DEF 14A of Hercules Capital, Inc.
Filed Apr 23, 2024 · FY20230001193125-24-107052
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
| Potential Payments upon Termination or Change in Control | 33 | | CEO Pay Ratio | 35 | | Pay vs. Performance | 36 | | Independent Director Compensation | 38 | | Equity Compensation Plan Information | 39 | | PROPOSAL 2: ADVISORY VOTE TO APPROVE THE COMPANY’S NAMED EXECUTED OFFICER COMPENSATION | 40 | | PROPOSAL 3: AUTHORIZATION OF THE COMPANY TO SELL OR ISSUE SHARES OF ITS COMMON STOCK AT A PRICE BELOW ITS THEN-CURRENT NAV PER SHARE, SUBJECT TO THE CONDITIONS SET FORTH IN PROPOSAL 3 | 42 | | Overview and Conditions of Below-NAV Sales | 43 | | Reasons to Conduct Below-NAV Sales | 44 | | Key Stockholder Considerations | 45 | | Dilutive Effect of Below-NAV Sales on Stockholders | 45 | | Trading History of the Shares | 46 | | Tables | 47 | | PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANT FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024 | 50 | | Background | 51 | | Key Stockholder Considerations | 51 | | Principal Accountant Fees and Services | 51 | | Pre-Approval Policy | 52 | | AUDIT COMMITTEE REPORT | 53 | | STOCKHOLDER PROPOSALS | 54 | | QUESTION AND ANSWERS | 55 |
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| Biographical Summary Table (Directors) |
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| Name, address and age(1) | Position(s) held with Company | Term of office and length of time served | Principal occupation(s) during the past 5 years | Other directorships held by Director or Director Nominee during the past 5 years | | Robert P. Badavas (71) | Lead Independent Director | Class I Director since 2006 | President of Petros Ventures, Inc. from November 2009 to December 2011 and since September 2016. | Polyvinyl Films, Inc. since 2019. | | Pam Randhawa (55) | Independent Director | Class I Director since 2021 | Founder and Chief Executive Officer of Empiriko Corporation since 2010. | Massachusetts Life Science Center since 2016 and Massachusetts Biotechnology Council since 2017. | | Gayle Crowell (73) | Director Nominee and Independent Director | Class II Director since 2019 | Senior Operating Consultant at Warburg Pincus from 2001 to 2019; Independent Business Consultant since 2019. | Envestnet (ENV) since 2016, Pliant Therapeutics since 2019, GTreasury from 2021 to 2023, Instinct Science since 2022, Centerbase since 2022, Fexa since 2023, Dude Solutions from 2014 to 2019 and Resman from 2020 to 2021. | | Thomas J. Fallon (62) | Director Nominee and Independent Director | Class II Director since 2014 | Executive Vice President - Business Development of Sanmina Corporation since 2022, Chief Executive Officer of Infinera Corporation from 2010 to 2020. | Infinera Corporation from 2010 to 2020. | | Nikos Theodosopoulos (61) | Director Nominee and Independent Director | Class II Director since 2023 | Independent director, advisor, consultant and angel investor in the technology industry. | Arista Networks from 2014 to 2023, Driving Management Systems from 2018 to 2022, Harmonic from 2015 to 2022, ADVA Optical Networking from 2014 to 2022. Adtran Holdings Board Member since 2022 | | DeAnne Aguirre (63) | Independent Director | Class III Director since 2022 | North America Managing Partner and Health Industries Leader at Strategy&, a PwC Network Company from 2015 to 2020. | Cisive since 2022; EPAM Inc. since 2023. | | Wade Loo (63) | Independent Director | Class III Director since 2021 | Investor Committee Member at Mapletree Europe Income Trust since 2021 and Investment Committee Member at Mapletree US Commercial Income Trust since 2021. | Silicon Valley Community Foundation 2015 to 2023, University of Denver – Daniels College of Business since 2015, University of Denver Board of Trustees since 2023, Computer History Museum since 2023, JobTrain from 2006 to 2019. | | Scott Bluestein (45) | Interested Director, Chief Executive Officer and Chief Investment Officer | Class III Director since 2019 | Chief Investment Officer of Hercules from 2014; Interim Chief Executive Officer from March 2019 to July 2019; Director and Chief Executive Officer since July 2019. | Gibraltar Equipment Finance since 2023, Gibraltar Business Capital since 2019, Tectura Corporation since 2017, Sungevity from 2017 to 2020. |
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| (1) The address for each officer and director is c/o Hercules Capital, Inc., 1 N B Street, Suite 2000, San Mateo, California 94401. |
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| (2) No director otherwise services as a director of an investment company subject to the 1940 Act. |
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| Biographical Information of Director Nominees |
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| GAYLE CROWELL ✓ Independent Director Age: 73 Board Member since 2019 Term expires in 2024 Committee Memberships: ● Compensation (Chair) ● Governance | Business Experience ● Independent Business Consultant since 2019 ● Senior Operating Consultant, Warburg Pincus, a leading global private equity firm (2001-2019) ● President and CEO, RightPoint Software (acquired by E.piphany), customer relationship development and management software (1998-2000) ● Senior Vice President and General Manager, ViewStar (acquired by Mosaix), network-based process automation software encompassing workflow automation, document image processing and information management company (1994-1998) ● Group Director, Oracle Corporation, computer technology corporation (1990-1992) ● Vice President of Sales, DSC, networking company (1989-1990) ● Vice President of Sales, Cubix Corporation, designer, engineer and manufacturer of computer hardware systems (1985-1989) Public Directorships ● Envestnet (member of audit, compensation and nominating and governance committees), a leading provider of integrated portfolio, practice management, and reporting solutions to financial advisors and institutions (since 2016) ● Pliant Therapeutics (chair of information security and compliance committee and nominating and governance committee, member of compensation committee and audit committee), a clinical stage biopharmaceutical company that discovers, develops and commercializes novel therapies for the treatment of fibrosis (since 2019) Private Directorships ● Executive Chair, Instinct Science, a provider of cloud-based, electronic medical records and practice management systems for the modern veterinary office and hospital (since 2022) ● Executive Chair, Centerbase, a law practice software platform that allows law firms to support the management and growth of their firms with configurable legal operations and client lifecycle management software solutions (since 2022). ● Lead Director, Fexa, a provider of innovative facility management software tools that cater to the needs of retailers, restauranteurs, and service providers (since 2023) Prior Directorships ● Lead Director, GTreasury, an integrated digital treasury management platform that allows companies to manage