DEF 14A of Virtus Investment Partners, Inc.
Filed Apr 3, 2024 · FY20230001193125-24-086077
NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS
| | Page | | DIRECTOR COMPENSATION | 78 | | Director Compensation | 79 | | OTHER MATTERS | 80 | | ADDITIONAL INFORMATION | 80 | | Appendix A | A-1 | | Appendix B | B-1 | | Appendix C | C-1 | | Appendix D | D-1 |
ITEM 1—ELECTION OF DIRECTORS
ITEM 1—ELECTION OF DIRECTORS Our Board currently has eight members. Our certificate of incorporation previously provided for a classified Board divided into three classes of Directors. At our 2023 annual meeting of shareholders, shareholders approved a proposal to amend our certificate of incorporation to effectuate a phased-in declassification of the Board. At each annual meeting of shareholders commencing with the 2024 Annual Meeting, the successors to the directors whose terms then expire will be elected for one-year terms, and, beginning with the 2026 annual meeting of shareholders, the entire Board will be elected on an annual basis. Accordingly, the Directors up for election at the 2024 Annual Meeting will be elected to a one-year term. The Directors standing for election at the 2024 Annual Meeting are Mr. Holt and Ms. Jones. Mr. Holt has been a director of the Company since it became an independent public company on January 1, 2009, while Ms. Jones was appointed to the Board in October 2014. Mr. Zarrilli’s term expires at the 2024 Annual Meeting, and the Board has determined to reduce its size to seven members effective upon the conclusion of his term. The Board thanks Mr. Zarrilli for his decade of service on our Board. Under our Corporate Governance Guidelines, a director is generally required to retire no later than the first annual meeting following his or her 74th birthday. Under exigent circumstances, the Board may request that the director continue to serve; provided, however, that no director shall serve beyond the first annual meeting following his or her 75th birthday.
Board Nominees
Board Nominees In February 2024, members of our Governance Committee evaluated the contributions and performance of Mr. Holt and Ms. Jones as members of our Board. As part of its evaluation, each of our directors was interviewed regarding his or her views of the performance of each of Mr. Holt and Ms. Jones by a representative of the Governance Committee. Following completion of its individual evaluations, the Governance Committee recommended to the Board that each of Mr. Holt and Ms. Jones be nominated to stand for re-election as a director at the Annual Meeting. Our Board, having considered the recommendations of the Governance Committee, approved Mr. Holt and Ms. Jones as nominees for election to the Board by the shareholders. If elected by shareholders, Mr. Holt and Ms. Jones will hold office for a one-year term expiring at the 2025 annual meeting of shareholders and until his or her successor has been duly elected and qualified, or upon his or her earlier resignation, retirement, death, disqualification or removal. Each of Mr. Holt and Ms. Jones has indicated that he or she will serve if elected. We do not anticipate that any Board nominee will be unable or unwilling to stand for election but should any such nominee be unavailable for election by reason of death or other unexpected occurrence, your proxy, to the extent permitted by applicable law, may be voted by the proxies named therein, with discretionary authority in connection with the nomination by the Board and the election of any substitute nominee. A plurality of the affirmative votes cast by shareholders present in person or represented by proxy and entitled to vote is required for the election of each such director nominee. That said, pursuant to our Bylaws, any director nominee who receives a greater number of votes “withheld” than votes “for” such director nominee’s election is required to promptly tender such director nominee’s resignation subject to acceptance by the Board. The Board’s decision, which will not involve the participation of any incumbent director who fails to receive a majority of the votes cast in an uncontested election of directors, will be promptly disclosed in a public announcement.
The Board recommends that shareholders vote “FOR” the election of its two director
The Board recommends that shareholders vote “FOR” the election of its two director
nominees, Timothy A. Holt and Melody L. Jones, as directors of Virtus
nominees, Timothy A. Holt and Melody L. Jones, as directors of Virtus Listed below are the names of the Board’s nominees to the director seats and the incumbent directors who will be continuing in office following the Annual Meeting, together with certain biographical and business information regarding such persons and the experience and certain other factors considered in connection with the selection of such persons for membership on our Board.
Board Nominees
Board Nominees TIMOTHY A. HOLT (71), Director since 2009. Mr. Holt held various senior management positions with Aetna, Inc., a managed healthcare company, until his retirement in 2008. He was Senior Vice President and Chief Investment Officer from 1999 to 2008, Vice President and Chief Investment Officer from 1997 to 1999, Chief Enterprise Risk Officer from 2004 to 2007, Senior Vice President and Chief Financial Officer of Aetna Retirement Services from 1996 to 1997, Vice President of Portfolio Management Group from 1992 to 1995, Vice President of Aetna Portfolio Management from 1991 to 1992, Vice President, Finance and Treasurer from 1989 to 1991, Vice President of Public Bonds from 1987 to 1989, Property/Casualty Portfolio Manager from 1983 to 1987, Investment Officer from 1981 to 1982 and Investment Officer/Analyst from 1977 to 1981. He was a member of Aetna’s Executive Committee from 2003 until his retirement in 2008. Mr. Holt served as a consultant to Aetna during 2008 and 2009. Since 2012, Mr. Holt has served as a director of MGIC Investment Corporation, a provider of private mortgage insurance in the U.S. where he is Chairman of the Securities Investment Committee, and from January 2014 to February 2017 served as a director of StanCorp Financial Group, which was a publicly traded insurance products company until it was acquired in March 2016. With his broad management, financial and investment experience at Aetna, Mr. Holt brings to our Board leadership and knowledge regarding the financial and investment industries, risk management, corporate governance and financial and corporate operational matters. Mr. Holt’s extensive management and investment experience positions him well to serve as the Chairman of our Board and as a member of our Compensation Committee and Governance Committee. MELODY L. JONES (64), Director since 2014. Ms. Jones provides executive assessment and coaching services through 32-80 Advisors, LLC, which she founded in 2017. From 2012 to 2017, Ms. Jones served as the Chief Administrative Officer (“CAO”) for CEB, a best practice insight and technology company. In her role as CAO, Ms. Jones had global responsibility for New Product Development, Information Technology, Legal and Compliance, Human Resources, Communications, Philanthropy and the Member Events department. She joined the firm in December 2005 and served as the Chief Human Resources Officer (“CHRO”) until February 2012. She managed CEB’s Professional Services practice from 2010 to 2012 and the firm’s product development function from 2013 to 2015. Prior to CEB, Ms. Jones served from 2002 to 2005 as the global head of Human Resources for T. Rowe Price, a global investment management firm. Prior to joining T. Rowe Price, Ms. Jones spent eight years at Aon Corporation, a global insurance brokerage and consulting company, serving from 1998 to 2002 as the CHRO. She joined Aon in 1994, as head of the Midwestern Regional Office of Aon Consulting. In 1996, she assumed responsibility for the HR Strategy and Technology consulting practice and managed this global practice until assuming her role as CHRO for the corporation. Ms. Jones also served as a senior consultant with Organizational Dynamics, Inc., an international management training and consulting company, and held several leadership positions across a six-year tenure with Citicorp Mortgage. Ms. Jones currently serves on the Boards of CEATI, a user-driven best practices network organization for the utilities industry, and Fount Global, whose focus is technology and insights for HR leaders. She also serves on the Advisory Boards of Pamlico Investment Partners, a mid-market private equity firm, and Exec Online, a global leadership development business. Ms. Jones brings to our Board management and leadership experience, which positions her well to serve as a member of our Board and Governance Committee and Chair of our Compensation Committee.
