DEF 14A of Lincoln Educational Services Corp
Filed Apr 3, 2024 · FY20230001140361-24-017455
Performance-Based Executive Compensation
| ● | During the fiscal years ended December 31, 2023 and 2022, performance-based restricted stock comprised 50% of the executive equity compensation. Such performance-based restricted stock vests based upon the attainment of performance metrics set by the Compensation Committee each year for the applicable three-year vesting period of the restricted stock grant. The terms of these awards are described in more detail below under “Long-Term Stock Incentives.” |
Performance-Based Executive Compensation
| ● | We maintain an annual performance-based Management Incentive Compensation Plan (the “MIC Plan”) for cash bonus compensation. Payments under the MIC Plan are based on the attainment of predetermined adjusted EBITDA target. The terms of these awards are described in more detail below under “2023 Annual Performance-Based Incentive Compensation.” |
Recent Changes to the Compensation Program
| ● | eliminating the individual performance component of our annual incentive compensation program and adding a component linked to company-wide financial outcomes that directly reflects the Company’s overall health and viability; |
Recent Changes to the Compensation Program
| ● | capping the maximum amount payable under the annual incentive compensation program at 200% of target; and |
Recent Changes to the Compensation Program
| ● | granting performance-based restricted stock that vests upon the attainment of adjusted EBITDA targets established for each year. |
Recent Changes to the Compensation Program
| ● | Cap on Annual Incentive Compensation. The aggregate maximum annual incentive award that can be earned by each of our named executive officers is capped at 200% of their target. |
Recent Changes to the Compensation Program
| ● | No tax gross-ups. As discussed below under the heading “Employment Agreements and Change in Control Benefits,” we do not provide our executive officers with tax gross-ups for “excess parachute payments” upon a change in control. |
Compensation Philosophy and Objectives
Compensation Philosophy and Objectives The Company and the Compensation Committee believe that compensation paid to executive officers should be closely aligned with our performance on both a short-term and long-term basis, and that such compensation should assist us in attracting and retaining key executives that are critical to our long-term success. Our compensation program is designed to offer executive officers competitive compensation based on our performance and the individual’s contribution, performance, and leadership in the execution of our business model. Our compensation policies are intended to motivate, reward, and retain highly qualified executives for long-term strategic management and enhancement of shareholder value, to support a performance-oriented environment that rewards achievement of specific internal Company goals, and to attract and retain executives whose abilities are critical to our long-term success and competitiveness. Our compensation goals are further intended to mitigate incentives for our executives to take excessive risks that may be adverse to the Company and our shareholders in the long-term. The Compensation Committee has reviewed all components of the compensation for the named executive officers, including salary, annual incentives, equity and long-term incentive compensation; the dollar value to the executive and cost to the Company of all perquisites; and the actual projected payout obligations under potential severance and change in control scenarios.
Setting Executive Compensation
Setting Executive Compensation We intend to continue our strategy of compensating our executives through programs that emphasize performance-based incentive compensation. We have structured annual cash and long-term equity incentive compensation to both motivate executives to achieve the business goals set by the Company and to reward the executives for achieving such goals. Our executive compensation program is further designed to discourage excessive risk taking by assessing performance across multiple dimensions and metrics, including both regulatory performance and student outcomes. For the named executive officers, the main components of our compensation program are base salary, an annual performance-based cash incentive, and long-term performance-based restricted stock. In allocating compensation among these components, the Compensation Committee believes that the compensation of senior management, the levels of management having the greatest ability to influence our performance, should be predominately performance-based. Base salary is intended to provide a certain level of income commensurate with an executive’s position, responsibilities, and contributions to the Company. The annual performance-based cash incentive compensation focuses on short-term performance while the performance-based restricted stock is tied to achievement of performance over a longer period of time. This mix of short- and long-term incentives provides sufficient rewards to motivate near-term performance, while at the same time providing significant incentives to keep our executives focused on longer-term corporate goals that drive shareholder value. In addition, we believe this balance of short-term and long-term incentive compensation and the mix of varied performance metrics helps mitigate the incentive for executives to take excessive risk that may have the potential to harm the Company in the long-term. Compensation for Scott M. Shaw, our President and Chief Executive Officer, is based on the Compensation Committee’s independent assessment of Mr. Shaw’s performance during the year. Our President and Chief Executive Officer plays a significant role in setting the compensation for the other named executive officers by presenting an evaluation of each executive’s performance and his recommendation for levels of their compensation. The Compensation Committee makes all final decisions with respect to the total compensation package for each of the named executive officers and has the authority to accept, reject, or modify these recommendations in connection with its determination. The Compensation Committee may retain compensation consultants having special competence to assist it in evaluating the compensation of the named executive officers, in its sole discretion. The Compensation Committee did not retain a compensation consultant in 2023.
