 1/26/2023 | $58,000 | $580,000 | $1,160,001 | | | | | | | | | | SO | 5/26/2023 | 1/26/2023 | | | | | | | | 9,145 | 194.12 | $744,677 | | | RSU | 5/26/2023 | 1/26/2023 | | | | | | | 3,812 | | | $739,985 | | | PSU | 5/26/2023 | 1/26/2023 | | | | 3,537 | 10,883 | 21,766 | | | | $2,224,485 | | Joseph LaPlume | EICP | 1/26/2023 3/6/2023 | 1/26/2023 | $38,220 | $382,200 | $764,400 | | | | | | | | | | SO | 5/26/2023 | 1/26/2023 | | | | | | | | 5,252 | 194.12 | $427,670 | | | RSU | 5/26/2023 | 1/26/2023 | | | | | | | 2,189 | | | $424,929 | | | PSU | 5/26/2023 | 1/26/2023 | | | | 2,031 | 6,250 | 12,500 | | | | $1,277,500 |
2023 Grants of Plan Based Awards
(*) Types of Award: EICP—Executive Incentive Compensation Plan SO—Stock Option RSU—Restricted Stock Unit PSU—Performance Share Unit (1) See the section of the Proxy Statement entitled “Compensation Discussion and Analysis—Compensation Elements—Long-Term Equity Incentive Awards” for a discussion regarding our equity award grant date practices. (2) Reflects the threshold amount payable (10% of target for the least weighted goal), the target amount payable (100% of target for all goals), and maximum amount payable (200% of target for all goals) under the EICP plan for fiscal year 2023. Threshold amounts reflect minimum award opportunity under the EICP plan for the smallest weighted EICP goal for the respective named executive, although if minimum performance levels (85% of Operating Income target and 90% of Revenue target) are not achieved, there may be no payout. Under certain discretionary circumstances, additional amounts can be paid under the EICP plan. The potential payouts are performance driven and therefore completely variable. Actual amounts paid to the named executives under the EICP plan with respect to fiscal year 2023 are set forth in the Summary Compensation Table above. Reflects the number of PSUs payable at threshold (32.5%), target (100%), and maximum (200%) levels, with fractional shares rounded down. For purposes of this table, threshold payout is considered to be the smallest non-zero payout possible given both EPS and relative TSR performance for the May 26, 2023 grants, over the course of the plan. See the description of how the threshold, target, and maximum amounts payable are determined under “Compensation Discussion and Analysis— Compensation Elements—Long-Term Equity Incentive Awards” set forth on pages 54-56 of this Proxy Statement. Reflects RSUs granted on May 26, 2023. Reflects stock options granted on May 26, 2023. (6) The grant date fair market value of options granted on May 26, 2023 has been calculated using the Black-Scholes pricing model, based on the following assumptions: an expected volatility of 36%, a weighted average expected life of 6.0 years, and a risk-free interest rate of 3.8%. The grant date fair value of restricted stock is determined from the market value of the stock on the date of grant. The grant date fair value of PSUs is determined consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date, based on the probable outcome of the performance conditions, computed in accordance with FASB ASC Topic 718. Description of Certain Awards Granted in 2023 All awards of stock options, RSUs and PSUs to our named executives were granted pursuant to our Amended and Restated 2018 Incentive Plan. The vesting provisions of our PSUs are set forth above on pages 54-56 of this Proxy Statement. Options vest and become exercisable in equal installments on or about the anniversary date in each of the four years following the date of grant, subject to continued employment. RSUs generally vest in installments on or about the anniversary date in each of the four years following the date of grant, subject to continued employment. The installments are generally equivalent in amount. The exercise price of stock options is equal to the closing price of our common stock on the date of grant. Equity awards granted to our named executives in 2023 also include full career retirement vesting provisions, as described further on page 55 of this Proxy Statement. All grants of non-equity incentive plan awards have been made pursuant to our EICP plan. Employment Related Agreements and Arrangements As described in the Compensation Discussion and Analysis, until 2018 we generally and historically had not entered into employment agreements with any of our U.S.