liquidity risk, market risk, counter party and credit risk (2021-2023) ● Dude Solutions, the leading provider of cloud-based operations management software to optimize facilities, assets and workflow (2014-2019) ● Lead Director, Resman, a property management platform of owners, operators and investors across the multifamily, affordable and commercial real estate marketplaces (2020-2021) ● MercuryGate, a developer of a transportation management system and offers a software that enables shippers, carriers, brokers, freight forwarders and third-party logistics providers to plan, monitor and track shipments (2014-2018) ● Lead Director, Yodlee, the leading data aggregation and data analytics platform, helps consumers live better financial lives through innovative products and services delivered through financial institutions and FinTech companies (2002-2015) ● Coyote Logistics, a third-party logistics provider that combines a centralized marketplace with freight and transportation solutions to empower your business (2011-2015) ● SRS, an automotive dealer software designed to increase fixed operations profitability, provide customer multipoint vehicle reports and increase customer loyalty and retention (2004-2013) ● TradeCard, a SaaS collaboration product that was designed to allow companies to manage their extended supply chains including tracking movement of goods and payments (2009-2013) Other Experience ● Member, National Association of Corporate Directors (NACD) ● Member, Women Corporate Directors (WCD) Education ● BS from University of Nevada Reno |
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| KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Significant experience in venture capital and technology. ✓ Banking/Financial Services. Held a variety of key executive and management positions at large global financial institutions. Significant experience as a board member and board committee chair overseeing financial services regulatory compliance. ✓ Leadership/Strategy. Extensive experience as a director and executive with broad operational experience in investments and finance. ✓ Finance, IT and other Business Processes. Extensive experience in commercial lending, sales marketing as well as other key business processes ✓ Enterprise Risk Management. Experience in managing enterprise risk as CEO. Significant experience in cybersecurity and regulatory oversight as a director and committee chair and as a career technologist with cybersecurity software experience. | ✓ Governance. Experienced in both corporate governance and executive compensation for both public and private companies. ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and/or non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A both in identifying targets and evaluating potential targets, as well as post-acquisition integration activities. ✓ Cybersecurity. Experience in cybersecurity, a certification or degree in cybersecurity, or the knowledge, skills or other background in cybersecurity, including, for example, in the areas of security policy and governance, risk management, security assessment, control evaluation, security architecture and engineering, security operations, incident handling, or business continuity planning. |
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| THOMAS J. FALLON ✓ Independent Director Age: 62 Board Member since 2014 Term expires in 2024 Committee Memberships: ● Governance (Chair) ● Compensation | Business Experience ● Executive Vice President - Business Development, Sanmina Corporation, an American electronics manufacturing services provider (2022-present) ● Chief Executive Officer, Infinera Corporation, a global supplier of innovative networking solutions (2010-2020) ● Chief Operating Officer, Infinera Corporation (2006-2009) ● Vice President of Engineering and Operations, Infinera Corporation (2004-2006) Other Business Experience ● Vice President, Corporate Quality and Development Operations of Cisco Systems, Inc. (2003-2004) ● General Manager of Cisco Systems’ Optical Transport Business Unit, VP Operations, VP Supply, various executive positions (1991-2003) Prior Directorships ● Infinera Corporation, a global supplier of innovative networking solutions (2009-2022) ● Piccaro, a leading provider of solutions to measure greenhouse gas concentrations, trace gases and stable isotopes (2010-2016) Other Experience ● Member, Engineering Advisory Board of the University of Texas at Austin ● Member, President’s Development Board University of Texas ● Member, Technical Advisory Board Quantumscape Education ● Bachelor’s degree in Mechanical Engineering from the University of Texas at Austin ● Master’s degree in Business Administration from the University of Texas at Austin |
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| KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Significant experience in venture capital and technology. ✓ Leadership/Strategy. Extensive experience as a director and executive with broad operational experience in investments and finance. ✓ Finance, IT and other Business Processes. Extensive experience in commercial lending, sales marketing as well as other key business processes ✓ Enterprise Risk Management. Experience in managing enterprise risk as CEO. | ✓ Governance. Experienced in both corporate governance and executive compensation for both public and private companies. ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and/or non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A both in identifying targets and evaluating potential targets, as well as post-acquisition integration activities. |
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| NIKOS THEODOSOPOULOS ✓ Independent Director Age: 61 Board Member since 2023 Term expires in 2024 Committee Memberships: ● Audit | Business Experience ● Independent director, advisor, consultant and angel investor in the technology industry ● Various capacities with UBS, a provider of financial services, most recently as managing director of technology equity research (1995-2012) ● Senior equity research analyst for Bear, Stearns & Co. Inc., an investment banking firm that was acquired in 2008 by JPMorgan Chase (1994-1995) ● Various capacities at AT&T Bell Laboratories and AT&T Network Systems a provider of communications equipment (1985-1994) Public Company Directorships ● Adtran Holdings, a provider of networking and communications equipment (2022-present) Prior Public Company Directorships ● Arista Networks (member of audit and nominating and corporate governance committees), a provider of data-driven, client to cloud networking for large data center/AI, campus and routing environments (2014-2023) ● Harmonic (chair of audit committee), a provider of virtualized broadband and video streaming solutions (2015-2022) ● ADVA Optical Networking (chair of supervisory board and nomination and compensation committee; member of audit committee), a telecommunications vendor providing network equipment for data, storage, voice and video services (2014-2022) Prior Private Company Directorships ● Driving Management Systems (d/b/a Motion Intelligence), a producer of distracted-driving prevention solutions (2018-2022) Other Experience ● Member at NT Advisors LLC (2012-Present) ● Member, Columbia Engineering Entrepreneurship Advisory Board (2013-2021) Education ● MBA from NYU Stem School of Business ● Master of Science, Electrical Engineering from Stanford University ● Bachelor of Science Electrical Engineering from Columbia University |
