DEF 14A of LPL Financial Holdings Inc.
Filed Mar 28, 2024 · FY20230001193125-24-080802
Proposal 1: Election of Directors
Proposal 1: Election of Directors As of March 28, 2024, our Board of Directors consisted of ten directors: nine independent directors and our chief executive officer, Dan H. Arnold. Each of our current directors is standing for reelection at the Annual Meeting, and each has been nominated by our Board based on the recommendation of the Nominating and Governance Committee. Each director nominee would hold office until our annual meeting of stockholders in 2025 and until his or her respective successor has been elected. As described below, each of our nominees has considerable professional and business expertise. Our Board of Directors recommends a vote “FOR” each nominee based on its carefully considered judgment that the experience, qualifications, attributes and skills of each nominee qualify him or her to serve on our Board of Directors.
Board of Director Nominees
Board of Director Nominees The name, age and a description of the business experience, principal occupation, and past employment and public-company directorships of each of the nominees during at least the last five years are set forth below. In addition, we have summarized the particular experience, qualifications, attributes and skills that led the Board of Directors, including our Nominating and Governance Committee, to determine that each nominee should serve as a director.
Board of Director Nominees
| Dan H. Arnold | BACKGROUND | | | Age 59 Director Since 2017 | Mr. Arnold has served as our chief executive officer and a director since January 2017. Mr. Arnold has served as our president since March 2015, with responsibility for our primary client-facing functions and long-term strategy for growth. Mr. Arnold served as our chief financial officer from June 2012 to March 2015 and was responsible for formulating financial policy, leading our capital management efforts, and ensuring the effectiveness of the organization’s financial functions. Prior to 2012, he was managing director, head of strategy, with responsibility for long-term strategic planning for the firm, product and platform development, and strategic investments, including acquisitions. He has also served as divisional president of our Institution Services. Mr. Arnold joined the Company in January 2007 following our acquisition of UVEST Financial Services Group, Inc. (“UVEST”), a broker-dealer and investment adviser that provided services to banks, credit unions and other financial institutions. Prior to joining us, Mr. Arnold worked at UVEST for 13 years, serving most recently as president and chief operating officer. Mr. Arnold earned a B.S. in electrical engineering from Auburn University and holds an M.B.A. in finance from Georgia State University. | | | | QUALIFICATIONS | | | | Mr. Arnold’s pertinent qualifications include his unique perspective and insights into our operations as our current president and chief executive officer, including knowledge of our business relationships, competitive and financial positioning, senior leadership, and strategic opportunities and challenges; operating, business and management experience as the chief financial officer, president, and now chief executive officer of a public company; and expertise in the financial industry and in particular brokerage and investment advisory services, including service as a director of the American Securities Association since April 2019 and past service as a director of the Securities Industry and Financial Markets Association from April 2015 to July 2018. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current None | Past 5 Years None |
Board of Director Nominees
| 2024 Proxy Statement | 9 |
Board of Director Nominees
| | Proposal 1: Election of Directors |
Board of Director Nominees
| Edward C. Bernard | BACKGROUND | | | Age 68 Director Since 2020 Independent Committees: Audit and Risk Committee Compensation Committee | Mr. Bernard served as the vice chair of the board of directors of T. Rowe Price Group, Inc. (“TRP”), a global investment management firm, from 2007 to April 2019. Mr. Bernard served as a vice president of TRP from 1989 to December 2018 and as a member of the management committee of TRP from 2000 to December 2018. He oversaw TRP’s marketing, distribution, client service, information technology, legal and communications activities from 2006 until December 2018. He also served as chair of the board of all sponsored TRP mutual funds and trusts during that period and as president and/or chair of T. Rowe Price Investment Services, a registered broker/dealer, from 1996 to 2018. Mr. Bernard served as a director of TRP from 1999 to April 2019. He currently serves as Chair of the Financial Accounting Foundation. He previously served as chair of the board of governors, and as a member of the executive committee, of the Investment Company Institute, the national trade association for the mutual fund industry, and as a director of UTI Asset Management Company. Mr. Bernard received his B.A. from Brown University and an M.B.A. from New York University. | | | | QUALIFICATIONS | | | | Mr. Bernard’s pertinent qualifications include expertise in the wealth management industry, gained through his over 30 years of experience in investment management and leadership roles as a member of the board of governors at the Investment Company Institute; his high level of operating, management and strategic planning experience, gained through his executive positions and roles as vice chair of the board of directors of TRP and chair of all sponsored TRP mutual funds and trusts; and his deep understanding of financial product distribution, compliance requirements and the perspectives of advisors and their retail clients, including with respect to the use of technology, product and analytics as a competitive differentiator. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current None | Past 5 Years T. Rowe Price Group, Inc. UTI Asset Management Company (India) |
Board of Director Nominees
| 10 | 2024 Proxy Statement |
Board of Director Nominees
| | Proposal 1: Election of Directors |
Board of Director Nominees
| H. Paulett Eberhart | BACKGROUND | | | Age 70 Director Since 2014 Independent Committees: Audit and Risk Committee (Chair) Compensation Committee | Ms. Eberhart currently serves as chair and chief executive officer of HMS Ventures, a privately-held business involved with technology services and the acquisition and management of real estate. From 2011 through 2014, she served as president and chief executive officer of CDI Corp. (“CDI”), a provider of engineering and information technology outsourcing and professional staffing services that was then a public company. Ms. Eberhart also served as chair and chief executive officer of HMS Ventures from January 2009 until January 2011. She served as president and chief executive officer of Invensys Process Systems, Inc. (“Invensys”), a process automation company, from January 2007 to January 2009. From 1978 to 2004, she was an employee of Electronic Data Systems Corporation (“EDS”), an information technology and business process outsourcing company that was subsequently acquired by the Hewlett-Packard Company, and held roles of increasing responsibility over time, including senior level financial and operating roles as president of Americas of EDS from 2003 until March 2004 and senior vice president of EDS and president of Solutions Consulting from 2002 to 2003. She is a Certified Public Accountant and received her B.S. from Bowling Green State University. | | | | QUALIFICATIONS | | | | Ms. Eberhart’s pertinent qualifications include her wealth of managerial and executive experience gained through her leadership as the chief executive officer of CDI, formerly an NYSE-listed public company, and Invensys, as well as her numerous years of service as an executive officer of EDS, including president of Americas; financial and accounting expertise gained through various other operating and financial positions during her 26 years at EDS; strong knowledge of the intersection of technology, data and finance industries; and knowledge and experience gained through her leadership and service on the boards of other public companies, including prior service as lead director of Anadarko Petroleum Corporation and risk oversight experience in chairing the governance and risk committee of its board of directors. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current Valero Corporation Fluor Corporation KORE Wireless | Past 5 Years Anadarko Petroleum Corporation Vine Energy |
Board of Director Nominees
| 2024 Proxy Statement | 11 |
Board of Director Nominees
| | Proposal 1: Election of Directors |
Board of Director Nominees
| William F. Glavin Jr. | BACKGROUND | | | Age 65 Director Since 2017 Independent Committees: Audit and Risk Committee Nominating and Governance Committee | Mr. Glavin served as chair of OppenheimerFunds, Inc., a global asset management firm (“OppenheimerFunds”), from 2009 until 2015, as chief executive officer from 2009 until 2014, and as president from 2009 until 2013. OppenheimerFunds was a majority owned subsidiary of MassMutual Financial Group (“MassMutual”), a mutual life insurance company, at which Mr. Glavin held several senior executive positions prior to joining OppenheimerFunds. He served as co-chief operating officer of MassMutual from 2007 to 2008, executive vice president, U.S. Insurance Group of MassMutual from 2006 to 2008, president and chief executive officer of Babson Capital Management LLC (“Babson”), an asset management firm and subsidiary of MassMutual, from 2005 until 2006 and chief operating officer of Babson from 2003 to 2005. Prior to joining MassMutual, Mr. Glavin was president and chief operating officer of Scudder Investments, an asset management firm, from 2000 to 2003. Mr. Glavin received his B.A. from the College of the Holy Cross. | | | | QUALIFICATIONS | | | | Mr. Glavin’s pertinent qualifications include his experience over the course of a 25-year career in the financial services industry, including as a chief executive officer and chief operating officer; extensive experience in strategic planning and talent management, in part based on his success in leading OppenheimerFunds through a period of significant market turbulence; a deep understanding of financial product distribution, compliance and operations, including technology demands in the financial services industry; and experience overseeing broker-dealers, including MassMutual’s broker-dealer MML Investor Services, LLC. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current Invesco Ltd. | Past 5 Years None |
Board of Director Nominees
| 12 | 2024 Proxy Statement |
Board of Director Nominees
| | Proposal 1: Election of Directors |
Board of Director Nominees
| Albert J. Ko | BACKGROUND | | | Age 49 Director Since 2023 Independent Committees: Audit and Risk Committee | Mr. Ko serves as the chief executive officer of Auctane, a global delivery experience company that operates brands such as ShipStation, Stamps.com, ShippingEasy, Ship Engine, Metapack and Packlink. Previously Mr. Ko served as chief executive officer of Early Warning Services, LLC, a bank-owned financial technology company that operates the Zelle Network®, a digital payments network connecting financial institutions, enabling real-time money transfers and person-to-person payments. He held this position from May 2019 until June 2023. From February 2006 to May 2019, Mr. Ko held senior executive roles at Intuit Inc., a business software company that specializes in financial software, including chief transformation officer, general manager of Mint, which is a personal financial management app, and head of product for Intuit’s Small Business Group. Prior to joining Intuit, Mr. Ko was a management consultant at both the Boston Consulting Group, Inc. and McKinsey & Company, where he advised technology and industrial clients. He also currently serves on the board of directors of Elation Health, Inc., a privately held healthcare technology company. Mr. Ko received a B.A. from Yale University and a J.D. from Harvard Law School. | | | | QUALIFICATIONS | | | | Mr. Ko’s pertinent qualifications include: his 20-year career experience leading at scale businesses and developing innovative product experiences in financial technology, payments, delivery and consumer and small business management; consumer insights and entrepreneurial mindset developed in overseeing transformational change initiatives at Intuit focused on best serving its customers; expertise in strategic planning and organizational effectiveness gained from his experience as a management consultant; and a deep understanding of the financial services industry, including institutional risk management, from serving as chief executive officer of a fintech company owned by seven of the country’s leading banks. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current None | Past 5 Years None |
Board of Director Nominees
| 2024 Proxy Statement | 13 |
Board of Director Nominees
| | Proposal 1: Election of Directors |
Board of Director Nominees
| Allison H. Mnookin | BACKGROUND | | | Age 53 Director Since 2018 Independent Committees: Compensation Committee (Chair) Nominating and Governance Committee | Ms. Mnookin has served since July 2017 as a senior lecturer of business administration in the technology and operations management unit at the Harvard Business School. From April 2016 to November 2016, Ms. Mnookin served as the chief executive officer of QuickBase, Inc. (“QuickBase”), a provider of online application software which was spun-off by Intuit, Inc., a business software company that specializes in financial software, in 2016. Ms. Mnookin was an employee of Intuit from 1998 to 2016 and held roles of increasing responsibility over time, including vice president and general manager of Intuit’s QuickBase business from July 2010 to March 2016. She previously served as a director of Quartz Holding Company, the holding company of QuickBase, from November 2016 until its sale in April 2019. In addition, she currently serves on the board of directors of Bill Holdings, Inc. Prior to joining Intuit, she held several sales and product marketing positions with Oracle Corporation Ms. Mnookin received her A.B. with honors from Harvard College and her M.B.A. from the Harvard Business School. | | | | QUALIFICATIONS | | | | Ms. Mnookin’s pertinent qualifications include her 20-year career in the technology industry, including executive leadership of high-growth cloud and business software companies, as well as service as a director of Bill Holdings, Inc., a public company that provides cloud-based software to simplify and automate back-office financial transactions for small- and mid-sized businesses. These experiences, including general management in Intuit’s small business division where she was responsible for leading a portfolio of Intuit’s business products, shaped her understanding of how businesses have transformed their technologies to increase strategic advantage. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current Bill Holdings, Inc. | Past 5 Years None |
Board of Director Nominees
| Anne M. Mulcahy | BACKGROUND | | | Age 71 Director Since 2013 Independent Committees: Compensation Committee Nominating and Governance Committee (Chair) | Ms. Mulcahy served as chair of the board of trustees of Save The Children Federation, Inc., a non-profit organization dedicated to creating lasting change in the lives of children throughout the world, from March 2010 to February 2017. She continues to serve as a trustee of Save The Children Federation, Inc. She previously served as chair of the board of Xerox Corporation (“Xerox”), a global business services and document technology provider, from January 2002 to May 2010, and chief executive officer of Xerox from August 2001 to July 2009. Prior to serving as a chief executive officer, Ms. Mulcahy was president and chief operating officer of Xerox. Ms. Mulcahy received a B.A. from Marymount College of Fordham University. | | | | QUALIFICATIONS | | | | Ms. Mulcahy’s pertinent qualifications include her extensive experience in all areas of business management and strategic execution as she led Xerox through a transformational turnaround; valuable insights into organizational and operational management issues, including business innovation, financial management and talent development; and leadership roles in business trade associations, public policy activities and other public companies, including as lead independent director of Johnson & Johnson, which provide the Board with additional expertise in the area of organizational effectiveness. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current Graham Holdings Company Johnson & Johnson | Past 5 Years Williams-Sonoma, Inc. |
Board of Director Nominees
| 14 | 2024 Proxy Statement |
Board of Director Nominees