Other Continuing Members of the Board
Other Continuing Members of the Board GEORGE R. AYLWARD (59), Director since 2008. Mr. Aylward has served as President of the Company since November 6, 2006 and has been our President and CEO since January 1, 2009, when the Company became an independent public company. He joined the predecessor to the Company, Phoenix Investment Partners, Inc. (“PXP”), which was the majority owned asset management subsidiary of The Phoenix Companies, Inc. (“PNX”), in 1996. At PNX, Mr. Aylward served as President, Asset Management, and Senior Executive Vice President from February 2007 to December 31, 2008; Executive Vice President, Asset Management, from November 6, 2006 to February 2007; Senior Vice President and Chief Operating Officer, Asset Management, from 2004 through 2006, and Chief of Staff to the Chairman, President and CEO from 2002 through 2004. He also served in several senior financial positions at PXP prior to 2002. Since 2006, Mr. Aylward has served as President and Trustee of the Virtus Mutual Funds, having been Executive Vice President from 2004 to 2006; President (since 2010) and Trustee (since 2012) of the Virtus Variable Insurance Trust; Trustee and President of the Virtus Alternative Solutions Trust since 2013; Director of the Virtus Global Funds, plc since 2013; and Chairman and Trustee of Virtus ETF Trust II since 2015. In addition, he serves as President, CEO and Director (or Trustee) of 12 closed-end funds for which one of the Company’s affiliated registered investment advisers, either Virtus Investment Advisers, Inc. or Virtus Alternative Investment Advisers, Inc., is the investment adviser. Mr. Aylward brings to our Board demonstrated leadership, extensive knowledge of and experience in the asset management and financial services industries, and superior executive management and financial skills as our CEO. PETER L. BAIN (65), Director since 2019. Mr. Bain served as President, Chief Executive Officer and Director of OM Asset Management, a global multi-boutique asset management firm now known as BrightSphere Investment Group, from 2011 to 2017. From 2001 until 2009, he held various positions at Legg Mason, a global asset management firm, including Senior Executive Vice President from 2004 to 2009, head of affiliate management and corporate strategy from 2008 to 2009 and as chief administrative officer from 2003 to 2005. Prior to that time, he was with Berkshire Global Advisors from 1991 to 2000 where he served as Managing Director from 1995 to 2000, and earlier at Merrill Lynch & Co. in various roles from 1987 to 1990. Mr. Bain brings to our board demonstrated leadership experience in the asset management industry. Furthermore, Mr. Bain’s extensive experience with a wide array of corporate finance and operational matters positions him well to serve as a member of our Board and Compensation Committee. SUSAN S. FLEMING (54), Director since 2009. Dr. Fleming is an angel investor, entrepreneur in residence, keynote speaker, and executive educator for corporate clients focusing on issues of gender diversity and inclusion. She served as a senior lecturer of management and entrepreneurship at Cornell University from 2009 to 2018. Dr. Fleming worked at Capital Z Financial Services, a private equity firm, as a Principal from 1998 to 2001 and as Partner from 2001 to 2003. She was Vice President at Insurance Partners Advisors, LP, a private equity firm, from 1994 to 2003 and held various positions at Morgan Stanley and Company from 1992 to 1994. In August 2018, Dr. Fleming joined the board of RLI Corp., an American property and casualty insurance company where she serves as a Director and is a member of the Audit Committee and Chair of the Finance and Investment Committees. Her prior directorships include Endurance Specialty Holdings, Ltd., a global insurance provider, where she served from May 2011 to March 2017; Universal American Financial Corp., a family of specialty healthcare companies, from July 1999 to December 2003; PXRE Group, Ltd., a property reinsurer, from April 2002 to April 2005, Ceres Group, Inc., an insurance and annuity products provider, from February 2000 to August 2006; and Quanta Capital Holdings, Ltd., a specialty insurance and reinsurance holding company, from July 2006 to October 2008. With her years of experience in investment banking, private equity, education and entrepreneurship, Dr. Fleming brings to our Board demonstrated leadership and experience with a wide array of corporate finance, mergers and acquisitions, and operational matters. Dr. Fleming’s experience in corporate finance and organizational leadership also positions her well to serve as a member of our Board and Audit Committee and Chair of our Governance Committee. PAUL G. GREIG (68), Director since 2019. Mr. Greig served as Chairman of the Board of Opus Bank (“Opus”), a federally insured chartered commercial bank, from 2017 to 2019. While at Opus, he held the role of interim Chief Executive Officer and President during 2018 and 2019. At Opus, he served as chair of the Risk Committee and as a member of the Governance and Nominating Committee and Audit Committee. Prior to joining Opus, Mr. Greig served as Chairman of the Board, President and Chief Executive Officer of FirstMerit Corporation, a regional diversified financial services company, from 2006 to 2016. He has been a member of the Advisory Board of Omni Senior Living, senior residential communities located throughout Ohio, since 2016. He previously served as President and Chief Executive Officer of Citizens Banking Corporation—Illinois from 2005 to 2006 and was a director and member of the Audit Committee of the Federal Reserve Bank of Cleveland from 2011 to 2014. Mr. Greig brings to our board exceptional leadership experience along with expertise in financial and accounting matters, which positions him well to serve as a member of our Board and Chair of our Audit Committee. W. HOWARD MORRIS (64), Director since 2021. Mr. Morris has been President and Chief Investment Officer of The Prairie & Tireman Group, an investment partnership, since 1998. Mr. Morris was formerly Emergency Financial Manager, Inkster, Michigan Public Schools, from 2002 to 2005, and Chief Financial Officer, Detroit, Michigan Public School District, from 1999 to 2000. He is a Certified Public Accountant and Chartered Financial Analyst. Since 2007, Mr. Morris has served on the Board of Owens Corning, an American company that develops and produces insulation, roofing, and fiberglass composites and related materials and products. Mr. Morris brings to our Board expertise in investment management and financial matters, which positions him well to serve as a member of our Board and Audit Committee.
Compensation Policies and Practices
| What We Do | | ✓ Provide for a substantial portion of our executives’ pay to be at-risk via annual and long-term incentives | | ✓ Balance compensation among cash and equity and fixed and variable pay | | ✓ Impose a cap on executive officer annual and long-term incentives | | ✓ Evaluate compensation and performance compared to relevant peer companies | | ✓ Conduct an annual advisory vote of shareholders on executive compensation | | ✓ Engage with shareholders for input on a continuous basis | | ✓ Require executives to meet minimum stock ownership levels | | ✓ Maintain a compensation clawback policy compliant with the Dodd-Frank Act and NYSE rules | | ✓ Prohibit hedging of holdings in Company stock | | ✓ Engage an independent compensation consultant to assist in evaluating annual compensation program design and pay decisions for our executive officers and to advise the Compensation Committee | | What We Don’t Do | | × No single-trigger change-in-control provisions | | × No employment agreements for our NEOs | | × No aspect of compensation policies or practices encourages excessive, adverse risk-taking by executives | | × No repricing of “underwater” stock options without shareholder approval |
Peer Group Benchmarking
Peer Group Benchmarking As the Company must compete with other asset management companies for talent and must attract and retain critical executive talent with industry- specific skills and experience, the Committee believes that comparative data is useful and appropriate in establishing competitive compensation levels for executives. Management obtains and uses third-party survey data from McLagan, a leading performance/reward consulting and benchmarking firm in the asset management industry. Our executive positions are compared against survey data based on positions with similar responsibilities and scope at firms with which we compete in our industry. In addition, compensation is reviewed against peer companies selected from traditional publicly traded asset managers that compete with the Company for talent and that are compared with the Company based on the following characteristics:
Peer Group Benchmarking
| • | Business model |
Peer Group Benchmarking
| • | Diversity of investment strategies and products |
Peer Group Benchmarking
| • | Distribution channels |
Peer Group Benchmarking
| • | Management roles |
Peer Group Benchmarking
| • | Ownership structure |
Peer Group Benchmarking
| • | Assets under management |
Peer Group Benchmarking
The Committee annually reviews the companies that comprise the executive compensation peer group for significant changes in the characteristics listed above. The Committee uses compensation data publicly disclosed by these peer companies as a market check and as only one of the factors for evaluating compensation levels. The peer group consists solely of asset managers because compensation programs within this industry are distinct from pay programs in the broader financial services sector, and asset managers are typically competing specifically with other asset managers for executive talent. For 2023, the Committee selected the following 11 public asset management companies for inclusion in the Executive Compensation Peer Group. The Company’s size, as measured by assets under management, approximated the median of the Executive Compensation Peer Group. The companies in the Executive Compensation Peer Group differ from companies that are included as peers for comparative financial results, including TSR, as shown on Appendix C.
Peer Group Benchmarking
| Executive Compensation Peer Companies | | Affiliated Managers Group | | AllianceBernstein | | Artisan Partners Asset Management | | BrightSphere Investment Group | | Cohen & Steers | | Federated Hermes | | GAMCO Investors | | Janus Henderson Investors | | Pzena Investment Management | | Victory Capital Holdings | | Wisdom Tree Investments |
Compensation-Setting Process
| • | Setting target annual and long-term incentive opportunities for each NEO by reviewing market positioning in relation to each executive’s role and responsibilities; |
Compensation-Setting Process
| • | Selecting annual and long-term incentive performance metrics used in funding incentive awards that are directly linked to the Company’s annual strategic and business planning process; |
Compensation-Setting Process
| • | Reviewing the market position of each NEO’s final total compensation to validate placement within the market range. |
Compensation-Setting Process
| • | Recommending performance metrics and objectives for our annual and long-term incentive compensation plans; and |
The Use of Compensation Consultant
The Use of Compensation Consultant The Committee has engaged Mercer, a leading human resource consulting firm, as its independent compensation consultant. Mercer participates in the Committee’s meetings and provides counsel and objective analysis on the Company’s executive compensation program and practices, and additional competitive data for the Committee’s consideration. In addition, Mercer assists in assessing the risk of the Company’s executive compensation program and provides ongoing reviews. Mercer believes that the Company’s executive incentive program has an appropriate balance between performance incentives and risk mitigation. Mercer also assisted the Committee with the preparation of this Compensation Discussion and Analysis. Mercer has implemented policies and procedures so that it and the Committee are confident that the advice the Committee receives from the individual executive compensation consultant is objective and not influenced by Mercer’s or its affiliates’ relationships with the Company, if any.