-based corporate executive officers. The named executives, however, are beneficiaries of certain separation and change-in-control agreements, as well as defined benefit and deferred compensation arrangements, as further described below in this Proxy Statement. On February 12, 2018, we entered into an employment agreement with James C. Foster, our Chair, President and Chief Executive Officer, which was subsequently amended and restated on May 18, 2021. The purpose of the agreement is to benefit from Mr. Foster’s decades of experience and unique skill set by promoting the retention of Mr. Foster. This agreement provides for the following material compensation terms: • Mr. Foster will remain employed as the Chair and Chief Executive Officer of the Company through February 12, 2026. • The employment agreement memorializes Mr. Foster’s current compensation arrangements, including his base salary and target annual cash bonus. • The agreement also provides that the vesting schedule and all other terms of the outstanding equity awards held by Mr. Foster as of May 18, 2021 will remain the same. • Mr. Foster is permitted to terminate his employment at any time, with or without notice, in the manner specified in the employment agreement but with the corresponding economic consequence of losing the post-retirement vesting benefits in his existing equity awards. • If Mr. Foster provides notice of the termination of his employment or the Company provides notice of the termination of his employment without cause, then the Company may elect to suspend Mr. Foster’s active duties and responsibilities and, during the balance of a specified notice period, Mr. Foster will be entitled to receive only his base salary, any previously earned bonus, and the continued vesting of any previously granted equity awards. If the Company does not exercise its election right, then, during the balance of such notice period, Mr. Foster may continue to actively perform his duties under the employment agreement and will be entitled to his ordinary compensation. In addition, if Mr. Foster provides notice of the termination of his employment any equity awards granted to him on or after May 18, 2021 will continue to be outstanding and become exercisable in the same manner as if his employment had continued. If the Company provides notice of the termination of Mr. Foster’s employment without cause, Mr. Foster will be entitled to receive such extended equity vesting for any equity awards granted to him on or after May 18, 2021, as well as the severance payable to Mr. Foster under the Company’s existing Corporate Officer Separation Plan. Upon the expiration of the employment term, Mr. Foster will be eligible for such extended equity vesting for any equity awards granted to him on or after May 18, 2021 but will not be entitled to any severance payments or other benefits under the Company’s Corporate Officer Separation Plan. • Mr. Foster will be subject to post-termination non-competition and non-solicitation covenants for a period of at least one year and a perpetual confidentiality covenant. The Company agreed to reimburse Mr. Foster for the cost of his attorneys’ fees incurred in the negotiation of the employment agreement. In connection with Ms. Pease joining the Company in 2022 to become our Corporate Executive Vice President and Chief Financial Officer, we entered into an at-will employment offer letter with her that provides for the following material compensation terms: • Base Salary: Base compensation of $600,000 annually. Beginning in 2023, Ms. Pease was eligible for future salary increases based on her performance and the Company’s annual salary program design. • Bonus: Ms. Pease is eligible to participate in the Company’s Executive Incentive Compensation Program, with a targeted bonus equal to 70% of her gross annual base salary for 2022. •
2023 Grants of Plan Based Awards
Equity: Ms. Pease was eligible to receive annual stock awards beginning in May 2022. For 2022, Ms. Pease received an equity award with a grant value of $2,000,000, comprised of: (1) 60% Performance Share Units (PSUs); (2) 20% options to purchase Company common stock; and (3) 20% Restricted Stock Units (RSUs). Beginning in 2023, Ms. Pease is eligible to receive an annual equity award, the terms and conditions of which are commensurate with the awards typically granted to our executive officers. • One-Time New Hire Equity Award: Ms. Pease was granted a one-time new hire equity award with a grant value of $1,700,000, structured (1) 25% in the form of options to purchase Company common stock and (2) 75% in the form of RSUs. One-Time Signing Bonus: Ms. Pease received a one-time signing bonus in the gross amount of $800,000, with the initial $200,000 paid within 30 days of her start date, and with the remaining $600,000 paid after 12 months of employment with the Company.
Outstanding Equity Awards at Fiscal 2023 Year End
Outstanding Equity Awards at Fiscal 2023 Year End The following table sets forth the information regarding each outstanding unexercised or unvested equity award held by our named executives as of December 30, 2023.