2023 Annual Performance-Based Incentive Compensation
2023 Annual Performance-Based Incentive Compensation Our named executive officers are eligible to participate in the MIC Plan. Under the MIC Plan, the Compensation Committee approves the calculation of performance-based cash incentive opportunities for our named executive officers based on financial performance targets. Awards under the MIC Plan reflect the Compensation Committee’s belief that a significant portion of the total annual compensation of each named executive officer should be contingent upon the overall financial performance of the Company. At the beginning of the fiscal year ended December 31, 2023, the Compensation Committee defined the 2023 cash incentive performance target goal based to the Company’s adjusted EBITDA performance. For the fiscal year ended December 31, 2023, the Compensation Committee set the incentive compensation target at 100% of base salary for Mr. Shaw, 75% of base salary for Mr. Meyers, and 50% of base salary for Mr. Nyce. The maximum award allowable under the MIC Plan to any named executive officer in any given year is 200% of their incentive compensation target. Adjusted EBITDA Performance. For the fiscal year ended December 31, 2023, each named executive officer’s target incentive opportunity was fully based on the achievement of the adjusted EBITDA target goal. The named executive officers may earn more than their target, subject to the cap of 200% of their incentive compensation target, if the Company’s adjusted EBITDA was greater than the target goal. The percentage increases by 8% for each percentage point that actual performance was above the target goal. For the fiscal year ended December 31, 2023, the Company exceed the adjusted EBITDA target goal and as a result, the named executive officers earned 148% of their respective incentive compensation targets as set forth below:
2023 Annual Performance-Based Incentive Compensation
| Named Executive Officer | Target 2023 MIC Plan Award ($) | Total 2023 MIC Plan Payment ($) | | Scott M. Shaw | 500,000 | 740,000 | | Brian K. Meyers | 269,216 | 398,440 | | Chad D. Nyce | 150,000 | 222,000 |
Long-Term Stock Incentives
Long-Term Stock Incentives Stock incentives focus executives’ attention on the Company from the perspective of an owner with an equity stake in the business thereby aligning interests with those of shareholders. The Compensation Committee believes that the Company’s long-term performance is achieved through an ownership culture that encourages long-term performance by our named executive officers through grants of stock-based awards. Our shareholder-approved LTIP provides for the grant of stock options, restricted stock, performance stock and other equity-based awards. Awards are generally made at the discretion of the Compensation Committee based on a multiplicity of factors, including total compensation at peer companies, the level of equity ownership of the executives, and judgments of individual performance during the year. The Compensation Committee believes that a combination of time-based and performance-based restricted stock grants better align the interests of our named executive officers with those of our shareholders. EBITDA targets are set by the Compensation Committee at the beginning of each applicable year. If the applicable EBITDA target is not attained, the Compensation Committee has the discretion to determine that the performance-based restricted stock that would have vested had the target been attained will not be forfeited but, instead, will be subject to a catch-up EBITDA target to be set in the subsequent year. A catch-up target is a stretch goal that requires a greater level of performance than the performance goal set for the applicable performance period. The catch-up target is applicable only for awards issued prior to December 31, 2023. Subsequently, the Compensation Committee eliminated the catch-up target opportunity for future grants starting in fiscal year 2024. In addition, notwithstanding the attainment of the applicable performance targets, the Compensation Committee has the discretion to determine that all or a portion of performance-based restricted stock will not vest based on facts and circumstances occurring after the date of grant that the Compensation Committee deems relevant.