Pay Mix
Pay Mix We believe the majority of executive compensation should be at-risk and come from performance-based pay. The proportion of “at-risk” compensation, as well as the balance of incentive opportunity mix between annual and long-term incentive opportunity, is determined by each executive’s role and responsibilities compared to market data. The Committee set the target for the CEO’s short-term/long-term incentive variable pay mix at 50%/50% for 2023, consistent with the 2022 target ratio and in alignment with the pay mix for CEOs in the compensation peer group. When considering the pay mix of the CEO, the Committee also recognizes that the CEO, who owns approximately 3.7%(8) of outstanding shares, is a significant shareholder of the Company and owns shares well in excess of the stock ownership guidelines.
Annual Incentive Compensation
Annual Incentive Compensation Annual Incentive Plan Design Annual incentive awards for our executive officers are funded from an executive officer incentive pool that has a formulaic maximum funding set at 7% of operating income, as adjusted, before any variable incentive compensation. The allocation of the CEO’s award is based on the Committee’s assessment of actual results relative to pre-established absolute and relative performance goals for the Company. Measures used for such purpose are linked to business strategy and organized into categories with collective weightings that include, as shown in the table below, three financial objectives (50%), three operational objectives (30%), and five categories of strategic objectives (20%). The allocation of awards to other NEOs also considers their respective department/unit and individual accomplishments. At the beginning of the fiscal year, based on its ongoing evaluations, discussions with its independent compensation consultant, and feedback from shareholders, the Committee considers the performance metrics and strategic priorities that will be used for annual incentive purposes. The Committee evaluates (i) whether the metrics are adequately linked to the Company’s annual strategic, operational, and financial plans; and (ii) whether the metrics will drive appropriate behaviors; and (iii) whether any other metrics would be appropriate to add. For 2023, the Committee approved the financial and operating metrics listed below, as well as the strategic objectives that follow the 2023 Annual Incentive Performance Metrics and Results. The financial and operating metrics for 2023, with the exception of the operating margin, as adjusted, metric, required improvement over prior year (for absolute measures) or results that exceeded industry median levels (for relative measures). The strategic objectives were substantially similar to those used for 2022, as they continued to reflect current organizational priorities. The financial and operating metrics were:
Annual Incentive Compensation
| • | The earnings-based target of EPS, diluted, as adjusted, of $26.00 was a modest increase from the actual 2022 results. |
Annual Incentive Compensation
| • | The target of 35.0% for operating margin, as adjusted, represented a decrease from the 2022 result of 36.9%. |
Annual Incentive Compensation
| – | The targets for EPS, diluted, as adjusted, and operating margin, as adjusted, both reflected the expected impact in 2023 of the continuation of the difficult market conditions experienced during 2022. |
Annual Incentive Compensation
| • | Targets for the two relative performance metrics – placement in the 45th percentile among Financial Peers for growth in operating income, as adjusted, and 55% of long-term AUM outperforming their peer groups on a three-year basis – were consistent with those used in 2022, with target payouts requiring performance above industry-median levels. |
Annual Incentive Compensation
| • | The 1.0% target for the total net flow rate was consistent with the 2022 target. |
Annual Incentive Compensation
| • | The Committee recognized that under management’s leadership, the Company has significantly diversified its business profile, with strategies for institutional investors representing 36% of AUM as of December 31, 2023 compared with 28% of AUM two years prior. Thus, the Committee replaced the prior metric of gross mutual fund sales versus peers with a broader sales metric of gross sales rate for all products. The target for this metric was set at 18.0%, a 300-basis-point increase from the 2022 result. |
Annual Incentive Compensation
The Committee believes these financial and operational targets and strategic objectives represent an appropriate challenge. At year-end, the Committee evaluates performance against these financial, operational, and strategic metrics, and the corresponding quantitative or qualitative targets for each metric that are established at the beginning of the year. Outcomes on individual metrics within each category (financial, operational, and strategic) are viewed collectively and do not have specified weightings. The Committee considers the relative weightings of each category of metrics and, based on its evaluation of each metric, determines its overall assessment of Company results. This assessment determines the final incentive pool funding, the award amount for the CEO, and other NEO awards. The Committee believes this structured approach facilitates a holistic assessment of performance and is the most effective way to measure the CEO’s leadership and the other NEOs’ performance within the context of a dynamic investment industry. Annual Incentive Performance Metrics and Results The performance results for the 2023 financial and operational metrics, the related targets and prior-year results, as well as key accomplishments on the Company’s strategic objectives, are summarized in the tables below. The Committee determined that while the Company continued to execute on its long-term business plan, the difficult market conditions of 2022, which included rising interest rates, inflation, geopolitical tensions, and heightened volatility, continued to result in more conservative investor behavior throughout 2023, leading to continued negative retail flows that affected revenues and earnings. Results for the Financial and Operational Objectives were determined to be below target, and results for the Strategic Objectives were determined to be above expectations.
Annual Incentive Compensation
| 2023 Annual Incentive Performance Metrics and Results | | | | | | | | Results and Targets | | | Variance | | | Metric | 2023 Actual | 2023 Target | 2022 Actual | To Target | % (1) | | Financial Objectives (50%) | | | | | | | Operating margin, as adjusted (2) | 31.6% | 35.0% | 36.9% | (3.4%) | (10%) | | Growth in operating income, as adjusted, versus Financial Peers | 75th percentile | 45th percentile | 75th percentile | (30%) | N/M | | Diluted EPS, as adjusted (2) | $21.93 | $26.00 | $25.74 | ($4.07) | (16%) | | Committee’s Evaluation: The Committee determined the above 2023 results to be below target, noting that these financial results reflected the challenging market environment during much of 2023 that continued to result in more conservative investor behavior. Diluted EPS, as adjusted, was 16% below target; operating margin, as adjusted, was 10% below target; and the Company was in the third quartile for relative growth in operating income, as adjusted. The Committee noted as a mitigating factor that the Company’s 2023 diluted EPS, as adjusted, represented a 10% five-year and 11% three-year CAGR, both ranking second among the Financial Peers and demonstrating management’s continued focus on the long-term growth of the business. | | | | | |
Annual Incentive Compensation
| | Results and Targets | | | Variance of 2023 Actual to Target (1) | | Metric | 2023 Actual | 2023 Target | 2022 Actual | | | Operational Objectives (30%) | | | | | | Gross sales rate for all products (3) | 16.7% | 18.0% | 15.0% | (1.3%) | | Relative investment performance (4) | 40% | 55% | 49% | (15%) | | Total net flow rate (5) | (4.7%) | 1.0% | (6.7%) | (5.7%) | | Committee’s Evaluation: The Committee determined the overall results for the Operational Objectives to be below target, noting the following: The gross sales rate for all products, which was the new sales-related metric for 2023, was 16.7%, a 170-basis-point improvement over the 2022 actual, with increases for retail separate accounts and open-end funds, which partially offset a decline for institutional separate accounts, but still below the 2023 target of 18.0%. The total net flow rate of (4.7%) improved from (6.7%) in 2022 but was below the target of 1.0% and ranked in the bottom quartile among the Financial Peers. Relative investment performance for the three-year period was lower than the target and prior year’s results, as certain strategies, particularly those that had consecutive years of significant outperformance prior to 2022, including quality, aggressive growth, and technology strategies, remained out of favor due to the market environment. The Committee did note that performance for the one-year period was above target levels and performance for the five-year period was modestly below the target level. | | | | |
Annual Incentive Compensation
| (1) Refers to number of percentage points of variance. |
Annual Incentive Compensation
| (2) The referenced non-GAAP measures are described and reconciled to GAAP reported amounts in Appendix A to this Proxy Statement. |
Annual Incentive Compensation
| (3) New metric for 2023. |
Annual Incentive Compensation
| (4) Defined as % of AUM in top 50% of peer group on a three-year basis; analysis covers 58% of the Company’s AUM and excludes certain Retail Separate and Institutional accounts and Structured Products. |
Annual Incentive Compensation
| (5) Annualized net flows divided by beginning-of-period long-term AUM. |
Annual Incentive Compensation