Outstanding Equity Awards at Fiscal 2023 Year End
| | Option Awards | | | | Stock Awards | | | | | Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | James C. Foster | 17,436 | 0 | 144.67 | 2/22/2024 | | | | | | | 19,155 | 9,578(3) | 179.66 | 5/29/2030 | | | | | | | 9,434 | 9,435(4) | 337.99 | 5/28/2031 | | | | | | | 6,010 | 18,032(6) | 244.41 | 5/27/2032 | 2,871(8) | 678,704 | 131,051 | 30,980,456 | | | 0 | 28,176(7) | 194.12 | 5/26/2033 | | | | | | Flavia H. Pease | 0 | 4,649(5) | 245.88 | 05/02/2032 | | | | | | | 1,105 | 3,318(6) | 244.41 | 05/27/2032 | 8,628(12) | 2,039,659 | 18,391 | 4,347,632 | | | 0 | 5,314(7) | 194.12 | 5/26/2033 | | | | | | William D. Barbo | 3,027 | 1,514(3) | 179.66 | 5/29/2030 | | | | | | | 1,555 | 1,555(4) | 337.99 | 5/28/2031 | | | | | | | 1,009 | 3,027(6) | 244.41 | 5/27/2032 | 4,035(9) | 953,874 | 16,417 | 3,880,979 | | | 0 | 4,696(7) | 194.12 | 5/26/2033 | | | | | | Birgit Girshick | 5,916 | 0 | 144.67 | 2/22/2024 | | | | | | | 4,875 | 1,625(3) | 179.66 | 5/29/2030 | | | | | | | 1,829 | 1,830(4) | 337.99 | 5/28/2031 | | | | | | | 1,658 | 4,976(6) | 244.41 | 5/27/2032 | | | | | | | 0 | 9,145(7) | 194.12 | 5/26/2033 | 6,733(10) | 1,591,681 | 30,381 | 7,182,068 | | Joseph LaPlume | 5,013 | 1,672(3) | 179.66 | 5/29/2030 | | | | | | | 1,738 | 1,738(4) | 337.99 | 5/28/2031 | | | | | | | 1,119 | 3,359(6) | 244.41 | 5/27/2032 | | | | | | | 0 | 5,252(7) | 194.12 | 5/26/2033 | 11,266(11) | 2,663,282 | 18,952 | 4,480,253 |
Outstanding Equity Awards at Fiscal 2023 Year End
(1) Calculated based on the closing price ($236.40) of our stock on December 29, 2023, the last trading day of the fiscal year 2023, rounded to the nearest whole cent. (2) Represents outstanding PSUs held on December 30, 2023 that remain subject to performance and forfeiture provisions. The number represents the larger of the number of underlying PSUs (1) assuming threshold PSUs are achieved, or (2) if first fiscal year performance of the three-year award has exceeded the threshold, the next highest performance measure (target or maximum). In this chart, 2022 performance exceeded threshold levels and 2023 performance exceeded threshold and target levels, and thus the number of PSUs for 2022 is the target number of such shares that can be delivered in the future and the number of PSUs for 2023 is the maximum number of such shares that can be delivered in the future. The one-time December 2021 PSU grant made to Mr. LaPlume in December 2021 has not yet met the threshold performance level, and thus the PSUs for this grant are the minimum number of such shares that can be delivered in the future. 2022 PSUs granted in 2022 vest on December 28, 2024 and 2023 PSUs granted in 2023 vest on December 27, 2025 and will be paid out in the first calendar quarter of 2025 and 2026 respectively, as unrestricted shares of Charles River common stock after final TSR performance is assessed and payout amounts are approved by the Compensation Committee. PSUs granted in 2021 are not included in this number since they are considered fully vested as of the end of fiscal year 2023, notwithstanding the fact that final payment amounts were approved by the Compensation Committee in the first calendar quarter of 2024. (3) The unexercisable stock options vest on 5/29/2024. (4) One half of the unexercisable stock options vest on each of the following dates: 5/28/2024 and 5/28/2025. One half of the unexercisable stock options vest on each of the following dates: 5/02/2024 and 5/02/2025. One third of the unexercisable stock options vest on each of the following dates: 5/27/2024, 5/27/2025 and 5/27/2026. One quarter of the unexercisable stock options vest on each of the following dates: 5/26/2024, 5/26/2025, 5/26/2026 and 5/26/2027. (8) The stock awards vest on 5/29/2024. (9) The stock awards vest as follows: 454 shares on 5/29/2024; 251 shares on 5/28/2024; 252 shares on 5/28/2025; 373 shares on 5/27/2024; 373 shares on 5/27/2025; 374 shares on 5/27/2026; 489 shares on 5/26/2024; 490 shares on 5/26/2025; 489 shares on 5/26/2026; and 490 shares on 5/26/2027. (10) The stock awards vest as follows: 487 shares on 5/29/2024; 296 shares on 5/28/2024; 296 shares on 5/28/2025; 614 shares on 5/27/2024; 614 shares on 5/27/2025; 614 shares on 5/27/2026; 953 shares on 5/26/2024; 953 shares on 5/26/2025; 953 shares on 5/26/2026; and 953 shares on 5/26/2027. (11) The stock awards vest as follows: 501 shares on 5/29/2024; 281 shares on 5/28/2024; 281 shares on 5/28/2025; 414 shares on 5/27/2024; 414 shares on 5/27/2025; 415 shares on 5/27/2026; 547 shares on 5/26/2024; 547 shares on 5/26/2025; 547 shares on 5/26/2026; 6,771 shares on 12/25/2026; and 548 shares on 5/26/2027. (12) The stock awards vest as follows: 2,592 shares on 5/2/2024; 2,593 shares on 5/2/2025; 409 shares on 5/27/2024; 409 shares on 5/27/2025; 410 shares on 5/27/2026; 553 shares on 5/26/2024; 554 shares on 5/26/2025; 554 shares on 5/26/2026; and 554 shares on 5/26/2027. We have not engaged in any option re-pricings or other material modifications to any of our named executives’ outstanding equity awards during fiscal years 2021, 2022, or 2023.