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| KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Experience in venture capital-backed companies in general, and our specific portfolio company industries: technology, life sciences and middle market. ✓ Banking/Financial Services. Experience with banking, mutual fund or other financial services industries, including regulatory experience and specific knowledge of the Securities Act. ✓ Finance, IT and other Business Processes. Extensive experience as an audit committee chair overseeing finance, accounting and internal controls, IT and other key business processes. | ✓ Enterprise Risk Management. Experience with enterprise risk management processes and functions, including compliance and operations. ✓ Governance. Experience with corporate governance issues, particularly in publicly-traded companies. ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A, both in identifying targets and evaluating activities. |
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| Biographical Information of Directors |
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| DEANNE AGUIRRE ✓ Independent Director Age: 63 Board Member since 2022 Term expires in 2025 Committee Memberships: ● Governance ● Compensation | Business Experience ● North America Managing Partner and Health Industries Leader at Strategy&, a PwC Network Company, and Healthcare Strategy Leader for the strategy consulting business ● Various positions, including Technology Leader of Southern Cone based in Brazil, and Co-leader Organization and Strategic Leadership Business at Booz & Co./Booz Allen Hamilton Public Directorships ● EPAM Inc. (NYSE: EPAM) (member of nominating and corporate governance committee), a leading digital transformation services and product engineering company, since 2023 Private Directorships ● Director, Cisive, a global technology-enabled compliance solutions company, since 2022 Prior Directorships ● Director, Global board of directors at Booz & Co./Booz Allen Hamilton from 1998 to 2007 ● Director, Stanford University Sloan Advisory Board from 1994 to 2005 Director, Catalyst Global Advisory Board from 2011 to 2013 ● Director, Catalyst Western Region Advisory Board from 2005 to 2011 Education ● Master’s degree in Science, Business Administration from Stanford University ● Bachelor’s degree in Science, Mathematics with an emphasis in Computer Science from Fort Hays State University |
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| KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Leadership/Strategy. Extensive experience as a director and executive with broad operational experience in investments and finance. ✓ Finance, IT and other Business Processes. Extensive experience in commercial lending, sales marketing as well as other key business processes ✓ Governance. Experienced in both corporate governance and executive compensation for both public and private companies. | ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and/or non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A both in identifying targets and evaluating potential targets, as well as post-acquisition integration activities. |
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| WADE LOO ✓ Independent Director Age: 63 Board Member since 2021 Term expires in 2025 Committee Memberships: ● Audit (Chair) ● Compensation | Business Experience ● Audit partner for multinationals and venture-backed entities, with experience working with companies in the areas of technology, financial and life sciences ● Partner in Charge of KPMG LLP’s Northern California Audit Business Unit, whose territory includes the Silicon Valley and San Francisco offices ● Certified Public Accountant (California) Prior Public Company Directorships ● Guidance Software - Board Member and Audit Committee Chair (2016-2017) ● Kofax Ltd. - Board Member and Audit Committee Chair (2011-2015) Private and Non-Profit Directorships ● Member of the Board of Trustees at University of Denver (2023-present) ● Board Member at Computer History Museum, a not-for-profit museum (2023-Present) ● Investor Committee Member at Mapletree Europe Income Trust and Mapletree US Income Commercial Trust, both Private Real Estate Investment Trusts (2021-present) ● Board Member (2015-2023), Audit Committee Chair (2015-2019) and Board Chair (2021-2023) at the Silicon Valley Community Foundation ● Executive Advisory Board Member at the University of Denver—Daniels College of Business (2015-present) and Board Chair (2018-2021) ● JobTrain—Board Member (2006-2018), Audit Committee Chair (2006-2010) and Board Chair (2011-2017) Other Experience ● Led KPMG’s Audit Committee Institute activities in Silicon Valley, which provides audit committee and governance best practices to audit committee chairs Education ● Bachelor’s degree in Accounting from the University of Denver |
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| KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Experience in venture capital-backed companies in general, and our specific portfolio company industries: technology, life sciences and middle market. ✓ Banking/Financial Services. Experience with banking, mutual fund or other financial services industries, including regulatory experience and specific knowledge of the Securities Act. ✓ Leadership/Strategy. Both as partner at KPMG and board chair at various organizations, responsible for leading large teams and establishing and executing successful business strategies. ✓ Finance, IT and other Business Processes. Extensive experience as an audit partner and audit committee chair related to finance, accounting and internal controls, IT and other key business processes | ✓ Enterprise Risk Management. Experience with enterprise risk management processes and functions, including compliance and operations. ✓ Governance. Experience with corporate governance issues, particularly in publicly-traded companies. ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A, both in identifying targets and evaluating potential targets, as well as post-acquisition integration activities. |