| | Proposal 1: Election of Directors |
Board of Director Nominees
| James S. Putnam | BACKGROUND | | | Age 69 Director Since 2005 Independent Chair of the Board Committee: Compensation Committee | Mr. Putnam has served as chair of the Board of Directors since March 2017, and he served as our lead director from June 2016 until March 2017. He was employed by LPL Financial from 1983 to 2005 and served as its managing director of national sales from 1987 to 2005. In that role, he was responsible for the recruitment, retention and management of LPL Financial advisors, as well as branch development, marketing and all product sales. Mr. Putnam also previously served as the chief executive officer of Global Portfolio Advisors (“GPA”), formerly a global brokerage clearing services provider that sold substantially all of its operations in 2014. GPA was under common ownership with LPL Financial until 2005, and Mr. Putnam served as chief executive officer of GPA from 2004 until 2014. He began his securities career as a retail representative with Dean Witter Reynolds in 1979. Mr. Putnam received a B.A. from Western Illinois University. | | | | QUALIFICATIONS | | | | Mr. Putnam’s pertinent qualifications include his unique historical perspective and insights into our operations as our former managing director of national sales; operating, business and management experience as the chief executive officer at GPA; and expertise in the financial industry and deep familiarity with our advisors. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current None | Past 5 Years None |
Board of Director Nominees
| Richard P. Schifter | BACKGROUND | | | Age 71 Director Since 2005 Independent Committee: Audit and Risk Committee | Mr. Schifter is a senior advisor of TPG, a leading global private investment firm. He was a partner at TPG from 1994 through 2013. Prior to joining TPG, Mr. Schifter was a partner at the law firm of Arnold & Porter in Washington, D.C. where he specialized in bankruptcy law and corporate restructuring. He joined Arnold & Porter in 1979 and was a partner from 1986 through 1994. Mr. Schifter currently serves on the advisory board of the University of Pennsylvania Law School. He received a B.A. with distinction from George Washington University and a J.D. cum laude from the University of Pennsylvania Law School. | | | | QUALIFICATIONS | | | | Mr. Schifter’s pertinent qualifications include his high level of financial literacy gained through his investment experience as a TPG partner; experience on other company boards and board committees; and nearly 15 years of experience as a corporate attorney with an internationally-recognized law firm. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current None | Past 5 Years Avianca Holdings SA Caesars Entertainment Corporation EnLink Midstream, LLC ProSight Global, Inc. |
Board of Director Nominees
| 2024 Proxy Statement | 15 |
Board of Director Nominees
| | Proposal 1: Election of Directors |
Board of Director Nominees
| Corey E. Thomas | BACKGROUND | | | Age 47 Director Since 2019 Independent Committees: Audit and Risk Committee Nominating and Governance Committee | Mr. Thomas serves as the chair of the board and chief executive officer of Rapid7, Inc. (“Rapid7”), a public company that provides analytics for security and information technology operations. Mr. Thomas has been chief executive officer and a director since October 2012. From November 2008 to September 2012, Mr. Thomas held various other roles at Rapid7, including serving as chief operating officer. He also currently serves on the board of directors of Blue Cross Blue Shield of Massachusetts, a nonprofit private health insurance company, and the Federal Reserve Bank of Boston. Mr. Thomas received a B.E. from Vanderbilt University and an M.B.A. from the Harvard Business School. | | | | QUALIFICATIONS | | | | Mr. Thomas’s pertinent qualifications include his general management experience, including his top-level perspective on strategy and organization management as the chief executive officer of a public company; strategic insights with regard to information technology, cybersecurity and global sales and marketing gained through his career in the technology industry; an entrepreneurial mindset focused on solving the needs of clients ranging widely in size and industry; and experience leading operations involving multiple product delivery models, including his past role as a chief operating officer. | | | | OTHER PUBLIC COMPANY BOARDS | | | | Current Rapid7, Inc. | Past 5 Years Catalyst Partners Acquisition Corp. |
Board of Director Nominees
In the vote on the election of the director nominees, stockholders may:
Board of Director Nominees
| ◾ | Vote FOR any of the nominees; |
Board of Director Nominees
| ◾ | Vote AGAINST any of the nominees; or |
Board of Director Nominees
| ◾ | ABSTAIN from voting as to any of the nominees. |
Board of Director Nominees
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES AS A DIRECTOR.
Board of Director Nominees
| 16 | 2024 Proxy Statement |
Board of Director Nominees
| | Information Regarding Board and Committee Structure |
Information Regarding Board and Committee Structure
Information Regarding Board and Committee Structure Since January 2023, the Board of Directors has consisted of ten directors. In 2023, the Board held seven meetings. Each of our directors attended at least 75% of the aggregate of:
Information Regarding Board and Committee Structure
| ◾ | the total number of meetings of the Board of Directors during 2023; and |
Information Regarding Board and Committee Structure
| ◾ | the total number of meetings held by all committees of the Board on which the director served during 2023. |
Information Regarding Board and Committee Structure
Seven of our ten directors in 2023 attended 100% of such aggregate number of meetings. Our Corporate Governance Guidelines provide that each director who is nominated for election is expected to attend the Annual Meeting. Each of the ten nominees for election at the 2023 annual meeting of stockholders attended such meeting, with one director attending by telephonic conference.
Role of the Compensation Committee
| | Board of Directors Compensation |
Board of Directors Compensation
Board of Directors Compensation
Director Compensation Policy
Director Compensation Policy Our director compensation policy provides that each of our non-employee directors receives an annual service retainer of $255,000. Of this amount, $100,000 is paid in a lump sum in cash (or, at the director’s election, in the form of shares of our Common Stock as described below) and $155,000 is paid in the form of restricted shares of our Common Stock granted under our 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). Directors could elect to defer receipt of the equity portion, or both the equity and cash portions, of their 2023 service retainers, as described under “Deferred Compensation Plan” below. The following table sets forth the additional annual service retainers under our director compensation policy that members of our standing committees received for their additional duties during 2023:
Director Compensation Policy
| | Chair | Each Other Member | | Audit and Risk Committee | $30,000 | $15,000 | | Compensation Committee | $25,000 | $12,500 | | Nominating and Governance Committee | $20,000 | $10,000 |
Director Compensation Policy
Our director compensation policy also provides that the chair of the Board receives an additional annual service retainer of $140,000 in connection with his or her additional duties. The retainers for committee and chair service are paid in cash in installments following the end of each quarter of service. Our directors are also reimbursed for expenses incurred in connection with their attendance at Board and committee meetings. Mr. Arnold does not receive additional compensation for his service as a director. As noted above, each of our non-employee directors elected at our 2023 annual meeting of stockholders was granted an annual award of restricted stock or, as described below under “Deferred Compensation Plan,” deferred stock units, having a grant date value of $155,000 (based on the average of the closing price of our Common Stock for the trailing thirty consecutive trading days including the grant date). In each case, these awards vest in full on May 8, 2024, which is the day prior to the Annual Meeting, generally subject to the director’s continued service through that date. In addition, Mr. Ko, who was elected to our Board in January 2023, was granted a prorated annual award of restricted stock upon his election having a grant date value of $38,750 (based on the average of the closing price of our Common Stock for the trailing thirty consecutive trading days including the grant date) under the terms of our director compensation policy. This award vested in full on May 10, 2023, which was the day prior to the 2023 annual meeting of stockholders. We believe these equity grants serve to further align our directors’ interests with the interests of our stockholders. Our director compensation policy permits non-employee directors to make an election to be issued, in lieu of the cash portion of their annual service retainer, fully vested shares of our Common Stock. In 2023, the number of fully vested shares was determined by dividing $100,000 by the average of the closing price of our Common Stock for the trailing thirty consecutive trading days including the date such shares were granted. The Compensation Committee reviews the director compensation practices of our compensation peer group annually, as described under “Benchmarking” in the Compensation Discussion and Analysis, with the assistance of the Compensation Consultant. The Compensation Committee did not recommend any changes to our director compensation policy in 2023, as a result of the 2023 benchmarking analysis or otherwise.
Deferred Compensation Plan
| | Board of Directors Compensation |
Equity Ownership Guidelines
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | | Edward C. Bernard | 122,593(3) | 147,337(4) | 269,930 | | H. Paulett Eberhart | 142,500 | 147,337(4) | 289,837 | | William F. Glavin, Jr. | 120,093(3) | 147,337(4) | 267,430 | | Albert J. Ko | 137,500 | 188,087(5) | 325,587 | | Allison H. Mnookin | 135,000 | 147,337(4) | 282,337 | | Anne M. Mulcahy | 127,593(3) | 147,337 | 274,930 | | James S. Putnam | 247,593(3) | 147,337(4) | 394,930 | | Richard P. Schifter | 110,093(3) | 147,337(4) | 257,430 | | Corey E. Thomas | 120,093(3) | 147,337(4) | 267,430 |
Non-Employee Director Compensation Mix
Non-Employee Director Compensation Mix
Non-Employee Director Compensation Mix
| (1) The amounts shown in this column represent the aggregate grant date fair value of restricted stock awards or, in the case of non-employee directors who elected to defer receipt of the equity portion of the annual service retainer, deferred stock units granted to our non-employee directors in 2023 in connection with the equity portion of the annual service retainer. The aggregate grant date fair value of the restricted stock awards and deferred stock units, as determined under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, was determined by multiplying the number of shares underlying the award by $187.93, which was the closing price per share of our Common Stock on the grant date. For information regarding the number of shares of restricted stock and unvested deferred stock units held by each non-employee director as of December 31, 2023, see the table in footnote 2 below. The amounts shown in this column do not include the value of any fully vested shares of Common Stock or deferred stock units that certain of our non-employee directors elected to receive in lieu of the cash portion of the annual service retainer. In accordance with SEC rules, such amounts are shown in the column “Fees Earned or Paid in Cash.” Restricted stock carries the same voting and other dividend rights as shares outstanding. Deferred stock units are credited with dividend equivalents as and when dividends are paid, subject to any applicable vesting requirements associated with the award. |
Non-Employee Director Compensation Mix
| 30 | 2024 Proxy Statement |
Non-Employee Director Compensation Mix
| | Board of Directors Compensation |
Non-Employee Director Compensation Mix
| (2) The following table shows the aggregate number of shares of restricted stock and unvested and vested deferred stock units held by each of our non-employee directors as of December 31, 2023. All restricted stock awards and unvested deferred stock units reported in the table below will vest in full on May 8, 2024. |
Non-Employee Director Compensation Mix
| Name | Restricted Stock Awards (#) | Unvested Deferred Stock Units (#) | Vested Deferred Stock Units (#) | | Edward C. Bernard | — | 787 | 7,763 | | H. Paulett Eberhart | — | 787 | 7,313 | | William F. Glavin, Jr. | — | 787 | 20,443 | | Albert J. Ko | 784 | — | — | | Allison H. Mnookin | — | 787 | 4,726 | | Anne M. Mulcahy | 784 | — | — | | James S. Putnam | — | 787 | 13,016 | | Richard P. Schifter | — | 787 | 26,065 | | Corey E. Thomas | — | 787 | 11,013 |
Non-Employee Director Compensation Mix
| (3) This amount includes the value of fully vested shares of Common Stock or, as described below, deferred stock units that the director elected to receive in lieu of the cash portion of the director’s annual service retainer. The aggregate grant date fair value of these shares and deferred stock units, as determined under FASB ASC Topic 718, was determined by multiplying the number of shares underlying the award by $187.93, which represents the closing price per share of our Common Stock on the grant date. Each of Messrs. Bernard, Glavin, Schifter and Thomas delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the cash portion of the annual service retainer and instead receive deferred stock units of equivalent value. |
Non-Employee Director Compensation Mix
| (4) Each of Messrs. Bernard, Glavin, Putnam, Schifter and Thomas and Mses. Eberhart and Mnookin delivered a written deferral election under the Deferred Plan pursuant to which the director elected to defer receipt of the equity portion of his or her annual service retainer and instead receive deferred stock units of equivalent value. |
Non-Employee Director Compensation Mix
| (5) The amount shown in this column includes the prorated annual award of restricted stock granted to Mr. Ko on February 1, 2023. The aggregate grant date fair value of these shares, as determined under FASB ASC Topic 718, was determined by multiplying the number of shares underlying the award by $235.55, which represents the closing price per share of our Common Stock on the grant date. |
Non-Employee Director Compensation Mix
| 2024 Proxy Statement | 31 |
Non-Employee Director Compensation Mix
| | Compensation Discussion and Analysis |
Summary of 2023 Corporate Performance
Summary of 2023 Corporate Performance The following information is intended to provide additional context for the Compensation Committee’s assessment of the Company’s overall performance in 2023 for compensation-related purposes. As discussed below, the Compensation Committee established a bonus pool funding framework in February 2023 that assigned equal weighting to achievement of the Company’s 2023 financial performance targets and 2023 business goals (together, the “2023 Corporate Goals”). The Compensation Committee retained a limited amount of discretion to adjust bonus pool funding based on its assessment of key drivers of the Company’s performance. The Company delivered solid business and financial results in 2023. The Company’s total advisory and brokerage assets increased 22% year-over-year to reach a new high of $1.4 trillion as of December 31, 2023. The increase was driven by continued organic growth, complemented by higher equity markets. Total organic net new assets of $100.4 billion in 2023 translated to a 9% growth rate. Organic growth was driven by strength in both our traditional and new markets, as the Company made progress in enhancing its value proposition for advisors. Organic growth, combined with a favorable interest rate environment and expense discipline, led to solid financial performance. The Company’s gross profit increased 26% year-over-year to $4.0 billion for 2023. Core general and administrative expense (“Core G&A”) increased 15% from the prior year to $1.4 billion, which was within the Company’s target range for 2023. The gross profit and Core G&A results contributed to EBITDA of $2.0 billion and Adjusted EBITDA of $2.2 billion, which reflected year-over-year increases of 30% and 35%, respectively. Gross profit, Core G&A, EBITDA and Adjusted EBITDA are non-GAAP financial measures that are described under “Non-GAAP Financial Measures” in Appendix A. The Company’s share price appreciated 6% over the twelve-month period. For additional discussion and analysis of the Company’s 2023 financial performance, please refer to the Annual Report.