| Strategic Objectives (20%) | | | | | Focus Areas: | Summary of Key Accomplishments | | Product Quality: Maintain a set of attractive investment strategies to meet current and future demand | • Expand investment capabilities • Expand product offerings • Integrate AlphaSimplex strategies • Transition strategies previously managed by an unaffiliated subadviser | • Completed acquisition of AlphaSimplex: — Added a leading manager of liquid alternative investment solutions, with $7.8 billion in AUM at closing on April 1, 2023, and further diversified Company’s asset mix by strategy and client — AlphaSimplex’s flagship trend-following managed futures strategy, a multi-strategy hedge fund replication strategy, and risk-efficient alternative solutions expanded alternative investment capabilities and complemented the Company’s traditional and other liquid alternative offerings — Integrated AlphaSimplex into investment oversight, product support and performance analysis processes • Expanded and managed product offerings to ensure we have strategies that meet changing needs and markets, including: — Introduced Virtus Newfleet Short Duration Core Plus Bond ETF; three Irish Collective Asset-management Vehicles (ICAVs), and additional share classes of Undertakings for Collective Investment in Transferable Securities (UCITS), both for the European Union market • Transitioned three international equity mutual funds that were managed by an unaffiliated subadviser following evaluation of the strategies’ performance • Investment managers delivered strong relative performance across asset classes and products, including: — 86% of retail separate account assets and 67% of institutional assets, outperformed their benchmarks on a five-year basis as of December 31, 2023 | | | | — 38 of 77 rated funds, representing 70% of fund AUM, had a 5- or 4-star Morningstar Rating and 63 rated funds, with 90% of fund AUM, had 5, 4 or 3 stars at December 31, 2023 — Eleven of the Company’s open-end funds with more than $1 billion of AUM had 5 or 4 stars, representing distinctive strategies from seven different managers |
Annual Incentive Compensation
| Strategic Objectives (20%) | | | | | Focus Areas: | Summary of Key Accomplishments | | Distribution Growth: Increase market share in existing channels and capitalize on opportunities in new channels | • Realign retail distribution • Enhance Institutional business development model • Integrate AlphaSimplex products in Institutional and Retail offerings | • Completed a review of the wholesaler coverage model and developed a realigned territory and channel plan to: — Maximize coverage in key financial markets and optimize support for Registered Investment Advisors (RIAs); and — Increase team activity to allow wholesalers to deepen relationships with high-quality financial advisors — Assessed product support models and expanded product specialists, including for exchange-traded fund (ETF) sales — Expanded institutional distribution with new resources • Continued focus on growth in Institutional business resulted in the product representing 37% of AUM as of December 31, 2023 compared with 28% of AUM two years prior • Leveraged retail marketing capabilities, public relations, social media, and distribution relationships, and significant presence in the wirehouse and independent/RIA channels to promote AlphaSimplex’s strategies • Continued to refine and expand advisor targeting and segmentation with additional data and enhanced methodologies — Expanded multimedia and interactive sales collateral with targeted social media, email promotional material, thought leadership, and conference calls to support outreach to financial advisors — Introduced marketing collateral for AlphaSimplex strategies and integrated the firm’s branding, collateral, and digital identity | | Operating Optimization: Provide shared business support services that maximize the effectiveness and leveragability of the business | • Optimize technology infrastructure • Enhance shared operational services model • Optimize legal entity structure for international operations • Integrate AlphaSimplex into shared services model | • Expanded the Company’s data repository to integrate investment management fee application and upgraded the Customer Relationship Management system for retail distribution • Continued to implement the scheduled phase-in of the Company’s fixed income affiliated managers onto a proprietary common operating platform, and completed the build-out of additional performance analytics, risk management and client reporting capabilities |
Annual Incentive Compensation
| Strategic Objectives (20%) | | | | | Focus Areas: | Summary of Key Accomplishments | | | | • Gained operating efficiencies by revising the legal entity structure for international subsidiaries, which streamlined entity management and ensured appropriate structure to support distribution growth • Integrated AlphaSimplex into technology and operations shared services model and transitioned fund administration support and transfer agency service providers for AlphaSimplex’s funds | | Talent Engagement: Attract and retain the talent necessary to effectively execute business objectives | • Enhance on-boarding, training, and engagement • Continue to execute on diversity and inclusion efforts • Integrate AlphaSimplex employees | • Completed an enhanced employee onboarding program and implemented onto a new platform — On-boarded AlphaSimplex employees and integrated team onto Company’s benefits and compensation programs, human resources policies, and Human Resources Information Systems (HRIS) platform • Enhanced training capabilities through HRIS and LinkedIn Learning to develop and assign individual development plans for key talent • Revised retail and institutional sales incentive plans to better align outcomes and drive results given dynamic market conditions • Provided organization-wide diversity and inclusion activities, including: — Each ERG delivered employee-focused events throughout various offices — Created Financial Literacy programs and presentations for community partners who support teens in underrepresented communities — Expanded partnerships with organizations and job boards – including Hive Diversity, a Latin American professionals’ association, Professional Diversity Network, LinkedIn groups, Handshake, and Girls Who Invest – to maintain a pipeline of diverse talent — Developed monthly learning collections for employees based on specific events such as Black History Month, LGBT Pride Month, and Hispanic Heritage Month |
Annual Incentive Compensation
| Strategic Objectives (20%) | | | | | Focus Areas: | Summary of Key Accomplishments | | Financial Management: Manage resources for profitability, growth, risk mitigation, and creation of long-term shareholder value | • Manage capital optimally • Optimize financing structure • Enhance financial assessment tools Integrate AlphaSimplex financial operations | • Returned a meaningful level of capital to shareholders with a total payout of $112 million or 86% of net income attributable to Virtus Investment Partners, Inc. compared with $155 million or 132% 2022. Capital returned to shareholders represented 69% and 79% of net income attributable to Virtus Investment Partners, Inc. as adjusted, in 2023 and 2022, respectively: — Increased quarterly Common Stock dividend by 15% to $1.90 per share, the sixth consecutive annual dividend increase — Repurchased $45 million of Common Stock, or approximately 224,000 shares, at an average price of $201 per share, which reduced shares outstanding by 1.3% since December 31, 2022 • Maintained solid balance sheet with low levels of leverage — Ended the year at $258.8 million of gross debt compared to $261.6 million as of December 31, 2022, with respective gross leverage ratios of 0.9x and 0.8x EBITDA(9) • Increased minority ownership position in Zevenbergen Capital Investments, a manager of strategies offered in Company’s mutual funds • Integrated all financial processes of AlphaSimplex, including AUM and revenue reconciliation, into the Company’s centralized financial platform | | Committee’s Evaluation: The Committee evaluated management’s performance and leadership across each of its five primary Strategic Objectives and the overall qualitative results for strategic priorities and focus areas and determined that they were above expectations, with particular emphasis on: completion of the acquisition of AlphaSimplex and integration of the affiliate into the shared services model; the increase in minority ownership of Zevenbergen Capital Investments; further diversification of AUM by product, investment strategy, and geography; successfully managing continued enhancements to the common operating platform and support for affiliated managers; the Company’s meaningful return of capital, including the sixth consecutive annual increase of the common stock dividend; and management’s continued focus on the long-term growth of the business even during the difficult market environment throughout a substantial portion of the year. | | |
Annual Incentive Compensation
| (9) Defined and calculated in accordance with the company’s credit agreement. |
Annual Incentive Compensation
In determining the funding level of the executive officer incentive awards, the Committee carefully assessed the Company’s performance against the above financial, operational, and strategic objectives, particularly recognizing the revenue decline due to the impact of the challenging market environment in 2022 that continued into the first half of 2023. Based on these evaluations, the Committee determined that the Company’s overall performance was below target and that the annual incentive awards for the executive officers should be funded, in aggregate, at 29% of the maximum potential pool funding of 7% of operating income, as adjusted, before any variable incentive compensation.
Annual Incentive Compensation
| Category | Weight | Committee Assessment | | Financial | 50% | Below Target | | Operational | 30% | Below Target | | Strategic | 20% | Above Expectations | | Overall | 100% | Below Target |
Annual Incentive Compensation
CEO Award Determination
President, Chief Executive Officer and Director
President, Chief Executive Officer and Director For our CEO, the Committee established the annual incentive opportunity to position his target total compensation, which comprises base salary, annual incentive, and long-term incentive, competitively relative to amounts paid to peer group CEOs. For the 2023 performance year, the annual incentive target was $3.2 million, with a range of zero to a maximum of 200% of target. The performance objectives of our CEO are directly aligned with the factors that are considered in determining the annual incentive pool funding, as reviewed in the 2023 Annual Incentive Performance Metrics and Results table, above. Additional information about the results included: Financial Objectives (50%)
President, Chief Executive Officer and Director
The Committee determined that for the overall performance assessment of the CEO for 2023, the quantitative results for the financial and operational objectives were below target, while overall results for strategic priorities were above expectations. Based on the results against these 2023 financial, operational, and strategic goals, the Committee assessed the CEO’s overall performance to be below target. Given the above assessment, the Committee determined that the CEO’s performance would indicate an annual incentive payout of $2.8 million, or 12.5% below the target of $3.2 million and 3.7% above the prior year’s actual annual incentive payout. The following table sets forth the CEO’s annual incentive award opportunities ranging from below threshold to maximum levels and his actual annual incentive payouts for 2023 and 2022.