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| SCOTT BLUESTEIN Interested Director, Chief Executive Officer and Chief Investment Officer Age: 45 Board Member since 2019 Term expires in 2025 | Mr. Bluestein is the only Interested Director on the Board, as he also serves as the Company’s Chief Executive Officer and Chief Investment Officer. He joined the Company as Chief Credit Officer in 2010 and was promoted to Chief Investment Officer in 2014. While continuing to serve in that role, he was elected as Interim Chief Executive Officer in March 2019 and Chief Executive Officer and President in July 2019. Additional Business Experience ● Founder and Partner, Century Tree Capital Management (2009-2010) ● Managing Director, Laurus-Valens Capital Management, an investment firm specializing in financing small and microcap growth-oriented businesses through debt and equity securities (2003-2009) ● Member of Financial Institutions Coverage Group focused on Financial Technology, UBS Investment Bank (2000-2003) Private Directorships ● Director, Tectura Corporation since 2017. ● Director, Gibraltar Business Capital since 2019. ● Director, Gibraltar Equipment Finance since 2023 Past Directorships ● Director, Sungevity from 2017 – 2020 Education ● Bachelor’s degree in Business Administration from Emory University |
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| ROBERT P. BADAVAS ✓ Independent Director (Board Chair) Age: 71 Board Member since 2006 Term expires in 2026 Committee Memberships: ● Audit | Business Experience ● President, Petros Ventures, Inc., a management and advisory services firm (2009-2011 and since 2016) ● President and Chief Executive Officer at TAC Worldwide, a multi-national technical workforce management and business services company (2005-2009) ● Chairman and CEO of PlumChoice, Inc., a technology services and software company (2011-2016) ● Executive Vice President and Chief Financial Officer, TAC Worldwide (2003-2005) ● Senior Partner and Chief Operating Officer, Atlas Venture, an international venture capital firm (2001-2003) ● Chief Executive Officer at Cerulean Technology, Inc., as venture capital backed wireless application software company (1995-2001) ● Certified Public Accountant, PwC (1974-1983) Public Directorships ● Constant Contact, Inc., including chairman of the audit committee, a provider of email and other engagement marketing products and services for small and medium sized organizations, acquired by Endurance International Group Holdings, Inc. (2007-2016) Private Directorships ● Polyvinyl Films, Inc., director, a leading manufacturer and distributer of food-grade film products for consumer, retail, and food-service markets worldwide (since 2019) Prior Directorships ● PlumChoice, a venture-backed technology, software and services company ● RSA Security, a computer and network security company – publicly traded until acquired by EMC ● Arivana, Inc., a telecommunications infrastructure company—publicly traded until its acquisition by SAC Capital ● On Technology, an IT software infrastructure company—publicly traded until its acquisition by Symantec ● Renaissance Worldwide; an IT services and solutions company—publicly traded until its acquisition by Aquent Other Experience ● Trustee Emeritus, Bentley University (2005-2019); Board Chair (2018-2019); Vice Chair (2013-2018) ● Board of Trustees Executive Committee and Corporate Treasurer, Hellenic College/Holy Cross School of Theology (2002-2018) ● Trustee Emeritus, The Learning Center for the Deaf; Board Chair (1995-2005) ● Master Professional Director Certification, American College of Corporate Directors ● National Association of Corporate Directors Certification ● Annunciation Greek Orthodox Cathedral of New England, Parish Council President (2016-2022) Education ● Bachelor’s degree in Accounting and Finance from Bentley University |
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| KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Extensive experience in software, business and technology enabled services and venture capital. ✓ Leadership/Strategy. Significant experience as a senior corporate executive in private and public companies, including tenure as chief executive officer, chief financial officer and chief operating officer ✓ Finance, IT and Other Business Strategy and Enterprise Risk Management. Prior experience as a CEO directing business strategy and as a CFO directing IT, financing and accounting, strategic alliances and human resources and evaluation of enterprise risk in such areas. | ✓ Enterprise Risk Management. Experience in managing enterprise risk as CEO. ✓ Governance. Extensive experience as an executive and director of private and public companies with governance matters. ✓ Strategic Planning. Experience with senior executive level strategic planning for publicly-traded companies, private companies and/or non-profit companies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A both in identifying targets and evaluating potential targets, as well as post-acquisition integration activities. |
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| PAM RANDHAWA ✓ Independent Director Age: 55 Board Member since 2021 Term expires in 2026 Committee Memberships: ● Audit ● Governance | Business Experience ● CEO and Founder of Empiriko Corporation, a biotechnology startup (2010-present) ● Co-Founder, AgroGreen Biofuels, renewable energy startup (2010-2012) ● Vice President, Strategic Development, Sermo, a healthcare technology company (2008-2009) ● Vice President, Marketing, Phase Forward, a life sciences technology company (2005-2007) Other Business Experience ● Director of Massachusetts Life Sciences Center, a Massachusetts Investment Fund to promote the life sciences sector (2016-present) ● Chair and Director of Massachusetts Biotechnology Council, an industry association for biotechnology (2017-present) Non-Profit/Government Leadership ● Member, The World Economic Forum’s Global Future Council on Biotechnology (2018-2020) ● Chair, National Science Foundation and National Institution of Justice, Industrial Advisory Board of Center for Advanced Research in Forensic Science (2019-2020) ● Member, the Economic Development Planning Council for the State of Massachusetts (2019) ● Member, Boston Women’s Workforce Council, a public-private partnership between the Mayor’s Office and Greater Boston employers dedicated to eliminating the gender/racial wage gap (2016-2020) Education ● BA in Economics from University of Rajasthan ● MPM from Carnegie Mellon University |
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| KEY QUALIFICATIONS AND EXPERIENCE | | | ✓ Client Industries. Experience leading and advising VC-backed companies generally and in our portfolio company industries. ✓ Finance, IT and Other Business Processes. Experience related to finance, IT, sales, business development, marketing, or other key business processes. ✓ Governance. Experience with corporate governance issues Strategic Planning. Experience with senior executive-level strategic planning for publicly-traded companies, private companies, non-profit and government. | ✓ Enterprise Risk Management. Experience with enterprise risk management processes and functions, including compliance and operational. ✓ Leadership/Strategy. Experience leading teams and establishing and executing successful business strategies. ✓ Mergers and Acquisitions. Experience with public and/or private company M&A both in identifying targets and evaluating potential targets, as well as post-acquisition integration activities. |