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested The following table shows information regarding stock option exercises and vesting of restricted stock awards, RSUs, and PSUs with respect to the named executives during the fiscal year ended December 30, 2023.
2023 Option Exercises and Stock Vested
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | James C. Foster | — | — | 30,702 | 7,166,015 | | Flavia H. Pease | — | — | 409 | 79,395 | | William D. Barbo | 5,511 | 399,919 | 4,660 | 1,060,662 | | Birgit Girshick | 3,205 | 464,875 | 5,541 | 1,255,866 | | Joseph LaPlume | 9,128 | 262,979 | 5,189 | 1,181,254 |
2023 Option Exercises and Stock Vested
(1) The value realized on the exercise of stock options and the immediate sale of shares acquired upon exercise is based on the difference between the exercise price and the intraday price of our common stock at the time of exercise. In other circumstances, such as when the underlying shares are held following the exercise of the stock option, the value realized is based on the difference between the exercise price and the closing price of our common stock on the date of exercise. (2) The value realized on vesting of restricted stock and RSUs is based on the closing price of our common stock on the trading date immediately preceding the date of vesting. The value realized on vesting and payout of PSUs granted on May 28, 2021 is based on the closing price of our common stock on the last trading date of the fiscal year, December 29, 2023 ($236.40).
2023 Non-Qualified Deferred Compensation
2023 Non-Qualified Deferred Compensation We maintain the Charles River Laboratories Deferred Compensation Plan (Deferred Compensation Plan) for certain eligible employees, including our named executives. Under the Deferred Compensation Plan, participants may elect to defer bonus and salary amounts, and may select the investment returns to be applied to deferred amounts from among a menu of referenced mutual funds as well as an interest crediting rate. Participants must specify the distribution date for deferred amounts at the time of deferral, in accordance with applicable IRS regulations. Generally, amounts may be paid in a lump sum or installments upon retirement or termination of employment, or later if the employee terminates employment after age 55 and before age 65. Amounts may also be distributed during employment, subject to a minimum deferral requirement of three years. In addition to the Deferred Compensation Plan, certain of our officers and key employees also participate, or in the past participated, in our amended and restated Executive Supplemental Life Insurance Retirement Plan (ESLIRP), which is a non-funded, non-qualified arrangement. Annual benefits under this plan equal a percentage of the average of the highest five consecutive years of compensation, offset by amounts payable under our Social Security and the U.S. Pension Plan we had in place at that time. The age-based percentages are 46% at age 59, and up to 55% at age 62 and over. The normal retirement age is 62. Eligible spouses (married one year or longer at the executive’s retirement date) receive survivor benefits at a rate of 100% of the benefit paid to the executives during the first 15 years following retirement and at the rate of 50% thereafter. Executive officer participants vest as to 50% of the total benefit after five years of service, with a 10% incremental increase in vesting percentage for each year thereafter. In connection with the establishment of the Deferred Compensation Plan in 2006, current active employees who agreed to convert their accrued ESLIRP benefit to a comparable deferred compensation benefit discontinued their direct participation in the ESLIRP. Instead, the present values of the accrued benefits of ESLIRP participants were credited to their Deferred Compensation Plan accounts, and future ESLIRP accruals will now be converted to present values and credited to their Deferred Compensation Plan accounts annually. Mr. Foster was a participant in the ESLIRP. In addition, we provide, or provided in the past, certain active employees, all of the named officers other than Mr. Foster, an annual contribution into their Deferred Compensation Plan account of 10% of (A) the employee’s base salary plus (B) the lesser of (1) their target annual bonus or (2) actual annual bonus. The credited amounts for Mr. LaPlume, Ms. Girshick, and Ms. Pease vest in one quarter increments annually over a four-year period. The credited amounts for Mr. Barbo vest immediately because once a participant in the Deferred Compensation Plan reaches age 60, all contributions are non-forfeitable. The named executives become eligible for the employer contribution after they have served one full calendar year in the eligible position. Separately, the Deferred Compensation Plan provides certain senior executives, including the named executives, with a pre-retirement life insurance death benefit equal to four times the sum of (1) their base annual salary plus (2) their target bonus amounts (on a net basis taking into account all other company provided life insurance). For total life insurance amounts potentially payable to the named executive upon their termination of employment due to death, see the section of this Proxy Statement entitled “Executive Compensation and Related Information—Potential Payments upon Termination or Change in Control”. The following table sets forth, for each of our named executives, information regarding their participation in our Deferred Compensation Plan during fiscal year 2023.