President, Chief Executive Officer and Director
| CEO Annual Incentive Award Opportunity and Actual Award | | | | | | | Below Threshold | Target (100% payout) | Maximum | Actual | | 2023 | $0 | $3,200,000 | $6,400,000 | $2,800,000 | | 2022 | $0 | $3,200,000 | $6,400,000 | $2,700,000 |
President, Chief Executive Officer and Director
| • | Company financial, operational, and strategic objective results used to determine the executive officer incentive award pool funding and CEO annual incentive award, as noted above (50%); |
Executive Vice President, Chief Operating Officer
| • | 64% of AUM was above their benchmarks as of December 31, 2023 and 59% of AUM of all long-term investment strategies(10) was in the top 50% of the Financial Peers. This was a significant increase from 2022 one-year performance, when 32% of the AUM was in the top 50% of the Peer group; |
Executive Vice President, Chief Operating Officer
| • | 86% of retail separate account assets and 67% of institutional assets were outperforming their benchmarks on a five-year basis. |
Executive Vice President, Chief Human Resources Officer
| • | Managing the long-term succession planning for an affiliate’s chief investment officer (CIO), including the promotion of a portfolio manager (PM) to co-CIO and promotions of two other PMs to new positions as head of research and chief market strategist; |
Executive Vice President, Chief Human Resources Officer
| • | By partnering with Distribution and Finance, members of the Human Resources team under Ms. Peña revised certain sales incentive plans for retail and institutional Distribution to better align outcomes and drive results given dynamic market conditions. |
Executive Vice President, Chief Human Resources Officer
The annual incentive awards for the NEOs listed in the table below were recommended by the CEO and approved by the Committee. The table also provides the annual incentive awards for each NEO, other than the CEO, for the prior year.
Executive Vice President, Chief Human Resources Officer
| Named Executive Officer | Annual Incentive Award for | | | | 2023 | 2022 | | Michael A. Angerthal | $1,800,000 | $1,850,000 | | Barry M. Mandinach | $1,350,000 | $1,325,000 | | Richard W. Smirl | $1,800,000 | $1,850,000 | | Mardelle W. Peña | $515,000 | n/a(a) |
Long-Term Incentive Compensation
Long-Term Incentive Compensation To promote and reward the achievement of the Company’s long-term performance objectives, and to attract, motivate, and retain high-caliber leadership, the Company uses two forms of long-term incentives to align the interests of executives with those of our shareholders:
Long-Term Incentive Compensation
| • | Restricted Stock Units (“RSUs”) – Value increases or decreases with ordinary share performance, aligning the interests of NEOs with shareholders. The three-year vesting period for RSUs strongly supports NEO retention in addition to alignment with shareholders. |
Long-Term Incentive Compensation
| • | Performance Share Units (“PSUs”) – Provide value based on the achievement of results against the Company’s key performance metrics, relative to peers, over a three-year performance period, rewarding achievement of longer-term financial goals while putting the award at risk if threshold results are not achieved. Value is also directly related to share performance, further aligning NEOs’ and shareholders’ interests. |
Long-Term Incentive Compensation
The Company’s practice is to issue equity awards in the form of RSUs and PSUs only, and not in the form of stock options or Stock Appreciation Rights (SARs). Additionally, it is the Company’s practice to grant annual equity awards on a default date following the Committee’s compensation decisions and to grant equity awards to newly hired or promoted executives on the next available open-window default date. Each NEO’s long-term incentive award target, as shown in the 2023 Long-Term Incentive Awards table below, is determined based on the individual’s responsibilities, market-level competitive positioning for similar roles, and consideration of internal alignment. Awards to executive officers are split 50% each to PSUs and RSUs. The performance metrics related to the long-term incentive awards and vesting periods encourage a focus on sustained, long-term results. 2023 Long-Term Incentive Plan In the first quarter of 2023, the Committee approved the 2023 long-term incentive plan (“LTIP”), which provided for 50% of the awards to be granted in PSUs and 50% in time-vested RSUs. The Committee believes the equal allocation between PSUs and RSUs provides an appropriate balance between performance recognition and retention for the NEOs as well as alignment with shareholders. Both of the metrics for the PSU awards are measured over a three-year period. The two equally weighted relative performance metrics are:
Long-Term Incentive Compensation
| • | Relative TSR, which is the cumulative three-year total return of the Company’s Common Stock, including dividends, relative to the Financial Peers and directly relates to our shareholders’ experience as long-term investors in the stock; and |
Long-Term Incentive Compensation
| • | Relative Net Flow Rate of Long-Term AUM, which is the cumulative long-term net asset flows divided by the beginning long-term AUM, relative to the Financial Peers. The Committee believes this metric best captures the Company’s success relative to many of our direct competitors. |
Long-Term Incentive Compensation
Each of these performance measures is designed to ensure that our NEOs are aligned with the interests of shareholders and rewarded for the achievement of the Company’s longer-term business objectives, strategic priorities, and long-term shareholder value creation. Potential payouts for the PSU awards are as follows:
Long-Term Incentive Compensation
| Performance Measure | Weight | Below Threshold | Threshold | Goals Target (a) | Maximum | Payout Opportunity (b) | | Relative Shareholder Return | 50% | <75th percentile | 75th percentile | 45th percentile | 25th percentile+ | 0 – 200% | | Relative Net Flow Rate of Long-Term AUM | 50% | <75th percentile | 75th percentile | 45th percentile | 25th percentile+ | 0 – 200% | | Payout Opportunity | | 0% | 50% | 100% | 200% | |
Long-Term Incentive Compensation
| (a) Above-median performance, achieved at the 45th percentile, is required for target-level payout. |
Long-Term Incentive Compensation
| (b) Actual payout is interpolated on a linear basis between threshold and target, and between target and maximum performance levels. |
Long-Term Incentive Compensation
Payout levels are interpolated on a linear basis for performance outcomes between the target and maximum levels and between the threshold and target levels. If the Company’s absolute TSR is negative, the maximum payout for that performance measure is capped at target. The Committee believes that the use of relative performance metrics for long-term incentive awards provides a degree of rigor that may be otherwise lacking when evaluating absolute results against internally established performance metrics. The Committee also believes that determination of incentive awards based on two performance metrics diversifies the risk associated with any single indicator of performance. Long-Term Incentive Awards and Performance
2023 Long-Term Incentive Awards (a)
2023 Long-Term Incentive Awards (a)
2023 Long-Term Incentive Awards (a)
| NEO | PSU – Relative Three-Year Net Flow Rate of Long-Term AUM (25%) | PSU – Relative Three-Year TSR Ranking (25%) | RSU Time-Vested (50%) | 2023 Long-Term Award Total | | George R. Aylward | $800,000 | $800,000 | $1,600,000 | $3,200,000 | | Michael A. Angerthal | $231,250 | $231,250 | $462,500 | $925,000 | | Barry M. Mandinach | $150,000 | $150,000 | $300,000 | $600,000 | | Richard W. Smirl | $250,000 | $250,000 | $500,000 | $1,000,000 | | Mardelle W. Peña | $87,500 | $87,500 | $175,000 | $350,000 |
2023 Long-Term Incentive Awards (a)
| (a) Reflects grant date fair value of award. |
2023 Long-Term Incentive Awards (a)
The results of the three-year metrics and the final value of the award will not be determined until the first quarter of 2026. 2021 Long-Term Incentive Plans In February 2024, the Committee certified the results for the three-year TSR measure in the 2021 – 2023 performance period as being in the 42nd percentile, which resulted in a payout for this component of those awards at 115% of target. The results for the three-year metric of relative net flow rate of long-term AUM were certified to be at the 92nd percentile, and under the 45th percentile needed for target (100%) funding. Accordingly, this component of those awards had no payout.