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| Officers Who Are Not Directors(1) |
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| SETH H. MEYER Chief Financial Officer Age: 55 | Mr. Meyer joined the Company in 2019 as Chief Financial Officer. He oversees the financial and accounting functions of the Company and serves as an officer of select subsidiaries. Additional Business Experience ● Chief Financial Officer, Swiss Re Corporate Solutions Ltd. (2011-2017) ● Managing Director, Swiss Re, serving as Group Tax Director, Finance Division Operating Officer and Head of Finance Large Transactions (2000-2011) ● Senior Tax Manager, PricewaterhouseCoopers LLP (1997-2000) ● Tax Manager, Jackson National Life Insurance Company (1994-1997) ● Senior Tax Accountant, KPMG Peat Marwick (1992-1994) ● Tax/Audit Assistant, Burke & Stegman CPAs (1990-1992) Education ● Bachelor’s degree in Accounting from Michigan State University ● Master’s degree in Business Administration in Professional Accounting from Michigan State University |
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| CHRISTIAN FOLLMANN Chief Operating Officer Age: 41 | Mr. Follmann first joined the Company in 2006 and was promoted to Chief Operating Officer in 2022. He oversees the operations function for the Company and serves as an officer of select subsidiaries. Additional Business Experience ● Analyst, Hercules Capital, Inc. (2006 – 2009) ● Associate, Hercules Capital, Inc. (2009 – 2011) ● Director of Investment Analysis and Strategy, Hercules Capital, Inc. (2011 – 2016) ● Senior Director of Operations and Strategic Projects, Hercules Capital, Inc. (2016 – 2022) Education ● Bachelor’s degree in International Business from Northeastern University ● Bachelor’s degree in International Management from Reutingen University |
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| KIERSTEN ZAZA BOTELHO Chief Legal Officer Chief Compliance Officer and Corporate Secretary Age: 38 | Ms. Botelho joined the Company in 2022 and serves as Chief Legal Officer Chief Compliance Officer and Corporate Secretary. She oversees the legal and compliance function for the Company and serves as secretary for the Company and an officer of select subsidiaries. Additional Business Experience ● Associate General Counsel, Bain Capital Credit, LP (2019-2021) ● Vice President, Legal, BlackRock, Inc. (2017-2019) ● Associate, Skadden, Arps, Slate, Meagher & Flom LLP (2013-2017) Education/Other ● Bachelor’s degree in International Relations from Boston University ● Juris Doctor from Boston University School of Law ● Member, State Bar of Massachusetts |
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| (1) Biographical information of Scott Bluestein, our Interested Director, Chief Executive Officer and Chief Investment Officer, is included on page 17. |
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| COMPENSATION DISCUSSION AND ANALYSIS |
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This Compensation Discussion and Analysis discusses our NEO compensation program generally, as well as the compensation paid to the following named executive officers (“NEOs”) who served during the fiscal year ended December 31, 2023:
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| Scott Bluestein | Seth H. Meyer | Christian Follmann | Kiersten Zaza Botelho | | Chief Executive Officer Chief Investment Officer | Chief Financial Officer | Chief Operating Officer | Chief Legal Officer Chief Compliance Officer Corporate Secretary |
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Key Sections and Definitions
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| Key Sections | Page | | Introduction | 22 | | Compensation Determination Process | 22 | | Role of the Independent Compensation Consultant | 23 | | Peer Group Composition, Data and Review | 23 | | Assessment of Company and Individual Performance, Pay-for-Performance Alignment and Other Considerations | 24 | | Risk Assessment of the Compensation Program | 25 | | The NEO Compensation Program | 26 | | Compensation Philosophy | 26 | | Regulatory Limitations on Compensation | 26 | | Compensation Elements | 27 | | Clawback Policy for Section 16 Officers | 29 |
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AASR means average annual shareholder return Equity Plan means the Company’s Amended and Restated 2018 Equity Incentive Plan LTRSU means long term restricted stock unit. Peer Group means the peers companies listed on the table on page 23 PSU and Retention PSU means performance stock unit and retention performance stock unit ROE means return on equity ROIC means return on invested capital ROAA means return on average assets RSA means restricted stock award RSU means restricted stock unit TSR means total stockholder return
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Executive compensation determinations are made in accordance with strong corporate governance practices and are subject to Board-level oversight. The Compensation Committee provides primary oversight over our compensation programs, including the design and administration of executive compensation plans, assessment and setting of corporate performance goals, as well as individual performance metrics, and the approval of executive compensation. The Compensation Committee also retains an independent compensation consultant, and where appropriate, discusses compensation-related matters with our CEO, as it relates to the other NEOs. The Compensation Committee operates pursuant to a charter that sets forth its mission, specific goals and responsibilities. A key component of the Compensation Committee’s goals and responsibilities is to annually evaluate, approve or make recommendations to our Board regarding the compensation of our NEOs, and to review their performance relative to their compensation to ensure that NEOs are compensated in a manner consistent with our compensation philosophy. The Compensation Committee also evaluates and makes recommendations to the Board regarding the compensation of the Independent Directors and administers the Company’s Equity Plan. The Compensation Committee may not delegate its responsibilities; however, it may and does request, receive and evaluate input from an independent compensation consultant and our CEO. Our CEO, Scott Bluestein, does not participate in any deliberations regarding his own compensation but reviews with the Committee, on at least an annual basis, the performance of each of the other NEOs. At least quarterly, our CEO discusses with the Compensation Committee Chair the Company’s operating performance relative to key performance objectives and evaluates the discretionary cash bonus pool for our NEOs. Our CEO makes recommendations to the Compensation Committee with respect to changes to base salaries, annual bonuses and equity awards based on his reviews of the other NEO’s individual performance and the Company’s overall absolute and relative performance. Our CEO does not attend meetings of the Compensation Committee unless invited by the Committee Chair.