Summary of 2023 Corporate Performance
As discussed below, the Compensation Committee determined that the Company’s performance for 2023 met or exceeded each of the 2023 Corporate Goals, other than relative total shareholder return (“TSR”) results. As a result, the 2023 bonus pool was funded above the target level and the annual cash bonus awards to our employees were generally paid at target level, or above target level for high performing employees, including our NEOs. This approach is consistent with the Compensation Committee’s philosophy and past practice. Total advisory and brokerage assets, which reflect net new assets in addition to market movement, were $1.4 trillion as of December 31, 2023, a 22% increase from the prior year balance of $1.1 trillion. Total net new assets in 2023 were $104.1 billion.
($ in millions)
| In addition, we do not do the following: | | | ✘ | re-price stock options without stockholder approval; | | ✘ | permit hedging transactions or short sales by executives; | | ✘ | permit pledging or holding company stock in a margin account by executives; | | ✘ | enter into individual employment agreements; | | ✘ | provide excise tax gross-ups to executives; or | | ✘ | grant “spring-loaded” equity awards, which take advantage of material non-public information to enhance the value awarded to recipients. |
Components of Compensation
| ◾ | annual cash bonus awards; |
Components of Compensation
| ◾ | long-term equity incentive (“LTI”) awards; and |
Components of Compensation
| ◾ | severance and change-in-control benefits. |
Base Salary
In increasing our NEOs’ base salaries, the Compensation Committee considered the competitiveness and mix of each executive’s total compensation opportunity based on benchmarking data prepared by the Compensation Consultant. This benchmarking data included compensation data for comparable roles at relevant peer companies and other survey data, as described further in the “Benchmarking” section (“Benchmarking Data”). In each case, the Compensation Committee’s determination to increase the NEO’s base salary and its determination of the magnitude of such increase were made to more closely align such salary level with market levels on the basis of the Benchmarking Data and in consultation with the Compensation Consultant. In increasing Mr. Gates’s salary a second time in 2023, the Compensation Committee considered his responsibilities, tenure, performance and hire-away risk to better align with the Benchmarking Data. The 2023 salary compensation for all of our NEOs appears in the Summary Compensation Table that follows this CD&A.
Annual Cash Bonus Awards
Annual Cash Bonus Awards We provide annual cash bonus awards in order to tie a significant portion of the overall cash compensation of our senior executives, including our NEOs, to the achievement of annually established, key short-term corporate objectives and financial goals of the Company. See “Bonus Pool Funding Framework” and “2023 Business Goals Performance Evaluation” below for a description of these objectives and goals and our 2023 performance against them. The Compensation Committee believes that our NEOs, as key members of the Company’s leadership team, share responsibility for supporting the corporate and financial goals and performance of the Company. At the beginning of 2023, the Compensation Committee established:
Annual Cash Bonus Awards
| ◾ | target award amounts for each NEO; and |
Annual Cash Bonus Awards
| ◾ | a bonus pool funding framework that provided a potential range of bonus pool funding based on the level of achievement of the Company’s 2023 Corporate Goals, which were approved by the Board and consisted of both financial and business goals. |
Bonus Pool Funding Framework
Bonus Pool Funding Framework In establishing the 2023 bonus pool funding framework at the beginning of 2023, the Compensation Committee maintained the same general approach to assessing corporate performance that it has used since 2018. In this approach, bonus pool funding is determined by the Compensation Committee based on the Company’s achievement of pre-established financial and business goals, with the Compensation Committee reserving limited discretion to adjust funding based on its assessments of key drivers of the Company’s performance.
Bonus Pool Funding Framework
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Bonus Pool Funding Framework
| | Compensation Discussion and Analysis |
Bonus Pool Funding Framework
Consistent with its historical practice, the Compensation Committee selected Adjusted EBITDA as the primary metric to evaluate the Company’s financial performance in 2023. In addition, the Compensation Committee again selected relative TSR as a secondary metric to evaluate the Company’s financial performance in 2023, and determined that the Company’s TSR for 2023 would be evaluated according to its percentile rank among a comparator group consisting of companies in the (1) Asset Management & Custody Banks and (2) Investment Banking & Brokerage Sub-Industry classifications of the Standard & Poor’s 1500 Capital Markets Industry classification (the “Comparator Group”), the same comparator group used in 2022. In setting these financial performance metrics, the Compensation Committee believed that Adjusted EBITDA continued to serve as a useful metric in assessing the Company’s earnings from operations because it excludes certain items that are not representative of the performance of the Company’s core business, such as share-based compensation and the net impact of certain acquisitions. The Compensation Committee introduced relative TSR as a secondary metric in 2021 because it believed it is useful for assessing the Company’s financial performance relative to companies facing a similar level of macroeconomic sensitivity. In addition to financial performance, the Compensation Committee assessed the following four 2023 business goals (the “2023 Business Goals”) under the bonus pool funding framework, which were approved by the Board of Directors at the beginning of the year along with underlying initiatives and quantitative key results:
Bonus Pool Funding Framework
| ◾ | Empower advisors to create the practice that best fits their aspirations and client needs, and be the destination and strategic partner of choice for enterprises delivering wealth management (the “Advisor & Enterprise Offering Goal”); |
Bonus Pool Funding Framework
| ◾ | Provide an industry-leading integrated service and technology platform, and deliver expanded capabilities and products for an enhanced client and investor experience (the “Core Foundation & Value Expansion Goal”); |
Bonus Pool Funding Framework
| ◾ | Deepen participation with clients through services that help them run thriving businesses and deliver enhanced advice (the “Business & Advice Services Goal”); and |
Bonus Pool Funding Framework
| ◾ | Empower the Company to innovate, collaborate and thrive as we deliver on the promises we make to our clients (the “Play Enablement Goal”). |
Bonus Pool Funding Framework
To determine the bonus pool funding for 2023, the Compensation Committee assigned the following baseline weightings, which reflected equal weighting of the achievement of the Company’s 2023 financial performance goals, on the one hand, and 2023 Business Goals, on the other:
Baseline Criteria Weightings
Baseline Criteria Weightings The Compensation Committee assigns baseline criteria weightings assuming performance at target, with the actual amount funded with respect to each component adjusted up or down depending on performance. Target performance as it related collectively to the 2023 Corporate Goals would have yielded a 2023 bonus pool funding of $111 million, subject to the discretion of the Compensation Committee to increase or decrease the bonus pool funding by up to 20%. Financial Performance Goals (40% baseline weighting). The Compensation Committee established the following baseline weights for the Company’s two financial performance goals:
Baseline Criteria Weightings
| Goal | Baseline Weight | | Adjusted EBITDA Goal | 30% | | Relative TSR Goal | 10% | | Total Financial Performance | 40% |
Baseline Criteria Weightings
For both financial performance goals, the range of potential bonus pool funding was scaled such that performance above target would yield a payout proportionately greater than the baseline and performance below target would yield a payout proportionately below the baseline. This approach was intended to ensure that the Company’s 2023 financial performance was a primary driver in the bonus pool funding framework.
Baseline Criteria Weightings
| Percentage of Target | Percent Payout | | 120% | 150% | | 100% | 100% | | 80% | 50% |
Baseline Criteria Weightings
| Relative TSR Percentile Rank (based on Comparator Group) | Percent Payout | | 80th | 150% | | 50th | 100% | | 25th | 50% |
Baseline Criteria Weightings
| Performance Rating | Percent Payout | | Exceeds | 150% | | Meets | 100% | | Partially meets | 75% |
Baseline Criteria Weightings
The collective level of achievement of the 2023 Business Goals resulted in a funding level of 46% for the 2023 Business Goals component of the 2023 bonus pool funding framework, which was six percentage points above its baseline weighting of 40%. Committee Discretion (20% baseline weighting). In establishing the bonus pool funding framework in February 2023, the Compensation Committee
Baseline Criteria Weightings
discussed the appropriate level of discretion, if any, to be retained by the Compensation Committee to adjust bonus pool funding up or down based on its assessments of key drivers of performance and other considerations not reflected in the 2023 Corporate Goals. Consistent with practice in prior years, the 2023 bonus pool funding framework enabled the Committee to take into account the following considerations in assessing the achievement of the Company’s financial performance and its business goals:
Baseline Criteria Weightings
For 2023, the collective level of achievement of the Company’s financial and business goals yielded a total bonus pool funding of approximately $116 million. The Compensation Committee declined to exercise its discretion to increase or decrease the level of 2023 bonus pool funding. This $116 million bonus pool funding was 5.3% of Adjusted EBITDA in 2023, compared to bonus pool funding that was 6.1% of Adjusted EBITDA in 2022. Bonuses to our NEOs, other executive officers and other employees of the Company were paid from this pool.
Individual Cash Bonus Award Determinations
Individual Cash Bonus Award Determinations The Compensation Committee evaluates each NEO’s contribution to the Company’s overall performance, as well as the NEO’s individual performance with respect to Company goals under the bonus program. In determining whether and to what extent bonuses are paid, the Compensation Committee takes into account discussions with management and the Compensation Consultant. The Compensation Committee also reviews management’s proposed framework for distribution of the annual bonus pool by job level, which is designed to scale bonus payouts for senior executives up or down based on Company performance to a greater extent than other employees’ bonuses are scaled up or down. As a result, bonus payout percentage in 2023 for job levels of managing director and above, which includes our NEOs, was designed to be higher than our bonus pool funding percentage overall. For additional information, including the assessment process for our chief executive officer, please see “How Compensation Decisions Were Made” in the CD&A. The Compensation Committee has discretion to pay bonuses above or below the established targets based upon its assessment of each NEO’s contributions, performance and potential, and other considerations such as internal pay equity. Our chief financial officer provided updates on the Company’s actual performance compared to the 2023 Corporate Goals at each quarterly meeting of the Compensation Committee, and he also presented updates at a meeting of the Compensation Committee in January 2024. In February 2024, the Compensation Committee reviewed the individual performance in 2023 of each of our NEOs, including their respective contributions to the Company’s overall performance against the 2023 Corporate Goals. The Compensation Consultant participated in each of the meetings. Based primarily on these assessments, the Compensation Committee exercised its discretion to award annual cash bonuses to Messrs. Arnold, Audette, Enyedi, Gates and Steinmeier above their respective target award amounts for 2023. In making its individual determinations, the Compensation Committee considered the collective level of achievement of the Company’s financial and business goals and each such NEO’s individual performance, including against applicable 2023 Corporate Goals:
Individual Cash Bonus Award Determinations
| ◾ | Mr. Arnold’s leadership of the Company in delivering solid core business results, an enhanced operating model and new business capabilities aligned to the Company’s long-term strategic vision and cultural evolution; |
Individual Cash Bonus Award Determinations
| ◾ | Mr. Audette’s success as chief financial officer in addressing opportunities and challenges in the market to drive strong financial results, as well as progress in improving the efficacy and efficiency of the Company’s operations, risk and compliance functions following his appointment in 2023 as head of business operations; |
Individual Cash Bonus Award Determinations
| ◾ | Mr. Enyedi’s leadership in implementing our client success operating model, which consolidated several business functions to provide a more integrated and consistent client experience, as reflected in increased net promoter scores and record-low advisor attrition; |
Individual Cash Bonus Award Determinations
| ◾ | Mr. Gates’s leadership in advancing the competitive differentiation of our technology platform, including progress during 2023 with regard to platform availability, resiliency and scalability, which contributed to an enhanced client and investor experience in 2023; and |
Individual Cash Bonus Award Determinations
| ◾ | Mr. Steinmeier’s contributions to the development and execution of the Company’s strategy, including his leadership in delivering our organic growth results, horizontal expansion of our affiliation models and development of our large financial institution channel, including entry into a strategic relationship agreement with Prudential Financial, Inc. in 2023. |
Individual Cash Bonus Award Determinations
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Individual Cash Bonus Award Determinations
| | Compensation Discussion and Analysis |
Individual Cash Bonus Award Determinations
The table and chart below show the target annual cash bonus award opportunity established for Messrs. Arnold, Audette and Enyedi at the beginning of 2023, and for Messrs. Steinmeier and Gates in March and April 2023, respectively, following the Compensation Committee’s consideration of their responsibilities, tenure, performance and hire-away risk in light of, and to better align with, the Benchmarking Data, as well as the actual cash bonus awarded to each of our NEOs for 2023 (paid on March 8, 2024), as determined by the Compensation Committee.