2023 Long-Term Incentive Awards (a)
| 2021 LTIP Performance Results | | | | | Performance Metric | Performance Period | Performance Result (a) | Payout% | | Shareholder Return (b) | 2021 –2023 | 42nd percentile | 115% | | Relative Net Flow Rate (c) | 2021 –2023 | 92nd percentile | 0% | | Subtotal | | | 58% | | Time Vested Award (d) | N/A | N/A | 100% | | Total | | | 79% |
2023 Long-Term Incentive Awards (a)
| (a) Performance results are in the form of percentiles; relative goals are 75%, 45% and 25% for threshold, target and maximum, respectively. |
2023 Long-Term Incentive Awards (a)
| (b) Represents the cumulative three-year total return of Common Stock, including dividends, if any, relative to Financial Peers. |
2023 Long-Term Incentive Awards (a)
| (c) Defined as the cumulative long-term asset net flows divided by the beginning long-term assets under management, relative to Financial Peers. |
2023 Long-Term Incentive Awards (a)
| (d) Vested ratably in one-third increments annually in March 2022, 2023 and 2024, respectively. |
Assessment
| • | Balance among short- and long-term incentives, cash and equity, and fixed and variable pay |
Assessment
| • | Multiple performance measures |
Assessment
| • | Limited change-in-control benefits |
Clawback Policy
Clawback Policy In August 2023, the Company modified its clawback policy to comply with the final NYSE rule. Under the revised policy, the Company must recoup any incentive-based compensation received by current or former “officers” (as defined under Rule 16a-1 of the Exchange Act) on or after October 3, 2023 that was erroneously granted, earned or vested based wholly or in part upon the attainment of a material financial reporting measure that has been restated. This includes awards made under the annual and long-term incentive plans, PSUs, and performance-vesting stock options, and restricted stock, but excludes purely time-vested equity awards. The recoupment is to be calculated without regard to any taxes paid and allows for recovery of amounts deferred to non-qualified plans along with interest/earnings therein. Generally, there is no Board or Committee discretion allowed; the clawback is mandatory upon an accounting restatement due to the material noncompliance with any financial reporting requirement under the securities laws, unless the Committee determines that the recovery is impracticable as a result of limited, enumerated factors. The look-back period is the last three completed fiscal years prior to the date the Company is required to prepare a restatement as defined in the policy. With respect to awards granted prior to the adoption of the SEC-required modifications, the Company’s prior clawback provisions would apply.
Severance and Change-in-Control Agreements
Severance and Change-in-Control Agreements Severance The Company provides executives, including the NEOs, with an executive severance arrangement that provides for separation pay and benefits on the condition that the departed executive does not solicit clients or employees, or take other actions that may harm the Company for specified periods following termination. Benefits are tiered based on years of service and calculated using the executive’s base salary and the average of the last two years of annual incentive payments. We believe that having pre-set terms governing an executive’s separation from service tends to reduce the time and effort needed to negotiate individual termination agreements and promotes more uniform and fair treatment of executives. See “Termination Payments and Change-in-Control Arrangements – Executive Severance Allowance Plan.” Change-in-Control Agreement A legacy agreement in place for Mr. Aylward, our CEO, as described under “Termination Payments and Change-in-Control Arrangements – Change-in-Control Agreement with Mr. Aylward,” is the only change-in-control agreement we have in place with any NEO. The agreement was put into effect December 31, 2008 at the time the Company was preparing to become an independent publicly traded company. During any period in which a change in control occurs, the agreement provides that Mr. Aylward is entitled to receive benefits that are designed to ensure management continuity, encourage retention, preserve shareholder value, and enable the CEO to focus on his responsibilities without undue distraction due to concerns related to new owners. These benefits are also designed to assure that in these circumstances, the CEO will not be unduly influenced in his actions by events that could occur following a change in control. Mr. Aylward’s change-in-control agreement includes a “double trigger” provision which means that, in order for Mr. Aylward to receive benefits under the agreement, there must be both a change in control and a termination by the Company without cause or by him for good reason within two years following the change in control. Under the terms of the agreement, Mr. Aylward is entitled to a tax gross-up in the event that the aggregate value of all “excess parachute payments,” as defined under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), upon a change in control exceeds, by 10% or more, the maximum amount that could be paid to him without his incurring an excise tax of 20% under Code Section 4999. If the “excess parachute payments” are less than 10%, then the amounts payable to Mr. Aylward under the change-in-control agreement will be reduced to the maximum amount allowed without triggering Code Section 280G. The gross-up is intended to preserve the level of benefits to be provided under the agreement but includes the 10% threshold to avoid situations where the cost to the Company far exceeds the benefit to Mr. Aylward.
Tax Considerations
Tax Considerations Code Section 280G disallows a company’s tax deduction for what are defined as “excess parachute payments” and Code Section 4999 imposes a 20% excise tax on any person who receives excess parachute payments. In the event that a portion of a potential payment to our CEO under his change-in-control agreement would be classified as an excess parachute payment, we may be denied a federal income tax deduction, and our CEO may become entitled to a tax gross-up payment to compensate him or make him whole in respect of the excise tax. No other NEO or other executive officer has any potential tax gross-up protection in connection with a severance event.
Summary Compensation Table
Summary Compensation Table The following table provides compensation information for our NEOs.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | | George R. Aylward | 2023 | 600,000 | | 3,200,000 | 2,800,000 | 16,500 | 6,616,500 | | President and Chief | 2022 | 600,000 | | 3,200,000 | 2,700,000 | 15,250 | 6,515,250 | | Executive Officer | 2021 | 600,000 | | 3,000,000 | 5,000,000 | 14,966 | 8,614,966 | | Michael A. Angerthal | 2023 | 400,000 | | 925,000 | 1,800,000 | 16,500 | 3,141,500 | | Executive Vice President | 2022 | 395,833 | | 925,000 | 1,850,000 | 15,250 | 3,186,083 | | Chief Financial Officer | 2021 | 375,000 | | 800,000 | 2,550,000 | 14,500 | 3,739,500 | | Barry M. Mandinach | 2023 | 415,000 | | 600,000 | 1,350,000 | 41,500 | 2,406,500 | | Executive Vice President | 2022 | 415,000 | | 600,000 | 1,325,000 | 40,250 | 2,380,250 | | Head of Distribution | 2021 | 415,000 | | 575,000 | 2,000,000 | 39,500 | 3,029,500 | | Richard W. Smirl | 2023 | 425,000 | | 1,000,000 | 1,800,000 | 16,500 | 3,241,500 | | Executive Vice President | 2022 | 425,000 | 250,000 | 1,500,000 | 1,850,000 | 45,250 | 4,070,250 | | Chief Operating Officer | 2021 | 283,333 | 250,000 | 500,000 | 2,000,000 | 142,948 | 3,176,281 | | Mardelle W. Peña | 2023 | 300,000 | | 350,000 | 515,000 | 16,500 | 1,181,500 | | Executive Vice President | | | | | | | | | Chief Human Resources Officer | | | | | | | |
Summary Compensation Table
| (1) The amounts reported in this column represent base salaries earned by each of the NEOs for the listed fiscal year and have not been reduced for deferrals. |
Summary Compensation Table
| (2) The amounts reported in this column reflect (a) for 2022, the first-year anniversary sign-on award for Mr. Smirl, and (b) for 2021, the sign-on award for Mr. Smirl, as previously disclosed. |
Summary Compensation Table
| (3) The amounts reported in this column reflect the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. Additional information, including fair valuation assumptions, concerning the Company’s accounting for its equity awards is included in Note 16 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The amounts in the column reflect rounding. The 2023-2025 LTIP award was granted on March 15, 2023. If fully earned, the 2023 LTIP maximum award for each of our NEOs would be as follows: $4,800,000 for Mr. Aylward; $1,387,500 for Mr. Angerthal; $900,000 for Mr. Mandinach; $1,500,000 for Mr. Smirl; and $525,000 for Ms. Peña. The award comprises 50% RSUs and 50% PSUs, with the PSUs having a performance measurement period ending December 31, 2025, all with a three-year vesting period. The PSUs, measured at December 31, 2025, will convert to RSUs with a value from 0% – 200% of the award granted based on Company performance. The 2022 stock award for Mr. Smirl includes a first-year anniversary sign-on RSU award with a grant-date fair value of $500,000, as previously disclosed. |
Summary Compensation Table
| (4) The amounts reported in this column reflect the actual cash award earned under the annual incentive plan for the respective year. |
Summary Compensation Table
| (5) The amounts reported in this column for 2023 reflect Company contributions to the Company’s 401(k) Plan for each NEO and, for Mr. Mandinach, a paid stipend for reimbursement of housing expenses of $25,000. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards The table below provides information on PSUs, RSUs and equity- and non-equity-based performance awards granted to each of the Company’s NEOs during the fiscal year ended December 31, 2023. All awards were made under our Omnibus Incentive and Equity Plan (the “Omnibus Plan”).