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| Role of the Independent Compensation Consultant |
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| The Compensation Committee has engaged FW Cook as its Independent Compensation Consultant to assist the Compensation Committee and provide advice on a variety of compensation matters relating to CEO and NEOs compensation, peer group selection, compensation program best practices, market and industry compensation trends, improved program designs, market competitive director compensation levels and regulatory developments. FW Cook reports directly to the Compensation Committee and does not provide any other services to the Company. The Compensation Committee has assessed the independence of FW Cook pursuant to applicable NYSE rules and has concluded that FW Cook’s work for the Compensation Committee does not raise any conflict of interest. | INDEPENDENT COMPENSATION CONSULTANT DUTIES: • Providing information, research, market analysis and recommendations with respect to our NEO and Independent Director compensation programs, including evaluating the components of those programs and the alignment of those programs with Company performance. • Advising on the design of the NEO and Independent Director compensation programs and the reasonableness of individual compensation levels and awards, including in the context of business and stockholder performance and the importance of individual officers to the Company’s success. • Providing advice and recommendations that incorporate both market data and Company-specific factors. • Assisting the Compensation Committee in making compensation determinations for NEOs after the evaluation of, among other things, Company and individual performance, market compensation levels and recommendations by the CEO. • Advising the Compensation Committee on certain other compensation matters, including peer group selection and regulatory developments. |
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| Peer Group Composition, Data and Review |
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To determine the competitiveness of executive compensation levels, the Compensation Committee analyzes a peer group of internally managed BDCs, financial services companies and real estate investments trusts, or REITs. The Peer Group analyzed in connection with 2023 compensation determinations is set forth below. The Compensation Committee believes the Peer Group reflects the labor market for our officer and employee talent, has a similar investor base, and, like the Company, the BDCs and REITs are pass-through entities with the majority of earnings required to be distributed to stockholders as a dividend. The Compensation Committee does not specifically benchmark the compensation of our NEOs against that paid by other companies. The Peer Group was used as one of multiple factors in determining the annual cash bonus awards made with respect to 2023 (but paid in 2024).
BIOGRAPHICAL INFORMATION
| Peer Group | | | | | BDCs | Financial Services | Real Estate Investment Trusts | | | Capital Southwest Main Street Capital Trinity Capital | AllianceBernstein Artisan Partners Cohen & Steers Moelis & Company Victory Capital WisdomTree | Arbor Realty BrightSpire Capital Chimera Investment Hannon Armstrong Ladder Capital LXP Industrial | MFA Financial New York Mortgage Redwood Trust Sabra Health Care Spirit Realty Two Harbors |
BIOGRAPHICAL INFORMATION
| | Return on Average Assets (ROAA) (excl. cash) | | Return on Equity (ROE) | | Return on Invested Capital (ROIC) | | Average Annual Shareholder Return (AASR) | | | Performance Period | HTGC | % Rank of Peer Group | HTGC | % Rank of Peer Group | HTGC | % Rank of Peer Group | HTGC | % Rank of Peer Group | | 1-Year | 7.5% | 100% | 14.9% | 98% | 7.7% | 100% | 42.9% | 82% | | 3-Year | 6.2% | 100% | 12.2% | 100% | 6.4% | 100% | 17.7% | 93% | | 5-Year | 6.1% | 100% | 12.1% | 100% | 6.2% | 100% | 21.3% | 88% |
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Notes: 1-, 3- and 5-year calculations of performance are based on data as of December 31, 2023. Companies with less than three and/or less than five full years of historical financial and AASR performance are excluded. Financial Services peers are excluded from analysis of capital allocation because services companies are not as capital intensive as REITs and BDCs, which are primarily engaged in direct investment of firm capital. The data is from S&P Capital IQ and is not adjusted by FW Cook, which means that the data may not reflect internal adjustments regularly made by Hercules or by the peer companies when assessing their performance. The Compensation Committee believes that compensation paid to our NEOs for 2023 was commensurate with the Company’s overall absolute performance as well as our performance relative to the Peer Group during the relevant performance periods. The 2023 compensation decisions made by the Compensation Committee considered the fact that our performance relative to the Peer Group was generally above the 80th percentile, and in most cases above the 95th percentile measured using ROAA, ROE, ROIC and AASR during the trailing one-, three-, and five-years as indicated above. The same was also true for 2022 performance when 2023 decisions were made for salary and 2023 equity awards. In addition, in 2023, the Compensation Committee recognized that the Company achieved numerous records with respect to operating performance including but not limited to Record Total Investment Income, Record Net Investment Income and Record Gross Fundings.
BIOGRAPHICAL INFORMATION
In determining annual compensation for our NEOs, the Compensation Committee analyzes and evaluates the individual achievements and performance of our NEOs as well as the overall relative and absolute operating performance and achievements of the Company. We believe that the alignment of (i) our operating plan, (ii) stockholder expectations and (iii) our employee compensation is essential to long-term business success and the interests of our stockholders and employees and to our ability to attract and retain executive talent, especially in the competitive environment for top-quality executives in the venture debt industry. Our operating plan involves taking on credit risk over an extended period of time, and a premium is placed on our ability to maintain stability and growth of NAV as well as continuity of earnings growth to pass through to stockholders in the form of recurring dividends over the long term. Our strategy is to generate income and capital gains from debt investments with attached warrant securities, and to a lesser extent direct equity, of our portfolio companies. This income supports the anticipated payment of dividends to our stockholders. Therefore, a key element of our return to stockholders is current income through the payment of dividends. This recurring payout requires methodical asset acquisition as well as highly active monitoring and management of our investment portfolio over time. To accomplish these functions, our business requires implementation and oversight by management and key employees with highly specialized skills and experience in the venture debt industry. A substantial part of our employee base is dedicated to the generation of new investment opportunities to allow us to sustain dividends and to the maintenance of asset values in our portfolio. In addition to the performance factors above, the Company considered the following Company-specific performance factors over the relevant performance periods: overall credit