Individual Cash Bonus Award Determinations
| NEO | Target Award | Target Award as a Percentage of Base Salary | Cash Bonus | Cash Bonus Awarded as a Percentage of Base Salary | Cash Bonus Awarded as a Percentage of Target Award | | Dan H. Arnold | $3,325,000 | 350% | $4,000,000 | 421% | 120% | | Matthew J. Audette | $1,165,500 | 185% | $1,375,000 | 218% | 118% | | Matthew Enyedi | $650,000 | 130% | $785,000 | 157% | 121% | | Greg Gates | $1,164,189 | 212% | $1,375,000 | 250% | 118% | | Richard Steinmeier | $1,350,000 | 225% | $1,675,000 | 279% | 124% |
Annual Cash Bonus Awards
Annual Cash Bonus Awards
Long-Term Equity Incentive Awards
Long-Term Equity Incentive Awards The purposes of our LTI program are to promote the achievement of corporate goals that drive long-term stockholder value, to align the interests of our executive officers and other key employees with those of our stakeholders and to retain key executives. Our LTI program is critical to our efforts to hire and retain the best talent in the financial services industry. At the beginning of each year, the Compensation Committee establishes annual LTI award targets for executive officers, including our NEOs, after reviewing the recommendations of our chief executive officer (other than for himself) and additional information, including Benchmarking Data. Annual target award amounts are based on each executive’s position, including job responsibilities, and base salary, after consideration of Benchmarking Data and prior awards to the executive. After the conclusion of the year, the Compensation Committee determines the actual amounts of the LTI award to be granted to each of our NEOs. Because the value of the LTI awards depends on the Company’s longer-term performance, LTI awards are an element of our executive retention strategy. In determining the LTI award amounts, the Compensation Committee takes into account discussions with management and the Compensation Consultant, and an NEO’s actual LTI award may vary from the target amount previously established for that executive by the Compensation Committee. In accordance with SEC rules, the equity awards shown in our Summary Compensation Table and Grants of Plan-Based Awards Table reflect LTI awards that were granted during the 2023 calendar year. Accordingly, the awards shown in such tables include the LTI awards granted in February 2023 to each of our NEOs, as well as an additional award to Mr. Gates in June 2023, which we describe below, but do not include the LTI awards granted in February 2024, which we also describe below.
Long-Term Equity Incentive Awards
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Long-Term Equity Incentive Awards
| | Compensation Discussion and Analysis |
LTI Awards in 2023
LTI Awards in 2023 In February 2023, the Compensation Committee approved annual equity grants to our NEOs. These awards were based on each NEO’s 2022 LTI award target, as well as their individual performance during 2022 and over time, leadership responsibilities and potential, as well as retention considerations. The annual equity grant to Mr. Arnold consisted of 70% PSUs and 30% time-based restricted stock units (“RSUs”), and annual equity grants to Messrs. Audette, Enyedi, Gates and Steinmeier consisted of 60% PSUs and 40% RSUs (such percentages in each case determined based on grant date value, assuming target performance for PSUs). We believe that this blended approach provides appropriate incentives for long-term stockholder value creation while also serving as a retention tool for the Company. We also believe that the use of PSUs aligns with our pay-for-performance principles and puts appropriate focus on long-term alignment and pay relative both to market peers and stockholder returns. In addition, Mr. Gates received an LTI award in June 2023, which consisted of 100% RSUs (the “Gates One-Time RSU Award”). The Compensation Committee determined that it was appropriate to grant this award to Mr. Gates in light of the Benchmarking Data, the highly competitive market in which we operate, his hire-away risk and the importance of Mr. Gates’s role and responsibilities within, and the importance of his remaining with, the Company. In determining the size of the award, the Compensation Committee sought advice from the Compensation Consultant. 2023 Performance Stock Unit Awards. The PSUs granted in 2023 are eligible to become earned PSUs based on the Company’s TSR relative to the Comparator Group over a three-year performance period ending on February 14, 2026 (the “Performance Period”). The number of earned PSUs is based on the percentile ranking of the Company’s TSR within the Comparator Group’s TSR results. For the PSUs granted in 2023, the Compensation Committee continued to use the Comparator Group described above under “Bonus Pool Funding Framework.” Based on the Company’s relative performance, the number of earned PSUs can range between 0% (below threshold) and 200% (maximum) of the target award as shown below:
LTI Awards in 2023
| Performance Level | 3-Year Relative TSR Percentile Rank (based on Comparator Group) | Common Shares Earned (as a % of Target) | | Maximum | 80th | 200% | | Target | 50th | 100% | | Threshold | 25th | 50% | | Below Threshold | Below 25th | 0% |
LTI Awards in 2023
If the TSR Percentile Rank is greater than the 25th but less than the 80th percentile, the number of earned PSUs will be interpolated on a straight-line basis between performance levels. The beginning and ending share price for TSR calculations will be based on the average closing price of our Common Stock for the trailing 30 consecutive trading days including each of the beginning and end dates of the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee certifies achievement of the performance criteria associated with the award. The number of earned PSUs is capped at 100% of the target award if the Company’s TSR is negative over the Performance Period. In granting PSUs in 2023, the Compensation Committee calculated the number of shares underlying each award using a price per share equal to the average closing price of our Common Stock for the trailing 30 consecutive trading days including the grant date. This approach was intended to mitigate the effect of stock price volatility. 2023 Restricted Stock Unit Awards. Each RSU granted in 2023 entitles the grantee to receive one share of our Common Stock upon vesting. RSUs granted to our NEOs vest over time in three equal annual installments. In granting RSUs in 2023, the Compensation Committee calculated the number of shares underlying each award using a price per share equal to the average closing price of our Common Stock for the trailing 30 consecutive trading days including the grant date, consistent with the approach for PSUs.
LTI Awards in 2024
LTI Awards in 2024 In February 2023, the Compensation Committee established annual LTI award targets for each of our NEOs that ranged from 190% (for Mr. Enyedi) to 1000% (for Mr. Arnold) of base salary. In setting each NEO’s LTI award target, the Compensation Committee took into account their position,
LTI Awards in 2024
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LTI Awards in 2024
| | Compensation Discussion and Analysis |
LTI Awards in 2024
responsibilities and base salary; the Benchmarking Data; the recommendations of the chief executive officer (other than for himself) and the Compensation Consultant; and their potential contributions to the execution of the Company’s overall performance goals. In March 2023, the Compensation Committee approved an increase in the LTI award target for 2023 for Mr. Steinmeier (from 235% to 260% of base salary), and in April 2023, the Compensation Committee approved an increase in the LTI award target for 2023 for Mr. Gates (from 200% to 260% of base salary). In both cases, the Compensation Committee approved the changes based on its consideration of the executives’ responsibilities, tenure, performance and hire-away risk in light of, and to better align with, the Benchmarking Data. In February 2024, our chief executive officer and chief human capital officer met with the Compensation Committee and discussed the LTI target award previously set by the Compensation Committee for each NEO, as well as each NEO’s individual performance both during 2023 and over time, leadership responsibilities and potential, and retention considerations (with the chief executive officer and the chief human capital officer absent during discussions affecting them personally). The Compensation Consultant participated in the meeting. Based on these considerations, as well as those listed under “Individual Cash Bonus Award Determinations,” for 2023 the Compensation Committee exercised its discretion to award LTI above the target award amount for Messrs. Arnold, Audette, Enyedi and Steinmeier and at the target award amount for Mr. Gates. The table and chart below show the target LTI award established for each of our NEOs for 2023, as well as the actual LTI award granted to our NEOs in February 2024 for 2023 performance, in each case as determined by the Compensation Committee:
LTI Awards in 2024
| Executive | 2023 Annual Base Salary | LTI Target % of Base Salary | LTI Target $ | LTI $ Granted(1) | LTI as % of Target | | Dan H. Arnold | $950,000 | 1,000% | $9,500,000 | $10,450,000 | 110% | | Matthew J. Audette | $630,000 | 225% | $1,417,500 | $1,450,000 | 102% | | Matthew Enyedi | $500,000 | 190% | $950,000 | $1,100,000 | 116% | | Greg Gates | $550,000 | 260% | $1,430,000 | $1,430,000(2) | 100% | | Richard Steinmeier | $600,000 | 260% | $1,560,000 | $1,600,000 | 103% |
LTI Awards in 2024
| (1) These LTI awards were granted on February 25, 2024 for services provided during fiscal year 2023. The number of shares underlying each award was calculated using a price per share equal to the average closing price of our Common Stock for the trailing 30 consecutive trading days including the grant date. Mr. Arnold received 70% of his LTI award as PSUs and 30% as RSUs. The other NEOs received 60% of their awards as PSUs and 40% as RSUs. PSUs are eligible to become earned and vested based on the achievement of performance criteria over a three-year period, as described above. RSUs are scheduled to vest in equal annual installments over a three-year period. |
LTI Awards in 2024
| (2) This amount does not include the Gates One-Time RSU Award described on page 42. |
Long-Term Incentive Awards
Long-Term Incentive Awards
($ in thousands)
For the PSUs granted in 2024, the Comparator Group, payout range and performance period length remained the same as the PSUs granted in 2023. Beginning with PSUs granted in 2022, the start of the three-year performance period shifted from January 1 to February 15. The rationale for this shift was to more closely align the start date of the performance period with the grant date of the awards, in order to reduce potential variance between the award value approved by the Compensation Committee and the grant date fair value, which is the value assigned to the PSUs for purposes of the Summary Compensation Table. The performance period for the PSUs granted in 2024 will end on February 14, 2027. Because the NEO LTI awards described in the table above were granted in 2024, they are not reflected in our Summary Compensation Table or Grants of Plan-Based Awards Table.
Payout of 2021 PSUs
Payout of 2021 PSUs In February 2021, the Compensation Committee granted PSUs with terms substantially similar to the 2024 PSUs described above. Each of Messrs. Arnold, Audette, Enyedi, Gates and Steinmeier received an award of PSUs in 2021, the Performance Period for which ended on December 31, 2023. The Company’s TSR during this Performance Period ranked in the 100th percentile of the Comparator Group, which resulted in a number of earned PSUs of 200% of the target award for each of Messrs. Arnold, Audette, Enyedi, Gates and Steinmeier. The earned PSUs vested on February 25, 2024.
Effect of Termination of Employment and Retirement on Equity Awards
Effect of Termination of Employment and Retirement on Equity Awards Unvested stock options, RSUs and PSUs generally are forfeited if an NEO voluntarily leaves the Company other than upon retirement. In the event of retirement, stock options and RSUs granted before 2023 will become fully vested, and RSUs granted in 2023 or after will remain outstanding and continue to vest according to their original vesting schedule, subject to the terms of the underlying award agreement and compliance with applicable non-competition and other restrictive covenants. Stock options will generally remain exercisable for a period of two years following retirement and, except in the case of a Designated Retirement (as defined below), PSUs will generally remain outstanding and eligible to become earned PSUs based on relative TSR performance at the end of the performance period but credited on a pro rata basis (based on the number of days that have elapsed between the start of the applicable performance period associated with such award and the retirement date). “Retirement” means the termination of employment other than for cause following either:
Effect of Termination of Employment and Retirement on Equity Awards
| ◾ | attainment of age 65 and completion of five years of continuous service with the Company; or |
Effect of Termination of Employment and Retirement on Equity Awards
| ◾ | attainment of age 55 and completion of ten years of continuous service with the Company. |
Effect of Termination of Employment and Retirement on Equity Awards
In the event of a Designated Retirement (defined below), PSUs granted in 2024 or after will generally remain outstanding and eligible to become earned PSUs based on the PSU relative TSR performance at the end of the performance period but will not be subject to the proration described above. “Designated Retirement” means the termination of employment other than for cause following the attainment of age 60 and completion of ten years of continuous service with the Company. Mr. Arnold has attained the age of 55 and completed more than ten years of continuous service with the Company and, therefore, is retirement eligible. However, Mr. Arnold has not attained the age of 60 and therefore does not qualify for Designated Retirement. No other NEO was retirement-eligible or qualified for Designated Retirement as of December 31, 2023.
Severance and Change-in-Control Benefits
Severance and Change-in-Control Benefits Our Executive Severance Plan enables us to offer protection to our NEOs in the event their employment with us is involuntarily terminated by the Company or is terminated for good reason by the executive (each, a “qualifying termination”). We believe that providing these benefits helps us compete for executive talent and may help us retain current key employees. All of our NEOs are eligible for severance benefits under the Executive Severance Plan. For more information please refer to the discussion under “Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023.”
Role of Compensation Consultant
Role of Compensation Consultant The Compensation Committee has the authority to engage its own advisors to assist it in carrying out its responsibilities. The Compensation Committee engaged the Compensation Consultant to advise it on compensation matters and provide experiential guidance on what is considered fair and competitive practice in our industry, primarily with respect to the compensation of our executive officers, and also with respect to director compensation.