Grants of Plan-Based Awards
| | Grant Date | Date of Compensation Committee Approval | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (1) | | | All Other Stock Awards: Number of Shares of Stock or Units (c)(#)(3) | All Other Stock Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock And Option Awards ($)(4) | | Name | | | Threshold ($) | Target (a)($) | Maximum ($) | Threshold (#) | Target (b)(#) | Maximum (#) | | | | | | George R. Aylward | | | 0 | 3,200,000 | 6,400,000 | | | | | | | | | | 3/15/2023 | 2/21/2023 | | | | 0 | 9,352 | 18,704 | 9,352 | | | 3,199,880 | | Michael A. Angerthal | | | 0 | 1,800,000 | | | | | | | | | | | 3/15/2023 | 2/21/2023 | | | | 0 | 2,702 | 5,404 | 2,704 | | | 924,858 | | Barry M. Mandinach | | | 0 | 1,350,000 | | | | | | | | | | | 3/15/2023 | 2/21/2023 | | | | 0 | 1,752 | 3,504 | 1,755 | | | 599,978 | | Richard W. Smirl | | | 0 | 1,800,000 | | | | | | | | | | | 3/15/2023 | 2/21/2023 | | | | 0 | 2,922 | 5,844 | 2,923 | | | 999,963 | | Mardelle W. Peña | | | 0 | 515,000 | | | | | | | | | | | 3/15/2023 | 2/21/2023 | | | | 0 | 1,022 | 2,044 | 1,023 | | | 349,859 |
Grants of Plan-Based Awards
| (1) The amounts as reflected in column (a) relate to the annual cash incentive opportunities for each NEO. For Mr. Aylward, the amounts reflect the target and maximum payout opportunities. For the other NEOs, because the actual payout is based on the level of performance achieved, the target amount is not determinable and therefore, in accordance with SEC rules, the amount reflected is a representative amount based on 2023 performance. The performance metrics and actual payments are discussed in the Compensation Discussion and Analysis and the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column. |
Grants of Plan-Based Awards
| (2) The 2023 LTIP awards granted on March 15, 2023 reported in these columns represent the award opportunities for each NEO. The two metrics against which performance are measured in this plan are discussed earlier in the Compensation Discussion and Analysis under the heading “2023 Executive Compensation.” |
Grants of Plan-Based Awards
| (3) The 2023 LTIP awards granted on March 15, 2023 reported in this column represent RSUs that vest ratably over three years. |
Grants of Plan-Based Awards
| (4) The grant date fair value is equal to the number of units granted as reflected in columns (b) and (c) multiplied by the closing price of the Company’s stock on the date of grant, which was $171.08 for the LTIP awards granted on March 15, 2023. |
Outstanding Equity Awards at Fiscal Year-End
Outstanding Equity Awards at Fiscal Year-End The table below provides information on the RSUs and PSUs held by each of the Company’s NEOs as of December 31, 2023.
Outstanding Equity Awards at Fiscal Year-End
| | Stock Awards (1) | | | | | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | 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, Units or Other Rights That Have Not Vested ($) | | George R. Aylward | 1,911(2) | 462,003 | | | | | 3,295(3) | 796,599 | | | | | 4,889(4) | 1,181,965 | | | | | 9,352(7) | 2,260,940 | | | | | | | 3,666(5) | 886,292 | | | | | 1,833(6) | 443,146 | | | | | 9,352(8) | 2,260,940 | | | | | 2,338(9) | 565,235 | | Michael A. Angerthal | 510(2) | 123,298 | | | | | 878(3) | 212,265 | | | | | 1,414(4) | 341,849 | | | | | 2,704(7) | 653,719 | | | | | | | 1,059(5) | 256,024 | | | | | 530(6) | 128,133 | | | | | 2,702(8) | 653,236 | | | | | 676(9) | 163,430 | | Barry M. Mandinach | 367(2) | 88,726 | | | | | 631(3) | 152,551 | | | | | 917(4) | 221,694 | | | | | 1,755(7) | 424,289 | | | | | | | 687(5) | 166,089 | | | | | 344(6) | 83,165 | | | | | 1,752(8) | 423,564 | | | | | 438(9) | 105,891 | | Richard W. Smirl | 608(10) | 146,990 | | | | | 1,874(11) | 453,058 | | | | | 1,528(4) | 369,409 | | | | | 2,923(7) | 706,664 | | | | | | | 1,145(5) | 276,815 | | | | | 573(6) | 138,528 | | | | | 2,922(8) | 706,423 | | | | | 731(9) | 176,727 | | Mardelle W. Peña | 201(2) | 48,594 | | | | | 345(3) | 83,407 | | | | | 535(4) | 129,342 | | | | | 1,023(7) | 247,320 | | | | | | | 401(5) | 96,946 | | | | | 201(6) | 48,594 | | | | | 1,022(8) | 247,079 | | | | | 256(9) | 61,891 |
Outstanding Equity Awards at Fiscal Year-End
| (1) All RSU and PSU values are based on $241.76, the closing price of the Company’s Common Stock on December 29, 2023, the last trading day of our most recently completed fiscal year. |
Outstanding Equity Awards at Fiscal Year-End
| (2) This amount represents 17% of the 2021 LTIP award made up of RSUs that vested on March 15, 2024. |
Outstanding Equity Awards at Fiscal Year-End
| (3) This amount represents 25% of the 2021 LTIP award that completed the three-year performance cycle on December 31, 2023 and vested on March 15, 2024. The 2021 LTIP three-year performance results are discussed in Long-Term Incentive Compensation of the Compensation Discussion and Analysis under “2021 Long-Term Incentive Plans.” |
Outstanding Equity Awards at Fiscal Year-End
| (4) This amount represents 33% of the 2022 LTIP award made up of RSUs that vest ratably on March 15, 2024 and 2025. |
Outstanding Equity Awards at Fiscal Year-End
| (5) This amount represents 25% of the 2022 LTIP award made up of PSUs that will convert to RSUs with a value from 0% – 200% of the award granted based on Company performance, following the three-year performance period and, to the extent earned, will vest on March 15, 2025. The number and market value of units reported reflect target level achievement based on the Company’s above threshold level performance. The actual number of units that will be distributed is not yet determinable. |
Outstanding Equity Awards at Fiscal Year-End
| (6) This amount represents 25% of the 2022 LTIP award made up of PSUs that will convert to RSUs with a value from 0% – 200% of the award granted based on Company performance, following the three-year performance period and, to the extent earned, will vest on March 15, 2025. The number and market value of units reported reflect threshold level achievement based on the Company’s threshold level performance. The actual number of units that will be distributed is not yet determinable. |
Outstanding Equity Awards at Fiscal Year-End
| (7) This amount represents 50% of the 2023 LTIP award made up of RSUs that vest ratably on March 15, 2024, 2025 and 2026. |
Outstanding Equity Awards at Fiscal Year-End
| (8) This amount represents 25% of the 2023 LTIP award made up of PSUs that will convert to RSUs with a value from 0% – 200% of the award granted based on Company performance, following the three-year performance period and, to the extent earned, will vest on March 15, 2026. The number and market value of units reported reflect maximum level achievement based on the Company’s above-target level performance. The actual number of units that will be distributed is not yet determinable. |
Outstanding Equity Awards at Fiscal Year-End
| (9) This amount represents 25% of the 2023 LTIP award made up of PSUs that will convert to RSUs with a value from 0% – 200% of the award granted based on Company performance, following the three-year performance period and, to the extent earned, will vest on March 15, 2026. The number and market value of units reported reflect threshold level achievement based on the Company’s threshold level performance. The actual number of units that will be distributed is not yet determinable. |
Outstanding Equity Awards at Fiscal Year-End
| (10) This amount represents the number of RSUs awarded to Mr. Smirl in 2021 as part of his employment offer. The remaining portion of the award will vest on May 3, 2024. |
Outstanding Equity Awards at Fiscal Year-End
| (11) This amount represents the number of RSUs awarded to Mr. Smirl in 2022 as part of his employment offer. The remaining portion of the award will vest ratably on May 3, 2024 and 2025. |
Stock Vested
Stock Vested The table below sets forth the number of shares acquired and the value realized upon the vesting of stock awards during 2023 by each of our NEOs.
Stock Vested
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | George R. Aylward | 36,051 | 6,230,680 | | Michael A. Angerthal | 9,670 | 1,671,165 | | Barry M. Mandinach | 6,899 | 1,192,370 | | Richard W. Smirl | 2,309 | 398,114 | | Mardelle W. Peña | 3,796 | 656,042 |
Stock Vested
| (1) The value realized on vesting was computed by multiplying the number of RSUs that vested by the closing price of our Common Stock on the vesting date. |
Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation The following table reflects each NEO’s 2023 compensation deferrals, Company contributions, earnings, withdrawal activity, and aggregate balance as of December 31, 2023 under the Excess Plan.