Time-Based Restricted Stock Awards
Time-Based Restricted Stock Awards On February 23, 2023 and February 23, 2022, the Compensation Committee awarded time-based restricted stock (the “Time-Based Restricted Shares”) to certain members of our management, including each of our named executive officers. The Time-Based Restricted Shares vest ratably over three years and represent 50% of the total restricted shares awarded in each year.
Performance-Based Restricted Stock Awards
Performance-Based Restricted Stock Awards On February 23, 2023, the Compensation Committee awarded performance-based restricted stock (the “Performance-Based Restricted Shares”) to certain members of our management, including each of our named executive officers. The Performance-Based Restricted Shares vest over three years, upon the attainment of certain financial performance targets set by the Compensation Committee for each of the fiscal years 2023, 2024, and 2025, the attainment of which is determined in March of each succeeding year. The Performance-Based Restricted Shares represent 50% of the total restricted shares awarded. On February 23, 2022, the Compensation Committee awarded performance-based restricted stock (the “Performance-Based Restricted Shares”) to certain members of our management, including each of our named executive officers. The Performance-Based Restricted Shares vest over three years, upon the attainment of certain financial performance targets set by the Compensation Committee for each of the fiscal years 2022, 2023, and 2024, the attainment of which is determined in March of each succeeding year. The Performance-Based Restricted Shares represent 50% of the total restricted shares awarded. On February 25, 2021, the Compensation Committee awarded Performance-Based Restricted Shares to certain members of our management, including each of our named executive officers. The Performance-Based Restricted Shares vest over three years, upon the attainment of certain financial performance targets set by the Compensation Committee for each of the fiscal years 2021, 2022, and 2023, the attainment of which is determined in March of each succeeding year. The Performance-Based Restricted Shares represent 100% of the total restricted shares awarded.
No Backdating or Spring Loading
No Backdating or Spring Loading The Company does not backdate options or grant options retroactively. In addition, we do not plan to coordinate grants of options, restricted stock or other equity awards so that they are made before announcement of favorable information or after announcement of unfavorable information. Stock options are granted at fair market value on the date the option grants are approved by our Compensation Committee. Fair market value has been consistently determined as the closing price on the NASDAQ Global Select Market on the grant date. All option grants and restricted stock awards require the approval of the Compensation Committee. The Company’s general practice is to grant options and restricted stock only on the date of a regularly scheduled Compensation Committee meeting, although there are occasions when grants have been made on other dates.
Compensation Consultants
Compensation Consultants In determining the compensation of our named executive officers, the Compensation Committee considers many factors, such as the executive’s position with the Company and level of responsibility, skills and experience required by the position, the executive’s experience and qualifications, the Company’s ability to replace such individual and the overall competitive environment for executive talent. The Committee has the authority to retain its own advisor to consider, from time to time, the Company’s compensation philosophy and programs and provide guidance, as appropriate. The Committee relies on an independent compensation consultant for guidance in determining the appropriate structure of director and executive compensation as well as appropriate levels of compensation. The Compensation Committee did not retain a compensation consultant in 2023.
Comparative Data
Comparative Data The Company does not consider its review of market data regarding executive compensation as a formal benchmarking process and does not target named executive officer compensation at a specified level of a peer group. In the fiscal year ended December 31, 2023, the Compensation Committee informally reviewed compensation information set forth in public filings with the Securities and Exchange Commission (including base salaries, annual incentive bonuses and equity-based compensation) for the following companies:
Comparative Data
The purpose of this review was, among other things, to determine whether the level of compensation proposed to be paid to the Company’s named executive officers during 2023 was within the range of compensation paid to the named executive officers at our peer companies. After this informal review, the Compensation Committee determined that the compensation proposed to be paid to the Company’s named executive officers was below the peer group range and determined to further consider these findings with regard to future compensation determinations.