Role of Compensation Consultant
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Role of Compensation Consultant
| | Compensation Discussion and Analysis |
Role of Compensation Consultant
In 2023, the Compensation Consultant worked directly with the Compensation Committee to develop recommendations for compensation levels for our executive officers and non-employee directors. In addition, the Compensation Consultant provided data and other information regarding competitive compensation programs and policies, as well as information concerning compensation plan design and regulatory developments. Finally, the Compensation Consultant conducted a risk assessment of the Company’s executive compensation policies and practices. The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to SEC rules and has determined that the work provided by the Compensation Consultant did not raise a conflict of interest.
Benchmarking
Benchmarking We believe that a competitive pay package is a critical tool in our efforts to attract and retain qualified executives. The Compensation Committee’s goal is to ensure that we continue to measure our compensation practices against organizations that compete with us for key executives, that are considered important benchmarks in our industry and that are comparable in size and scope to our business. During 2023, the Compensation Committee engaged the Compensation Consultant to prepare analyses to benchmark and assess our overall compensation program and practices against marketplace standards. The Compensation Committee’s purpose in requesting these analyses was to be provided with general market perspective on executive officer and director pay levels and compensation design practices, and to ensure that the Company’s practices are competitive with our peers. Although the Compensation Committee believes the analyses provide a representative view of the market in which the Company competes for talent, the analyses are among several considerations used by the Compensation Committee in assessing executive and director compensation. Working with the Compensation Consultant, the Compensation Committee reviewed 2023 total target compensation for Messrs. Arnold and Audette against the compensation levels of chief executive officers and chief financial officers of companies within our peer group, respectively, and for Messrs. Enyedi, Gates and Steinmeier against the compensation levels from Equilar’s Executive Compensation survey covering financial services and investment services companies. In the case of Messrs. Gates and Steinmeier, the Compensation Committee also considered as supplemental data compensation levels of named executive officers other than chief executive officers and chief financial officers of companies within our peer group. The companies within our peer group used in the review of 2022 year-end compensation decision-making and in setting 2023 total target compensation consisted of:
Benchmarking
| ◾ | Ameriprise Financial, Inc. (AMP) | ◾ | Northern Trust Corp. (NTRS) | | ◾ | Bread Financial Holdings, Inc. (BFH) | ◾ | Raymond James Financial, Inc. (RJF) | | ◾ | Broadridge Financial Solutions, Inc. (BR) | ◾ | SEI Investments Company (SEIC) | | ◾ | Franklin Resources, Inc. (BEN) | ◾ | SS&C Technologies Holdings, Inc. (SSNC) | | ◾ | Interactive Brokers Group, Inc. (IBKR) | ◾ | Stifel Financial Corp. (SF) | | ◾ | Invesco Ltd. (IVZ) | ◾ | The Charles Schwab Corporation (SCHW) | | ◾ | Nasdaq, Inc. (NDAQ) | ◾ | The Western Union Company (WU) |
Benchmarking
The chart below compares the 2022 revenues for and market capitalizations as of December 31, 2022 of the Company and the median of the peer group described immediately above (in billions):
Benchmarking
| | Revenue | Market Capitalization | | Peer Group (Median) | $5.9 | $13.2 | | LPL Financial Holdings Inc. | $8.6 | $17.1 |
Benchmarking
In late 2023, with the assistance of the Compensation Consultant, the Compensation Committee conducted a focused review of the size and composition of the Company’s peer group in order to assist with 2023 year-end compensation decision-making and the review of 2024 total target compensation. In particular, the Compensation Committee considered the continued appropriateness of the peer companies and additional candidates for potential inclusion in the peer group, particularly in light of the Company’s talent acquisition strategies, which continuously evolve in response to market dynamics. Following this assessment, the Compensation Committee determined that no changes were needed to the Company’s peer group.
Benchmarking
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Benchmarking
| | Compensation Discussion and Analysis |
Benchmarking
As a result, the companies within our peer group used for 2023 year-end compensation decision-making and in the review of 2024 total target compensation consisted of the same peer group, listed in the chart above, that was used for 2022 year-end compensation decision-making and in the review of 2023 total target compensation. The chart below compares the 2023 revenues for and market capitalization as of December 31, 2023 of the Company and the median of the peer group described immediately above (in billions):
Benchmarking
| | Revenue | Market Capitalization | | Peer Group (Median) | $5.9 | $14.9 | | LPL Financial Holdings Inc. | $10.1 | $17.2 |
No Employment Agreements
No Employment Agreements We do not have individual employment agreements with any of our executive officers, including our NEOs, although we have a practice of entering into offer letters with new executive officers that generally lay out the expected terms and conditions of their employment. Our executives serve at the will of the Board, and their rights to severance benefits following a termination of employment, if any, are determined under our Executive Severance Plan, which applies uniformly to executives at the managing director level and above.
Executive Severance Plan
Executive Severance Plan Under our Executive Severance Plan, participants who experience a qualifying termination of employment are eligible to receive continued payment of base salary for one year, an amount equal to the most recent annual bonus paid or payable to the executive and a subsidy of COBRA continuation benefits for one year. Additional benefits, including possible accelerated vesting of equity-based awards, are described elsewhere in this proxy statement under “Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023.”
Compensation of Named Executive Officers
Compensation of Named Executive Officers Except where otherwise noted, the equity awards shown in the Summary Compensation Table and Grants of Plan-Based Awards Table for the fiscal year 2023 were granted in February 2023 in respect of services performed in 2022. Please refer to the Compensation Discussion and Analysis included in last year’s proxy statement for a discussion of these awards. Equity awards in respect of services performed in 2023 that were granted in 2024 do not appear in the Summary Compensation Table or Grants of Plan-Based Awards Table in accordance with SEC rules. Please refer to the Compensation Discussion and Analysis in this proxy statement for a discussion of these awards. The tables in the following sections of this proxy statement provide information required by the SEC regarding compensation paid to or earned by our NEOs. The footnotes to these tables provide important information to explain the values presented in the tables and are an important part of our disclosures.
Summary Compensation Table
Summary Compensation Table The following table sets forth information for our NEOs concerning the total compensation for the years ended December 31, 2023, 2022 and 2021, as applicable to such NEO (or such shorter period of the NEO’s service):
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | | Dan H. Arnold President and Chief Executive Officer | 2023 | 946,154(4) | 11,901,699 | 4,000,000 | 89,937 | 16,937,790 | | | 2022 | 920,096(5) | 8,906,441 | 3,885,000 | 38,853 | 13,750,390 | | | 2021 | 892,308(6) | 8,569,310 | 3,375,000 | 39,250 | 12,875,868 | | Matthew J. Audette Chief Financial Officer and Head of Business Operations | 2023 | 625,385(7) | 1,319,013 | 1,375,000 | 77,280 | 3,396,678 | | | 2022 | 600,000 | 1,315,344 | 1,500,000 | 30,375 | 3,445,719 | | | 2021 | 600,000 | 1,582,270 | 1,365,000 | 37,122 | 3,584,392 | | Matthew Enyedi Managing Director, Client Success | 2023 | 492,308(8) | 1,102,237 | 785,000 | 75,510 | 2,455,055 | | Greg Gates Managing Director, Chief Technology and Information Officer | 2023 | 524,039(9) | 1,435,139(12) | 1,375,000 | 55,984 | 3,390,162 | | Richard Steinmeier Managing Director, Divisional President, Business Strategy and Growth | 2023 | 592,308(10) | 1,381,540 | 1,675,000 | 80,518 | 3,729,366 | | | 2022 | 540,192(11) | 1,440,671 | 1,300,000 | 32,751 | 3,313,614 | | | 2021 | 500,000 | 1,788,720 | 1,280,000 | 28,384 | 3,597,104 |
Summary Compensation Table
| (1) Represents the aggregate grant date fair value of PSUs and RSUs, in each case computed in accordance with FASB ASC Topic 718 and, in the case of PSUs, based on the probable outcome of the performance conditions associated with such awards on the grant date. The aggregate grant date fair value of RSUs was determined based on the closing price of our Common Stock on the grant date (or, if the grant date was not a trading day, the closing price on the trading day that immediately precedes the grant date), discounted to reflect the absence of dividend rights in connection with such awards. The aggregate grant date fair value of PSUs is estimated using a Monte-Carlo simulation model as of the date of grant. Please see the heading “Share-Based Compensation” in Note 2 — Summary of Significant Accounting Policies, to our consolidated financial statements filed with our annual reports on Form 10-K for the years ended December 31, 2023, 2022 and 2021. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The table below shows the grant date fair value of PSU awards granted in 2023, 2022 and 2021 assuming target and maximum levels of performance are achieved (amounts under the “Stock Awards” column represent the aggregate grant date fair value of PSUs based on the probable outcome of performance conditions, which for each of 2023, 2022 and 2021 assumed target level of performance was achieved). |
Summary Compensation Table
| 2024 Proxy Statement | 51 |
Summary Compensation Table
| | Compensation of Named Executive Officers |
Summary Compensation Table
| | 2023 | | 2022 | | 2021 | | | Name | Target ($) | Maximum ($) | Target ($) | Maximum ($) | Target ($) | Maximum ($) | | Dan H. Arnold | 9,051,931 | 18,103,862 | 6,783,740 | 13,567,481 | 6,656,056 | 13,312,112 | | Matthew J. Audette | 885,406 | 1,770,812 | 884,664 | 1,769,328 | 1,093,412 | 2,186,824 | | Matthew Enyedi | 739,837 | 1,479,674 | | | | | | Greg Gates | 763,488 | 1,526,976 | | | | | | Richard Steinmeier | 927,378 | 1,854,756 | 969,000 | 1,938,000 | 1,236,014 | 2,472,028 |
Summary Compensation Table
| (2) Represents the dollar value of annual cash bonus awards earned by each NEO for the relevant year. |
Summary Compensation Table
| (3) See “All Other Compensation” table below for additional information. |
Summary Compensation Table
| (4) Mr. Arnold received an increase in base salary from $925,000 to $950,000 effective on February 13, 2023. |
Summary Compensation Table
| (5) Mr. Arnold received an increase in base salary from $900,000 to $925,000 effective on March 1, 2022. |
Summary Compensation Table
| (6) Mr. Arnold received an increase in base salary from $850,000 to $900,000 effective on February 14, 2021. |
Summary Compensation Table
| (7) Mr. Audette received an increase in base salary from $600,000 to $630,000 effective on February 13, 2023. |
Summary Compensation Table
| (8) Mr. Enyedi received an increase in base salary from $450,000 to $500,000 effective on February 13, 2023. |
Summary Compensation Table
| (9) Mr. Gates received an increase in base salary from $450,000 to $500,000 effective on February 13, 2023 and from $500,000 to $550,000 effective on May 1, 2023. |
Summary Compensation Table
| (10) Mr. Steinmeier received an increase in base salary from $550,000 to $600,000 effective on February 13, 2023. |
Summary Compensation Table
| (11) Mr. Steinmeier received an increase in base salary from $500,000 to $550,000 effective on March 1, 2022. |
Summary Compensation Table
| (12) Includes a one-time grant of 1,532 RSUs on June 12, 2023, which is further described on page 42 as the Gates One-Time RSU Award. |
2023 Grants of Plan-Based Awards
2023 Grants of Plan-Based Awards The following table provides additional information about non-equity and equity-based awards granted to our NEOs during the year ended December 31, 2023:
2023 Grants of Plan-Based Awards
| Name | Approval Date | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock ($)(4) | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Dan H. Arnold | | | | 3,325,000 | | | | | | | | | 2/6/23 | 2/25/2023 | | | | | | | 11,646 | 2,849,768 | | | 2/6/23 | 2/25/2023 | | | | 13,587 | 27,174 | 54,348 | | 9,051,931 | | Matthew J. Audette | | | | 1,165,500 | | | | | | | | | 2/6/23 | 2/25/2023 | | | | | | | 1,772 | 433,607 | | | 2/6/23 | 2/25/2023 | | | | 1,329 | 2,658 | 5,316 | | 885,406 | | Matthew Enyedi | | | | 650,000 | | | | | | | | | 2/6/23 | 2/25/2023 | | | | | | | 1,481 | 362,400 | | | 2/6/23 | 2/25/2023 | | | | 1,110 | 2,221 | 4,442 | | 739,837 | | Greg Gates | | | | 1,164,189 | | | | | | | | | 2/6/23 | 2/25/2023 | | | | | | | 1,528 | 373,901 | | | 2/6/23 | 2/25/2023 | | | | 1,146 | 2,292 | 4,584 | | 763,488 | | | 6/7/23 | 6/12/2023 | | | | | | | 1,532 | 297,750 | | Richard Steinmeier | | | | 1,350,000 | | | | | | | | | 2/6/23 | 2/25/2023 | | | | | | | 1,856 | 454,162 | | | 2/6/23 | 2/25/2023 | | | | 1,392 | 2,784 | 5,568 | | 927,378 |
2023 Grants of Plan-Based Awards
| (1) Represents the target annual cash bonus award opportunity established for each NEO in 2023. For information about the cash bonuses actually awarded to each NEO for 2023 (paid on March 8, 2024), please see “Individual Cash Bonus Award Determinations” in the CD&A and footnote 2 to the Summary Compensation Table above. |
2023 Grants of Plan-Based Awards
| (2) Represents the number of threshold, target and maximum potential future payouts under the PSUs awarded under our 2021 Plan. PSUs are eligible to become earned PSUs based on the Company’s TSR relative to the TSR of the Comparator Group (as defined above) over the Performance Period (as defined above). The number of PSUs that is earned is determined based on the Company’s relative ranking between the 25th and the 80th percentiles of the Comparator Group’s TSR results. Amounts in the threshold column (50% of the target award) reflect the number of PSUs that would be earned if threshold performance were achieved (a TSR percentile rank at 25%); amounts in the target column (100% of the target award) reflect the number of PSUs that would be earned if target performance were achieved (a TSR percentile rank at 50%); and amounts in the maximum column (200% of the target award) reflect the number of PSUs that would be earned if maximum performance were achieved (a TSR percentile rank at or above 80%). The number of PSUs earned between threshold, target and maximum performance levels is interpolated on a straight-line basis between performance levels. No PSUs will be earned if performance is below the threshold level. The number of earned PSUs is capped at 100% of the target award if the Company’s TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee determines the level of achievement of the performance criteria associated with the award and the number of PSUs that have become earned under the award agreement. |
2023 Grants of Plan-Based Awards
| (3) Represents the number of RSUs awarded under our 2021 Plan. RSUs are scheduled to vest over a three-year period in equal tranches, with the first tranche scheduled to vest on the first anniversary of the grant date. |
2023 Grants of Plan-Based Awards
| (4) Represents the grant date fair value of PSUs and RSUs, in each case computed in accordance with FASB ASC Topic 718, and in the case of PSUs, based on the probable outcome of the performance conditions associated with such awards on the grant date. The aggregate grant date fair value of RSUs was determined based on the closing price of our Common Stock on the grant date (or, if the grant date was not a trading day, the closing price on the trading day that immediately precedes the grant date), discounted to reflect the absence of dividend rights in connection with such awards. See footnote 1 to the Summary Compensation Table above. |
2023 Grants of Plan-Based Awards
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2023 Grants of Plan-Based Awards
| | Compensation of Named Executive Officers |
2023 Grants of Plan-Based Awards
We do not have individual employment agreements with any of our executive officers, including our NEOs, although we have a practice of entering into offer letters with new executive officers that generally lay out the expected terms and conditions of their employment, including potential levels of compensation. Please refer to the Compensation Discussion and Analysis in this proxy statement for a discussion of our cash bonus awards and long-term equity incentive awards.