performance, performance against annual gross funding goals, overall yields, efficiency ratios, total and net investment income and realized and unrealized gains and losses. Corporate Goals. For 2023, the Compensation Committee determined incentive compensation for each NEO based in part on the Company’s achievement of corporate performance goals developed by the Compensation Committee. These goals included operational performance as well as performance relative to the Peer Group. The Compensation Committee believes that the corporate goals applicable to all NEOs create an alignment not only with stockholders but also to the Company’s business strategy and performance goals. Defined Individual Goals. For 2023, the Compensation Committee developed individual goals for the CEO. In addition, the CEO and each NEO developed individual goals for the NEOs and such goals were approved by the Compensation Committee. Each set of individual goals are unique to the applicable executive officer’s responsibilities and position within the Company. While each of the factors may not be weighted, the Compensation Committee took into consideration each of these factors to determine each NEO’s incentive compensation. Pay-for-Performance Alignment. The Company believes that there exists an alignment between the compensation of our NEOs and the Company’s performance over the relevant performance periods. As noted above, a broad range of individual performance factors and Company performance factors are analyzed each year, including TSR relative to the Peer Group, and, in 2023, analysis of relative ROAA, ROE, ROIC and AASR versus the Peer Group over one-, three-, and five-years to measure short-, medium-, and long-term performance. The objective in analyzing these key performance factors is to align NEO compensation to the Company’s performance relative to the Peer Group and the Company’s absolute corporate performance. Stock Ownership Guidelines. The Company maintains stock ownership guidelines, which are outlined in the Company’s Corporate Governance Guidelines. We believe that material stock ownership by the NEOs plays a role in effectively aligning the NEOs’ interests with those of stockholders and strongly motivates the NEOs to build long-term shareholder value. Pursuant to our stock ownership guidelines, the CEO is required to own at least 5x his annual salary in Shares, based on market value, within five years of joining the Company. The other NEOs are required to own at least 2x their annual salary in Shares, based on market value, within three years of joining the Company. The Board may make exceptions to this requirement based on circumstances; however, no exceptions have been made for the current NEOs. Messrs. Bluestein, Meyer and Follmann and Ms. Botelho met their minimum guidelines. The Compensation Committee’s review of the NEO’s stock ownership as of December 31, 2023 showed that:
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| • | Mr. Bluestein owned 2,223,745 Shares, RSAs and RSUs. Based on his 2023 salary of $650,000, he owns Shares worth 5x his annual base salary. |
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| • | Mr. Meyer owned 309,265 Shares, RSAs and RSUs. Based on his 2023 salary of $550,000, he owned Shares worth 2x his annual base salary. |
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| • | Mr. Follmann owned 89,686 Shares, RSAs and RSUs. Based on his 2023 salary of $300,000, he owns Shares worth 2x his annual base salary. |
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| • | Ms. Botelho owned 40,179 Shares, RSAs and RSUs. Based on her 2023 salary of $300,000, she owns Shares worth 2x her annual base salary. |
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| • | Bonus payouts and equity incentive awards that are not based solely on corporate performance objectives but also on individual performance levels |
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| • | The financial opportunity in our long-term equity incentive program is best realized through long-term appreciation of our stock price, which mitigates excessive short-term risk-taking |
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| • | The engagement and use of an independent compensation consultant |
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| • | Annual cash bonuses that are paid after the end of the fiscal year to which the bonus payout relates |
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| • | We may sponsor either an equity incentive plan or a profit-sharing plan – but not both. The Compensation Committee believes that equity incentives strongly align the interests of our NEOs with those of our stockholders. We |
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| therefore sponsor and maintain the equity incentive plan described in this proxy statement as the Equity Plan. |
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| Annual Cash Bonus Awards Rewards NEOs for individual achievements and contributions to our financial performance and strategic success during the year |
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| Name | 2023 Cash Bonus Award ($) | | Scott Bluestein | 3,200,000 | | Seth H. Meyer | 835,000 | | Christian Follmann | 425,000 | | Kiersten Zaza Botelho | 395,000 |
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| Long-Term Equity Incentive Awards Provides meaningful retention incentives while rewarding NEOs for individual achievements and contributions to our success through the alignment with and creation of stockholder value |
BIOGRAPHICAL INFORMATION
Our long-term equity incentive awards are designed to develop a strong link between NEO compensation and the Company’s strategic goals and performance, as well as align the interests of our NEOs and other key employees with those of our stockholders. The Compensation Committee strongly believes that annual equity grants motivate executive performance that is aligned with our stockholders’ return expectations. We make long-term equity incentive awards to our NEOs pursuant to our Equity Plan, which permits awards of stock options, RSAs and RSUs that typically vest over three years and after seven years, respectively. The Compensation Committee granted RSAs and RSUs rather than stock option awards to NEOs for 2023 performance. Grant Practices for NEOs. Annual equity compensation grants to NEOs have typically been granted in the first quarter of the year. In January 2023, the Company granted RSAs following 2022 performance. The Company granted RSUs in February 2023 and December 2023. January 2024 RSAs reflected the strong financial performance in 2023, with higher ROAA, ROE, and ROIC than the vast majority of the Peer Group. Restricted Stock Awards (“RSAs”). In January 2024, the Compensation Committee granted RSAs to each of the NEOs. With respect to determining the amount of the RSAs, the Compensation Committee assessed each NEO’s individual performance for 2023, the overall performance of the Company in 2023 and the levels of equity compensation paid by other companies with whom we compete for executive talent. Based on this assessment, the Compensation Committee determined that RSAs be granted to the NEOs with respect to 2023, in the amounts and on the dates set forth below to reward them for services performed in 2023 and to retain their continued services in future years. The RSAs vest one-third of the shares underlying the awards on the first anniversary of the grant date and vest the remaining Shares in equal quarterly installments over the following two years.