Employment Agreements and Change in Control Benefits
Employment Agreements and Change in Control Benefits The Company has entered into employment agreements with Messrs. Shaw, Meyers, and Nyce. Each of these agreements will expire on December 31, 2025. The employment agreements are described below under “Employment Agreements.” The employment agreement for each of Messrs. Shaw, Meyers and Nyce provides that upon a change in control of the Company, the term of the agreement will be extended automatically for an additional two-year term commencing on the date of the change in control and ending on the second anniversary of the date of the change in control. Each employment agreement further provides that all stock options and restricted stock awards held by the named executive officer will immediately vest in such event. We do not provide our named executive officers with tax gross-ups for “excess parachute payments” under Section 280G of the Internal Revenue Code upon a change in control. In the event that any payment or distribution by us to or for the benefit of our named executive officers would be considered a “parachute payment” for purposes of Section 280G, the amount of such payments may be reduced to the largest amount permissible without triggering excise taxes under Section 4999 of the Internal Revenue Code.
Tax Deductibility of Compensation; Accounting
| Summary Compensation Table | | | | | | | | Name and Principal Position | Year | Salary ($) | Stock Awards (1) ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total ($) | | Scott M. Shaw | 2023 | 500,000 | 1,200,000 | 740,000 | 18,683 | 2,458,683 | | President and | 2022 | 500,000 | 1,100,000 | 126,720 | 14,264 | 1,740,984 | | Chief Executive Officer | | | | | | | | Brian K. Meyers | 2023 | 358,955 | 500,000 | 398,440 | 13,236 | 1,270,631 | | Executive Vice President, Chief | 2022 | 358,955 | 500,000 | 68,230 | 11,595 | 938,780 | | Financial Officer and Treasurer | | | | | | | | Chad D. Nyce | 2023 | 300,000 | 350,000 | 222,000 | 5,927 | 877,927 | | Executive Vice President, | 2022 | - | - | - | - | - | | Chief Innovation Officer | | | | | | |
Potential Payments upon a Termination or Change in Control
Potential Payments upon a Termination or Change in Control The following table summarizes the value of the termination payments and benefits that our named executive officers would receive upon:
Potential Payments upon a Termination or Change in Control
| ● | the Executive’s Involuntary Termination (as defined below); |
Potential Payments upon a Termination or Change in Control
| ● | a Change in Control (as defined below); or |
Potential Payments upon a Termination or Change in Control
| ● | the Executive’s Death or Disability. |
Potential Payments upon a Termination or Change in Control
In each case, the amounts are determined as if the trigger event occurred on December 31, 2023 and equity is valued based on the closing stock price of $10.04 on December 31, 2023. This table excludes vested account balances under our 401(k) plan, which is generally available to all of our employees. The terms of the benefits are set forth in the employment agreements of our named executive officers as described immediately following the table.