Outstanding Equity Awards at December 31, 2023
Outstanding Equity Awards at December 31, 2023 The following table sets forth information with respect to unexercised stock option awards, unvested RSUs and unvested or unearned PSUs, as applicable, as of December 31, 2023:
Outstanding Equity Awards at December 31, 2023
| 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 ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested ($)(2) | | Dan H. Arnold | 77,603 | —(3) | 39.48 | 3/13/2027 | — | — | — | — | | | 77,606 | —(4) | 65.50 | 2/23/2028 | — | — | — | — | | | 68,820 | —(5) | 77.53 | 2/25/2029 | — | — | — | — | | | — | — | — | | 4,915(7) | 1,118,752 | — | — | | | — | — | — | | 7,837(8) | 1,783,858 | — | — | | | — | — | — | | 11,646(9) | 2,650,863 | — | — | | | — | — | — | | 68,800(10) | 15,660,256 | — | — | | | — | — | — | | — | — | 54,858(11) | 12,486,778 | | | — | — | — | | — | — | 54,348(11) | 12,370,692 | | Matthew J. Audette | 27,704 | —(3) | 39.48 | 3/13/2027 | — | — | — | — | | | 15,874 | —(4) | 65.50 | 2/23/2028 | — | — | — | — | | | 12,903 | —(5) | 77.53 | 2/25/2029 | — | — | — | — | | | — | — | — | | 1,256(7) | 285,891 | — | — | | | — | — | — | | 1,590(8) | 361,916 | — | — | | | — | — | — | | 1,772(9) | 403,343 | — | — | | | — | — | — | | 11,302(10) | 2,572,561 | — | — | | | — | — | — | | — | — | 7,154(11) | 1,628,393 | | | — | — | — | | — | — | 5,316(11) | 1,210,028 | | Matthew Enyedi | 1,381 | —(6) | 45.55 | 3/6/2025 | — | — | — | — | | | 5,154 | —(3) | 39.48 | 3/13/2027 | — | — | — | — | | | 5,382 | —(4) | 65.50 | 2/23/2028 | — | — | — | — | | | 5,653 | —(5) | 77.53 | 2/25/2029 | — | — | — | — | | | — | — | — | | 655(7) | 149,091 | — | — | | | — | — | — | | 1,014(8) | 230,807 | — | — | | | — | — | — | | 1,481(9) | 337,105 | — | — | | | — | — | — | | 5,896(10) | 1,342,048 | — | — | | | — | — | — | | — | — | 4,564(11) | 1,038,858 | | | — | — | — | | — | — | 4,442(11) | 1,011,088 |
Outstanding Equity Awards at December 31, 2023
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Outstanding Equity Awards at December 31, 2023
| | Compensation of Named Executive Officers |
Outstanding Equity Awards at December 31, 2023
| 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 (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested ($)(2) | | Greg Gates | 7,189 | —(5) | 77.53 | 2/25/2029 | — | — | — | — | | | — | — | — | | 990(7) | 225,344 | — | — | | | — | — | — | | 1,372(8) | 312,295 | — | — | | | — | — | — | | 1,528(9) | 347,803 | — | — | | | — | — | — | | 1,532(9) | 348,714 | — | — | | | — | — | — | | 5,938(10) | 1,351,608 | — | — | | | — | — | — | | — | — | 6,170(11) | 1,404,415 | | | — | — | — | | — | — | 4,584(11) | 1,043,410 | | Richard Steinmeier | — | — | — | | 1,420(7) | 323,220 | — | — | | | — | — | — | | 1,742(8) | 396,514 | — | — | | | — | — | — | | 1,856(9) | 422,463 | — | — | | | — | — | — | | 12,776(10) | 2,908,073 | — | — | | | — | — | — | | — | — | 7,836(11) | 1,783,630 | | | — | — | — | | — | — | 5,568(11) | 1,267,388 |
Outstanding Equity Awards at December 31, 2023
| (1) Amounts were determined by multiplying the number of RSUs or PSUs, as applicable, by $227.62, the closing price per share of our Common Stock on December 29, 2023, the last business day of 2023. |
Outstanding Equity Awards at December 31, 2023
| (2) Amounts were determined by multiplying the number of PSUs that would be earned at maximum performance levels by $227.62, the closing price per share of our Common Stock on December 29, 2023, the last business day of 2023. |
Outstanding Equity Awards at December 31, 2023
| (3) These awards vested over a three-year period in equal tranches and became fully vested on March 13, 2020. |
Outstanding Equity Awards at December 31, 2023
| (4) These awards vested over a three-year period in equal tranches and became fully vested on February 23, 2021. |
Outstanding Equity Awards at December 31, 2023
| (5) These awards vested over a three-year period in equal tranches and became fully vested on February 25, 2022. |
Outstanding Equity Awards at December 31, 2023
| (6) These awards cliff-vested over a three-year period and became fully vested on March 6, 2018. |
Outstanding Equity Awards at December 31, 2023
| (7) These awards vest over a three-year period in equal tranches, with the first and second tranches having vested on the first and second anniversaries of the grant date, respectively, and the third tranche scheduled to vest on the third anniversary of the grant date. |
Outstanding Equity Awards at December 31, 2023
| (8) These awards vest over a three-year period in equal tranches, with the first tranche having vested on the first anniversary of the grant date, and the second and third tranches scheduled to vest on the second and third anniversaries of the grant date, respectively. |
Outstanding Equity Awards at December 31, 2023
| (9) These awards vest over a three-year period in equal tranches, with the first, second and third tranches scheduled to vest on the first, second and third anniversaries of the grant date, respectively. |
Outstanding Equity Awards at December 31, 2023
| (10) Amounts represent PSUs that were earned with respect to the Performance Period ended on December 31, 2023 and that vested on February 25, 2024, the third anniversary of the grant date. The number of earned PSUs was 200% of the target award, as discussed under “Compensation Discussion and Analysis—Long-Term Equity Incentive Awards—Payout of 2021 PSUs.” |
Outstanding Equity Awards at December 31, 2023
| (11) Amounts represent PSUs and assume achievement of performance at maximum levels. PSUs are eligible to become earned PSUs based on the Company’s TSR relative to the TSR of the Comparator Group (as defined above) over the Performance Period (as defined above). The number of PSUs that is earned is determined based on the Company’s relative ranking between the 25th and the 80th percentiles of the Comparator Group’s TSR results. If threshold performance were achieved (a TSR percentile rank at 25%), 50% of the target award would be earned; if target performance were achieved (a TSR percentile rank at 50%), 100% of the target award would be earned; and if maximum performance were achieved (a TSR percentile rank at or above 80%), 200% of the target award would be earned. The number of PSUs earned between |
Outstanding Equity Awards at December 31, 2023
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Outstanding Equity Awards at December 31, 2023
| | Compensation of Named Executive Officers |
Outstanding Equity Awards at December 31, 2023
| threshold, target and maximum performance levels is interpolated on a straight-line basis between performance levels. No PSUs will be earned if performance is below the threshold level. The number of earned PSUs is capped at 100% of the target award if the Company’s TSR is negative during the Performance Period. Earned PSUs become vested on the later of the third anniversary of the grant date and the date on which the Compensation Committee determines the level of achievement of the performance criteria associated with the award and the number of PSUs that have become earned under the award agreement. |
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested The following table sets forth the options exercised and stock vested during the year ended December 31, 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) | | Dan H. Arnold | 175 | 36,841(3) | 4,849 | 1,199,158(10) | | | 353 | 74,324(4) | 4,914 | 1,215,232(10) | | | — | — | 3,918 | 968,921(10) | | | — | — | 67,888 | 16,788,702(11) | | Matthew J. Audette | 5,810 | 1,274,714(5) | 1,567 | 387,519(10) | | | 5,000 | 1,097,265(6) | 1,256 | 310,609(10) | | | 5,000 | 1,097,294(7) | 795 | 196,604(10) | | | 5,000 | 1,097,389(8) | 14,104 | 3,487,919(11) | | Matthew Enyedi | 3,265 | 605,038(9) | 703 | 173,852(10) | | | — | — | 655 | 161,982(10) | | | — | — | 507 | 125,381(10) | | | — | — | 6,324 | 1,563,925(11) | | Greg Gates | — | — | 735 | 181,766(10) | | | — | — | 1,500 | 299,985(12) | | | — | — | 990 | 244,827(10) | | | — | — | 685 | 169,401(10) | | | — | — | 4,410 | 1,090,593(11) | | Richard Steinmeier | — | — | 1,378 | 340,779(10) | | | — | — | 1,420 | 351,166(10) | | | — | — | 870 | 215,151(10) | | | — | — | 12,396 | 3,065,531(11) |
2023 Option Exercises and Stock Vested
| (1) For purposes of calculating the value realized on the exercise of option awards, the market price of our Common Stock at the time the option was exercised was used. |
2023 Option Exercises and Stock Vested
| (2) For purposes of calculating the value realized on the vesting of stock awards, the closing price of our Common Stock on the vesting date was used. |
2023 Option Exercises and Stock Vested
| (3) These options were granted on March 13, 2017 with an exercise price of $39.48 per share and were exercised on September 19, 2023, at which time our Common Stock was trading at $250.00 per share. |
2023 Option Exercises and Stock Vested
| (4) These options were granted on March 13, 2017 with an exercise price of $39.48 per share and were exercised on September 20, 2023, at which time our Common Stock was trading at $250.03 per share. |
2023 Option Exercises and Stock Vested
| (5) These options were granted on February 25, 2016 with an exercise price of $19.85 per share and were exercised on February 6, 2023, at which time our Common Stock was trading at $239.25 per share. |
2023 Option Exercises and Stock Vested
| (6) These options were granted on February 25, 2016 with an exercise price of $19.85 per share and were exercised on February 6, 2023, at which time our Common Stock was trading at $239.30 per share. |
2023 Option Exercises and Stock Vested
| (7) These options were granted on February 25, 2016 with an exercise price of $19.85 per share and were exercised on February 6, 2023, at which time our Common Stock was trading at $239.31 per share. |
2023 Option Exercises and Stock Vested
| (8) These options were granted on February 25, 2016 with an exercise price of $19.85 per share and were exercised on February 6, 2023, at which time our Common Stock was trading at $239.33 per share. |
2023 Option Exercises and Stock Vested
| 56 | 2024 Proxy Statement |
2023 Option Exercises and Stock Vested
| | Compensation of Named Executive Officers |
2023 Option Exercises and Stock Vested
| (9) These options were granted on March 6, 2015 with an exercise price of $45.55 per share and were exercised on August 22, 2023, at which time our Common Stock was trading at $230.86 per share. |
2023 Option Exercises and Stock Vested
| (10) These RSUs vested on February 25, 2023, on which date the closing price of our Common Stock was $247.30 per share. |
2023 Option Exercises and Stock Vested
| (11) These PSUs vested on February 25, 2023, on which date the closing price of our Common Stock was $247.30 per share. |
2023 Option Exercises and Stock Vested
| (12) These RSUs vested on June 5, 2023, on which date the closing price of our Common Stock was $199.99 per share. |
Nonqualified Deferred Compensation for the Year Ended December 31, 2023
Nonqualified Deferred Compensation for the Year Ended December 31, 2023 The Deferred Compensation Plan allows a select group of highly compensated or management employees to defer up to 100% of their current compensation, which includes for this purpose base salary, service bonus, performance-based compensation and commissions. Distributions of deferred amounts may be made only upon a qualifying distribution event (consistent with Section 409A of the Internal Revenue Code), which, depending on the individual’s election, may be a separation from service, death, or a specified date, or may be the earliest of one or more of these events. At the time an election is made to defer compensation under the Deferred Compensation Plan, participants may choose, with respect to each potential qualifying distribution event, to receive amounts in either a lump sum or in equal annual installments over a number of years (but not to exceed five years for specified date elections and not to exceed ten years for separation from service elections). Deferred amounts are credited with an investment return determined as if the amounts were invested in one or more investment funds made available under the Deferred Compensation Plan and selected by a participant. The following table sets forth information relating to nonqualified deferred compensation for each NEO for the year ended December 31, 2023:
Nonqualified Deferred Compensation for the Year Ended December 31, 2023
| Name | Executive Contributions in Last Fiscal Year ($)(1) | Registrant Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($)(2) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last Fiscal Year End ($) | | Dan H. Arnold | — | — | 899,240 | — | 6,398,415(3) | | Matthew J. Audette | 300,000 | — | 94,760 | — | 709,487 | | Matthew Enyedi | 176,250 | — | 40,908 | — | 285,588(4) | | Greg Gates | — | — | — | — | — | | Richard Steinmeier | — | — | — | — | — |
Nonqualified Deferred Compensation for the Year Ended December 31, 2023
| (1) Amounts in this column are also reported in the “Summary Compensation Table” above for 2022 under “Non-Equity Incentive Plan Compensation” for Messrs. Audette and Enyedi. |
Nonqualified Deferred Compensation for the Year Ended December 31, 2023
| (2) Amounts in this column do not constitute above-market or preferential earnings and therefore are not reported as compensation in the “Summary Compensation Table” above. |
Nonqualified Deferred Compensation for the Year Ended December 31, 2023
| (3) Amount includes contributions that were made prior to Mr. Arnold becoming an NEO, and that therefore were not recorded in prior summary compensation tables. |
Nonqualified Deferred Compensation for the Year Ended December 31, 2023
| (4) Amount includes contributions that were made prior to Mr. Enyedi becoming an NEO, and that therefore were not recorded in prior summary compensation tables. |
Nonqualified Deferred Compensation for the Year Ended December 31, 2023
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Nonqualified Deferred Compensation for the Year Ended December 31, 2023
| | Compensation of Named Executive Officers |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023 The table below details post-employment arrangements with our NEOs, including severance benefits and change-in-control benefits to which they would have been entitled under the Executive Severance Plan as of December 31, 2023, if a termination of employment and/or a change-in-control had occurred on such date. Amounts reported for the accelerated vesting of RSUs and PSUs are based on a price per share of our Common Stock of $227.62, the closing price per share of our Common Stock on December 29, 2023, the last business day of 2023.