Non-Qualified Deferred Compensation
| Name | Executive Contributions in Last FY ($)(1) | Registrant Contributions in Last FY ($)(2) | Aggregate Earnings in Last FY ($)(3) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) | | George R. Aylward | — | — | 36,289 | — | 197,237 | | Michael A. Angerthal | — | — | — | — | — | | Barry M. Mandinach | — | — | — | — | — | | Richard W. Smirl | — | — | — | — | — | | Mardelle W. Peña | — | — | — | — | — |
Non-Qualified Deferred Compensation
| (1) There were no voluntary deferrals of salary in 2023. |
Non-Qualified Deferred Compensation
| (2) There were no Company contributions to the Excess Plan in 2023. |
Non-Qualified Deferred Compensation
| (3) Amounts in this column are not reported as compensation for fiscal year 2023 in the “Summary Compensation Table” since they do not reflect above-market or preferential earnings. |
2023 CEO Pay Ratio
2023 CEO Pay Ratio As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act and Regulation S-K of the Exchange Act, we are providing the following information about the relationship of the annual total compensation of our CEO and the median of the annual total compensation of our other employees for 2023 (our “CEO pay ratio”). Our CEO pay ratio information is a reasonable good faith estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. The ratio of the annual total compensation of our CEO, calculated as described in our Summary Compensation Table, to the median of the annual total compensation of all employees for 2023 was 26.6 to 1. This ratio was based on the following:
2023 CEO Pay Ratio
| • | The annual total compensation of our CEO, in accordance with SEC rules, included earlier in this Proxy Statement in the “Total” column for 2023 in the Summary Compensation Table, was $6,616,500. |
2023 CEO Pay Ratio
| • | The median of the annual total compensation of all employees (other than our CEO), determined in accordance with SEC rules, was $248,550. |
2023 CEO Pay Ratio
Methodology for Determining Our Median Employee. As there has been no significant change to our employee population or to our employee compensation arrangements in the past fiscal year that we reasonably believe would result in a significant change to our pay ratio disclosure, we elected to use the same median employee that was identified in 2022 to calculate the 2022 CEO pay ratio for the purpose of the 2023 CEO pay ratio. In accordance with SEC rules, we selected December 31, 2022 as the date on which to determine our median employee. As of that date we employed 772 employees. The median employee selected was based on our entire workforce, without regard to their location, compensation arrangements, or employment status (full-time versus part-time), and was the employee whose compensation was at the middle of the compensation of our employee population (excluding our CEO). Median Employee Compensation. For purposes of determining the median employee compensation, we used the annual total compensation value in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K as of December 31, 2023 as the compensation measure (including base salary, short- and long-term incentives, retirement plan contributions, and perquisites), the same methodology applied for the 2023 CEO’s annual total compensation.
Pay Versus Performance
Pay Versus Performance In accordance with Item 402(v) of Regulation S-K, we are providing the following information regarding the relationship between compensation of our CEO or Principal Executive Officer (PEO) and our other named executive officers (NEOs) and certain financial performance measures of the Company for the fiscal years ended on December 31 of 2023, 2022, 2021, and 2020. For further information on the Company’s pay-for-performance philosophy and how executive compensation aligns with our performance, refer to the Compensation Discussion and Analysis section of this proxy statement.
Pay Versus Performance
| Pay Versus Performance Table | | | | | | | | | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | Year | Summary Compensation Table Total for PEO (1) | Compensation Actually Paid to PEO (2) | Average Summary Compensation Table Total for non-PEO NEOs (1) | Average Compensation Actually Paid to non-PEO NEOs (2) | Value of initial fixed $100 Investment based on: | | Net Income ($ in millions) | Earnings Per Share (EPS) - Diluted, as adjusted | | | | | | | TSR (3) | Peer Group TSR (3)(4) | | | | 2023 | $6,616,500 | $8,956,197 | $2,492,750 | $2,376,310 | $220.47 | $143.59 | $141.5 | $21.93 | | 2022 | $6,515,250 | ($4,240,418) | $2,835,458 | $1,094,131 | $168.48 | $118.80 | $106.6 | $25.74 | | 2021 | $8,614,966 | $17,309,308 | $3,002,445 | $4,163,311 | $253.35 | $167.07 | $262.8 | $35.85 | | 2020 | $8,005,917 | $22,858,118 | $2,600,151 | $5,277,068 | $182.40 | $121.30 | $120.0 | $16.21 |
Pay Versus Performance
| (1) NEOs included in these columns reflect the following: |
Pay Versus Performance
| Year | PEO | Non-PEO NEOs | | 2023 | Mr. Aylward | Mr. Angerthal, Mr. Mandinach, Ms. Peña, and Mr. Smirl | | 2022 | Mr. Aylward | Mr. Angerthal, Mr. Mandinach, Mr. Smirl, and Wendy J. Hills, Executive Vice President, Chief Legal Officer and General Counsel (retired) | | 2021 | Mr. Aylward | Mr. Angerthal, Ms. Hills, Mr. Mandinach, and Mr. Smirl | | 2020 | Mr. Aylward | Mr. Angerthal, Ms. Hills, Mr. Mandinach, and Francis. G. Waltman, Executive Vice President, Product Management (retired) |
Pay Versus Performance
| (2) In accordance with Item 402(v) requirements, the fair values of unvested and outstanding equity awards were remeasured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the tables below. For PSUs with a relative TSR metric, the fair values as of each measurement date (prior to the end of the performance period) were determined using a Monte Carlo simulation pricing model, with assumptions and methodologies that are generally consistent with those used to estimate fair value at grant under U.S. GAAP. For PSUs with a non-TSR metric, fair values reflect the probable outcome of the performance vesting conditions as of each measurement date. For each fiscal year reflected, the “compensation actually paid” (“CAP”) to the PEO and the average CAP to the non-PEO NEOs reflect the following adjustments made to the total compensation amounts reported in the Summary Compensation Table for each applicable fiscal year, computed in accordance with Item 402(v) of Regulation S-K. |
Pay Versus Performance
| | 2023 | | Summary Compensation Table Total for PEO | $6,616,500 | | Less: Grant Date Fair Value of Equity Awards | ($3,200,000) | | Add: Year-end Fair Value of Equity Awards Granted in the Applicable Fiscal Year that are Outstanding and Unvested | $4,900,093 | | Add: Year-over-Year Change in Fair Value of Equity Awards Granted in Prior Fiscal Years that Vested in the Year | $1,251,044 | | Add: Year-over-Year Change in Fair Value of Outstanding and Unvested Equity Awards | ($1,088,952) | | Add: Value of Dividends on Stock Awards not Otherwise Reflected in Fair Value or Total Compensation | $477,512 | | Compensation Actually Paid to PEO | $8,956,197 |
Pay Versus Performance
| | 2023 | | Average Summary Compensation Table Total for NEOs (other than PEO) | $2,492,750 | | Less: Grant Date Fair Value of Equity Awards | ($665,000) | | Add: Year-end Fair Value of Equity Awards Granted in the Applicable Year that are Outstanding and Unvested | $880,393 | | Add: Year-over-Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year | $214,772 | | Add: Year-over-Year Change in Fair Value of Outstanding and Unvested Equity Awards | ($167,044) | | Less: Value of Awards Granted during Prior Fiscal Year that were Forfeited during current Fiscal Year, determined as of prior Fiscal Year end | ($77,413) | | Add: Value of Dividends on Stock Awards not Otherwise Reflected in Fair Value or Total Compensation | $71,781 | | Average Compensation Actually Paid to NEOs | $2,376,310 |
Pay Versus Performance
| (3) TSR is calculated based on a fixed investment of $100 measured from the market close on December 31, 2019 (the last trading day of fiscal 2019) through and including the end of the year for each year reported in the table. |
Pay Versus Performance
| (4) Peer companies utilized for comparative financial results, as referenced in our Compensation Discussion and Analysis and as shown in Appendix C, are: Affiliated Managers Group, Inc., AllianceBernstein Holding L.P., Artisan Partners Asset Management Inc., BrightSphere Investment Group Inc., Cohen & Steers, Inc., Federated Hermes, Inc., Franklin Resources, Inc., Invesco Ltd., Janus Henderson Group plc, T. Rowe Price Group, Inc., and Victory Capital Management Inc. |
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Non-Employee Director Compensation Paid in 2023
Non-Employee Director Compensation Paid in 2023 We pay non-executive directors an annual retainer for their service on the Board, along with additional retainers reflecting committee service. The compensation package:
Non-Employee Director Compensation Paid in 2023
| • | Reflects the expertise and counsel that each director contributes and their commitment to the Board; |
Non-Employee Director Compensation Paid in 2023
| • | Aligns the interests of directors with those of our shareholders; and |
Non-Employee Director Compensation Paid in 2023
| • | Is competitive with the market. |
Director Compensation
Director Compensation The table below shows the value of all compensation paid to non-employee directors in 2023.
Director Compensation
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | Peter L. Bain | 107,500 | 107,481 | 214,981 | | Susan S. Fleming | 113,750 | 113,730 | 227,480 | | Paul G. Greig | 112,500 | 112,480 | 224,980 | | Timothy A. Holt | 186,250 | 186,217 | 372,467 | | Melody L. Jones | 116,250 | 116,230 | 232,480 | | W. Howard Morris | 107,500 | 107,481 | 214,981 | | Stephen T. Zarrilli | 107,500 | 107,481 | 214,981 |
Director Compensation
| (1) Each then-serving director receiving compensation was awarded shares of Common Stock on May 17, 2023. The full grant date fair value of each such award computed in accordance with FASB ASC Topic 718 is reflected in the table above. Additional information concerning the Company’s accounting for its equity awards is included in Note 16 of the Notes to Consolidated Financial Statements in our 2023 Form 10-K. |