Potential Payments upon a Termination or Change in Control
| Payment upon Termination | | | | | | at Fiscal Year End December 31, 2023 | | | | | | Name | Aggregate Severance ($) | Stock Awards (1) ($) | Benefits (2) ($) | Total ($) | | Scott M. Shaw | | | | | | Involuntary Termination (3) | 2,000,000 | 3,795,471 | 30,164 | 5,825,635 | | Change in Control | - | 3,795,471 | - | 3,795,471 | | Death or Disability (4) | 500,000 | 3,795,471 | - | 4,295,471 | | Termination for Cause or Resignation without Good Reason | - | - | - | - | | Brian Meyers | | | | | | Involuntary Termination (5) | 1,099,300 | 1,677,102 | 27,276 | 2,803,678 | | Change in Control | - | 1,677,102 | - | 1,677,102 | | Death or Disability (4) | 269,216 | 1,677,102 | - | 1,946,318 | | Termination for Cause or Resignation without Good Reason | - | - | - | - | | Chad D. Nyce | | | | | | Involuntary Termination (6) | 675,000 | 1,260,080 | 12,001 | 1,947,081 | | Change in Control | - | 1,260,080 | - | 1,260,080 | | Death or Disability (4) | 150,000 | 1,260,080 | - | 1,410,080 | | Termination for Cause or Resignation without Good Reason | - | - | - | - |
Potential Payments upon a Termination or Change in Control
| (1) All outstanding stock options, restricted stock and performance-based restricted stock granted by the Company to the named executive officers will become fully vested and immediately exercisable upon (i) a Change in Control (as defined below); (ii) an Involuntary Termination (as defined below); or (iii) upon the executive’s death or disability. |
Potential Payments upon a Termination or Change in Control
| (2) Includes a cash payment equal to the Company’s estimate of the employer portions of the premiums that would be necessary to continue the executive’s health care benefits coverage until the first anniversary of the executive’s date of termination. |
Potential Payments upon a Termination or Change in Control
| (3) Consists of a lump sum payment equal to two times the sum of Mr. Shaw’s 2023 base salary and the target amount of his annual performance bonus for the fiscal year ended December 31, 2023. |
Potential Payments upon a Termination or Change in Control
| (4) Includes an annual cash incentive compensation award under the MIC Plan for the year of termination based upon target levels. |
Potential Payments upon a Termination or Change in Control
| (5) Consists of a lump sum payment equal to one and three-quarters times the sum of Mr. Meyer’s 2023 base salary and the target amount of his annual performance bonus for the fiscal year ended December 31, 2023. |
Potential Payments upon a Termination or Change in Control
| (6) Consists of a lump sum payment equal to one and one-half times the sum of Mr. Nyce’s 2023 base salary and the target amount of his annual performance bonus for the fiscal year ended December 31, 2023. |
Director Compensation for Fiscal Year End December 31, 2023
Director Compensation for Fiscal Year End December 31, 2023
Director Compensation for Fiscal Year End December 31, 2023
| Name | Fees Earned ($) | Stock Awards (1) ($) | Total ($) | | J. Barry Morrow | 95,000 | 105,000 | 200,000 | | John A. Bartholdson | 79,000 | 60,000 | 139,000 | | James J. Burke, Jr. | 71,000 | 60,000 | 131,000 | | Kevin M. Carney | 70,000 | 60,000 | 130,000 | | Ronald E. Harbour (2) | 50,250 | - | 50,250 | | Michael A. Plater | 69,000 | 60,000 | 129,000 | | Felecia J. Pryor | 67,000 | 60,000 | 127,000 | | Carlton E. Rose | 69,000 | 60,000 | 129,000 | | Sylvia Young | 45,750 | 60,000 | 105,750 |
Director Compensation for Fiscal Year End December 31, 2023
___________
Director Compensation for Fiscal Year End December 31, 2023
| (1) Represents the grant date fair value of a restricted stock award granted on May 5, 2023 to each of the Directors. The fair value of this grant was determined in accordance with FASB ASC Topic 718 (excluding the effect of estimated forfeitures) as determined based on applying the assumptions used in the Company’s financial statements. See Note 10 to the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023, regarding assumptions underlying the valuation of equity awards. |
Director Compensation for Fiscal Year End December 31, 2023
| (2) Mr. Harbour served on the Board of Directors through May 5, 2023. |
Director Compensation for Fiscal Year End December 31, 2023