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| Named Executive Officer | Benefit | Without Cause or For Good Reason ($) | Disability, Death, Retirement ($) | Double-Trigger Change-in- Control ($)(1) | | Dan H. Arnold | Severance | 950,000(2) | — | 1,425,000(3) | | | Bonus | 4,000,000(4) | — | 4,987,500(5) | | | Accelerated/Continued Vesting of RSUs | 5,553,473(6) | 5,553,473(7) | 5,553,473(8) | | | Accelerated Vesting of PSUs | 13,538,610(9) | 13,538,610(10) | 13,538,610(11) | | | Group Benefit Continuation | 16,319(12) | — | 24,479(13) | | | Total | 24,058,402 | 19,092,083 | 25,529,062 | | Matthew J. Audette | Severance | 630,000(2) | — | 945,000(3) | | | Bonus | 1,375,000(4) | — | 1,748,250(5) | | | Accelerated/Continued Vesting of RSUs | 601,144(6) | 1,051,149(7) | 1,051,149(8) | | | Accelerated Vesting of PSUs | 1,972,100(9) | 1,972,100(10) | 1,972,100(11) | | | Group Benefit Continuation | 16,319(12) | — | 24,479(13) | | | Total | 4,594,563 | 3,023,249 | 5,740,978 | | Matthew Enyedi | Severance | 500,000(2) | — | 750,000(3) | | | Bonus | 785,000(4) | — | 975,000(5) | | | Accelerated/Continued Vesting of RSUs | 376,711(6) | 717,003(7) | 717,003(8) | | | Accelerated Vesting of PSUs | 1,143,563(9) | 1,143,563(10) | 1,143,563(11) | | | Group Benefit Continuation | 16,347(12) | — | 24,521(13) | | | Total | 2,821,621 | 1,860,566 | 3,610,087 | | Greg Gates | Severance | 550,000(2) | — | 825,000(3) | | | Bonus | 1,375,000(4) | — | 1,746,284(5) | | | Accelerated/Continued Vesting of RSUs | 613,436(6) | 1,234,156(7) | 1,234,156(8) | | | Accelerated Vesting of PSUs | 1,267,388(9) | 1,267,388(10) | 1,267,388(11) | | | Group Benefit Continuation | 16,319(12) | — | 24,479(13) | | | Total | 3,822,143 | 2,501,544 | 5,097,307 | | Richard Steinmeier | Severance | 600,000(2) | — | 900,000(3) | | | Bonus | 1,675,000(4) | — | 2,025,000(5) | | | Accelerated/Continued Vesting of RSUs | 662,147(6) | 1,142,197(7) | 1,142,197(8) | | | Accelerated Vesting of PSUs | 2,196,533(9) | 2,196,533(10) | 2,196,533(11) | | | Group Benefit Continuation | 17,444(12) | — | 26,166(13) | | | Total | 5,151,124 | 3,338,730 | 6,289,896 |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (1) Our Executive Severance Plan provides enhanced severance benefits on a “double trigger” basis in the event of a termination of employment by the Company without cause or a termination by the executive for good reason, in each case, within 12 months following a change-in-control. All amounts reported in this column assume both that a change-in-control occurred on December 31, 2023 and that the NEO’s employment was terminated by the Company without cause or by the executive for good reason on December 31, 2023. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| 58 | 2024 Proxy Statement |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| | Compensation of Named Executive Officers |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (2) Represents continued payment under our Executive Severance Plan of the NEO’s base salary in effect on the separation date for 12 months. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (3) Represents continued payment under our Executive Severance Plan of the NEO’s base salary in effect on the separation date for 18 months. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (4) Represents payment under our Executive Severance Plan of an amount equal to the bonus paid (or payable) to the NEO for the most recently completed calendar year. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (5) Represents payment under our Executive Severance Plan of an amount equal to 150% of the target bonus amount for the calendar year in which the NEO’s employment is terminated. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (6) Represents the value of shares of Common Stock in respect of the unvested portion of any outstanding RSUs scheduled to vest based solely on the passage of time within 12 months following a termination of employment, the vesting of which would have been accelerated under our Executive Severance Plan. In the case of retirement-eligible NEOs, this represents the value of all outstanding unvested RSUs, the vesting of which would have been, (i) in the case of RSUs granted before 2023, accelerated under our Executive Severance Plan or, (ii) in the case of RSUs granted in 2023 or later, continued in accordance with the original vesting schedule applicable to such RSUs, in each case under the terms of the NEO’s RSU agreements. Mr. Arnold was the only NEO who was retirement-eligible as of December 31, 2023. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (7) Represents the value of shares of Common Stock in respect of all outstanding unvested RSUs, the vesting of which would have been (i) accelerated upon a termination of employment due to death or disability or (ii) in the case of retirement, continued in accordance with the original vesting schedule applicable to such RSUs, for RSUs granted in 2023 or later, or accelerated, for RSUs granted before 2023, in each case under the terms of the NEO’s RSU agreements. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (8) Represents the value of shares of Common Stock in respect of all outstanding unvested RSUs, the vesting of which would have been accelerated under our Executive Severance Plan. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (9) Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2023, with such amount prorated based on the number of days the NEO was employed during the Performance Period. Under our Executive Severance Plan, upon a qualifying termination of employment by the Company without cause or a termination by the executive for good reason, other than in connection with a change-in-control, the actual number of shares of Common Stock that will be earned and vested in respect of outstanding unvested PSUs, if any, depends on actual performance measured at the end of the Performance Period, prorated based on the number of days the NEO was employed during the Performance Period. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (10) Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2023, with such amount prorated based on the number of days that the executive was employed during the Performance Period. Under the NEO’s PSU agreements, upon termination of employment due to death, disability or retirement, the actual number of shares of Common Stock that will be earned and vested in respect of outstanding unvested PSUs, if any, depends on actual performance measured at the end of the Performance Period, prorated based on the number of days that the NEO was employed during the Performance Period. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (11) Represents the value of unvested PSUs assuming the target number of shares of Common Stock in respect of such PSUs became earned and vested on December 31, 2023, prorated based on the number of days that the NEO was employed during the Performance Period. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (12) Represents payments under our Executive Severance Plan of an amount equal to 100% of the employer portion of premiums (plus the additional amount charged for administrative costs as permitted by COBRA) for continued health and dental plan participation under COBRA for the NEO and his qualified beneficiaries for a 12-month period. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| (13) Represents payments under our Executive Severance Plan of an amount equal to 100% of the employer portion of premiums (plus the additional amount charged for administrative costs as permitted by COBRA) for continued health and dental plan participation under COBRA for the NEO and his qualified beneficiaries for an 18-month period. |
Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
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Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2023
| | Compensation of Named Executive Officers |
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of total annual compensation for Mr. Arnold, our president and chief executive officer (the “CEO”), to the median of the annual total compensation of all our employees (other than the CEO) (the “CEO Pay Ratio”). For 2023:
CEO Pay Ratio
| ◾ | Mr. Arnold’s total annual compensation: $16,937,790 |
CEO Pay Ratio
| ◾ | Median annual total compensation of all employees (other than CEO): $86,430 |
CEO Pay Ratio
| ◾ | Ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees (other than CEO): 196:1 |
CEO Pay Ratio
We used the following methodology to determine the foregoing ratio:
CEO Pay Ratio
| ◾ | We determined our 2023 median employee (our “2023 Median Employee”) from our employee population on December 31, 2023. |
CEO Pay Ratio
| ◾ | To identify the 2023 Median Employee from our employee population, we first determined each employee’s 2023 Box 1 W-2 wages (“Compensation Measure”) for the 2023 calendar year (“Measurement Period”), as reflected in our payroll records and systems. |
CEO Pay Ratio
| ◾ | For those full-time employees who were employed on December 31, 2023 but who were not employed for the full Measurement Period, we annualized compensation paid to such employees during 2023. |
CEO Pay Ratio
| ◾ | We then identified our 2023 Median Employee from our employee population based on this Compensation Measure. |
CEO Pay Ratio
We then determined the annual total compensation for 2023 of the median employee and our CEO in accordance with the following:
CEO Pay Ratio
| ◾ | The median employee’s annual total compensation represents the amount of such employee’s compensation for 2023 that would have been reported in the Summary Compensation Table in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K if the employee were a named executive officer for 2023. |
CEO Pay Ratio
| ◾ | The annual total compensation of the CEO represents the amount reported in the “Total” column of our Summary Compensation Table included on page 51 of this proxy statement. |
CEO Pay Ratio
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our records and the methodology described above. The SEC rules for identifying the median compensated
CEO Pay Ratio
| 2024 Proxy Statement | 63 |
CEO Pay Ratio
| | Compensation of Named Executive Officers |
CEO Pay Ratio
employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above.
CEO Pay Ratio
| 64 | 2024 Proxy Statement |
CEO Pay Ratio
| | Pay Versus Performance Disclosure |
Pay Versus Performance Disclosure
Pay Versus Performance Disclosure In accordance with Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive “compensation actually paid” (or “CAP”) to the Company’s principal executive officer (“PEO”) and non-PEO named executive officers (the “Other NEOs”) and certain aspects of the financial performance of the Company. The Compensation Committee does not utilize CAP as the basis for making compensation decisions. For further information concerning our compensation philosophy and how we align executive compensation with our performance, please see our Compensation Discussion & Analysis.