2023 Non-Qualified Deferred Compensation
| Name | Executive Contributions in Last FY ($) | Registrant Contributions in Last FY ($)(1)(2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($)(1) | | James C. Foster | — | — | 4,732,125 | — | 34,881,809 | | Flavia H. Pease | 310,958 | — | 54,551 | — | 550,707 | | William D. Barbo | — | 81,238 | 146,076 | — | 1,117,000 | | Birgit Girshick | — | 101,811 | 188,833 | — | 1,404,338 | | Joseph LaPlume | — | 77,314 | 124,631 | — | 756,962 |
2023 Non-Qualified Deferred Compensation
(1) For purposes of consistency, the amounts shown in this table include only those contributions, earnings, withdrawals, and distributions that occurred during calendar year 2023. Accordingly, amounts credited by us with respect to compensation earned in the last fiscal year, but which are credited in 2024, have not been included in this table. However, these amounts (Mr. Foster, $0; Ms. Pease, $96,141; Mr. Barbo, $89,221; Ms. Girshick, $115,393; and Mr. LaPlume, $82,333) have been included in the total compensation set forth in the Summary Compensation Table under the column entitled “All Other Compensation”. As further discussed in the narrative above, the amounts set forth in the column entitled “Registrant Contributions in Last FY” represent the present value of the accrued benefits, after adjustments for outstanding Medicare taxes, which were credited to the named executives’ Deferred Compensation Plan account balances. The amounts listed under the column “Registrant Contributions in Last FY” in this table and in prior years have been reported as compensation in the Summary Compensation Table for previous fiscal years.
Potential Payments upon Termination or Change in Control
Potential Payments upon Termination or Change in Control The information below describes and quantifies certain compensation that would become payable under existing plans and arrangements if the named executive’s employment had terminated on December 30, 2023, given the named executive’s compensation and service levels as of such date and, if applicable, based on our closing stock price on that date. (Since our last trading day in fiscal year 2023 was December 29, 2023, where applicable we have assumed a stock price of $236.40, the closing price on that date). Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event, our stock price, and the named executive’s age. Disability and Life Insurance Separate from the provisions of the Officer Separation Plan or the change in control agreements discussed below, the named executives may be entitled to disability or life insurance proceeds in the event of termination due to such events. For instance, in the event of termination of the U.S.-based named executives as a result of disability, disability insurance could provide, in line with our other employees, up to a maximum additional amount of 100% of salary for up to 13 weeks (short-term disability) and up to 50% of basic monthly earnings up to $25,000 per month (core long-term disability—maximum benefit of $12,500/ month). In the event of termination of the named executives as a result of death, additional life insurance payments could provide a maximum additional amount to the named executives’ beneficiaries as follows: Mr. Foster, $11,841,000; Ms. Pease, $4,000,000; Mr. Barbo, $3,909,000; Ms. Girshick, $5,221,000; and Mr. LaPlume $3,713,000 (inclusive of amounts payable as a result of the pre-retirement death benefit pursuant to our Deferred Compensation Plan). The total termination compensation described below does not include these amounts. Severance Plans Under our Officer Separation Plan, a corporate officer whose employment is terminated by us for reasons other than cause, voluntary resignation, disability, early or normal retirement, or death, and who has not been offered a comparable position (as defined under the Officer Separation Plan) with us, is entitled to receive a severance payment in accordance with the following table:
Potential Payments upon Termination or Change in Control
| | Years of Completed Company Service at Separation Date | | | | | Less than 2 years | 2 years to 5 years | 5 years or more | | Level: | Amount of Base Salary Pay Continuations: | | | | Executive Vice President and above | One year | One year; additional 12 months mitigated severance | Two years | | Senior Vice President | Six months | One year | One year; additional 12 months mitigated | | Vice President | Six months | Six months; additional six months mitigated severance | One year |
Potential Payments upon Termination or Change in Control