Fiscal year 2023 Compensation. Each of the non-employee directors earned an annual retainer of $55,000 for services to the Company and J. Barry Morrow, our Non-Executive Chair, received an additional annual retainer of $40,000. In addition to their annual retainers as members of the Board, members of the Audit Committee earned an additional annual retainer of $8,000 except in the case of the Audit Committee Chair who earned an annual retainer of $15,000 and members of each of the Nominating and Corporate Governance Committee and the Compensation Committee who earned an additional annual retainer of $6,000 except in the case of the Chairs of such Committees who, in each case, earned an annual retainer of $10,000. Non-employee directors are also eligible to receive awards of shares of restricted Common Stock under the 2020 Long-Term Incentive Plan as compensation for their services as directors. Annual Grants of Restricted Stock. On the date of each annual meeting of shareholders, each non-employee director receives an award of shares of restricted Common Stock equal to $60,000 and the Chair receives $105,000 (based on the fair market value of a share of the Company’s Common Stock on the date of grant) for service as a director of the Company, provided that such non-employee director continues to serve as a director of the Company immediately after such annual meeting. On May 5, 2023, each non-employee director received 10,471 shares of restricted Common Stock, while Mr. Morrow received 18,325 shares of restricted Common Stock. The restricted stock awards vest in full on May 5, 2024, the first anniversary of the grant date. The per share fair market value of a share of the Company’s Common Stock on May 5, 2023, based on the closing price of the Common Stock on such date, was $5.73. Pay versus Performance The following table shows, for the last three fiscal years, the total compensation paid to our named executive officers as reflected in our Summary Compensation Table (the “SCT”), “compensation actually paid” to our named executed officers (as determined in accordance with applicable rules), our total shareholder return (“TSR”) and our net income. The information provided under the heading “Pay versus Performance” shall not be considered “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into a filing.
Director Compensation for Fiscal Year End December 31, 2023
| Year | Total Compensation Per SCT Paid to Principal Executive Officer (1) ($) | Compensation Actually Paid to Principal Executive Officer (2) ($) | Average Compensation Total for Non-Principal Executive Officer - NEOs (3) ($) | Average Compensation Actually Paid to Non-Principal Executive Officer - NEOs (4) ($) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return (5) ($) | Net Income (in thousands) (6) ($) | | 2023 | 2,458,683 | 4,021,370 | 1,074,279 | 1,687,803 | 154 | 25,997 | | 2022 | 1,740,984 | 842,209 | 824,827 | 386,445 | 89 | 12,634 | | 2021 | 1,693,608 | 1,996,032 | 883,424 | 1,064,992 | 115 | 34,718 |
Director Compensation for Fiscal Year End December 31, 2023
___________
Director Compensation for Fiscal Year End December 31, 2023
| (1) The dollar amounts reported are the amounts of total compensation reported for Scott Shaw, our President and Chief Executive Officer, recognized as our Principal Executive Officer for these purposes for each corresponding year in the “Total” column of the Summary Compensation Table. |
Director Compensation for Fiscal Year End December 31, 2023
| (2) The dollar amounts reported represent the amount of “compensation actually paid” to Mr. Shaw, as computed in accordance with Item 402(v) of Regulation S-K. In accordance with the requirements of Item 402(v) of Regulation S-K, the following table sets forth the adjustments made to Mr. Shaw’s total compensation for each year to determine the “compensation actually paid”. Mr. Shaw holds no stock options, no awards were modified during the year and no dividends or other earnings were paid during the year prior to the vesting date of an award. |
Director Compensation for Fiscal Year End December 31, 2023
| (3) The dollar amounts reported represent the average of the amounts reported for our named executive officers, NEOs, excluding Mr. Shaw, in the “Total” Column of the Summary Compensation Table for each corresponding year. The NEOs, excluding Mr. Shaw, included for purposes of calculating the average amounts in each applicable year are Mr. Meyers and Mr. Nyce. |
Director Compensation for Fiscal Year End December 31, 2023
| (4) The dollar amounts reported represent the average of the amounts of “compensation actually paid” to our NEOs, excluding Mr. Shaw, as computed in accordance with Item 402(v) of Regulation S-K. In accordance with the requirements of Item 402(v) of Regulation S-K, the following table sets forth the adjustments made to our NEOs’ total compensation, excluding Mr. Shaw for each year to determine the “compensation actually paid”. Neither of Messrs. Meyers or Nyce holds any options, no awards were modified during the year and no dividends or other earnings were paid during the year prior to the vesting date of an award. |