Pay Versus Performance Table
Pay Versus Performance Table
Pay Versus Performance Table
| Year (1) | Summary Compensation Table Total for PEO (2) | Compensation Actually Paid to PEO (3) | Average Summary Compensation Table Total for Other NEOs (2) | Average Compensation Actually Paid to Other NEOs (3) | Value of Initial Fixed $100 Investment Based on: (4) | | Net Income (millions) (6) | Adjusted EBITDA (millions) (7) | | | | | | | Total Shareholder Return | Peer Group Total Shareholder Return (5) | | | | 2023 | $16,937,790 | $18,786,197 | $3,242,815 | $3,697,130 | $255 | $133 | $1,066 | $2,170 | | 2022 | $13,750,390 | $28,454,770 | $3,345,183 | $4,710,541 | $240 | $119 | $846 | $1,611 | | 2021 | $12,875,868 | $23,880,808 | $4,129,996 | $5,647,041 | $177 | $133 | $460 | $1,047 | | 2020 | $7,256,713 | $7,136,927 | $2,482,312 | $2,661,740 | $115 | $98 | $473 | $946 |
Pay Versus Performance Table
| (1) Mr. Arnold served as the PEO for the entirety of 2023, 2022, 2021 and 2020, and our Other NEOs for the applicable years were as follows: |
Pay Versus Performance Table
| • | 2023: Matthew Audette, Matthew Enyedi, Greg Gates and Richard Steinmeier |
Pay Versus Performance Table
| • | 2022: Matthew Audette, Edward Fandrey, Dayton Semerjian, Kabir Sethi and Richard Steinmeier |
Pay Versus Performance Table
| • | 2021: Matthew Audette, Edward Fandrey, Dayton Semerjian and Richard Steinmeier |
Pay Versus Performance Table
| • | 2020: Matthew Audette, Scott Seese, Dayton Semerjian and Richard Steinmeier |
Pay Versus Performance Table
| (2) Amounts reported in these columns represent (i) the total compensation reported in the Summary Compensation Table (“SCT”) for the applicable year in the case of Mr. Arnold and (ii) the average of the total compensation reported in the SCT for the applicable year for our Other NEOs. |
Pay Versus Performance Table
| (3) Amounts reported in these columns represent compensation actually paid for the applicable year. Compensation actually paid represents the total compensation reported in the SCT for the applicable year after giving effect to adjustments required by SEC rules. A reconciliation of the adjustments that were used to calculate the CAP amounts from the SCT amounts for Mr. Arnold and for the average of the Other NEOs is set forth in the following table. |
Pay Versus Performance Table
| 2024 Proxy Statement | 65 |
Pay Versus Performance Table
| | Pay Versus Performance Disclosure |
Pay Versus Performance Table
| | 2023 | | 2022 | | 2021 | | 2020 | | | | PEO | Average Other NEOs | PEO | Average Other NEOs | PEO | Average Other NEOs | PEO | Average Other NEOs | | Summary Compensation Table Total | $16,937,790 | $3,242,815 | $13,750,390 | $3,345,183 | $12,875,868 | $4,129,996 | $7,256,713 | $2,482,312 | | Minus Equity Award Value Reported in SCT for the Covered Year | 11,901,699 | 1,309,482 | 8,906,441 | 1,822,659 | 8,569,310 | 2,331,496 | 4,171,168 | 902,852 | | Plus Year End Fair Value of Equity Awards Granted During the Covered Year that Remain Outstanding and Unvested as of Last Day of the Covered Year | 9,499,412 | 1,090,598 | 11,733,474 | 1,752,675 | 9,927,564 | 2,632,703 | 5,411,976 | 1,183,545 | | Plus Year over Year Change in Fair Value as of the Last Day of the Covered Year of Outstanding and Unvested Equity Awards Granted in Prior Years | 2,137,341 | 298,907 | 6,189,193 | 830,202 | 5,575,299 | 805,582 | 1,142,884 | 200,353 | | Plus Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Covered Year | — | — | — | — | — | — | — | — | | Plus Change in Fair Value as of the Vesting Date from the Prior Year End of Equity Awards Granted in Prior Years that Vested During the Covered Year | 2,113,353 | 374,292 | 5,688,154 | 605,140 | 4,071,387 | 410,256 | (2,503,478) | (301,618) | | Minus Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Covered Year | — | — | — | — | — | — | — | — | | Plus Value of Dividends or other Earnings Paid on Equity Awards Not Otherwise Reflected in Fair Value or Total Compensation for the Covered Year | — | — | — | — | — | — | — | — | | Compensation Actually Paid | $18,786,197 | $3,697,130 | $28,454,770 | $4,710,541 | $23,880,808 | $5,647,041 | $7,136,927 | $2,661,740 |
Pay Versus Performance Table
Totals may not foot due to rounding. In the table above, the unvested equity values are computed in accordance with the methodology used for financial reporting purposes, and for unvested awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the year. For the change in fair value of stock options, we used the Black-Scholes option pricing model with corresponding assumptions (risk-free interest rate, dividend yield, expected volatility factor and expected option life) determined as of the applicable measurement date. Otherwise, the valuation assumptions used to calculate fair values did not materially differ from those used in our disclosures of fair value as of the grant date. In the Company’s 2023 proxy statement, the value of RSUs granted to Mr. Arnold, the vesting of which would be accelerated upon his retirement, was included as equity awards granted and vested in the covered year, in accordance with then-applicable SEC guidance. More recent guidance from the SEC permits such amounts to be included as equity awards granted during the covered year that remain outstanding and unvested as of the last day of the covered year, provided the awards have not vested in accordance with their vesting schedule and the executive has not retired. As Mr. Arnold has not retired as of the end of the most recently completed fiscal year, we have elected to reclassify such amounts accordingly. The other NEOs are not retirement eligible as of the most recently completed fiscal year.
Pay Versus Performance Table
| (4) Total Shareholder Return (TSR) is cumulative for the measurement periods beginning on December 31, 2019 and ending on December 31 of each of 2023, 2022, 2021 and 2020, respectively, calculated in accordance with Item 201(e) of Regulation S-K. |
Pay Versus Performance Table
| (5) “Peer Group” represents the S&P 500 Financial Sector Index, which is used by the Company for purposes of compliance with Item 201(e) of Regulation S-K. |
Pay Versus Performance Table
| (6) This column reflects net income as reported for each year in the Company’s Annual Report on Form 10-K. |
Pay Versus Performance Table
| (7) Adjusted EBITDA is the company selected measure and is defined as EBITDA, further adjusted to exclude certain non-cash charges. See Appendix A in this Proxy Statement for a reconciliation of Adjusted EBITDA, a non-GAAP measure, to net income, the most directly comparable GAAP measure. |
Pay Versus Performance Table
| 66 | 2024 Proxy Statement |
Pay Versus Performance Table
| | Pay Versus Performance Disclosure |
Performance Measures Used to Link Company Performance and CAP
| | Pay Versus Performance Disclosure |
Adjusted EBITDA
Adjusted EBITDA Adjusted EBITDA is defined as EBITDA, further adjusted to exclude certain non-cash charges. We believe that Adjusted EBITDA can be a useful financial metric in assessing our historical operating performance from period to period by excluding certain items that we believe are not representative of our core business. Set forth below is a reconciliation of the Company’s net income to Adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021.
Adjusted EBITDA
| 2024 Proxy Statement | 81 |
Adjusted EBITDA
| | Appendix A: Non-GAAP Financial Measures |
Adjusted EBITDA
Set forth below is a calculation of gross profit for the periods presented (in thousands):
Adjusted EBITDA
| | Years Ended December 31, | | | | | 2023 | 2022 | 2021 | | Total revenue | $10,052,848 | $8,600,825 | $7,720,830 | | Advisory and commission expense | 5,915,807 | 5,324,827 | 5,180,090 | | Brokerage, clearing and exchange expense | 105,984 | 86,063 | 86,023 | | Employee deferred compensation (1) | 4,101 | — | — | | Gross Profit | $4,026,956 | $3,189,935 | $2,454,717 |
Adjusted EBITDA
| (1) During the first quarter of 2023, the Company updated its presentation of employee deferred compensation to be consistent with its presentation of advisor deferred compensation. This change has not been applied retroactively as the impact on prior periods was not material. |
Adjusted EBITDA
Set forth below is a reconciliation of the Company’s total expense to Core G&A for the periods presented (in thousands):
Adjusted EBITDA
| | Years Ended December 31, | | | | | 2023 | 2022 | 2021 | | Total expense | $8,608,073 | $7,489,172 | $7,119,501 | | Advisory and commission | (5,915,807) | (5,324,827) | (5,180,090) | | Depreciation and amortization | (246,994) | (199,817) | (151,428) | | Interest expense on borrowings | (186,804) | (126,234) | (104,414) | | Amortization of other intangibles | (107,211) | (87,560) | (79,260) | | Brokerage, clearing and exchange | (105,984) | (86,063) | (86,023) | | Employee deferred compensation (1) | (4,101) | — | — | | Loss on extinguishment of debt | — | — | (24,400) | | Total general and administrative expense | 2,041,172 | 1,664,671 | 1,493,886 | | Promotional (ongoing) | (486,326) | (353,946) | (288,016) | | Regulatory charges | (71,320) | (32,564) | (29,430) | | Employee share-based compensation | (66,024) | (50,050) | (41,844) | | Acquisition costs | (48,103) | (36,165) | (76,388) | | Core G&A | $1,369,399 | $1,191,946 | $1,058,208 |
Adjusted EBITDA
| (1) During the first quarter of 2023, the Company updated its presentation of employee deferred compensation to be consistent with its presentation of advisor deferred compensation. This change has not been applied retroactively as the impact on prior periods was not material. |
Adjusted EBITDA
| 82 | 2024 Proxy Statement |
Adjusted EBITDA
| | Appendix A: Non-GAAP Financial Measures |
Adjusted EBITDA
Set forth below is a reconciliation of the Company’s net income to EBITDA and Adjusted EBITDA for the periods presented (in thousands):
Adjusted EBITDA
| | Years Ended December 31, | | | | | 2023 | 2022 | 2021 | | Net income | $1,066,250 | $845,702 | $459,866 | | Interest expense on borrowings | 186,804 | 126,234 | 104,414 | | Provision for income taxes | 378,525 | 265,951 | 141,463 | | Depreciation and amortization | 246,994 | 199,817 | 151,428 | | Amortization of other intangibles | 107,211 | 87,560 | 79,260 | | EBITDA | 1,985,784 | 1,525,264 | 936,431 | | Employee share-based compensation (1) | 66,024 | 50,050 | 41,844 | | Other (2) | 118,559 | 36,165 | 68,662 | | Adjusted EBITDA | $2,170,367 | $1,611,479 | $1,046,937 |
Adjusted EBITDA
| (1) Represents share-based compensation expense for equity awards granted to employees, officers, and directors. Such awards are measured based on the grant-date fair value and recognized over the requisite service period of the individual awards, which generally equals the vesting period. |
Adjusted EBITDA
| (2) Other includes acquisition costs incurred to setup, onboard and integrate acquired entities and the loss on extinguishment of debt. Other for the year ended December 31, 2023 also includes $40.0 million in regulatory charges to reflect the amount of the penalty proposed by the SEC as part of a potential settlement to resolve the SEC’s civil investigation into the Company’s compliance with records preservation requirements for business-related electronic communications stored on personal devices or messaging platforms in connection with an industry-wide review of off-platform communications that are not covered by the Company’s captive insurance subsidiary. Other for the year ended December 31, 2021 also includes adjustments to exclude the impact of the acquisition of Waddell & Reed’s wealth management business. |
Adjusted EBITDA
| 2024 Proxy Statement | 83 |
Adjusted EBITDA
LPL FINANCIAL HOLDINGS INC. 1055 LPL WAY FORT MILL, SOUTH CAROLINA 29715 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information until 11:59 p.m. Eastern Time on May 8, 2024. Follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. Eastern Time on May 8, 2024. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V36985-P07360 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY LPL FINANCIAL HOLDINGS INC. The Board of Directors recommends you vote FOR each of the nominees listed in Proposal 1 and FOR Proposals 2 and 3. 1. Elect the ten nominees named in the proxy statement to the Board of Directors of LPL Financial Holdings Inc. (the “Company”). Nominees: For Against Abstain 1a. Dan H. Arnold 1b. Edward C. Bernard 1c. H. Paulett Eberhart 1d. William F. Glavin Jr. 1e. Albert J. Ko 1f. Allison H. Mnookin 1g. Anne M. Mulcahy 1h. James S. Putnam 1i. Richard P. Schifter 1j. Corey E. Thomas For Against Abstain 2. Ratify the appointment of Deloitte & Touche LLP by the Audit and Risk Committee of the Board of Directors as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024. 3. Approve, in an advisory vote, the compensation paid to the Company’s named executive officers. NOTE: Such other business as may properly come before the meeting or any adjournment thereof will be voted on by the proxy holders in their discretion. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. V36986-P07360 LPL Financial Holdings Inc. Notice of 2024 Annual Meeting of Stockholders Proxy Solicited by the Board of Directors for the 2024 Annual Meeting of Stockholders — May 9, 2024 Matthew J. Audette and Gregory M. Woods, and each of them with power to act without the other and with power of substitution (the “Proxies”), are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the 2024 Annual Meeting of Stockholders (the “Annual Meeting”) of LPL Financial Holdings Inc. (the “Company”) to be held on May 9, 2024 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted as directed by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR all nominees in Proposal 1 and FOR Proposals 2 and 3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. (Items to be voted appear on reverse side)