During the period in which such officer receives paid outsourcing support from us, the officer is entitled to receive the mitigated severance on a month-to-month basis (up to the maximum period set forth in the table above) to the extent the officer has not accepted an offer for full time employment, advisory, consulting, or other full-time work. Through 2023, executive officers were entitled to be paid 80 hours of accrued vacation time upon separation. In addition, the Officer Separation Plan provides corporate officers with certain benefits continuing for the length of the severance payments (primarily health and welfare benefits), as well as reimbursement for specified outplacement services. Furthermore, corporate officers who are participants in the EICP may be eligible for payouts in accordance with the terms and conditions of the EICP. Payments under the Officer Separation Plan are generally made “biweekly” (our normal payroll cycle), although if any of the payments or entitlements would constitute deferred compensation in accordance with Section 409A of the Code that might subject the officer to additional tax, interest, or penalties under Section 409A, then payment of such amounts will be delayed until the earlier of six months from the separation of service or the officer’s death. In exchange for these payments, the officer must execute a release agreement satisfactory to us that includes, among other things, an agreement not to compete with us or solicit our employees for one year following the officer’s separation. The Officer Separation Plan is not applicable to any corporate officer who has entered into a written employment agreement providing for severance payments, although it is noted that Mr. Foster’s employment agreement incorporates provisions of the Officer Separation Plan therein. Each of the named executives is a participant in this plan. Change in Control Agreements We have entered into change in control agreements with each of our corporate officers with the position of corporate executive vice president or above, including each of the named executives. These agreements provide such officer with severance and other benefits in the event his or her employment terminates under certain conditions during the term of the agreement and within one year following a “change in control” (as defined in the agreements). Each agreement has a term of three years, with automatic one-year extensions thereafter. Payments made to the corporate officer under the agreement will generally offset or reduce payments and benefits to which the officer may be entitled under any other severance plan or agreement with us (including the Officer Separation Plan described above). The agreements provide that any options to acquire our common stock awarded to the corporate officer under any stock option or other long-term incentive plan shall become fully exercisable upon the occurrence of both (1) a change in control and (2) the termination of the officer within eighteen months following such change in control. In addition, restrictions on any shares of our restricted stock, restricted stock units, and PSUs held by the corporate officer shall lapse upon such events, although with respect to PSUs, any such accelerated vesting will occur to the extent that the applicable performance conditions, as adjusted or prorated as necessary, have been satisfied as of the date of such termination of employment. Each corporate officer covenants in his or her agreement that, in the event of a change in control during the term of the agreement, he or she will remain in our employment after the change in control until the earliest of (1) six months after the date of the change in control; (2) termination by the corporate officer of his or her employment for “good reason” (as defined in the agreement) or by reason of death, disability, or retirement; or (3) termination of the corporate officer’s employment by us for any reason. If the employment of the corporate officer is terminated during the term of the agreement and on or before the first anniversary of a change in control either (1) by us other than for “cause” (as defined in the agreement), death, or disability or (2) by the corporate officer for good reason, the corporate officer will be entitled to certain severance benefits, as follows: • a lump sum cash severance payment equal to a multiple of three (Mr. Foster only) and two (all other named executives) times the sum of (1) the corporate officer’s then annual base salary, and (2) the corporate officer’s target bonus for the fiscal year in which the termination occurs; • additional service credit of three years (Mr. Foster) and two years (all other named executives) for pension purposes assuming a 4% increase in compensation for each year; • continuation of group medical benefits and certain other perquisites for a period of three years (Mr. Foster only) and two years (all other named executives); and • 26 weeks of outplacement services (up to $50,000), and payment of legal fees incurred in connection with any termination of employment other than a termination by us for cause. If any of the payments or entitlements would constitute deferred compensation in accordance with Section 409A of the Code that might subject the named executive to additional tax, interest, or penalties under Section 409A, then payment of such amounts will be delayed until the earlier of six months from the separation of service, or the named executive’s death.