Director Compensation for Fiscal Year End December 31, 2023
| (5) The dollar amounts reported represent the value of an initial fixed investment of $100 and are calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (ii) the difference between the closing stock price of the Company’s Common Stock at the end and at the beginning of the measurement period, by the closing stock price of our Common Stock at the beginning of the measurement period. The closing stock price of the Company’s Common Stock on the last trading day in December in each of 2023, 2022 and 2021 was $10.04, $5.79 and $7.74, respectively. There were no dividends in any of such years. |
Director Compensation for Fiscal Year End December 31, 2023
| (6) The dollar amounts reported represent the amount of net income reflected in our consolidated audited financial statements for the applicable year. |
Director Compensation for Fiscal Year End December 31, 2023
The following table reconciles total compensation per the SCT compared with “compensation actually paid” to the Principal Executive Officer and Non-Principal Executive Officer NEOs:
Director Compensation for Fiscal Year End December 31, 2023
| Adjustments to Determine “Compensation Actually Paid” to the Principal Executive Officer | | | | | | | | | Year | Total Compensation Per SCT ($) | Deduct Amounts Reported as Stock Awards in SCT( $) | Add Year-end Value of Unvested Equity Awards Granted in Year ($) | Change in Value of Unvested Equity Awards Granted in Prior Years ($) | Change in Value of Equity Awards Granted in Prior Years Which Vested in Year ($) | Deduct Prior Year-end Fair Value of Awards Granted in Prior Years That Failed to Meet the Vesting Conditions in Year ($) | Total Compensation Actually Paid ($) | | 2023 | 2,458,683 | (1,200,000) | 1,959,025 | 777,380 | 26,282 | - | 4,021,370 | | 2022 | 1,740,984 | (1,100,000) | 873,665 | (264,053) | (6,979) | (401,408) | 842,209 | | 2021 | 1,693,608 | (500,000) | 640,652 | 180,699 | (18,927) | - | 1,996,032 |
Director Compensation for Fiscal Year End December 31, 2023
| Adjustments to Determine Average “Compensation Actually Paid” to the Non-Principal Executive Officer NEOs | | | | | | | | | Year | Average Compensation Per SCT ($) | Deduct Amounts Reported as Stock Awards in SCT ($) | Add Year-end Value of Unvested Equity Awards Granted in Year ($) | Change in Value of Unvested Equity Awards Granted in Prior Years ($) | Change in Value of Equity Awards Granted in Prior Years Which Vested in Year ($) | Deduct Prior Year-end Fair Value of Awards Granted in Prior Years That Failed to Meet the Vesting Conditions in Year ($) | Average Compensation Actually Paid ($) | | 2023 | 1,074,279 | (425,000) | 693,814 | 327,968 | 16,742 | - | 1,687,803 | | 2022 | 824,827 | (425,000) | 337,552 | (165,627) | (5,948) | (179,358) | 386,446 | | 2021 | 883,425 | (250,000) | 320,326 | 118,731 | (7,490) | - | 1,064,992 |
Analysis of the Information Presented in the Pay Versus Performance Table
Analysis of the Information Presented in the Pay Versus Performance Table As described in more detail in the section “Compensation Discussion and Analysis,” the Company’s executive compensation program is comprised of a variety of components including a performance-based approach. While the Company utilizes several performance metrics to align executive compensation with Company performance, not all of these are covered by the Pay versus Performance table. Further, while the Company seeks to incentivize long-term performance, this is not necessarily aligned with “compensation actually paid” (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table. Compensation Actually Paid and Cumulative TSR The following graph provides a description of the relationship between the amount of “compensation actually paid” to Mr. Shaw and the average amount of “compensation actually paid” to the Company’s NEOs as a group (excluding Mr. Shaw) to the Company’s Cumulative Total Shareholder Return (“TSR”) over the three years presented in the Pay versus Performance table. Compensation Actually Paid and Net Income The following graph provides a description of the relationship between the amount of “compensation actually paid” to Mr. Shaw and the average amount of “compensation actually paid” to the Company’s NEOs as a group (excluding Mr. Shaw) to the Company’s net income over the three years presented in the Pay versus Performance table. Audit Committee Report The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the Company’s financial reporting