BIOGRAPHICAL INFORMATION
| Name | Grant Date | Restricted Stock Award | Fair Value of Restricted Stock Award($)(1) | | Scott Bluestein | 1/09/2024 | 264,368 | 4,600,003 | | Seth H. Meyer | 1/09/2024 | 94,828 | 1,650,007 | | Christian Follmann | 1/09/2024 | 32,184 | 560,002 | | Kiersten Zaza Botelho | 1/09/2024 | 25,862 | 449,999 |
BIOGRAPHICAL INFORMATION
In accordance with applicable compensation disclosure rules, the foregoing equity awards granted in 2024 in respect of 2023 performance by our NEOs are being described above because they are relevant to a complete understanding of the Company’s overall NEO compensation program for 2023, but such equity awards will be formally reported in the 2024 Summary Compensation Table and related compensation tables to be contained in the Company’s 2025 annual proxy statement. Long Term Restricted Stock Unit (“LTRSUs”). In February and December 2023, the Compensation Committee granted LTRSUs to each of the NEOs. The LTRSUs vest on the seven-year anniversary of the grant date. The Compensation Committee believes that LTRSUs should be periodically awarded to key employees, including our NEOs, to recognize and retain individuals with exceptional performance. The LTRSUs vest in full after a seven-year period to maximize the retentive strength of the award.
BIOGRAPHICAL INFORMATION
| Name | Grant Date | Restricted Stock Units | Fair Value of Restricted Stock Units($)(1) | | Scott Bluestein | 02/06/2023 | 74,983 | 311,929 | | | 12/07/2023 | 39,164 | 207,569 | | Seth H. Meyer | 02/06/2023 | 13,633 | 56,713 | | | 12/07/2023 | 13,055 | 69,192 | | Christian Follmann | 02/06/2023 | 8,521 | 35,447 | | | 12/07/2023 | 9,791 | 51,892 | | Kiersten Zaza Botelho | 02/06/2023 | 3,408 | 14,177 | | | 12/07/2023 | 9,791 | 51,892 |
BIOGRAPHICAL INFORMATION
| (1) The amounts reflect the aggregate grant date fair value of RSUs made to our NEOs during the applicable year |
COMPENSATION TABLES
| Summary Compensation Table |
COMPENSATION TABLES
| Name and Principal Occupation | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($) | All Other Compensation ($)(4) | Total ($) | | Scott Bluestein | 2023 | 650,000 | 3,200,000 | 5,019,494 | — | 22,500 | 8,891,994 | | Chief Executive Officer and | 2022 | 650,000 | 3,000,000 | 3,700,008 | — | 20,500 | 7,370,508 | | Chief Investment Officer | 2021 | 650,000 | 2,350,000 | 3,449,995 | — | 19,500 | 6,469,495 | | Seth H. Meyer | 2023 | 550,000 | 835,000 | 1,625,903 | — | 30,000 | 3,040,903 | | Chief Financial Officer | 2022 | 550,000 | 875,000 | 1,274,998 | — | 27,000 | 2,726,998 | | | 2021 | 550,000 | 770,000 | 1,088,502 | — | 26,000 | 2,434,502 | | Christian Follmann | 2023 | 300,000 | 425,000 | 462,343 | — | 22,500 | 1,209,843 | | Chief Operating Officer | 2022 | 260,000 | 350,000 | 250,005 | — | 20,500 | 880,505 | | Kiersten Zaza Botelho | 2023 | 300,000 | 395,000 | 366,067 | — | 22,500 | 1,083,567 | | General Counsel, Chief Compliance Officer and Corporate Secretary(5) | 2022 | 300,000 | 300,000 | 99,993 | — | 18,000 | 717,993 |
COMPENSATION TABLES
| Grants of Plan Based Awards in 2023 |
COMPENSATION TABLES
| Outstanding Equity Awards at Fiscal Year End, December 31, 2023 |
COMPENSATION TABLES
| Options Exercised and Stock Vested in 2023 |
COMPENSATION TABLES
| Nonqualified Deferred Compensation in 2023 |
COMPENSATION TABLES
| Potential Payments Upon Termination or Change in Control |
COMPENSATION TABLES
| CEO Pay Ratio |
COMPENSATION TABLES
| Pay vs. Performance |
COMPENSATION TABLES
| | | | | | Value of Initial $100 Investment: | | | | | Year | Summary Compensation Table CEO Total Compensation ($) | Compensation Actually Paid to CEO ($) (1) | Average SCT Non-CEO NEOs Total Compensation ($) | Average Compensation Actually Paid to Non-CEO NEOs ($) (1) | Company TSR ($) | Peer Group TSR ($) (2) | Net Income ($ in thousands) | Return on Equity | | 2023 | 8,891,994 | 11,871,291 | 1,778,104 | 2,234,447 | 187.59 | 128.90 | 337,484 | 14.9% | | 2022 | 7,370,508 | 12,508,448 | 1,441,832 | 1,354,862 | 131.26 | 113.50 | 102,081 | 11.6% | | 2021 | 7,410,986 | 11,960,041 | 1,548,309 | 1,560,941 | 145.05 | 125.26 | 174,155 | 11.1% | | 2020 | 7,871,404 | 12,662,414 | 1,621,547 | 1,676,816 | 115.13 | 91.15 | 227,261 | 11.3% |
COMPENSATION TABLES
| (1) The amounts shown for Compensation Actually Paid (CAP) have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by our CEO or Other NEOs. These amounts reflect the Summary Compensation Table Total (SCT) with certain adjustments as set forth in the following reconciliation table: |
COMPENSATION TABLES
| Independent Director Compensation |
COMPENSATION TABLES
| Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Option Awards ($) | All Other Compensation ($) | Total ($) | | Robert P. Badavas | 250,000 | 59,996 | — | — | 309,996 | | DeAnne Aguirre | 145,000 | — | — | — | 145,000 | | Gayle Crowell | 215,000 | — | — | — | 215,000 | | Thomas J. Fallon | 205,000 | — | — | — | 205,000 | | Joseph F. Hoffman | 45,000 | — | — | — | 45,000 | | Brad Koenig | 97,258 | — | — | — | 97,258 | | Wade Loo | 215,000 | — | — | — | 215,000 | | Pam Randhawa | 190,000 | 59,996 | — | — | 249,996 | | Nikos Theodosopoulos | 25,000 | 14,990 | — | — | 39,990 | | Doreen Woo Ho | 45,000 | — | — | — | 45,000 |