Potential Payments upon Termination or Change in Control
A “change in control” is defined in each agreement as any one of the following: (1) the closing of the sale of all or substantially all of our assets as an entirety to any person or related group of persons; (2) our merger or consolidation with or into another corporation, or the merger or consolidation of another corporation with or into us or one of our subsidiaries, such that immediately after such transaction our outstanding voting securities immediately prior to such transaction represent less than a majority of the total voting power of the outstanding voting securities of the entity surviving such merger or consolidation; or (3) the closing of a transaction pursuant to which beneficial ownership of more than 50% of our outstanding common stock (assuming the issuance of common stock upon conversion or exercise of all then exercisable conversion or purchase rights of holders of outstanding convertible securities, options, warrants, exchange rights, and other rights to acquire common stock) is transferred to a single person or entity, or a “group” (within the meaning of Rule 13d5(b)(l) of the Securities Exchange Act of 1934) of persons or entities, in a single transaction or a series of related transactions. Under the agreement, the term “cause” is defined as: (1) the willful and continued failure of the corporate officer to perform his or her duties with us, (2) a substantial violation of our Code (and any successor policy), (3) conviction of a felony, or (4) engaging in conduct that violates the confidentiality provisions of the agreement. “Good Reason” is generally defined to include: (1) situations such as the assignment to the corporate officer of duties inconsistent with his or her position or responsibility prior to the change in control, (2) a reduction in annual base salary (excluding across- the-board salary reductions affecting all senior executives), (3) failure to pay any portion of current compensation or deferred compensation when due after the expiration of a grace period (excluding across- the-board reductions or failures affecting all senior executives), (4) failure to maintain any compensation plan that is material to the corporate officer’s total compensation, (5) failure to maintain material benefits that are substantially the same as those in effect when the change in control occurs, and (6) job relocations requiring the corporate officer to relocate more than 50 miles from the office where he or she is based.
2023 Pay Ratio Disclosure
2023 Pay Ratio Disclosure
Pay Ratio
Pay Ratio In accordance with the requirements of Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K (which we collectively refer to as the Pay Ratio Rule), we are providing the following estimated information for 2023: • the median of the annual total compensation of all our employees (except our Chief Executive Officer) was $53,621; • the annual total compensation of our Chief Executive officer was $14,096,924; and • the ratio of these two amounts was 263 to 1. We believe that this ratio is a reasonable estimate calculated in a manner consistent with the requirements of the Pay Ratio Rule. SEC rules for identifying the median employee and calculating the pay ratio allow companies to apply various methodologies and apply various assumptions and, as a result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.
Pay versus Performance
Pay versus Performance Pursuant to SEC rules, the Pay versus Performance disclosure below details compensation for the Company’s CEO and average compensation for the other named executives, both as reported in the Summary Compensation Table and with certain adjustments to reflect compensation actually paid to such individuals in each of the Company’s fiscal years 2023, 2022, 2021, and 2020. The disclosure also provides information on the Company’s TSR, as well as that of the S&P 500 Health Care Index, on a cumulative basis over the same four fiscal years. The Company’s Net Income is shown for the past four fiscal years, as well as non-GAAP EPS which we consider another important performance measure. A detailed discussion of the Compensation Committee’s decisions regarding the compensation awarded to the named executives for 2023 can be found in the section of this Proxy Statement entitled “Compensation Discussion and Analysis”. Please see Appendix A to this Proxy Statement for reconciliation of our GAAP EPS to non-GAAP EPS for 2014-2023.
Pay versus Performance
| Year | Summary Compensation Table Total for CEO ($) | Compensation Actually Paid to CEO ($)(1) | Average Summary Compensation Table Total for Other Named Executives ($)(2) | Average Compensation Actually paid to Other Named Executives ($)(1) | Value of Initial Fixed $100 Investment Based on(3) | | Net Income ($) | Non- GAAP EPS ($) | | | | | | | Total Shareholder Return ($) | Peer Group Total Shareholder Return ($) | | | | 2023 | 14,096,924 | 18,903,908 | 3,692,047 | 4,743,481 | 156 | 143 | 474,624,000 | 10.67 | | 2022 | 13,447,872 | (11,539,600) | 3,298,049 | (397,971) | 143 | 140 | 486,226,000 | 11.12 | | 2021 | 13,705,580 | 43,168,611 | 4,392,906 | 9,206,989 | 243 | 141 | 390,982,000 | 10.32 | | 2020 | 13,483,411 | 50,018,818 | 2,773,587 | 8,856,107 | 166 | 111 | 364,304,000 | 8.13 |