process by monitoring, among other matters, the quality and integrity of the Company’s financial statements; the independence and performance of Deloitte & Touche LLP, the Company’s independent registered public accounting firm; and the performance of the Company’s internal auditors. Management has primary responsibility for preparing the financial statements and for the reporting processes, including the design and maintenance of the Company’s system of internal controls. The independent registered public accounting firm is responsible for auditing the Company’s consolidated financial statements and opining upon the effectiveness of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”). The Audit Committee is solely responsible for the compensation, appointment and oversight of the Company’s independent registered public accounting firm. In this context, the Audit Committee has met and held discussions with management, the independent registered public accounting firm and the internal auditors, separately and together, with and without management present, regarding the Company’s audited consolidated financial statements as of December 31, 2023, and for the year then ended and regarding the Company’s internal controls. Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the U.S. The Audit Committee also discussed with the independent registered public accounting firm the matters required to be discussed by PCAOB Auditing Standard No. 1301 (formerly Auditing Standard No. 61), Communications with Audit Committees. Further, the Audit Committee discussed with the internal auditors the Company’s plans for and scope of internal audits, identification of audit risks and results of audit activities. The Audit Committee reviewed and discussed with the independent registered public accounting firm the auditor’s independence from the Company and its management. As part of that review, the Company’s independent registered public accounting firm submitted to the Audit Committee the written disclosures and the letter required by PCAOB Rule 3526 (Independence Discussions with Audit Committees) in which Deloitte & Touche LLP affirmed its independence from the Company. Further, the Audit Committee discussed with Deloitte & Touche LLP the firm’s independence and considered whether the firm’s provision of non-audit services to the Company was compatible with maintaining the firm’s independence. The Audit Committee concluded that Deloitte & Touche LLP is independent from the Company and its management. Based upon the considerations described above and subject to the limitations upon the role and responsibilities of the Audit Committee as set forth in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements for the year ended December 31, 2023 be included in the Company’s 2023 Annual Report.
Analysis of the Information Presented in the Pay Versus Performance Table
| AUDIT COMMITTEE | | Kevin M. Carney, Chair John A. Bartholdson Michael A. Plater | | Carlton E. Rose |
Analysis of the Information Presented in the Pay Versus Performance Table
PROPOSAL 2: NON-BINDING ADVISORY VOTE ON THE COMPANY’S COMPENSATION OF NAMED EXECUTIVE OFFICERS Pursuant to the rules of the Securities and Exchange Commission adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are providing shareholders with a proposal to approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis and tabular and narrative disclosures of this proxy statement (the “say-on-pay” vote). We encourage shareholders to read the Compensation Discussion and Analysis beginning on page 14 of this proxy statement, which describes how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative which provide detailed information on the compensation of our named executive officers. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in this proxy statement are effective in achieving our goals. The Board recommends a vote for the following resolution: “RESOLVED, that the shareholders hereby approve the compensation of the named executive officers as disclosed pursuant to Item 402 of Regulation S-K under the Securities Act of 1933, as amended, including the Compensation Discussion and Analysis, the accompanying compensation disclosure tables and any related narrative disclosure in this proxy statement.” Although the vote on this Proposal 2 is advisory and non-binding, the Compensation Committee and the Board of Directors will review the voting results on the proposal and will consider shareholder views in connection with our executive compensation program. At the 2023 Annual Meeting, approximately 86% of the votes cast on the say-on-pay proposal voted in favor of our NEOs’ compensation.