Pay versus Performance
(1) SEC rules specify adjustments from the Summary Compensation Table totals to calculate compensation actually paid to the CEO and other named executives. These adjustments are detailed in the table below titled “Reconciliation of Summary Compensation Table Total to Compensation Actually Paid” but do not necessarily reflect cash or equity value transferred to the executive outright. (2) For 2020, 2021 and 2022, our named executives were: Mr. Foster, Mr. David Smith (former Chief Financial Officer), Mr. Barbo, Ms. Girshick and Mr. LaPlume. Ms. Pease became a named executive in 2022 when she assumed the role of Chief Financial Officer. For 2023, our named executive officers are: Mr. Foster, Ms. Pease, Mr. Barbo, Ms. Girshick and Mr. LaPlume. (3) TSR was measured for 2020 for the period from December 27, 2019 to December 24, 2020; for 2021 for the period from December 27, 2019 to December 23, 2021; for 2022 for the period from December 27, 2019 to December 30, 2022; and for 2023 for the period from January 2, 2023 to December 29, 2023. The peer group is the S&P 500 Health Care Index. Reconciliation of Summary Compensation Table Total to Compensation Actually Paid The table below details the adjustments made to the total compensation paid as disclosed in the Summary Compensation to arrive at the compensation actually paid for our CEO and the average for our other named executives:
Pay versus Performance
| Year | Executive(s) | SCT Total | Deduct Current Year Equity Grants(1) | Deduct Change in Value of Pension or Non-qualified Deferred Compensation Earnings from SCT(1) | Add Pension Value Attributable Current Year’s Service | Add Year End Fair Value of Equity Awards Granted in Current Year(2) | Add Change in Value of Prior Years’ Grants that Remained Unvested at Year End(3) | Add Change in Value of Prior Years’ Grants that Vested in Current Year(4) | Compensation Actually Paid | | 2023 | CEO | 14,096,924 | 11,433,096 | — | 788,969 | 14,598,471 | 476,837 | 375,803 | 18,903,908 | | | Other Named Executives | 3,692,047 | 2,474,809 | — | — | 3,338,251 | 166,941 | 21,052 | 4,743,481 | | 2022 | CEO | 13,447,872 | 10,939,883 | — | 989,746 | 7,459,567 | (10,070,482) | (12,426,419) | (11,539,600) | | | Other Named Executives | 3,298,049 | 2,418,873 | — | — | 1,848,071 | (1,380,356) | (1,744,862) | (397,971) | | 2021 | CEO | 13,705,580 | 10,422,089 | — | 823,145 | 15,460,355 | 13,268,849 | 10,332,771 | 43,168,611 | | | Other Named Executives | 4,392,906 | 3,203,012 | — | — | 3,965,695 | 2,276,985 | 1,774,415 | 9,206,989 | | 2020 | CEO | 13,483,411 | 10,218,426 | 194,061 | 719,230 | 19,616,106 | 15,605,432 | 11,007,126 | 50,018,818 | | | Other Named Executives | 2,773,587 | 1,766,995 | — | — | 3,392,036 | 2,649,868 | 1,807,611 | 8,856,107 |
Pay versus Performance
These amounts were reported in the Stock Awards, Option Awards and Change in Pension Value and Non-qualified Deferred Compensation Earnings columns of our Summary Compensation Table included in our Proxy Statement in each respective year. (2) These values are calculated by valuing RSUs granted in the respective year with the stock price on the final trading day of that fiscal year, valuing PSUs granted in the respective year with the Monte Carlo value on the final trading day of that fiscal year plus the impact of EPS performance in the first year of the performance period and valuing options granted in the respective year with the Black-Scholes value on the final trading day of that fiscal year. (3) For any portion of a grant made prior to the respective year that remained unvested throughout that year, the value at the end of that year is compared to the value at the end of the prior year using the methodology described in footnote 2. (4) For any portion of a grant made prior to the respective year that vested in that year, the value of the vested portion as of the vest date is compared to the value at the end of the prior year using the methodology described in footnote 2. The three measures listed below are the most important for determining compensation for our named executives. Revenue and Non-GAAP Operating Income are the main components of EICP (short-term incentive), and Non-GAAP EPS determines baseline performance of PSUs granted to our named executives (long-term incentive). For more details on the elements of our compensation program, please see “Compensation Discussion and Analysis—Compensation Elements” on pages 48-57 of this Proxy Statement.
Pay versus Performance
| Most Important Performance Measures | | Revenue | | Non-GAAP EPS | | Non-GAAP Operating Income |
Pay versus Performance
The values calculated for “compensation actually paid” to our CEO and other named executives show alignment between value being delivered through compensation and our most important performance measures. The charts below show the Company’s TSR compared to compensation actually paid, as well as the peer group TSR. Non-GAAP EPS is a component of long-term incentive design for our named executives. The relationship between compensation actually paid and non-GAAP EPS is shown below. The relationship between compensation actually paid and Net income attributable to common shareholders is shown below.